Archive | April, 2012

Markets Weekly Round Up – And What A Week

14 Apr

The markets have ended the week down, marking the largest weekly decline so far this year. What a crazy week in the markets! The markets have felt more like a roller coaster than the financial valuations of shares in companies, with prices swinging wildly on an almost daily basis and that’s in a week where there was virtually no significant economic and other driving news.

Investor sentiment has really shown how quickly investors views have and can change from optimist to pessimist. This change was expected as we have seen a lack of market volatility and investment realism based on actual underlying fundamentals so the likelihood of the “king’s new clothes” scenario I had expected. The question is – is this just a bit of profit-taking before the rally continues or the end of an overzealous spike – the calm before the storm and panic?

I am expecting a short-term pull back based on fundamentals, Eurozone fears, US & China economic story and reality that the markets have priced in an overly optimistic view of the near future. In spite of this I believe the general trend and data show a positive story over a long time horizon but the short-term will be volatile and is currently over-priced with a further drop expected.

The Markets

The recent market drop and increased volatility reflects, in my opinion, investor sentiment regarding the health of the UK and global economies, which saw some of the most impressive gains of the year going into earnings season and were then wiped out over the last two weeks.

I can confirm that prior to the recent declines, I had already restructured client’s portfolios to be significantly more defensive and the outcome is during this negative period we have made a profit and are well placed to take advantage of the opportunities created by the situation. Client’s investment risk exposure is carefully controlled to reflect their personal risk profile as a maximum if potential profits warrant the exposure.

When we have weeks like the ones that have just been, help to explain why investing for the long-term is the only way to play the markets today but with the bias to maximise potential risk adjusted profits and minimise any potential to losses. The plan is to structure and manage clients’ portfolios to reflect potential risk/return opportunities with a limitation on the exposure as defined by your individual risk profile. To be sure, I believe you should stay well-informed about the recent happenings and this is part of the reason for the existence of this blog.

However, wild swings like this week’s often hurt investors’ psyche more than they help unless you receive suitable support, guidance and investment advice. The risk being that investors can be largely distracted from the most central aim of saving and when you receive quality advice market volatility, panic and confusion can lead to enhanced profits.

Questions, please contact me at, twitter welshmoneywiz, linkedin Darren Nathan

Pensions, Annuities and Drawdown

13 Apr

Capped drawdown was introduced as part of Government reforms to abolish compulsory annuitisation at age 75.

Following the changes, which came into force in April 2011, the maximum amount a person in capped drawdown can withdraw from their pension pot each year is equivalent to 100% of the GAD annuity rate. So the initial income generated by a level single life annuity and the drawings through capped drawdown are the same. The future drawings through capped drawdown is set tri-annually depending on gilt rates and the value of the pension fund (so investment performance is a key factor).

Last week the Association of British Insurers debated the issue as many have raised concerns about the potential of falling annual drawdown income.

Mark Hoban, Financial Secretary to the Treasury gave his opinion on this  subject: “Whilst the Government reforms to extend and improve capped drawdown gives greater freedom, they do interact with the effectiveness of a fund manager’s strategy and gilt rates to determine the maximum drawdown. The Government appreciates that in the short-term, some of the other factors affecting drawdown rates may be combining with the change in the annual withdrawal limit to reduce individuals’ total drawdown income. However, the Government’s reforms are based on longer term considerations; we are confident that the reforms will improve flexibility and income sustainability for savers for the future.”

When considering the most appropriate route for your pension income, you need to consider current and future factors. Annuities have the benefit of a defined and known income, possibly for life or a fixed term; although in most cases may cease on the death of the annuity holder. Whereas capped drawdown provides an income directly from the pension fund and so future values can be volatile and could lead to either, an increasing or decreasing income; but on the death of the pension account holder the benefits can be received by the surviving spouse and possibly their dependants. 

There are pros and cons to both and the intricacies need to be considered before making a decision, take professional advice to consider your options.

My contact details are :- email, twitter welshmoneywiz, linkedin Darren Nathan

China’s Economy is Heading for a Soft Landing, Slowdown or Hard Landing?

