Dear Friend
I hope that you have all had a Happy Easter! Well, the tax-year-end has gone. Remember, don’t wait till the last minute if you have things you should and could be doing now to gain optimum benefit – we have had many ISA contributions poised for 6 April already for example. There are fewer and fewer ways of avoiding tax as well so all the more reason to optimise your allowances. Without being political too but there could be disruption ahead and if there is a regime change, then having as much as possible in government-sponsored tax-friendly schemes like ISAs and Pensions is not going to be unhelpful is it!
BREXIT UPDATE – ANYTHING NEW AFFECTING YOUR MONEY & INVESTMENTS?
Well… whatever your views on the style of Brexit, not many of us wanted to be facing EU elections. The outcome could be a serious bloody nose though the implications of these long-term would not be vast I suppose (though would ratchet-up the ‘redundancy’ payments to them all I guess…). It has all gone quiet for the parliamentary recess but each day has seen new information it seems but a pleasant rest ensued over Easter. This eshot is not a political forum, nor a political message, and I hope it will always retain its impartiality. However, local Conservatives have secured Dominic Raab, the ex-Brexit Secretary to speak in North Devon at a dinner on 9 May – he continues to promote ‘Brexit’ and the invitation is open so if you want details, drop an email to the Party’s local office at northdevon@tory.org. I am happy to publicise any such high-profile visits of any relevant political or Brexit/Remain individual if it helps create opportunity for any of us to attain greater illumination of what might be the financial implications for us all!
CHARITY SUPPORT
A small North Devon charity, Flying Fish Artists that supports people who have experienced mental health issues by using art as a means of therapy, has received a much welcome funding boost from a local business. We have awarded a grant of £2,100 from our fund administered by Devon Community Foundation. From their peaceful yet centrally located studio in Rock Park Lodge, Flying Fish enables members to come together to share experiences of their personal mental health challenges, supporting each other whilst using art as a creative and therapeutic means of recovery.
The funding will enable Flying Fish to develop members’ art skills through workshops, field trips, supplying art materials and being able to provide safe storage for members’ artwork. I was born only a short distance from the Lodge and at the presentation it was lovely to meet the trustees and indeed some of the group! We could see how invaluable the concept of art can prove to be for the recovery of the members, their therapy and ongoing improvement and amazing how their artistic skills have also evolved. I am sure some of them never knew they had it in them! We love to support small groups where there is a real commitment by volunteers to the concept as well and so often, relatively small sums can make such a significant difference to their operations.
We are pleased to work with Devon Community Foundation (DCF). It provides an efficient route to funding small local groups and charities, often the ones providing the most vital of help in our communities but who receive the smallest share of charitable donations. Our own fund has granted £6,465 to North Devon organisations already since it was created; it all helps add-up to the £12.8million which DCF has distributed, on behalf of their donors, to over 4,000 projects across Devon since 1996. The latest grant round is just about to start so if your project needs funds, please do enquire!
Separately, we are very excited to announce that we have now completed the onerous registration process for the ‘Philip J Milton & Company Plc Charitable Foundation’, our own charity which will act both as a conduit for donations but will also look to gift additional funds to local good causes and enquiries are welcomed. One of our projects aims in due course is to provide basic financial planning and budgeting skills to those who would benefit from it the most.
DEBT IN DEFICIT
Well, the uncertainties of Brexit, coupled with a few other things around the Globe, have conspired to push bond prices higher again and against the trend which was set to see interest rates rise. We’ve also seen a few other political uncertainties creep-in and things like the oil price has been nudging upwards too to its highest level for some time. Central banks ‘artificial’ ‘quantitative easing’ is also continuing to have an impact on pricing of course.
However, did you know that $10trillion of tradeable debt is again giving investors a negative return? How daft is that… What does that mean? This means that you lend your money to an institution or a government and upon maturity they’ll give you back less than you gave them, even after allowing for interest. Forget inflation too – that’s gobbling-up your money on top.
Yes, that total sum is ten times a thousand, thousand, thousand Dollars. It is not just blue-blooded governments’ debts (are any that blue really) but also some corporations which have been elevated to those levels. Last month, France’s LVMH raised money on the markets promising to pay investors less than the starting levels on maturity and investors, so desperate for ‘quality’ debt, over-subscribed six times for it, having an effect on pricing of other issues too of course.
Other curious things have been happening too. Total, the French Oil giant, raised a perpetual bond (yes, that’s right, never needing repayment) at only 1.75%pa and the previously seriously troubled Italian Bank Unicredit had €5billion of orders for its perpetual offering. Even so-called ‘junk bonds’ are interesting – ‘Power Solutions’, a company with six times more debt than actual earnings, only had to pay 4.375% to get it away. In fact, in Euros, the rates which supposedly ‘high yield’ borrowers have to pay are the lowest they have been all year.
At some point, the outlook for traditional ‘value’ equities will change and a good proportion of this cash will look to gravitate out of these things and chase very few opportunities, propelling share prices markedly higher. When that turn will happen though is anyone’s guess at the moment but it could start sooner than many envisage. It is one side of the fence from which you need to make sure you are not watching it from the other!
And then there is an emerging market debt – the Saudi Aramco Bond at under 4% interest rate and over-subscribed in the biggest ever sum – $100billion chasing just $12billion of bonds raised in the end – and at rates lower than anticipated as a consequence of the interest. What is funny is that this company, owned by the Saudi State, is paying less for its borrowing than the Saudi State is paying for its direct debt! Something has to give! Think about it too (especially with the Total Bond above) there are risks lending to oil companies as the world is becoming more ‘green aware’ – just imagine if in twenty years they are faced with giant clean-up and compensation costs – unlikely but not impossible. Meantime the juicy income in oil stocks is attractive – and the bond maturing in 2050 attracted the highest attention too and I bet that interest rates will be higher than present rates at least once or twice these next thirty-one years! Indeed – it can be dangerous following the popular view – eg ‘no oil’. Just as happened with tobacco stocks some years ago in the face of all the cancer claims – if you did not have some exposure to the sector you would have underperformed dramatically. I am not talking ‘ethics’ now (though it is curious to note how many green zealots smoke too!) but simply investment diversity. Oil will have some excellent returns for more years than many imagine yet, whatever the long-term future holds.
DIVIDEND INCOME
It is amazing to think that last year, dividends paid by Britain’s quoted companies hit £99.8billion, an increase of 5.1% on the previous year. Including the few ‘special dividends’ too, the annual increase was 8.7%. This is really good news for investors with shares and share-related funds and it also underpins capital values too. The first quarter has started well too – granted with a special dividend or two but up 16% on 2018 and that means the figure for 2019 should easily surpass £100billion.
Did you ever wonder where the UK’s household spending is concentrated? The biggest segment now is transport, followed by ‘housing, fuel and power’ (which is one category). ‘Recreational and cultural activities’ is the fourth category and ‘restaurants and hotels’ the sixth.
RISK WARNING
Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.
To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!
If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website www.miltonpj.net. We celebrated our thirtieth anniversary in 2015 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.
Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.
My best wishes
Philip J Milton DipFS CFPCM Chartered MCSI FPFS FCIB
Chartered Wealth Manager
Fellow Of The Personal Finance Society, Fellow Of The Chartered Institute Of Bankers
