Detailed DD post [re-post after r/pennystocks removed it]
I posted this yesterday morning (UK time) but after 5 hours or so, pennystocks deleted the original post. A few people messaged me asking for it to be shared in a few High Tide specific pages. So here it is! -- This is my first time posting a DD post – a friend of mine who moderates on SPACs has shared some analysis I have written previously, but I’m keen to share this here, and see if there is any appetite for sharing my own personal written DD I have on the 30 stocks I have across a number of different portfolios. I have modified this format, as it was originally a script for a video which I created on the stock. If you prefer to listen – check it out here: https://youtu.be/qsjwU7kkPsw Some of the market stats (market cap, current multiples, etc.) are correct as of Feb-06, and clearly a little outdated since the price movements. Not a financial advisor, do your own DD. I am long HITI and have an expectation of a long term hold on this stock. Overview
High Tide Canada-based cannabis retail company, operating under multiple brands. It operates under 3 core divisions:
Brick and mortar retail – 4 key brands with just under 70 locations in Canada. Brands include: Canna Cabana, New Leaf, Meta Cannabis and Kushbar. Forecast to have around 115 stores by end of 2021
Online retail – has 2 brands, both of which attract millions of viewers per month – Grasscity.com and CBDcity.com
Wholesale – manufacturer of paraphernalia in US and Canada. Number of products are branded with various celebrities, Snoop Dogg, Paramount Pictures, Trailer Park Boys and many more
Has good c-level execs and experienced executive board; hold significant stake in the business. CEO Raj Grover holds just over 21% of the shares
Currently has a market cap of around $280m. Still significant upside to the valuation – see analysis later in post
Investment Merits Very strong market growth:
Business has demonstrated growth both organically (through new store openings, more online sales and greater wholesale sales), as well as inorganically through M&A
Growth in markets which High Tide has a physical presence in is expected to be very strong. North American cannabis market (Canada and US) is forecast to grow by 30% a year to 2027 (source: research and markets)
Analysts covering High Tide are forecasting growth in excess of this, which is positive to see and implies capturing market share
New markets / geographies ‘opening up’, legalizing and regulating cannabis is also an exciting and realistic prospect for incremental growth:
The US federal legalization debate is on the table
Many other countries are considering this too and High Tide is well positioned for these; this is catalyzed by the fact that government debt has increased significantly as part of the response to the COVID-19 health crisis. This needs to be repaid somehow, and increasing tax rates on existing taxes is an unpopular political move. Finding new tax revenues is a more palatable way of increasing tax revenues for governments. This is especially important in countries where elections are upcoming.
Personally I do expect to see this accelerate the agenda for the regulation and legalization of cannabis in many new countries
Whilst predominantly Canada and US based, High Tide does have presence in some markets where cannabis is not regulated or legalized, the UK for example (~10% of Grasscity sales are made here) and so it is well positioned with a strong and established brand to capitalize on this opportunity, when / if the market ‘opens up’
Regulation
High Tide benefits from the regulatory focus and overhang on the cannabis retail sector as it represents a strong barrier to entry, making it more challenging for new competitors to enter market
Participants in the market need to have licenses and ensure consistent compliance with laws to continue operating – failure to comply can result in significant financial penalties
Personally I normally don’t like investing into retail. There are usually fairly limited barriers to entry, minimal differentiation and negligible customer loyalty, however the cannabis market does have different characteristics in this respect and makes it a more compelling proposition
Regulation also benefits those with scale, something High Tide has as the leading player in the market. It costs money to obtain and retain licences to operate and it costs money to ensure compliance with all the laws and regulations and that all staff are acting in accordance with these
Some parallels in this respect which can be drawn to casino gaming in casinos; you don’t see new casinos popping up at the same rate which you see new restaurants or apparel stores opening
Demand
There’s a lot to like about the demand dynamics for High Tide. It’s vice-nature means that demand is less correlated to disposable incomes. Given where we are in economic cycle, especially important consideration
For those doubting this, check alcohol, tobacco or gambling expenditure across economic cycles historically, for a proxy
Strong performance throughout COVID-19 crisis
Despite heavy weighting towards brick and mortar, (the most hard hit part of retail) it has effectively managed the shift to online, which is a positive
Has relied on government support and financial assistance in the form of job retention schemes (address in more detail later in post)
This demonstrates management are capable and have effectively navigated the challenging situation
Data
Massively summarized from the video, (and my video on KERN) so check that out if interested in this point, however, they have unique access to supply chain data which could be monetized effectively and generate strong levels of recurring revenues
Other established sectors have a trusted party with such unique access to data (e.g. alcohol, lithium, different foods, etc.) and the opportunity here is enormous
I would like to see High Tide capitalize on this
Forecasts financials & analysts
Currently 2 analysts covering High Tide, both have a buy rating on the business
Their coverage is slightly outdated (expect this being updated soon and a further catalyst for positive price action) and their price targets are 60c; at the time their reports were published, they were forecasting a 4x upside (HITI was trading at ~15c)
Same analysts also forecasting strong growth - 77% CAGR to 2022. They are forecasting revenues of around $250m and EBITDA of $46m. A reminder here, these are professional analysts, not YouTube students – these come from their financial models, the assumptions of which are discussed with management
Going to go quick here, its explained more slowly in the video but High Tide is currently valued at a significant discount to the other listed peers
Looking at EV / FY+1 Sales multiples – EBITDA not meaningful as some of the peer group are EBITDA negative and High Tide itself has only recently become EBITDA positive
Personally, I think Planet13 is the most comparable given its business model
Taking both Planet13 multiple and peer group average multiple, this is then applied to High Tide’s forecast FY+1 sales to calculate an enterprise value – this is adjusted for net debt to get to a market capitalization and then divided by the share count to get an implied share price
The table below shows the implied stock price valuations from this analysis
Net debt will change in coming year given the capital structure and a large number of convertible notes – this has been ignored given it will have small impact on the price
The share count will change as a result of dilution from various instruments – if this bothers you massively then look at the valuation discount on the basis of the enterprise value as it does not impact this (and only slightly on the market cap given minimal impacts to cash from instrument execution, etc.)
Not accounting for any stock split, consolidation or any other M&A deals
The FY21 financials are on the basis of the mean broker estimates from Thomson Reuters – Seeking Alpha has different and slightly outdated ones
US is only a small part of the market which High Tide addresses, while a change in regulation would have a big impact on the company, currently it is unlikely this would happen, given the discussions about potential federal legalization
Canada regulation is established and not going anywhere
Other countries likely to legalize and regulate cannabis, as outlined earlier
Dilution
No escaping that there will be some significant dilution for shareholders, as pointed out in the table below, but this should be already priced into the stock
Potential that new equity issuances could occur to help finance growth, but provided this growth is delivered, it should be accretive for the stock price
A risk that investors need to be aware with for all companies which have relied on government financial support during COVID-19 measures. Such support has resulted in the number of businesses going bankrupt decreasing massively – this is at a lower level than it ever normally is and is masking some real underlying issues within companies. As investors we need to be open eyed about this
As High Tide has benefited from support in the form of the Canada’s Emergency Wage Support scheme, there is the risk that once this is lifted it may become apparent that the cost base has not been effectively managed
Personally, I think this is mitigated by the synergy analysis conducted as part of the M&A. A full cost base analysis would have been conducted to calculate the potential $8.4m synergies so strong likelihood that this is under control, but should keep on our radar and reassess
Marketing expenses and celebrity licenses
Need more information to ascertain whether these are underpinned by a compelling ROI. Seen a lot of people suggest this is a great positive, but the impact on sales volumes from these is unknown, as is the terms of these license agreements (e.g. split between upfront fee vs. volume-based fee)
No escaping the fact that it is an increased cost and so need to understand the ROI this generates to determine whether it really is compelling
Is there really more demand to pay a premium for Snoop Dogg bongs, Guns n Roses papers, Cheech & Chong grinders, or whatever they may be?
So far management have suggested this has been helpful in driving new sales, but this is something to dig into more
How To Value A Stock (From Someone Who Has Beaten The S&P Almost Every Year Since 2008)
I recently wrote this up for my friends who asked me how I do what I do. I figured I'd share it here. This is freely available to anyone who wants it, though please credit me if you simply copy/paste. Nothing here is novel, and can be done by anyone. I am not a financial professional, and the example given below is only Abbvie because I forgot that Abbott Labs was alphabetically the first in the S&P 500 when picking an example. First, let’s come right out and say that if you do not have the time to do this, or do not find it enjoyable, just buy low-cost index funds that track either the total market or the S&P 500. Second, let’s make an important distinction: Investing – This is the act of purchasing assets for less than their intrinsic value. This PDF will focus on how to determine the intrinsic value of an asset that produces income. Note that for most assets, this is simply how much money you can extract from the asset over the period of time that you hold it for. There’s no other value than money in investing. Causes and emotions are what philanthropy is for. Speculating – This is, at its core, the act of taking supply of an asset from the present to the future (by hoarding it). If there is more demand, lower supply, or both, this pays the speculator to take the asset from a period of low value to one of high value. It is not gambling, but is very difficult to do, since it entails taking on timing risk. It is not illegal, immoral, or impossible, but I have no special insight into it. I’ll leave it there. Gambling – This looks a lot like speculation, but without any particular reason to believe the asset will be more valuable in the future. Speculators at least estimate the value of an asset to investors, as they are ultimately the end market for an asset. Do not gamble. Full stop. Determining the intrinsic value of an asset The value of an asset is simply the present value of all future income that asset can provide you. Since a dollar in five years is naturally less valuable than a dollar today, you have to discount future income against the opportunity cost of forgoing the dollars you invest today. When we get to the Present Value equation, this is represented by interest. It can also be thought of as the opportunity cost of investing in the asset instead of some other asset or simply consuming the dollars instead. Here’s the actual math. Note that it’s not super hard, and while I will explain it, there are dozens of free websites that will quickly let you calculate this. The key phrase to Google would be “present value of a growing annuity calculator.” PV = (C / i - G) * {1 – [(1 + G)/(1 + i)]^n} PV = present value C = cash flow per period n = number of payments i = interest rate G = growth rate The value for PV is your estimation of what the asset is worth today. If this ends up far higher than the market price, you are probably purchasing dollars for quarters. Avoid edge cases, as you are guessing about both the interest and growth rate. C is the cash flow per period. If you have a high degree of confidence in the culture of the company and it has a long history of being good stewards of retained earnings, you can use the earnings per share (EPS). I usually use the dividend. It is impossible to fake or financially engineer a dividend, and requires less looking through financial documents to make sure it’s what it appears to be. But for, say, Apple or Microsoft or Chevron, feel free to use the EPS. The number of payments is how many payments you expect while holding the asset. Dividends in American companies are typically quarterly (though some pay monthly or every six months, so check on that), so every multiple of four would represent one year if you choose to do it that way. If n = 16, then you’re expecting to hold the