13 Apr

The big worry about China, is our reliance that their growth will help drive economies around the world out of the global recessionary cycle. So, if the assumption on this is wrong, how dire will the fallout and effect be on the Chinese and global economies? 

The Chinese economy grew at a more muted rate in Q1 2012, with growth of 8.1%, down from 8.9% in Q4 2011 and lower than amalgamated economists forecasts of 8.3%. The figure where a soft landing is expected to transfer into a hard landing and potentially market crash is 7.5%

So, China’s economy is not heading for a major crash based on these indicators and many suggest will manage to engineer a soft landing. The concern being that the downward trend if not stemmed could fall below 7.5% before year-end and markets are more vulnerable to “what they fear” rather than “what is”.

There are many leading economists forecasting opposite scenarios – the optimists believe an engineered soft-landing will be achieved while – the pessimists  believe the Chinese economy is heading for a crash. 

The problem being if you research boom bust cycle, you’ll get thousands of articles and research documents on its history and if you research soft landing there are very few entries and no historic events. There’s never been a boom and a soft landing ever.

I believe the Chinese economy does not seem to have a problem with growth. I think there is a problem with credit underneath the growth. For international markets, in general, to regain confidence in the Chinese market which will lead to a sustainable rally, we will need to know what are these issues and how they are being dealt with. I think this will be dealt with on a piecemeal approach and once this is the case I believe we can move on. This coupled with issues in the banking sector (as credit is uncertain) make a compelling argument that a soft landing is unlikely. I also don’t believe a crash is expected, markets will pullback on a realisation if a soft-landing is not compelling but I believe the available funding and the wish of China’s officials will soften the hard-landing.

My contact details are :- email, twitter welshmoneywiz, linkedin Darren Nathan

Rising Stars – One Idea – Look To Luxury Brands

11 Apr
Okay, we are well aware that the markets are in a phase of possibly a market correction but at least a drop. You will be aware that I have previously amended clients’ portfolios in expectation of the current pull back and I personally believe that the markets will drop further, at least in the short-term.
Now could be a good time to review decisions to take advantage of buying opportunities, for those who have followed a similar strategy and have avoided the declines – I expect you will be well placed to take advantage of the market opportunities as they unfold.
Last year was a good year for the luxury goods industry, with sales rising by over 15%. The market growth has primarily been driven by wealth in emerging markets; and consumers from Asia ex Japan, the Middle East, Eastern Europe and South America buy about half of all luxury goods.
Many luxury consumers buy luxury products while travelling overseas, as they may find better prices due to lower taxes and possibly better choice. According to Global Blue (a specialist in processing tax refunds), the most important luxury buyers while travelling are the Chinese, Russians, Japanese and Brazilians. Also, high-end consumption in the US is doing better than expected, adding to the industry’s growth. I believe this has been driven by the financial recovery and lower unemployment rates lifting sentiment among these upper-income consumers.
Luxury goods’ is a profitable business and companies have strong balance sheets. I see the outlook for luxury goods remains favorable.

The key to investing is including elements, which add the potential of profit on a risk adjusted return basis but a careful eye needs to be kept to fundamentals, market failings, diversity and asset allocation to help ensure the best potential outcome is achieved.
If you need my assistance or have any questions, contact me on the details above – my email address is

Market Round Up & Outlook

10 Apr

Recently, we have seen both the continuation of the Bull Market and last week this ended with some poor results leading to a drop from there. It’s still fair to say there is both good and bad news entering the market and the data at best is sending mixed messages.

Economic Data

 The Good News – factory orders grew, the unemployment rate fell, and auto sales were reasonable.  

The Bad News – new payroll additions were well below forecasts, construction spending slumped, and consumer credit levels didn’t come anywhere near growing as much as it has been of late.

The one area last week that created the most focus was the jobs data and the message was clearly mixed. The aggregate of the numbers verify that the jobs picture is getting better.  The number of total unemployed seems to be falling, while the total number of employed is rising. 

