Regulation Overload

Let me apologise now. This is probably the least interesting blog I have ever written for clients. Don’t be fooled by the picture of pretty cygnets.

Frustrating Month

Hopefully from the outside, our business just looks like its nice and relaxed. But like a swan, above the water all looks serene but below the surface every moving part is going like the clappers to keep it there. Such has been the last month or two with for us more to come over the coming months.

Authorised & Regulated by The Financial Conduct Authority

This one line says it all, but let’s dig a bit deeper to see what it means. Authorised is easy to explain. It’s just the first hurdle to jump. Show the FCA you have sufficient capital to wind down a business if it all goes wrong and they will consider your application. Minimum capital is currently €50,000. Continue reading “Regulation Overload”


Why is the FTSE 100 doing so well?

Given the current global political uncertainty, coupled with an ever-escalating Islamic fundamentalist jihad causing atrocities around the world, why is the FTSE 100 sat virtually at an all-time high?

This is currently the most frequently asked question by my clients. I’m going to give you my best shot at an answer. Because it doesn’t stack up. Until recently, shocks like the kind we are seeing weekly would have the markets up and down like a yo-yo.

Actually the FTSE 100 just looks average in relative terms

First of all the FTSE 100 isn’t the stand-out best global stock market currently. Continue reading “High”

Greece is a Turkey

At Christmas, when I was a lad in the 60’s, every family bought a full grown plucked and be-headed bird and then tried to stuff it into a Belling oven for hours on end. The heavier the turkey in lbs., the greater the bragging rights. Bernard Matthews later popularised the bird and taught us that Norfolk turkeys were for life, not just for Christmas. He transformed them into basically cylindrical shapes that came wrapped in polythene. It still tasted like chicken, but drier. Anyway, the small detail that had been kept from me in Bernard’s TV adverts, was that turkeys are plain nasty creatures. You should see the way they treat each other when kept in captivity. Most birds are territorial, anybody who has witnessed the darker side of our common or garden Robin understands they are always up for a good scrap with another Robin. Robins are not cute like depicted on our Christmas Cards.

You see, a turkey isn’t smooth and cylindrical and wrapped in polythene from birth, it’s full of deadly sharp bits that can peck and kick. Turkeys kill each other in captivity if allowed to. A turkey farm resembles the “fly on the wall” staple numpty TV, that is so popular these days. “I’m a celebrity, get me out of here” & “Big Brother”. The format is much the same in both shows. A group of strangers are kept in captivity, gangs start to form almost spontaneously. Eventually the weakest are picked on by the others for the supposed amusement of the TV audience, baying for gossip and blood.

A weak vulnerable turkey can’t claim celebrity status or be voted off the farm. In a turkey farm the farmer could step in and protect the most vulnerable bird at any time. But he doesn’t. The farmer lets the bullying go on. Cock fighting for sport may be outlawed, but in turkey farming, better one dead bird than a whole flock of bruised and battered birds, with so many scars they are only fit for sausages. The outcome is always assured, the bird eventually dies, the carcass is thrown away and the turkey gangs start pecking the next weakest bird on the farm.

Greece is the weakest and ugliest bird in Europe. For three years Greece has been continuously patched-up and kept alive on financial life support by the European Central Bank, the European Commission, and the International Monetary Fund. There is an argument that Greece deserves all the grief they get, having falsified their entry paperwork when they joined the EEC. But maybe the press and the readers of those newspapers have also become complicit in this endless bullying. After all we know that Greek men never really work a day in their lives, they pay no tax and retire at the grand old age of 40. I read that in “The Daily Truth” so it must be factually correct.

The Germans, the French and us Brits collectively are the biggest bullies. Continually chastising the Greeks for continuously borrowing when they can never repay what they owe already and refusing to put their house in order. Well hello! UK Government debt stands at £1.3 trillion and climbing. We don’t produce olive oil, we’ve had the real stuff flowing for 40 years or so. Norway had oil too and instead of owing like us, they have around £1.5 trillion invested in their sovereign fund. Where has our prosperity gone?

The German’s talk a good story, but they don’t even count the massive cost of re-unification of the East and West of their country in their total borrowings. That’s creative accountancy more than equivalent to Greece’s little errors and omissions. The European Community financial accounts have not been signed off by the auditors for 17 years because they don’t reflect reality. Talk about the kettle calling the pot black.

All eyes have already started to look for the next sacrificial turkey in Europe. Portugal, Spain or Italy. They are all potentially lined up. If together they agree to just keep pecking with the others, they just may not get pecked themselves.

To the other members of the EU it’s important Greece is kept alive, but if they do default what can their creditors do? Repossess the Tavernas? I don’t think so. Most of the debt has not been lent against something that can be repossessed. Angela Merkel can’t criticise Vladimir Putin and then just send her panzer tanks in to Greece like Vladimir annexed the Crimea. The debt will be just written off because it’s tiny in relative terms to the overall level of Pan-European debt. And besides most of it now comprises interest. At the interest rates charged, any lender has had a fair return by now. What’s left Is mainly owed to European governments, central banks and the IMF. Any small investor who loses out this late in the game cannot say he hasn’t been warned.

You will no doubt be relieved to hear we have held no Government Debt in our portfolios since 2012. Modern Portfolio theory suggests we should hold 40-60% in fixed interest investments. The interest rates currently offered, just do not compensate for the possible risk of not getting our original capital back. Every country in the world has defaulted on some debt at some point in its history, except for 5 I believe.

