Anthony Bolton predicts better 2009 for Investors

Legendary investor Anthony Bolton has predicted a better 2009 for investors.

He said in the Sunday Times on 14th Decemeber, “Everything I need to see for a bottom is there. Valuations look cheap and you often get this kind of high intra-day volatility at a turning point,” he said.

“All the pieces are in place for a rally in the first quarter. The first stage of the bull market will be quite strong followed by a long period of consolidation. In the long run the market could return to its peak [6,930 in December 1999] but it could take quite some time.”

Does he know what he is talking about?

From 1979 until 2007, Bolton delivered average annual returns of 20.3% , compared with 7.7% from the FTSE All-Share index in that period,

A to Z of 2008...Credit Crunch, recession, Iceland

2008 was a busy year for everybody in financial Services & a new star was born in Robert Peston, the BBC's Mr Credit Crunch.

Money marketing have a useful A to Z of the year's events. (not online so far)

eg Z is for Zero : the number of banking jobs left in Iceland

10 Reasons to use an Independent Financial Adviser : 1

1 We are independent. We are not tied to any particular group. This means our recommendations are unbiased & impartial.

Many advisers only have ties to certain product providers. This can generate higher commissions for the advisers involved. Always check for independence.

The question to ask, "are you independent & whole of market?"

To be continued

Xmas Luxuries at Lidl

In this months Observer Food Monthly, Allegra McEvedy prepares a Christmas feast with luxury items bought at bargain price at Lidl.

Can vouch for the smoked salmon, rollmops and creme fraiche.

In Swindon, the store is in Gorse Hill, take a coat..the heating seems to be turned down!

http://www.guardian.co.uk/lifeandstyle/2008/dec/14/cheap-christmas-dinner

VAT Reduction of 2.5%

Will Alistair Darling's 13 month reduction of VAT by 2.5% have any effect on an ailing economy?

A client remarked to me last week that they would not rush into a shop advertising a 2.5% reduction..

One problem for businesses is re-calculating their VAT bills.

Pre Budget Report November 2008

Alistair Darling delivered his pre-budget report. The main points

• Temporary 2.5% cut in VAT to 15% from 1st December for 13 months
• New 45% tax band for those earning more than £150 000
• National Insurance to go up by 0.5% in 2011
• £60 Christmas gift for pensioners
• Phased increase in vehicle excise duty

The key question is that will the government be able to pay for the increased borrowing caused by events such as bailing out failing financial institutions and financing wars in Iraq & Afghanistan.

Interest Rate cut of 1.5%

As anticipated the Bank of England cut interest rates to 3%. The lowest in some 50 years.

Will mortgage rates come down?

That is the important question, banks and building societies have not been passing on reductions to consumers because they have been worried about their profit margins.

There are some lenders who would be able to lower rates substantially but are not doing so becasue of lack of competition in the market place.

Will savers be hit?

Yes, rates for savers will reduced much quicker than for lenders.

Recent Financial Events...September & October 2008

The last few weeks have seen some extra-ordinary events in the financial World. US & UK governments have refinanced the banking sectors and failing institutions have been bought up by rivals.

The Bank of England lowered interest rates yesterday (8 October) along with other Central Banks. The idea being to stop or lessen recessions around the world.

Events have been driven by fear more than reality. What we will see is more regulation and less risk, which is what consumers need.

Lehman Brothers & Merrill Lynch...why the fuss? Important in Swindon?

An extra-ordinary weekend has seen US Investment Bank Lehamn Brothers file for bankruptcy.

Secondly Merrill Lynch has ben bought bu the Bank of America.

Both companies were badly hit by having bought bad mortgage related debt.

There will be repercussions this week. The Bank of England & European Central Bank have provided more money today to help credit markets and it is predicted that the US Federal reserve will lower interest rates.

How does it affect the consumer in Swindon & beyond?

Lehaman Brothers & MerrillLynch have been at the heart of the credit crunch. The cleansing/purging of the 2 companies is part of the clear up process.

AS the process goes on then credit will slowly begin to be made available to banks....which will eventually mean customers will be able to get cheaper mortages (theoretically).

Cheshire & Derbyshire “saved” by Nationwide

It looks like the Cheshire and Derbyshire Building Societies are about to be taken over by the Nationwide Building Society. The Derbyshire is the 9th and the Derbyshire the 11th biggest societies with about 1 million customers between them.

The Derbyshire has been hit because it could not raise money on the money markets...the credit crunch again. Whilst the Cheshire had encountered some problems with its commercial property lending.

The Financial Services Authority has had a hand in recommending the deals to the 2 societies and the speedy negotiations which have taken place

Will there be any windfall payments?

Borrowers & savers with the Derbyshire or Cheshire should not expect any windfall payments owing to the problems they have encountered.

Can you trust the financial pages of National Newspapers?

Since the dawn of mankind there have been get rich schemes. The financial pages of the national pages abound with rich succesful people, the implication being that you are the only one not making any money.

Many a time the city editors encourage you to invest in a fund or company or asset that is high risk, has peaked in value and is on the way down.

Some examples from the last few years.

1 Invest in gold...it hit a high in April 2008 and the price has retreated
2 Buy to Let Property. Too many unwanted flats, falling house prices.
3 Bubbles in India & China in 2007

Possibly the worst re-occurring offence is to give tips on company shares as though they were horse racing tips (Thanks to Lawrence Gosling of Investment Week for that analogy)

The solution
Have a broad based portfolio of assets not linked to the rise of fall of risky asets

Stamp Duty "Holiday"

Alistair Darling announced a Stamp Duty Payment Holiday.

