Dear Friend
Well. Global stocks record their best month on record. Primarily the vaccine was the cause but enhanced by Mr Biden’s success (though I believe that if Mr Trump had won decisively too the same impact would have happened). Were you in it or had you either been sitting on the side-lines or cashed-out when things were low? You can’t change the past but you can influence your future. There is still plenty of ludicrous value especially in the UK market. I have to say that for our clients, we were ‘in’ and waiting patiently. Again, perhaps this proves that the best investment anyone could have made from the spring forwards is in ‘patience’. Please, however, don’t chase the trendies which are just as over-priced as they always were, propelled by billions of speculative froth from gamblers and there will be a reckoning at some time – buy overlooked ‘value’.
Just conditioning my comments, the FTSE100 had the best month since January 1989 and the ‘World Index’ which had its ‘best ever’ has not been going too many decades! However, the result is still impressive and markets are still looking positive for Christmas. An outcome to the ‘Brexit’ situation is likely to be the positive underpinning for the UK’s market generally going forwards whatever the ‘deal’ and partly because it has also been the World’s worst performing main market for a very long time and unloved too because of the ‘uncertainty’ caused. This is changing into ‘certainty’ going forwards and whatever type that is, markets, business and people can react to that and move forwards. Mark my words.
Organic Compensation
Readers will know we have been helping the afflicted investors in the Organic affair in terms of securing their compensation. Most of our work has been as a simple goodwill gesture and helping direct investors to make free of charge claims with the FSCS direct. Unfortunately, we have found that a considerable number were cold-called by claims’ chasing parasites which had accessed confidential information and bamboozled callers into signing-up with them and thus losing up to 48% of their rightful compensation as commission to these entities, many of which are totally dubious and misleading and they too should have directed the investors to the free service instead. These investors suffered all the stress of the wrong advice, dubious and possibly fraudulent investment behaviour by their chosen investment managers and then to be victims of these firms as well. We have helped a few lodge complaints against these now as well but that isn’t so easy.
Now the final suspended Organic funds have been written off at zero, even those who received some interim payments from the FSCS can claim a final sum. We have just received a note from client ‘RK’ who had received a final payment of a further £6,000. He says: “so thank you for your advice and for the encouragement you gave to put a claim in in the first place as it would have been so much easier to get a third party to do it on my behalf but I am at least £20,000 better off for doing it myself so please continue to encourage others to do it themselves.”
Funeral Plans
I think in simple terms I can say ‘don’t buy one’. Yes, there may be rare occasions but these things favour the sellers and the agents rather than the person to whom they have been sold. Did you know that the seller of these things notches-up an average £800 commission on each one, so guess who benefits the most! They are not regulated and nor are the underlying investment funds and that should sound alarm bells. From 2022 (why the unnecessary delay…grrr!) they will be regulated by the FCA at last but expect a surge in sales’ activity in the meantime – I wonder why…
Markets
So some interesting things of late. Whilst lots of ‘greenwashing’ and rather partisan and patronising ‘virtue signalling’ on the ESG front going on (Environmental, Social and Governance), the oil price sees a three month high (and likely to continue advancing and with it possible inflationary pressures – we still use oil and shall do for a long time to come whatever the World’s endeavours…) as have some of the other ‘less-than-friendly’ stocks as they were so bombed-out. Miners, holiday companies and airline stocks (usually these fall as oil prices rise of course) have also rocketed as the gains from ‘normality’ outpace the increased costs from flying. Indeed, as AstraZeneca announced even more positive news on the vaccine and a non-profit declaration, its shares fell to their lowest for some time as the hype exceeded the hope and what – no profit? It reminds – sometimes you have to ‘sell on the strike’ so the adage goes about oil exploration stocks when they strike oil as the hype and hope far exceed the ultimate reality. Tech investors and electric car manufacturers may like to reflect upon that!
