Morning Brief – US Dollar

US Dollar


Despite showing a gain to above JPY 106, USD was at a 3 year low yesterday as the commodity currencies such as the AUD and CAD benefited, as did the EUR posting $1.2230. Copper traded at $9,500 a ton its highest in 10 years and 10 year USTreasuries yielded 1.46%.


Asian Markets


It was South Korea’s Kospi that set a blistering pace with a gain of over 3% yesterday followed by the Nikki with 1.67% and the Hang Seng with 1.2%. As the end of the UK tax year approaches in just over a month, those reviewing their pensions and investments would do well to look at those Asian markets. While not all those Asian economies are uniformly attractive, nevertheless looking at China and the Greater China dependant economies plus the commodity economies such as Australia, if one subscribes to the view of a healthier global economy in 2021, there has to be a place for a decent amount of Asia in everyone’s portfolio. And this morning…oh dear, all those gains given back, but on the other hand those markets now cheaper for bargain hunting buyers!


W.L.Gore and Apple


One makes high quality sports clothing and one makes high quality electronic consumer goods; both are of course American. The difference lies in their treatment of customers and especially when there are issues with their products. One has a well oiled machine with its customer interface and the other said: you can make a complaint if you like, but it will be ignored. The first concerned some Goretex gloves (GBP40) that had faulty stitching and the second was in respect of its recently acquired Dr Dre trademark and its top of the range Powerbeats(GBP 222) that failed to re-charge. Moral of the story: when a very large company like Apple loses touch with its original mission regarding customers, consumers need a viable alternative. For me it will be Bose-great service and GBP179.


Eric Clapton


It was this day in 1997 that Eric Clapton won the Best Male pop category at the 39th Grammy Awards. EC has done good-at the last count worth over USD 450 million and still enjoying playing almost 50 years on from his debut in 1962. This song made it into the top 40 in 20 countries and was in the Billboard Hot 100 for 43 weeks. Here is Change the World:


If I could reach the stars
I’d pull one down for you
Shine it on my heart
So you could see the truth
That this love I have inside
Is everything it seems
But for now I find
It’s only in my dreams
That I can
Change the world
I would be the sunlight in your universe
You would think my love was really something good
Baby if I could
Change the world
If I could be king
Even for a day
I’d take you as my queen
I’d have it no other way
And our love would rule
In this kingdom that we had made
’til then i’ll be a fool
Wishing for a day
That I can
Change the world
I would be the sunlight in your universe
You would think my love was really something good
Baby if I could
Change the world


Have a Great Weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – CHF



By the standards of the Swiss Franc, crosses including EURCHF, GBPCHF, and USDCHF are moving alarmingly fast. The sell off the in Franc is not necessarily bad news for either the aggregate Swiss population nor the rest of the world. Alongside the push towards normalisation in real economies and markets alike, the still exorbitantly high prices of defensive assets stands to undermine signals of a durable and credible recovery. The Swiss Franc is one such defensive asset that investors hold onto to ride out troubling economic and financial conditions. With the EURCHF pair having soared to one year highs, it now faces considerable technical resistance levels. In order to demonstrate concrete confidence in the recovery, Swissy and other defensive assets should take out current support levels and continue their decline.


The weakening in the past few days in CHF has been violent. On Tuesday alone CHF gained in excess of one cent on its major crosses. This price move has prevailed against a backdrop of rising inflation expectations despite major central bank governors’ best efforts and further outperformance in the commodity space. As a defensive asset, the Franc usually sees investors hold short open positions against it during normal and good times. Throughout the pandemic, market participants particularly in the speculative space have held long positions with considerable open market interest. This market positioning appears to be increasingly unstable and in line with the gains already made this week could see a short squeeze.


The Franc also attracts one of the lowest interest rates in the G10 currency space with little sign of changing anytime soon. As the market opens up and risk appetite develops further, the Franc could also earn for itself the status as the go to funding currency to fulfil the market’s rediscovered appetite for the carry trade. This could put further downward pressure on CHF with a sell off towards 1.15 versus the Euro plausible by year end. It is the improving conditions globally with the vaccination trade and Draghi’s technocratic government in Italy that are providing the foundations for a weaker Franc in the present market. Any adverse shocks that disturb the more sanguine outlook than we have been used to in the past 12 months could upset this trajectory.




