| So what on earth did Barclays do… It sold $15billion more of an investment product than the US SEC had authorised. So it had to cancel some and as a consequence, it cost the Bank £450million. Not unsurprisingly, but the share price has been hit and confidence shattered – who on earth was monitoring this? It does make one wonder though if a bank can’t manage its own books how on earth can it manage the books and investments for its clients – I’d have lost confidence by now. Sadly, yes, we have some shares and we have been buying more now they have fallen (and over-reacted all the same). They’re still well up on their 2020 low, so we’re doing fine, but dropping 35% from their January peak is unwelcome all the same. Then inflation surges to a 30-year high at 7% (be grateful we are not in the US which is at 8.5%). What are you doing about your cash capital? Its real value is dropping as a consequence. Then inflation surges to a 30-year high at 7% (be grateful we are not in the US at 8.5%). What are you doing about your cash capital? Its real value is dropping as a consequence. Still, in a year several costs affecting inflation (eg energy prices) will be lower and that has a beneficial impact to counter the current spikes. That will work but whether ‘other things’ will by then be rising in reaction to increasing input costs… Stagflation here we come. Central banks still expect inflation to settle not far above 2%pa and are not increasing interest rates by as much as they otherwise might have done – for now anyway. They and ‘leading economists’ were wrong on short-term productions and could be wrong here too. Contrarily I called this spike (simply by monitoring commodity prices amongst other factors and the explosion in cash and credit) so I can’t be a ‘leading economist’ clearly! Passion I apologised to a new client for talking too much about the enthusiasm we have for some technical trading opportunities with closed-ended, quoted funds and how we can use them to boost returns for clients, unrelated to what the underlying markets do themselves. He replied, humbling me… “Please don’t ever apologise for being an enthusiast! Apart from the fact that that is what got you where you are, it is such a change from the negativity we see too much of.” Thank you AC, you are very kind!  Big companies So few fund management groups now control the vast majority of the world’s investment money, it causes problems (for them) which have never arisen before. It also causes constraints to every investor and things of which we all need to be aware. For example, it is suggested that as many as two-thirds of the UK’s FTSE100 companies have too little daily trading in their shares to satisfy these entities’ compliance departments and thus to be eligible for them to hold except ‘passively’. This is ludicrous and exaggerates the ‘Ponzi Scheme’ effect of most of the money chasing the same expensive stuff ever upwards until one day the bubble bursts and then it’s a very long way down for them. We are also told that in the UK, most groups won’t hold quoted Investment Trusts with market values under £200million. In each instance they worry that they can’t buy enough easily and thus they can’t sell easily either. So, for ‘them’ it is a constraint and for us – an even better opportunity of great value for clients as we can buy and hold things they won’t. I have shared before that this means we have to work harder in purchases and disposals sometimes but that’s our job (and some could say it should be theirs too). At some point this ‘trend’ will reverse as the better value in things other than the ‘biggest’ will be so obvious (we think it is already) they will want slices of it – we are ready! However, there are plenty of unloved, big and boring companies which throw-off big dividends too, so it’s not all one-sided!  Death We all die. Some leave their affairs in an organised state but most don’t and some are in an atrocious mess, causing big trouble and stress for nearest and dearest and if the wrong sort of professional executor is engaged (one without lots of investment experience), it can cost an arm and a leg to sort what are simple things not worth much either. We are seeing more and more enquiries about deceased people’s shares. They can be odd certificates which beneficiaries or executors must sell but what a minefield that is! Yes, we can sell shares but the person giving instructions has to make sure the certificates are valid, that they have all of them and that the right reregistration (if necessary) is done already. Otherwise, if you issue an instruction when the paperwork is wrong, the market demands delivery and if you can’t it will buy-back your faulty disposal and charge you the earth for the privilege! If certificates are missing, indemnities can also cost a fortune. As financial advisers, with clients and new enquirers, we are thorough and note it’s best tidying-up random holdings, not only making life easier but to avoid these sorts of problems on death. (Cynically, too many advisers only want to deal with the chunky things which pay them lots). Our clients’ families only need to tell us of a death and that’s it – all the holdings are with an independent, secure nominee already and we are there to help with the processes, without extra cost – and sale is easy. Yes, we also offer a compassionate, cost-effective professional service for attending to Estates and Probate as well.  