Welcome to a new all-time high for the FTSE100. Remember, it’s just a number and it’s the contents which are important and what are powering the underlying indices. Banks have been very strong (Lloyds’ results yesterday saw the shares at their highest since 2009) and now Rolls Royce is a major component too.
Oils are still a large part (though their share prices have been mixed!) and Astra Zeneca and GSK make-up a useful element of the rises. The ‘concentration risk’ in the US is not the same here whatsoever, even if the biggest five count for 35% of the Index’s overall value.
So, Mr Burnham is settling-in and hopefully some more suitable cabinet appointments this time round but of course time will tell. Much has been shared about things upon which more/new spending will be done but nothing much on how that will be funded. That is always worrying and lest we forget – this is still a Labour government.
Darren Jones MP, ex-Treasury, also recognises cutting taxes on energy bills does cut inflation – have I not raised this numerous times, cutting taxes on people’s spending also cuts headline inflation – seriously it’s not rocket science… That said, it starts well, with a welcome drift in inflation to 2.6% on lower fuel prices but these levels are not expected to last (and even the Bank of England says so, keeping interest rates unchanged). The Pound rallied slightly.
That aside, another report on global dividends is positive for share investors – global dividends rose over 10% according to the Janus Henderson Global Dividend and Buyback Index. This is something which those who only invest in cash don’t understand; income levels from a ‘balanced’ portfolio should rise over time because the underlying components progress their businesses, etc. Interest rates are simply that – interest rates and they can fall as easily as rise and inflation can exceed them too so the cash falls in real value.
Meantime, the amount of Inheritance Tax in the three months to June and also Income Tax, National Insurance and Capital Gains Tax were all at records, up approaching 10% on the same period last year.
Good news/bad news
It’s never always good news… Videndum, a true ‘falling knife’ if ever there was one, falls 38% on poorer results than expected – still a profit and the full year expected to be ‘in line’ but that’s a savage reaction. Hopefully the new Chief Executive will transform things – he starts next month. And just as things seemed to be working well, despite a strong and solid set of results with increased sales, profits and dividend, Rentokil surprises the market with limp news about future margins and the shares plunge 21%. Is that simply a case of awful handling of the news (yes) or, with all this hot and dry weather, how is it not rewarding its activities dealing with pests – read into that what you may.
However, one of our recent additions, RIT Capital Partners, has completed its tender offer and we have received an 18% uplift on our clients’ tendered shares, compared to the price before it was announced. I keep harping-on about it but this is a bonus you do not receive if you are using ordinary unitised funds as most investors out there do – probably because they have been told they are ‘cheap’ but what are they receiving on top for their money – nothing! Granted it wasn’t all our shares but a brokerage-free payment is most welcome, thank you. We shall now resume buying more RIT at what is still at a deep discount. Putting this in perspective but the gains we have enjoyed from RIT since first buying far surpass the small additional loss on Videndum noted above – that’s how it works – egg spreading!
And hot on the heels of our last takeover but Pinewood Tech, a relatively recent addition for us, jumps over a third on a bid by Ridgeway. For we ‘value’ investors, at this rate of attrition there won’t be many out there left to select! It might make our job of adding this special, extra value for clients easier but we shall recycle the funds into other under-priced opportunities which may well fall victim to a corporate predator appreciating their opportunity better than the market does. We remain spoilt for choice for clients!
Active V Passive
Seemingly, just as more and more undervalued companies are being taken-out by predators (and at useful premia to their depressed share prices, which is hardly surprising, though the victor is usually doing best out of the deal), more people are buying ‘the index’ because it is there (and dominated by US Tech trillionaire companies).
To us, as ‘value investors’ (there aren’t many of us still around!) it is fantastic hunting territory. It enables us to have feet in the markets like everyone else but it seems almost an assurance there will be extra bonuses from takeovers of these entities, many of which now barely scratch the surface of the passives as they are ‘too small’. Long may it continue for us and our clients though it is sad the Market here, particularly, is shrinking as these unloved corporates are being removed and our investors are receiving bonuses most times.