Discussion and Analysis by Charles Porter

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Morning Brief – UK Unemployment

UK Unemployment


Since march 2020 the number of people in work has fallen by 726,000 which is a 5 year high in unemployment to 5.1%-more than 60% of those jobs lost are the under 25’s. Within that overall figure, in Q4 2020 the number of people employed declined by 114,000. The statistic that stands out is that there are (only) 121,000 people actively looking for jobs. Before drawing any hasty and ill informed conclusions on that, this is due in part to the large and one of the worst hit sectors, the hospitality industry where those who want to work simply have no jobs to apply for given that cafes and pubs remain shut. GBP remains buoyant at a high versus EUR at 1.1570 and versus USD at 1.4075 partly on USD weakness and still riding high on the UK’s vaccination programme. Longer term GBP strength will depend on productivity and the overall health of the UK economy.


Travel Bookings


This week has seen the beginnings of a reversal in the fortunes of travel companies with tour operator Tui reporting a 500% increase in foreign holiday activity on its website. Some caution of course on two fronts: first that increase is from a very low base and secondly that understandably people are cautious given the uncertainty over vaccination passports and the draconian and expensive quarantine regulations upon return to their home countries. While Easter looks to be lost in terms of holiday bookings, hopes are pinned on May and the summer season. Meantime EasyJet and other short haul European airlines are enjoying a flood of enquiries.


The Eagles


Back on this day in 1976 The Eagles’ Greatest Hits went platinum and this was the first time a band had sold 1 million copies of a record. The Eagles were to stay in the Top Billboard 100 for the following 2 years and this song remains as much of a hit 45 years later: Hotel California


On a dark desert highway, cool wind in my hair
Warm smell of colitas, rising up through the air
Up ahead in the distance, I saw a shimmering light
My head grew heavy and my sight grew dim
I had to stop for the night
There she stood in the doorway;
I heard the mission bell
And I was thinking to myself,
“This could be Heaven or this could be Hell”
Then she lit up a candle and she showed me the way
There were voices down the corridor,
I thought I heard them say…


Welcome to the Hotel California
Such a lovely place (Such a lovely place)
Such a lovely face
Plenty of room at the Hotel California
Any time of year (Any time of year)
You can find it here


Her mind is Tiffany-twisted, she got the Mercedes bends
She got a lot of pretty, pretty boys she calls friends




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – 14 Days

14 Days


Bond yields and commodities continue to climb higher at a rapid pace. Commodity indices have now surpassed pre-pandemic levels amidst expectations of inflation around the corner. Commodities in particular are benefitting from analysts’ predictions that the restoration of pre-pandemic demand will outpace supply normalisation in the short-run. The ECB President moved yesterday to caution the market that her Bank was closely monitoring rising borrowing costs in the Eurozone. The bond and Euro market only reacted with a modest deviation in their trajectories, resolved to continue their respective paths higher. The longer run implications of steeper yield curves and economic growth look relatively certain given the inevitable bounce back from the pandemic in H2’21. But with Biden’s $1.9tn stimulus plan expected to be subjected to lawmakers’ votes as early as this week, what could the next two weeks hold in store for markets.


So far this year the worst performing currencies have been those of South America. Ranging from -6 to -4% on the year, the Argentine Colombian and Mexican pesos join the Brazilian Real as the worst performing currencies of the year. With limited or no vaccination schedules in place and monetary easing expected to follow, there is little evidence to present to suggest this trend will unwind anytime soon. The best performing currencies are those with strong pandemic responses and often in the cyclical commodity currency space. The best performers so far this year are TRY, GBP, AUD, NZD, NOK all with a considerable exposure to commodity prices. The Lira is the odd one out thanks to stubborn interest rates providing one of the only positive and significant real yields at the currency level on the planet. There is scope particularly in TRY and GBP for progress to be unwound given the fragile sentiment surrounding these currencies, but in the best performers too it seems the trend of higher yield, high beta and cyclical currency outperformance should continue.