The investment cost of green wokeism Before I am strung-up, yes we must indeed do more to help our planet, including insulation, energy efficiency and cuts in carbon emissions, especially via fossil fuels. However, political pressure (with both a small ‘p’ and a large one) and often fuelled by naivety and box-ticking rather than actual benefit, have cost investors billions since ‘ESG’ has taken to the fore. ‘It’ has been overdone with investments. Many quoted companies have dumped ‘dirty’ subsidiaries to help attain the smiley faces of compliance with green ‘targets’, which are often meaningless as such actions are artificial and don’t achieve anything. Take one case – Anglo American the global mining giant. In June 2021, at about the height of the pressures upon companies by placard-waving activists, politicians and institutional shareholders threatening to disinvest if they didn’t conform, it spun-off one of its dirtiest subsidiaries – Thungela Resources Ltd, which digs and sells coal to power stations. So of course, there were few big buyers of the shares and those pious shareholders who were allocated them could sell them immediately and be wet all the way to the bank with their tiny cheques. The shares started trading at around £1.11. Guess what? Since then, so in 10 months, they have been up to £13.69 – 12 times the float price. Yes, the sector – dirty energy – has been the investment case to buy but even without that, Thungela has been producing enough profit to buy all of its shares (the whole company!) in one year if it had wanted to do so. So the company was valued at £150million and since has been valued at £1.8billion. That shows the sort of extreme loss which big multinationals could have suffered by ticking boxes and funnily enough, the dirty bits are still doing what they were doing because they don’t have to satisfy the excessive extent of pious ‘ethical’ investment criteria (and are owned by less discerning investors and regimes, sadly). What’s frightening however, is that even unfettered, contrarian investment houses such as ourselves have to also be very wary about what we buy because there is this inert or specific pressure upon us too, so no, we don’t have any in portfolios – however good the value represented at the time – was that wrong…? And then on a different tangent but to think of the people who speculate on wholly imaginary assets called ‘crypto currencies’ when there were exciting opportunities with real assets, real companies, like Thungela… (and there always are on the markets!). How many of you remember when I encouraged people to buy Anglo as they fell like a stone all way down to £2.26 in 2016… they have been north of £41.70 and with chunky dividends to boot.  Women I read in ‘Portfolio Adviser’ a woman fund manager saying things which some might suggest are sexist, such as ‘women need to understand that ‘risk’ isn’t a dirty word’ and ‘women at the start of their investment journey can hold a lot of cash and with inflation growing, that’s a bad thing.’ I suppose the lesson for us as advisers is ‘education’ – not said in a patronising way but helping to illuminate why it is imperative to take guidance and then to take wise action. That goes for the inexperienced of any gender and any age. For those whom we have the privilege to call our clients, we think we do and have done a pretty good job overall!  St James’ Place Oh dear, in the news for the wrong reasons again… this time its marketing leads’ team was encouraged to lie to entice wealthy people to join them. It really is not good. I am sorry but as a staunchly independent and ethical financial adviser and investment manager and not a very, very expensive, restricted one like SJP, this challenges the underlying integrity of the whole operation. My time in a cold-calling factory for SJP partners where we were told to lie This is what Citywire has said: SJP has a long history of a sales culture which stretches back to Allied Dunbar, which some of its founders were architects of. In recent years the FTSE 100 wealth management giant has tried to shake off this reputation, and in 2019 banned overseas trips, including cruises, which were used as perks for its partners bringing in the most revenue. However, our exposé shows some SJP partners were, until recently, using a cold-calling lead generator that employed high-pressure sales tactics, with leaderboards and commission. What is more, these student cold callers were instructed to lie and use a disingenuous sales script to book appointments for some SJP partners. For the UK’s biggest wealth manager to have its name being used by such a cold calling operation is astonishing. This is also not the first time some SJP partners have used unregulated introducers to get client leads – we have reported on other examples with online lead generators. At the very least, SJP should launch an internal inquiry to find out which partners were using Barnaby Beckett for client leads and put an end to them using such old-school services.  Value investing I have said before and I’ll say it again… one of the free benefits of traditional ‘Value Investing’ is that if Mr Market doesn’t begin to reflect the true underlying value of a company, then more often than not, a corporate predator will – and bid for the lot. We have enjoyed many such events these last few years and the latest is Ted Baker, which has offered itself for sale. Sadly (greedily?) we don’t have very many and had only just started buying them when they fell below £1. In 2015 they were the equivalent of £35.55! Even in May last year they hit £2.12. It’s a conundrum when we add the latest opportunity… do we sell something else to raise more money so we can pursue our latest hot possibilities or wait and slowly build our stake? Certainly we didn’t expect a bid right after we added them to the list but there we are. So a few fortunate (mainly new) clients will have enjoyed a near 100% gain since February as we had lots of cash to invest for them… sorry if you aren’t – it’s just the way the cookie crumbles sometimes. However, don’t fret, as most of our albeit more minor direct share exposures (compared to our much bigger collective Trusts) could become ‘victims’, opportunity in there for free! 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 |
Shocking decisions, market musings and some passion
