The end is nigh....(maybe...maybe not)

Apparently if you are a Dalek you are about to be retired. Having begun life in 1963 and achieving screen success in the 1965 film "Dr Who and the Daleks" with Peter Cushing and Roy Castle, the BBC report that the Daleks are to be retired... but then we have heard all this before and the ever youthful Time Lord himself was once put out to pasture, but is now a fairly successful element of BBC programmes. Given the longevity of the Doctor and the worlds favourite "monster" I imagine that attempting to retire the Dalek may be a little premature.

Recent discussions with several clients have revealed a similar pattern - retirement ages may be moved around, but a considerable number of our clients are adopting a less "final" approach to retirement. Many voice the view that they enjoy working and if not employed to do so, expect to find their time occupied in something that looks and feels rather like "work". Perhaps the term "work" is unhelpful, with associations (perhaps) of hard graft and the daily grind... a better term to use is fairly difficult to pin down. Terms that we might consider could be "calling" or "vocation" or even dare I sound too much like a coach "passion".

I increasingly find clients are less concerned with reaching "retirement" and having a tick list of things to do before I die - thankfully. As none of us know when our time is up (apparently now also including "the world will definitely end on 21 May 2011" delusions of  the Californian Mr Camping) it is perhaps wise to consider living whilst you are alive - as fully as possible. If ever I needed a nudging reminder of this, it was in the form of an interesting preview of new film "Life In One Day" which is a collection of video snippets of a day in the life of... well, the planet. This is a "small film" which really means that it will not get a lot of airtime at cinemas across the UK. If you get the chance to have a look, its worth watching (though the wobbly camera work that is inevitable with the amateur film maker means that you should sit a reasonable distance from the screen to avoid a sense of motion sickness). It is released in the UK on 17th June.

Green Investment Bank - Positive Action to Reduce Waste and Expense

The Green Investment Bank got a lift this week with further coverage of environmental issues. On Wednesday night I was at a meeting (The Big Climate Connection) with Zac Goldsmith and Vince Cable who both spoke very clearly (and impressively) about the problems, challenges and contradictions that face us as we embark nationally and internationally to reduce negaitive impact on the envronment. You can find out more about the Stop Cimate Chaos Campaign, which is an impressive coalition of lots (and I mean lots) of charities and social action organisations.

Prior to the meeting on Monday Nick Clegg had announced plans about the Green Investment Bank - which is essentially a fund of money to assist the UK in adapting to and adopting cleaner energy and modifying our homes which account for around 26% of all energy useage. The Bank will be started in April 2012 (the year for everything it seems) with a £3bn capital fund. This will rise to an estimated £15bn. It is the first of its kind in the world. In time, it will be permitted to also borrow funds. The full speech can be viewed here.

Business Updates - 27 May 2011

As we head into a Bank holiday weekend, the first official weekend of the British summer, we seem to be in for a mixed bag of weather - much like the mixed results from the UK retailers.

But of course, this isn’t any annual report, this is a Marks and Spencer annual report… covered in plenty of jam as MandS revealed an increase in profit of nearly 13% - so it is not all doom and gloom on the high street. Sales were increased by 4.2% to £9.7bn much of which is accredited to improvements in the in-store presentation and additional food ranges. If only the State and Banking system was run!

It may not be that great a Bank Holiday for UK Bankers as Moody’s (one of the credit ratings agencies) feels similarly about UK Banks, but frankly they are in no position to carp as all of the credit rating agencies were factors in the lack of appreciation of risk and “whats under the bonnet” that made the credit crunch as bad as it was (or is). Anyhow, on Tuesday they warned that they are likely to be reducing their rating (a gold star system that now seems even less worthwhile than those handed out at primary school) for 14 of our UK Banks and Building Societies. These are Lloyds Banking Group, RBS, Santander UK, Bank of Ireland UK, Co-operative Bank, Coventry Building Society, Nationwide Building Society, Newcastle Building Society, Norwich and Peterborough Building Society, Nottingham Building Society, Principality Building Society, Skipton Building Society, West Bromwich Building Society and Yorkshire Building Society. The main reason cited for the possible downgrade is that the UK Government would be less likely now, than in the past to bail them out…. which frankly tells us all nothing that we didn’t already think. In my humble opinion it tells us very little about each of the Banks concerned. Although you will note that two of the big 4 banks are missing from this list (Barclays and HSBC). The impact of this is a guessing game, but possible outcomes are that the share prices in the identified Banks reduce and just for good measure their own borrowing costs are likely to increase…so nobody wins.

Sadly, the Japanese earthquake and its impact on the nuclear power plant at Fukushima has left its owners Tepco reporting a £9.4bn loss, which is the tenfold reverse figure of their profit in 2010. So the last few months has cost them the equivalent of the last 10 years, never mind the future costs that they are likely to suffer as they attempt to restore the region to some form of safe environment. Even giant firm Sony has reported a loss for the year at £2bn which has had disrupted supply chain impacts compounded by the cyber attack on its game platform PlayStation.