The big story to watch out for over the comings days and short number of weeks is going to be how the market digests the outcome of the push to pass 1.9tn Dollars of stimulus program over the line. As with recent large fiscal stimulus measures, the sudden flood of new cash in such large volumes into the pool of USD should, by the simple laws of supply and demand, cause its price to fall. In the case of the Dollar especially, given its reserve and safehaven status, the extra fiscal push towards economic restoration and the positive global stillover of the stimulus in terms of trade and investment could release further defensive Dollar demand. In the run up to the vote expect an inverse correlation between the Dollar and the markets perception of the likelihood of the bill passing. The more likely Biden’s bumper fiscal spending plan looks, the weaker the Dollar should trend. This in turn should give space for emerging and commodity currencies to expand into.


However, what we could see if the mega stimulus plan gets voted through is potential reversal of this trend in a quasi-buy the rumour sell the news event. Subject to how the fixed income market reacts, if the passing of the bill triggers yet another sell off in US treasuries and the yield climbs even higher in the medium and long dated end of the curve, the reward could attract investors and hot money back to the Dollar. Over the next two weeks therefore, subject to the passing of the stimulus bill, it is going to be critical to monitor other markets’ interpretation of the fiscal package to determine the net result on the US Dollar. Certainly discussions overnight regarding how the US intends to fund the fiscal spending through higher corporate taxation and safe havens could encourage a deterioration of the capital account to the detriment of the Dollar also.




Discussion and Analysis by Charles Porter

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Morning Brief – Inflation



A survey recently undertaken in the USA found that both market professionals and also retail investors when polled, by a significant majority responded that they were not concerned about inflation. Without wishing to rain on that particular parade, we should all remember that only approximately half of the population have any experience of inflation. Apart from increasing productivity or raising taxes, the historic remedy for governments looking to reduce debt has been to inflate their way out. While there has been a barely imperceptible increase in inflation in the past year, it is nothing in comparison to the 1970’s when oil stood at $3.56 in 1973 and reached $39.50 in 1980. An equivalent move in the 2020’s would see oil go to $320 and no-one is anticipating that-thank goodness. However as markets look hopefully for signs of an uptick in inflation, for the other half of the population that do have first hand experience of inflation, it is with some trepidation. UK Inflation stands at 0.5% and in both the USA and the EU it is pretty much the same.


South Africa Tax


The RSA Treasury is seeking to raise ZAR 40 Billion (USD 2.73 Billion) over 3 years by increasing the country’s income tax rates, but due to the loss of skilled and high earning workers who have migrated overseas, this is looking unlikely-good news in some ways for tax payers, but the less good news for the country is that the tax base is too small for the amount of debt that has been incurred.


South China Sea


Tensions rose again over the weekend with Taiwan scrambling planes to intercept Chinese fighters that once again invaded its airspace. In addition to the US presence in the area, France separately dispatched an aircraft carrier to the South China Sea for exercises. Unkind suggestions were made that this was to distract from France’s fascination with President Macron’s waistline-he is reported as having increased his previously sylphlike profile from 73 kg by at least 10%. EUR unmoved and trading at USD 1.2120.


James Blunt


Singer, songwriter, musician and record producer, James Blunt has demonstrated great success in his career from his start as an army officer together with a wide selection of sporting interests. As he enjoys his 47th birthday today, he can reflect on all that plus the no small feat of selling more than 20 million records. Here is one of his best:

My life is brilliant

My life is brilliant
My love is pure
I saw an angel
Of that I’m sure
She smiled at me on the subway
She was with another man
But I won’t lose no sleep on that
‘Cause I’ve got a plan


You’re beautiful
You’re beautiful
You’re beautiful, it’s true
I saw your face in a crowded place
And I don’t know what to do
‘Cause I’ll never be with you


Yes, she caught my eye
As we walked on by
She could see from my face that I was
Fucking high
And I don’t think that I’ll see her again
But we shared a moment that will last ’til the end


You’re beautiful
You’re beautiful
You’re beautiful, it’s true
I saw your face in a crowded place
And I don’t know what to do
‘Cause I’ll never be with you




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – US Employment

US Employment


Keenly watched as a barometer of not only the US but also the global economy, initial claims for unemployment benefits was higher than expected this week and compounded by a revision upwards by 55,000 in the claims for the preceding week meant that the market did not like it with USD weakening after two days of gains. The headline figure is that 18.3 million Americans were receiving unemployment benefits at the end of January. The weekly figures can as demonstrated be volatile and this week the release has been exacerbated by the auto manufacturers closing down production on some production lines due to a world shortage of semi conductor chips.




