Well, the news is beginning to brighten, it seems – pleasingly the infections here are dropping and deaths too and even the Bank of England is admitting its most pessimistic projections were wrong, though clearly the hit to the economy will be savage. It’s certainly not over despite the relaxations to lock-down. Common sense and being alert will continue to apply going forwards. If you are not vulnerable and can manage to escape for a break from 4 July and you need it, enjoy it and appreciate what our beautiful natural Country can offer too – but don’t expect everywhere to be open.
Another of the scam victims we have been helping informally has secured compensation of over £40,000 through the FSCS for the Organic Investment Management debacle, I am pleased to report. However, almost every day we hear details of what parasitic claims’ chasing companies have been doing as well and it makes our blood boil. See below… the whole Organic fiasco could result in compensation of between £12-20million and the question will again have to be asked – what will be done against the perpetrators of all that which went wrong and also what is being done about entities like the Resort Group International Plc which was the recipient of so much of the money which was recycled? Those meant to be regulating these entities also need to look hard at themselves. Other advisers and victims elsewhere were buying the same rubbish; too so total losses will be in the hundreds of millions. Please, please, don’t invest in dodgy, non-standard trash however bright it looks – use a professional, independent financial adviser so at least if it goes wrong you have a chance of recompense. And yes, proper investments can go down in value as well as rise (over the long-term, properly balanced and well-diversified portfolios will always rise) but that is infinitely better than losing all your money to a scam fronted by glossy brochures with pictures of sunshine and beaches or promises of property-backed security not worth the paper it might not even be written upon.
The world’s biggest seventeen companies have added approximately $1.7trillion to their stock market capitalisations since the beginning of the year. This means the values of all their shares in issue have risen by this sum. Yes, that is despite the Pandemic problems. So effectively, whilst they fell a little in the Spring too, they have rebounded and are now higher still. They are all ‘tech’ companies of some type, led by Amazon. This sum of ‘added value’ is not far from the whole value of the British Stock market, to give you a reference point.
Sure, technology has been relatively unscathed and indeed, several such companies have benefited handsomely from the lock-down but will that be permanent? The feeding frenzy pushing ever more cash into exactly the same colossally priced holdings could lead to an almighty correction in them, as greed and the fear of ‘missing-out’ come home to roost. It hasn’t happened yet and many would argue it won’t (and that several of these companies have colossal cash balances too) but the proportionate value all these companies versus all the others represents one of the biggest prospective bubble exposures since the Dot.Com one bursting in 2000 (when technology, telephony and media at one stage represented 40% of the value of all the world’s stocks). Indeed, whilst it may be an old record I am playing, the comparative excessive ratings of ‘growth stocks’ which all these now represent versus old-fashioned ‘value’ is at one of the biggest gaps ever seen. Take the UK and remember that in 2000, at one point Vodaphone was the ‘then’ darling and it represented 16% of the value of the whole of the FTSE100 and the shares were over £4. They are now around £1.25.
Many investors are sanguine about all of this and as the same over-hyped stocks fill ‘cheap’ index trackers (which are weighted towards the biggest companies of course) and we have also found they have been high-up in the stakes of ‘socially responsible investments’ too (despite seriously questionable practices and especially about taxation from several of them!), thus giving these concepts an undeserved air of performance on the back of that. This is likely to mean more people than ‘normal’ out there may have a big shock at some point as a rebalancing is so long overdue. Maybe what the recovering world needs to do is a globally agreed accord to have an international super-tax to take the odd trillion or two from these firms to help pay for the recovery from the Pandemic. That would work well and would only repay what they have taken already and the absence of equitable tax payments which they should have been making to date. However, governments had better act quickly as the froth could all evaporate…
Not surprisingly but in the spring, investors flocked to Cash ISAs and avoided Market ISAs. Of course I generalise but this is based on the HMRC records for where the money went. History shows how the emotions play-out. It is an understandable reaction but doesn’t make it ‘right’ of course; 1.1million more subscribed to an ISA in 2018-19 totalling £67billion. Even before the Pandemic, the public shunned shares over ‘cash’ (76% of subscriptions went to Cash ISAs). Members of the public and institutions have a propensity to invest in shares where they are expensive and selling them when they are at the bottom. Indeed, these sorts of facts about cash investments are very helpful as they frequently flag the likely way for the future. It is a play on ‘buy when the blood is running in the streets’ and the opposite (from the Wall Street crash in 1929) which is ‘when the bell hop is telling you what stocks to buy it is time to sell’. At the moment everyone and his dog has been very happy buying tech stocks… Remember too that zero interest on an ISA isn’t much fun nor tax saving but you can transfer a Cash ISA to a Market ISA in part or total so maybe now is the time to think about that.
