Dear Friend
BREXIT UPDATE – ANYTHING NEW AFFECTING YOUR MONEY & INVESTMENTS?
We wait patiently. Will the EU elections have to take place in the UK? I hope not – meaning that something will have changed by 22 May. I think I say that too with an impatience for some certainty to replace the uncertainty, rather than a judgement on what the outcome should be. However, Sterling has been firmer as it expects some progress so let us hope the currency is right! Meantime, our recent comments about British shares being far too cheap regardless of the outcome have been proven true with marked increases since the end of last year.
MARKETS
If we are not careful we tend to be somewhat glib about market conditions. Remember how horrible things looked in mid-December? We were doing all we could to discourage people from accessing their investments and it was quite difficult as it was just at the same time that we took-over the management of defunct Organic Investments and understandably people wanted to take their money from there out of fear that more bad things could happen if they didn’t. Thankfully, we succeeded in the vast majority of cases and since that time (and our first ever obligation under the silly new rules to issue banal letters to investors if their accounts had dropped ‘over 10%’ since the last reporting date), the main UK markets have bounced from the low point by just under 20% (and with dividend income on top). The US market, which in my view remains expensive, has also regained recent peak levels. Things are not ‘dear’ however and for the UK especially, there is some tremendous value out there and from many boring stocks and ‘despite Brexit’. Even where clients needed to access some cash, we noted our views and just by deferring the withdrawal for a few weeks let alone months could have made a considerable difference – rather than what most firms do which is simply to act upon the instruction given. It is moments like those, where of course we cannot give any guarantees of instant recovery and simply our interpretation of how we see things, that a small annual fee for the investment management or whatever pales into insignificance simply because we care and try to do our best for our clients. Our clients’ long-term best interests are ours at the end of the day and we are privileged to have a capital resource behind us too that can ensure that integrity is reflected in our decisions – unfortunately that is not always the case elsewhere.
ORGANIC CLIENTS
Just an update for clients of Organic Investment Management Plc. We are still working on the latest position but the promised disposal of the saleable assets in the Dublin-based funds is underway and it is hoped that the demerger of those elements will take place on 16 May. A sizeable amount will still remain inaccessible in suspended funds but at least this will be progress.
Be wary however in that one client has advised us that a Claims’ Management Company has called her and noted that they were acting ‘in liaison with us’ in relation to a compensation claim. Please do NOT respond – we do not and have not passed anyone’s details to any such firm. It really is despicable what some people will do. I hope that our letter of 3 April was helpful in regard to the latest position; there could be merit in registering your claim with the FSCS on https://claims.fscs.org.uk/PreScreening/EnterDetails if you wish on the basis that the more who do so, the better for its earlier attention now.
Incidentally, we are now open to accept transfers from the rather unresponsive Organic system we inherited to the superior PJM&Co range. These require individual letters for your consideration but if you would like one and have not already received one explaining the principles for your consideration, please reply to this message.
SAINSBURY
I think the merger should have gone ahead. The market has punished Sainsbury’s shares, driving them to a thirty-year low point. With a chart support line being breached now, this could be one to tuck away – at the end of the day, it still does what it does, successfully, profitably and quite boringly and with the Argos offering within, it should be able to reposition itself. Holders are more likely to have been speculators expecting the deal to progress so it may take a while before new institutional investors consider how the management is going to repair from the present hiatus. However, there’s still a hefty dividend yield and at these levels they are just too cheap. Indeed, it is the sort of opportunity that a corporate investor like Warren Buffett should snap-up now. He could take the lot at a still cheap £6billion I expect – a mere £3 or so a share and see how he could play with his other brands on some integration.
THE LAW OF UNINTENDED CONSEQUENCES
The Sainsbury/Asda merger reminds me of this. It makes me wonder what might happen with the Local Elections on Thursday and the national angst at how the electorate will interpret recent political events – or the lack of them to some degree. Yes, these are for local politicians and therefore primarily voting for those interested in and passionate about their local area and doing things for the local people from bins to planning and so on but there will inevitably be a backlash applied against them and in many regards, wholly unfairly as they don’t have any say on ‘Brexit’ for example. However, the point is simply this – by not voting, or by voting for ‘someone else’ contrary to what you usually believe, you could end-up with a far worse outcome for yourself as a consequence. Now you can see why the Sainsbury/Asda merger is not so far away from the comparative here!
EMCAS
I was not saddened to see the closure of EMC Advisory Services Ltd last week as it called-in the administrators. This was one of the claims’ chasing parasites which together have extracted billions of compensation which should have gone to aggrieved consumers and not to the owners and staff of these firms. In August 2013 I raised many concerns about this firm in a piece I wrote for a local paper but it was dismissed in that at the time as it was seen as a success story ‘employing 360 people’ and so on. I still have the articles and shall wonder if that paper would be interested in now doing an article on it!
The redundant staff now seek pity but to be frank, to work for such a firm without high morality levels being reflected means that I struggle to share sympathy and shouldn’t wish to employ anyone who is prepared to compromise ethics simply to receive a salary and commission.
SHARE BUY-BACKS
At the same time that dividends have rocketed, in the US the amount of company funds used to buy-in and cancel shares has been rocketing. Often funded by new debt, it can have a self-fulfilling effect on the share prices and the cynic could say that corporate bonuses are based on shares and related to their levels too… hmmm. Since the financial crisis, US companies have returned $8trillion in dividends and buy-backs, a colossal sum, buying-in and cancelling $800billion of shares in 2018 alone. That $8trillion would buy, at current prices, all the leading listed companies in the UK, France, Germany, Spain, Italy and Sweden. It is also nearly five times all of Russia’s economic output and worth all the gold which has ever been mined. For me, I do not like excessive buy-backs at all and believe they are wrong and I prefer dividends and not artificial stimuli to share prices which have other negative implications down the line.
WHEAT
Contrary to logic, the price of wheat has been especially low of late. This is good for consumers of all types – for vegetarians and also those feeding the produce to animals and using it for biofuel. However, the price seems artificially depressed and running at levels last seen thirteen or fourteen years ago and that doesn’t allow for inflation. This could have implications (though low prices are common with several core agricultural products generally at present) as producers switch to crops they believe are more rewarding.
IT’S ALL GREEK!
Do you remember in 2012 at the height of the Greek crisis (which frankly was not handled well by the EU authorities and where the real austerity (meaning cuts and not simply less over-spending!) has been especially damaging to its economy and the Society there) that interest rates on ten year Greek Government bonds hit 49%? Well, last week the five-year bond yield fell below that for US Government bonds. How about that for a transformation and significant profit for those who had the courage to stick with it. That said, there are still problems and unless the ECB really accepts a universal undertaking to back all host nations’ debt obligations… the artificiality will continue.
RISK WARNING
Stock market investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.
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
