Dear Friend
URGENT UPDATE ON CONDITIONS AND GUIDANCE
URGENT UPDATE ON CONDITIONS AND GUIDANCE
I am going to start with two positive points. The first is that it seems spring has arrived. Nature is in action and it is lovely to see life ‘beginning’ again, totally unaffected by the turbulence affecting us all. The days are lengthening and even the sun has been shining. The ‘normality’ of life as ‘it’ perceives it to be is there for us all to see and hopefully appreciate, in the face of the maelstrom we are facing now.
I shall now follow this with a second positive point and that is to thank the many, many clients who have expressed their real concern for us too and the knowledge that this is beyond what the very best of us could have envisaged and expected. Many have endured far worse too – the ravages of war and its destruction and deaths. It is very humbling and whilst it makes ‘it’ no easier at all of course as the burden we feel for our clients is immense. Endeavouring to do the very best for them and to encourage them to do the right things now is not in any way an easy task. We shall continue our outmost to try to keep our heads regardless of what others do.
What can we wish for you? Please stay healthy and please do all you can to stay sane. Remember you have the telephone and you can speak to people, friends, family – be ‘religious’ about this – it is very important if you are in the vulnerable groups needing to self-isolate for so long. Eat well and regularly and keep exercising too to sustain yourself. Your health and mental well-being are very important and your continuing to be here is far more crucial than any aspects affecting anything else, from your job to your investments and we must all not forget that – and the interactions with our friends and families which hopefully we shall all better appreciate and cherish when the other side arrives again, as it will.
PHYSICAL PRACTICALITIES
As you may imagine we are taking the necessary precautions in the face of the infection’s spread. The Office is likely to be closed aside from delivery of forms, etc and all undertaken with appropriate distance between staff and you, both for your protection and the protection of others with whom we may come into contact. We are splitting the workforce so that more will work at home to protect a functioning Office and telephonic and computer links are in place. Telephone and Skype interview are available as a precautionary measure too and obviously if there has to be interaction (such as witnessed signing of documents) then we shall tackle those on a case-by-case basis. The postal system still works and our letter box is available all the time.
MARKET UPDATE
I am sure that I cannot add anything more to what you have already seen on the media. We have been and are being subjected to the worst volatility and extreme and negative events I have ever experienced. They are afflicting the speculative and what were considered to be ‘safe’ investments alike in many instances and even gold has been falling of late, dropping over 13% from its high, apparently down to those accessing liquidity or indeed meeting ‘margin calls’ against other investment positions or debts they held against other assets. Forced sellers of some assets also create a big downward spiral in the investment price regardless of the underlying fundamentals of the company or even the investment fund.
You know something is fundamentally wrong when such daily spikes are so extreme (with five of the biggest points’ movements for the Dow Jones in a matter of days) and you see such giants as Royal Dutch Shell shares down by over 50% since the beginning of the year alone and where its dividend payments become equivalent to over 14%pa and still maintainable based on the Business’ cash flow, etc despite the ravaged oil price as a consequence of Saudi Arabia and Russia’s unhelpful shenanigans. It’s certainly not alone and plenty of sound companies have seen their share prices battered and at levels never anticipated in any semblance of prior rational assessment and when they may have been purchased.
It’s almost pointless selecting some of the worst-savaged as there are so many and the main indices themselves have now fallen by amongst the biggest percentage declines of any bear market in history and a severity and speed never experienced, exacerbated by an ever-jittery audience, a lack of connectivity by investors with the underlying businesses to which they have subscribed, fewer large long-term investors these days as used to exist (insurance funds and better balanced pension funds for example), more ‘passive’ holders (index-trackers) and the ability of trading instantly, with a more inexperienced investor and institutional base converting irrational fears into a trade and losses sustained for them, as opposed to sitting-it-out. You must not panic, you must not sell-up and if you have spare funds beyond your emergency pot, then think about nibbling-away, with eyes closed and put all the correspondence about your holdings in a drawer to revisit later in the year. Do not keep ‘logging-on’ to see the values of your investments, if you have such access. It does not help.
