I am a little late in bringing you my review of the second quarter of 2021. It is because I decided to change the format somewhat and report the managed portfolio results on a fixed page, which will then be updated each quarter. As always the task took more time than I thought, but hopefully you will find the presentation more comprehensive.
I have shown the long term results for each portfolio that we manage. This gives you the chance to not only see how your portfolio has grown, but you can also see how each portfolio has performed that other clients are invested in. I have included the investment goal of each portfolio that we manage, so you can decide if you would like to invest in any additional portfolios along with your present portfolio.
How’s it going?
In a word – well. We continue to beat our peer group over 3 months, 6 months, 12 months, 3 years, 5 years and 10 years in all portfolios. Even our Cautious Portfolio is back on top. Just. The decisions we have made since the markets crashed 15 months ago continue to be profitable with client portfolios growing to all time highs.
We had been very cash heavy as you know, waiting for some direction from the US, but we eventually deployed the excess cash during a recent dip in June. Some of that cash went towards buying tracker funds in the US and Europe on the Nucleus platform. As you know buying funds isn’t my first choice, they carry additional costs and are a very blunt tool meaning we have to hold the whole index, irrespective of the amount of deadwood that it holds. However I needed to balance the US and European exposure we had started to build on the Transact platform where we own individual overseas shares directly. Certainly the US fund has started to deliver already.
What’s happening around the world?
China – At last it looks like the decision I took to avoid any investment in any Chinese company has proved to be correct. Trust seems to have completely broken down. The Chinese market continues to fall due to building communist party interference. I had thought that eventually there would be a day of reckoning and in the meantime the party would prop up their stock market artificially, but they are allowing the market to drift ever lower. I have been prepared to forego the growth potential, as timing a profitable exit would prove impossible. It seems strange that the Chinese communist party has spent years attracting foreign investment into the country and now seems to be driving that same money out with ever decreasing corporate governance. Knowing the communists there must be a grand plan, let’s hope it doesn’t involve annexing Taiwan in the short term. The US would be forced into a conflict and that would be very bad for global stock-markets. With Chinese funds continuing to fall, Emerging Markets funds must follow since the index is comprised between 35% and 40% China.
USA – Over the pond the pause is over. Facebook, Apple, Amazon, Netflix, and Google collectively make up 25% of the S&P 500, most have now declared their last quarters earnings and profit and the growth on growth has been phenomenal. Collectively they have dragged the index back up to another all time high. (Maybe the 5 should be called the S&P 125 and the other 495 shares in the index should be the S&P 375?) The Biden administration will be watching closely and more targeted taxation must surely follow. But let’s not forget, as in the UK, there is tax on share profits which is already not insignificant. Maybe the government doesn’t need to collect it’s share directly from the companies since it does pretty well taxing profitable investors.
UK – Meanwhile the FTSE 100 limps along, no higher today than it was in April. The index is jam-packed full of dead-legs with legacy issues and pension deficits. Who would own a FTSE 100 tracker? Content with only earning 3 – 4% dividends for 22 years and counting, but still as volatile as other markets that at least generate double the return! Some of us remember it was at 7000 points in 1999. Our growth has come in the UK market by avoiding pretty much every company in the FTSE 100 over the last 13 years.
What’s on the horizon?
I have to mention Covid-19 somewhere, so here goes. The UK has possibly reached herd immunity. That is a good thing. Well it is for the population as whole, but it’s bad for many other vested interests. Perhaps that’s why the BBC continues with it’s insane scare-mongering coverage of every “case”, it is because it knew people would notice there was no Olympics coverage it could give us.
And what about all of the experts with their woeful projections? If I made those sort of projections, most of which proved to be wrong by 10 fold, I would expect to be sacked. They must be hoping for the dreaded “Epsilon Variant” to come along, which makes peoples arms and legs fall off when they cough.
Seriously it’s been a tough time for the vulnerable, it’s been a time of reckoning for individuals, children, jobs, businesses and investors. Hopefully the recovery can continue from here.
Summer is normally a pause for the markets, but this summer it feels like they are being reborn, let’s hope that continues and further lock-downs don’t return across the Northern Hemisphere as it enters it’s winter months. As ever we continue to look to the investment horizon.
You can see our investment results here.
Transact
The gradual movement of client accounts to Transact continues but there are inevitable bottlenecks. The Pingdemic we hear about has badly affected staffing levels in both Nucleus and Transact. We are hopeful that normality returns soon and the time taken to transfer will return to what it was, which was about 3 weeks. We thank those who are in the process of moving for their patience.
Meanwhile we have created a tool to give individuals a cost benefit analysis of their options. Some clients should stay on the Nucleus platform and some should move. Until I can get around to discussing the pros and cons with every client, please feel free to run your circumstances through the calculator. All you will need to know is your current balance on Nucleus. If you invest as a family or a couple input the collective balance. You can have a go here.
I notice you are reading ‘Apocalypse Never’. The book received a very favourable review in the Daily Mail so Shellenberger’s take on climate change as being nothing to fear must be true! Record breaking wild fires, heat bombs and ‘Once in a hundred years’ flooding in Europe and China, not with standing.
I became alarmed by the prospect of global warming after reading ‘Six Degrees’ by Mark Lynas (2007) and watching ‘An inconvenient truth’. Globally 1.2C warmer now and too late to avoid 3.0+C by 2040.
There is no political will to confront the need for mitigation just grandstanding about reducing emissions to limit warming to approx 2.0C. Grandstanding by politicians that know they will have ridden the ‘gravy train’ and disembarked before our kids and g’kids have to live with the consequences.
By the way how are BP and Shell shares doing? 🤔🤔