Dear Friend
We hear that death levels are elevated at the moment both from the cold and also ‘flu symptoms which can turn into pneumonia if you’re not careful or are already vulnerable – please stay safe. We attended the funeral of a very dear friend last week – he was diagnosed with terminal cancer over two decades ago and fought so bravely to live life to the fullest – which he did.
Finally, other complications and a return of the evil disease manifesting itself in different ways sapped him of his life but we are grateful to have enjoyed the length of time with him which we did. Funerals always give opportunity to celebrate someone’s life as well as to reflect and catch-up with people who we may not have seen for a very long time too of course, let alone to pay our respects to the Family and to show that we care about them too. He was a great advocate of shooting and fishing too and as a tribute, a few of us wore a shooting suit at the event – I have never done that in my life before but know he would have appreciated the gesture!
We are seeing more and more individual special situation shares (which I am pleased to say we hold) being up by considerable amounts since only September/October last year. They should never have been as cheap as they were, but when there isn’t just one or two but many which have doubled, let alone rising by 50%, it makes a considerable difference to a client’s overall portfolio even if they just have a few. These are the same stocks many were selling at the time as they had performed badly (fallen lots) – how silly of them. For ‘balanced’ clients, we have several direct stocks as ‘icing on the cake’ over and above a general portfolio of quoted investment funds and defensive assets for their extra protection, diversity and an ability to spread asset classes further but it seems we should have relied more upon our own choices than several of theirs! As ever, it is the going forwards which counts – and to remember that it is what you don’t have that is just as important – thankfully we have not had any which have ‘tanked’ at the same time, even if a handful continues to disappoint.
Longer term, Nat West (and the banks generally) have also been moving ahead. It is up threefold on the 2020 low and back to levels last seen in 2015. Yes, you’ve guessed-it, we are full of banks and global financials so that’s helped us no end! Many investors have few or none as they had been such awful performers but that is what piqued our extra interest. Now if their service can match their share prices… we can but dream. Meantime the Governor of the Bank of England is doing his best to talk-up the economy… After being wrong about ‘recession’ last time when he said we were already ‘in it’ (and not apologising) he’s now saying it’s pretty inevitable we’ll have one this year. Realism and stabilising the markets, etc are crucial parts of his job; he doesn’t seem to have a handle…
Investors’ support (or lack of)
So of unitised fund management groups, which ones saw the biggest loss of support last year (net funds withdrawn), forcing them to have to sell stock to meet redemptions?
Top of the pile was Ballie Gifford with £10.2billion, followed by Aviva at £6.1bn, Janus Henderson at £3bn, BNY Mellon at £2.5bn and Fundsmith at £2.4bn. The latter’s flagship fund dropped from £29billion to £22.5billion in the year after its under-performance. Ballie Gifford saw £27billion disappear last year with atrocious performance adding to investor discontent – over 40% of what it had at the start of the year.
Dr Martens – putting in the boot
So from a much-heralded launch in January 2021 and a share price of £5.15 seen the very next month on excitement, the shares have since slumped to £1.34. Was the Company really worth £5billion? No, of course not. Is it now worth £1.4billion? Probably – if it can create growth for its products. This is the very difference of something ‘popular’ and ‘what you’ve heard-of’ and the true value of something. That’s a 74% loss in two years. No, we did not support them. Those who floated and who sold-up then were very shrewd. We still don’t have any but at these levels they’re tempting but so many others are as well.
The moral? Don’t just buy something because it is ‘new’ or because you have heard of it, without having a handle on ‘value’. It floated the same time as Moonpig and Deliveroo (down similar sums), THG (The Hut Group) down 90% and Made.com (gone bust). Tesla joined the S&P500 Index at the ‘same’ time.
Lessons here… and remember, index-trackers are forced to buy components of their index. Sadly too, this is the sort of stuff enthusiastic novices buy and then it becomes the poisoned chalice which means they avoid stock markets for ever afterwards – rather than recognising maybe that it was just a silly mistake and doesn’t condemn the principle at all.
Pension & investment service
We come across and hear about so many cases of atrocious service from pension and investment administration entities. This is not only public bodies but superannuation schemes run by large outsourcers like Mercer’s. Even to try to ascertain values of a client’s account can be a nightmare. Just imagine if you are with one of these and say you are approaching pension age or you need to reassess your holdings and cannot access details to be able to make judgements, let alone if you are relying upon the money?
To us, client service is imperative. We are not perfect but we strive to do the best we can. We even answer all enquiries even if there has to be a short delay sometimes. We don’t have tiresome recorded messages on our telephone system, so you speak to a real person immediately and one who can help you. How much is that worth to you? How much might it cost you if you don’t have that at the imperative time when you need it? We can provide universal investment valuations at the drop of a hat. We assume naively these attributes are the same ones which all businesses aim to achieve.
On top of this, these same principles and morals drive our investment management processes. It’s how we consider transactions, additions, disposals, the optimum way of participating in an asset we like and when and regardless of the extra work it can so often create for us. However, if we can secure a better outcome for our clients and lower overall costs, then we do that. It’s what drives us. Yes, we offer specialist services too but in a nutshell it is why we have only three regulated advisers (‘salesmen’) and 29 other staff. Most advisory firms have more salesmen and very few administrators and adviser assistants to service clients’ needs – I wonder why!