asset for 4 years. You can also put in a year’s worth of dividends and keep n = years rather than quarters. I typically do n = 30, since 30 years is both a long time horizon that is realistic, and coincides when I will hit “retirement age.” You will have to decide how far ahead you’re planning. For most people, they are net purchasers of investments while working and net sellers while retired, so keep that in mind. Note that using years instead of quarters will lessen the amount of compounding, and will provide some cushion in case you’re wrong. Interest is one of the two variables you have to guess at. Typically, one would put what you expect the actual long-run interest rate to average for this investment. Unfortunately, this is really difficult. Instead, I use a rate that represents my opportunity cost. There are any number of relatively safe ways to get a 5% yield on money invested, so I generally use i = 5% to represent that this asset has to perform better than a utility or telecom or real estate investment trust. Feel free to use what you feel is most appropriate for you. A higher interest rate will lower the value of the asset, so high-balling this number will provide some cushion in case you’re wrong. The second variable you have to guess at is the growth rate. If you’re looking at the dividend, you want to know how fast to expect it to grow over time. If you’re using the EPS for C, then you want to see how quickly the total earnings are growing per share. This is extremely difficult to predict. I recommend taking the 5-year growth rate and halving it. Dividends will also be more predictable here, as most companies pay out far less than they make, which means even if EPS grows slowly, the dividend can still grow quickly for many years after a boom is over for the company. Note that lowering your estimate for G will lower the value of the asset, so low-balling this number will provide some cushion in case you’re wrong. OK, so let’s walk through an example. I’ll use Abbvie, a biotech/pharmaceutical company. It has a quarterly dividend for the coming year of $1.30/share. Its dividend has an 18.5% growth rate over the last 5 years, and has grown it for the last 7 (it’s only been around for 8 years). I assumed a growth rate (G) of 7%. I used $5.20 as the starting dividend this coming year and used years for my n = 30. As always, I used i = 5%. This gave me an estimated present value of 1 share of Abbvie at $197.94. As of writing this, Abbvie shares are trading on the market at $103.43. This looks like a screaming buy, but first let’s look at why I have a high degree of confidence. Note how the interest was higher than the going rate – I used my “low-risk alternative” as an opportunity cost. Abbvie has an extremely high rate of growth for its dividend, so I took less than half of its current rate. I also calculated annually rather than quarterly, which reduces the impact of high rates of growth. That’s three places in the equation where I consciously lowered the estimated value of a share of Abbvie, and it still came out as a strong buy – spending less about 50c for a dollar! I do this because even if I’m wrong in some or all of my predictions, I now have quite a bit of room to be wrong and still make money. It’s like how you don’t walk next to a steep cliff, right? You should know how to walk where you want to, but there’s always the small chance something could cause you to slip or put a foot wrong. But if your plan is always to be 5 feet away from the edge of the cliff, the odds are that you’ll not go over the edge even if you fall down. Many people feel this is over cautious. But let my portfolio speak for itself. I’ve beaten the S&P 500 index fund every year except one since 2008. My brokerage only keeps digital records back to Dec 2015, but the S&P 500 returned 101% since then – with dividends reinvested. My own portfolio has returned 256%. So caution is still very high reward. In fact, if you just don’t lose, you’ll do better than the vast majority of professional money managers (about 85% of whom cannot even match the index funds). Due diligence still has to occur Now, we can’t just go straight out and buy Abbvie – though it’s a high profile company that receives lots of investor and regulator scrutiny so it’s less likely to have a landmine than most. Just to make sure, you’ll want to do the following before buying shares in this company: -Check the debt load. If the debt is very high, has very high interest rates, or has a lot of it maturing very soon, then this is a yellow flag. It doesn’t mean don’t buy, but make sure you understand the structure of the company’s debt and make sure it won’t impair the company’s earnings going forward. This information is found on the balance sheet. Abbvie has $97.287 billion in long-term liabilities such as debt, pension liability, and deferred taxes. That’s a lot compared to their assets, but they also are owed some money, so it nets out about $90 billion. -What’s the book value? Book value is fairly low at $8.65/share. This is pretty much the assets minus the liabilities. Abbvie is in a knowledge industry, however, so you shouldn’t expect their main assets to be physical capital that can be sold. It’s mostly organizational or human capital from their workforce, so this isn’t worrying. If Abbvie was, say, a retailer with stores and land and inventory, you’d want this to be much, much higher for the share price. There’s no easy way to judge this one, unfortunately, but it’s good to look it up and you’ll eventually get a feel for it. No red flags here. -What are the catastrophic risks that even you or I could think of? For a company in the pharmaceutical space, the obvious answer is regulatory and political risk. Regulatory risk is just want it sounds like – more regulation which can be either costly to comply with or lower profits. This does have an upside, which is that it makes it harder for new competitors to enter a market, so I tend to be rather sanguine about regulatory risk. Political risk is much more severe. This is when politicians decide to either confiscate a company, target it specifically rather than the industry it’s in, or other ways in which the government is involved with taking rather than regulating. In Anglo countries (US/UK/Canada/Australia), the rule of law is typically strong enough that this doesn’t happen much, as there is usually some kind of due process. Places like China, Argentina, Russia, and the EU are much more likely to nationalize or otherwise capriciously penalize a company due to the prevailing political winds. Abbvie has a global footprint, but that also means it’s diversified against such risk. It’s headquartered in the US, so it’s unlikely someone will simply take the entire company. -Payout ratio? Abbvie has a fairly high payout ratio (80% for the last completed fiscal year of 2019), as they have been aggressively growing the dividend. That’s another good reason to input a much lower G than the last few years. That being said, Abbvie has been around for 8 years (it was spun off of Abbott Labs) and has grown its dividend for the last 7 years and has announced it will this coming year as well. The payout ratio is pretty high, but not worrisome. It suggests a fairly mature company that’s now returning cash to shareholders. I’d say this is not nothing, but less than a yellow flag for me. Any company with 95%+ payout ratio is much more vulnerable to a dividend cut. -Credit rating? S&P gives Abbvie a BBB+ grade for its unsecured debt. This is a slight downgrade because their balance sheet is currently digesting a big acquisition from early 2020 (Allergan). Moody’s gives it a Baa2 rating for unsecured debt. These are both good, solid, investment-grade credit ratings (if you were buying the bonds of Abbvie). This looks great. -Does it need a genius? Some companies run on all cylinders because they have a genius at the helm – often a founder. But what you want is a company any dummy can run, because sooner or later any dummy will. Don’t plan to invest long-term in companies that require skilled management. Abbvie is fairly diversified and has an OK pipeline of research. They also can buy little biotech companies that invent something but can’t navigate the regulations to bring it to market. So pondering giants are actually a good thing. Means they’re hard to break. So, given that there was nothing obviously treacherous in our basic due diligence, and the extreme discount at which our example is selling for, this would be one you might want to buy! This is what I do for all the companies I invest in. Notice that there is no story, no excitement, no narrative, no counting on good or bad management. Emotion has no place in investing. You also will notice that we took every opportunity to reduce the risk of losing your capital by always sandbagging the estimated value of the company. You never want to pick up nickels in front of a steamroller. You want the investment to be so obvious it hits you in the face like a baseball bat. If you’re ever on the fence, don’t do it. You don’t have to hit home runs – just don’t strike out. You can be even more conservative in your estimates than I am. If, for instance, you used 5% growth rate for Abbvie’s dividend, you’d still get a present value of $148.57/share vs the current market price of $103.43. Similarly, you could use a higher interest rate, which would also lower the estimated present value. You may have to do this calculation with more companies to find one to buy, but even in a very expensive market like today’s, there is always an opportunity. You don’t even have to look at little companies. There’s around 500 companies in the S&P – just start with “A” and work your way through all of them. A quick note about further reading: I very strongly urge most people to actually read as little as possible on this subject once they get the basics. That’s not because there’s not more to learn, but because I would sadly say the majority of what I see and hear is actively bad advice. But if you do want to keep up with financial news and books and chat boards, the best thing to do is find out what the historical returns of the person giving advice are. Since WWII, the long-run return on the S&P 500 has generally been just a bit shy of 10% per year. If someone can’t beat that, year-in-and-year-out, then their advice is worthless. As in, you don’t want to accidentally absorb it. This is, unfortunately, true for most professionals. Over the last 15 years, 92.2% of actively managed funds have underperformed a simple S&P 500 index fund (and they charge you fees for the privilege). Beware anyone selling something. The advice here is given freely That’s why I made a point of mentioning that I have and regularly outperform the standard fund almost every year. Granted, I don’t have many of the regulatory restrictions a public fund would have, but it shows how useful the advice I’m giving here is. You don’t need anything fancy. You don’t need anything high risk. I’ve done this through two deep recessions and the longest bull market in history. If you want to learn more about investing in general and where I learned how to do this, you can read Benjamin Graham’s The Intelligent Investor. It was written in the 1930s, so much of the technical information is out of date. Skip over that and just read it for the concepts. Even easier reading is to go online to Berkshire Hathaway’s website and pull Warren Buffett and Charlie Munger’s annual letter to shareholders. Almost all of them have something useful in them and don’t make you do equations. I am available for questions in the comments
Not just another HITI / HITIF post... Serious DD incl. valuation analysis
Reposting this DD after it was removed by mods first time around. Potential offending points have been removed. --- Some of the market stats are a little outdated (market cap, current multiples, etc.) but are correct as of Feb-06. This was originally written for another purpose. Not a financial advisor, do your own DD. I am long HITI and have an expectation of a long term hold on this stock. Overview
High Tide Canada-based cannabis retail company, operating under multiple brands. It operates under 3 core divisions:
Brick and mortar retail – 4 key brands with just under 70 locations in Canada. Brands include: Canna Cabana, New Leaf, Meta Cannabis and Kushbar. Forecast to have around 115 stores by end of 2021
Online retail – has 2 brands, both of which attract millions of viewers per month – Grasscity.com and CBDcity.com
Wholesale – manufacturer of paraphernalia in US and Canada. Number of products are branded with various celebrities, Snoop Dogg, Paramount Pictures, Trailer Park Boys and many more
Has good c-level execs and experienced executive board; hold significant stake in the business. CEO Raj Grover holds just over 21% of the shares
Currently has a market cap of around $280m. Still significant upside to the valuation – see analysis later in post
Investment Merits Very strong market growth:
Business has demonstrated growth both organically (through new store openings, more online sales and greater wholesale sales), as well as inorganically through M&A
Growth in markets which High Tide has a physical presence in is expected to be very strong. North American cannabis market (Canada and US) is forecast to grow by 30% a year to 2027 (source: research and markets)
Analysts covering High Tide are forecasting growth in excess of this, which is positive to see and implies capturing market share
New markets / geographies ‘opening up’, legalizing and regulating cannabis is also an exciting and realistic prospect for incremental growth:
The US federal legalization debate is on the table
Many other countries are considering this too and High Tide is well positioned for these; this is catalyzed by the fact that government debt has increased significantly as part of the response to the COVID-19 health crisis. This needs to be repaid somehow, and increasing tax rates on existing taxes is an unpopular political move. Finding new tax revenues is a more palatable way of increasing tax revenues for governments. This is especially important in countries where elections are upcoming.
