Dear Friend

Before anything else, let me wish you a Happy New Year. I shall also be brave and wish you a prosperous 2019. However, I can do so in expectancy and from two simple bases. The first is that there has been so much uncertainty, especially in regard to the UK and what Brexit will bring, good or bad, that it is in ‘prices’ already and secondly, following the attack primarily on value stocks, prices in so many areas are so good that the mathematical probability is now weighed in favour of upside as little or no ‘good news’ is priced into things at all.

BREXIT UPDATE – ANYTHING NEW AFFECTING YOUR MONEY & INVESTMENTS?

We continue to be buffeted from the head winds surrounding the uncertainties abounding and indeed ahead. It looks more likely now that actually, Theresa May will secure support for her deal and a realisation that if there are things we don’t like through the other side then, do you know what, we’ll sit down and talk about them. The crucial difference will be that those conversations will be taking place from outside of the EU. I do not say that from ‘glee’ or ‘resignation’ but simply stating that the greatest ’uncertain’ will have become a ‘certain’ and as resolute human beings, it is amazing how strong we are to adapt and work constructively and progressively with whatever new set of criteria affects us. One likelihood then is that Sterling will have fewer reasons to be as weak as it has been and the market, especially affecting UK-centric stocks which have been so blitzed, could rebound very strongly indeed. Remember too the FTSE100 is lower now than when these present levels were first seen in 1999!

There is much angst ‘out there’ at the moment but one curious indicator confounds all that – in the three months to November, one in forty people changed jobs, primarily of their own volition. That is one of the biggest employment turnarounds since the records have been kept. The relevance here is that people are leaving secure, job-legislation protected positions, to take on new jobs which start their records from scratch and without any job security for two years. Whilst inevitably some will be for greener grass which certainly proves not so green when they arrive, it reflects a confidence they are feeling that Brexit will not upset their work expectations and their sense of security for themselves and their families. This may also be a factor in the increasing wage levels being reported now too (expected to be around 3.5% for 2019 as well) – above inflation although it is suspected that in due time, wage costs themselves will start to push-up prices of goods and services again.

Interestingly too, credit card spending year-on-year is also up – November’s 7.5% higher than the previous year. Even after allowing for spending trend changes (eg contactless over cash), this also doesn’t reflect a consumer population expressing negativity about its future.

THE MARKETS

Well, what can be said? Rather than a Santa rally, the markets have been torrid and Wall Street will have threatened to have had the worst December since 1931, the great crash heralding the Depression. Within the month, it fell by significant daily amounts as well as rallying on one of the lowest volume trading days of the year too to rise by the most points ever seen on one day. This volatility is not especially helpful, it has to be said, as it confuses investors in terms of the difference between short-term speculation and risk-taking and long-term investment in real assets.

2018 has not taken many prisoners. To have preserved the value of your money was nigh impossible during the calendar year, with only a few assets coming anywhere close. Gold pipped-upwards over the last six months but still down on last January’s level (but being priced in US Dollars gave a boost to UK holders too), cash and some currencies and a few share sectors, from global pharmaceuticals to utilities and German Bunds. Yes, we too have lost overall as ‘balanced’ portfolios suffered losses and not having enough of the compensating things to cover for the declines. Of course we have had some things which give the appearance of not having noticed any problems at all including, fortunately, several of our biggest holdings but also the occasional stock which has been badly impacted by some unrelated event or sentiment. We’re still licking our wounds in some areas though and looking at what has caused the declines, not resting on any laurels from the odd improvement. Do we sell at a loss? Do we hold or buy more when it falls so much? These are the crucial questions, the hardest of decisions and the ones where keeping your cool is imperative as panicking is no solution for anyone and neither is an automaton-type approach. The discipline of ‘balance’ has proven invaluable (as it always should) even if some of the enemies are quiet predators which erode values over a lengthier time – like inflation for example. We were there at the forefront warning people about the crypto-currency scam (Bitcoin et al) and haven’t suffered at all from the implosion in prices of things like crude oil (though affecting oil companies of course) but even that is now reaching a price level where it is worth buying as a defensive asset again – $40 a barrel is too cheap, $80 is too expensive, all things considered for now.

All we can say, even taking Brexit uncertainties to one side, is that there are too many real bargains out there at the moment. Indeed, the forward dividend yield on the whole FTSE100 is now just under 5% – a figure rarely seen in the last thirty years; throw £1000 at the stockmarket and expect 5% income in the first year (and regular increases thereafter too) from the dividends paid by real companies making real profits from trading with you and me day-in, day-out, come rain or shine, Brexit or not. Don’t forget that and don’t panic react in the short-term to others’ selling and their pushing of prices down erratically and irrationally.