The German steel company has called off talks with UK steel company Liberty owned by Sanjeev Gupta. The war of words started immediately with the blame game in full swing last night with Thyssenkrupp accusing Liberty of making a lowball offer and in return Liberty saying it was incomprehensible that Thyssenkrupp had chosen to call it a day. In case you are wondering the gap is quite wide with Liberty valuing the steel division at negative EUR 1.8 billion and Thyssenkrupp seeing it as being zero to minus EUR 400 million. With GBP at a recent high versus EUR, that gap may not be quite as large as it seemed a few weeks ago.




News that VW is contemplating a stock market listing for wholly owned marque Porsche. The argument for doing so is clear cut: VW needs cash (lots of it) to get in the race for electric vehicles properly. Ferrari shares trade on a heady multiple of 32 times earnings which can in part be explained by Italian flamboyance and exuberance; the rest is due to the juicy margins on their cars. A more sober German multiple of for example 20 times Porsche earnings would deliver VW an amount almost equivalent to the value of the whole VW group at present. Porsche already has an EV product in the Taycan, so if you do not fancy a set of flash wheels, keep your eyes peeled for news of the listing. The shares may represent long term value. On the other hand, if you are looking for an excuse, Porsche do produce superb cars…!


One Hit Wonder


Maybe unfair but Harry Nilsson did only have one number one hit. It was this day in 1972 that the Pete Ham and Tom Evans song released by Harry Nilsson went to number one and was a smash hit. In 1994 Mariah Carey also enjoyed huge success with Without You by staying in the Top 40 for 21 weeks.


Without You:

No I can’t forget this evening or your face as you were leaving


But I guess that’s just the way the story goes
You always smile, but in your eyes
Your sorrow shows
Yes, it shows


No I can’t forget tomorrow
When I think of all my sorrow
When I had you there but then I let you go
And now it’s only fair that I should let you know
What you should know


I can’t live
If living is without you
I can’t live
I can’t give anymore
I can’t live
If living is without you
I can’t give
I can’t give anymore


Well, I can’t forget this evening or your face as you were leaving
But I guess that’s just the way the story goes
You always smile, but in…


Have a Great Weekend!




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – Rates



Yields on longer dates US debt have now largely wiped out their post March 2020 collapse. The sell-off in global government debt is yet one more symptom of the so-called reflation trade and the market’s bet on normality returning over the coming months and quarters. On the one hand, with a huge fiscal stimulus plan progressing in the United States and 2021 growth recently forecasted by Morgan Stanley at 6.5% perhaps this move is sustainable. However, with much of the planet still in varying degrees of lockdown, promising yet adolescent vaccination programmes unfolding, this move and stretched price valuations could lead us to at least one more Covid-related market sell-off.


So far this week data hard and soft from all corners of the globe have fuelled and sustained the sell-off in treasuries. For the first time since the pandemic began a US 30-year note trades with a yield above 2%. With benchmark interest rates still at record lows, the steepening of the yield curve is driven by market expectations of inflation returning and a stronger economy in the longer run. But higher yields, particularly if ushered in quickly and not at a rate easily digestible by other asset markets can cause severe bouts of volatility. Record low yields in government and corporate paper across developed economies have been a source of rising equity valuations and sustained the stock market rallies we have seen since April last year. This rally in turn has been seen as the barometer of financial stability and market calm despite economic fundamental duress. If the stock market panics about rising yields in the US treasury market and other geographies, the sell-off could create a fear that raises volatility and encourages a correction of market risk appetite.