Personally I do expect to see this accelerate the agenda for the regulation and legalization of cannabis in many new countries
Whilst predominantly Canada and US based, High Tide does have presence in some markets where cannabis is not regulated or legalized, the UK for example (~10% of Grasscity sales are made here) and so it is well positioned with a strong and established brand to capitalize on this opportunity, when / if the market ‘opens up’
Regulation
High Tide benefits from the regulatory focus and overhang on the cannabis retail sector as it represents a strong barrier to entry, making it more challenging for new competitors to enter market
Participants in the market need to have licenses and ensure consistent compliance with laws to continue operating – failure to comply can result in significant financial penalties
Personally I normally don’t like investing into retail. There are usually fairly limited barriers to entry, minimal differentiation and negligible customer loyalty, however the cannabis market does have different characteristics in this respect and makes it a more compelling proposition
Regulation also benefits those with scale, something High Tide has as the leading player in the market. It costs money to obtain and retain licences to operate and it costs money to ensure compliance with all the laws and regulations and that all staff are acting in accordance with these
Some parallels in this respect which can be drawn to casino gaming in casinos; you don’t see new casinos popping up at the same rate which you see new restaurants or apparel stores opening
Demand
There’s a lot to like about the demand dynamics for High Tide. It’s vice-nature means that demand is less correlated to disposable incomes. Given where we are in economic cycle, especially important consideration
For those doubting this, check alcohol, tobacco or gambling expenditure across economic cycles historically, for a proxy
Strong performance throughout COVID-19 crisis
Despite heavy weighting towards brick and mortar, (the most hard hit part of retail) it has effectively managed the shift to online, which is a positive
Has relied on government support and financial assistance in the form of job retention schemes (address in more detail later in post)
This demonstrates management are capable and have effectively navigated the challenging situation
Data
Massively summarized from the other purpose, however, they have unique access to supply chain data which could be monetized effectively and generate strong levels of recurring revenues
Other established sectors have a trusted party with such unique access to data (e.g. alcohol, lithium, different foods, etc.) and the opportunity here is enormous
I would like to see High Tide capitalize on this
Forecasts financials & analysts
Currently 2 analysts covering High Tide, both have a buy rating on the business
Their coverage is slightly outdated (expect this being updated soon and a further catalyst for positive price action) and their price targets are 60c; at the time their reports were published, they were forecasting a 4x upside (HITI was trading at ~15c)
Same analysts also forecasting strong growth - 77% CAGR to 2022. They are forecasting revenues of around $250m and EBITDA of $46m. A reminder here, these are professional analysts, not YouTube students – these come from their financial models, the assumptions of which are discussed with management
Going to go quick here, however, High Tide is currently valued at a significant discount to the other listed peers
Looking at EV / FY+1 Sales multiples – EBITDA not meaningful as some of the peer group are EBITDA negative and High Tide itself has only recently become EBITDA positive
Personally, I think Planet13 is the most comparable given its business model
Taking both Planet13 multiple and peer group average multiple, this is then applied to High Tide’s forecast FY+1 sales to calculate an enterprise value – this is adjusted for net debt to get to a market capitalization and then divided by the share count to get an implied share price
The table below shows the implied stock price valuations from this analysis
Net debt will change in coming year given the capital structure and a large number of convertible notes – this has been ignored given it will have small impact on the price
The share count will change as a result of dilution from various instruments – if this bothers you massively then look at the valuation discount on the basis of the enterprise value as it does not impact this (and only slightly on the market cap given minimal impacts to cash from instrument execution, etc.)
Not accounting for any stock split, consolidation or any other M&A deals
The FY21 financials are on the basis of the mean broker estimates from Thomson Reuters – Seeking Alpha has different and slightly outdated ones
US is only a small part of the market which High Tide addresses, while a change in regulation would have a big impact on the company, currently it is unlikely this would happen, given the discussions about potential federal legalization
Canada regulation is established and not going anywhere
Other countries likely to legalize and regulate cannabis, as outlined earlier
Dilution
No escaping that there will be some significant dilution for shareholders, as pointed out in the table below, but this should be already priced into the stock
Potential that new equity issuances could occur to help finance growth, but provided this growth is delivered, it should be accretive for the stock price
A risk that investors need to be aware with for all companies which have relied on government financial support during COVID-19 measures. Such support has resulted in the number of businesses going bankrupt decreasing massively – this is at a lower level than it ever normally is and is masking some real underlying issues within companies. As investors we need to be open eyed about this
As High Tide has benefited from support in the form of the Canada’s Emergency Wage Support scheme, there is the risk that once this is lifted it may become apparent that the cost base has not been effectively managed
Personally, I think this is mitigated by the synergy analysis conducted as part of the M&A. A full cost base analysis would have been conducted to calculate the potential $8.4m synergies so strong likelihood that this is under control, but should keep on our radar and reassess
Marketing expenses and celebrity licenses
Need more information to ascertain whether these are underpinned by a compelling ROI. Seen a lot of people suggest this is a great positive, but the impact on sales volumes from these is unknown, as is the terms of these license agreements (e.g. split between upfront fee vs. volume-based fee)
No escaping the fact that it is an increased cost and so need to understand the ROI this generates to determine whether it really is compelling
Is there really more demand to pay a premium for Snoop Dogg bongs, Guns n Roses papers, Cheech & Chong grinders, or whatever they may be?
So far management have suggested this has been helpful in driving new sales, but this is something to dig into more TLDR
Despite the recent rally in stock price, the business remains undervalued on a relative basis versus its peers (analysis in body of post). There is a compelling investment case for High Tide where in my opinion the merits of the investment outweigh the risks. Clearly given the small cap nature of the stock, this is inherently more volatile than larger blue chip stocks and carries with it a degree of risk.
It's fucking great. I wake up happy, I do pretty much whatever I want during the day, I go to sleep happy. I indulge my limited passions and hobbies, I plunge down fascinating rabbit holes of knowledge, I bugger off to places for months at a time (harder with Brexit, you xenophobic malcontents), I spend time with people I want to. I feel smug. I don't have an alarm waking me up, I don't need to take any shit off anyone, I don't burn 90 mins a day on a loud bus screeching stop announcements at 90db in my ear. In the summer I sometimes pop over to the local greenery, have a pint and meal, read a book, soak up the sun. Great stuff. My phone is always on silent. It can wait. People occasionally ask me “what I do all day”. If your imagination is so limited, living in such an incredible time, with so much at your fingertips, that the question even crosses your mind, then carry on working and bitching about it, you don't know how to be happy. “Scipio used to say that he was never less idle than when he had nothing to do “ - Cicero, On Duties.
2How to get there
2.1Difficulty modes
2.1.1Easy mode: Get free university education, get a good job, buy a cheap house
Not too difficult if you were born in 1972. Easy mode is now disabled in the UK. Maybe available in foreign versions of the game, such as in Greece or Denmark.
2.1.2Medium mode: Don't have kids
I swear to god, I have been pretty lucky not to accidentally father a crotch goblin, and believe me, little Goocho often vetoed my brain. Use contraceptives. Notice how all the shit hole countries don't give women control over their reproduction. If I had foolishly crapped out a kid, I would have had to work another 10 years at least I reckon. Ugh. Borrow kids to play with them, and return when they start crying.
2.1.3Hard mode: Have kids
Look, if you are spending 100k or whatever to raise a kid I don't know what to tell you, at least you got laid eh? I hope you enjoy working like I didn't. Seriously, if you have a job you like, great stuff, things will be much easier for you. The impetus to leave it won't be so great. The point of all this is to be happy after all!
2.2Control your costs
Filling your house full of nonsense is consumerism at it's worst. I practice a kind of minimalism. So I don't own a freezer, a cooker or a dish washing machine. Guess what? They will never need repairing or replacing! But I do own an amazing OLED tv, a solid speaker system, loads of films and books. Minimalism is a whole other subject, and attracts the mentally ill who take it to extremes. Spend money on a decent mattress you fools. Subscriptions are death by a thousand cuts, and will weigh you down. However Netflix and Amazon Prime are great. Shades of grey. Screw charities, charity workers get paid salaries and you are supposed to give for free? Nope. Begging scum. “it is only the price of a coffee”, bitch please, I pay 10p a cup for my lovely coffee. Pay your taxes. Don't be a leech on society. Live in a small house. Aldi is great. If you don't get married, you can't get ruinously divorced, . Insurance is generally a scam, if you are drunkenly fucking up so regularly than you need your phone insured, sort your life out. You really need that car? Hmmm. If you are driving to the supermarket and paying for the gym, you are an idiot. Those two cancel each other out. Only unhappy people play the lottery. Buy a decent phone for £200, pay £5 a month for service. You think iFruit users will look down upon you? Comparison is the thief of joy. DIY accomplishments are mentally rewarding, great exercise and cheap – or you can throw money at a problem to make it go away, this is the point of money after all, we sell and buy time with it. Before I buy anything big, I ask myself, is this worth x days sitting in an office for? Spend your money how you like, I am not your mum. Enjoy what you have.
2.3Plan a little
Write down (don't guess) how much you spend a month over a couple of years. For investments, assume inflation cancels out general increase in non distributing equity value. This is all a rough guessing game anyway, don't pretend it isn't. I think there are two ways to look at when you can stop working:
2.3.1Cash drawdown per month until death
If you assume you are going to die around 85 (actuarial tables available online), divide your cash + private pension wealth + state pension amount will pay you until age 85 by the number of months left to live, this tells you how much you can spend a month before you die. Sounds like enough? Investment appreciation means you might have more than that.
2.3.2Cash dividends per month
You have a lumpsum of wealth. Flexible uk pension rules means you no longer need to take the annuity gamble. 4% returns a year seems conservatively doable. Can you live on that? Means you die with a load of cash. Stash it in your silk lined coffin.
2.4Play it safe, but not too safe
Assume laws and taxes will change. Don't count too much on that state pension. If the NHS falls ill itself, you might need some cash to go private. Good luck getting that hip surgery in the next 12 months post covid! If the stock market takes a 10% dump, you must still sleep soundly. Don't live too close to the edge. Assume and hope your parents will spend all their wealth on themselves, having a happy end of life in an old folks home. Points off as a human being for relying on your parent snuffing it for free money. What if your body conks out and you start shitting yourself and have to pay 4k a month to be served Dickensian gruel in a nursing home? Trust in the societal safety net? Work another 5 years just in case? Keep a cyanide pill by the bed? Sell your house I guess? I'm rolling the dice on this one. Maybe dancing in VR and these 50 degree Victorian terrace stairs will keep me fit (or kill me).
2.5Personal Story
Went to Uni, got a Computering degree, got a job I liked, autistic-ally worked at it, got paid lots of money, bought a house at 26 for 48k, parents threw in 10k to get rid of me, paid off the mortgage in 30 months. After 8 years in said job, started to dislike it, took 6 months off work. Worked another 2 years before I got made redundant, 15k for doing nothing? Yes please! Worked about half the time from age 32 to 46 as Contractor scum, in jobs I generally disliked or eventually hated. Had 2-3 years between jobs. Snatching retirement chunks from the future. I figured, why leave retirement until I am too old to enjoy it? Took around 3 months to get a new job each time, I didn't care, I loved not working! Played casino blackjack for a couple of years for ~8 hours a week, made £12k. Shuffling machines have stopped all that now, was bored of it anyway. Decided at 40 I had better get a pension, threw money at it when working. So at 46, when I walked out on the pathetic management at my last gig (FIS Birmingham, you see when you are retired, you really don't have to give a shit!), I had worked for a total of ~15 years, thoroughly enjoyed not working and was sick of working. At 47 I realised maybe I don't actually need another job? Started paying real attention to my finances. At 48, I have 110k cash & 140k pension = 250k. 4% a year dividends = 10k a year. I can live happily on that. £800 a month is enough. I spent £350 a month in December and January, had a great time. Will get a PS5 when available, boiler is bound to break eventually. It all evens out. My state pension fortells a sickly £117 per week. Meh. Forgive me for not factoring that in too much. Who knows where I will be in 20 years? Hopefully sleeping in late without an alarm clock.
Detailed DD post [re-post after r/pennystocks deleted it]
I posted this yesterday morning (UK time) but after 5 hours or so, pennystocks deleted the original post. A few people messaged me asking for it to be shared in a few High Tide specific pages. So here it is! Hope this is OK for the mods here? -- This is my first time posting a DD post – a friend of mine who moderates on SPACs has shared some analysis I have written previously, but I’m keen to share this here, and see if there is any appetite for sharing my own personal written DD I have on the 30 stocks I have across a number of different portfolios. I have modified this format, as it was originally a script for a video which I created on the stock. If you prefer to listen – check it out here: https://youtu.be/qsjwU7kkPsw Some of the market stats (market cap, current multiples, etc.) are correct as of Feb-06, and clearly a little outdated since the price movements. Not a financial advisor, do your own DD. I am long HITI and have an expectation of a long term hold on this stock. Overview
High Tide Canada-based cannabis retail company, operating under multiple brands. It operates under 3 core divisions:
Brick and mortar retail – 4 key brands with just under 70 locations in Canada. Brands include: Canna Cabana, New Leaf, Meta Cannabis and Kushbar. Forecast to have around 115 stores by end of 2021
Online retail – has 2 brands, both of which attract millions of viewers per month – Grasscity.com and CBDcity.com
Wholesale – manufacturer of paraphernalia in US and Canada. Number of products are branded with various celebrities, Snoop Dogg, Paramount Pictures, Trailer Park Boys and many more
Has good c-level execs and experienced executive board; hold significant stake in the business. CEO Raj Grover holds just over 21% of the shares
Currently has a market cap of around $280m. Still significant upside to the valuation – see analysis later in post
Investment Merits Very strong market growth:
Business has demonstrated growth both organically (through new store openings, more online sales and greater wholesale sales), as well as inorganically through M&A
Growth in markets which High Tide has a physical presence in is expected to be very strong. North American cannabis market (Canada and US) is forecast to grow by 30% a year to 2027 (source: research and markets)
Analysts covering High Tide are forecasting growth in excess of this, which is positive to see and implies capturing market share
New markets / geographies ‘opening up’, legalizing and regulating cannabis is also an exciting and realistic prospect for incremental growth:
The US federal legalization debate is on the table
Many other countries are considering this too and High Tide is well positioned for these; this is catalyzed by the fact that government debt has increased significantly as part of the response to the COVID-19 health crisis. This needs to be repaid somehow, and increasing tax rates on existing taxes is an unpopular political move. Finding new tax revenues is a more palatable way of increasing tax revenues for governments. This is especially important in countries where elections are upcoming.