OUT ON A LIMB

Yes, I am going out on a limb now. I am prepared to call the market and say that there are significant areas which are far too cheap and which represent generational opportunities. This isn’t the ‘eternal optimist’s dream’ but a realist having continued to analyse the data and confidence out there in the real world. If you have cash spare or have been holding-back, don’t wait to commit it – buy when things are at their apparent darkest as that is when the best value is seen. And if you don’t have the confidence to do it all at once, do it in phases – we can take direct debits into all accounts for example so you drip-feed into investments.

MARTIN LEWIS – YOUNG MONEY

I have mentioned before the donation Martin Lewis has made so that a free textbook and guide has been sent to every school. The book on educating youngsters on finance can be downloaded too – may I suggest that you consider making this available to someone you know? It is without charge and is a great guide to some of the basics of money and financial planning. And don’t be shy – really there is no age limit to learning some of the basics too! It’s available on:- https://www.moneysavingexpert.com/news/2018/11/financial-education-textbooks-funded-by-martin-land-in-english-s/

PENSION OPT-OUTS

Amazingly, over the last three years 250,000 NHS staff have opted-out of one of the most generous pension schemes in existence, amounting to 16% of active membership in the scheme. Now, should we be pleased that the Country is saving a colossal sum as the State pays the biggest proportion of all salary-related public sector pensions or really, as a financial adviser, should I wonder what on earth is going on and what sort of advice and guidance are these staff receiving? I have to say that in some regards the old rule was best – no choice, no opt-out and remember too that many of the employees now work for contract companies so this is simply the ‘pure’ NHS staff. https://www.financialplanningtoday.co.uk/index.php?option=com_k2&view=item&id=9662:250-000-nhs-workers-opt-out-of-pension-scheme&Itemid=468&utm_source=newsletter_1489&utm_medium=email&utm_campaign=nearly-10m-in-auto-enrolment-6-in-10-cut-spending-in-2018-selected-job-vacancies I am fearful that it is ignorance of the cost, the benefits and indeed how the scheme can work within other forms of life insurance and pension/financial provision. I am not surprised too if all the negativity within the media works to demoralise the staff, especially the lower paid, who begin to believe all the public’s negativity stories and feel it is easier to cut commitment to their own futures. Do they not realise that even for a short service record the benefits are immense and are retained or available for assimilation within another State job or to pick-up again in some distant date when the reward will be based upon a future pay level? It could be right for high earners who have hit limits but most opting out are aged between twenty-six and thirty-five apparently and before someone says ‘it is because they can’t afford it’ – remember that there are now over 10million people in auto-enrolment pensions and the drop-out rate is remarkably low, meaning that those members have found the funds to remain contributors. Perhaps it is because they have not afforded the time to seek uncompromised advice on their overall financial position.

MONEY LAUNDERING

Contrary to what some have suggested, the UK is at the forefront of the global fight against money laundering. Typically we have been the ones pushing – including within the EU where the somewhat more lax traditions of certain Wine-belt and Eastern Bloc countries have given certain reluctance to be so forward.

The UK has just been given the world’s top award for action against Money Laundering by the Financial Action Task Force which sets global standards against financial crime. The UK secured 8 out of 11, cementing better assessments than Switzerland and the US. This follows the very first Court order to seize assets of suspicious origin and has looked again at the so-called ‘Golden Visa’ scheme.

All that said, much, much more needs to be done and some high-level individual criminal prosecutions of those individuals failing to report suspicious activities, from car dealers to estate agents, solicitors, accountants and yes, financial advisers. Top-end London property could also benefit from some historic checks into the source of funds, perhaps back to when the rules were introduced in 2004 and if the EU really means business it would impose the same requirement across the EU too. If you have nothing to hide, then there is nothing about which to worry, is there.

To remind you, why do I send out occasional emails? Because everyone can save money. We have no connection with any companies mentioned and you have to make your own contacts and satisfy your own enquiries. What is in it for us? If we can prove that we are knowledgeable and that our service and advice have good value, then you might contact us for professional financial planning and investment help. You don’t have to do that though and there’s no charge for emails. If simply they save you money, then accept them with our compliments! However, you’ll know where we are!

If you have any queries of any form or indeed any subjects you think I could include, please contact me. I also refer you to our website www.miltonpj.net. We celebrated our thirtieth anniversary in 2015 and have been publishing a well-respected independent column in the local Paper for most of that time and free client newsletters as well.

Do not forget however the usual caveats – this is not ‘advice’ and you are encouraged to seek that before embarking upon any financial route involving investments, etc.

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