Market rises and speculation

Market rises and speculation

So I was premature last time – Nvidia is now ‘worth’ more than Apple. Are the lunatics running the asylum, as speculative fervour has truly taken hold… there we are – the psychology of markets – I mean the masses? That’s not ‘investment’ – it’s sheer speculation, flows of money and the fear of missing out (FOMO).

What’s happened this week at home and abroad?

In the same week, St James’s Place is booted-out of the FTSE100 as its market value falls too far. Of course, what does that mean for it? From a position of excessive valuation and a reputation for arrogance around its very high costs and an opaque charging regime reminiscent of the bad ol’ days of slick but commissioned-salesmen (now firmly under review), perhaps there’s now an overreaction afoot whereby the claims’ chasing parasites are inciting investors to claim those charges back, if the relevant servicing might not have been satisfied. From a well-oiled machine to an organisation suffering such unrelenting attacks it can have unintended consequences and a desire for personnel and advisers to jump ship – if advisers can afford to leave anyway, as many are indebted to SJP in one way or another, forcing them to continue just selling SJP products, whether good or bad.

Bad news – the Bill in Parliament to revisit charges’ disclosure on Investment Trusts was one of those not finishing. The bad news is that the unrelenting selling of these great investment vehicles by naïve investors and institutions may continue, as the maths reflect poorly on theoretical charges and despite the returns being achieved, etc.

The good news is that those who understand will be able to keep mopping-up the dumped stock at continually cheap prices and big discounts to the underlying assets as a result, even if reward will be more fund closures and 100% cash returns as the assets are sold.

And M. Macron chooses to go to the polls as a swing to the Right takes hold – and the Euro falls so that Sterling is a hair’s breadth away from its highest since the Brexit vote in 2016. Aside from a wet April and no economic growth, things are changing for the better here as well – the markets are telling us so!

Tax news

I agree with pundits who say that we are already paying too much tax and thus are spending too much on public services and welfare (it’s not the quantum which matters but how it’s spent remember). The overall tax burden under a Conservative Government has reached the highest levels since WW2. However, a change of government won’t suddenly make it better and Labour’s modus operandi is to increase taxes to fund even bigger public spending and welfare. So where that leaves us is in a pickle. The mutual hope is that economic recovery (it is happening!) increases revenues and thus taxes and it also cuts welfare costs as more are in work and thus tax reductions can come from the surplus.

The unfortunate truths are that as a consequence of the pandemic and the energy/cost-of-living crisis particularly but the Conservative administration actually overspent colossally and has been one of the most generous social spenders of all times, ratcheting-up public services (headed by the NHS), welfare and benefit payments, as well as colossal commitment to infrastructure spending too. It had no choice but to cope with the pandemic and also the energy/inflation crisis, with colossal extra spending to keep households and businesses afloat (funded by a doubling of the National Debt).

Accusations of ‘austerity’ fly about too but public spending and welfare are the highest they have ever been, so actually the word takes on a new meaning, not of ‘cuts’ but ‘not a big enough excess being spent in my pet areas’ but again, this is said only to paint the backdrop of what the new government will face. Where might cuts fall? Are there too many public sector employees? As the cost of employment (and pensions, etc) escalate, then the easiest way of cutting costs is staff cuts. Are salary and benefit levels unsustainable? Will AI lead a transformation and job losses? Already, unemployment is rising again.

There is much talk about low-hanging fruit like ‘cutting-down on tax avoidance’ (evasion is illegal – as is aggressive avoidance). However, that again usually means those shouting it want attacks on ‘others’ who clearly are wealthier than me but not ‘me’. Watch out! HMRC is already aggressive (rightly so I guess!), so much of this ‘dream’ is fanciful rather than reality. Then there are the theoretical easy targets – the billionaires – those who will decide ‘enough is too much’ and who will gently relocate to lower tax havens and still retain their legitimate holiday-home presence here to continue enjoying our culture and education for their children but paying not a sou of Income Tax, rather than what they are now. Italy and Greece are refining their non-dom regime to attract these people instead.

Then even more penal windfall taxes on energy producers are already seeing them stop developing our North Sea reserves, encouraging them to base their businesses elsewhere so again, rather than windfalls, we collect less overall tax than they have been paying. Several have already stopped or pulled-out of North Sea activities even under the present penalties. That’s simply foolishness.