Personally I do expect to see this accelerate the agenda for the regulation and legalization of cannabis in many new countries
Whilst predominantly Canada and US based, High Tide does have presence in some markets where cannabis is not regulated or legalized, the UK for example (~10% of Grasscity sales are made here) and so it is well positioned with a strong and established brand to capitalize on this opportunity, when / if the market ‘opens up’
Regulation
High Tide benefits from the regulatory focus and overhang on the cannabis retail sector as it represents a strong barrier to entry, making it more challenging for new competitors to enter market
Participants in the market need to have licenses and ensure consistent compliance with laws to continue operating – failure to comply can result in significant financial penalties
Personally I normally don’t like investing into retail. There are usually fairly limited barriers to entry, minimal differentiation and negligible customer loyalty, however the cannabis market does have different characteristics in this respect and makes it a more compelling proposition
Regulation also benefits those with scale, something High Tide has as the leading player in the market. It costs money to obtain and retain licences to operate and it costs money to ensure compliance with all the laws and regulations and that all staff are acting in accordance with these
Some parallels in this respect which can be drawn to casino gaming in casinos; you don’t see new casinos popping up at the same rate which you see new restaurants or apparel stores opening
Demand
There’s a lot to like about the demand dynamics for High Tide. It’s vice-nature means that demand is less correlated to disposable incomes. Given where we are in economic cycle, especially important consideration
For those doubting this, check alcohol, tobacco or gambling expenditure across economic cycles historically, for a proxy
Strong performance throughout COVID-19 crisis
Despite heavy weighting towards brick and mortar, (the most hard hit part of retail) it has effectively managed the shift to online, which is a positive
Has relied on government support and financial assistance in the form of job retention schemes (address in more detail later in post)
This demonstrates management are capable and have effectively navigated the challenging situation
Data
Massively summarized from the video, (and my video on KERN) so check that out if interested in this point, however, they have unique access to supply chain data which could be monetized effectively and generate strong levels of recurring revenues
Other established sectors have a trusted party with such unique access to data (e.g. alcohol, lithium, different foods, etc.) and the opportunity here is enormous
I would like to see High Tide capitalize on this
Forecasts financials & analysts
Currently 2 analysts covering High Tide, both have a buy rating on the business
Their coverage is slightly outdated (expect this being updated soon and a further catalyst for positive price action) and their price targets are 60c; at the time their reports were published, they were forecasting a 4x upside (HITI was trading at ~15c)
Same analysts also forecasting strong growth - 77% CAGR to 2022. They are forecasting revenues of around $250m and EBITDA of $46m. A reminder here, these are professional analysts, not YouTube students – these come from their financial models, the assumptions of which are discussed with management
Going to go quick here, its explained more slowly in the video but High Tide is currently valued at a significant discount to the other listed peers
Looking at EV / FY+1 Sales multiples – EBITDA not meaningful as some of the peer group are EBITDA negative and High Tide itself has only recently become EBITDA positive
Personally, I think Planet13 is the most comparable given its business model
Taking both Planet13 multiple and peer group average multiple, this is then applied to High Tide’s forecast FY+1 sales to calculate an enterprise value – this is adjusted for net debt to get to a market capitalization and then divided by the share count to get an implied share price
The table below shows the implied stock price valuations from this analysis
Net debt will change in coming year given the capital structure and a large number of convertible notes – this has been ignored given it will have small impact on the price
The share count will change as a result of dilution from various instruments – if this bothers you massively then look at the valuation discount on the basis of the enterprise value as it does not impact this (and only slightly on the market cap given minimal impacts to cash from instrument execution, etc.)
Not accounting for any stock split, consolidation or any other M&A deals
The FY21 financials are on the basis of the mean broker estimates from Thomson Reuters – Seeking Alpha has different and slightly outdated ones
US is only a small part of the market which High Tide addresses, while a change in regulation would have a big impact on the company, currently it is unlikely this would happen, given the discussions about potential federal legalization
Canada regulation is established and not going anywhere
Other countries likely to legalize and regulate cannabis, as outlined earlier
Dilution
No escaping that there will be some significant dilution for shareholders, as pointed out in the table below, but this should be already priced into the stock
Potential that new equity issuances could occur to help finance growth, but provided this growth is delivered, it should be accretive for the stock price
A risk that investors need to be aware with for all companies which have relied on government financial support during COVID-19 measures. Such support has resulted in the number of businesses going bankrupt decreasing massively – this is at a lower level than it ever normally is and is masking some real underlying issues within companies. As investors we need to be open eyed about this
As High Tide has benefited from support in the form of the Canada’s Emergency Wage Support scheme, there is the risk that once this is lifted it may become apparent that the cost base has not been effectively managed
Personally, I think this is mitigated by the synergy analysis conducted as part of the M&A. A full cost base analysis would have been conducted to calculate the potential $8.4m synergies so strong likelihood that this is under control, but should keep on our radar and reassess
Marketing expenses and celebrity licenses
Need more information to ascertain whether these are underpinned by a compelling ROI. Seen a lot of people suggest this is a great positive, but the impact on sales volumes from these is unknown, as is the terms of these license agreements (e.g. split between upfront fee vs. volume-based fee)
No escaping the fact that it is an increased cost and so need to understand the ROI this generates to determine whether it really is compelling
Is there really more demand to pay a premium for Snoop Dogg bongs, Guns n Roses papers, Cheech & Chong grinders, or whatever they may be?
So far management have suggested this has been helpful in driving new sales, but this is something to dig into more
Not another HITI / HITIF DD post... detailed analysis incl. valuation [re-post after it was deleted on r/pennystocks for some reason...]
I posted this yesterday morning (UK time) but after 5 hours or so, pennystocks deleted the original post. I had a message to share it on here too, so here it is! -- This is my first time posting a DD post – a friend of mine who moderates on SPACs has shared some analysis I have written previously, but I’m keen to share this here, and see if there is any appetite for sharing my own personal written DD I have on the 30 stocks I have across a number of different portfolios. I have modified this format, as it was originally a script for a video which I created on the stock. If you prefer to listen – check it out here: https://youtu.be/qsjwU7kkPsw Some of the market stats (market cap, current multiples, etc.) are correct as of Feb-06, and clearly a little outdated since the price movements. Not a financial advisor, do your own DD. I am long HITI and have an expectation of a long term hold on this stock. Overview
High Tide Canada-based cannabis retail company, operating under multiple brands. It operates under 3 core divisions:
Brick and mortar retail – 4 key brands with just under 70 locations in Canada. Brands include: Canna Cabana, New Leaf, Meta Cannabis and Kushbar. Forecast to have around 115 stores by end of 2021
Online retail – has 2 brands, both of which attract millions of viewers per month – Grasscity.com and CBDcity.com
Wholesale – manufacturer of paraphernalia in US and Canada. Number of products are branded with various celebrities, Snoop Dogg, Paramount Pictures, Trailer Park Boys and many more
Has good c-level execs and experienced executive board; hold significant stake in the business. CEO Raj Grover holds just over 21% of the shares
Currently has a market cap of around $280m. Still significant upside to the valuation – see analysis later in post
Investment Merits Very strong market growth:
Business has demonstrated growth both organically (through new store openings, more online sales and greater wholesale sales), as well as inorganically through M&A
Growth in markets which High Tide has a physical presence in is expected to be very strong. North American cannabis market (Canada and US) is forecast to grow by 30% a year to 2027 (source: research and markets)
Analysts covering High Tide are forecasting growth in excess of this, which is positive to see and implies capturing market share
New markets / geographies ‘opening up’, legalizing and regulating cannabis is also an exciting and realistic prospect for incremental growth:
The US federal legalization debate is on the table
Many other countries are considering this too and High Tide is well positioned for these; this is catalyzed by the fact that government debt has increased significantly as part of the response to the COVID-19 health crisis. This needs to be repaid somehow, and increasing tax rates on existing taxes is an unpopular political move. Finding new tax revenues is a more palatable way of increasing tax revenues for governments. This is especially important in countries where elections are upcoming.
Personally I do expect to see this accelerate the agenda for the regulation and legalization of cannabis in many new countries
Whilst predominantly Canada and US based, High Tide does have presence in some markets where cannabis is not regulated or legalized, the UK for example (~10% of Grasscity sales are made here) and so it is well positioned with a strong and established brand to capitalize on this opportunity, when / if the market ‘opens up’
Regulation
High Tide benefits from the regulatory focus and overhang on the cannabis retail sector as it represents a strong barrier to entry, making it more challenging for new competitors to enter market
Participants in the market need to have licenses and ensure consistent compliance with laws to continue operating – failure to comply can result in significant financial penalties
Personally I normally don’t like investing into retail. There are usually fairly limited barriers to entry, minimal differentiation and negligible customer loyalty, however the cannabis market does have different characteristics in this respect and makes it a more compelling proposition
Regulation also benefits those with scale, something High Tide has as the leading player in the market. It costs money to obtain and retain licences to operate and it costs money to ensure compliance with all the laws and regulations and that all staff are acting in accordance with these
Some parallels in this respect which can be drawn to casino gaming in casinos; you don’t see new casinos popping up at the same rate which you see new restaurants or apparel stores opening
Demand
There’s a lot to like about the demand dynamics for High Tide. It’s vice-nature means that demand is less correlated to disposable incomes. Given where we are in economic cycle, especially important consideration
For those doubting this, check alcohol, tobacco or gambling expenditure across economic cycles historically, for a proxy
Strong performance throughout COVID-19 crisis
Despite heavy weighting towards brick and mortar, (the most hard hit part of retail) it has effectively managed the shift to online, which is a positive
Has relied on government support and financial assistance in the form of job retention schemes (address in more detail later in post)
This demonstrates management are capable and have effectively navigated the challenging situation
Data
Massively summarized from the video, (and my video on KERN) so check that out if interested in this point, however, they have unique access to supply chain data which could be monetized effectively and generate strong levels of recurring revenues
Other established sectors have a trusted party with such unique access to data (e.g. alcohol, lithium, different foods, etc.) and the opportunity here is enormous
I would like to see High Tide capitalize on this
Forecasts financials & analysts
Currently 2 analysts covering High Tide, both have a buy rating on the business
Their coverage is slightly outdated (expect this being updated soon and a further catalyst for positive price action) and their price targets are 60c; at the time their reports were published, they were forecasting a 4x upside (HITI was trading at ~15c)
Same analysts also forecasting strong growth - 77% CAGR to 2022. They are forecasting revenues of around $250m and EBITDA of $46m. A reminder here, these are professional analysts, not YouTube students – these come from their financial models, the assumptions of which are discussed with management
Going to go quick here, its explained more slowly in the video but High Tide is currently valued at a significant discount to the other listed peers
Looking at EV / FY+1 Sales multiples – EBITDA not meaningful as some of the peer group are EBITDA negative and High Tide itself has only recently become EBITDA positive
Personally, I think Planet13 is the most comparable given its business model
Taking both Planet13 multiple and peer group average multiple, this is then applied to High Tide’s forecast FY+1 sales to calculate an enterprise value – this is adjusted for net debt to get to a market capitalization and then divided by the share count to get an implied share price
The table below shows the implied stock price valuations from this analysis
Net debt will change in coming year given the capital structure and a large number of convertible notes – this has been ignored given it will have small impact on the price
The share count will change as a result of dilution from various instruments – if this bothers you massively then look at the valuation discount on the basis of the enterprise value as it does not impact this (and only slightly on the market cap given minimal impacts to cash from instrument execution, etc.)
