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Fiscal Year End

In a week or so we will all be in the new tax year. Let’s take a look at how the last one played out for us as investors.

Although it has been 5 years or so since I watched a single game of football (no World Cup, no Euros, no Manchester United) I thought I would add a football theme to this performance blog. Like football, investment can be tedious at times and stretch our patience, but then there are moments of magic too. Let’s hope the current magic continues.

Football verses Soccer

Although I haven’t watched a game of soccer (US speak for football) I have watched many games of football (US speak for American football). If only the Yanks would speak English, it would make understanding much easier. Language difficulties are not just linked to sport. In investment we have shares they have stocks, we have gilts they have treasuries, we have bonds and they have….bonds. OK there are some similarities too.

I love the strategy behind football (I’ve started so I will stick with it), I like the concept that the two teams never meet. Unlike in soccer , where the same 11 players of the first team play the 11 players of the opposing team. Striker can tackle striker and defender can tackle defender. In football there are two teams and special teams too. Star quarterback never goes up against the opposing teams star quarterback. The offensive team is met by a defensive opposition, and vice versa. 11 players on, 11 players off when the tide turns. Talk about parking the bus, in football they bring on guys the size of a tranny van and then park a second set of vehicles behind that row.

Individual team members are chosen because;

  • They can throw a ball, but not necessarily catch one well.
  • Catch a ball, but probably couldn’t throw well.
  • Run fast.
  • Dodge.
  • Block.
  • Kick.
  • Think.
  • Be thoughtless.

There are parallels to be had in investing. Defensive shares versus growth shares for instance; there is a time in the game to choose one or the other or both. The list above is a proxy for asset allocation in investment. But I’ll be honest, I just love all of the football stats.

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Steady

Budget Summary

I despair at the state of the UK and UK politics generally. Probably global politics. Was that even a UK budget? I’ve already forgotten most of it. I don’t need to remember much because I know most of what was said was just hot air.

  • A new British ISA – I know this isn’t going to happen, within 1 week it’s already been placed on the back burner until 2025.
  • An attack on holiday property entrepreneurs from 2025 – I’ve no idea who else will be buying these former run down properties. I expect seaside towns and other beauty spots to decline without this inward investment. Formerly poor areas will now lose a large part of their much needed tourist economy. Sure local property prices will become more affordable as “out of towners” retreat, but without those tourist jobs the locals will not have the income to be able to buy a local property.
  • Non-Doms told to leave in 2025 – like the Conservative Party even has a say in this. they will be toast probably by November this year. It was always Labour policy to do this. I’ve looked at this area in some detail. Non-Doms do pay tax, pay VAT on their outsized purchases and stump up oodles of stamp duty land tax on multi-million pound property purchases. Non-Doms also employ a small army of accountants, solicitors, financial advisors and investment managers (not me), cleaners, gardeners, hairdressers, manicurists, dog walkers and property maintainers. All of which will lose customers – meaning lower VAT receipts and lower income tax on profits. They are not tax dodgers, just because the investment income they earn and leave abroad isn’t also taxed in the UK. Where does any political party expect to replace all of this lost revenue?
  • Plus some other drivel set to come into force in 2025 & 2026. Who believes any of that will happen with a change in Government?
  • The NHS is broken, let’s throw another £3.6bn at it in the future (a future which we are all sure doesn’t include a Conservative Party). More empty promises.
  • Oh yes – there was the bribe of a reduction of 2% in NI for those working below the age of 66. The trouble is, 1 in 5 eligible “workers” do not work in the UK or register for benefits of any kind. They don’t pay tax or NI. Obviously it is the 4 in 5 that do work that pay all of the taxes. Will £10 a week per worker change any voters mind? I doubt it.
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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

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