Well, we are almost there. Have you cast your vote yet (by post)…? Election Day is tomorrow and if you have an unused postal vote, you can still take it to your polling station and hand-in the envelope.
However, first, to cheer you up and to change the subject, next Christmas is now nearer than the last one is behind us… The Election must be important as even Boris has appeared as a last minute rallying call for his Party. Like him or loathe him – he has popular charisma and appeal, undoubted wit and cerebral capabilities wielded so effectively and uniquely in words – a welcome interjection amongst all the seriousness, whoever wins!
Are you swayed by any party (or ‘dis-swayded’ by them instead!)? As the time has been approaching there has been more a sense of fear in the electorate I sense, a case of voting to ensure you avoid what you believe will create a rather worse outcome for you and the Country rather than a ‘better’ one. That’s compared to any one party really leading from the front so markedly, dynamically and positively. Yes, there’s good with both government contenders but plenty about which to be concerned too. However, I must apologise for a comment last time – there’s no suggestion of Capital Gains Tax on your home – well, whether that is forever (or there should be a tax or not) is a different matter!
It’s been entertaining (but sad) to see the banter ‘you’ve had 14 years to sort this out’ (despite having to deal firstly with the awful financial crisis inherited from Labour in 2010 (‘there’s no money left’ you might remember), Brexit (for good or bad), the Pandemic and the Cost-of-living/energy crisis (created by Putin we can’t forget) matched by ‘you’ve had 14 years to come up with better solutions’. And then Labour noting its solutions to issues but having voted down the same ideas when the Government presented them… and ‘you said we should back Liz Truss’ and ‘you said Jeremy Corbyn would have made a great Prime Minister’… was it ever always thus…?
So ultimately, are people going to vote with their pockets, as they perceive them as being affected? How do you imagine your finances will be enriched (or probably a case of being less unenriched!)? And as for across the Atlantic… oh dear, their problems are rather more concerning for global democracy – and what might wobbles and colossal debts there do for the global markets and financial stability?
Well, whoever wins, we wish them all success in the job and trust that worst fears won’t be realised. We trust that the economic recovery path upon which pleasingly we are embarked will continue and without too much inappropriate disruption. We should also be grateful politically that we are not in America nor France at the moment perhaps. Finally, whoever and whichever party wins, we wish them all success for our Country and we offer our prayers to envelop and support them and their endeavours. Remember too that despite populist views, the vast majority of these ‘daft’ candidates stand because they wish to do good for their Country (‘daft’ because who would really want the attention and the colossal workload, let alone all the fiery arrows thrown against them so incessantly).
Economics
So our first quarter’s economic growth was revised upwards to be the strongest in the G7. That’s great, positive news – economic growth underpins the ‘feel good’ factor but also helps to increase tax collected and also theoretically cutting benefits as more are contributing positively rather than drawing-down benefits. Negatively it can fuel inflation of course but not this time. In the US, inflation there falls to a three year low and the EU’s figures are reassuring too, so the way is paved for good cuts to interest rates here.
Good news, bad news
So Regional REIT is biting the bullet and raising the necessary funds to repay its Bond, reduce other borrowings and fund capital accretive projects. New shares are being issued at 10p and fully underwritten by a successful entrepreneur who was at the helm of Redrow, the builder.
We are holders and the shares have fallen from this but we are entitled to buy 2.142 new shares for each one we own, at a discounted price of 10p. At this stage, we intend to do that if the price fits, having to find c£1.5million for all of our clients. If we don’t, we lose that special buying opportunity which accrues to the underwriter (who likewise buys none if every shareholder subscribes). We shall do what we can for all participating clients but clearly if the funds aren’t there, we are constrained for them. Of course, meantime the shares are subject to the market’s sentiments – short-sellers may try to exploit the situation as well as existing shareholders selling stock to raise money for the Open Offer. What we do know though is that if any shareholders do not participate, the underwriting investor will end-up with a useful proportion of a very cheap real estate portfolio…
I remember at the depths of the 2002/3 financial crisis when British Steel, privatised in 1988, did a similar thing – the majority of private shareholders eschewed the opportunity as they felt they had lost so much money so emotion drove what otherwise was very logical and really an obvious thing to do – buying a share at such a cheap price which was already trading on the market at a significantly higher sum. I recall being away in the Alps from the constant bad news at the time and seeing the share price at 3.5p in a German newspaper headline. Corus, as it became known, was later taken-over at £6.08, at a considerable premium to that open offer price. As of today, Regional REIT’s shares are around 14p so an immediate 40% uplift in value, all things being considered equal!
Clarification
In case you were confused last time (sorry!), the inflation calculator was from 2000 till now, so £100 in Premium Bonds is only worth £55 in real terms today.
Big mergers
What happens when investment management firms merge together? There are lots of positives but also negatives and a core one is that the larger they are, the less dynamic they can afford to be as they have so much money to manage and thus can’t do for all their clients what they used to be able to do with smaller sums. Regulation now is very tight too so centralised compliance teams can’t tolerate independent maverick managers across the Country doing their own thing, so clients end-up having to ‘conform’ centrally along with everyone else. William Heathcoat-Amory talks here about the £100billion+ Rathbones/Investec merger and the consequences and potential inevitable ‘dumbing-down’ of the investment approach because it has little choice, as its size stops deft-footedness in smaller opportunities, especially here with the use of Investment Trusts.
He speaks optimistically about a new breed of wealth manager who can exploit the holes such a big organisation leaves behind (we might not be so new but certainly we operate heavily in the space!). Some of these are where managers leave to set-up a new firm with perhaps £100-200million following them, so effectively consolidation working in reverse.
Remember too, with Investment Trusts there are two return opportunities. The first is that they are invested in market assets just like other funds used by most investors and advisers. The second is the technical trading opportunities such as the chance to buy their shares at a deep discount to the underlying assets’ market value. Most advisers and managers either can’t use them or don’t and if yours is one of those, perhaps you want to ask some pointed questions! As for us, we can and do use whatever medium we believe is the most suitable and attractive for our clients – we have no bias – it’s what is best.
Will planning
Oh dear. Why is it that undertakers note a marked rise in disputes after a death and more problems than ever there seemed to be with Wills and estates? One local undertaker said that more funerals now seem marred by problems between family than without and we see and hear more and more dispute situations arising out of the estates and so often, it is too late even for aggrieved parties to be able to do much about it.
Last weekend after their elderly Father’s recent death, I was presented with the Will written by a local lawyer and which disinherits all the children, bar one who mysteriously reappeared on the scene relatively recently (though not having lived nearby either). So the one child will inherit ‘all’ the £1/2million estate, though they have said they will give the siblings some money – what is that all about? Professionally I have said we would never write such a Will if asked – unless (very rarely) there was a strong accompanying letter explaining why the others had been purposefully disinherited – which is not the case.
Recently I came across two cases where the Wills were fine but different local legal Will-writers had failed to register the property correctly so that the provisions which the deceased spouses made to protect their respective families (and also to ringfence capital against the concern of care fees) could not be fulfilled as all the property passed automatically to the surviving spouse. It’s not good is it? Is your Will watertight? If not, perhaps you should contact us without delay!
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