Not accounting for any stock split, consolidation or any other M&A deals
The FY21 financials are on the basis of the mean broker estimates from Thomson Reuters – Seeking Alpha has different and slightly outdated ones
US is only a small part of the market which High Tide addresses, while a change in regulation would have a big impact on the company, currently it is unlikely this would happen, given the discussions about potential federal legalization
Canada regulation is established and not going anywhere
Other countries likely to legalize and regulate cannabis, as outlined earlier
Dilution
No escaping that there will be some significant dilution for shareholders, as pointed out in the table below, but this should be already priced into the stock
Potential that new equity issuances could occur to help finance growth, but provided this growth is delivered, it should be accretive for the stock price
A risk that investors need to be aware with for all companies which have relied on government financial support during COVID-19 measures. Such support has resulted in the number of businesses going bankrupt decreasing massively – this is at a lower level than it ever normally is and is masking some real underlying issues within companies. As investors we need to be open eyed about this
As High Tide has benefited from support in the form of the Canada’s Emergency Wage Support scheme, there is the risk that once this is lifted it may become apparent that the cost base has not been effectively managed
Personally, I think this is mitigated by the synergy analysis conducted as part of the M&A. A full cost base analysis would have been conducted to calculate the potential $8.4m synergies so strong likelihood that this is under control, but should keep on our radar and reassess
Marketing expenses and celebrity licenses
Need more information to ascertain whether these are underpinned by a compelling ROI. Seen a lot of people suggest this is a great positive, but the impact on sales volumes from these is unknown, as is the terms of these license agreements (e.g. split between upfront fee vs. volume-based fee)
No escaping the fact that it is an increased cost and so need to understand the ROI this generates to determine whether it really is compelling
Is there really more demand to pay a premium for Snoop Dogg bongs, Guns n Roses papers, Cheech & Chong grinders, or whatever they may be?
So far management have suggested this has been helpful in driving new sales, but this is something to dig into more
Harold Wilson is the 50 year old current Prime Minister, and Leader of the Labour Party, a post he has held since 14th February 1963
Edward Heath is the 49 year old current Leader of the Conservative Party, a post he has held since 28th July 1965
Jo Grimond is the 52 year old current Leader of the Liberal Party, a post he has held since 5th November 1956
Background
1964 – The election of 1964 saw the end of an era of Conservative dominance with Harold Wilson’s Labour Party winning the election. However, Wilson only won a majority of 4 MPs due to a late Tory uptick which placed him in a precarious position. Wilson wanted another general election to secure a larger majority. In early 1966 the Labour MP for Hull North unexpectedly died. This was a seat Labour had only flipped in 1964 and had a majority of only around 2.5%. This could have been a routine pick up for the opposition, but the end result was a swing of +8.9% to Labour, signifying Labour could perform well electorally. The Liberals also saw a bit of a revival in 1964 gaining 3 seats and increasing their share of the vote by 5.3%, the Liberals also picked up seats in London, whereas from 45-64 they had been seen as a party which clung on in the fringes of the country: Cornwall, Wales and Scotland’s Highlands and islands.
The Economy Stupid – One of the largest issues facing Labour as soon as then entered office was the large deficit and poor balance of trade left by the Conservatives. Labour moved quickly – establishing a new ministry of technology, unveiling a national plan for the economy, and cutting back on the military, raising protective tariffs on imports, and raising taxes. The deficit has been cut from £750m to £350m and the balance of trade has also improved. This early “test” reflected positively on Wilson and Labour’s ability to run the economy. Labour have also repealed the controversial charges on prescriptions and increased the amount of houses being built.
The 1965 Conservative Leadership contest – After the defeat of 1964 Douglas-Home may have been able to stay as leader of the Conservatives after the improvement in Conservative polling, however the party had been in power for 13 years and reacted very negatively to its return to opposition and Home did not believe he was suited to being leader of the opposition. Home changed the Conservative Party’s leadership election process which had led to so many issues for Home. Now a simple election between Conservative MPs with each having one vote decides the next leader. The winner of this contest is Edward Heath. Heath was somewhat of a surprise with the more widely known former Chancellor of the Exchequer Reginald Maulding expected to win. Heath however had served as Chief Whip – with his job being to wrangle Conservative MPs into voting one way or another and Heath had a more intimate knowledge of how to win over his party members while fighting a clear and focused campaign.
Heath vs Wilson – Heath and Wilson will (spoiler!) fight over 4 general elections so let’s compare them. In many ways both are remarkably similar. Both were born in 1916 and both had middle class upbringings, both excelled at school and won scholarships to Oxford. Because of this both are seen as more modern “technocrats” as opposed to the nobility who traditionally became Prime Minister. Both were involved in Oxford student politics although Wilson only somewhat. Heath on the other hand became President of the Oxford Union debating society and of Oxford University’s Conservative society. Heath travelled extensively throughout Europe before World War 2, even attending a Nuremburg Rally in 1937 and attending an SS cocktail party with Goering, Goebbles and Himmler (whom he described as the most evil man he’d ever met). Heath therefore stood as a pro-interventionist candidate in student politics, heavily backing the Spanish Republic and defeating a pro-Franco candidate for leader of the Conservative society. Heath fought in World War 2 and rose to the rank of Lieutenant-Colonel whereas Wilson signed up but was regarded as too important to fight in the war and stayed in Britain organising coal stocks. Both served in multiple ministerial positions and both as President of the Board of Trade. Here Heath instituted an extremely controversial policy during Home’s last year as Prime Minister – lifting the restrictions on the amount of foods Supermarkets could buy. This law was put in place to help small grocers and Heath was warned if he repealed it he’d split the party before an election by antagonising one of the Conservative’s key supporters in small business owners (Heath went on anyway and the split never happened). Heath’s experiences as chief whip during the Suez Crisis, negotiating entry into the EU, and in repealing this law imbued a great deal of self-confidence within him as he’d soldiered through incredibly difficult circumstances but always come out the other side undamaged. On the other hand Wilson’s time as “Nye Bevan’s dog” during the battles between Bevan and Gaitskell reinforced the importance of maintaining party unity and managing big personalities within government.
The quiet man – Heath however has one key disadvantage when compared to Wilson in his charisma or lack thereof. Wilson is incredibly witty and charismatic, but Heath seems to shun the concept of even giving interviews, sometimes going years between television appearances and appearing very stiff and wooden when he does talk. This hasn’t helped the fact that Heath has had less than a year as Leader of the Conservatives before the election. As a result very few voters have even heard of him, and Wilson is incredibly effective at making fun of Heath. Heath believes that the electorate will tire of Wilson and see him as a fake like Heath does (for his public persona and Wilson’s exaggerations about his childhood and upbringing with Wilson trying to paint himself as rising from the working class despite being comfortably middle class) and because of this… Basically does very little to make arguments as to why the voters should back him, instead just sitting back and waiting. This has alarmed his supporters who elected him as a direct answer to Wilson.
Liberal dilemmas – For the Liberals 1964 was a great success. While still nowhere as near as popular as Labour or the Conservatives the Liberals did manage to make themselves seem like a true 3rd party instead of some regional relic of the 1800s. Grimond however is facing new issues – Grimond presented himself as a young, radical alternative to the old Tories but that role has become adopted by Wilson and the Tories elected a technocrat. Grimond is the oldest of the 3 leaders and a firm member of the upper class of society. Grimond also struggled with supporting Labour. Since Labour had such a thin majority there was always the question of if the Liberals would agree to support Labour on certain issues which many Liberals disliked the thought of. Wilson and Grimond seemed to come to an agreement on institution proportional representation – a long-term aim of the Liberals but Wilson has not upheld his end of the bargain. Grimond is also struck by the suicide of his son Andrew during the campaign which takes a great mental toll on Grimond and seemed to take a lot out of him (as you’d expect).
Europe again – Edward Heath is one of the firmest supporters of Britain’s entry into the European Economic Community, a policy which the Liberals also support. Wilson’s position is more confused. Wilson personally opposes entry as does the left-wing of the Labour party, but those on the right support entry. Wilson in a desire to keep the party together has made speeches indicating he supports entry but has not committed to actually joining and has accused Heath of “rolling on his back like a spaniel at any kind gesture from the French”.
9-5-1 – Heath has managed a rare hit on Wilson by referring to Britain’s economic figures. As mentioned before Labour has gained the trust of the public by managing to quickly bring down Britain’s budget and trade deficits but Heath has referred to 9-5-1 meaning the 9% rise in wages, 5% rise in prices and meagre 1% rise in production. Heath is warning about the issue of inflation, but Wilson saw the unpopularity of Home’s attempts at a wage pause, and also wishes to continue full employment both of which have led him to committing little action to combatting inflation.
Issues
Labour:
New incentives for exports, maintenance of tariffs on imports, cuts onoverseas military expenditure, new taxes on overseas income and control over the export of capital to stop the flight of the rich abroad
Increased productivity by selective investment, incentives to reinvest profits, a new corporation and board to reorganise industry and increase productivity
Encouragement of agricultural and horticultural co-operation, increased and cheaper marketing of foodstuffs, support for farm workers
Fixed income, prices, and rent control to curb the cost of living
500,000 new homes a year by 1970, continuation of Crown Land Commission to seize land at below-market prices to combat “land famine” and remove land from the free market, improved public transport for commuters, modernization of old city centres, and continuation of the policy of building new towns
Commitment to full employment, new recognition of the right to a trade union, equal pay for equal work
increase by 1970 the annual spending on hospital building to a figure double the highest sum spent in any year by the Conservatives, increase in medical students, rapid expansion on health and welfare services for old and disabled
Creation of “The Open University” by using TV and Radio to deliver University lessons
A new tax on gambling and gaming, and a land tax based on the difference between the value of the land as it’s currently used and the price received when its sold for redevelopment
Votes at 18 years old, reorganisation of civil service, local governments, law commission to revise and modernize old laws, and a conference to review the UK’s voting system
“Realistic” controls on immigration
Increase in police officers, new youth parole system to cut down on numbers in jail
Commitment to European Free Trade Association but no commitment to join or stay out of European Economic Community
Conservative:
Tax incentives for saving money, a new act for industrial relations to end restrictive practices, intimidation and establish that agreements between unions and employers are legally enforceable, encouragement of competition between businesses
Wider ownership of houses, pensions and capital
Restrictions on immigration and fairer treatment for immigrants
An attack on rising rates of crime
Goal of 500,000 new houses
Entry into the European Economic Community
New cost effectiveness department to cut government waste, reorganisation of economic ministries into one department as well as combining the Ministry of Health, the Ministry of Pensions and National Insurance and the National Assistance Board into a single Department, hiring of university and industry professionals to help draft legislation and policies
New inspectors of welfare to co-ordinate support between local authorities and hospitals, improved benefits for old, children, and widows
Establishment of education television centre to help teach children, more power to local education providers and authorities, more choice in education for parents
Expansion of education and higher education budgets for Scotland and Wales
Initiate peace talks to break the deadlock in Rhodesia
Support for admission of China into the U.N.
