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Investment Tax Wrapper – Investment Bonds v Collective Investments

20 Jul

I always find the argument around the suitability of the investment wrapper paramount. Too often I see new clients – who maybe non-tax payers with an investment bond wrapper rather than collective. If this is personally owned I struggle with why someone has chosen to pay Basic Rate Tax when they most likely could have paid no personal tax – admittedly the tax is paid within the fund but all costs will affect investment performance.

OK lets start by getting a bit of jargon out of the way…when I use the global term Collectives, I am referring to anything along the lines of OEICs, Unit Trusts, Investment Trusts, SIVACs, UCITS I, II, III, etc. I am just trying to use an all-inclusive term.

Choosing the most appropriate investment for an individual will depend upon many factors including :-

  • personal circumstances
  • investment objectives
  • current and future levels of income

What factors to consider?

The summary below compares bonds and collectives from the perspective of taking an income, capital growth and various tax and estate planning options.  Whilst the choice of investment should not be made for taxation reasons alone it will be a critical factor.  Other key factors will include product pricing, charges, investment structure, administration and service, fund choice, asset classes, death benefits and trust options.

Investment Bonds


Taking an income Taking an income
5% withdrawals can be taken per annum without incurring an immediate tax charge (deferred but not free of tax) and any unused allowance can be carried forward to future years. • Bonds are a useful way of providing an ‘income’ without any impact on an investor’s personal allowance and/or age allowance, (within the 5% allowance).• If withdrawals exceed the 5% allowance (or higher cumulated amount), tax may be payable depending on the tax position of the investor and whether the bond is either onshore or offshore • Because investment bonds are non-income producing assets there is no need for annual tax returns, unless there has been a chargeable event (such as exceeding the 5% annual allowance) resulting in a chargeable gain (realised profit).                             • The income from a collective will be taxable whether taken or reinvested. Non-Equity funds (which hold greater than 60% in cash or fixed interest) have income paid as an interest distribution net of 20% tax (and non-taxpayers can reclaim). Equity funds (which hold less than 60% in cash or fixed interest) have income paid as dividend income with a 10% non-reclaimable tax credit. • Income paid (or reinvested) from a collective will be included in the assessment of an investor’s personal taxation and/or age allowance – although if the collective is held under an ISA wrapper this problem is solved.• Disposal of shares/units to supplement income is a disposal for capital gains tax, although this may be covered by your annual capital Gains Tax Allowance (currently £10,600 in Tax Year 2012/2013). The rate of CGT payable will depend on the allowances and reliefs available to the investor and on their income tax position.• Because collectives produce income they will normally need to be reported each year to HMRC, even if accumulation units or shares are chosen. Capital gains may also need to be reported when a disposal takes place but only if tax is expected to be payable.
Capital growth Capital growth
• When the bond is surrendered (this is a chargeable event) tax is assessed and may be payable depending on the personal income tax position of the bond owner. This is true whether the bond is either onshore or offshore.• Switching funds in an investment bond can take place with no tax implications for the investor. (This is not a disposal for tax purposes while the funds remain under the bond wrapper.)                                              • When shares/units are cashed in, this is a disposal for capital gains tax although this may be covered by your personal Capital Gains Tax (CGT) Allowance. • Losses on disposals can be offset against other capital gains – so can create effective tax planning scenarios.• Taper Relief and Indexation Allowance are no longer available on personal scenarios.• Switching funds within a collective is a disposal for CGT with possible tax and reporting requirements.
Tax & Estate Planning Tax & Estate Planning
• Individuals may be able to alter their level of income to reduce or avoid tax on surrender of the bond.Examples – those who have pension income in drawdown can reduce their income received to minimise tax payable; or could use part of the proceeds to help fund a pension, EIS, VCT, etc. so that the tax credit created offsets the tax bill associated with the investment bond encashment. • Gifting the bond (by assigning it nit not for “monies worth”) to a lower or non tax-payer. So an assignment to a spouse or child in further education may not create any liability (depending their personal tax rate) to CGT or income tax. It could reduce or avoid the tax that would otherwise have to be payable by the investor. • Individuals may be able to make a pension contribution to reduce or avoid any further liability to income tax on the surrender of their investment bond.• Gifting the bond to another (i.e. assigning into trust or to an individual) will be a transfer of value for Inheritance Tax and depending the terms of the trust may be covered by an exemption – more commonly though will be treated as a chargeable lifetime transfer.

• Having multiple lives assured can avoid any chargeable event upon death of the bond owner. This is assuming the contract is for encashment on the death of the last life assured. 

• If a chargeable gain arises in a tax year in which the investor is non-UK resident then there will be no further liability to UK income tax.  There may be a tax liability in their country of residence.

• A special relief applies to offshore bonds that reduces the tax liability on chargeable gains for individuals who have been non-UK resident for any period of their investment – Time Apportionment Relief.

• Investment Bonds, depending on the interpretation by local authority, may not be included within the means test for local authority residential care funding – care is needed as this varies from authority to authority, year-to-year, the circumstances surrounding and prior to the investment and many other factors.

• Individuals may be able to alter their level of income to reduce the tax rate payable on a capital gain e.g. those who have pension income in drawdown may be able to reduce it, by careful selection of funds within the collective to select the desires level of taxable income.• Transferring the collective to another individual or into trust will be a disposal for CGT purposes although this may be covered by your Personal Annual Allowance to CGT, or an exempt transfer between spouses. If into trust, gift holdover relief may also be available depending on the type of trust.• Individuals may be able to make a pension contribution which in turn could reduce the rate at which they pay CGT.• Transferring the collective to another individual or into trust will be a transfer of value for Inheritance Tax purposes, although this may be covered by an exemption.• No CGT is payable on death.

