An elevated view of the City of London’s financial district skyline at dusk.
getty
The U.K. is the absolute runt of the stock market litter. It’s not an accident. It’s been wrecked by U.K. governance, regulations, directives, regulators, and taxes. You might say it has had its accreting value sucked out of it since 2000. France has done something similar; meanwhile, the U.S. system has pumped value in, as has Germany, blowing a boom bubble rather than killing the host like the U.K. system.
The morale of the U.K. has never been lower, at least not since the 1970s and those dire, dysfunctional socialist years. The FTSE is a summary of the last epoch, since 2000, of ossification.
Yet, as I have been predicting here, the FTSE 100 is twitching into life because extreme value has a value-add: predation and the rendering of the victim.
In market speak, that is takeovers.
Like easyJet this week, a company on a P/E of 9, with a fat dividend, fat profits, and a brilliant business, gets taken out for a song by, well, not a local outfit. There is no local outfit to do it because the local system is broken. It is no surprise that the bidder comes from a market landscape overflowing with capital. Boom buys bust.
Oh well, I made a packet out of the fall. I shall cry all the way to the bank.
So here is the chart:
The FTSE chart – which way is it going?
Credit: ADVFN
If you look closely, you might find it comical, in a bathetic kind of way.
When it breaks up, it’s going to motor, and here is a close-up of that unfolding:
The FTSE chart is close-up – on the rise
Credit: ADVFN
It’s my guess there will be no change in the U.K.’s underlying dynamics, so the investment thesis is to sit on big value and await its takeover. While other markets get spicier and hotter, they will drag up the FTSE 100 like stretcher-bearers.
There are good returns to be had, and you never know—the U.K. could perk up and good things might happen. Every silver lining has a dark cloud.
Oh wait…