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Alex Harvey, CFA | 14 December 2020

Scotched Eggs

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Of the five weekly blogs I will have written this year, none of them have been untarnished by Covid 19 with my first – Tipping Point – penned on 9th March as markets tumbled into the Corona induced abyss. From the pre Covid peak on 12th February the market hit its lows just ‘28 days later’1 , with the streets of London and cities around the world looking eerily similar to those in Danny Boyle’s rage inducing horror of the same name. Reassuringly for investors equity markets are now comfortably higher from those levels. Roll forward to December and after two national and several tiered local lockdowns here in the UK there are signs of life on the high street and hope for 2021 with the vaccine rollout gathering pace just five weeks after the first vaccine discovery was announced. That is a stunning achievement however you look at it, and credit to those making it possible

Since the end of ‘Lockdown 2.0’ in the UK, people have been able to return to previously ‘non-essential’ shops, get a haircut, go to the gym and enjoy a game of tennis or a round of golf. And those not living in the highest Tier 3 risk areas have even been able to pay a visit to the 19th hole or that quintessentially British institution, the pub. The rules of the game have changed, however, as masks, table service and ‘track and trace’ are order of the day should you want to sup a festive ale this Christmas. And if you live in a single person household then technically speaking you should be drinking alone (a worrying sign) unless you are having a ‘business’ meeting with your colleagues = friends. The source of greatest entertainment about the recent relaxing of rules relates to the ‘substantial’ meal that needs to be purchased should you wish to order an alcoholic beverage. Demand for scotch eggs has reportedly surged tenfold in recent weeks. The Co-op – a chain of local grocery stores in the UK – has reported a 26% year on year increase in sales; in the first week of December alone sales of the savoury snack rose 11%. [Readers should note quality varies markedly in this market; active selection most definitely trumps passive].

Despite the hype, I’ve yet to find an establishment that will accept the purchase of a lowly single scotch egg as a substantial meal. Instead we’re being subjected to new menus of bar snacks designed for this state of post lockdown semi-stasis. My jaw dropped last week when my portion of croquetas (croquettes to you and me) contained just two of the savoury delights. Given this tapas style dish is commonly shared it felt considerably unsubstantial for the £8.50 chain pub privilege. The big plate they arrived on also suggested darker forces at play. Later that week when my nachos were charged at £9.50 rather than the £8.50 stated on the menu, I was told by the waitress that she thought she had removed all of the ‘old menus’ but this one must have slipped through. It won’t take many more partial lockdowns to make that 12% mark-up felt. Adding to this sense of culinary robbery, the UK government’s ‘Eat out to Help Out’ scheme in August reportedly saw some menu prices rise on the back of the government’s subsidy that funded a 50% food discount of up to £10 per person. It is unlikely these prices will revert fully once we reach the new end state, whatever form that takes.

Now, I’m really not bothered by the extra quid here or there and we must do everything we can to support our local shops, pubs and eateries – make no mistake about that - but there is a common thread here. What is arguably being served up – more by unintended stealth than by design - is something we’re told is not on our menus; inflation. As readers will know our portfolios are designed to outperform inflation by a margin over time, and having that margin becomes even more important if headline inflation becomes warped by shrinkflation (the croquetas) or a lowering in quality (corner shop scotch eggs). So, if you want to keep up with the bar snacking Joneses next Christmas then you’d better cook up some inflation beating returns.

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In case you missed it

7 December 2020

A pack of wolves

By Lorenzo La Posta, CFA

Our newly expanded fund management business in the UK now has a physical presence in London and Liverpool, providing outcome-based investment services to clients all over the world.


30 November 2020

A brief history of
how to lose money

by Richard Stutley, CFA

At times like this, it is worth reflecting on the common ways in which investors suffer permanent loss of capital as opposed to short term fluctuations in the value of their investments.


23 November 2020

Road to recovery

by Andrew Hardy, CFA

The recovery potential in ‘value’ stocks remains massive, particularly in the areas hardest hit by the pandemic, but investors don’t necessarily have to take on high levels of risk or sacrifice quality in their portfolios, to access this opportunity.

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