Market Madness Again


Dear Friend

Market Madness Again

Here are some interesting facts for you. So, despite the average S&P 500 stock’s earnings down a third on a year ago the index hits a new peak… as the average stock there actually stands at 28% below its peak… Technology now counts for 38% of the value of the whole of that index (let’s say the ‘US market’); it’s so reminiscent of the 1999 froth when technology, media and telephony counted for 40% of the world’s market value…

The frightening thing is that the advent of ‘cheap’ index trackers means most investors are full of this stuff (even deceived ‘socially responsible’ ones) – well done on what you have achieved but when are you shuffling across to undervalued sectors? We aren’t full of tech at the moment whatsoever and we are in the minority… Apple Inc hits $2trillion – that’s only increasing by a ‘mere’ $1trillion since the March low and a bigger sum than the value of all the FTSE100 companies put together. Something will have to give sometime soon – I suggest you don’t want to be anywhere too near when it goes. (This just shows – I wrote that ‘last week’ and since, the tech bubble has been spiked – is the correction permanent or temporary but it has a long way to fall. Sadly lots of novice investors using things like ‘Robin Hood’ in the US especially who perceived that the likes of Tesla and so on only ever go upwards could be in for serious shocks and especially as so many have bought ‘geared’ plays so every Dollar reflects many dollars’ worth of stock on margin. Tesla is down around 36% since 1 September. It will soon be TFAANGs for the memories. My personal Tesla ‘short’ wasn’t beefy enough but I mustn’t complain…)

Taking from the poor and giving to the rich

Is the very popular (too popular?) Robin Hood stock dealing system in the US (Thankfully aborting its service offering over here) simply a gamblers’ den ready to see all the innocent and inexperienced lose a shed-load of money? The company’s supporters have helped fuel the excessive increases in Tesla and also foreign stocks like Nintendo – as of course the ‘players’ imagine you can only win and never lose. It really is quite scary but I suppose the good thing is that the stocks involved for these excitable individuals are pretty limited in range and won’t have much impact on ‘real’ investors when they all go sour and the Sheriff of Nottingham rides off into the sunset with all their money.

Training

It never stops – Felix and I have just completed the Certificate of Professional Training & Development in ‘Consumer Vulnerability in Later Life’ delivered by the Society of Later Life Advisers (SOLLA) in collaboration with Just Plc. For me I think that over forty-two years of full-time work and dealing with real people and their real circumstances helps but one or two new ideas and concepts of recognising – and responding – to vulnerability in people is important. Sadly, dealing with many ‘scam victims’ over the years makes me realise that vulnerability is not always obvious either – as rocket scientists and successful professionals are all as susceptible when their guard is lowered. Please be careful and build relationships with professionals you know you can trust and who have your best interests at heart – not theirs. That bit really is not hard.

Pensions

It is great how millions are benefiting from the Autoenrollment rules now in place. They don’t only have pensions for the first time in their lives in many instances but they also have some life insurance (the value of their funds) and something upon which to build for their futures.

However, I have said before that it is a high cost for employers and perhaps too much when added to all the other high costs of employing anyone and which may deter businesses from actually employing anyone at all (or as many) after we come through the other side of this Pandemic.

However, a disturbing report suggests that many are losing-out on their statutory entitlement to pensions at their workplace. We are aware of how the ‘casual’ industries can still end-up cheating the regulations too easily (or by ignorance) and treat employees as self-employed or ‘cash in hand’ and as for pension contributions (despite the rules), they just doesn’t feature, let alone holiday pay and things like that.

https://www.ftadviser.com/pensions/2020/08/27/warning-1-in-20-workers-short-changed-on-pensions


Rolls Royce

Strange times indeed. If I remember correctly and without being too bothered to check but my memory for such things isn’t bad, Rolls Royce Plc (the aero and marine engines’ giant) floated on the Stock Market in 1985 and its shares were £1.85 a piece. Covid19 has impacted its trade but its shares now trade at not far above that level, some thirty-five years later and I don’t recall any share splits or anything. Of course the business is different and yes, it has been affected and whilst we don’t own any, surely something is wrong with the market’s valuation of this Company now, even with all the unfortunate news within… after all, even high-riding US tech executives need Rolls Royce engines to jet about the world and on their boats…

Property Funds

It is bad news for those with unitised property funds of any form I guess. I have proposed a simple solution for them/their industry and which is worthy of debate even if it is not the ‘same’ but I wonder if any of the giants will take it up? I have this funny feeling that much commercial property is so seriously undervalued at the moment and it could prove to be the nadir and a once-in-a-generational opportunity for investors – not to buy their ‘own’ lump of real estate but certainly property funds for their portfolios. After all, diversification is king and it is one of those sorts of things that if you own a little, in normal times it shouldn’t do you any harm, is uncorrelated to other financial instruments to good degree, should be relatively safe and generating a good income and way above the bank. Here I am being quoted in the Financial Times’ sister magazine.

https://www.ftadviser.com/investments/2020/09/04/pivot-to-reits-inevitable-after-fca-proposals/

Buy Bitcoin

I have seen it all now. A whole page advert in the respected FT’s magazine. ‘Hedge your portfolio with ‘x’ Bitcoin Funds’. Why? Of course it says it is ‘an investable store of value asset that operates independently of the traditional financial system… bitcoin’s inherent scarcity – its hard-coded fixed supply makes it a compelling hedge against inflation.. and it still has room to run’. The funds buying them are ‘institutional grade and low management fee’. (Why do you need a fund to buy and ‘manage’ just one asset type anyway…). I think I have seen it all now and it is greater endorsement for barge pole economics… please do not get caught. Perhaps gold-foil covered chocolate buttons have a future after all – if we stamp ‘limited edition’ on them… and I wonder when someone somewhere will realise that someone has the key to keep generating an unlimited supply of these ethereal things to satisfy demand… (‘oh no that cannot possibly happen’ the zealots will scream at me – ‘you just don’t understand!’)

Risk Warning

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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