MORE SPECIAL OFFERS – SIG 25P OPEN OFFER/MITIE RIGHTS ISSUE
A number of clients responded to the De La Rue issue and we are subscribing for as many new shares at £1.10 as we can (against today’s market price of £1.30) so well done them. There are more opportunities if these feature in your pots! SIG has announced a cash raise now too – an open offer at 30p a share but no excess top-up opportunity. Then Mitie Group announced the acquisition of a very attractive portfolio of liquidating Interserve’s businesses and a Rights’ Issue to fund it, based on 11 new shares at a very low 25p for every 5 shares held already and the shares bounced to almost hit £1. We hold few SIG but more Mitie and shall look to take advantage of as many of the special discounted shares as we can – if your account holds these, then especially for Mitie it is good to make sure you have enough cash and top-up your ISA or Pension, etc if so!
SAVINGS IN PENSONS
Last year the total contributed to personal pensions under ‘auto-enrolment’ rose to nearly £20billion, up a third on 2018. This is a phenomenal achievement and a great boost to personal savings as so many of these individuals had no or very little pensions before. Employers and employees have been contributing and whilst Covid19 will impact this year’s, it is positive.
However, we find that more and more people have dribs and drabs of pensions in different places and inadvertently they can be paying high costs for some of these as well as not ‘having any handle’ on exactly what they have. We often help clients consolidate their pensions so these valuable assets begin to work for them in a constructive and cohesive way and managed properly, to suit their unique circumstances and not in some unresponsive pot. Remember too that pensions are a form of free life insurance – the life insurance company may not tell you that you may be able to cancel the policy and save the premia if you have enough protection from your ‘free’ pensions or death-in-service benefits at work!
HSBC – FILM PARTNERSHIPS
HSBC has been presented with a class action on behalf of disgruntled investors in the Eclipse Film Partnerships. There are forty Eclipse schemes in total.
We were and are tiny and the likes of HSBC is a giant with expensive lawyers and advisers. So why did it think differently to how we did because when these things first appeared? We believed they sailed the wrong side of the wind so we did not support them, or any of the similar schemes promoted to avoid tax. HMRC has had its day and proven that the whole concept was a sham.
A law firm has now started a class action pursuing £1.3billion from HSBC – ouch. The promoting company, Future Capital Partners, went into liquidation in September 2018, taking many millions in fees and commissions with them…
If I was an investor, I too would have asked my adviser the same questions about sailing the wrong side of the wind… so what proportionate responsibility should the investors bear, if a claim is successful? Please don’t misinterpret things either – we believe that all taxpayers have a duty to ensure they use their relevant tax allowances and reliefs efficiently and we help our clients in this way and very successfully – but this is different! (Pensions as a wrapper inside which you can put pretty much whatever you like from cash and gold to speculative shares and being one of the best going – for everyone under the age of seventy-five, working or not!).
I know I have written about these many times but there seem to be no depths to which some of them won’t stoop. I have just written yet another complaint to the FCA about one of these ‘regulated’ entities about the Organic Investment Management debacle where the investor should never have appointed it in the first place and he is likely to end-up losing £13,000 to it which he can ill afford. Not only have we done all the work involved in regard to ascertaining the origin for the complaint and communicated all of this without charge to the investor but he is a vulnerable person who gave-up work to be a full-time carer for his disabled wife. Claims companies now theoretically have to note to their prospective victims that claims can be made direct to the FSCS or the FOS without any costs at all but this one says in its awfully written terms:- You do not have to use our services to pursue your claim. It is possible, for you, to present yourself, for free, either to the person against whom you wish to complain to or the relevant Statutory Ombudsman or Statutory Compensation Scheme. You would need to familiarise yourself with pension regulations.
Since when has a claimant needed to familiarise himself with pension regulations to claim what is due to them? Won’t it be great if the FCA steps-in and orders that firm to refund any fees taken from any claimants whilst this term has been in existence and that all ongoing claimants will be given the opportunity of cancelling the engagement without cost? Sadly I have little faith in the process working as it should. We are toying with a representation to our MP to bring in rules to stop some of their atrocious behaviour against unsuspecting people who have already been victims before.
These entities made unsolicited approaches to people on the Organic list using confidential information which had been taken or had been sold from the original firms without any consent, irrespective of GDPR (often sold-on or for commission-sharing and sometimes by the original unscrupulous perpetrators of the crimes which caused the investors the losses in the first place) and then they have been exerting serious pressure upon investors to be appointed when that was unnecessary in the vast majority of circumstances. The worst cost we have seen is a firm which will take 48% of whatever compensation is paid, with no upper cap. The more recent one we have found is a barrister but he has been reported to the Bar Standards Board!
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 celebrate our 35th anniversary in 2020 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