Ker-ching in Bejing - China Smashing Records

Further evidence that the balance of power is shifting firmly East is news that a painting has sold in China for $65m - about £40m. The world auction figures now put China as the most lucrative art market in the world. Whilst art is phenomenally difficult to value, the trend is clearly one of the increasing economic strength of the Chinese. Art prices has been having something of a renaissance over the last 3 years as investors have sought alternatives to equities.

For more information about auctions or the commercial side of art visit Art Info website, or you could click here.

Business Updates 19 May 2011

I think that it is probably fair to say that we all know that there is plenty of money to be made from drugs - well Alliance Boots have posted some very good results for 2011 Q1. Alliance Boots was formed as a result of the merger between Boots and Alliance UniChem it is no longer a publicly owned company. Revenue was up by 15% to £23.3m from £20.2m and trading profits up to £1,051m. This is a significant player in the pharmaceutical world and one that many of us turn to in sickness and in health...

You may have also read that Mothercare (also Early Learning Centre) are now planning to close around 25% of their high street stores over the next two years in response to the changing shopping habits of consumers. In truth, this has been the general direction of the group anyway with an increasing number of out of town stores and reducing number of high street stores. This is despite worldwide sales rising by 7.1% to £1.2bn, although UK sales are down, they declined by only 0.5% which given the economic environment I would not really think to be a poor result.

Mothercare believe that shopping habits are changin for good and have been working on mobile phone shopping applications as well as their online offering. At the moment just over half of revenue for the company comes from the UK alone. Share values in the company have been declining since December when shares trading at £6.25 and are currently trading around £4.50 which is clearly significantly below market returns.

The Chinese are coming - as if to prove that the world balance of power is shifting to the East, China's largest online company Tencent (not to be confused with 50Cent) has taken a 16% holding in Elong the Chinese online travel company for £52m, this is a business that is 56% owned by Expedia. I am at a loss to explain the Pingu-like penguin character that forms the logo for Tencent, but presumably this makes sense to the Chinese. If you know the reason, do let me know.

Trial with error - but learning and improving

Many of our clients will have received an email from me outlining advice about portfolios and rebalancing holdings. I have been eager to try out some new software from infusionsoft and this was a suitable time for a first attempt. The majority of the process has worked, although I made an initial faux-pas by not correctly inserting first names, which made it look rather odd. I have already had lots of valuable feedback from clients about how to improve communication and clarify what I need. Thank you for your patience as I work with the team to get this right. I'm always looking for helpful feedback, so do get in touch if you have any furrther comments.

Interest Rate Rise Guessing Game

One of the better known and better performing Fund Managers - Richard Buxton who runs the Schroder UK Alpha Fund is reported by Money Marketing to believe that interest rates won't rise here in the UK during 2011. Mr Buxton is a much admired Fund Manager and has had strong results with the UK Alpha Fund, depending on when you compare the data. Prior to his time at Schroders he ran the UK Equity Growth Fund at Barings, which was also successful. Mind you I remember being at a seminar in the City in 1999 whilst he was at Barings and I came away with the suggestion that we should also be mortgaging our grandmothers to take advantage of the rising dot.coms. It is pretty hard to go against the views of some of the more successful Fund Managers and most investors were caught up in the subsequent dot.com crash. Of course making mistakes is all a part of life and particularly investing. However, I am still of the view that the majoriy of Fund Managers do not consistently outperform the market.

I hope that Richard is right and that rates remain as they are, we all know that the economy is fragile and inflation looks as though it has relented a little. However, markets and market makers are complex and frankly some of the alledged inflation due to global food prices has nothing to do with reality or crop harvests and rather more to do with derivative trading - taking bets (albeit "educated ones") on the market which then make the market. In my humble opinion, this is not a good thing.

Prudential Profits Are Rising

Prudential recently announced their 2011 Q1 figures, which look impressive. Their global profit is up over the same period a year ago from £427m to £498m a £71m increase or nearly 17%. This at a time when pensions have been struggling, markets have had a hard time and generally the world might be described as "uncertain". This is of course, precisely what insurance companies thrive upon - uncertainty and perhaps rightly so. I have a high regard for Prudential who struggle to make the transition from traditional insurance company to that of ... well there's the dilemma. The insurance world is somewhat betwixt and between. Insurance has probably "never been needed more" than in 2011 yet traditional ways to manage money and investments is evolving rapidly to reflect a more cut and thrust short-termism world order, where fund managers are paid on results to outperform (and not many do). The rise of the fund supermarket or wrap or whatever you want to call it has meant that traditional pensions are somewhat lagging behind... and who in their right mind would buy the most traditional form of saving - and endowment?

