Interesting Times

Dear Friend

Interesting times! The US is now threatening action against growling inflation – or won’t it… the jury’s out… (and the Bank of England says ours will hit 3%) but under the radar, Greek Government bonds have gone negative for the first time ever – can you imagine that! Beware of Greeks bearing gifts went the saying but you now have to give them gifts to hold your money for you – what a turn-out for the books (and so artificial) but this seems to be continuing worldwide, even if the amounts of ‘negative bonds’ have dropped from their peak – a mere $13trillion now. Inflation?

I enjoyed someone’s analogy of inflation being a ‘Wealth Tax. Just think, the Government is taking a 3% tax on all your cash at the bank and under the mattress, every year – that’s what inflation means (certain real assets (like shares) are reasonably protected against that and some assets will fall as it and its consequences (eg higher mortgage/lending rates) conspire against those assets).

Well, our sterling out-performance against the main indices and ‘tech growth’ has been continuing as ‘Value’ sustains its rewards and our managed funds continue their ascent albeit the performance graph is levelling-off, as we predicted. We are still receiving an excellent level of income across the board though again, as the capital value of a stock increases, for a new investor they won’t receive the same percentage income as one committing in spring last year. However, that is tempered by general economic and corporate recovery which will allow companies to resume dividends where they suspended them and many ‘old industries’ which have continued doing well during the pandemic so they are increasing their payments to investors too. We remain happy predicting a ‘natural income’ from a ‘balanced’ portfolio of assets (whatever one of those is!) at around 3.25-3.5%pa from present levels and indeed, maybe nudging nearer the 4% mark in fact with a few judicious new additions. The historic yield on the Allshare Index at the moment is 2.8% so add-in a few income-paying defensives and selected high-yielders to offset our zero-payers and that is not such a challenge.


Just a short note to thank fellow independent financial advisory professional, Mr Alan Steel, for whom I have always held a great deal of respect (and for him and his Firm’s achievements), for his kind comments. It was and is indeed his image of the ‘football team’ to which I referred last time to fill your investment portfolio too. I daren’t almost repeat what he said:- “Keep up the great work. Your clients are very fortunate!” Shucks!

The humbling continues though when a freelance writer, editor and journalist says (after doing a profile piece for the trade…) “I think it was one of the best we’ve had! So refreshing to hear people voice views that so many are probably thinking! Huge respect to you, sir! Many thanks again for your contributions. I suspect many will echo your thoughts.”

I’d best go back into my shell now!

Takeover Promises For Clients

When an investment we hold receives a takeover bid or some other form of positive corporate action, then our investors enjoy the bonus benefit of that. In our summer newsletter to all clients, we GUARANTEED that investors in our strategies will continue to enjoy more such bonuses. Why? Because if the markets themselves do not better recognise many of the under-valued situations we hold, then other companies or bidding predators will and they’ll not just buy a few shares – they take the lot. ‘Value will out.’

I have said many times that a ‘Value’ strategy will lead to additional gains like this – an extra result for free. We have had far more than our fair share these last few years and right after Vectura’s agreed deal adding just over £500,000 to aggregate client valuations, Morrison’s has now been approached and our holding has jumped by £360,000. The funds will be recycled into more ‘similar’ situations. No, not every client has every holding but we have a wide array and ‘chance’ is very high for everyone with balanced strategies to give that little boost. It is not just direct stocks either but it happens with our Investment Trusts and Funds when undervalued ‘discounts’ can evaporate overnight, all to clients’ benefit. Put it another way, just imagine if you only had £1,000 of Morrison’s stock in your £20,000 ISA. Your gain on this one special bonus is the equivalent of 1.5% of return – that’s more than any cash account will pay you in a year and remember – this is not the primary reason we chose that stock in the first place! Look at it another way and it is all or most of the fees to manage your WHOLE account for a year – isn’t that worth having? If you are not with us, do you have similar letters from your manager or adviser…

Then today, we note that one of our ‘discount plays’ has received a letter from its major shareholder (only recently buying extra stock) that it will not support the Fund’s continuation. In a nutshell, this means that the present share price will increase from just over £1 to £1.28 up till the end of the year, all else remaining unchanged – it’s a shame, as I like the Trust but there we are – a 24% bonus return for our investors from ‘now’ on top of what the component investments do anyway. I suppose I should not complain – it’s one of the inevitabilities as to why we buy these sorts of things in the first place and most advisers do not seem to even understand them – let alone use them or have the facility to use them despite the extra attractions for their clients for free.

Business Action North Devon – Business Of The Year Awards

We have been delighted to again be the main sponsor of the Awards. Well done to all the entrants and all the category winners! Well done too for the organisers and all the judges who have completed all the hard work!