This week there is little in the way of economic data other than towards the end of the week there is the PPI (Producer Price Inflation) and Consumer Price Inflation.  Both are expected to be higher for March.


Stock Markets

Last week was the second losing week in the last three, and only the fourth losing week in the last sixteen. We have seen some positive results over the last few months but I can’t help but ask if the recent declines is an omen of the long-overdue correction and maybe is now starting to unfold?

The CBOE Volatility Index (VIX) is starting to test its trading range.  In fact, the VIX’s 50-day moving average line is clearly under pressure as a ceiling. I expect a further tranche of unexpected bad news could push the VIX above this ceiling and this could out the  pull-back (and market drop) into motion.

At the moment, this is just conjecture but could clearly be the next big move for the markets.

Any questions or need assistance, ask –

SIFA Slams St James’s Place

6 Apr

St James’s Place (SJP) is a well respected Insurance and Investment Company who still work solely through a self-employed sales force. The down side is they are not independent but have many proficient sales people who will offer the best of the product range they can sell.

The outrage is from the Solicitor IFA trade body Sifa, who have accused St James’s Place of making “distinctly misleading” claims and it raises concerns where an institution who gives financial advice sees it to be acceptable to allow dishonest business practices. SJP has written out to financial advisers in an attempt top attract them to join St James’s Place, while suggesting that they can continue to receive professional introductions through solicitors.

This is not the case as solicitors are governed by a strict code of practice to refer only suitably qualified independent financial advisers and this can’t be a sales person from SJP. SJP’s sales people are called Partners and Senior Partners depending their success and longevity in selling their products.

SIFA has reported SJP (St James’s Place) to the Solicitors Regulation Authority.

The SRA’s code of conduct states solicitors can only refer clients who need investment advice to “independent intermediaries”. It defines an independent intermediary as an IFA who can advise on investment products from across the whole of the market and offers a fee option.

Markets Trade Lower

6 Apr

Share prices have dropped this week as fears return over problems in the Eurozone and US jobs data on Friday, where many stock markets were closed for the Easter holiday. 

Spain’s situation has spiked its’ bond yields over concerns of the financial well-being in Spain and need for a bail-out from the Eurozone. The data from the US helped to balance these fears with positive results hopefully leading to more evidence of a recovering labor market. The results today from the non-farm payrolls is needed to be solid.

Any questions, my contact details are at the top of the page or email me –

No Change to Bank of England Base Rate or Quantative Easing Programme

6 Apr

Back in March 2009, the Bank of England dropped its base rate to 0.5% and has remained there now for its’ consecutive 37th month.

The programme of quantitative easing has been kept at £325bn, this was in February 2012 an increase of £50 Billion. The latest round of QE is expected to be completed by the end of May 2012. It’s interesting to read, from last month’s MPC (Monetary Policy Committee) minutes that 2 of the 9 members wanted to increase the programme further to a total of £350 Billion.

Questions, please ask – my email address is

Changes to State Pension and Pension Credits

5 Apr

Budgets are sometimes contrived and Chancellor George Osborne’s was no different. It is estimated that almost two million pensioners will not benefit overall from the changes. Yes, they will receive more through State Pension but will receive less through Pension Credits.

Pension Credits will reduce  for pensioners who saved for their retirement, which takes affect this week. These changes are also expected to effect discounts, such as, on council tax, housing benefit, cold weather payments, and help with heating costs from energy suppliers.

I think the changes will be a shock for many pensioners who will be receiving this news in letters from the Department for Work and Pensions revealing their state pension for the new tax year.

Personally, I believe that it is unfair for older people on low incomes to have their benefits reduced. Typically and sadly I think it is plausible that this may be the case, where the headline is rather rosy – highest rise in State Pension – and the details may not be quite so generous. The changes to Pension Credit were known as they were announced in the pre-Budget report in 2011.

The situation will lead to those pensioners who have larger savings will receive less while those who are poorer will receive more. To be fair with the government’s limited resources I think they have tried to make the best out of a poor situation. I would prefer all pensioners to benefit but where would we need to make cuts to pay for this ? – Education, Health Service, Social Services, Police Force, etc. – I just feel they were limited on choices.

