Good afternoon. Early days but the agreement to a ceasefire was much welcomed by the markets. It is an odd world when sometimes you are grateful that some of your assets fall in price, because they were the hedges against other things you have been holding.
So, when oil and energy stocks slumped last Wednesday week, it was good, despite the losses over the previous day’s prices, because it meant that more of the other assets rose usefully in value at the same time. That’s what hedges are there to help do – to protect and smooth excesses. It’s only gamblers who have too much on just one side of the equation at any one time and that’s not our job.
Anyway, we had a rather good day as we had been nibbling-away with spare cash resources as things weakened in price – as I hope clients would have expected us to do – and a few new larger clients will have had a special starting bonus of some rather cheap prices (as well as most of those exploiting last minute ISA and pension allowances etc) – well done!
The FTSE250, where we have quite a useful exposure, rose by over 1,000 points at one stage (nigh 5%) – ridiculous but there we are. Sterling also jumped against the US Dollar so a double benefit for our clients. Meantime across the Pond the NASDAQ and the S&P 500 scaled new all-time highs, just as if nothing has happened… quiet worrying, I have to say.
Still, it’s too early to see the one swallow as a harbinger of summer though yes, I did see my first swallows on 5 April (and a good number too) and promises of the warmest day in 2026 were welcome after some very chilly times. Gaily the birds have flown back from South Africa where they spent the winter, oblivious to what’s happening in the Middle East. Maybe there is an investment lesson in there!
It is interesting; inevitably we see withdrawal and liquidation requests all the time from ‘natural’ things such as estates winding-up, needs for cash, pension retirement needs or whatever. However, when we do, we go a step further than most investment and advisory organisations, which is to try to guide people. When acute short-term volatility arises, if they are not desperate for funds, we do our utmost to encourage them to wait till stability returns – not that we can promise that in the short-term but even on that Wednesday, the FTSE250 opened up over 4%, Japan over 5% and so on. Why force sales on a bad day(s)? These sorts of returns are equivalent to maybe a year’s worth of interest on that mortgage you felt compelled to repay, or a year’s worth of natural sustainable income yield from a balanced portfolio and just because you push-through an instruction from emotion, rather maybe than waiting for a more ‘normal’ time to reappear.
Of course, sometimes too it can be that an investor is moving elsewhere – eg we find family taking-over parents’ assets and consolidating them to another firm where we have not had the closeness of contact and then, certainly it is not the best thing to move across during times of volatility.
You could sell on bad days, take the cash across (perhaps over a month cycle typically, after the administrative ramifications have taken-hold), only to find that some good news has materialised and the same markets into which the new adviser is then placing you have risen significantly just as you need to buy. Yes, it happens and yes, we warn people to be very wary as the best advice then from ‘that’ new adviser is to stay put till things return to a semblance of normality, even if that means they have to wait for their 40 pieces of silver.
After all, does the adviser have your or his best interests at heart? Some transfers (especially if stock transfers are involved) can take literally months too – some big firms are diabolical at being able to coordinate things for their new client and it’s not our responsibility either, as much as we do our utmost to cooperate professionally and efficiently. Indeed, on several instances with some big firms, if I had been the client, it would have been bad enough for me to walk away quickly and appreciate that our service was far superior, if that is how they act towards their clients and how they manage capital! Glossy brochures and slick advertising only go so far eh!
The economy
The IMF has labelled the UK as the one which will be hit the hardest by the oil and gas price spike. However, it also lambasts the Chancellor’s dire handling of the economy and previous prior growth and an absence of confidence as a consequence of her clumsy and ill-thought-through policies. Of course, the Government is trying hard to downplay this.
Our growth rates will now be as low as the average in the EU it seems. This might mean interest rates don’t rise or may indeed fall again as a stimulus to an impacted economy but if inflation rises from higher input prices, the Bank of England will continue to use this blunt tool to punish consumers and restrain spending. Stagflation is not good.
Of course, the Chancellor has already factored-in higher economic growth to justify her escalating public spending and welfare, so from where will that committed money now come – and diminishing tax takes, as so many more enter the welfare programme as opposed to working and contributing. And of course, the cost of UK government borrowing is the highest since 2008 and the time of the financial crisis under Labour last time. This has been marked by the biggest ever Gilt issuance – a 10-year cost on £15billion of debt and that’s nothing about which to be proud, even if the demand was very strong (the biggest ever too).
