October eh. How did that happen? Where has 2017 gone? Still, it could be worse. We could be booked on a Monarch Airlines flight. No problems, we might think, we can always get switched onto Ryanair. Ah, maybe not.
Then there is Spain. I am sure that this is entirely inappropriate, but what sort of democracy is it where you get a sound thrashing from the police for voting? Where will it all end if people are allowed to vote? Markets have merely shrugged their broad shoulders and ignored all this. Nonetheless it is hard to see how the Catalan situation is going to end well.
One of the more intriguing stories from last week involved the chicken supplier 2 Sisters. The less appetizing angle to the story was the alleged unsavoury goings on in the company’s West Bromwich poultry plant. If you missed the story, 2 Sisters is the UK’s largest supplier of chicken; it claims to process six million chickens a week and supplies around a third of all chicken products sold in the UK. That is an extraordinary amount of chicken.
In an operation of that size, it is no great surprise that standards can slip. And standards at the West Brom plant appear to have done precisely that. If you are not currently eating your lunch, the gist of the allegation is that the plant has been fiddling slaughter dates in order to get old meat an artificially late ‘use by’ date: passing off dodgy meat as fit for consumption.
The positive aspect is that Marks & Sparks, Aldi, Lidl and the Co-op all said pretty much immediately that they would stop sourcing from the West Brom plant. Tesco and Sainsbury have been slower and are still buying while conducting investigations.
There are two puzzling aspects to this. First, why have Tesco and Sainsbury not suspended first and investigated second? And second, why has this alleged malpractice not been picked up on before by anyone’s supply chain due diligence? In this rapidly evolving world of transparency, traceability and sustainability this should not be happening. So it is a qualified well done to the buyers for stopping sourcing very quickly, but with a big question mark about why they were unaware of this happening in the first place. If the gossip boards are to be believed, rancid chicken is a well-known problem.
Sustainability within supply chains has become a major issue for companies. As one further example, when Malaysian palm oil producer IOI was found to be deforesting, it had its sustainability accreditation removed by the RSPO (the Roundtable on Sustainable Palm Oil, of which IOI was a founder member). This made its oil unsellable to the majority of buyers. It took Unilever a further year of its own investigations after RSPO renewed accreditation before it would again buy palm oil from IOI.
The point of this is that simply stopping buying is not enough, the users of the oil have to engage with IOI to make sure that it understands why, what it has been doing wrong and what the implications are if it refuses to change its ways. If it is of any interest to you, the burning of rainforests was believed to account for 20% of global carbon emissions; the largest single source of carbon and more than the world’s combined transportation systems. Latest estimates are that a reduction in the rate of deforestation has reduced this to 10% (source: Greenpeace, Rainforest Alliance).
The past three months were again very benign for investment markets. Global equities drifted dreamily upwards, but with the UK as a notable laggard. Emerging and Frontier Markets lead the way, but the 5% rise in the Dow Jones is not to be sniffed at. Bond yields have barely shifted. There is almost a degree of serenity, as if markets have meditated into a sense of higher consciousness, divorced from worldly troubles.
This is the month in which the Federal Reserve switches from Quantitative Easing to Quantitative Tightening. The very policy that created this serenity is reversing, yet markets care not one iota. The message, I think, is that they do not believe that the Fed will see it through. The economy will slow again and the banks will restart QE. It is easy, risk-free money. It is also thoroughly unhealthy that risk-taking should be so discouraged, that achieving such low returns should be so richly rewarded. Something has to change.
Last week was a win for me with the unspotted reference to the Candy Man. Today, what should one do if Sister Suzie, Brother John, Martin Luther and Phil and Don are at the door?