You might be forgiven for thinking... so what! insurance companies rip everyone off... well perhaps some have and indeed the way charges are structured would make you wonder, but we need a good insurance industry, one that is competitive and well resourced. There is a degree to which the net inflows of money to the industry as a whole is alarming, for the last 4 years there have been net outflows (more out than in). According to the most recent 2010 ABI publication (reflecting 2009 statistics) the amount paid into pensions and life assurance products amounted to £119bn (9% less than in 2008) whereas payments to policyholders were £153bn. This cannot go on and underlines the main problem that Britain isn't saving enough and probably cannot afford to do so. So well done Prudential on a good set of results, let's hope that some of the profit is passed back to policyholders and not just the shareholders.

Fancy a $2.25m Bribe?

It may not be a surprise to those working within the financial services industry, but today I reported my first suspected fraud to SOCA. This followed an email addressed to me personally and offering a bribe to help move $15m from Africa. I won’t mention which President’s name was used to provide the bait or the country concerned.  I suspect that the email is completely bogus, but given that the FSA are keen to see that IFAs are involved with the fight against terrorism and financial crime (and my compliance consultants suggesting this would be wise) I duly reported the incident, though do so frankly expecting it to be just another email scam.

I very much doubt that there are three boxes, each stuffed with $5m for onward cargo. The payment for help to move the money out of Africa (which I am assuming is fictitious) is 15% of the stated amount; that’s $2.25m which I guess is a fairly reasonable bribe! So do let me know if on your travels across Africa, you come across three luggage trunks that look like they may be stuffed with money. They will be the one's with several armed guards.

If you have similar emails, which I certainly used to have several years ago. I am almost 100% certain that they will be completely bogus, but just in case – let the authorities know.

Savings Gap is £9 trillion...or to put it another way..... a big number

One of my professional bodies - the Chartered Institute of Insurance (CII) have published some research which reveals an alarming savings deficit at an estimated £9trn... yes that is trillion. Such a number reminds me of primary school days when children would try to express something big in a kind of made up sort of way. This is a trillion pounds sterling though. Something that despite our own pension provision will surely affect us all due to the State having to cut its purse strings at some point in the future. Nine trilllion pounds. £9,000,000,000,000 is what nine trillion looks like.

As a bright client you are probably thinking to yourself... hang on that's not a trillion, that's a billion (a million million).Yes you'd be right...but we are working on an American standard now and by we, I don't mean me, I mean the planet - or at least the UK, which decided to adopt the US/French version of counting. This dates back to a former Chancellor, one Denis Healey way back in 1975 saying that UKplc was adopting the American usage of the term (even though it is wrong!).

At a time when we really need clarity over our national sums, I am having to follow the errors of others in this respect. Like many of my generation, I'm stuck somewhere between imperial and metric and the UK's inability to be one or the other.

These rather mind blowing (or mind numbing?) statistics provide concern in an ageing population, where many of 31million people expected to retire over the next 40 years are "non-savers" and are relying upon inheritances that they invariably will not receive due to the rising cost of long-term care into which one in 4 people enter - or an estimated 8m people. So somewhere at some point the sums are not adding up...for society, which is simply not saving enough (because we tend to live lifestyles that we can't really afford).

Talking Money May/June 2011

I'm pleased to announce that the latest digital version of Talking Money is now available online. This issue considers pension reforms within the public sector, absolute return funds as well as the new rules about flexible drawdown, mentioned earlier.

We shall send out hard copies to clients that require them in the near future once we recieve these from the printers.

Business News Updates 11th May 2011

The retail sector has sector has had a decent month, in part due to many of us rushing out to buy garden furniture and "summer stocks" due to the warm weather. Sainsbury's seem to have encouraged us all to spend more with themas we tried something new. They saw an increase of 12.8% in pre-tax profits for Q1. Sales were up by 7.1% to £23bn.

The Bankers continue to have mixed fortunes with yours and mine. Royal Bank of Scotland announced a Q1 net loss of £528m, which was blamed on the Irish, whose luck certainly seems to have run out. You may have also picked up that the Banks are now dropping their challenge to the High Court ruling to resolve the payment protection insurance mis-selling scandal. As a result they are all starting to set aside funds for hefty payouts. Lloyds for example, set aside £3.2bn for compensation, which merely goes to show the depth and scale of the scandal.

Perhaps as a result of renewed interest in the Eurovision Song Contest and Dima Bilan winning in 2008 for the first time, the Russians have taken him at this word ("Believe") and decided to take a more active involvement in the music scene. Well, probably not, the music industry is just that - an industry and Access Industries recently paid $3.3bn in an all cash payment for the world's third largest music firm - Warner Music. Warner have a number of artists on their label including the Red Hot Chilli Peppers, Eric Clapton, Seal, Genesis, Neil Young, The Bee Gees and James Blunt.