Passives-led crash
An interesting article along similar lines to what I have shared previously; could the excessive exposure to ‘cheap passives’ – index-tracking funds, be a precursor for a collapse in sentiment and hence prices for all the same things? RC Brown’s Oliver Brown: Passive dominance risk at crucial tipping point
It is all very well reading the received wisdom which says that ‘active’ managers have underperformed those who simply ‘buy it because it is there’ but if sentiment changed and selling began and escalated, it could snowball into an unstoppable avalanche and compounded from a starting point of a high risk concentrated portfolio (ie US tech stocks) which are excessively over-priced in the first place, so falls are long overdue.
Of course, the ‘very low cost’ is another reason promoted by adherents (which include regulators and governments alike, as if that is the only factor which counts for anything) but if your assets have fallen or are falling by more than others, then the cost is something of a red herring with the true cost being multiple percentages of actual loss suffered, over another manager who has the capability of taking some contrarian decisions, even if he may not be totally right either of course. It’s too late then, after the event, to realise that significant-sized risk.
What is risk?
So, at last some reports are appearing that an excessive promotion of the potentially bad effects of ‘risk’ deters people from investing sensibly. Too much regulatory concentration has been placed on the negatives and for too long – just imagine if the ‘risks’ of losing money on home ownership (and especially speculating on borrowed money to do that!) were pushed to the fore – few would ever buy one! Just think, if there were innumerable risk protocols we all had to read before we cross the street at a pedestrian crossing – just in case we might be knocked-down and the ramifications of that happening.
The biggest risks are those not recognised as risks by investors – the loss of opportunity, the poor returns of ‘doing nothing’, or excesses in cash with inflation eating-away the true value of your money, etc versus being ‘balanced’ with a wide variety of financial assets, etc to help protect against the excesses of ‘risks’ altogether. Or there is even worse, being scammed by some wholly unregulated crypto currency scheme sold by the man at the pub or online on social media or by some ‘finfluencer’.
Good news/bad news
Well, amongst the continuing erratic market behaviour buffeted by the winds of view, it is good to have a couple of pieces of good news anyway.
First Digital9 Infrastructure agrees a final £10million payment from the Verne Global disposal, so a 3.5p payment is received by shareholders. That asset was valued at zero last June and which puts a rather different perspective on a share price which was as low as 5p recently. A total of 323.4million shares were redeemed at 9.28p – that’s 37% of the Fund – rather higher than the residual share price. However, it is a very good uplift to recent prices but very hard to value what is left now and little consolation to those buying at far higher prices earlier in its existence..
On a similar trajectory, Hydrogen Capital Growth is going to delist at the end of the month and there, the shares have bounced by over half from the lows on the announcement. It will still all be down to what negotiated settlements the Board can secure for its presently unpopular assets – best hope is well north of 20p so very much worth waiting the course, however irritating a delisted asset is. Realism suggests rather lower sums…
JPM Global Core also announces a good asset value and that by 30 June, 80% of the original value will have been repaid and 85% by the year-end. On the news, the shares bounced 12%. Many investors had cashed-out their rumps when the value left shrank but clearly, holding-on has been very rewarding!
Riverstone Credit continues to secure its loan repayments and a further 24.7% of our shares are being redeemed at the asset value, so a further useful bonus above the current share price. The Fund is still being paid a handsome yield from the underlying loans meantime. This cash is on the back of the RM Infrastructure repayment at the net asset value which will materialise next week too – so some more good news!
Finally, Close Bros rebounds 16% as it announces it should be able to absorb the possible £320million car finance compensation claims comfortably. Hopefully short-sellers Viceroy will be somewhat out of pocket and an investigation launched into its behaviour of spreading malicious stories to push the price down to profit!
How much?
I see Coutts has raised its threshold to be a customer to £3million. Lower than that and you may be offered the standard Nat West Premier service which is really a package of ‘products’ – shouldn’t it be its ‘secondary’ service…?
Our clients will be reassured to hear that presently we don’t have such thresholds… though you can become a member of our elite club of clientele quite simply and no, you’re not ever ‘just a customer’ for product sales.
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