POSITIVE ACTION
Yes, there is positive action which some can perform. There are many investments which offer value which will never ever be repeated, whether from assets held by them or income they will continue to generate. Investors can look at the income levels they are taking and consider leaving it in the markets for reinvestment if they can afford that. Some are looking at their cash balances and other assets and considering whether they should be bottom-fishing, even if you are assured never to hit the exact lowest levels but a staggered and regular investment strategy is more likely to do just that.
In five years, people will look back and wonder why they did not buy more of these depressed assets. They will see that some businesses were unable to survive – not just small ones but possibly whole chains of quoted and private businesses (unless government support exists to sustain them). This could be pub and eatery chains, cinema groups, hotels, holiday firms, gyms, theatres, shops and all forms of other ‘entertainment’ establishments. What will this do to property companies which rent premises to them or the lenders which have enabled them to be successful previously?
There will be beneficiaries too. The vast majority of people will come thorough this global catastrophe healthily. China’s populace and its economy are already recovering dramatically and its coal consumption generating its energy is not far from pre-crisis levels with people back to work. We still have the heights of the infection yet to come. Just think what is happening to supermarkets’ trade at the moment and the demand for many household products and foodstuffs and many business models are relatively unaffected from insurance to healthcare, pharmaceuticals, IT, telephony, media and defence and the vast construction infrastructure spend which has been announced.
I shall repeat what I have said before. It is almost impossible to envisage it now but a reality will prevail and the markets will regain poise and normality. I cannot say when. The income flows into investments are enduring and with a conclusion to this pandemic in months, not years, then opportunity for full repair to our systems exists. You and I shall continue to buy our groceries, put fuel in our cars and homes, use the electricity, water, telephones and mobile devices, take our pills, maintain our properties, clothe and house ourselves, engage our accountants, pay our insurance premiums and mortgage instalments and all the other bills we have and yes, we’ll continue to entertain ourselves. We’ll still buy capital goods, from technology to cars and things for our homes and businesses. Commerce in all forms will survive, make profits and distribute some as dividends to investors and they will pay interest on their loans.
There will be unexpected consequences too. We could find that inflation returns to the world, because business closures could mean shortages of some goods and services through the other side mean the survivors will have to ratchet-up prices to ration availability – take flights for example. Maybe that is a good thing for the environment. Residential property prices are extremely vulnerable too – they have been artificially inflated for a long time and whilst owners cannot convert a pessimistic notion into a quick sale overnight, the mood can change very quickly and desperation set-in, especially if interest rates have to rise in the face of inflation returning. Unemployment could rocket too – from a scenario of full employment ‘now’ to massive lay-offs with the last-in being the first-out but it will be indiscriminate and the ‘casual and lifestyle economy’ shuddering to a halt as we have to deal with a severe, negative economic impact.
We are seeing a resolute clientele which is standing firm in the face of this storm and many who are indeed considering what active things they can do to buy at these depressed levels. Year-end Pension and ISA investment limits are there to be used and if you wish to subscribe, the ISA application is here:- https://www.miltonpj.net/wp-content/uploads/2019/11/ISA-Application-Form.pdf Another adviser wrote that we should be using our spare cash beyond what we need or emergencies to keep buying the lower things become and until all our money has gone. It is hard to be that courageous in the face of this but history will prove him right.
OTHER NEWS – FUNERAL PLANS
As we too had been petitioning, I am pleased to report that long after it was due, the sale of Funeral Plans is to be regulated. There will also be recourse to the Financial Ombudsman Service for complaints. It is likely to take eighteen months (which is too long) but at least it will be happening and the risks and cowboy operators who also function in that market will at last be tackled.
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 celebrate our 35th anniversary in 2020 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