Liberal:
Simplification of tax system, reduction of direct taxes, cutting of tariffs, continuation of incomes policy but wages to rise in line with productivity,
New works councils to force management of businesses to regularly consult and negotiate with workers, workers to become shareholders in their place of work, A standard contract of service to be introduced covering the right to Union representation; an equal range of security benefits for wage and salary earners; holiday pay based on average earnings; a guaranteed opportunity for further education and training in employer's time; and equal rates of pay for men and women doing identical work
Increased prices for beef, expansion of production of cereals to eventually end tariffs on cereal imports
Parliaments for Scotland and Wales, elected regional councils responsible for the use of land, including new towns and new industries, public transport and hospital building, water supplies, regional resources and all facilities for leisure and the arts, streamlining of government ministries
Creation of new motorways but for all new motorways to be pay roads
No controls on amount of immigrants entering UK, expansion of teaching facilities to teach immigrants English and special funds for housing in areas with rapidly growing immigrant communities
Cuts to defence spending, British nuclear weapons to be given to international organisations
Proportional representation, votes at 18
Increase in state pensions, encouragement of employers to supplement them, increase in sick and unemployment pay, paid for by A Social Security Tax, replacing National Insurance stamps and levied on employer (two thirds) and employee (one third)
Increase in number of GPs and nurses, better facilities for them, and new hospitals as well as improvements to existing hospitals
salaries, working conditions and pensions of teachers to be improved, 11+ exam to be abolished, slum schools to be improved
Entry into European Economic Community
Increased trade and international aid for poverty stricken countries, pressure on Rhodesian government to step down and the formation of a new government to represent all Rhodesians
Jan/12/2021 news: __ Gas prices could rise: ֏ vs $ __ Jailed for taking Azeri bribe __ How much will AM-AZ railway cost? __ COVID strain, vaccine, stats __ POW & borders __ Childbirth subsidy __ Seismic resistance __ IRS to monitor casinos __ Environmentalists to have voice __ Yezidi theater __ more
Your 11-minute Tuesday report in 2562 words.
gas prices could rise due to currency fluctuations
Russian gas price (at the border) had increased from $150 to $165 per 1000m3 in 2019. Although the Russian currency Ruble was devaluing against the Dollar, Armenia was/is paying for gas with Dollars. Since 2019, the Pashinyan administration has been trying to convince Russia to implement a different gas payment mechanism within the EAEU trade bloc. Making payments in Rubles instead of Dollars was one of the priorities: "We are constantly talking about high dollarization within the EAEU, but we still pay for Russian gas in dollars. Our proposal was that it would be more correct if we paid for gas in rubles, because I think it is more logical, also within the EAEU," said Pashinyan in early 2020. This idea was also shared by Vladimir Putin's personal adviser back in October 2018. It appears the EAEU has been working towards this goal lately. But meanwhile, Armenia has to pay for Russian gas in Dollars. With Armenian Dram devaluing against the Dollar, the pricing for consumers will likely be revised. Consumers pay 139 Drams per cubic meter. This was calculated in 2020 when $1 was 480 Drams. Today $1 = 520 Drams. Large consumers pay in Dollars and have their rates adjusted periodically, while small consumers (general public) pays in Drams. Armenia imports 2.2 billion m3 gas from Russia annually, at the price of $165 per 1000m3. 0.7 billion of it is consumed by the general public. Dram was devalued by 6.6% since November. This could prompt the internal gas company to raise the prices, including for the general public. https://armenpress.am/arm/news/1039886.html http://www.armbanks.am/en/2020/04/07/128024/ https://neftegaz.ru/en/news/energy/406887-armenia-should-pay-for-russian-gas-in-rubles/
Public Council meets drone and robotics industry
The Public Council (linked to PM's office) held a meeting with engineers from the drone, robotics, AI, and nano-tech industries. They discussed ways to help the state to develop the military-industrial complex, drone production, aviation, and to bring their quality to international standards. https://factor.am/327477.html
former PACE MP sentenced to 4 years for taking bribes from Azerbaijan
An Italian court has concluded that Italian PACE representative Luca Volonte, who is the former head of the European People's Party, took €2.4 million in bribes from the Aliyev regime in 2012-2013. The bribe was handed over by Azerbaijan's PACE delegation leader Suleymanov. The scheme was coordinated by an Azeri lobbying firm based in Brussels. In return, the MP gave Azerbaijan favors during PACE and Italian Parliament sessions. https://armenpress.am/arm/news/1039927.html Tags: #caviar
POWs and searches
The search crews in Artsakh discovered bodies of 10 soldiers and 1 civilian in Jabrayil, Hadrut, and Sgnakh regions. The civilian has already been identified by his relatives. The cause of death is being investigated. Many bodies under the possession of the Armenian side are yet to be identified, while more bodies will likely be found during daily searches for the foreseeable future. Overall, 575 calls have been made by families who are looking for missing relatives, says the Russian humanitarian envoy in Artsakh. https://armenpress.am/arm/news/1039900.html , https://www.panarmenian.net/arm/news/289293/ Human Rights Ombudsman Tatoyan once again criticized Azerbaijan for intentionally politicizing and delaying the POW swap mission. "It is against international laws to file felony cases and arrest POWs because that's a form of a prohibited punishment. Azerbaijan is also hiding the true number of POWs." The Ombudsman has noted that Armenian residents in Tegh, Vorotan, and several other bordering villages have lost access to 2500 hectares of farming lands due to border changes. (some lands that were internationally recognized as part of Azerbaijan were given to Azerbaijan after the war). https://armenpress.am/arm/news/1039933.html , https://factor.am/327226.html , https://www.armtimes.com/hy/article/204175
POW discussions: general prosecutor meets Azeri counterpart
Chief prosecutor Arthur Davtyan and his Azeri counterpart were invited to Russia. The three sides held a conversation about the establishment of future contacts in the field of international law and other related topics. Prosecutor Davtyan mentioned the importance of implementing the November 9th statement about the return of POWs, "which will serve as an assurance for implementation of other [trade unblocking] issues." https://armenpress.am/arm/news/1039953.html , https://armenpress.am/arm/news/1039972.html
how much will a new railway network cost?
Azeri economists believe it will cost around $430 million to build a railway network connecting Kars(TR)-Nakhijevan(AZ)-Meghri(AM)-Zangelan(AZ)-Baku(AZ). Overall, if you add Gyumri between Kars and Nakhijevan, it could cost about $434 million. Economists believe Armenia can use this network to connect with Russia via two directions: Gyumri-Nakhijevan-Meghri-Baku (southern trip), or Ijevan-Ghazakh-Baku (northern trip). https://www.panarmenian.net/arm/news/289313/
rumors & rebuttals: traitors are not selling Azeri juice in Armenia
Telegram channel Mediaport circulated rumors that "Azeri Sandora juice is being sold in Armenia". The misinformation was picked up by several outlets and caused confusion among the buyers. Fact-checkers contacted Sandora's local importer who said the producer is a Ukrainian company that sells its product in multiple post-Soviet republics, so they have one unified tag that contains information both in Armenian and Azeri languages. https://fip.am/14469
Pricing for 43 commonly-consumed items was examined by the consumer protection agency in Artsakh. 12 became more expensive, 5 cheaper, 26 remained the same. Onion +25%, cottege cheese +6%, milk +6%, gloves +5%, ..., pear -12%, rice -1%, eggs -1%, butter -1%. Several dairy product prices went up, and since Artsakh has dairy companies that own dominant market share, the consumer agency will launch an investigation to see if there was price-fixing. https://armenpress.am/arm/news/1039946.html
seismic resistance assessment for old buildings
A significant portion of Armenia's large apartment complex buildings were built half a century ago. They may not be seismically safe, considering Armenia's geolocation. After the 1988 earthquake, some buildings remain populated despite being deemed highly unsafe. Many other buildings have safety irregularities. It is necessary to assess the situation, so the Urban Development Committee has drafted a bill "Methodology for assessing the priority of increasing the seismic resistance of buildings and structures". https://armenpress.am/arm/news/1039887.html
IRS will closely monitor gambling industry / RFID chips & servers
IRS press release: gambling facilities and online betting services will be more closely monitored. We worked with international experts to digitize the gambling industry and bring it on par with international standards. All gambling machines and platforms operating in Armenia will be connected to one server which will be connected to a monitoring Center. All betting and winning transactions will be recorded. The Center will also install RFID microchips in casinos to monitor the movement of chips, the chips purchased or won by players, in real-time. The government's Digital Council has approved the bill, which is yet to be discussed and voted in the Parliament. The goal is to be able to monitor the financial flows in this sector and to estimate the actual revenues. It will combat money laundering. (BHK skipping a Parliament session due to "COVID" in 3, 2, 1, ... /joke) https://armenpress.am/arm/news/1039915.html
new "public council" will advise Nature Ministry
Nature Minister Romanos met several environmental organizations and environmentalists and discussed the creation of a new Council, which will advise him on nature protection issues, help draft bills and roadmaps, work with other environmental organizations and NGOs. The Council is accepting applications. https://armenpress.am/arm/news/1039896.html
large quantities of illegally-cut trees were busted
Context: An incident happened last week between parents of drafted soldiers and military officials at a military unit. The parents wanted assurances that their sons would be safe after being deployed on Artsakh borders. The parents wanted to know why Armenian soldiers are still being sent to Artsakh "despite the November 9th statement saying Armenians should withdraw from Artsakh." During the confrontation, an incident happened between a military official and a journalist. The official struck the camera and instructed it to be turned off. Several media outlets released a message condemning the officer for hindering the journalist's work. https://armenpress.am/arm/news/1039973.html
infrastructure upgrades
Four settlements in Kotayk province (Yeghvard, Nor Gegh, Aragel, Zovuni) have a newly renovated irrigation pipeline as part of a govt subsidy program. https://www.armtimes.com/hy/article/204202
today in history
1932: First Yerevan tramway began operating in Yerevan 1951: The UN Convention on the Prevention and Punishment of the Crime of Genocide was implemented. https://armenpress.am/arm/news/1039885.html
get your free colonoscopy today
The National Center for Oncology has purchased the latest generation tools and will perform a free and enjoyable colonoscopy for residents over the age of 45, for the next 6 months. The goal is to detect suspicious growths at an early stage. It's the third most common cancer among adults in the world. It has become more common in Armenia in the past decade. When detected early, it can be fully treated. https://armenpress.am/arm/news/1039911.html
... we lift some of the restrictions! "Aye, aye, Captain!" "I can't hear you!" "The rule that limits attendance to non-commercial gatherings to no more than 60 people has been removed. All other safety requirements remain in place," said a Healthcare official. "You can enter Armenia via air or land by presenting negative COVID test results that were taken within the past 3 days. If you don't, you will be tested at the airport and will need to self-isolate until the results arrive." https://armenpress.am/arm/news/1039931.html
Armenia will soon import COVID vaccines
Healthcare Ministry: we are negotiating with multiple entities. The first batch of vaccines will arrive between late-January and mid-February. We are negotiating with producers whose vaccines have passed the necessary tests: Sputnik V, Pfizer, Moderna, and AstraZeneca. In the first phase, the vaccines will be given to the most vulnerable 10% of the population. https://armenpress.am/arm/news/1039921.html
Sputnik V vaccine has already been tested in Armenia
Healthcare Ministry: no complications were reported by the 15 patients, including Minister Torosyan. The often-discussed "skin redness" in the injection area has not been observed, either. The first injection gave a 91.4% efficiency. The second increased it to 94%. Even if the vaccine doesn't fully prevent the infection, it can save the patient's life by making the case mild (is that right??). https://armenpress.am/arm/news/1039925.html
the new COVID strain: good news, bad news
Doctor Davit Melik-Nubaryan: the version of COVID that mutated in the UK will eventually reach Armenia. Preliminary data shows that those who have already been infected and gained immunity from the original COVID will be immune to this new strain. It is believed that the immunity will last 6-12 months for the majority. The good news is that the new strain isn't more deadly and doesn't result in heavier cases. The bad news is that it spreads a lot faster. The Healthcare system could be overloaded again. The vaccines against the original strain will likely work against the new one. Pharmaceutical companies may have to modify the vaccines, but it will only take weeks. Closing borders with the UK won't be helpful to prevent it. We may already have the new strain. We need to develop a new strategy from the ground up. Viruses mutate all the time. It's part of the evolution. Sometimes they cause more severe symptoms, sometimes lesser. From the evolutionary and survival standpoint, viruses want to cause less severe symptoms for the host so they can have a chance to spread wider. https://armenpress.am/arm/news/1039856.html
Armenian scientists will study the COVID strain
CDC chief Bakunts: Armenia will have the ability to study the genetic mutations of the coronavirus. Active work is underway to invest in research resources. Meanwhile, we can submit a virus sample to a WHO laboratory to conduct a study for us. https://armenpress.am/arm/news/1039962.html
families with newborn children receive mortgage subsidy
450 families have so far taken advantage of a government subsidy program that helps with purchasing apartments. ֏526 million will be paid as part of this 2020-2023 program. It is part of a recent initiative to boost the birthrate. Two other aid programs went into effect in mid-2020. Provincial families received a downpayment subsidy equalling 5% of the total price. Another one subsidizes insurance payments. The same family can apply for all three programs, and there is no age limit for parents. https://factor.am/327385.html
diaspora-government cooperation expands: iGorts
iGorts is a program that recently recruited 48 highly skilled diasporan Armenians to visit Armenia and work at 19 various government agencies. Three more volunteers have arrived today to begin their work: Shila Palyan from Canada, Zaven Ayvazyan from Russia, and Anahit Mikaelyan from Cyprus. https://www.armtimes.com/hy/article/204211
Yerevan to install 32 more elevators in apartment complexes
Arabkir district is the next recipient. Hundreds of units were installed in 2020. They replace the decades-old elevators that have become dangerous and poopy. The new elevators come equipped with running water and flush so you can drain your crap /s. https://armenpress.am/arm/news/1039954.html
have you been buying stuff right and left lately?
