The UK Economy grew by 0.3% in the first quarter – which is good news though some of it is clawing-back losses from before. However, the underlying trend shows very little improvement and as noted last time, the general employment situation is worsening.
In a nutshell (and stating the obvious), the more unemployed and the more on benefits, the less productivity and the worse on the finances, as there is less coming-in and more going out. As I read last week, with over half of adults enjoying the benefit system in one way or another and the other half having to work twice as hard to fund the first… killing what incentivises the enterprising to perform well, work hard and achieve to help pay for an ever-growing social society isn’t a very good nor sustainable idea.
The US market is powering ahead again; corporate results may be fine but on pretty-much all historic comparators, it is dear, very dear and there’s no room for error. Core worries such as ballooning government debt (over here too) seem not to have depressed enthusiasm but at some point, something major is going to break. Microsoft has joined Nvidia as a $4trillion company now too. Never have so few stocks counted for such a proportion of the S&P500 index, where yields from dividends have slumped to approach a meagre 1% (the UK FTSE100 is 3.3%). The biggest risk there is complacency – ‘expect the unexpected’.
Watch government borrowing rates too, especially here at home where longer-dated rates are rising just as Bank Base Rate was cut. Bigger debt and higher debt financing means less for public spending and the need for yet more taxes. In a sluggish economy when governments tend to pre-spend the sum by which they anticipate the economy will be growing, it’s especially poor news.
The eye-watering numbers on benefits and the payments to those who were not even born in our country and yet to contribute to it economically are at an all-time record. It’s fine being benevolent to those in need but to what extent – all these figures are reactionary and the lack of pre-planning is what irritates most people, it seems. We can’t afford to pay the whole world’s poor at UK benefit rates, however nice that might make us feel inside – it’s rather unaffordable, especially when so many are still not contributors to the economy thorough work apparently. This isn’t politics – it’s financial common sense.
30-year Gilt yields have just risen to their highest since 1998, at 5.62% and 10-year rates are 4.74%. Politically this is a serious issue and reflective primarily of mistakes the Government’s made and the markets’ lack of confidence that it has a handle on the economy. I know that still the Chancellor criticises Liz Truss and Kwasi Kwarteng’s budget (when 30-year Gilts spiked briefly at 4.85%) but things are far worse now and with bulging government borrowing. Yes, international trends are ‘in there’ too but our rates are amongst the worst of major economies. It is hard to know where this will take us in the future and ‘other’ ramifications.
A toast to the Ladies’ Tea!
I am pleased to report that the Ladies hosted a successful Afternoon Tea raising money for Breast Cancer Now – well done team and helpers! A great sum was raised and the Charitable Foundation rounded-it up to £500, so thank you to all of them and also those who supported the event.
Sadly, Helen and I couldn’t attend as arrangements for our second son, Noah’s wedding to Kate next Saturday are accelerating apace…. Who agreed to host the reception at our home – ha! However, the gardens should look lovely too!
Fortieth celebration
So the actual date is now here! It doesn’t seem so long ago… or maybe I am just feeling older! It’s lovely to be able to add to the celebration with a bumper set of quarterly results after the Trump-tariff shenanigans giving limp markets in April but we never did too badly then anyway.
Watch-out for more publicity, a special edition posted newsletter to all on the database due to arrive soon and invitations to all participating investment clients to join us for our big day on 20 September. There’s food, entertainment, music, fireworks, we’ll try to make it an event to remember – and starting with a Cream Tea in the afternoon (and especially for those who can’t manage nights).
Local publicity is being ramped-up too… From ‘what have I done?’ to managing £278m – North Devon firm marks 40th anniversary
Good news/bad news
Our stocks seem to be doing fine and without any new idiosyncratic hits recently. We’ve continued trimming some of our core and long-held ‘ex-value’ stocks with more to go – recycling the funds into tomorrow’s hopeful performers. However, as ‘value’ rises, our job is harder but we’re still spoilt for choice!
Have now and pay later (or not)
So as Klarna announces a significant rise in provisions for bad debts and a $53million loss for the three months to 30 June, its head believes that it will ‘be unlikely that people can’t pay back their loans’. Hmmm. He goes on ‘in fact the opposite is true, Klarna’s delinquency rate continues to fall’.
I shouldn’t be surprised if the regulator does an ‘Amigos Loans’ here and investigates whether these facilities should have been made available so freely to all and without consideration to the prospective borrower’s capacity to repay the debt. That would be a thing, wouldn’t it!
A simple, personal debt firm with a reputed flotation expectation of many billions could then evaporate pretty much before it has joined the real world, even if I hope not! After all, what is the difference between this, HP or other loans for goods effectively? Some consumer somewhere is paying the interest cost… (Technical answers not required on a postcard thank you). In most cases, if you really can’t afford ‘it’ then maybe you shouldn’t be buying it.
Maxims – being a better investor – from the ‘Basil of Barnstaple’
4. ‘Value Investing’ means buying something which is inherently ‘undervalued’, often below its assets for example. This is as opposed to ‘momentum investing’ as most follow, chasing what all other investors are doing and trusting there will be more of them in the future to propel prices ever higher. We are ‘value investors’.
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
