Last week we were greeted with even higher inflation figures, apparently fuelled by higher aviation costs though primarily the problem remains reaction to the Government’s increases in Minimum Wage, National Insurance and other business costs and taxes. Curiously, at the same time the cost of oil and gas has been very weak but not filtering-through to crucial headline inflation rates.
This is a poor portent for further interest rate cuts short-term but before savers smile, if they are not receiving 3.8% interest on their deposits, their cash is devaluing by the day. As mentioned last time and worse again today, we now have the highest government borrowing rates of the larger economies in the world – not something about which to be proud. Today our market took a breather with the biggest drops for some time but the States have followed suit.
There was some good news though and that is that last month’s PSNCR (the Government’s borrowing) was lower than expected as higher tax and National Insurance receipts from employers helped. That’s still £60billion of extra debt from April to July alone, however. Inheritance Tax payments also appear to be continuing their inexorable rise too.
We are told the Government is also looking at a new form of ‘Property Tax’. Will this be the death knell for residential property as an investment? Nothing might happen tax-wise at all of course but conversely we have seen ideas of a 0.5% annual tax, so £2,500pa on that £500,000 home. Would they dare, I wonder, even if they removed Stamp Duty (which only applies on purchases)?
Meantime, it seems Mrs Reeves has been reading our missives… the threat of a Bank windfall tax is rearing its head again after the impressive recovery in banks’ prospects and share prices… we’ve been trimming our exposures with the latest sales the day before the news broke when collectively they suffered the biggest one-day drop for some time…
Gold is now a bigger central bank reserve internationally than US Bonds – an interesting situation and having fuelled demand for the yellow metal, helping to account for the highest ever prices. Despotic nations (or ones which might become thus) don’t want to hold assets which they may not be able to access should the ‘world’ go against them – a sad portent for mature and collaborative international relations. Labour’s Gordon Brown sold a big chunk of ours for c$300 an ounce – the price is now almost 12 times that. The concept then was that gold wouldn’t ever be a reserve currency as we had become more sophisticated and societally advanced than that. (I did write to him and suggested he was being unwise – only to receive a trait letter to that end!)
Silver has been out-performing gold however but the contrarian in me believes that each is becoming somewhat over-priced as neither was ever so cheap in the first place. We’ve had silver as a core defensive asset for some years now and are not complaining, especially as safe government bonds have been dire.
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 for clients 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 which should have arrived and invitations to all participating investment clients and friends to join us at Trimstone for our big day on 20 September. There’s food, a cornucopia of entertainment, music, fireworks, we’ll all 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
If you haven’t replied yet, please don’t delay as time is becoming tight!
Good news/bad news
Costain announced reduced sales’ figures and the shares slumped 17% – frustrating, as dividend and net profit were higher but the market is impatient about results which allegedly will show a step-change ‘next year’. We shall watch developments – we had trimmed but not enough!
Conversely, tiddler Carclo rises 16% as the shares return to the market from suspension after the results are announced and the Pension Fund deficit is clarified properly. Still good value and much recovery of the past to go – many investors will be pleased and some recovering lost ground which all helps!
Just general comments but the natural gas price has been declining significantly but no one seems to be talking about it. The problem of course is that we are hardly benefiting at all, primarily because we are turning-off gas consumption:- https://tradingeconomics.com/commodity/natural-gas
What irks is that instead, our energy prices are rising this autumn, yet again. In Spain they have an oversupply of energy from solar when the sun is shining so prices fall but of course, that isn’t sustainable out of season in the same way.
What else might you not have seen? Did you know the global butter price has been rocketing? The Butter Price Index has risen to an all-time peak and I am not really sure ‘why’. Demand outstrips supply and from the trough in 2000, the index is up some 150%. Where are you Mum… she used to make her own butter from the excess ‘going-over’ cream which our house cow used to generate… a recent $7,200 per tonne was 54% above the figures two years ago, albeit slightly less than May levels. Why? Part of the ‘why’ is the decline in milk herds, with growth in the leading areas (the EU, the US, New Zealand, Argentina and Australia) predicted to be a mere 0.5% this year. Cream and the reduction in low-fat diets are also impacting, as is the explosion in demand for whey protein, a cheese waste product so more cheese is being made instead.
