Negative markets but a good PJM average

The global market is still in some flux and now is not the time to be selling shares

The 15th anniversary of Lehmans’ collapse passed on 15 September. Aren’t memories short – the world’s whole financial system could have imploded (and really Lehmans shouldn’t have been allowed to go – and liquidity could have been used – its demise exacerbated the problems). The financial downturn was the worst since the Great Depression. There’s a sobering thought.

The global banking system is more robust now anyway though the share prices of many of the big players are still languishing in the doldrums, it has to be said. Last month, Arm floated at $51 on the US market and the already expensive shares rose by 33% to give a meaty $69billion ‘value’ for the company. Since, they have gone all the way back down to the starting level though – oddly enough not so prominently reported. This was the largest US listing for two years. We don’t have any – and don’t intend to do so either.

What else is news? Global Money Market funds have attracted $1trillion so far in 2023 and the expectation is $1.5trillion by the year end. That’s actually good news, as history will prove that when investors eschew stocks for cash, they invariably do so at the ‘wrong times’ for valuations and at some stage, much of that cash will come flooding back. Typically these funds hold short-dated government stock and are an alternative short-term safety valve, with a targeted 5-5.25% return on the back of much higher interest rates and yields on government debt which are the highest for 15 years. So far, no one seems to be talking about the fact that governments worldwide will be paying rather bigger interest bills on colossal national debts – dead money and money not going into public services nor benefits. It remains a great shame that governments didn’t fill their boots with cheap, very long-term debt when the rates were so low… now ‘they’ are talking about recession too – at least that will kill inflation but it should herald lower interest rates as well.

Meantime, we remind investors that our ‘average’ strategy has a natural income yield in the region of 5%pa now – ludicrously high but because of some of the compelling value available on the markets. In our view though, capital appreciation potential is not sacrificed to create this income either – the best of both worlds but patience is required.

The markets have taken a negative turn again – especially in the US with worries over government budgets being renewed and rising bond yields. It is not the time to be selling shares. In the same breath, a tech company with more money than sense it seems – Meta (Facebook) – took on a London flagship property from British Land, refurbishing it and then letting-it-out in only 2021 but has now decided it doesn’t need it and pays a £149million penalty to escape the next 18 years’ commitment… Rumours are, too that British Land may be able to re-let it at a higher price as well.

Disasters in Morocco & Libya

Villagers deal with the aftermath of the terrible earthquake in Morocco. Credit: ShelterBox

Here is the link to the article noted last time and the Company’s Foundation’s response:- Call for North Devon to support ShelterBox appeal for Morocco and Libya

You can also donate via Donate – ShelterBox if you wish.


Cicero has taken-up residence in the Office. A marble bust of him is on the stairwell now. It is believed sculpted by Edward Hodges Baily (RA) in 1830. It graced Honiton Pottery’s entrance from 1930. The Pottery ceased production in 1991.

It seems apt for our firm and investment management skills – one of Cicero’s famous sayings is ‘the wise are instructed by reason, average minds by experience, the stupid by necessity and the brute by instinct’. Baily also sculpted Nelson at Trafalgar Square!

More good news

So our 12th event this year already – Henderson Diversified has announced plans to merge with Henderson High Income but we can take our cash at a mere 1% discount to the net asset value. Henderson Diversified has traded at a consistent discount for some time so that will result in a good bonus for our investors. We can look to redeploy the funds elsewhere if we do not move across to what is a good Trust, all the same.


Another of our smaller holdings has received a bid and a further £230,000 added to clients’ funds as a result. Renewi has been targeted by Macquarie. Ditto – it’s too cheap but may well succeed. The bid is lower than the price in August 2022 so a better offer may be needed. Still, it is 72% above the August 2023 level! There really are so many similarly attractive stocks but you have to hold them in the first place – and be patient.


With talk of possible increases in ISA subscriptions (and simplification) and perhaps some withdrawal or reduction in Inheritance Tax by the Conservative Government… are either of these strictly necessary – or priorities for the Country…? I’d prefer to see the roll-back on the silly reductions in Capital Gains Tax and investment income allowances introduced last April and becoming even worse next year really – far more practical benefit and reducing the numbers of people forced to complete Tax Returns.

