Author: Howard Scott

Posted on

As February Ends

Rebalance

As promised, albeit a little later than hoped, here’s a little commentary behind the recent rebalances of our main portfolios held on the Transact platform.

Inflation

As investors, our world changed at the beginning of 2022 as the rate of inflation ran rampant and central banks endeavoured to control inflation with aggressive interest rate rises. Equity markets plummeted. It seems like the easy yards have now been gained with inflation in the UK back from 11% to 4% now. Getting the rate of inflation down from here and back to the 2% per annum target will be a stickier proposition. More importantly other nations, including the US now have inflation in the low 3’s, so the UK should fall back in line within the next month or two.

As interest rates rose a safe cash return seemed like a much less risky proposition than shares. However change is finally afoot.

Opportunities & Risks

The eyes of investors are focused on five main opportunities and risks

Continue reading “As February Ends”
Posted on

2024 Begins

Happy New Year!

Before we look ahead to this new year, let’s look back at what we all went through in 2023. It was really quite a lot!

January

  • China opens borders, ending zero-COVID policy.
  • Almost three million people were infected with COVID-19 over the Christmas period
  • Microsoft invests $10B into OpenAI, extending their partnership.
  • UK Inflation starts the year at 10.5%

February

  • Chinese “Spy Balloon” drifts over the Americas.
  • The original 4 day Russian invasion of Ukraine has now lasted 365 days.
  • Russia suspends participation in nuclear arma reduction treaty.
  • The Bank of England raise interest rates from 3.5% to 4%.
  • US interest rates rise to 4.75%
  • A milder winter across Europe ensures gas reserves do not run out as feared.
  • An estimated 475,000 workers go on strike, the single biggest day of industrial action for more than a decade, 

March

  • Silicon Valley Bank and other regional US banks collapse causing banking turmoil.
  • The Bank of England announces that the UK arm of Silicon Valley Bank is to enter insolvency, following the demise of its US parent, the largest banking collapse since the 2007/8 financial crisis. Many UK tech startups are prevented from accessing cash to pay staff
  • UBS buys collapsing Credit Suisse for $3.2B
  • BOE base rate rises to 4.25%
  • US interest rates reach 5%
Continue reading “2024 Begins”
Posted on

Decisions, decisions

We use our brains to think.

Everyone understands that, there’s nothing new or ground-breaking in the above statement. Except it seems evolution hard-wired our brains to do anything and everything we possibly could do instead of thinking. The brain is less of a thinking machine – more a thinking avoidance machine. How so?

Our brain requires oodles of energy to function. Our grey matter uses 20-25% of our total calories burnt every day. So in our former hunter-gather times, when Homo Sapiens went days and days without food, our brains were trained to run in eco-mode. Less decision time = more down time = less calorific requirement. Less thinking, more thinking avoidance.

These days, understanding how our brain works has become increasingly important when it comes to many challenges including investing. We process so much information in a day that our brains cannot think about it all. It goes caveman more often than we realise

How does our brain do this? The brain creates short-cuts. Instead of considering the problem and burning more precious calories, it efficiently creates an answer based on our memory of past experiences. Before it ponders the new problem it simply jumps to an answer it previously had. It has efficiently therefore avoided thinking.

Continue reading “Decisions, decisions”