Quietly Brilliant?

You may have heard of the Blackberry or the iphone or indeed a variety of other handheld devices. One that to many in the UK is a relatively new player is HTC. They have virtually doubled their profits in Q2 against Q2 in 2010 to £380m HTC is based in Taiwan and manufacturers smart phones and is listed on the Taiwan stock market. I believe that HTC are the only manufacturer currently producing a handset with 3D capabilities.

Is water the new gold?

Anyone with a pulse will appreciate that this is a planet covered largely by water, but unfortunately, drinking water is fairly scarce in many parts of the world and no doubt you will be aware of the drought that is occurring in East Africa. Water is a precious, life saving commodity. There are many that believe that it is a resource that is running out, particularly due to the way many industries use such vast quantities in production processes.

So it ought to be an incident of note when a business from Hong Kong makes an offer to buy one of the UK's water companies. Northumbrian Water were approached at the start of the month by Cheung Kong Infrastructure Holdings Limited (CKI). The Board have agreed to permit CKI to conduct due diligence. The initial offer is 465pence per ordinary share. Northumbrian Water is a UK listed share.

Chances of winning

The news that the biggest EuroMillions jackpot of €185million was won by a British couple Colin and Chris Weir may tempt others to believe that they too can win the jackpot. Certainly €185million is a lot of money to win and I have to say that I have a number of concerns about anyone winning (or inheriting) very large sums suddenly. Whilst the attraction of great wealth is something that appeals to most of us, as we all know, money can be very divisive. I wonder how many well-wishers and friends are truly able to cope with such dramatic changes in "fortune". It would seem that this is something that Bill and Melinda Gates also have concerns over and have plans to gift most of their wealth to charity rather than their children. I believe the same is true of Warren Buffet who plans to give away 99% of his personal wealth. 

The chances of winning the main UK lottery are apparently 14million-to-1. That is a very small chance. In investment terms any financial adviser suggesting that you will lose all of your capital in 13,999,999 occasions out of 14,000,000 would probably not attract many clients. So rather than listen to those that wish to make their fortune, perhaps time should be spent listening to those that have. Here is probably the world's most successful investor Warren Buffet.

Beans means...buck$

The worlds favourite coffee shop (Starbucks) has announced plans to reorganise its global operations, at the moment only 20% of its revenue is generated from outside of the US. The plan is to create three new regions, each with its own president to oversee operations. It is interesting to see how a giant coffee company carves up the world into China and Asia Pacific, Americas, EMEA (Europe, UK, Middle East, Russia, Africa). Michelle Gass has been names president of Starbucks EMEA.

It may interest you (it may not) that in Q2 of 2011 there were 10m Starbucks cards activated worth £128.8m. If you are a card user you will appreciate the mechanics of reloading a card. There were 14.3m reloads in Q2 worth $341.1m at an average of $24 per reload. Big numbers from the big coffee house that began life in 1971 as a single outlet in Pike Place Market, Seattle.

Co-operative financial services to close

On Friday, the Co-operative announced that it is pulling out of providing financial advice. CFS is now in the process of rearranging itself making something like 670 of its financial advisers redundant. This is in part due to rising regulatory costs and presumably a decision about their ability to deliver a workable service with the new rules for advisers from 2013 (all advisers have to charge fees from 2013 and remove commission).

Royal London are now in talks with Co-operative over the sale of its life assurance and asset management businesses.  AXA are also in the frame to take over some of the assets and perhaps some of the branch-based staff. They will be offering AXA products. The IFA arm of the Co-operative Bank was sold off last year. The Co-operative has been an advocate of ethical investment and it is not clear this has been effected. This is not good news for many people that have modest levels of savings and want ethical investment, reducing the choice further.

There be Gold in d'em hills...and silver...and...

Fresnillo, the silver mining company recently published their Q2 figures to end end of June. Their overall Q2 production of silver increased by 8.8% and by the way, they also increased gold production by 20.6% over the same period in 2010. These are record levels for Fresnillo largely due to the successful start-up of production as the Saucito mine. The company is on track to achieve the full 2011 production targets - anticipating production of 44 million ounces of silver and 400,000 ounces of gold. Fresnillo plans to double production from the new Mexican mine by 2015.

However the news is better-sweet, during the same period Fresnillo "suffered two fatalities of unionised personnel" and contractors at various operations suffered five fatalities. Mining is hazardous. You will recall the 33 miners that became trapped in a mine in Chilli who were working at the San Jose gold and copper mine. Fresnillo are a UK FTSE listed company and about the 42nd largest company listed on the UK stockmarket and representing about 0.6% of the FTSE100. Fresnillo has 4 main mines at Fresnillo, Cienega, Herradura and Saucito.