Then it is a little like the unsquared circle – political parties driving for 380,000 new homes every year under their watch (as the Lib Dems have just approved at their Conference yet Lib Dem North Devon Council is stopping all new additional home builds despite ostensibly flagging the desperate homes’ shortage here as well). But this cannot be in in my back yard, nor on flood plain, flood zone (even at first floor level and above where there is not an issue) and certainly not removing the oppressive new rules in phosphate-high areas (which the Government tried to overturn) and despite the dubious ecological reasons which have already stopped the construction of perhaps 180,000 planning-approved homes. Cake and eat it, anyone?

Of course, some (all?) political parties, especially in marginal or swing seats, are adept at promoting both arguments, depending upon their immediate audience! The markets then try to interpret and react to the various announcements and the polls, according to the sentiments for ‘who’ may be pulling all the strings at the next General Election.

Dealing logistics

We can buy and hold ‘anything’ which exists effectively, choosing what umbrella of a fund for example, which best suits our clients’ investment needs. The major collective fund industry is unitised ‘open-ended’ funds where money is thrown at the manager, new units are allocated or units bought-back and typically at fixed valuation points during the day. So, if you give an instruction just after today’s cut-off point, you have to wait for tomorrow and whatever the world might throw at it during that time and then you simply have to take the price given to you.

We also find that the confirmation of these trades can take an unacceptably long period to arrive, meaning that clients’ accounts cannot be updated nor adjustments to values and revised acquisition needs of other assets made, based upon the addition or disposal of that stock for example. Of course, you don’t also know upon what basis the assets have been valued either, till afterwards (replacement cost or net realisation value for example, all depending on other flows for the fund at the same time). Cash settlement on sales, for example, is up to four days later and that accords to when the deal was struck too of course. That may limit the manager’s ability of exploiting a very short-term opportunity too – the cash is not available in time. Pleasingly, we are not so constrained even if we have to be selective what we sell and when, if such event arises!

However, if you trade in Investment Trusts and ETFs, then deals are done at the price, there and then and you know exactly where you stand. The contractual agreement is struck through the Stock Exchange, with settlement one or two days later – end.

People don’t really understand the nuances of the process and to be frank, the industry – and the regulator – should tighten things generally. How does the manager make money on new units issued for example? Should pricing valuation differences between replacement cost and net realisation value be reflected as a ‘cost’ to investors? Why do the big managers prefer to promote their open-ended funds as opposed to closed-ended vehicles like Investment Trusts, where, to trade in these you buy or sell to someone else on the Stock Exchange itself and the manager is not involved and makes no turn (expect at the launch)? I bet your adviser or your unitised investment company never tells you this when you subscribe!

Salary-related pension schemes

There are still 5,000 schemes apparently and with assets of £1.4trillion (with BT’s as the biggest with Pension liabilities at £42billion and a deficit of £4.4billion in June 2022. That could have evaporated now, transforming the parent company’s position too). Lots of people have transferred-out their benefits and many are rightly smug, if it was right for them, at the colossal transfer values the schemes paid them to go. All the rest may well have had the options removed from them effectively as the transfer values have plummeted by as much as 60%, as schemes don’t have to keep anything like the same amount of money to pay ‘fixed’ future benefits for members. Falls in long-term longevity are also reducing costs to schemes by 2% too.

Most of these schemes have very low incremental rates in the pension benefits too so in real terms these deferred incomes have been dropping heavily in real terms whilst yields on equities, for example, have at least been keeping pace with inflation even if not as a mirror image. Even the Pension Protection Fund is in surplus with a large reserve but it is still looking to make a £100million levy on employers which seems very wrong – and yet another real cost companies don’t need at a difficult time. The pot of just under £450million represents 146% of assets to the liabilities. Put another way… if those original schemes had been ‘allowed’ to continue, then they would have enjoyed the surpluses and their members would not have suffered any cuts to their pension benefits… and maybe companies like Wilko and Woolworths would not have closed-down either…

Plimsoll’s latest ratings

It is always good to receive another endorsement for the Firm as continuing to be in the top category of ‘strong’ in the annual survey of comparable businesses covering our financial strengths etc. At the same time, 366 of our competitors are rated as being in ‘danger’ and it notes that 90% of these previously have gone-on to fail totally.

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


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!

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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.