The Dow Jones broached 30,000 for the very first time – somewhat over-extended as it is plush with over-priced tech stuff sadly so what will happen? Will it mirror Tokyo in 1989 which then became the biggest market in the world? I shan’t frighten readers by telling them what happened afterwards… though if you have cheap global trackers you may care to reflect that most of your money in 1989 would then have been in that bubble. Tokyo is still way below that 1989 peak.
Buying On The Dips
None of us wants to ‘throw good money after bad’ or ‘catch a falling knife’ but in just a matter of weeks, it is easy to look back and regret not buying some stocks when they were so cheap. Yes, we did chase many down as they fell and you’ll never hit the bottom till you know about it afterwards. However, in so many instances now, it is evident that is what you should have done (or could still do in many instances).
Take a worked example. So a share is £1 and it drops and you rebalance your exposure by buying more as it falls. Say you see £1,000 as your chosen investment in that company. You start with 1,000 shares.
It falls to 70p – £700. You buy 428 more (£300’s) to reweight you to £1,000 (1,428 shares).
It falls further to 35p – £500. You buy 1,429 more (£500) to reweight you to £1000 (2,857 shares). So now your average price is 63p.
The shares rebound on a takeover bid and a suitor decides to offer £1 which is what they were worth before the trauma. Your holding is worth £2,857.
Of course, some entities are on the way out and should not be bought just because they have fallen but there are innumerable examples of just this sort of volatile behaviour occurring this year and where share prices of companies and indeed some funds too reacted simply to panic and not the base fundamentals as clearly as perceived. Not only would the investor here have trimmed his overall breakeven price to 63p (still 37% lower than his original purchase) but for the Company simply to be valued at the same level it was at the start, he gains a handsome profit over the person who ‘did nothing’. I think the point is – would you consider taking such action (or just clamming-up in the face of such drops) and indeed did you consider it this year? The worst examples would be those who panicked so much they sold out at or near the bottom and would incur losses they could never retrieve.
Bitcoin
Often talked-about but what is it? It’s a ‘pretend’ asset. It has just regained its previous peak and zealots talk about almost infinite future targets for the price of this cryptocurrency. Even Nigel Farage is talking about it in his new financial circulars (which fortunately I think will confuse most people rather than entice them to buy).
Sorry but our scepticism remains. Indeed, as the first version is now so expensive, it must be time to create ‘Bitcoin 2’ – all the same characteristics of course – limited quantity, accessible as a ‘currency’ (really, who would use a currency which gyrated so much in price…). Is all of this really turning into the biggest Ponzi scheme ever – because at the end of the day, that is what a Ponzi scheme is and it is almost destined to collapse as it has a finite reach before toppling-over. When I read in the Weekend Press of ‘housewife puts all her £30,000 in Premium Bonds in’ I become even more concerned.
What might kibosh the whole principle? Central governments banning it for consumer protection purposes and to stamp-down on money laundering and other criminality I suspect. Afterall, there is nothing ‘unique’ about one any of these things over any other, assuming that ‘protection’ and so on is as good as it can be with each one… maybe too central banks will create their own form of universal ‘currency’… my, they could each be backed by say a deposit of something – gold anyone?
Investment Trust Profit
We have held it for a long time and finally, it has given-up the ghost and is closing-down. Henderson Alternatives Strategies Trust failed in its objective of securing support to continue and is selling all its assets and returning he cash to investors. It is a shame – the concept was and is good (buying a portfolio of similarly undervalued collective funds) but we mustn’t complain as we were buying £1’s worth of underlying assets for as little as 65p at one stage. What our clients will now secure is perhaps 98p after costs and of course they have also enjoyed the bounce in the value of those underlying assets as they are invested in the markets too. The shares are now suspended pending the progress of the liquidation process. Clients will know we like these sorts of situations and several have ‘come good’ over the last few years but there are still many we are buying – a technical opportunity for investment return which has nothing to do with what the markets are doing every day. Most advisory firms do not use Investment Trusts at all – a missed opportunity.
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 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