For now, however, yields remain at palatable levels for risk assets with the real yield of much global debt still in negative territory. Any severe rout in the US treasury market would be presumably data driven and therefore we will have to wait and see the impact of 12 months of disaster government spending levels and particularly the fate and effect of Biden’s new stimulus package. So long as stimulus packages serve to plug the consumer output and private investment gap rather and crowd out and over finance the economy the result of fiscal spending should not be overly inflationary. If anything, a little bit of inflation will help governments pay down the extraordinary accumulation of debt they have been forced to amass during the pandemic.


Therefore, it’s too early for the market to panic about rising inflation and should rather enjoy the prospects of a rosier economic backdrop around the corner. Immediately for foreign exchange therefore, a better determinant of value and price movement will be continue to be the relative success of a nation’s vaccination program and how quickly they can get their economy back to full output. In the US and the UK over the medium run therefore, higher interest rates at the front end of the curve coupled with strong economic growth could see their currencies outperform.




Discussion and Analysis by Charles Porter

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Morning Brief – US Dollar

US Dollar


With US consumer sentiment falling in the last two weeks and indications of slower job growth, hopes for a fast snap back for the US economy have been dented but not badly damaged-see below. What this adds up to is a drop of 1.5% in the USD over the past fortnight. All grist to the GBP mill which at over 1.39 is benefitting from a Boris vaccination bounce as well as the USD weakness. Expectations of a stronger global recovery is of course also bad for the USD.

EUR has recovered some of its poise and is trading at USD 1.2150+ while the row between EU and its constituent parts rumbles on over the European vaccination rollout.


Silver and Gold


Silver off at $27.90 and Gold down $22.50 a whisker above the psychologically key level of $1800-why? It’s all down to where the bond market is trading with 10 year US Treasury yields at 1.25% a high for this year buoyed by hopes that the $1.9 trillion Covid relief package is progressing towards finalisation plus what is perceived as an increasingly successful US vaccination program.


Hang Seng


Hong Kong’s Hang Seng index re-opened post New Year with a bang yesterday jumping almost 2% to 30,746.66. While China remains shut, stocks rallied and interestingly those rises notably included cinema stocks IMAX China  and Alibaba Pictures. Beleaguered cinema stocks in the West might draw comfort from the fact that Chinese box office takings during the week ending 11-02-21 set a revenue record.


Good Vibrations


With the end of February (almost) in sight, surfers are dusting off their boards and getting ready for the season everywhere from Biarritz to Big Sur by listening to their surfing sounds.  Therefore it is appropriate to turn to Brian Wilson and The Beach Boys who this day in 1966 recorded Good Vibrations. After that Brian Wilson having experimented with marijuana worked his way through the entire menu of so called psychedelics before moving on to cocaine. Happily now at the end of that particular journey, Brian Wilson continues at the age of 78 to perform and produce great music. Here is Good Vibrations:


I-I love the colorful clothes she wears
And the way the sunlight plays upon her hair
I hear the sound of a gentle word
On the wind that lifts her perfume through the air


I’m pickin’ up good vibrations
She’s giving me the excitations (oom bop bop)
I’m pickin’ up good vibrations (good vibrations, oom bop bop)
She’s giving me the excitations (excitations, oom bop bop)
I’m pickin’ up good vibrations (oom bop bop)
She’s giving me the excitations (excitations, oom bop bop)
I’m pickin’ up good vibrations (oom bop bop)
She’s giving me the excitations (excitations)


Close my eyes, she’s somehow closer now
Softly smile, I know she must be kind
When I look in her eyes
She goes with me to a blossom world


I’m pickin’ up good vibrations
She’s giving me excitations (oom…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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Morning Brief – False signal

False signal


As a barometer of the world economy the price of oil is watched closely. Due to the relatively inelastic demand and supply of oil, at least in the short run, higher oil prices tend to be a signal of a more active global economy. Therefore movement of energy market tickers higher can serve as the metronome of the global economy.  What we see in today’s market is a confusing signal of a rising oil price but one that could be down to idiosyncratic market conditions rather than a shift of gear for worldwide markets. Certainly, the recent performance of commodity currencies attests to the rising price of oil as a false signal.


