National Debt Vs £22bn Black Hole
The end of August / beginning of September is a kind of no man’s land for the market, but one that contains a degree of expectancy. The expectancy that the market will return to normal after the summer holiday’s and liquidity and newsflow resume in earnest. This year it should mean that the coming week brings us the action we are craving for. Unfortunately, it could be the case that there is no action at all. The Labour government has flagged that anyone with money or energy should just leave the country, and that the now infamous £22bn black hole left by the Conservatives needs to be filled.
Why? The UK national debt was 97.6% of GDP or some £2.6 trillion. On this basis who cares about the odd £22.6bn. It is a drop in the ocean. At the current rate of progress we are adding up to £1trln per decade to the national debt, something which implies every year we go under by £80bn. There is no austerity, no balancing of the books, and of course all of this means we have to borrow more and more. So why don’t governments just borrow more as they have since the end of the Thatcher era in 1990? The answer is that they are governed by dogma. Whether it is paying for the NHS, welfare, or any of the other sacred cows. In the case of Labour it is the Marxist class warfare they are peddling. This is ironic given the way that the country is increasingly classless. Indeed, the battle lines now are culture / woke wars. Class was largely put to bed at with New Labour.
October Budget
D-Day or Pain Day, will be at the end of October with the tax rises on things like CGT and Inheritance Tax, as well as all the other stealth taxes and allowance freezes. But is it not the case that Starmer and friends know that the pips are already being squeezed and the forthcoming moves will be a massive disincentive for investors? Of course they do, and that is what they want. I am still going by my July 4 call that the Labour government may struggle to last even a year in its current form. The UK is essentially as ungovernable as it was in the 1970s, and the decisions that need to be made way above the talents of the politicians we have currently elected.
Metals One / Rockfire / Sovereign
One of the plus points of the small cap area is that it can be, at least in special situations disengaged from the macro environment. A company invents something, discovers and asset, or wins a large contract, and nothing can stop it. This week, due to the ongoing post holiday hangover, there were relatively few examples of the above, but they were still there. Metals One (MET1), which is advancing strategic minerals projects in Finland and Norway, is announced that Kingsrose Mining, has satisfied the conditions precedent to the second stage of the Transaction Implementation Agreement regarding its staged earn-in to the Råna Project. Rockfire Resources (ROCK), the base metal, precious metal and critical mineral exploration company, announced a JORC Mineral Resource upgrade of 500% at the Molaoi zinc/silver/lead deposit in Greece, making it a globally significant deposit with more than 1 million tonnes of zinc. Sovereign Metals (SVML) announced that Kasiya graphite concentrate is confirmed to be an excellent feedstock for natural graphite anode materials suitable for battery production, and that its graphite concentrate will be an excellent anode material feedstock to the battery industry.
EQTEC / Mosman
It was somewhat surprising that shares of EQTEC (EQT) shares did not bounce back on news that the technology innovator, announced that £2 million have been received on the Company’s behalf comprising the full amount of the sum agreed under the settlement agreement with Logik Developments. The company also raised £1.1m, and is therefore all primes to enact its new strategy. Much followed Mosman Oil and Gas (MSMN) exploration, development and production company, announced that it is nearing the completion of the sale of its interest in Nadsoilco LLC. One would hope for fireworks when / if this gets over the line.
Celadon
In terms of the stock movers I was very pleased that the tweet regarding Celadon (CEL) being a possible technical / charting buy on August 29 at 36.5p for a move into the low 50p’s was proved to be spot on by the end of the week. The shares peaked at 52.5p. Who else does that is my immediate thought? But of course, there are many “experts” out there making calls. And one tends to be judged not by the winners, but by the losers. At least one hopes that Celadon itself appreciated the call.
Sealand / Mobile Streams / Shuka
Another call that made the grade from September 2, when the shares were 0.09p was Sealand Capital (SCGL), with the company being included in the Bulletin Board Heroes charting video. The initial target was 0.15p. In fact, the shares peaked this week at 0.38p. Mobile Streams (MOS) and Shuka (SKA) were also charting winners this week, and all of this rather makes me think it may be worth starting a “model portfolio” which would be published to highlight the most compelling new situations, such as Celadon was. Perhaps this could be a paywall service, such as Zaks-TA.com was in the 2000s.
Eurasia
Finally, there was some interesting news at Eurasia (EUA), which as has been its wont, delivered a RNS after hours on Friday. Here the highlight was the deal with small cap company liquidity provider Sanderson Capital, regarding a trade finance loan of up to £2.5m. Christian Schaffalitzky, EUA’s Chairman, has pledged 94,619,517 of his ordinary shares in the Company as collateral for the loan. One is rather reminded of the famous FedEx founder’s bet, where Frederick W. Smith took the company’s final $5,000 and turned it into $32,000 at the Black Jack table in Las Vegas. This maverick action turned the company around. Perhaps Schaffalitzky pledging his shares will do the same for EUA.
Author
