Member Info for steph

Well the Friday agreement between cabinet is significant for us through the mechanism of market stability by reducing the risk of crashing out of the EU and all our global trade agreements all at once. I expect lots of volatility until March 2019 but I do think the downside risk for the builders is now priced in.

Of course this Brexit agreement is not in any sort of final form as it has not yet survived contact with parliament, the EU or even technical reality and doable timelines. Not leaving the EU at all as well as crashing out of the EU (plus every grade of leaving in-between) are still all possibilities.

However it is the direction that is important. Brexit extremists well represented in Cabinet have signed off thus isolating their backbench colleagues. No doubt they will sign off reluctantly and at the last minute on many more moves in the direction of a Norway minus type deal May could have advocated from the start.

Interesting that services are excluded thus far. I suspect they will be put back in when the migration deal emerges to be similar to David Cameron's "safety brake". May as well.

I can't see a Brexit deal that leaves the UK fully in the customs union. That really is a red line for providing the appearance of having left. The rest can be fudged. Nobody but a few wonks cares about the difference between "under the jurisdiction of the ECJ" or "taking into account" the rulings oft the ECJ. Nor do I think the UK public so exercised about EU immigration if on a reciprocal basis and the surge from accession countries is drawing to an end. They are probably more worried about non-EU immigration and refugee immigration which has nothing to do with EU membership.

I can also understand why the EU is very reluctant to grant the UK full access to the single market alongside UK freedom to negotiate it's own trade deals. Norway has exactly this but Norway is a small country unlikely to compete with the EU on manufactured products. It is an anomaly, however, that the EU would rather not expand. Norway has been given a certain amount of cake but they are too small to really exploit it and too rich on oil an gas revenues to want to bother.

For example on car parts I believe the EU tariff for American cars and car parts is 10%.. If the UK can be in the single market and have in addition a zero tariff free trade with the USA EU car assembly might favour the UK over the EU because of the parts value chain differential. The EU will need to negotiate out all these details product by product and service by service. It will take time.

We were foolish to not embrace from the start the Norway template. That is down to May's stupid reliance on Nick Timothy who dug a great big pit for her and the nation she is only now trying to crawl out of. Those idiots from the home office fiasco were promoted so they could screw up our trading relations with the entire world.

A nation of lions led by rats.

Either way for TEF it will get resolved. The council will follow their officer and legal advise or there will be a review , appeal or it will get called in. Systems are in place to resolved it.

Local councillors may wish for it to be taken out of their hands so they can rail at the system as well rather than makes a decision that is best for their constituents. Grandstanding but that is what happens in democracies. Look at what happened to USA.

Blaming EU for all our faults was similar grandstanding. We did not use the trade agreements we had to export more to China and the commonwealth or to use the powers we had to favour local hire (we did just that for the Olympics) or provide the UK based training programs and tweaks of the in work support programs that feed UK citizens into UK jobs. Not the EU's fault we need so many foreign nurses and doctors. We pinched pennies on the training across many sectors and have been robbing other countries of their skilled staff for decades. We produce a lot of great historians but not some many skilled staff the UK economy actually needs.

https://www.standard.co.uk/news/uk/uk-population-growth-at-lowest-in-a-decade-and-london-has-suffered-the-biggest-hit-a3874516.html

I topped up a small amount at 440 thinking that was the bottom of the dip (and it was for a few days).

SUb 400 again. Soon as I get some dosh I'll top up more seriously.

It will be volatile until political uncertainty ends. While risk of a disorderly brexit is increasing I still think it is low. The bad news and private sector warnings are depressing the market but have a positive side in that it makes crashing out or a very hard brexit less likely. We have not left yet nor agreed terms. Still wide range of Brexit's possible including no Brexit at all. Any firming up of something even a bit soft with some negotiated freedom of movement and the market will jump.

As an investor I think the market is overreacting slightly to the political uncertainty and it will be all right on the night but last minute, noisy, confusing and messy. Good time to cautiously top up but not to have a highly leveraged position.

Brexit isn’t bad news for all UK companies, of course. It’s proving jolly lucrative for lawyers.

The Bank of England explains:



Business services turnover had been growing relatively solidly and more strongly than most other sectors. This was despite some hesitancy around client investment decisions that contacts reported had been driven by political uncertainty

For professional services firms, Mergers and Acquisition (M&A) activity from overseas buyers, Brexit preparations, and insolvency and restructuring activity had driven fee growth.

The new GDPR rules on data have also be a windfall for legal experts, the BoE adds, as companies have tried to understand how the regulations affect them.

https://www.thetimes.co.uk/edition/ceo-summit-2018/companies-prepare-for-hard-brexit-jp2lgm6w9

In the absence of central government funding for social housing often the best your local council can do is use it's planning and CPO powers in exchange for more social housing % in any "private" development.

Local councils also have some financial ability to directly build (or cross subsidize) social housing but it is quite limited these days. Most social housing delivered through planning gain negotiated with private developers.