Artic conditions have descended through northern America with areas as far South as Texas and the Gulf of Mexico experiencing sub-zero conditions. The freeze has not only driven up the demand for energy but also taken sources of energy including refineries and renewables off grid. Energy prices across the United States, particularly in those areas not familiar with such unseasonable weather, have sky rocketed. This sharp price rise has fed through to the global energy market with the price of Brent crude, oil located in the North Sea, still holding onto price gains this morning. This rise in oil and energy prices has had notable effects on currencies whose economies are exposed to the energy market, namely NOK and to some extent GBP. However, given that the price move is not indicative of a healthier global demand and cross-commodity price increase, traditional commodity, high-beta, currencies are not feeling the warmth they usually might amidst rising energy prices.


Identifying any signal from the noise in energy prices created by the rare conditions in the US oil market is challenging. The price move is particularly important as it sits within the broader, more important and systemic reflation trade that has been captivating markets. As the world prepares for what UK PM Boris Johnson has framed to be the last lockdown and return to normality, many market participants are expecting the price of oil and commodities at large to rally. This expectation is fed by the anticipated broader restoration of demand towards pre-pandemic levels and one that Wall Street names including JPMorgan and Goldman Sachs could send the price of oil per barrel close to $100. It is this kind of broader reflation that will benefit the wider commodity market and therefore impact the valuations of currencies in the wider commodity space including CAD, AUD and NZD. As temperatures are expected to give way to more mild conditions next week, we shall see whether today’s idiosyncratic market event is the catalyst to accelerate the pace of the reflation trade.




Discussion and Analysis by Charles Porter

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Morning Brief – St Valentine

St Valentine


Named after two martyrs both named Valentine executed by Roman Emperor Claudius ll in the 3rd century AD on 14 February(14-02-0002), Valentines Day now enjoys worldwide commercial success. It started off as a pagan festival which was then adopted by the Catholic Church before taking off with cards, flowers and gifts being exchanged. Needless to say, SGM-FX Operations Head and romancer Romeo, Jamie Pritchard marked Valentine’s Day florally, but in addition he substantially raised the bar by inking the purchase of a new home over the weekend.


Gorka Szczesliwicka


This will mean something to Polish readers and especially Polish skiers as being the nearest skiable mountain near Warsaw which has just re-opened. In a sign that gives hope to the rest of Europe, Poland has taken the positive and pragmatic decision given the relatively low incidence of Covid to get the entertainment sector going by declaring the cinemas and ski slopes open which will in turn give the economy a much needed boost. The Zloty duly rallied on this news and strengthened to 3.71 v USD.




Yesterday 14-02-21 you may have been too busy celebrating Valentine’s Day to have noticed, but a new radio station was launched named Boom. Targeted at baby boomers ie those born between 1946 and 1974, Boom has a great selection of presenters, music and other excellent content. Broadcasting digitally from London, Birmingham, Glasgow and Bristol, Boom can be found at 97.3 FM. Check it out, it’s just the antidote for 2021!


Livin’ on a Prayer


New Jersey rock band Bon Jovi released this hit song in 1987. Three members of the band that was launched in 1983 are still part of the current line up and continue to pack out the very largest stadiums. Here is Livin on a Prayer that still resonates today 34 years on:


Once upon a time not so long ago


Tommy used to work on the docks, union’s been on strike
He’s down on his luck, it’s tough, so tough
Gina works the diner all day working for her man
She brings home her pay, for love, for love


She says, we’ve got to hold on to what we’ve got
It doesn’t make a difference if we make it or not
We’ve got each other and that’s a lot for love
We’ll give it a shot


Woah, we’re half way there
Woah, livin’ on a prayer
Take my hand, we’ll make it I swear
Woah, livin’ on a prayer


Tommy’s got his six-string in hock
Now he’s holding in what he used to make it talk
So tough, it’s tough
Gina dreams of running away
When she cries in the night, Tommy whispers
Baby, it’s okay, someday


We’ve got to hold on to what we’ve got
It doesn’t make a…




Discussion and Analysis by Humphrey Percy, Chairman and Founder

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