Following the theme, what about rice prices? The Thai 5% ‘broken rice’ price has plunged by over 40% since 2024 and to the lowest levels for eight years on a record harvest there and in Vietnam, the removal of India’s export ban and purchases by Indonesia and the Philippines (protecting their domestic markets). Draw any conclusions you may about our inflation and prospective investment opportunities as well! At least this means cheaper prices for many poor in the world too.
House prices
Interesting things are happening in New Zealand with residential property prices – is it a portent of what could happen here? The Guardian notes:- New Zealand’s house prices are finally falling. Could this happen elsewhere?
Drops of nearly 20% or 30% in one year for Auckland and Wellington respectively are not minor declines, especially if you were one of those buying at the peak. I’m still old enough to remember the times of ‘negative equity’ and owners passing the keys-back to lenders to try to escape the debt…
There are already enough issues here which could be a depressant for over-priced UK homes, exacerbated by CGT on our homes and National Insurance on rents perhaps. The primary issue is that they are not cheap to begin so the degree of decline could be significant. Owners need to remember too that typically when things become negative, even selling at any price can become a major issue and you still have to pay the costs to keep them.
The Dotcom Bubble on steroids
This is how a US fund manager has described the AI revolution – or at least the elevated ‘valuations’ on shares with some connection to the technology. It’s impossible to disagree; his Company, GQG Partners’ fund performance has been ‘disappointing’ of late apparently but at least our concerns and negativity at elevated valuations have not generated the same disillusionment and performance issues – Portfolio & Benchmark Returns July 2025
The primary general concerns we’ve shared many times are the dominance of so few stocks to the whole US index (and the world) and the historically high valuation levels – as well as historically low levels of volatility. What will trigger a major upset over there? Rising US debt levels and the costs of financing it – the UK is in the same boat and as 25% of our government debt is ‘index-linked’, as inflation rises, so too does the cost of the Country’s exploding national debt, even if cheaper than long-dated gilts (eg 30-year debt at over 5.6%pa).
For naïve investors, over here what so many do not understand is that so much of their money in ISAs, their pensions (including employer schemes) can all be concentrated in just the same places, especially as UK institutions’ exposure to the UK is so low and the US so high (representing over c70% of all shares).
Bill Bonner in Moneyweek puts it more plainly. He refers to the $60trillion total value of US stocks presently and suggests that when the bubble bursts, we could see half of that evaporate. As noted above, investors in other areas would be significantly better-protected but it would be naïve to envisage that there would not be some repercussions, whatever you hold.
Green investing
I mentioned some while ago how atrocious the returns had been on ‘clean energy funds’ after the excessive hype especially at the peaks of euphoria in 2020-2022 – S&P Global Clean Energy Transition Index
I shan’t repeat that here though as ever, an honourable concept was oversold, overbought and wholly inadequately understood by many but investors have lost significantly since the peaks in general terms. What I hate most is retail investors (and institutions led by the same types of people) being abused for profit from those who gained handsomely by their investment.
Anyway, having shares in the largest builder and operator of wind farms in the world, Ofsted, would’ve fit that bill. Indeed, their shares were chased up to almost DKr1,400 in 2020 and earlier this month slumped 30% as it had to ask the market for more money. The shares are now DKr198, a loss of approaching 90%. It’s not all about money but Shell shares in the same period have risen by 177% as well as paying handsome dividends, a sobering comparison.
Maxims – being a better investor – from the ‘Basil of Barnstaple’
5. If you invest in a balanced portfolio for value, you will receive a good level of income from the components. That income will repeat, till the cows come home and regardless of what the capital values do from one day to the next.
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
