I hope you had a comfortable Christmas. Ours was nice – surreal too in many ways and with Lunch’s odd prospective disaster this year though thankfully averted at last minute (that’ll teach us for going on a longer walk than planned, with the turkey in the oven…) but you know, finding a few of the intended accompaniments in the fridge the next day and so on…it’s the first Christmas dinner I have ever eaten-outside too, so our Covid-recovering-and-on-day-ten’s-isolation-son could be on a second table all on his own but in the same area. Home-knitted scarf and hat (thank you Esme!) came in handy! Noah had been in one of the cottages since he returned from Watford three weeks ago and then developed symptoms. Before anything else, can I wish everyone a Happy, Healthy and Prosperous 2021 and the very best for you and your families and with the strength and courage to endure all that the closing stages of this evil Pandemic is throwing at us.
So, we have a Brexit deal! That’s good – it would never be perfect nor please all but what it does is replace uncertainty with certainty. It’s not changing now so on 31 December the transitional period ceases. We have an encouraging escalation in the vaccine roll-out with hopes of all vulnerable and over-fifty-year-olds being treated by the end of spring. It’s still not going to be an easy time and precautions remain imperative especially if we are aged or vulnerable (or in touch with those who may be) and it is still tragedy for those who have lost loved-ones.
So what to start predicting? The UK market now has a chance to move forwards. There are so many undervalued home-based situations which have colossal catch-up to make with the rest of the World and I really believe that could happen. One prediction I have seen is for the FTSE100 to hit five figures sooner than many expect – three years maybe – that would be around 15%pa plus income and yip – it could happen; it’s not so far-fetched now. Indeed, it must still jump 14% simply to hit the figure at which the year began, putting it all into context, so it is not so far away a projection after all. One sector due a revamp is the banking sector – so much value and share prices so cheap (and shares still so unowned and unloved). We have a few and shall increase our exposure – on the other basis that they are not so over-exposed as so many frothy stocks in the States for example either, if a big jump doesn’t happen. They are also ‘allowed’ to start paying dividends too so always good.
I expect Sterling to regain some of its impetus too. The US Dollar has been weakening but against the Euro, the Pound is too weak and as a nation we need to make hay whilst the sun shines – our goods are cheap to EU citizens at the moment and their goods are dear – 24% more since the recent peak in July 2015 so I expect to see that unravelling. So if you have EU assets, those Euros buy cheap Pounds still – at the moment.
At point of writing a number of our biggest holdings is enjoying exponential rises – long may it continue – even if it makes my job of buying for new clients that much harder. However, well done loyal and trusting clients as you are already in – your patience is at least beginning to be well rewarded and special congratulations to those who responded to our calls to sit tight and indeed to invest more cash when things were at their cheapest – there is still time to avoid missing-out so don’t delay if you are thinking about it and have too much cash earning you nothing still.
New Year Present
Hot on the heels of what was the largest compensation payment under the Organic debacle yet, a new maximum has just been achieved of £225,000 tax free in the investor’s hands. If compensation was unlimited it would have been £426,132.75. This was bad advice to transfer from a final salary scheme and then again the very shady and potentially fraudulent investments acquired by Organic (and maybe had the right advice with full probity been given it would still have been the best thing to have transferred but that is not the point). The individual concerned is very pleased and fortunately by our direct assistance and our guidance away from the ambulance chasers, as otherwise he would have lost up to £108,000 to them in commission for simply filling-in his claim particulars. No legal or complicated work was required contrary to what those charlatans suggest – the advisory firm was in default at the FSCS and the money simply awaiting him. Well done Mr B in Kilmarnock!
Peer-To-Peer Lender Going Bust
Moneything Capital Ltd has appointed administrators and investors’ money will be unlikely to be returned to them without a deep haircut. This is the latest ‘peer-to-peer’ lender to go under. I have said before, the principle is sound but when these entities are not properly regulated so that they are not covered by the FSCS when something like this goes wrong, investors should not touch with a bargepole. I say this about all of them – including one which seems popular in the Westcountry – ‘Folk-to-Folk’. Remember, the time when you need protection is when some of the rosy scenarios which attracted you in the first place have not come to fruition and then the dominoes fall. If you try to extract your deposits when everyone else wants theirs and the property development project (the principle borrowing reason) falters, then it is too late. All I should say is… firstly, they can easily apply for full regulation to protect investors (so why haven’t they?) and secondly, why not invest in some of the quoted loan funds on the Market instead – better propositions, significantly more widely spread loans, good ‘interest’ and instant access but even then, you need to be wary. We have several of these in strategies.
US Market Worry
So Tesla becomes famous for another reason – its coming of age as the biggest company (by market value, at $600billion) to join the American S&P 500 index ever and straight-in as one of the biggest ten (number five). The index is ‘weighted’ so managers of passive funds have had to make space for it by selling stuff lower down and chasing Tesla ‘because it is there’ and no other reason, even if personally they hate it or perceive it is ludicrously over-valued. In six months it has seen its shares rise 200%. Funnily enough, Apple has announced that it plans to have driver-less electric cars and is stockpiling Chinese components to that end so will Tesla’s fame be short-lived indeed? It really is a very long way down and what is interesting about stock market indices is that whilst Tesla has not added any ‘points’ to the Index, if it collapsed in value, it would rip-off many points added organically by the other existing components… and so close to the twenty-first anniversary of the 31 December 1999 Dot.com peak… history doesn’t repeat but it sure does rhyme!
What is odd is just this situation happened with the dear old FTSE100 in 1999/2000 and then it was Vodafone which jumped in size as it took-over Mannesmann of Germany. At its peak on 30 March 2000, Vodafone shares were £6.36 and have since been as low as £1.02 but the damage to the index was compounded because at the peak it counted for an upwardly revised 16% of the index. Remember too that all mainstream ‘cheap’ UK passives were impacted as the FTSE100 counts for the vast majority of all UK stocks so the other few thousands don’t count for much value. Checkout the graphs of the smaller company and midcap indices since the same date if you want to see the damage such bulky ‘addition’ can wreak in a mainstream ‘index-tracker’ but it’s ‘ok’… your losses are ‘cheap’..!
Accountants and Tax Advisers
Apparently as many as 40,000 tax agents in the UK are wholly unregulated, calling themselves ‘accountants’, ‘tax advisers’ or ‘bookkeepers’. The House of Lords is calling for the activities to be better regulated to avoid problems which can arise otherwise and the industry itself is supporting this move. It is true however that no qualifications nor experience of any form are required for you to purport to have skills in these fields and that is always worrying – if you use ‘one’, is your adviser backed by some form of regulatory protection attesting to qualifications, professional competence and capabilities and with some protections should something go wrong? Being ‘nice’ is not a qualifying attribute I regret to say!
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.
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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.