| Well it’s been better news on the markets these last few weeks, following the dismal conditions up till then. There is some dreadfully attractive value out there though. However, for the UK and underpinning our mantra regarding ‘natural sustainable income’ from your investments, dividends are holding-up really well. There were some large one-off payments last year, but more of the small number which deferred them during Covid has resumed them too. Year-on-year dividend payments for the quarter are 38% higher than last year according to Link Group, boosted by a weak Pound recently, too. This is the second largest quarterly figure ever, fuelled by miners, energy companies and banks, of which we have an excess. Over the last few weeks too, from Banks to energy producers and just general companies, dividends have been ratcheted-up on many of our holdings – which is all good news. Natural income, expensive homes and farewell Neighbours Remember, if say a company is delivering 10p a share in dividends and its shares are £2, then if short-term sentiment sees the shares halve to £1, then the 10p dividend is still the same. What that means is that if you buy, you buy twice the income for the same money and that’s the level at which you lock-in going forwards – all other things being equal of course. So, now’s not a bad time to buy a basket of income-paying, value shares as you achieve a great income from them and one which will rise over the years too. We are here to do that for you, of course! The other benefit of a good natural income is that if you need it to pay the bills, it will continue regardless of short-term shenanigans on the markets too, so you can weather any storm, safe in the knowledge that the income is unrelated to what’s happening to the daily capital movements. It’s only when you start spending the ‘bricks’ (rather than the ‘rental’) does it become a problem if the value of the ‘house’ doesn’t keep increasing as you’re then spending the capital. Our ‘balanced’ strategies can still project an anticipated annual income of circa 3.5%pa. That’s without detriment to the capital doing its job and our expectation of an increase in that income over time too. Some pay nothing and are there for capital gains and some pay income into double figures but that is the overall balance for a sensible term investor. And what about Recession? The US has just fallen into that – we are safe for a couple of quarters at least but the winter could be sticky. China is predicting a 30% drop in residential property prices this year and not only that, but builders have stopped building and sales have plummeted – how would that fare in the UK? Sales, from what I hear, have really slowed recently. That’s what people forget in a downturn in property – it’s not what you may be paid for your house but that you can’t sell and still have to fund the thing (and interest rates are higher on your debt). Imagine being the owner of the £10million Croyde home (pictured above too) and no doubt with financing north of 10%pa… it only wants one billionaire but meantime, interest may be £3,000 a day…I shan’t be buying it but for lots of reasons. Lighthouse from saddest ever Grand Designs episode is now on sale for £10 million Well, enjoy the rest of your summer; Helen was distraught at the ending of ‘Neighbours’ which started on 18 March 1985 (1 October 1986 for the UK). However, rest assured, later this year that means we shall have been in business for longer than Neighbours, so clearly we have more staying power – and we plan to be around a long time more yet! The cynic in me thinks it’s just an opportunity for them to rebase actors’ contracts and then a big relaunch – the publicity has been brilliant… maybe that’s why Vardy and Rooney were prepared to lose £3million over a silly defamation spat… the publicity to now sell themselves will yield even more money for them.  Reputation In business it is interesting in that you assume that how or what you do is what all the rest are like and aspire to do too. The reality, of course, is that that is not true. The same goes for knowledge as well and we find this especially in the world of investment management where sadly too many advisers out there are ‘product salesmen’ rather than ‘investment managers’ for example and I am not trying to be unkind to anyone. Yes, there is a role but the depth of understanding about what may be happening to the markets, commodities, inflation, interest rates, currencies and properties is not what most investors entrusting their capital to these people believe. Then there are the nuances (the opportunities) in the Investment Trust market versus the most-peddled unitised funds held by most investors (not our clients). Do they understand why the average closed-end vehicle (eg Investment Trusts) will always out-perform their unitised brethren over a sensible period? It makes no difference to us what we hold for clients (aside from buying the optimum thing for that part of clients’ accounts) but the significance is that we can hold anything – most advisers have very restricted platforms and cannot even include things where we may see some of the best value for example. (Some direct investors with Hargreaves Lansdown, A J Bell or Halifax iWeb don’t realise there are loads of things they can’t buy either). No one can be perfect but it doesn’t harm to aspire for that! Our mantra has always been that however well you do something, you must always be open to trying to do it better in the future. We are also always learning – something which might be on my gravestone! However, it was humbling last week when a competitor financial adviser from Barnstaple said to me: “…a very well established company as yours. I have heard great things from the North Devon community about your ethics and client management.” So well done to our whole Team! However, it does remind us of what too many in the rest of the industry don’t do – especially when the FCA brings-in a new series of regulations for the financial services’ profession about ‘Consumer duties’ to put the customer first. When we read this (like when it brought-in ‘Treating Customers fairly’) our immediate reaction is ‘don’t firms operate like that anyway’? How about yours, if you are not with us?  