Stressful Tests

Summer is here. Schools and Universities are working towards the end of their academic year. Many pupils and students will have had to sit examinations over the last few weeks. My daughters both sat exams. May and June are usually fairly stressful for students. So imagine the news from Friday evening that now nearly 3 years after the credit crunch really took hold the European Banking Authority published its 2011 results.

Ninety banks have been "stress tested" from 21 countries. Sadly eight banks failed the stress tests and a further 16 are frankly "borderline". That's roughly a quarter - not terribly impressive. The stress test essentially looks at capital available to the bank in the event of disaster. Levels of capital adequacy have been previously agreed. As a result many banks have been "repairing their balance sheets" the problem with them doing this is that they are building up their own reserves rather than lending money to stimulate economic growth. So all of these 24 banks will have to do further reparation to their balance sheets, which means further sluggish lending.

Up up and away

Well, I'm now at the start of my summer holiday and many thousands of people will be over the summer. Flying is one of those stressful moments for the infrequent flyers and a huge amount of trust and faith is placed in the pilot and the aeroplane. As a passenger on a commercial flight, we don't kick the tyres to check the pressure or ask to see the pilots license - something that we might otherwise do in many other aspects of "normal life". This collective "faith" is very difficult to challenge.

It may be of interest to learn how most commercial pilots get paid. Well, they have a basic salary and of course a pension scheme. However most of their pay comes from a bonus. A 747 captain with experience can earn over £100,000. Bonuses can be earned by saving fuel. In general the higher the aeroplane flies, the more efficient. So whilst you climb to the heights of the skies, so too does your captains income. 

Lessons from Golf - Practice, Practice, Practice...

The Open began on Thursday and with several British players ranked highly in the world, this years event at Royal St George's looks likely to be another event with much home interest. Throw in £900,000 for first prize and an overall sum of £5m to be shared between those that make the cut and you will quickly appreciate how the odd stroke here or there can make a significant impact on your pocket. Sadly, I am a very poor golfer. Golf can teach numerous lessons for life, for me, I'm always impressed by elite sports people that seem to be able to hold their nerve just at the right time. Invariably there is very little between the majority of players, but those that excel or become "greats" are those that have mastered focus. They don't appear to be bothered about the prize money, but about performing to their best ability, pursuit of the prize is naturally within their thoughts, but the masters know that the game is played over 4 days, often in very different conditions and with different partners. Winners tend to be those that make the fewest mistakes in golf, but also willing to take some weighed up chances.

To many, golf can seem like a silly game, hitting a tiny ball with a stick towards a hole not much larger than a coffee mug. To a golfer, it is a personal delight and constant challenge. Success is easily forgotten when disaster strikes, but as with most elite performers, the ability to learn and recover from set-backs tends to be what propels them towards continued success.

As with most sports, those that practice effectively tend to do well. Whilst attention is drawn to a 4-day competition like the Open, in reality many hours of training and tweaking are put in. Most golfers have a coach, which is worth reflecting on - why does someone at the "top of their game" need a coach?... perhaps this is what helps them stay at the top of their game. Financial planning is no different. A good financial planner is much like a coach, just because you may be "successful" does not disqualify you from benefiting from expert tuition and counsel. Making or earning money may be a "normal" activity, but I have yet to meet anyone that I could not help improve their game.

Ben Crenshaw once said "I'm about five inches from being an outstanding golfer. That's the distance my left ear is from my right". Another great golfer Tom Watson said "if you want to increase your success rate, double your failure rate". I also believe that he said "Its funny, the more I practice, the luckier I get". Often we marvel a great sporting success, yet fail to apply the life lessons that are offered up. When it comes to investing or managing your money, this takes time and practice to get right.

Monthly Market Report

June was a fairly tough month for most markets, all the vital statistics are available to read via our website. The new market report is now available.

Fit and Proper Person?

News Corp has today withdrawn its bid to take a majority shareholding in BSkyB. The current climate is clearly not helpful to their orginal plans. I presume that this would mean that there is no longer a requirement for the Competition Commission to investigate News Corp which was referred by the Culture Secretary on Monday.

For the record, financial advisers (often not highly regarded) have had to be fit and proper people for many years and this is simply part of the rules of engagement set out by the Financial Services Authority.

Perspective is everything

Today, Neptune is one year old. That's not Neptune the Fund Management Group which celebrated its ninth birthday in May this year. No, I'm talking about the planet Neptune. A year on Neptune is approximately the same as 164.79 years on earth. Being, what they are, the good and the great seem to order the world and universe by when we discovered it, rather than when it was created. Odd but true.

