So, inflation remain stubbornly high at 3.4% despite people not feeling especially confident about spending. So much of our outgoings now go towards ‘tax’ of course and we don’t have any control over that (but government does)… So businesses and organisations are obliged to increase their prices to cover increased costs (especially employment but including amongst the highest energy costs in the world and Business Rates).
As a result, borrowing costs were not cut at the last Bank of England review meeting, hurting business borrowers and mortgage holders alike. The Dollar is now its weakest against the Pound since October 2021.
We are also told average Britons’ wealth dropped by 3.6% last year, second only to Turkey. That conflicts with steady growth of 6%pa since the start of the decade. That will have been compounded by the millionaires leaving the UK which is in contrast to the US where they added an average of 1,000 of them every day last year. I can see the Opposition parties bringing-out the 1978/9 Saatchi and Saatchi advert ‘Labour isn’t working’ again…
Meantime, the prize pot on Premium Bonds has drifted below CPI inflation and let’s face it, after the big prizes are funded, millions of holders won’t even see 1.5%pa from their Bonds let alone 3.6%, which is the misery level from August. They’re not investments worthy to be held by most people…
Can I ask, how on earth can we be experiencing a 10-year high in workless households with children? One in nine children is in workless households – 1.45million. The ONS states it is ‘much more likely that children are going to be growing-up in a home where the adults are not even looking for work. How on earth too can one in five children have ‘special educational needs?’ Until we address the causes, there won’t be improvement either. This is all bad news for the Economy, Society and indeed the children and adults themselves.
As an aside, whilst it may be short-term but an interesting fact shared by Schroder’s head of Investment Research, Duncan Lamont last week is that since its peak, 90% of other country markets have now out-performed the US… (the MSCI All World Index), an interesting point and especially as more and more investors have cheap passive, index-trackers which means that over 70% of their money is in the US market, so under-performing… He went on to say too that if you compare earnings growth of global companies, when stripping-out the ‘magnificent seven’, other markets have kept pace with those in the US (guess which one’s shares are dear and therefore more risky than others).
We aren’t in that camp of US nor global passives ‘for the sake of it’ and have been doing embarrassingly well of late, as performance statistics attest and despite the US recovery. UK investors with these global trackers will also have been hit by a cheapening dollar – a trend which is likely to continue. That’s a further loss of 20% since the 2022 peak.
Compensation
It has been a very hard and long-drawn-out cause but finally, we are beginning to make some progress. Investors who were sold fraudulent ‘dreams’ of part-hotel-room ownership in the Cape Verde Islands have begun to be paid compensation.
Of course, this fraud was nothing to do with us but we have devoted considerable time on proving liability and that has not been easy and isn’t successful in all cases – but we haven’t given-up yet. These were for people who transferred pension plans to a SSAS – a complicated Company-linked pension scheme totally unsuitable for the investors involved but the only way for the miscreants to then sell them part-ownership of hotel rooms.
I must commend my colleague, Mr Toby Rogers, for his tenacity as well on this matter and I am sure Mr W will be eternally grateful for the compensation of £33,685 winging his way to him. Yes, we have charged a fee for the time-costed work but that is only hundreds and not as most claims’ chasing firms charge – we have seen up to 48% taken in commission.
Woodford Investment Management
Read the latest – What is behind Neil Woodford’s latest venture?
I am quoted in the FT’s Financial Adviser giving my views on Neil Woodford’s latest venture and indeed what went wrong at his old firm, causing investors to lose many hundreds of millions. Despite great popularity and a slavish following by many investors and advisers entranced by past results and an easy story to sell, we stayed away totally from what was the then ‘momentum buy’.
However, we did buy a number of the stocks which were being dumped unceremoniously by the administrator at give-away prices, come the end and indeed the Woodford Patient Capital Trust too, though we nibbled-away there too soon (but it’s beginning to reward patience now but only those who kept chasing it to the bottom, as we did, even if for most investors it will be a tale of losing a lot less).
Good news/bad news
More positive news from our largest holding, Tetragon (it is our largest by virtue of performance and not the money we have subscribed, I should add but we have been content running an over-weight). It has sold a useful stake in a participant fund company and the shares rise over 5% on the day – all making a meaningful contribution for clients. However, the shares are still trading at c55% discount to the underlying asset value…
Hansa announces an offer to acquire all of Ocean Wilsons and Hansa’s shares rise 13% – still at a deep discount but part of the attraction now ‘unlocked’. Hansa will become a £900million Fund afterwards, which is all good news for us.
The Regulator has emulated the Treasury’s comments on the expected compensation scheme for car finance commission claims, should the Supreme Court rule that was illegal. Effectively, worst fears for the banks and lenders involved would not be realised so a significant uptick in the related stocks may be due. Frankly, I don’t believe compensation is needed but certainly yes, commissions should now be publicised at the sale. However, the contracts and terms signed by car finance customers were clear and agreed by those customers. The position on holiday park lodges, mobile homes, bungalows, caravans, etc is far worse than these, in my view… and no one is doing anything about those… yet!
