It’s been good to see some economic growth with an unexpected 0.3% figure in November. Services and production rose and construction fell. The results at least counter some of the previous slippage but won’t be giving a great annualised figure regardless – but all helping.
Likewise, whilst we read a colossal 700,000 graduates are unemployed, since last February the numbers ‘economically inactive’ have fallen so we hope that means more generally are working! The drop in this number is over one million.
However, a nasty increase in inflation to 3.4% is not what the Chancellor wanted to see, even if it was not unexpected after the tax rises mean being passed-on in prices charged – and we haven’t even had the Minimum Wage increases in the system yet. Likewise, a small drop in the monthly borrowing for December sounds good but it is still a colossal £140billion since 5 April.
And as for silver… it has pipped $120 an ounce – ridiculous! We know gold and silver are peaky and due for a serious correction because all the investment adverts and scammers are out there pushing these as ‘great investments’ and dinner party and pub talk is all about buying. Remember, gold has doubled since only March 2024 and in the same time, silver has risen almost sevenfold.
We are ‘value’ investors and were buying the metal and the sector (miners etc) for years before the trend moved and as ever, it is the future and not the past which needs to drive your investing. We’re trimming already and have trimmed some far too soon (to a total clearance at some point but riding the froth meantime) and redeploying the money to prospects for tomorrow’s ‘silver’, typically unloved sectors (there aren’t so many today but there are a ’few’).
You also know there’s speculative fervour when central banks start withdrawing their silver coins for sale as the prices aren’t keeping-up with the increases in the value of the metal in them. When did that last happen! It’s a little different to the withdrawal of low value coins because the metal to make them costs more than the coin is worth, isn’t it.
Generally however, commodities are on a run – not universally but with some significant gains in most, from natural gas (from serious lows) but also metals. This will push-up inflation… I don’t believe the Chancellor is watching. It will feed-through to increases in input costs of products we buy (the ‘cost of living’).
Inadvertent investments
Occasionally, you ‘inherit’ some investments which necessarily you might not have acquired but they come your way and you have to assess them and make a decision as to whether you hold them or sell them to place the capital in things you ‘do’ want.
Sometimes, these things can prove to not be rewarding and they should be sold soon after they arrive (taxes considered sometimes too) but occasionally they add something to the radar encouraging a decision to retain them. Over the last couple of years, we had one gold miner and one esoteric, commodity Investment Trust and both came to an end, the first by a takeover by a much bigger miner where we were given shares in it and the latter, where the largest holding was distributed to shareholders in the closing-down process.
I am afraid we sold the former too soon, albeit in stages as the price kept rising but for the latter, a big gold miner now, we still own most and it has enjoyed an almost six-fold gain since the split was announced in October 2023. It fell back initially but we held-on, after researching and agreeing with the fundamentals. If only that Trust had continued, it would have been the best performing of all trusts now! Any regrets? Just the usual one… first that we should have added this miner to other strategies and kept-on buying but as ever, is that just being greedy! So well done clients if you are one of the fortunate to have held some of that, well done on your necessary patience as well!
It reminds me of another personal asset I held, back in the Dot.com bubble – a rather speculative remnant from a tiny, historic ‘Business Expansion Scheme’ investment for tax purposes which had been all but written-off. However, a financial services’ firm decided to reverse into it and it raised new money to resurrect it.
Unbeknown to me, it had connections with many smaller, paper dot.com entities which were floating and raising millions from speculators for loss-making and unproven ideas and as often they didn’t have any money, they paid their fees to the sponsoring financial institution helping them in their shares.
Seymour Pierce shares rocketed as the floated dot.com shares fed the frenzied buyers of anything related to the bubble, before it too collapsed into administration in 2013. I remember the shares going from 4p to well over £1 in a matter of months… and I believe up to c£1.40 at its peak before going all the way back down again. And yes, I did sell a useful chunk at over £1 and bought a small commercial/mixed property which I named after the original company (Talisman House)! Ah yes, much commercial property was dirt cheap then too.
Fishing for compliments – Fisher Investments UK
An interesting report has been published into Fisher Investment’s promotions and prolific advertising suggesting ‘their claims don’t tell the whole story’. Fisher Investments UK: Why the TV ads don’t tell the whole story
The firm, which is restricted and not independent like we are, seems effectively to just sell its own products and of those and the £15billion it manages for UK investors, it seems most clients are all stuffed into just the one fund – the Purisima Global Total Return Fund – and it’s hardly cheap in costs.
Just one fund, one fund house’s views? How can that possibly be the right thing for anyone? Maybe if you only have a small sum it ‘doesn’t matter’ but the firm targets the wealthier with glossy advertising, sound-bites and high intensity sales’ techniques. How ‘this’ can cater for claims that the Company treats clients ‘as an individual, tailoring retirement advice that’s just right for you’ leaves something to the imagination. Charges range from 2.25% to join and 1.5%pa in management and advisory fees (our own – and including advisory guidance – are zero and 1.25-1.5%pa). They also charge platform costs whereas ours are inclusive.
The greater concern is the Group’s significant emphasis on the US presently – as well as equities. At some point there will be a turn (US equities have already started to show that, as last year’s results attested). Granted, past results have reflected this emphasis but will the future be more like the outcomes which so many famous fund managers seem to suffer – as Nick Train and Terry Smith investors are now finding and Neil Woodford before them? You answer.