The threshold for Stamp Duty has been temporarily raised to £175 000. The idea is to get the housing market going again.

Will it work?

In the early 1990s, thne Chancellor Norman Lamont tried it. He was asked his opinions this time round. He mentioned that it had not worked then & he did not expect it to work now.

It will have no effect in London & the South East where the average property for a first time buyer costs £241,985.

Pensions advisers & advice...Swindon & beyond

In the old days when you wanted advice on your company pension, there was somebody you could call up or even meet to discuss contributions, investment choice & other matters.

However with cost cutting many firms outsource their pension services & employees do not have anybody to talk to.

Where can you get pensions advice?

You an contact an Independent Financial Adviser. We deal with pension everyday especially for self-employed people or those who had company pensions transferred into Personal Pensions.

The same principles apply whether you have a company, stakeholder, personal or self invested Personal Pension (SIPP).

You are looking to minimize charges and choose the right investments suited to your age and attitude to risk.

4.99% Mortgage Yorkshire Building Society...beware!

Mortgage providers are well versed in the art of getting their products to the top of best buy tables.

There is a horrific example currently from Yorkshire Building Society. It has a fixed rate of 4.99% for 2 years.

Sounds good? The reality is somewhat different

It has an arrangement fee of 3%, on a remortgage of £200 000, this is £6000!. You can also add this fee to the mortgage & pay interest on it.

You also pay a non refundable fee of 0.25% on application, £500 on the £200 000 remortgage example.

Conclusion

Avoid, truly shocking & rather misleading product.

Stamp Duty

This week the Chancellor announced some plans to possibly defer Stamp Duty to restart the housing market.

What is Stamp Duty?

It covers the registration of many types of official financial & legal transactions. The enforcement of it in the UK's American colonies was one of the triggers towards independence.

However the one you will be familiar with is when buying a house.

The rates are

over £125,000 to £250,000: 1%
over £250,000 to £500,000: 3%
over £500,000: 4%

Credit Crunch: 1 year old

It’s now 1 year since the term “the credit crunch” entered public circulation. The first signs can be dated back to February 2007 when HSBC issued a profits warning.

UK Banks made some pretty horrendous decisions taking on bad debt from the US. Unfortunately these mistakes have been passed onto customers higher mortgage & loan interest rates.

This week banking heavy weights HSBC, the Royal Bank of Scotland & Barclays issue trading updates this week. The results will be interesting. As mentioned last week the only people to lose their jobs are some Directors at Northern Rock.

What will happen next?

The Mortgage market will continue to be complicated, so it is worth getting proper independent advice before making a decision.
Banks will probably merge, we have already seen Santander (Abbey) swallow up Alliance & Leicester. Some smaller banks such as Bradford & Bingley and even some building societies could follow suite.

Negative Equity: BBC Radio Swindon

Below is a transcript of my feature with Claire Bailey on the BBC Radio Swindon Breakfast Show 1 August.

What is negative equity?

Your house is worth less than the mortgage you got to buy it.

When does it occur?

When house prices fall. The Telegraph said yesterday 1.7m home owners or 1/7 of the total were already affected ! There has been a 9% fall from last year’s peak (Halifax house price figures). A Standard & Poor’s survey predicts the market could fall by up to 26.8%.

Who is the worst hit by negative equity?

1 People who bought houses at the peak of the market last year and especially those who took out 100+% mortgages such as the infamous Northern Rock Together product. It allowed people to get houses when they didn’t earn enough.

2 Those in averagely priced homes…the top & cheap ends of the market haven’t been affected.

3 People who dabbled in Buy to let property..again bought at the top of the market

Does it happen often?

The last time was in the early 1990s.

Why have house prices fallen?

House price inflation was around 10% for most of the last decade. This is ultimately unsustainable. The people who drive the market..first time buyers can’t afford to buy.

Plus the impact of the most used financial term of the last year…the credit crunch.

First time buyers can’t get mortgages because banks aren’t lending money….certainly not 100+% mortgages.

What should you do?

Wait, sit tight. House prices will fall until the bottom is reached. At that point first time buyers will be able to afford properties.

The mortgage market will recover too…

John Templeton: Investment Wisdom

Investing legend John Templeton recently passed away at the beginning of July. In 2007 Time magazine made him one of their 100 Most Influential People.

During his long life, he made one very pertinent remark on investing.

“When people are desperately trying to sell, help them and buy. When people are enthusiastically trying to buy, help them & sell”

Thanks to Lawrence Gosling of Investment Week for the quote.

Banking chiefs should be sacked says fund manager

Fund manager James Foster of Artemis says heads of failing banks such as Fred Godwin of Royal Bank of Scotland & Andy Hornby of Halifax Bank of Scotland, "should be shown the door".

He continues, "they had forgotten the basic tenets of banking".

He was referring to their current problems, the way in which these had arisen & how the management of the banks are tackling them.

From Professional Adviser p5 24 July 2008

Northern Rock re-emerge

For the first time in many months, I have received marketing material for Northern Rock mortgages.

They are the most financially secure company to buy a mortgage or a savings product from at the moment because of government backing.

How do the mortgages compare?

The rates are fine but they still maintain a traditional feature of Northern Rock products...high arrangement fees.