Some of you may have had the Skype meeting experience with me - well Microsoft have stumped up a huge $8.5bn in cash to buy Skype, making this Microsoft's largest purchase. The irony will not be lost on PC users - their investor relations webpage takes ages to load up - or was this simply my own Internet connection? Probably me, or rather my Internet connection.

Returning to Europe, but remaining with a global brand leader, BMW has announced Q1 profits before tax of €1,812m up from €508m for Q1 in 2010. This is a significant increase. In Q1 BMW sold  382,758 BMWs (so not surprising that you see so many around!) you may remember that they now also own MINI and sold 60,860 of those and 723 Rolls Royce cars. These are global sales figures. Mind you orders are one thing, the world of motoring has a few supply issues at the moment with inevitably some tiny but vital component coming from Japan. Orders are now expecting fairly lengthy waiting periods, so if you are wanting a new car, you may have to wait.. much like most of the time spent in it if you ever drive in London or on the M25.

Pensions - 5 Things To Know Now

Those clients with Skandia pensions will have received a mailing from them over the last few days. In essence this outlines the new pension rules that have come into operation from 6th April 2011. The document is well written and quite clear, but it terribly wordy and dull looking - which will undoubtedly put many people off from reading it. So the key points - which apply to anyone with a pension are as follows.

1. The lifetime allowance (the total permitted value of your pension pot) will be reduced from £1.8m to £1.5m but this does not start until 6th April 2012.

2. The amount payable into all of your pensions is capped at £50,000 or 100% of your earnings (whichever is lower). However ANYONE under 75 can invest up to £3,600 towards a pension even if they have no income AND will receive tax relief at 20% - meaning that the amount paid is £2,880 with £720 provided as basic rate tax relief.

3. There is now a facility to use up (carry forward) any unused contribution allowance going back over the three previous years and assuming a maximum of £50,000.

4. There is now no requirement to buy an annuity by age 75, although in practice the great majority of people will. Remember that an annuity is simply a guaranteed income for life.

5. Provided that you have secured income of £20,000pa (which might include a State Pension) you can take the value of your pension pot as you like using the new flexible drawdown rules. You pay income tax on the money as though it was earned, but this does mean that you can effectively strip out your funds from personal pensions. This is ideal for many of our clients who want to control their income flow and tax payments.

There are other alterations, but frankly these are not that relevant to most people and I am happy to explain these in detail if required. One thing that has caused some confusion relates to tax free cash. At the moment all personal pensions (in their various forms) provide 25% of the fund as a tax-free lump sum. This has not been altered - contrary to some media speculation and suggestions.

Rate Held Again... No Surprise

You will probably be aware though perhaps not with all the coverage of the AV referendum but the Bank of England yesterday announced that interest rates would be held at 0.5%. This was not a surprise and I have been suggesting that rates are unlikly to rise until July. So the plainly obvious is that we are closer... but not there yet. There are also facts trickling through to back up the theory that inflation is starting to become less of an issue here in the UK - not the case in many of the more exciting economies, where inflation is the subject of more active monetary policy.  

Business News Updates - May 6th 2011

You will have probably heard that this April was the warmest April on record. It is alleged to have helped Next to increased sales for Q1, which were up 5.2% on the previous year. As a result profit expectations are set around £535m-£585m which by my maths is a margin of £50m (nearly 10% scope) but hey, it’s only £50m and about £15m more than previously forecast. I bet they wish that they also sold BBQ sets.

Unilever sales grew by 7% to €10.9bn in Q1 but I doubt that they put this down to the warmer weather and more people eating Walls ice cream and taking a bath or shower…would they? Of course not, this is a global business, a warm April in the UK is decidedly small beer on a global basis with only 25% of revenue derived from Western European markets. Sales is of course only one aspect of good news, profit is the real litmus test.

The Oil spike has of course helped the fortunes of the Oil giants. Take Royal Dutch Shell who have announced a 41% rise in net profits for Q1 of $6.9bn against $4.9bn a year ago. Exxon announced a massive 69% increase in profits for Q1 at a staggering $10.7bn. This is of course good news for those that hold shares in the company, but may be more of an irritant to those that merely fill up at a forecourt.

Keeping with the car theme, Chrysler Group LLC reported a net profit of $116m for Q1, compared with a net loss of $197m a year earlier, due to the success of its newer models and the overall recovery in global demand for vehicles which saw them shift 60,000 vehicles. This is its first quarterly profit since it emerged from bankruptcy protection two years ago. This will be a big boost to Fiat who have increased their stake in Chrysler.

Monthly Market Review

April was a good month for the Royal family and a good month for Oil. Those markets that saw the larger increases in value were Germany, Chile, Thailand, Korea. Russia has risen 14.5% in the year to date compared to the FTSE100 which has risen 2.9% over 4 months.