For some sites your local council CPO'ing only a few rich residents or commercial properties at a fair price can make a site so much more viable. This enables much more social housing to be offered without your local council needing to put in scarce cash -just enabling powers. Developers can't CPO on their own yet fear a ransom property on some sites holding up a viable development forever after they have been assembling a site property by property. Powers for social housing. Just a thought.

Housing associations have choice in where they build and helping them assemble a site is also something your local council can do to fast track increasing social housing in your area. A housing association led development can be up to 100% affordable.

Well nice to see our chat widening out to include a social critique as well as the normal economic and economically related political critiques. Best quality chat on the LSE.

Personally I think housing associations and housing departments of councils should get back into the business of building social housing directly. They would then contact builders just to be builders and not land owners and developers (lower risk and lower margins). That would mean 100% social housing for many sites not just 50%. In the 1950's (under labour and conservative administrations) direct council building of social housing was about 2/3rds of all housing constructed. We have done it before and can do it again.

TEF would probably be happy enough in that model. TEF's business model is closer to the housing associations and social housing delivery than any other major builder. During the great recession TEF kept marginally profitable by effectively building for the housing associations rather than speculative sites.

Even TEF though needs to make a profit or it would not exist. Most social housing agreements in London are run through a economic viability assessment called "three dragons". Even if social housing targets are 50% (and they can be in some areas) to actually get 50% still has to pass three dragons or nobody will build. If no natural profitability to build 50% some public subsidy needed to achieve the target. Not really up to the builders but the economic and incentives system they operate in. Basically the profit form the open market sales have been cross subsidising the social market units for 30 years because the modern governments (Labour and Tory) are too stingy to fund them directly. How we managed to afford it in the 1950's with the 200% of GDP war debt to pay off who knows but we did.

It is not as if the London builders are so profitable and development so easy that builders are flooding into London to chase the opportunity. Quite the opposite. The builders are cautious about London and that is why we build only 20,000 units per year and not the 60,000 needed just to keep up with demand.

The doubling was every 4to 6 years was from TEF in a follow up question at the AGM. They did say that the first period would be 4 and the remainder closer to 6. They are on track to achieve the first prediction. 6 is not a stretch for Tef. Of course dependent on benign background market conditions which is why I fuss over macro influences. They were not specific on the measurement whether it be volume, eps or other. We were talking about volume at the time. EPS will probably track volume as price inflation cancels out margin tightening. BTR must have tighter margins but may assist in raising volume faster so may be neutral for this prediction. A return to the much tighter margins in a real deep recession due to building directly for housing associations and councils is possible but as last time that was only for a bit to weather a storm and was vastly superior to losses. I think with only returning 1/3rd of eps and the BTR and housing association capital light partnership model well established I can see no reason from here doubling every 5to 6 years. Need some market luck to achieve anouther 4.

I've long ago declared I am pro EU based on criteria that is not economic, On this board, however, I try to limit myself to the economic implications of Brexit that might affect TEF's SP. We all have different points of view on the non economic issues of the day -and the board would not work if we indulge too often in them. An occasional diversion into horse racing an exception. I completely accept the EU are a bureaucratic pain in the ass. However our own home office could give the worst EU department a very good run for it's money on that criteria so unless one wishes to live as a hermit we don't seem to have a lot of choice. We will live under the jurisdiction of some awkward bureaucracy or another. All modern trade agreements have some mechanism of binding arbitration which means us being under the jurisdiction of some foreign judges or panel. The alternative is to have no arbitration procedures and to rely solely on the nuclear button of pulling out of the trade agreement if we are unhappy with our partners behaviour or interpretation. A trade agreement a bit like a marriage where three claps are given and it's over. This no binding arbitration trade agreement system would give us unlimited sovereignty but it would also make us unattractive to business investment who like stability and don't want a nation's trade agreements to be on a hair trigger whenever sentiment is stirred up by grandstanding populist politicians on either side. So in the real world we make alliances and reciprocal agreements with binding enforcement mechanisms that limit our absolute sovereignty. They are messy and run by bureaucracies that can and do feel foreign, remote and unaccountable.

http://www.itv.com/news/2018-06-05/poll-records-new-high-in-number-of-voters-saying-brexit-is-wrong/ Maybe the start of a snowball effect starting or just a one off spike. I think that many who voted leave based on what is now clear were unrealizable promised benefits have been -never-the less- loyal to leave because a vote however messy is still a vote. Not the first time politicians have oversimplified and overpromised and no the last. However multiple problems have arisen beyond the "normal" exaggerated political promises and there is an increasing feeling that vote leave really cheated -backed up in parallel by Russian meddling. Big difference between normal political exaggeration and actual legally defined "cheating". Any convictions will accelerate this trend. Trump not helping the leave cause either. EU looking better and better for all it's warts.