“So Mr UK Government, you want to borrow more money at only 2% interest rates, with long term inflation running at 2%. You currently owe £1.3 trillion, and you have a history of never repaying your debts off. I don’t think so”

Never a lender or borrower be. My Mum taught me that.

Pension Freedoms likely to continue

Pensions are complicated. Everybody would agree with that. If they were simple I would be out of a job. However over the last 5 years that has started to change. Recently they got a whole lot simpler. Hopefully now the General Election is over these revolutionary changes will now stick around for at least another 5 years. However Super Steve Webb, one of the architects of pension freedoms, was always going to lose his job.

A Short History of Pensions Ministers

May 1997
Harriet Harman: Secretary of State for Social Security
Frank Field: Minister of State for Welfare Reform

July 1998
Alastair Darling: Secretary of State for Social Security
John Denham: Minister for Pensions

January 1999
Alastair Darling: Secretary of State for Social Security
Stephen Timms: Minister for Pensions

July 1999
Alastair Darling: Secretary of State for Social Security
Jeff Rooker: Pensions Minister

May 2001
Alastair Darling: Secretary of State for Work and Pensions
Ian McCartney: Pensions Minister

May 2002
Andrew Smith: Secretary of State for Work and Pensions
Ian McCartney: Pensions Minister

June 2003
Andrew Smith: Secretary of State for Work and Pensions
Malcolm Wicks: Pensions Minister

September 2004
Alan Johnson: Secretary of State for Work and Pensions
Malcolm Wicks: Pensions Minister

May 2005
David Blunkett: Secretary of State for Work and Pensions
Stephen Timms: Pensions Minister

November 2005
John Hutton: Secretary of State for Work and Pensions
Stephen Timms: Minister for Pensions Reform

May 2006
John Hutton: Secretary of State for Work and Pensions
James Purnell: Minister for Pensions Reform

June 2007
Peter Hain: Secretary of State for Work and Pensions
Mike O’Brien: Minister for Pensions Reform

January 2008
James Purnell Secretary of State for Work and Pensions
Mike O’Brien Minister for Pensions Reform

October 2008
James Purnell: Secretary of State for Work and Pensions
Rosie Winterton: Minister for Pensions Reform

June 2009
Yvette Cooper: Secretary of State for Work and Pensions
Angela Eagle: Minister for Pensions Reform

May 2010 to Today
Iain Duncan Smith: Secretary of State for Work and Pensions

Steve Webb: Minister for Pensions

Who want’s to be a pensions minister, I don’t

The job as pensions minister was created by Labour in 1998. It falls within the Secretary of State for Work and Pensions team. Nobody wanted it. It just wasn’t sexy. It was long term, but it was manned by journeymen (and latterly journeywomen, “we better promote some of those”). You got the job if you were up and coming. A first ministerial post on your political ladder to greatness. Or you got the job as you fell from grace. A sort of stepping stone to being put to pasture quietly. Cabinet reshuffle after reshuffle, the team changed. Pensions legislation continued to stagnate because Labour insisted on means-tested benefits. There was no incentive to save, and it would take for ever to get fair value back out of the decades of saving into pensions.

From 1997 to 2010 Labour had 15 different pension teams.

I defy anyone, no matter how brilliant, to understand pension legislation in such a short time frame. It’s no wonder decisions made to simplify pensions, just made them more complicated. Good news for advisers like me, bad news for pensions savers.

From 2010 to 2015 The Coalition had just the one team.

The rise and fall of Pensions Super Steve

Narrator: As an outsider, it looked like a mistake from the get-go. The Conservatives needed to share some ministerial posts.

Mr Cameron: How about Minister for Pensions to the Lib Dems, nobody wants it anyway. All agreed? Good. Don’t care who it is.

enter Steve Webb stage right to utter silence

Narrator: I have to say Steve Webb, the Lib Dem who got the post as minister, has done an outstanding job for a whole generation of us savers. He has overseen a wholesale restructuring of pensions. The new pension freedoms have and will continue to change peoples lives for the better.

Mr Cameron: Well done Steve. Your pension reforms have probably helped to clinch the General Election for us. Your job is safe.

Mr Webb: There is no coalition anymore and I lost my seat as an MP.

Mr Cameron: Saves firing you then. Goodbye. I’m off to see The Queen.

exit Steve Webb stage left to utter silence

Scottish Independence

I have had several clients ask me if there is likely to be any problem with the Nucleus platform, should Scotland vote Yes. The short answer is no. If independence does happen I will then quickly give you the long answer.

What is interesting to me is what happens outside of Scotland? Here’s what I think could happen and I would be interested to know if any client can see any error in my assumptions. The map above shows the number of seats that Labour currently holds in Scotland in red and the number the Conservatives hold in blue. No big deal then to the Conservatives should Scotland leave, big problems I would suggest for Labour here in the UK. With Scottish seats not counting in a future UK general election, how could Labour ever regain power in the UK after Scottish Independence scheduled for 5th May 2016?

A yes vote sees the conservatives stay in power and unless Cameron reneges on his promise, there will then be a referendum in the future on our continued membership of the EU. Should Scotland make a go of it, and I think they will; Would the UK then have the confidence to leave the EU and go it alone too?

So if Scotland vote yes, perhaps expect us to exit the EU shortly after.

If Scotland vote no, Labour approach next years general election with additional Scottish strength assured and victory would be theirs.

I’ve not even factored in the potential UKIP seat gains, and they obviously want our national borders back.

From a UK stock market perspective, the Scottish vote should be a significant event.