...because trade turnover increased by +34%, and the number of printed receipts by +7%, during this year's New Year's holidays. ֏91 billion was spent between December 29-31, which is ֏23 billion more. https://www.armtimes.com/hy/article/204195
would your majesty be pleased to take a salt bath?
Nerqin Getashen will have a halotherapy "salt bath" center to help alleviate certain conditions. It's the first in Gegharquniq province. There will also be rooms for aromatherapy (oils), ogyxenotherapy (oxygen cocktails), and massage. The owner claims it helps boost immunity and alleviates breathing, allergy, and insomnia issues (take the claim with a bath of salt). https://armenpress.am/arm/news/1039974.html
first Yezidi theater to open in Armenia
"шəp' y əBин" or "war and love" will be the first performance in a newly opened Yezidi theater in Ejmiatsin. It's part of a «Եզդիների կողքին» cultural initiative. The crew had planned a major performance about Yezidi national legend but the 44-day war began and some were drafted. The crew ended up performing the "шəp' y əBин" during the war. It's about the importance of Yezidis in Armenia, and their love for the country. The January 17th performance will be dedicated to Yezidis who died fighting. The performers aren't professional actors but they received acting training on-the-fly. "It seems to work because their enthusiasm is great. A very good team has been formed," said the producer. https://armenpress.am/arm/news/1039941.html
Aram Khachaturian House-Museum will resume "Musical Thursdays"
Netherlands college will donate large quantities of school supplies
Several thousands of desks, chairs, furniture pieces, computers, lockers, etc. are being loaded in containers to be shipped to Armenia. The Hermann Wesselink college is renovating its building with new items so they decided to donate the old stuff to Armenian kids. This will be enough to equip 15 provincial schools. https://factor.am/327135.html
To think of these stars that you see overhead at night, these vast worlds which we can never reach. I would annex the planets if I could; I often think of that. It makes me sad to see them so clear and yet so far. -- Cecil Rhodes, Last Will and Testament
This is the 3rd post in a series on South Africa and Apartheid and so far in the first two neither Apartheid nor South Africa even exists. But we are to the mid climax. In first part we discussed how our groups of players: Afrikaners, British, Xhosa, Zulu, minor tribes, other ethnicities got to what would become South Africa. In the second part we discussed how the Zulus and Xhosa knocked themselves out of the game leaving the British and Afrikaners as the main players standing for who got rule what would become South Africa. We also discussed how the British policy was non-viable. This part is going to discuss how the British changed course and consequently won control. We are also going to get to the genesis of the Western Left's hatred of the Afrikaners and the genesis of Apartheid, We'll end on the creation of the Union of South Africa which while not the Republic of South Africa will allow me to stop talking about "Southern Africa", "territory that will become South Africa".... But unfortunately you will have to sit through this one more post where South Africa doesn't exist yet. Cecil Rhodes was born in 1853 the sickly asthmatic 5th son of a not particularly notable clergyman. He'd remain sickly his entire life dying in 1902 at the age of 48 from the sorts of deterioration of the heart and lung one wouldn't expect to see until a man was at least well into their 90s. In that short span he would: become one of the richest men in the world; found several countries; change the entire economic structure of the territories that would become: South Africa, Botswana, Zambia, Mozambique, Namibia and Zimbabwe; found 2 major corporations: the British South Africa Company and De Beers; rethink British imperialism inventing what would become the British Commonwealth; becoming one of the defining figures and great visionaries of the Victorian Age; trigger the 2nd Boer War; demonstrate the strategy changing nature of the machine gun decades before World War 1; be the only genuinely important Prime Minister of the Cape Colony; invent the concept of corporate armies; play a large role in saving the South African wine industry and most importantly be the only individual getting his own post in this series. :) Rhodes was sent to South Africa at the age of 17 so that the British weather didn't kill him. Rather than doing the normal thing and spending the money (amounting to a decade or less of a comfortable middle class salary, but no great fortune) on living with some gambling and girls thrown in he decided to head to the newly discovered diamond mines in Kimberly and started buying up small diamond mining operations leveraging each mine's output and outside financing to buy the next. Later he partnered with leading financing and trading firms so by 1888 had what amounted to monopoly control of diamond industry turning De Beers into the diamond powerhouse it remains to this day though the last pieces wouldn't fall into place until 1890. He by the 1880s De Beers was throwing off enough excess profits that he could pay investors and continue expending De Beers while being able to found the predecessor to the British South Africa Company operating much further into the interior opening up Bechuanaland and Rhodesia as colonies using his own profits to fund the administrative expenses much as the East India Company had done a century earlier. Rhodes believed that British policy wasn't viable because it was petty. A vibrant healthy economy throws off an enormous amount of tax revenue. Petty colonialism, like the kind the British were engaging in would never generate much profit because of its very short term nature. Britain should make money by investing in the local economy, spend some on upkeep, reinvesting most of the profits and just skim a little of a forever growing payout. What Britain had tried to do with the American colonies encouraging economic development was the right approach. The problem was London had been shortsighted and selfish turning the local administrators against them. The independence of the USA wasn't a strategic failure it was the result of poor tactical implementation. The problem the British were facing in Southern Africa was similar and since the policies had been similar the results would be as well. The Afrikaners had no reason to be loyal to a Britain which had spent almost a century making very clear that it had no interest in their welfare or society beyond some ports which were frankly not nearly so important since Suez had opened. Rhodes changed policy to have Britain stop acting like a colonizing power and start acting like the domestic government of South Africa as much as possible .Outlining his changes to colonial governing policy:
Colonial financing -- utilize profits from business ventures fund army. Rhodes' companies were good examples of this the British charter and the backing of British troops allowed him to make excess profits which allowed him to incur expenses which the previous skinflint administration could never have tolerated. For example British colonial bonds generated an average return of 4.7%. Investments in independent American bonds generated an average return of only 2.9%. The difference was not being taken into account when the Colonial Office calculated their return on investment which to Rhodes' mind was simply lousy accounting.
Long term investment -- In general rewire the metrics used at the London Colonial Office to focus on long term investment not short term profits.
Demographics -- The British were the world's first people. Physically populate as much of the world as possible. Assimilate other people's into the British way of life. In South Africa in particular he intended to win the hearts and minds of the Boer.
Stability -- The previous administration had focused on stability because instability created upheavals that increased administrative costs. For too long British colonial policy was to tolerate and coexist with local culture. To create a profitable economy agricultural efficiencies are going to need to be introduced. That means 90% of the natives are going to freed up to work in a manufacturing and processing workforce. It also means the agricultural tribal traditional culture is going to be completely destroyed. Instability not stability should be policy. Seek to replace local culture with British culture to enhance the potential for economic growth.
Glory to British not England -- English colonies exist for glory of England. British colonies self exist. England's glory is that is the Birthplace of the 1st people not how much of the world remains completely non-British while in some vague unimportant sense recognizing Victoria as their Queen.
Representation -- As long as colonial governments respond to a English democracy they will be unrepresentative of their people. Create a democratic institution which provides representation for all British people in a British Parliament. There should be an English parliament for England. Invite the United States to join this new institution. "Inauguration of a system of Colonial representation in the Imperial Parliament which may tend to weld together the disjointed members of the Empire and, finally, the foundation of so great a Power as to render wars impossible, and promote the best interests of humanity" (NB: this is essentially the British Commonwealth, though of course the USA was not invited)
Devastating defeat of enemies -- Colonial policy was designed to solve conflict cheaply. Small military victories do not undermine the hostile's economy nor their society and thus don't accomplish much. They simply delay and prolonging the problem created by the enemy allowing the enemy to choose points in time to achieve advantage. Avoid costly wars certainly but when war is needed seek to inflict devastating defeat so the subject people realize their inferiority. This realization facilities undermining their institutions and thus during the peace their way of life easily becomes more British. Further a willingness to war like this makes challenging Britain very costly and risky for potential enemies and thus wars will be far less frequent. The financial people are correct that the aggregate cost of inflicting devastating defeats infrequently is higher than more frequent small wars but the benefits are far greater. War carried out towards devastating defeat becomes a form of investment not a pure non-productive expense.