Neptune, now regarded as the further planet from the sun within our solar system was discovered in September 1846 by Johann Gottfried Galle (German) following application of enormous amounts of mathematical calculations by Frenchman Urbain le Verrier. His mathematics was quite brilliant. Perhaps even more impressive was Galileo (Italian) who is believed to have first calculated and observed Neptune nearly 230 years earlier in The Starry Messenger in 1610. Englishman John Couch Adams is also attributed to have discovered Neptune independently, again using mathematical brilliance.

How our global finance system could benefit from genius mathematicians like Galileo or le Verrier! At the same time, NASA are conducting the final Space Shuttle mission with Atlantis, which has hooked up with the International Space Station. All of this takes genius and is happening above your head now. Precisely what these giants of mathematics and science would make of our respective nations inability to balance the books would perhaps be the one element of maths that confounds them.

Social Action ISA

There has been increasing interest in a social action ISA. A variety of interested parties would like to take ethical investment a step further by using money to fund social action community projects. This is something that has been mooted for some time. There is suggestion that the ISA allowance could be increased with the increase being used to fund such projects. How this works in practice is yet to be thrashed out, but you may be interested in this short 2 minute piece from the BBC.

Happy to be wrong - rates held at 0.5%

There are not that many occasions in my life when I am happy to be wrong, but today's announcement to hold the Bank of England base rate at 0.5% is one of those occasions. I had previously suggested that I expected rates to rise in July 2011. This has yet to occur. Mind you, this is only good news for borrowers and not favourable for cash savers. The minutes of the meeting will be published by the Bank will be released on 20th July. For the record, last month of the seven members of the Monetary Policy Committee in June they voted 5:2 in favour of holding rates. It will be interesting to see if the vote was a little closer today.

FTSE100 up up and away?

The FTSE100 is close to its 12 month high (again). The 12 month high is currently 6091.33 achieved in February, today the index is trading at around 6025. This is still some way off the all-time high in December 1999 of 6930.20, but a significant improvement on 5th March 2009 at the credit crunching depths of 3512.10. Perhaps conveniently, this date is now 2.33 years ago, representing an annualised return of 26% excluding dividend income.

In practice few people invested on 5th March 2009, most simply had to wait for their investments to recover. I dare say that marketing departments of Fund Management groups will now be working hard to show their data in a very positive light. However, remember that a rising tide lifts all boats. In practice the FTSE100 is now pretty much back where is was prior to the credit crunch nightmare. The question then is what have we learned? It has taken a little over 2 years to recoup losses for those that were invested? hopefully rather more than simple maths. An important (vital) lesson is to take a long-term view.

Much can be hidden in statistics. Consider that on 5th March 2008 the FTSE100 index was nearly 20% lower than its all time high. Over the next 12 months it fell 40%. On that day the index was 50% of the all-time high. The following 12 months see the index rise 60% but still 15% below the all-time high. Marketeers (and journalists... and unscrupulous financial advisers) use these sort of statistics to overstate a point. Not convinced? here's the facts:

30th Dec 1999   6,930.20 (all-time high)

5th March 2000 6,487.50 (93.61% of all time high) fall of 6.3% from all time high

5th March 2001 5,931.30 (85.58% of all time high)

5th March 2002 5,214.00 (75.23% of all time high)

5th March 2003 3,563.50 (51.41% of all time high)

5th March 2004 4,547.10 (65.61% of all time high)

5th March 2005 5,036.30 (72.67% of all time high)

5th March 2006 5,858.70 (84.53% of all time high)

5th March 2007 6,058.70 (87.42% of all time high)

5th March 2008 5,853.50 (84.45% of all time high)

5th March 2009 3,529.90 (50.93% of all time high) fall of 40% in 12 months

5th March 2010 5,599.80 (80.80% of all time high) rise of 59.4% in 12 months

5th March 2011 5,990.40 (86.43% of all time high) rise of 6.9% in 12 months

5th March 2012 ????????

I should point out that this is merely the level of the FTSE100 index. Investors would have received income from dividend payments, so although there are falls in the valuations, income from dividends would mean that actual investment values are higher. The value of income from investment should not be underestimated.

Whilst there are people that have voiced the view that they "saw it coming" deciding when to withdraw from the market and then when to re-enter is very very difficult. Many people who saw the value of their portfolios reduce as a result of the credit crunch decided to hold cash, but by doing so missed a 60% rise in the market if they stayed out of the market for just 12 months waiting for things to get better. If you are looking for patterns within the data, I am afraid that the only pattern is that there is no pattern.