An EV of 551 and an SP of 463 is a reasonable gap given what I think is the modest but rising macro risk of a disorderly Brexit. A good time to hold. It is likely the Brexit background noise will get worse before getting better. Italy is back on the back burner but still a risk. Is it time to add or will there be better opportunities in a few months time? Our SP has been 495 2 years ago and the firm's fundamentals have improved significantly since then. It is now a bigger firm with a wider and more sustainable finance model for growth. We can easily drift over 5 quid and stay there even with the political turbulence about. A sudden breakthrough on Brexit would also cause a quick upwards correction. Seems unlikely now but a week is a long time in politics.

https://www.standard.co.uk/news/politics/theresa-may-to-confront-donald-trump-over-illegal-steel-tariffs-at-g7-meeting-a3853831.html In some ways trump is being helpful to the UK at this critical moment by being such an obvious ass,,ole. Before we irreversibly tear up the non EU trade agreements we have it is best to know what the prospects of obtaining something equal -never mind superior as we were promised by the Brexiteers. Dr Fox meanwhile appears to have given up on improving in any meaningful way our non-eu free trade agreements. Not even the roughest of draft agreements is even being floated never mind formally on the table. His department seem to be hoping just to hold on to what we have and accept we will lose some of that. Only the mad Mogg thinks it will all go swimmingly but he is truly detached from objective reality.

It is a great long term hold but our SP is held back by general market sentiment. Brexit is number one on that but there are other risks about -Italy, trade wars. The house builders are sensitive to any potential tightening up of skilled immigration as this is part of their market. For all Boris's talk about a post Brexit global Britain liberal on skilled immigration he can't carry that with the colleagues he keeps. The liberals on skilled immigration tend to be remainers. He can't even get May to exclude students from a already very low cap for immigration -and they almost all go back, commit few crimes while here and we make money off them. What is wrong with being an international education provider if it makes us money? Clean knowledge based industry and international connections and soft power influence to boot. May is really, really stupid. The wrong PM at the worst possible time. Corbyn is an honourable man but really stupid on Brexit -and I'm (emotionally if not intellectually) from his wing of the party. A curse on both their houses. To honour Brexit but not tank the economy requires some form of EFTA membership for 5 to 10 years while we sort out our future trade and customs arrangements. It takes that long -even if Dr Fox and Retched Mugg tells us it does not. Just really bad luck for us all that we have the wrong leadership at this critical moment. Bound to affect our SP in the short term. Ok for us long term holders topping up. We are getting better bang for our pound than we would have. 10 years form now the whole Brexit fiasco will be behind us. Even the 12 month broker SP guidance is probably held back by market sentiment. They like to be accurate even if not a science based on hard numbers.

It often dips after results. Just profit taking. Some general jitters in the market yesterday due to Italy. Maybe a bit of catch up today as well. Results underpin all we have been talking about on this blog.

You are right in that the company and my question at the last agm was all about doubling in volume of units every 4 to 6 years. Tightening margins might be counter balanced by rising average sale prices. Maybe not but they do partly cancel each other out. Margins might not tighten. We are just putting that in to be belt and braces. Only KPI that matters is net profit and if that doubles every 4 to 6 years those of us who are are long term holders will be very happy retirees.

I may show up at the AGM again and ask the question again. I think TEF is on track to do it. Indeed at the lower end of my 4 to 6 year range at the moment. With -as tef point out in the finals today- London supply is 20,000 and demand is 60,000 with no end of that imbalance in the foreseeable future. With 2/3rds of profit retained to fund growth and so many opportunities TEF can manage that. The other builders are not rushing into London to fill the gap. We moan on the planning problems but they are barriers to entry that protect TEF from excessive competition. Bit of a sweet spot. Enough barriers to entry to prevent competition to close the demand gap but not enough barriers to spoil the margins of the players like TEF already in the London market. Nothing else can match that capital growth potential at the level of risk. Investing in property directly will only yield 4% or so per annum over 15 years -even with a good wind.

finals as expected with a modest surprise on the upside on the pipeline comments and increased profits. Very much in line with my ISA strategy of the company doubling in size (or at least earnings) every 4 to 6 years. If I'm patient I'll be cosy in retirement with this.

https://www.telegraph.co.uk/business/2018/05/17/interest-rates-could-stay-rock-bottom-another-decade/ This is why multiples of earnings historical relationship is obsolete. Interest rates sub 2% doubles affordability against pre crash norms. More 90 and 95% mortgages without punitive rates also creeping into market. This is one massive boost to the London housing market. Just need a bit of clarity on our basic trading relationships and confidence will push prices gently upwards after the pause of the last year.

https://www.theguardian.com/commentisfree/2018/may/17/theresa-may-trump-migrant-visas Any sensible Brexit will do only limited damage to TEF"s market. London can absorb some minor damage and minor job losses. . However crazy restrictive immigration policies on skilled immigrants -especially post hard Brexit where we can for the first time restrict EU skilled immigrants- will do some real sustained damage to TEF's market. I am assuming this mad policy of May's will change but maybe I'm being overly optimistic. I also though it was impossible for Trump to get elected. I would seriously start investing a percentage in Canada if this nonsense does not stop. Unskilled immigrant restrictions well the impact is we pay more for food, hotels and cleaners. Skilled immigrant restrictions well we choke the up and coming economic sectors London does so well out of. It really is a threat to TEF's 20 year market and my ISA assumptions.