Bulletin – September 2017

What is KMG’s position on the North Korean question?

On the one hand, North Korea is a surrogate child which China hopes it can manage and thus benefit from with a range of potential advantages notwithstanding some horrendous consequences if the child becomes uncontrollable.
On the other hand, America, reminds me of the small boy with the catapult (North Korea) hurling stones at Goliath. Goliath of course being the United States with very few options.

Beijing can let Pyongyang frustrate the hell out of America, Japan and South Korea, indeed the rest of the world without incurring too much collateral damage. Remember China’s ambition to control the South China Seas and of course the waters around Japan motivate them to see a situation where North and South Korea somehow blend back together and not as a satellite state for either the Americans or the Japanese.

America’s options are pretty limited, other than an all-out nuclear attack. China, on the other hand, holds almost all of the cards against the North Koreans including control of much of its food, energy, raw materials and indeed most of the spare parts required to make the missiles work!

Notwithstanding spectacular miscalculations with an American president who is significantly unpredictable, here are the options:

  • If there is to be a nuclear war, then all options are off the table and we have not got a clue what maybe the outcome. So whatever pre-planning you or we may think sensible, the fact is the devastation and repercussions will be so huge that no investment strategy is worth contemplation other than as below.
  • Appeasement, when two of the key players are irrational we are reminded of the key players at the beginning of the Second World War, i.e. the Germans, Italians and Japanese and the rest of the world’s desperate attempt to try and appease them without success. Holding equity through the war proved to be the only real option for real growth and protection.
  • A non-nuclear conflict seems unlikely primarily because it will be the rest of the world versus China, in trying to protect North Korea. But really this seems unlikely particularly because of the China’s pragmatic approach to life is that in the end China wishes to get on with the world if only because it needs to trade with everybody and needs to do so to support its population and economic growth.

Thus, the conclusion to the KMG strategy and position is as follows.

There is plenty of evidence to suggest that economic health of the world is actually quite strong. There is plenty of good statistics being released about increase mineral extraction and commodity price growth – all of which suggest that economic activity is expanding. Even in Europe, with a strong euro, economic activity appears to be moving forward despite very moribund labour laws and chronic debt dilemmas. Of course, Europe’s expansion could be because of the debt crisis and the fact that if you continue to throw money at the problem, somewhere along the line the whole economy just has to expand.

Investing, therefore, in things rather than debt seems to be appropriate.

“Things”, may include property but not over-priced property in the south-east corner of England and all other hotspots around the world but property that genuinely produces wealth and economic development.

“Things”, also includes intellectual rights and investment in the expanding digital economy.

At the same time of course, we have all got to eat and live. We all need energy albeit that in all these cases the way in which we consume is going to change out of all recognition over the next 5-10 years and therefore investing in the future is likely to be very rewarding if we pick the correct trends.

Ultimately, the old mantra is consistently true and is proven as you look back through world history: investing in equity is not only one of the safest place to diversify your investment portfolio in the short-term but ultimately is likely to produce the best investment return both to protect you against currency fluctuation let alone capture global growth. The enclosed graph proves the point.

The digital-open-global economy allows us all, as never before, to run a truly global and diversified strategy at low cost. Even with the issues of BREXIT or Trump or Korea we can create better changes for investment return at lower cost, while reducing volatility and avoiding the effects of global meltdown.

We must expect huge volatility as a consequence of all the macro issues going on in the world and the Korean question is just one of many.

So, unless you need funds immediately and/or in the next year, remain thinly globally spread and rely on KMG to select what we consider to be the most likely outperforming strategies.

Patrick McIntosh


Cars, floods, broadband and Jean Claude Juncker


Having recently met with a large car manufacturer, I was interested to hear they are planning for the end of car ownership!

The future is driverless cars, Uber and Zipcar. By coincidence, two guests at an event I attended in Suffolk arrived in Zipcars from central London; both could easily afford big gas guzzlers but chose this option to move their family around.

Thinking about this in an EU dynamic, especially around the German economy and how cars represent such a central part of theirs and our whole life system, are we now at the edge of the horse-to-car evolution and about to move onto something else? A massive social change. Given the new scrappage scheme from all manufacturers, you cannot help feeling they are trying to keep ahead of the inevitable.


Notwithstanding the relationship between cars and pollution, the big immediate issue is short-term economic volatility as a massive release of funds for recovery, investment and renewable change are now made. This inevitably results from the recent cataclysmic events, and as we saw in the UK in 1987, when the October hurricane deferred the recession by two years.

We cannot forget Trump, indeed, thanks to him the debate will engage and move along in positive ways for the right types of investments.


With 90% of the UK soon to have fast connection, working anywhere any time and doing anything any time is transformational – the faster this happens the less relevant are borders, controls etc.

The establishment are struggling to “GET IT” but post Trump, BREXIT and the French elections, the wake-up calls have finally registered. So where does that leave global trade, customs unions, and currency as we know it? A Financial Times report in the week of 1st September discusses some of these issues and we must consider that the longer the UK procrastinates, the grater the likelihood of a non-existent BREXIT.

In our favour is Jean Claude Juncker, for if my reading is correct our negotiators are playing him perfectly because he is stuck in the old world we are leaving, as is much of the EU. Michel Barnier is forced to negotiate in the old world and if you tie cars, energy and broadband, the list for negotiation is enormous. I suggest post-outcome of the German election, Macron and Merkel will probably see the future and shift the goal posts, even the negotiating team.

Cameron was right to fight against Jean Claude Juncker, but ironically it might be our savour to reach a better deal by letting him get it wrong, a bit like letting Trump get it wrong so badly, it teaches even the Texans to see the truth!

Patrick McIntosh



With approximately one month until our seminars, we still have limited places available at both our events being held next month.

Thank you to those who have already responded. If you are still considering whether to attend either seminar, our two external speakers this year – Julian Jessop and Ann Pettifor offer their views and opinions on the current state of the economy, BREXIT and other important issues in what should be an informative and thought-provoking event.

Julian is Chief Economist at the IEA (Institute of Economic Affairs) and Ann Pettifor is a UK-based analyst and director of PRIME (Policy Research in Macroeconomics).

A recap on the dates:

  • National Liberal Club, London on Wednesday, 4th October
  • Denbies Wine Estate, Dorking on Monday, 9th October.

Both seminars will commence from 11am finishing with a light buffet lunch.

Please call us or email [email protected] if you would like to attend. Remember if you would like to bring a friend or colleague, just let us know so we can accommodate them.

We hope to see you next month at one of our seminars!

Kate Greenwood


State Street Fund

Some clients have recently received letters from State Street Fund requesting personal data.

This company is an administrator for some of the large fund managers and under tax legislation, they are seeking to update their files.

We would recommend that clients do not respond to this request. All your funds are held with platforms that take on the responsibility of reporting to relevant tax authorities.

Should you continue to receive contact or have any concerns, then please do let us know and we will be happy to discuss further with you.

Jenna Duffett