Business Awards We were delighted to be the lead sponsor of the North Devon Business Awards again and the celebration was held at Ilfracombe’s Landmark Theatre with 175 guests. The overall winner was a great little company with an international reach providing safe anaesthesia and respiratory equipment for use in locations or situations with limited or no infrastructure, so that means often the developing world. I am pictured here presenting the North Devon Business of the Year Award 2022 to Robert Neighbour, managing director of Diamedica UK Ltd. There were 114 entries across a vast range of business types and all of them are winners in reality and we wish them the very best on their journeys. Congratulations too to our very own James Sanders-Elliott whose secondary business SWC Builders Ltd had entered and deserved to have won! His firm has done several excellent jobs for us already.  Sickly Brits – the sick man of Europe There seems to be a malaise in the Country, from train drivers on £60,000 out on strike (and forcing computerised replacements of their roles the more expensive they become) to vast numbers of job vacancies and too many not wanting to fill them. Curiously, after Covid, most other countries’ work statistics have returned to pre-Covid levels but here, the numbers on Universal Credit are still 1million higher than before and the workforce is still significantly lower as more are claiming an inability to work. The UK is the World’s only developed country where the share of working-age people outside the labour force has kept rising after the Pandemic shocks. Are we able to say that it is because many are affluent enough to retire and not work or, courting controversy but intended to be a simple economic fact, that the well-intended Benefit system is too generous and encourages the outcome this fact suggests? Is it really true that 7.2million households ‘need’ benefits as that’s the number which has had the Winter Fuel grant? That is over a quarter of households, as if that in itself then becomes the populist idyll, to pay that proportion of our Society regardless of whether they ‘need’ the money or based upon their living and spending patterns, prudent or feckless. (And yes, it is noted that a goodly portion on benefits includes those at work of course).  Made.com Perhaps the epitome of the affluent spending bubble created by Covid lockdown and the inability to spend has ended for the trendy but expensive consumer durable world. Not only are we told that Walmart has $60billion of unsold stock in things which people aren’t buying like they were in their frenzy and even local art galleries are feeling the pinch but companies like Made.com which floated at a very good time, has seen its shares slump from £2 to mere coppers in just over that year. That’s an unpleasant inauguration for it and I fear it may not survive – though it has a big sale… and the items are just ‘dear’ now rather than ‘very expensive’ could the cynic say! Being the spending Philistine I am, I had never heard of it till I saw its recent share price results…  How well-off do you feel? It is fascinating (but perhaps not unexpected by those of us who have studied this in the past and considered ‘need psychology’, etc) but most people don’t consider they are ‘well-off’ compared to others. This is the survey for you:- https://www.newstatesman.com/society/2022/07/60-per-cent-brits-average-income Perhaps as a Society we all need to do more work (regardless of where we are ‘at’) in terms of being content and appreciative for what we have (and it’s not all down to our income or capital either!). Then the mind-set of our Country would change and expectations and general satisfaction would change maybe…  Coincidences Coincidences are simply two unrelated things which happen to coincide. I am not a fatalist. However, this one takes the biscuit! Enjoy! On Friday afternoon I had a call from brokers to GRIT Plc – a tiny asset we own – Global Resources Investment Trust. A loan conversion was due to complete but has to be deferred a short while for paperwork. An email appeared at 2.23pm requesting a signature and explaining this. Shortly after, I receive another call from another broker but this time regarding GRIT (Real Estate Investment Trust Plc) – a much more meaningful asset we own and nothing to do with the other GRIT! At 2.26pm an email arrived noting there has needed to be a short postponement to a significant corporate action for the Company. And no, such corporate activities themselves are generally very rare and no, I don’t receive calls about them either as we are not usually that engaged! Not a tip as I am not allowed to do such things, but each has fantastic opportunity for advancement from present low levels but for totally different reasons. 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 |
Natural income, expensive homes and farewell Neighbours