Pension Credit has two components:

  • Guarantee Credit, which tops-up your income
  • Savings Credit, which rewards people who  saved for retirement.

Guarantee Credit is claimed by the poorest pensioners. The government calculates how much income you receive from state pension, private pension and savings of more than £10,000. Currently, Guarantee Credit it tops up your pension, to income of at least £137.35 a week (for a single person) and £209.70 a week (for a couple).

Pensioners with an income of at least £103.15 a week (£164.55 for couples) can receive Savings Credit. This pays up to £20.52 a week for a single pensioner and £27.09 for a couple. This is on top of the basic state pension of £102.15 and any Guarantee Credit.

Increases to Guarantee Credit historically has been linked to average annual increases in earnings. In November 2011, the Chancellor announced a higher increase of 3.9%. Guarantee Credit from next week will increase to at least £142.70 a week (£217.90 for couples).

For those affected, time is upon us to make some decisions – those who have accepted lower returns on capital may need to review their decisions to up their income to support cost of the changes. I look after many retired people who are enjoying the benefit of income portfolios typically yielding around 4.4% net of basic rate tax. As a portfolio, capital values will move up and down but risk profiling helps limit the risk to capital.

Who Can Claim Pension Credit

The qualifying age for pension credit is 61 for Guarantee Credit and 65 for Savings Credit.

The Guarantee Credit age is rising with the women’s state pension age. This will hit 65 in 2018, 66 in 2020 and 67 in 2027.

The new rules set out that from April, pensioners must have an income of £111.80 a week (£178.35 for couples) to qualify for Savings Credit.

The Treasury has also reduced the maximum payout from April to £18.54 (£23.73 for a couple).

If I can help or you have any questions, please ask. My details are in the header or Email me at

Are The Markets From 2011 Repeating In 2012?

4 Apr

Recently, there has been much publicised about the buoyancy of the markets, with more appetite for risk assets – all true but I believe it will be a rocky road with corrections along the way. I am also concerned that there may be a market ceiling, which markets won’t break though in the near-term.

It is uncanny when we review the markets from the start of 2011 and much of the same was reported. The profile looks scarily similar for many similar reasons – this led on to two periods of major correction and rally in the year.

I think it is fair to say, that this isn’t a normal market recovery. I have heard it described almost like an abusive relationship where the abnormal becomes the normal, and we accept as normal what is clearly abnormal behaviour.

The situation so far :-

  • In the short-term we are hopeful that the improved economic data from the States will lead on to more and better than expected news. The problem being, this is not the whole story.
  • So far, we have had at best, a weak recovery globally with loose monetary and fiscal policy.
  • De-leveraging has and is being used to stabilise fiscal markets but by its’ nature is a growth constraint (the money and interest has to be repaid) and is dis-inflationary.
  • The Eurozone Debt Crisis dominates European Agenda for most of the latter half of 2011 and the issues are still to be solved.
  • There are signs that concerns over the Eurozone Debt Crisis is returning but the focus being Spain and Italy, rather than Greece – seems to be building momentum in a similar way to last year.
  • Spain is the fourth largest economy in the Eurozone so is significantly larger than Greece economically – so the measures needed will be expected to be proportionately larger.
  • The European Central Bank helped boost the European banking system through two mass liquidity injections to restore confidence in the European markets and banking system.

I personally believe that we will have periods of exuberance and periods of panic in 2012. The recovery is likely to be positive but anemic and so growth will not be excessive but the fundamentals show that we are slowly resolving the situation. This doesn’t mean there won’t be casualties, collapses and failures but rather we will continue and grow but not as well as we may hope.

In these situations there will also be the growth of new markets, sectors, trades and industries; where we will see successes and failures. The art is picking well, being careful but not too careful and always take advantage of opportunities both good and bad – by avoiding a loss places you in a strong position to buy in at cheaper prices to benefit from an expected price bounce and associated profits.

Good luck investing and if you need a professional approach, contact me on the details above or email me at