I don’t have any immediate answers I regret – there is too much public spending and too much welfare which is all very well-intended but it has unintended consequences as well. Cuts in each to fuel a more benevolent tax regime seem impossible to imagine.

Of course all the parties also do their ‘carefully costed budgets’ but seem to ignore consequential costs of one form of action over another. For example, if you increase the cost of private education by 20% (VAT), it is basic supply and demand economics that some people will be unable to afford to pay any longer (or choose not to do so) and thus the State system will see more pupils. So these ‘fully-costed budgets’ should at least give some expectation for a rise in State School costs to compensate but there is not even a penny. There may still be a net tax gain but certainly not 100%. This is the same argument with the Non-doms’ attack from both major parties in that rather than collecting more from present payers, they end-up collecting a far smaller total from a smaller contingent.

So what could be attacked and thus actions you may wish to pre-empt now? ISA subscriptions capped to a lifetime limit (so invest £20,000 now!)? CGT Raised to up to 45% from 20%, realise profits now! Pension plans raided or contribution caps brought-in so again, fill-up today! VAT extended to more goods and services, the turnover limit for registration cut to £30,000? Inheritance Tax thresholds cut savagely and business and agricultural asset reliefs cut? CGT on profits from homes? Road Tax on electric vehicles?

Funds we manage

It seems to have been a long time coming but we are pleased to say that at the end of May, the funds we manage discretionarily on behalf of our clients have just hit their highest levels, breaching £1/4billion for the very first time, near to our 39th anniversary.

We want to thank all of our very patient clients and especially during these last difficult few years, through Brexit uncertainties, the pandemic collapse, the Ukraine war and then the inflation, energy and cost of living crisis.

This is not ‘performance’ as such and remember that it covers all assets held including a large sum of cash held temporarily but it does reflect the confidence and trust which our clients place in us to look after their money for them and to do the very best we can, regardless of what traumas face us all. We hope that we have fulfilled their wishes. Our clients hail from all over the Country and indeed several overseas as well, but most are ordinary people like you and me’ but together, we all add-up to a very meaningful sum.

At the end of October last year, the figure was £216million and it was there that the special newsletter encouraging people to buy (and certainly not sell!) was sent to all clients.

We manage the ‘downside risk’ even more carefully these days and indeed our biggest holding is now only 1.5% of the total assets we manage and it is a collective fund. The biggest ordinary company’s share we hold is 1.2%, swollen from the average for these of nearer 0.75% as it has risen so much and purposefully we have not trimmed it fully.

Productive assets

Something doesn’t quite add-up in our Country presently when we read that the numbers of ‘never employed’ households are the highest since 2012. This is 269,000 non-student households where no adult had ever been employed. Overall, 4.3million 16-64 year-olds live in households where no adult is employed, almost 300,000 more than last year. This is against a backdrop still of tight labour markets as well.

It’s hard quite to know what to think but it also means those who are working are supporting even more who are not. Of course for older people, they may well be happily able to afford early retirement and well-done to them if that is their choice!


Humbled to receive compliments from a client in Prague who shared how much he appreciated the work we do and that whilst he was working overseas including in the US, whilst he had investments there, he had no one who would look-after everything the way that we do and so he doesn’t have to worry about his finances.

He noted it is all very well having different funds, etc but without someone to coordinate and take those decisions it then becomes a stress and now he doesn’t have to worry about that and can concentrate upon what he considers are more important things.

Green problems

Yes of course doing nothing is not the answer, absolutely not but do our minuscule efforts make a difference when others may be going in the other direction? So we stop North Sea Oil production and its economic and security protection and rely on Saudi oil, which only costs Aramco $3.19 to drill a barrel, selling for over $70. Are our ethics and environmental care likely to be superior and more sensitive than Saudi Arabia’s I wonder?

So, we stop producing our own oil, a war happens, the price rockets and maybe even our supplies are cut – what does that do to us and our green policies when the sun don’t shine and the wind ain’t blowin’? It’s not easy but being sensible needs to be given greater credibility whilst we continue to do plenty about our environment.

Just Stop Oil never seems to protest in Saudi Arabia for some strange reasons – maybe it is time they widened the debate to recognise that all is not as straightforward as their own conscience-salving exploits don’t achieve (the exact opposite in fact).

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


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