Quietly and gently and perhaps almost unnoticed, the US Dollar had been seeing a drift downhill before strengthening again over last week. Against Sterling it has now been the lowest since September 2021, having fallen by over 26% since the Pound’s trough in July 2022.
We are not so unhappy as we have currency in our Defensive strategies but if your investments are full of US equities, recognise that you have lost that much on currency conversion alone too. Indeed, where possible too, we bought assets like commodities (typically priced in Dollars) which we hedged against a Dollar fall. We remain very negative on the Euro and positive on the cheap Yen.
Meanwhile, amongst the political fall-out (especially Lord Mandelson, an adept politician but accomplished ‘perpetrator of terminological inexactitudes’, too but clearly some in the present Labour regime knew far more than they have admitted and that may be their noose), manufacturing output surprised to the upside in January and the PMI (Purchasing Managers’ Index) rising to 51.8 from 50.6 and the best since August 2024. A separate survey on economic confidence was also more buoyant albeit still very negative.
Such factors suggest further interest rate cuts short-term might be on hold, especially as inflationary influences from the last budget are still absolutely present and despite the Bank of England’s optimism.
As for politics generally, we hear that Larry is the most stable member of 10 Downing Street after celebrating 15 years there. We understand he’s done a pretty good and reliable job and is as unphased as when he took-up residence. Yes, he’s the cat, 19-years-old and having served under six Prime Ministers.
New clients
So we have been recommended to some new clients, a retired doctor and his wife whose old adviser is selling-up and the large consolidator won’t look after them as they are ‘too small’ effectively, unless they sell them one ‘product’ and then ‘go away’ (ridiculous but there we are). We have sent our initial thoughts on their circumstances with tax planning guidance and investment options etc to consider. This is what they have said:- “Finally we would like to thank you again for taking the time to explain so much which we had never been made aware of in the past. It feels quite exciting embarking on a new financial journey!”
I am afraid that we find this far too often – I know we try to be thorough but so many out there are not really receiving the service, advice and guidance which they assume they ‘are’. Cynically, too often too their model is predicated on the simple sale of ‘products’ for a juicy fee and ones which pay an annual ‘advisory fee’, so ‘small bits’ and non-rewarding guidance for the adviser just don’t seem to feature, however pertinent… hmmm, I wonder why.
Another new client I saw last week had a £500,000 Trust fund sold as two bond funds – never any changes these last seven years but again, a nice annual retainer of £3,750pa taken from the respective pots for sending a jolly letter and the valuation and offering to chat about things that aren’t changing… Needless to say, we are not perfect but we do our best to do something rather different and more meaningful than that and without those sorts of advisory fees too.
Hi-Yo Silver!
For the young amongst you, those are the immortalised words of the Lone Ranger to his horse ‘Silver’. The last fortnight has seen some extreme volatility with the silver price moving between $121 and under $70 with the biggest one-day fall since the Hunt Brothers’ attempted manipulation came crashing-down in 1980. ‘Unprecedented’ comes to mind.
IG Index notes that 80% of its speculators were still ‘long’ during the first hit, so many will have been burnt heavily as the price crashed. We had been trickling-out as the price rose and still have a little left but the profits unlocked from this ‘defensive’ bullion asset and what was ‘previously’ a proxy for holding cash have also been ‘unprecedented’. We sold a chunk on the morning of that fateful Friday, after having enjoyed a 70% rise at one point in January alone. We haven’t bought any for a long time either.
Gold also fell 9-10% on that Friday, the biggest one-day fall since 1983 but still not far away from its all-time record. Both are ‘too dear’ and geopolitical events’ can only substantiate so much. Incidentally, it is worth noting too that central banks have been reducing their purchases of gold after the 2022/3 record highs, apparently now holding some 27% of their reserves in gold (buoyed-up by the higher values gained on those reserves too of course).
Still, it has been a ‘Hi-ho silver lining’ (the popular Jeff Beck 1967 song) for us and our participating clients, both in silver and related mining entities owned. As ever as far as we are concerned, this is sheer patience being rewarded big time and repaying the investment in disciplined investing – something too many investors have all but forgotten (as epitomised by the ‘must have it now’ US Tech sector).
Have you learnt your lesson? And remember, even if our clients’ total exposure to say silver was only 2% of total assets, if that became 4% just because of these extreme upside moves over mere months, that represents 2% of return for the total pot so the other 98% of our assets’ returns are extra for free. Put another way, it covers all the fees and costs which might apply for the whole service for a year and a handsome profit on top and ignoring all the value for the advice and all the other choice investment selections, management and administration. And there are still many out there who say holding a cheap global tracker/index fund and with no advice is the best thing to do – really?
Good news/bad news
One of our poorer investments, Sancus, announced the best results for many years after so many false starts. (I should add it hasn’t become poorer for years though – all the bad happened a long time ago). At one stage on the day, its shares rose by a mere 1000% on the results… patience being rewarded for seeing no return for such a long time, even if for many it is simply repairing past damage but what a gain! We bought a few for some clients on 8 January at under 0.5p and ‘today’ others were paying 3p! They’ve slipped-back since but interest in its prospects is awakened.
The same day, British Land bids for Life Science REIT and the shares rise 19% – one of those discounted Investment Trust plays we like so much. It’s still good value but a useful bonus for nothing for holding this medium over usual unitised assets held by most investors ‘out there’. Sadly, we don’t hold enough but!
On similar lines but reinvented Amigo Holdings has rocketed after announcing it is viewing gold and rare earth minerals in Africa for a reverse takeover, at the same time as converting loans into extra shares. The patient and afflicted investors here will be pleased at the significant bounce from under 0.002p to 3p at one stage however – did you buy a few more at the bottom!
