Meta and Microsoft both topped analysts’ expectations for latest quarter’s results at the same time the US economy suffered a regression of 0.3% in the first quarter’s ‘growth’ – apparently nothing whatsoever to do with President Trump of course and his actions of late.
Gold has come-off its top – an over-extended spike it might seem, fuelled by geopolitical uncertainty – best to hold the miners I guess – far cheaper but not so tangible an asset.
Warren Buffett, the legendary investor, has also announced his plans to retire – at a time when his Company has the highest ever cash reserves. What’s he/that saying about the US market? That has bounced as China and the US have agreed ‘something’ which is better than the total worst-case scenario, boosting the Dollar at the same time.
Here at home, the much-expected 0.25% cut in interest rates happened – more to follow. We also have a deal with the US – one only allowed because we are not in the EU, which is interesting. The terms still leave us worse-off than before the tariff announcement…
Investment income
‘The fields are white unto harvest’ (John4v35) but what does that mean in investment terms? As advisers, all too often I think we advisers can be accused of not returning to basics enough, to help explain things. Maybe this is one such case.
So what do we expect from an investment (well, a very diversified array of different things, to create a ‘portfolio’)? First of all, cash deposits are not ‘investments’ – they are ‘savings’ and in the old days, people knew that they kept their emergency money on deposit at the bank, building societies, National Savings, etc and they invested the rest. This difference began to become corrupted in the late 1960s and then with inflationary interest rates in the 70s, enticing people to think differently about deposits.
However, investments are likely to go up and down in value though for most, we are not taking about ‘double or bust’ but actually a limited volatility and more steady outcomes but over sensible periods of time and crucially, better than the very best of interest paid by deposit institutions and giving some protection against inflation (which eats-away at the real value of your money at the bank).
Yes, in this ‘portfolio’ there will be great assets, a few which will be awful and many which will be fair to middling but overall, they will produce the characteristics and security we all need. You will have different types of assets, maybe currencies, commodities, precious metals, bonds, infrastructure, big shares, small shares, funds and yes, if it exists, you might have it, all these pieces looking to work together to do their little job as part of a bigger plan and based on your overall financial and personal position, needs, etc.
The two returns we expect are simply the income these components generate and the capital increases we hope they will give us too, over time. The income is like a farmer reaping his harvest from his land. If he looks after the land, that harvest is there year-in, year-out. If he sells the land, not only has the capital gone but so too his future income.
At the moment, our ‘balanced strategies’ (whatever one of those might look like presently!) are producing a harvest of over 5%pa and that has no bearing to what the capital values may do from one day to the next. So, for those investors needing an income to help pay the bills, they can count on that, as well as hopeful income increases in time (even if just from inflation but there are so many components which should do better ‘tomorrow’ than today, so then they pay us more income) and also the capital values should rise too. That really is the Utopia of what an investor needs. If he doesn’t need the income, it is available to reinvest when it arrives, in the latest new best ideas to build the portfolio going forwards, as an ever-evolving strategy. And yes, as we see things presently, the fields are indeed ripe for harvest and much of the sort of ‘land’ we can buy for our crops is ‘dirt cheap’ too.
Good news/bad news
More of the former I am pleased to report. Middlefield Canadian plans to wind-up so investors will receive the net asset value and the discount evaporates, an extra 5%+ bonus for us. I liked the Trust so it is disappointing in many ways but we’ll recycle the proceeds in other similar opportunities hoping for more such bonuses. Still, that’s more than a whole year’s interest at the bank – and on one day, so thank you and a little more to come.
Digital 9 Infrastructure still limps along and a reduced net asset value ‘only’ five times the present share price now. Of course, valuations of esoteric assets are always arbitrary but still plenty of comfort cushion with the shares at these levels, despite great uncertainty on the final outcome. Feel sorry for the original investors who paid £1 or indeed £1.18 in 2021 at the height of ESG mania – we certainly didn’t but were still too early in our engagement. Partners of the new investment firm just bought 2.5million shares last week – a good sign.