Syncona jumps 6% as it announces some news which should benefit shareholders and an asset value still double the present share price. Yes, it is very specialist but there is a significant comfort cushion and nothing priced-in for opportunities and renewed investor appetite, let alone good news on any of its many investments. Schroders Capital Global Innovation also announces its expected tender offer at over 21p – the shares rise 10% to over 15p, still a useful discount. We kept chasing them down – to below 9p in March. This jump helps our own overall £700,000 rise on the stock since the end of May alone!
European Assets Trust agrees the basis of a merger with European Smaller Companies, which should reduce discounts. Sorry to see the latter go (again) but regardless, a small uptick in extra value for us meantime, 3% now and likely to be a further 9% based on terms.
Investment trends
People do have short memories. Do you remember when Moderna had the best vaccine for Covid? The shares hit $416 in September 2021. They’re now $26. Or Zoom which hit $559 in 2020, now $78 and Peloton which hit $163 in 2020 and now $6.18.
Syncona, noted above, hit £2.60 in 2018 and believe it or not but the shares traded at a premium to the value of its underlying assets. Now the shares are being given away and the best new investment for the Fund (when it realises cash from disposals) is to buy and cancel its own shares. The S&P Biotech Index is still down 52% from 2021 levels.
So, just what are the current themes to avoid (meaning the popular ones!). Don’t confuse a successful concept or business model with a cheap investment opportunity either! This is trying to avoid the hype and buying the unloved with prospects instead, maybe. So, do you avoid defence industries, gold or Artificial Intelligence and other technology specialists? Can you add to this list?
You’d be amazed at what boring investments we own which have gone up significantly in value as they have returned to more sensible levels of valuation… the only ‘trendy’ ones here on this list are Syncona and certain defence industries incidentally! How much have we avoided losing by not having the over-hyped… and is it going to be true again that the bigger they are, the harder they fall…
Where is the market AIMING?
AIM has celebrated its 30th anniversary with the Business Minister opening the market for the day. However, it’s the same government which passed a nigh death knell to the market by cutting IHT relief in half, adding further disruption to an already battered market.
We were impressed to hear one of our tiddlers, Built Cybernetics Plc, named as one of only four of the Minister’s prime examples of opportunity and innovation and yes, there are now plenty of great stocks there to buy and the bigger players can’t afford to support them as they are so small. Several of the bigger IHT players have been dumping stocks on investor aversion now the IHT provision is less attractive – at the moment we say 20% relief is still better than nothing and the extra disposals now give a great opportunity of picking-up some of their fire-sale bargains. Indeed, whilst very small amounts in reality (to spread risks as ever) but we’ve added a few more to mainstream strategies already, too.
Pension transfer advice
Wow, the numbers of regulated firms able to dispense full pension transfer advice has fallen by 71.5% to only 815 firms at the end of 2024. We are one of the few remaining and have three qualified advisers able to talk-about such pension transfers, whether action is encouraged or discouraged.
Transfer values have plummeted since their peak in late 2021 but it is still the right thing to review the benefits versus the transfer value in many cases. Note that review may not encourage change and it may be discouraged before you incur fees. However, there will be many individuals who will rue the day insofar as not enquiring when the opportunity was there for them to have done so. We did try to encourage as many people as we could… Please don’t be among them in the future.
Climate change
Here are some sobering facts which basically mean whatever we do here has no effect. That doesn’t mean we don’t do anything but extreme behaviour by zealots here who want simply to ‘feel pious’ are costing us and our State colossal cash and need to be challenged seriously. They need to redirect their ire.
Coal consumption is four times more now than in 1950. We are burning twice the amount of coal we did in 2000. Every minute 16,700 tonnes of coal are mined, enough to fill seven Olympic-sized swimming pools says the FT Why the world cannot quit coal.
More than 30% of all carbon emissions since the Industrial Revolution have come from burning coal and today, the most coal ever is being burnt, half of it in China and to make our cheap goods, amongst other things. Coal consumption is predicted to rise. India is catching-up with China and Indonesia, Russia and Turkey are also increasing usage. Of all major nations, we are the only one to have stopped coal altogether (the US is the third largest burner albeit dropping). And, why can’t coal be burnt cleanly?
The Taxman cometh…
So it’s not only Benefit cheats who can now be investigated via their bank accounts but the Taxman has increased his enquiries into citizens’ affairs to find tax evasion. He can check Land Registry records, Companies House, Credit Card spending, Travel records, Social Media and all the bank interest people receive.
Indeed, more and more cheats are being found… Then the Taxman isn’t time limited if he perceives tax fraud has happened… Most enquiries are data-led these days by its flagship ‘Connect’ software system and AI searches – and not random selection either.
The wealthy, defined as those earning over £200,000 or with more than £2million in assets, are the core attack group as there’s more at stake but no one is spared, quite rightly so. In 2023/4 these people paid an average of £140,000 in tax each – 25% of all personal tax receipts. And don’t forget – if you’ve been cheating (even ‘innocently’) then there is interest and hefty fines too and prison for the worst offenders, in theory. Of course, the wealthier are also the ones likely to be leaving the Country for lower tax regimes generally as well…
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