For more information please see:

Exchange Traded Funds (ETFs)

Phew! Whilst not all, the vast majority of these things simply replicate an index. Black Rock is the largest manager of these things and believe it or not but its aggregate ETF values are now over $3trillion. We have yet to ascertain what happens when there is a considerable market run on such popular concepts, where the manager has no choice but to sell at whatever price it can secure for something, held hostage perhaps to the market itself which knows the vendor has no option but to liquidate…

Industry Consolidators

It is happening as I said it would… there are billons of pounds chasing ‘private equity’ which then swoops on business types and absorbing them, transforming their models to a conformed one and then looking at selling-on those assets within three to five years, the typical ‘private equity’ pattern. It is happening with financial advisory firms and we are seeing the gradual encouragement of clients to leave whatever nice products they had with the old firm to move across into the more remunerative products that the consolidator has… charging more money to justify what is often a big price paid for the whole business. This squeezes everyone into the same ‘modelling’ and with the actual business then managed and overseen by someone afar, without individual accountability and the local staff becoming just ‘salesmen’ for the single product line. Then, over the years the new owners have the business, they have to package everything conveniently so then in that three or five year period they can present what they have as a more attractive morsel and to onsell to the next Private Equity consolidator…

If you don’t believe me… AFH, funded by Private Equity finance amongst other sources spent years acquiring and consolidating firms including several eclectic ones in North Devon, ranging from accountancy businesses’ financial services’ arms to one of the bigger independent firms and now it has been bought-out by a US Private Equity firm which will need to extract a bigger pound of flesh from all those clients than AFH did from its purchases.

As a staunchly independent firm, we are seeing the fall-out, with enquiries from clients of some of these firms – they don’t like the distant geographical control and the one-size-fits-all approach… and I have to say, the business model being pursued by this model doesn’t seem to have allowed for that… often too, the firms they acquire have self-employed advisers and if they lose interest or are disincentivised, they can just as easily disappear and take their clients with them… so what then!

Then there is the other – JP Morgan paying £700million to acquire Nutmeg, the constantly-loss-making internet financial ‘manager’… it might have thousands of customers who have joined for the cheap product and £3billion of money under administration but how much of that will stick when JPM finds it too can’t make a profit on those too-low charges! As my son Felix said, if we spent £90million on buying-in business which makes us losses but after a short few years that then can be sold for £700million (with some big TUPE contract obligations to adopt for the staff too!) then perhaps we’re in the wrong business! It reminds me of when the big financial institutions and insurance companies bought estate agents like there was no tomorrow and funds no limit – and then sold them all again for giveaway prices… rumour has it that Webbers locally went for a colossal sum and then the Firm was bought back not long after for the proverbial Pound…

Green Is Good – Green Is Very Clear

As I predicted and as is inevitable too, many people chasing the same thing and asset-wise, the price goes up, too fast and too much. The ‘World Renewable Energy Index’ rocketed up till the end of 2020 as all those enthusiastic ‘ESG’ investors piled-in and since then, the index has plummeted over 40%. What is perhaps more interesting is that the prices which ‘schemes’ are securing are falling too – so the investment models expect much lower rewards and the vast tranches of cash being thrown at all the relevant sectors is cutting prices (and investment returns which will make some projects uneconomic) – ultimately good for consumers but not those backing the projects. For example, in Spain an auction of 3GW of new capacity attracted a colossal number of bidders (eighty-three) with a resulting average price payable being a discount of 29% to the current price!

Conversely, as the carbon fuel energy industry is driven out of exploration, mainstream banking and so on by protestors (frequently by the same campaigners who will continue using oils, etc in various guises for decades yet, as it is impossible to stop overnight, however enthusiastic they and their governments may be – the prediction is for global ‘peak oil use’ to still be twenty years from now) then more capital and profits will concentrate on less-pleasant parts of the world where they don’t care as much about the environment or indeed corruption, ethics and shareholder democracy. I fear that rather than treating the whole sector as a pariah it is better to encourage the real international abusers of our world to reform gently rather than simply banning the tiddlers on our doorstep who have amongst the best governance and regulated controls in the world. I fear otherwise we may already be making things much worse for future generations than making them better, however ‘good’ some activists may feel about gluing-up the doors of a British bank because an oil company uses it.

Fear? What Fear!

Yes, I know, we are told the markets of the world gyrate between fear and greed – a simple reflection of all the participants in it – yes folk, that’s you and me and all our collective emotions combined. Modern technology and the ability to ‘gear-up’ (borrow to invest) has made asset prices from shares to commodities and houses rocket yet again and presently with no fear that any different environment may lurk out there.

That’s good – we are coming through an awful pandemic and we need the global economy to kick-start again as seems to be happening and profits and earnings to be generated and to help paying for all that debt which governments have layered upon us all. However, some caution is necessary as the unexpected is certainly not expected… there is a ‘Volatility Index’ and it has now returned to a pre-pandemic-year low of 15.7, basically relegating worry about tomorrow to the bin. I don’t want to be pessimistic but maybe this year, selectively ‘selling in May and going away’ may not be such a harmful thing after all – but only in the over-blown sectors of course (as there will be more Vecturas and Morrisons to occur yet – mark my words and we want to be still there waiting for them!).

Maybe too this explains the present notion that novice investors have in buying floatations and shares in companies they ‘like’ or businesses with which they have a connection but where they have little concept of their ‘value’. It’s not just the public though – institutions are the same (run by the same sort of people often!) but we wouldn’t have bought into the Dr Martens’ or Moonpig floats for example – far too dear in our view. Don’t get carried away with something just because you like their product or know the name – you may pay 100x what you should be paying for the shares… what do you base ‘value’ upon, after all!

Flexible ISAs

What is that! Well basically, say you have an ISA and a capital emergency arises where you need money in a hurry yet can put it back quickly afterwards. In a nutshell, with our ISAs now, you can do just that and take advantage of the tax rules which allow you to replace the funds without compromising the tax status of your ISA by a big withdrawal. I still wish we had some lending facility so we could lend clients funds secured against their investments, so they don’t have to incur any costs and being out of the market but perhaps that is a project for the future and regulations galore to satisfy, I am sure!

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 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