Are you out of your depth with your finances?
One of our septuagenarian clients who has been with us for many decades now, has enjoyed a swim with a friend off Hartland every day for many years now and has shared a recent photograph during this fine weather. Are you all at sea with your finances? Are you indeed out of your depth with your financial planning?
I can’t necessarily recommend you take a refreshing swim in the sea every day of the year, whatever the temperature and the weather but certainly we can help keep you afloat by ensuring your finances allow you to better sail-off into the horizon after taking all the necessary precautions and so you are as well placed as possible for a safe and rewarding cruise. She has allowed us to use her photograph – thank you!
This is what another client said too:-
‘With a big thank you as I really appreciate the letters you send out reassuring everyone in times of crisis. That was one of the reasons I left my previous financial advisers as didn’t feel supported by them’.
Thank you JL!
Testimonial
Readers will know we try to help people who have been scammed. This is a case for someone working overseas where the regulations and protections do not stretch and where colossal commissions also encourage mis-selling of wrong products when those ex-pats would be best-served relying upon onshore advisers such as ourselves. He was scammed over an occupational pension transfer to start, then yet more defunct ‘investments’ linked to the Resort Group International.
These are his words:-
‘Good morning and as always thank you for parting the dark clouds with a ray of sunshine. I must admit I felt pretty low and flat yesterday after reading your message and assuming the situation was not very good.
‘After re-reading and digesting what you had truthfully pointed out (which I am always grateful for), I felt slightly better and realised not all was lost and there is still hope that there will be a favourable outcome.
‘This has been hanging over me for such a long time causing me a great deal of stress and a feeling my work and savings had all been for nothing. Someone had taken that away from me and I couldn’t do anything about it. I couldn’t think about stopping work and looking forward to enjoying retirement with my wife and family.
‘But you and your team thankfully have given me hope that all is not lost, and I am no longer alone in this. Today’s message is a positive one and I am grateful for that.
‘I look forward to the day that all of this is behind us, and we are moving forward. I appreciate everything you are doing, not only the advice and direction you are giving me, but having someone in my corner is hard to put into words.
‘I really can’t thank you enough for giving me the support you have done so far and keeping a positive outlook of the situation. I did feel all was lost at one point.
‘I have not heard anything regarding the ongoing FSCS case. Fingers crossed, that is progressing, but I don’t like it when things go quiet’.
We have encouraged him to accept compensation on his pension mis-sale which should be over £140,000 and are helping pursue yet another claim involving a Resort Group International scam via the FSCS – and no bill proffered.
True Potential
We were fearful that the ‘commission’ this consolidator offered advisers was too good to be true – not for the advisers who accepted the payment but perhaps for the clients switched across. The firm has now set-aside £100million for any investors who may have lost out as a result of the eager switches from their old plans into True Potential’s limited ranges which then triggered an 8% payment to the original adviser. So if say that adviser had £50million of funds upon which it provide advice, it would receive a £4million payment on those switching across.
Additional to this, a S166 review has been ordered by the FCA – a penal direction demanding a ‘senior personal review’ by an independent consultancy. I suspect that will be rather costly and stifle the Company’s progression from here forward too. The Firm’s borrowings listed on the Guernsey Stock Exchange total £1.2billion – backers will be revisiting prospects as a result of all this – and what are the customers to think?
Inheritance tax
More and more estates are falling foul of chunky tax bills on death. It is also interesting to note how few seem to use certain allowances to deaden the liability to their families.
For example, an FOI request noted that only 2% of estates used the ‘Surplus Income’ rule in the last three years (1,490 estates). This is often a tool in our armoury, where people save monthly into an investment pot say for grandchildren, with no seven-year rules and no interference with other gifting. I expect the number is bigger as many people do this but perhaps don’t need to claim on death, having reduced their estates sufficiently by then.
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