I hope that this is a reminder that whilst the media will now start to talk up the success of the FTSE100 closely followed by fear that Europe and America may implode, taking the a long-term perspective is vital. Please consider my document "Our Approach to Investing" for further information.

Success - a funny old game?

I have to admit to being a little amused when I hear the media discuss Andy Murray and his chances of ever winning a grand slam tennis title. The guy only turned 24 in May and whilst he has still not won a grand slam tournament, his earnings from prize money alone in the 2011 season to date are $2.4m which is only a touch less than Roger Federer's $2.5m this year. Over his total career he has won prize money of $16.4m since turning professional in 2005. Pause for a moment, he is 24, been a professional for 6 years and has already won $16.4m. He is ranked 4th in the world by the ATP, behind Federer, Nadal and Djokovic who has had a fantastic run of form and obviously won the Wimbledon 2011 men's singles championship at the weekend. His season has seen him win $7.6m which is nearly a third of his total and  career winnings since 2003 of $27.8m. As Novak Djokovic claims the ATP number one spot, consistently progressing well in the 18 tournaments that he has played in this year he can certainly enjoy the heights of being the current tennis ace with 26 titles. 

Roger Federer: Career Earnings $63.5m with 67 titles (pro since 1998, now 29) now ATP#3

Rafael Nadal: Career Earnings $42.6m with 46 titles (pro since 2001, now 25) now ATP#2

Novak Djokovic: Career Earnings $27.8m with 26 titles (pro since 2003, now 24) now ATP#1

Andy Murray: Career Earnings $16.4m with 17 titles (pro since 2005, now 24) now ATP#4

Robin Soderling: Career Earnings $10.3m with 9 titles (pro since 2001, now 26) now ATP#5

Andy Roddick: Career Earnings $19.6m with 30 titles (pro since 2000, now 28) now ATP#10

Career earnings are from tournament prize winnings only, it does not include income from promotional work or other business activities. Whilst it is clearly Andy Murray's dream, ambition and determination to win a grand slam title (Australia, France, Wimbledon, US) by any sensible measure he is surely already a highly gifted and highly successful tennis professional. There may not be much in it (which could be said of a many tennis tournaments) but in terms of age and when he turned pro, Andy Murray's career is already a glittering one. Few people on planet earth can say that they got to number 4 in their field by the age of 24.

This prompts me to reflect on how success might be defined. It is surely rather more than simply being number one, or winning a specific tournament, even if it is a Wimbledon final (now in the past). This reminds me that success in a moment is fleeting and that real success is from the lives we lead consistently day after day.

The US Open, the fourth and final "grand slam" of 2011 is now just a few weeks away held in New York on 29 August. Last year Nadal beat Djokovic in a 5 set final. At the end of the year on 20 November London will again host a major competition in the O2 (The Dome) where the top 8 ranked ATP players will compete for the World Tour Finals. Tickets for the final (27 November) range from £100 to £8,500.

The career earnings figures that the ATP produce are really very helpful in terms of taking a longer-term view. I believe that we could all learn from this example (including the Government and HMRC) and would almost certainly handle money more thoughtfully if it was shown in a similar fashion, rather than a monthly or annual sum. If you read my piece about Public Sector pensions last week, you may be interested to learn that the total income earned from someone starting on £18,000 and inflating this by 2.5% over 38 years was £1.12m career earnings.

Gold to Go?

For all my blogging about gold over the last few weeks, you may not be aware of the Gold To Go ATM (automatic telling machine) that now resides a short distance from me at the Westfield shopping centre. This is not to be confused with the 1990's European TV quiz hosted by Henry Kelly. German company Gold to Go have been gradually placing gold dispensing machines in some high profile locations across the world. Much like a normal ATM you punch in your PIN to dispense money, though instead of your selected level of cash, you select the weight of gold bar that you require. Being German, the ATM is a remarkable and highly reliable piece of engineering, which is clearly a rather fundamental feature. Anyone that has ever used one of the car parks in Kingston Upon Thames will appreciate the problems of consistently failing machines.

This begs questions about money laundering and fraud, but apparantly this is all taken care of via a form of identity check. Suddenly you can appreciate that the machine does need to work rather well. The Gold to Go website says that there is money-laundering and smurfing protection. A smurfing attack is not a hoard of tiny blue...er.. smurfs? but an exploitation of internet broadcast addressing to create a denial of service... because this ATM is plugged into the internet. It includes a personal ID scanner and camera.

For those into coin collecting, this will perhaps be a temptation, indeed many may be tempted to convert cash into gold which is very neatly dispensed in mini gold bars, with local branding. Mind you, as for its original mining source, I suspect that you will not get this information printed on your receipt.