Taylor Maritime has now completed its capital distribution at c74p a share too. This is a significant premium to the share price so another good bonus for investors and over 20% above the market price the Friday before. The residual shares since slipped to 56p – good value.
No win, no fee litigation?
At last, the Solicitors’ Regulatory Authority is acting against law firms offering services for compensation claims and litigation. It has issued formal warnings, has 83 open investigations against possible miscreant firms and has closed six.
All we’d say is be careful; these terms are not as clearcut as they may appear and in financial services anyway, most claims we have seen are ‘natural’ and not requiring disputes – ie ‘bad’ firms which have gone under or had successful complaints against them already, so please don’t pay colossal charges for something which you may be able to manage claiming yourself.
The legal Regulator has said that there is a lack of transparency in fees and costs, or firms prioritising their own interests above those of clients. I wonder if this includes any local operators in this space?
We offer advisory services on financial services’ issues and first of all, free of charge, we review the claim to see if compensation is likely and then guide clients to the free services like the FOS and FSCS. If we should happen to act, we don’t take a proportion of the compensation either – the highest we have seen is a compensation firm taking 48% of victims’ compensation!
I’d like to see the ‘regime’ basically noting that when a systemic issue arises (eg a firm going bust or issues with common problems) that compensation is universal and paid direct to the affected clients – not only to those who enter a claim. The same with things like motor finance – force the firms to do the calculations, find the clients and pay them; no compensation then goes to claims’ companies. It’s not rocket science.
Taxing times
One million missed the deadline for filing their HMRC Returns apparently, people who knew they had to file. They will pay a penalty and interest on late tax payments too. Being polite… do you need help? If you do, give us a call – we are sympathetic and cost effective.
What about next year, with the new digital tax recording and quarterly returns – carnage I am sure. I am afraid I disagree with this change – too much of an imposition on busy businesspeople and landlords and a step too far.
Concentrated portfolios
One branch of investment theory is to not diversify too far. Research exists to ‘prove’ that, the idea is that if you concentrate upon your best buys that when they come good, you reap the benefits. We disagree with that philosophy. Why? Because it’s great when it works but what happens when it does not?
We have reasons and justifications for all our purchases and holds and the last few years have rewarded our value-led strategy of a vast diversification (which also increases opportunity for the individual investors). But crucially, it reduces risks quite dramatically, both through far more assets in the range but also a wider range of uncorrelated assets too, so they aren’t all of the same type.
Poor investors in Nick Train’s funds are suffering. The strategies longer-term have been great but shorter-term, a ‘concentrated portfolio’ of ‘high conviction’ assets has been dire. Maybe yes, today the assets are very undervalued and worthy of purchase. However, that’s not the point.
Then last week, there was a hit on information businesses and especially those which the market has decided arbitrarily might not be fully up to events in AI terms, such as Experian, London Stock Exchange and Relx (that one halving since last May for example). These three are core holdings in the Train emporium of limited main holdings – ouch. Adding Diageo and Burberry to the list, is the problem one of not recognising either that if the share prices are too far ahead of events it is time to sell? Likewise, maybe now it is time to buy (especially Diageo) but has there also been a case of ‘resting on past laurels’?
As I say, I am not ‘picking’ on Mr Train specifically but Terry Smith, Neil Woodford etc – there is a string of them and now yes, the most-chased, popular fund managers are Mr Passive and Mr Index-tracker, characters whom everyone out there seems to be flooding to buy indiscriminately. We aren’t.
Granted, it is great when a concentrated portfolio rewards and the survivors of this can show wonderful performance but history (and therefore comparative research performance) is strewn with those who have gone – because their strategy stopped working and where in some regards the managers took speculative and excessive, concentrated risks which, if they worked would have rewarded brilliantly (and the cynic would say would pay them very big bonuses) but if they don’t, well, they and their funds disappear.
Maybe today it will also be those concentrating upon US tech and that includes index trackers where concentration is in the biggest, most over-priced assets in the world… as for us, yes, you’ve guessed it, we are sniffing-around the two Train Investment Trusts trading at discounts to the already undervalued assets held as investors flee them. Yes, it might not be a smooth ride and each has exposure to the underlying management company but remember, our biggest exposure to anything presently is less than 2% of total client assets.
Big con
Probably just at the time that central governments are unwisely looking to roll-out some advanced form of legitimisation of crypto currencies, Bitcoin continued to slump before bouncing a little off the bottom and enduring its biggest-ever one day fall too. From $125,756 in October last year it has since plumbed the depths of $64,000 and oddly enough all those excited pundits seem to have disappeared from my social media feeds. That’s a drop of a half, wiping-out all the ‘Trump’ political bonus and don’t forget, whilst ‘other real things’ have been going up lots too.
I continue to reiterate it has no purpose aside from gamblers’ fervour and the ‘solution’ for a problem which doesn’t exist – aside from those who want to money launder, avoid central governments and commit general crimes and scams maybe (the latest being the ransom for the US abduction) – not much of an accolade, eh! Then, clearly that’s because I don’t understand ‘it’ – really? It isn’t a ‘currency’. It isn’t ‘stable’. It isn’t a solution to anything which can’t be addressed by other media. In fact, it is backed by nothing aside from punters’ excitement – or the absence of it.
The ‘Smarter Web Company’ has just floated on the UK market, with a ‘strategy’ to hold Bitcoin. It has used nigh £220million of investors’ money so far to become a Bitcoin treasury company. As with the Accenture purchase of Faculty for a colossal sum, maybe like the heydays of the Dot.com Bubble, these two signs suggest a top has been seen with excessive AI-related valuations and a Ponzi Scheme known as ‘crypto currency’. Bargepoles come to mind again.
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