Oil v gold – commodities
Thank you Ruffer for reminding us that today, one ounce of gold can buy almost 80 barrels of oil, a figure only seen recently during the pandemic when oil went into minus territory. So, gold’s too dear and oil too cheap – for investors it suggests (all other geopolitical factors considering) that some oil (companies) is a useful hedge against ‘things’.
HOME REIT
Good news that six individuals have been arrested in regard to corruption and bribery charges at HOME REIT which suffered a disastrous time. Sadly, it shows what can happen when ostensibly an honourable idea falls apart through negligent and inadequate management, however well-intentioned (naïve?) many at the top were in the pursuit of ethical idylls as well.
The Fund raised the best part of £1billion from well-intending investors and borrowed more as well, to buy residential properties (we all know you can’t go wrong there eh!) and letting them to charities and social concerns on long-term leases and which then took-in vulnerable tenants. Of the original £1 investors paid, if a legal action against the Trust is rebutted, investors might see 25p back. It remains sad that a ‘good idea’ was abused and defrauded in this way and where lax controls created the outcome arising.
Unfortunately green energy and infrastructure schemes have also been subject to exploitation and ‘ethical’ investors have found they bought a pup in more instances than really should ever have arisen – sometimes simply because enthusiasm for an idea is too far away from the underlying reality. Some might suggest the UK renewables’ policy is like that now, agreeing long-term prices for electricity which are nigh double what gas-fired power costs…
SJP in trouble
Investors in insurance bonds which may have had some property funds within them have been finding big tax problems upon encashment. In the old days, ‘insurance bonds’ generally were peddled like candy, as sadly the salesman received a fat commission of up to 7% on your investment and far more than ‘better’ and more tax efficient products.
We didn’t like them and are still dissuaded for most people, as they are not as tax efficient or flexible for most investors than other things like ISAs and direct holdings. They are sold with promises of ‘tax-free income’ (but that’s actually only your original investment being paid back to you over 20 years) etc and investors suffer taxes inside as the insurance entities pay that on both gains and income whether you are using your other own personal allowances or not.
However, the SJP problem centres upon the closing ‘property fund’ within the bonds which is suspended pending disposals and winding-up. So, if you are in an SJP bond and encash it, you can only have a partial withdrawal and have to leave the balance. What’s wrong with that, you may say? Well, the problem is that the tax rules are penal and most investors will suffer a colossal liability to Income Tax – often at higher rates, because of how the rules work on partial enchantments and even if you are not making much gain overall or any at all!
These problems can then resonate to executors winding-up estates of deceased loved-ones and so it goes on. I should have thought SJP could have orchestrated some solutions – even buying the properties themselves maybe (just over £400million last year) so the fund could be closed and proceeds liquidated in full, to avert these tax traps.
If people complain, as they should, it will be interesting to see how the Ombudsman decides!
SJP’s property fund closure lands clients with inflated bond tax bills
Rolls Royce Plc
Is continuing the £1.2billion buy back but is that wise at these high share price levels? Couldn’t the money be put to more productive use? The time to have bought-in and cancelled shares was at 35p, not £13+. Is it one to ‘short’ – is that bravery, foolishness or wisdom! (Sounds like gold and silver too!).
Good news/bad news
There have been some good results recently from fund management groups, including Ashmore and Schroders and which have seen their share prices jump (24% and 10% on the day respectively). I did say about the geared opportunity these offer (their profits rise if the assets they manage do and usually sales follow as well).
We increased our exposure to the sector (including Aberdeen, Liontrust and Ninetynine) and aside from Premier Miton, which seems to do all it can to be lacklustre (a shame as a good group but at least we are paid a heady dividend to wait for better things) but if you are not there, have you missed the boat? Fortunately we have far more in the good ‘uns (than Premier) we support…
Scams
The Police have started investigating the ‘79th Group’. Whilst ‘79’ is gold’s atomic number, the ‘investment schemes linked primarily to property are not. It’s simply fraud. The ASA has also ruled against a whisky advertisement too.
Please, why do people listen-to, or invest, in unregulated scams? You don’t need to do it – whether social media scams suggesting some personality is recommending something or crypto currency, whisky investment or property-backed lending. And then if you watched the shaman documentary… BBC Two – The Million Pound Shaman Scam it is pure fraud but why do people subscribe to such ridiculous concepts? Vulnerable people are duped by psychopaths – make a relationship with a trusted independent financial adviser instead and with whom you can talk any time – it may save your life let alone your finances.
Still, at last regulators are acting… even if late to the party there are plenty of other areas where action is imperative and overdue, including holiday lodges, caravans, etc, unregulated peer-to-peer loans and so the list goes on. Forget the possible ‘returns’ but remember the probable risk – all of your money could well disappear. Even if it doesn’t, the absence of any regulatory input will mean that when things go awry, protections don’t exist. Remember, any reputable idea would be regulated to protect those who it wants to participate.
Homes for sale
I was entertained to read Webbers’ appraisal of the residential housing market in North Devon – that a 12-year high in the numbers of houses for sale represented ‘growing seller confidence’.
I fear it is actually the opposite – the glut of ex-holiday homes and buy-to-let owners keen to leave the market, as the regulations and taxes are biting hard (curiously on the latter, some countries are desperately removing restrictions including ‘no fault evictions’ to try to encourage investors to own and rent-out properties again, as there is an even more terrible shortage of rental homes, as a consequence of draconian rules).
House prices remain far too high and holiday homes in once attractive areas… who is going to buy those now the market is turned – and at any price?
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