Chooseday – Tuesday 24 January
The second coffee morning went well on 24 January and it was good to welcome guests to share some company and coffee. The next one is at 10.30am till noon on 7 February – feel free to come along and join us!
Passive investment – index tracking and probably why not at the moment!
Mohamed El-Erian, investment guru and now president of my son’s old College, has been listening to what I have been saying about the slavery to ‘passive’ investing. The article says ‘why passive investing makes less sense in the current environment’. Why passive investing makes less sense in the current environment But it’s so much cheaper’ you may cry. But then, if a portfolio which doesn’t track blindly, as that is not considered the best thing to do at the moment because of conditions (rather like last year for those who followed the world’s largest passives), out-performs that cheap tracker/passive/lifestyle fund (you name it) by a mere 1%pa, guess who has paid the most for his investment? Mohamed El-Erian’s analogy of using an a la carte menu versus the default basic dish every time you visit an eatery rings true. Also if but just a little is allocated dynamically rather than ‘it’s there, it’s very big and global so I must have it’ – what a change in long-term results that can bring – as we have proven many times and rather significantly in 2022.
Oxfam report on global equality
I am bemused the media ran with this report noting how the global wealthy had amassed colossal fortunes over 2021, noting that the richest 1% had accumulated almost two-thirds of the whole wealth accumulated since the Pandemic start ($21trillion). Why I say it is embarrassing is that it doesn’t account for what happened in 2022 when markets lost in excess of $34trillion in financial assets alone and most of that came from the same 1% wealthiest.
The article says that if they were taxed some more… does that mean that for 2022 we’d pay them back some money for their losses…? I do argue with the comment too that wealth doesn’t trickle-down – it really does. Microsoft’s biggest legacy has been access to everyone with technology which we can all use to better ourselves and those around us. That is possibly the biggest ever legacy any wealthy person/company has ever created for the poor, but it is also up to them to use it.
Then in the same breath we read that some 54% of households in the UK take an average of £5,000 worth of benefits from the State more than they ever contribute. We are also told that one-in-five of us is ‘disabled’ – really? I find that very hard to believe. However, no system is sustainable if an ever-smaller number of high earners is paying the majority of the Income Tax to fuel the benefits enjoyed by the majority. Over-tax them and they will also go overseas.
Inheritance TaxDeath is coming to help save the Chancellor. Inheritance Tax receipts are rocketing as the inflated values of people’s homes, especially, are beginning to bite. Tax receipts between April and December last year rose £700million to £5.3billion and with recent excess deaths, even more money will be going to him rather than the deceased’s families.
There is planning which people can do though many are either reluctant to consider it or ignorant of the consequences upon their own estates – till it is too late. The average bill is now around £300,000 – less in places like North Devon but even then, a lot of tax at 40% on the excess above the already generous IHT free tax allowances.
Final salary pension schemes
If you have one and were considering transfer, have you missed the boat (if it was right for you)? Transfer values have fallen by 36% over 2022 according to XPS Pensions. The good news is that it is not too late to review yours but don’t delay too long. Remember, you do not have a fund, a pot of money with the scheme – you are simply a future financial liability and the scheme has to say what it holds for you today to meet that liability. As interest rates have risen, then they need to hold fewer ‘safe’ assets to pay a ‘fixed’ liability and that’s that. Of course there is more to it that that but that is the base principle. Pension transfer values fall by a third during 2022 According to this graph, the jammiest investors were those who banked their transfer values in December 2021 and where the transfer completed in early March for wise investment in the markets then. We actually have some very fortunate clients who seemed to enjoy those times! Well done them. To match this, we have been reviewing one investee company’s liabilities. From some £35million pension deficit two years ago, after the agreed £2million employer payment, the figure has dropped to nearer £10million – a significant reduction in liability going forwards. This will work through as a fantastic uptick in profits for sponsoring companies in reduced liabilities in due time. We own the shares and shall buy more!
Blue Planet
Still no action from the Regulator. I say this because had the necessary action ensued, there would be public news. The latest asset value has been listed as just over 10p and some ‘fool’ force-sold 275,000 shares to an unenthusiastic market at 4.5p, so a discount of 55% to the current asset value (if that is attainable) – and snapped-up swiftly by a buyer at 5.75p (did we miss an opportunity there?). The market price remains at 7p. Just think – we offered to take-over the management of this Trust when the share price was in the 30ps and the asset value nearer 50p… and we would have bought the sorts of assets the Trust used to own under its benchmark and published Trust objectives. I suspect under our care the present asset value would now be nearer 60p as well as having paid big dividends too (as opposed to none last year).
It’s no consolation to its investors nor us and heads need to roll over this and compensation recovered from those who have allowed the investment policy to change so awfully, without specific shareholder approval but the biggest losers over all this are the manager’s family with the majority stake. Maybe they will sacrifice this as compensation to the other shareholders in recognition of what they have done to the Trust.
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 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 Bankersn