Scope -- The British were far to unambitious in their aims. The goal of British colonialism should be "all lands where the means of livelihood are attainable by energy, labour and enterprise". The scope was, "the occupation by British settlers of the entire Continent of Africa, the Holy Land, the Valley of the Euphrates, the Islands of Cyprus and Candia, the whole of South America, the Islands of the Pacific not heretofore possessed by Great Britain, the whole of the Malay Archipelago, the seaboard of China and Japan, the ultimate recovery of the United States of America as an integral part of the British Empire"
map of Cecil Rhodes' proposed British Empire You'll notice that all of Africa was in the map. Rhodes was of the opinion that Africa was incredibly rich in minerals and peoples. But it wasn't exploitable for profit because of a lack of transportation infrastructure. Rhodes was pushing to start fixing this by creating a full African north-south railway connecting "Cairo to the Cape". Rhodes' BSAC conquests were designed to drive north while he used his political influence to push the Egyptian conquest further south into Anglo-Egyptian Sudan and then a business similar to BSAC run by Sir William Mackinnon to push into Uganda. For the northward push (primarily in what today is Zambia, Zimbabwe and Botswana) Rhodes was directly implementing his policy using a private army funded from the British South Africa Company. The Ndebele and Shona (Zulu tribes) were handled easily by the devastating defeat principle. Rhodes' forces demonstrated how effectively Maxims (a primitive form of machine gun) and barbed wire worked against simple rifles, spears and long shields achieving kill ratios never before seen in the history of warfare. As an aside these battles against the Zulus would also be used by those military theorists and historians who correctly anticipated in the later 1890s through 1910s how devastating a war between the great powers would be using these weapons against each other. Rhodes through BSAC had managed to push north of Lake Mweru and to the Northern tip of Lake Nyasa. Which almost connected with Sudan were it not for German East Africa (Burundi, Rwanda, and Tanzania) in the middle. In theory an alternative route through the Belgian Congo would also work but the gold mines in Tanzania kept Rhodes focused on taking German East Africa. Further Rhodes met his match in ruthlessness when it came to the Belgians. When Rhodes' negotiating agent sought a development contract for mineral-rich Katanga (in Congo) the native ruler Msiri refused. King Leopold II of Belgium obtained the same concession by having his agent signing it to Belgium himself over Msiri's dead body in the name of the "Congo Free State". At the same time Rhodes worked with the Colonial office and in 1890 British issued the "1890 British Ultimatum" to Portugal. This ultimatum by the British government forced the retreat of Portuguese military forces from areas which had been claimed by Portugal on the basis of historical discovery and recent exploration, but which the United Kingdom claimed on the basis of effective occupation. Portugal had attempted to claim a large area of land between its colonies of Mozambique and Angola including most of present-day Zimbabwe and Zambia and a large part of Malawi, which had been included in Portugal's "Rose-coloured Map". This ultimatum violated the Anglo-Portuguese Treaty of 1373 which to that point had been the longest standing peace treaty in history. Who owned what by the early 1900s Take a look at the map above and imagine the British controlling the north-south line connecting to a British/Portuguese line running east-west in the south and a joint French/British/Italian line running east-west in the north. From there local government and companies could construct smaller feeder lines creating a modern rail system. Hopefully and you start to see how Rhodes intended to start developing the transpiration infrastructure needed to create a strong African economy. All this was going to be for naught though if Southern Africa ended up as a Boer state hostile to British interests on the model ZAR (Zuid-Afrikaansche Republiek, Transvaal Republic). So Rhodes decided to run for Prime Minister of the Cape Colony and solve the problems of British strategy explicated in part 2. The primary problem the Boer had with British government is their divide and conquer approach. The British tilted to whomever was losing (a standard British policy they would also follow in Palestine) which for decades meant treating the Boer and native Africans as both being subject peoples while favoring the native Africans against the Boer. In Rhodes mind you could not expect to get loyalty from people you were obvious disfavoring. The British were the ones turning the Boer into enemies. So in 1892 Rhodes instituted the Franchise and Ballot Act. This was seen as a compromise between factions in the Colonial Office and the traditions in the Cape Colony for a broad democracy (anyone with £25 in property could vote) and Orange and ZAR's (Zuid-Afrikaansche Republiek, Transvaal Republic) more exclusive democracy. Rhodes raised the amount of property to £75, an amount specifically chosen to disempower many of the native Africans while allowing many Boers to vote. With a Boer and British based democracy locked in the Cape Colony's democratic powers could be strengthened, creating more self rule and making the involvement of the London Colonial Office less obvious. This concept of using a not explicitly racial criteria while instituting laws with racist intent is very modern. Various Liberals in the London Colonial Office especially missionaries disagreed strongly with Rhode's policies. They had been the ones advocating for the enlightened colonialism that was British policy. Missionaries in particular saw their role as: combating godlessness, superstition and backwardness. In particular encourage better use of land; encourage paycheck work; become trusted advisor to tribal leaders. The slogan "Bring the 3Cs into Africa" referred to Commerce, Christianity and Civilization. To their mind Rhodes' vision of British Imperialism was straight up military tyranny. If followed he would make England no different than a modern day Genghis Khan, creating a empire loathed by a vast expanse of subject peoples who would unite against it from all directions. Instead interfering minimally and being seen as an ally while slowly educated the elite in British custom and religion would cause a gradual consensual change that would build British alliances that would last centuries. Plus such an approach would fulfill the Lord's Great Commission (term for Jesus' command to convert the entire world to Christianity) in a way that honored God rather than shamed him. One need only look at how the Spanish, Portuguese and Balkans had thrown off Islam after centuries to see how ineffective military tyranny was at long term conversions that didn't require force. So in their mind: No the London Office should stand by its traditional values of: monopoly companies and plantations run in (unequal) partnership with indigenous elite. free trade, free (and indeed forced) migration, infrastructural investment, balanced budgets, sound money, the rule of law and incorrupt administration. As far as their Boer, in their mind the Boer were the primary impediment to enlighten British rule in South Africa, being Christians they were obligated to agree with the missionaries on the vision of the White Man's Burden and Enlightened Empire. Rather than making concession to the Boer they needed to be crushed to demonstrate the moral difference between the Boer and the British. With Rhodes' change in policy tilting towards rather than away from the Boer the Western Left came to truly hate the Boer in 1890s. Since the point of this series is the analogy I'll add that I wrote two posts about more or less the same groups of Liberal Christians turning against Israel again having to do with Israeli/Jews discrediting Liberal Western values and thus interfering with the Great Commission: WCC churches and Quakers. Rhodes in debates before and at the time considered this Liberal Empire stuff to be simply aspirational. Without economic interference there wasn't enough money to fund anything like what the Liberals proposed. He'd point to facts like that after a century of such rules in India they had increased the secondary schooling 7x to a whopping 2% while England with not nearly as many well funded missionary organizations was over 16%. Rhodes hoped to unify all of Southern Africa around this compromise approach to the franchise. ZAR however rejected this compromise. By the mid 1990s approximately 1/3rd of their white population were British (Anglicans). ZAR had every intent of maintaining religious based voting criteria (i.e. citizenship in ZAR was only open to people who were members of several Dutch Reformed Churches, see part 2). Obviously for Rhodes a situation where British people were the disempowered minority was intolerable. Additionally the ZAR were maintaining an anti-Cape Colony / anti-British / anti-Rhodes trade policy. It was becoming increasingly clear there would need to be regime change. So in 1895 Rhodes organized an attempted coup d'état now called the "Jameson Raid" (yes the same Jameson who went on to be Prime Minister 1904-8 of the Cape Colony after the 2nd Boer War). The Afrikaners were more astute than natives had been caught wind of the early organization and waited until the forces were committed trapping hundreds of Rhode's people creating a great embarrassment. Its at this point that the Boer made by far the greatest mistake of their history as a people. The 4 years between 1895-9 were when they made the choices that led to their ruin. The British were really embarrassed. A colonial governor who had a crown chartered corporation had been caught red handed engaging in a serious act of war against another sovereign state with no approval from Parliament. The Colonial Office admitted as much and forced Rhodes out of office in 1896. The Afrikaners had real negotiating leverage to work out a deal. It obviously would be extremely important that the next leader of the Cape be friendly. But they didn't decide to negotiate. Instead they started flirting with the Germans, while not actually signing a formal alliance with Germany that at least had the potential to provide them real protection. The flirtation however, turned a nasty incident into a serious threat to all British interests in Southern Africa forcing a British response. In Britain an alliance of Jingoists (populist military hawks) angry about the humiliation of 1st Boer War, Conservative Imperialists who wanted to end Boer independence especially in the ZAR (the 3 core values for Conservatives at the time were: Union with Ireland, the Empire and the superiority of the British race), Liberal Imperialists who supported Rhodes' vision and Missionaries who hated the Boer formed pushing for a war. Seeing this alliance form against them the Afrikaners did nothing to avert the danger. Rather they made a mistake many 2nd tier powers do when it comes to 1st tier powers. The Afrikaners confused the light force and weak will the 1st tier power is willing to spend on them with the amount of force the 1st tier power is capable of employing if it so chooses. Having beaten the British handily in the 1st Boer War when they were fighting the C-team (as I called in part 2) the Afrikaners grossly underestimated what they would face against a British army that had a political mandate for victory, what Britain's A-team would look like. Preparing for something slightly worse than the 1st Boer War the Boer began a serious arms buying program in 1897. ZAR also got more belligerent in their rhetoric which led to a formal alliance with the Orange State and Boer guerilla groups that could support the war effort in the Cape. The Boer had about 63k troops including some foreign troops. . The British were determined not to lose the 2nd Boer War. This was going to be the British-A team. By the second phase of the war between British soldiers, soldiers from other colonies and local Africans providing auxiliary Boer were facing a 500-600k man army. Nor was the command third or even second rate as it had been in the 1st Boer War. For example, the top military command would be Herbert Kitchener who was fresh from the victorious Anglo-Egyptian invasion of Sudan. Kitchener after the 2nd Boer War would go on to be the Commander-in-Chief for the armies in India and a decade after that the UK's Secretary of State for War during World War 1. He's this guy: Kitchener famous 1914 recruiting poster The cost to maintain that army would be £60m / year far more than Britain could ever pull out of Southern Africa (GDP and inflation adjusted the Boer War would cost the UK about $250b). The first phase of the war was a Boer offensive while the British were still deploying troops in October–December 1899. Once the British were done they conquered all pockets of resistance in the Cape and Orange as well as essentially the entire ZAR territory January to September 1900. The Afrikaners decided to fight when surrender was the better option. Leading to a guerrilla war between September 1900 and May 1902. The British simply could not afford to keep an army of that size in the field for years dealing with guerilla tactics until the Boer admitted they were beat. Facing time pressure the British felt they had no choice but to come down hard. The British cut the guerilla war short by instituting a scorched earth policy against areas giving support to guerillas in the ZAR (most of the ZAR). ZAR men were mostly in the militias. Scorched earth destroyed the food supply in the ZAR so the British threw the women and children in concentration camps. The army hadn't prepped for needing to support massive numbers of civilians so malnutrition and disease were rampant in the concentration camps. This disease and malnutrition resulting in a camp death rate of approximately 30% annually. A policy amounting to genocide. Pro Boer forces in the UK generated widespread opposition to the camps so the military response was to not confine woman and children and instead leave civilians on the now barren earth to die of starvation and exposure. Actual POWs were deported to Bermuda and India preventing the Boer from standing any chance of liberating them. African tribes that had lost territory to the Boer began moving in. While both sides had agreed not to arm natives or recruit tribes. But the British weren't going to fight for the Boer if tribes decided to take advantage of their defeat. The Boer were quickly losing everything they were fighting for: freedom, their lands, their family, the self dependence and surrendered rather than have their population geocoded to oblivion, being left with no economy and whatever lands they managed to hold being assaulted on all sides by natives who would take it from them. The Boer society that emerged from the surrender did not have separatist attitude. Destitute Boers now willing to work in the minds and alongside black Africans swelled the ranks of the unskilled urban poor competing with the "uitlanders" in the mines. The new economy was unambiguously focused on gold causing mine production to swell enriching the British interests. The Afrikaners were both physically and psychologically crushed, and wouldn't be causing any more problems for decades. In the UK the war came to be seen as excessive especially as the financial cost of the war sunk in. The Conservatives' suffered a spectacular defeat in 1906 driving the Conservative Prime Minister at the time (12 July 1902 – 4 December 1905) Arthur Balfour from office. He comes up rather regularly on this sub in his later role as Foreign Minister. As the Boer are no longer resisting the British Empire the shift towards more pro-Boer policies from England continues. In 1909 the British Parliament dissolves the British colonies of: Cape of Good Hope, Natal, Orange River Colony, and Transvaal and combines them into a Federal Union of South Africa. This makes South Africa into a Dominion (essentially Australia's status at the time). Jan Smuts (an Afrikaner) resurrects Rhodes' idea of a Common Wealth and the British embrace it. And so we conclude part 3 our story of how the British eventually won and South Africa came to exist. How the Western Left started to hate the Boer, a hatred they would resurrect later. And how the first steps towards apartheid were taken. Whew that was longer than I intended!
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