Readers also know that our biggest concern today is not ‘underperformance’ by not having the same big tech stocks as everyone else (regardless of their ‘valuations’) but the risk that the majority of the investing world out there faces from this US-led concentration on so few companies and all in the same, over-valued space. Most ordinary people out there with other management firms just don’t realise where their money is held or if they do, they are very complacent.
Fundsmith
Have the death knells been sounded for Terry Smith and his Fundsmith empire? He’s changed his views on companies in which he invests and after his performance has lagged and investors have been withdrawing funds, with billions having disappeared. It’s an interesting one – investors love to buy a good story and chase it almost at whatever cost and to some extent ‘it’ can perform initially but as something grows, it is harder to deliver.
Sometimes perhaps the story goes like this. Manager invests £1,000 quietly, makes some good selections (maybe even speculates as there’s little to lose) and sees the assets more than double to £2,500, then again, another year or two and indeed £5,000. Decides he is pretty good so goes to the market and raises money on the back of a 400% gain after say five years. Investors like the story and the personality and subscribe, buying units in the fund at £5 each. So, he raises £1billion on the back of his notoriety and success as everybody wants a piece of his cake.
Then the next two years, the ‘luck’ doesn’t continue, the pot drifts and loses a bit – not much but 5%, so that’s £5,000,000. However, he and his marketing team can still attract new money as he still shows an admirable long-term performance of 395% (but that’s based only on making £4,000 in the first four years)… In fact, he has actually lost far more money for investors than ever he made in the first place… when did you invest, if you still hold it? I am afraid I don’t see any reasons to remain compared to opportunities elsewhere – sorry…
Millionaires’ tax
I see some well-intended millionaires are suggesting they’d be happy paying more tax. Something called the Laffer Curve demonstrates that the majority doesn’t agree with that in that the higher rates go, the less money you collect, as more people are keener to do something to avoid the penal rates being levied – common sense really.
So is this purely a publicity stunt by these well-endowed individuals who are calling themselves ‘patriotic’ (so does that means anyone else not signing isn’t I wonder?). Why do I say that? Because they can pay more tax already and without everyone being subjected to the same terms. So perhaps HMRC should contact these 120 folk, send them this link and ask them to pay now:- https://www.gov.uk/guidance/voluntary-payments-donations-to-government
They could even then use that to tell the Government how much extra it has to spend! Indeed, these folk could then start a campaign to encourage more people to do exactly the same, led by example, as they suggest as many as 75% of millionaires will join them. Indeed, their ‘club’ membership could encourage each to have to sign-up to their ideals and prove their payments; they are also talking about a ‘wealth tax’ (which again is damaging to nations as people don’t like it and leave – and new wealthy spenders and investors decline to come), as well as percentages of their income.
Their mantra suggests their own extreme wealth is ‘sitting idle in the hands of the few’. Making such payments NOW would show they really mean they are ‘proud to pay and here to stay’. For context, in 2025/6 there were a mere 10 donors to HMRC giving a total of £72,250.48, down significantly on 2024/5.
And what has Scotland discovered? If you raise the tax percentage rates, if you are not careful you end-up raising less money for the coffers. Greedy SNP MPs increased the top tax rate to 48% and it has now been shown that doing that has cost the Country between £15-30million because more ‘victims’ have voted with their feet and done more to avoid paying the tax (legitimately). How foolish and a reminder again of the Laffer Curve. It’s pretty much common sense really but try telling that to avowed socialists! The cynic could also wonder how many of those top earners are also working for the public sector and government up there (which is where much of the money is spent in the first place)…
Interestingly, at the same time it has been noted (research by the Adam Smith Institute) that we now have the smallest numbers of millionaires in two decades, with a colossal number fleeing the Country’s high tax charges. Whether it is as much as a 60% decline in the last five years as some are suggesting but clearly regardless, the wealthy have been voting with their feet. Remember, the highest earners pay the biggest proportion of the total Income Tax bill.
What makes this figure even worse is that inflation has been 78% since 2006 (and the population is the highest ever) so it’s easier being a millionaire today too and on top of that, as asset values have rocketed, it is also easier to hit that target yet our total numbers are worse than then and instead we have record numbers drawing colossal welfare.
I also draw you a picture of simple supply, demand and price. If you buy six tomatoes each week and say the price is the same pretty much from one week to another, all is well. However, if the price rose say 25%, you may choose not to buy as many or indeed might skip buying them altogether and will buy a substitute instead so the vendor doesn’t receive 25% more money but actually receives less. If instead the price drops say 25% as a special offer, you many buy more to make tomato soup, so they sell more and have more turnover!
Did some of us issue common sense warnings at the time? Yes. Have we continued to cut off our noses to spite our faces for the socialist idyll? Yes. Shall all of us ‘who are left’ end-up paying more to compensate for what we are not collecting from those wealthy individuals no longer here? Yes. Absolutely there were some serious anomalies (especially with non-resident rules) but the changes went far too far, causing us and our tax coffers great cost, let alone loss of enterprise, investment, initiative, intellectual capability, employment, etc. It seems the main beneficiary has been the US and its economy instead.
Trends
I mentioned before about chasing trends – so is the expectation of bigger spending on ‘defence’ (from the new Chancellor who was in Defence before) a reason to buy the shares of the majors in this sector or not? Are prices up with events and will the new industries in the ‘sector’ do better than the older giants – so maybe fewer warships, submarines and aircraft and more cyber and drones? We have Chemring and Cohort but none of the majors – and a few of the tiddlers with some exposure and which the market hasn’t recognised yet.
What about house builders? Those who followed the Labour win two years ago will be sitting on hefty losses as builders have had a torrid time, so sometimes, with all these things, it is time to ‘feed the ducks’ when they quack and to look for tomorrow’s sectors which the masses haven’t noticed yet.
Again, ‘value’ often plays there – something(s) which are sorely underpriced can simply often be due a significant rerating – all you have to do, perhaps, is be patient! The market suggests Angela Rayner as Housing Minister will be good for building – it didn’t do any good last time but she knows a thing or two about Stamp Duty (and CGT) now so maybe that tax will be revised to boost the sector and the property market!
Nationwide Building Society
Readers will recall my earlier comment here and the Board’s rejection of any challenges when they use the ‘Quick Vote’ etc to defeat them. The independent candidate (which the Board didn’t want so he was not elected, under the same process) is continuing his struggles and would appreciate any nominations so a ‘Special General Meeting’ can be called. It’s a relatively easy process:- Nominate me to stand again in 2027 and if you have an account there, you qualify. This is simply to be nominated.
I wish him well – ‘Quick Votes’ everywhere should be abolished as they are acutely anti-good governance.
Afternoon tea
Invitation to tea! Don’t forget – Cancer affects all of us and our clients, family and friends are the same. Two of our ladies are joining the ‘Breast Cancer Now Afternoon Tea’ appeal to raise money. Pop-in between 1pm and 3pm on 14 August and have a cup of tea. Both have been affected by breast cancer in their families and indeed, so have many of our clients and families across the country, so a very worthy cause
They and other staff and family and friends will be baking cakes for donations from visitors! Well done Sarah and Viv for the initiative!
Butterflies at Trimstone
Do come along to Trimstone Manor next weekend – Saturday and Sunday, 8 and 9 August – as we host cream teas and Open Gardens for the Butterfly Conservation charity.
You may stroll the grounds, enjoy sumptuous cream teas and meet the emus and peacocks! There are plenty of butterflies to spot and you can also see what we have caught in our overnight humane moth traps too (all moths will be released unharmed afterwards!)
We are suggesting an entry donation of £5 and all of it will go to Butterfly Conservation, which carries out crucial work to raise awareness and preserve these delicate insects that are under threat yet form a vital part of our ecosystem and the British countryside. We hope to see you there!
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