• Investors who are both non UK resident and ordinarily resident will not be liable to UK CGT on disposal of their collective.  However, anti-avoidance legislation means they will need to remain non UK resident and ordinarily resident for five complete tax years for the gain to remain exempt from CGT.

•  Collectives are included within individual’s assessment for local authority residential care funding.

Taxation of Fund  Taxation of Fund
Onshore Bond funds’ internal taxation is extremely complex. In general terms it can be summarised as follows:• Interest and rental income are subject to corporation tax at 20%. Dividends are received with a 10% tax credit which satisfies the fund manager’s liability.• Corporation tax is payable on capital gains at 20%. Indexation allowance is available to reduce the gain.• Investors are given a non-reclaimable 20% tax credit to reflect the fund’s taxation.Offshore Bond funds are typically located in jurisdictions which impose no tax upon investment funds, such as Dublin, the Channel Islands and the Isle of Man. And so:

• Interest, dividends and rental income are tax-free while under the bond wrapper. Some non-reclaimable withholding tax may apply to certain overseas income.

• No corporation tax is payable on capital gains.

• Personal tax position, rates and residence status must be considered carefully as taxation is typically payable at your highest marginal rate when the bond is finally encashed.

Collectives are only subject to tax within the fund on income received, and so:• Interest and rental income are subject to corporation tax at 20%. Dividends are received with a 10% tax credit which satisfies the fund manager’s liability.• No corporation tax is payable on capital gains within the fund.



There is no black and white answer on this – it is all circumstance specific but an understanding of the differences is essential. My belief is only pay tax when required and lawful – so products with an inbuilt taxation are to be used only when necessary, the lesser tax rate or for a specific reason/purpose.

Investors make money through investments with three key principles – fair costs, minimise taxation and investment performance.

Ways to Maximise Your Income Returns

11 Jun

I have been giving the problem of poor returns on cash considerable consideration. So what do you do if you need a realistic income yield from your capital?


Equity Release 

I am anti this approach as this is simply raising a packaged loan secured against your home where you receive income in exchange for part of the value of your house and/or potentially an escalating loan that will need to be repaid one day.


Structured Products

Income Deposit Plans are typically 6 years in length and pay, say between 5% & 7% per annum depending on terms and qualification requirements i.e. pays this on a quarterly basis as long as the FTSE 100 remains between 4,500 & 7,000 or +/- 21% of the initial underlying level with the level expanding +/-6% every year

Deposit Plans are typically 3, 5 or 6 years in length and may pay at maturity up to 17%, 28% and 50%, respectively.

The actual terms need to be reviewed carefully and suggest professional advice is required.


Fixed interest funds

These include :-

Corporate Bond Funds – M&G Strategic Corporate Bond (yielding 3.6%), Threadneedle Corporate Bond (yielding 4.2%),  Close Bond Income Portfolio (yielding 3.5%) and Fidelity MoneyBuilder Income (yielding 3.9%)

Strategic Bond Funds – M&G Optimal Income (yielding 3.9%), Jupiter Stregic Bond (yielding 5.4%) and Fidelity Strategic Bond (yielding 3.2%)

High Yield Bond Funds – Threadneedle High Yield Bond (yielding 8.0%), Baille Gifford High Yield Bond (yielding 6.3%), AXA Global High Income (yielding 6.5%) and Kames High Yield Bond (yielding 6.4%)

– all are above at least 1% more than the best cash ISA rates. 

It is important to remember that the capital value of bond funds will trend to follow the sentiment and expectations of the wider economy to a greater or lesser extent. It is expected that a good fund manager should be able to hold the payout if further turbulence lies ahead. 

If you are willing to accept a greater capital volatility, you could look to equity income funds. Please remember that you are focussing on payouts rather than the day-to-day capital value movements.

These include :-

UK Equity Income Funds – Invesco Perpetual High Income (yielding 3.9%), Trojan Income (yielding 4.3%) and Fidelity MoneyBuilder Dividend (yielding 4.8%)

UK Equity & Bond Income Funds – Ecclesiastical High Income (yielding 4.7%), Jupiter Monthly Income (yielding 5.1%) and Close Brothers Diversified Income Portfolio (yielding 2.4%)

North American Income Funds – JPM US Equity Income (yielding 2.3%), Jupiter North American Income (yielding 1.7%), Legg mason UK Equity Income (yielding 2.4%) and Neptune US Income (yielding 4.4%)

Global Equity Income Funds – Newton Global High Income (yielding 4.8%), Invesco Perpetual Global Equity Income (yielding 3.3%), Aberdeen World Growth & Income (yielding 4.6%) and Baille Gifford Global Income (yielding 4.5%)

Emerging Markets Income Funds – UBS Emerging Markets Equity Income (yielding 5.7%)

Asian Income Funds – Newton Asian Income (yielding 5.1%), Schroder Asian Income (yielding 4.7%), L&G Asian Income (yielding 5.3%) and Henderson Asian Dividend (yielding 4.9%)

With Equity Funds :-

  • It is important to focus on funds with a good track record of performance and payout growth
  • Payout growth doesn’t have to mean every stock in a fund must grow its yield. (A significant proportion of growth in dividends comes from businesses “normalising” dividend payouts.)
  • There are some outstanding UK equity income funds, but to invest solely in the UK is to miss out on some fantastic potential globally.
  • It is expected that the greatest investment opportunities may lie in Global and Asian markets.
  • There are also companies outside the UK who may have less debt on their balance sheet and some fo the regulatory changes will encourage higher dividend payouts.

Investors may be avoiding Asia and Global markets because of perceived risk but it is clear they could be missing out or at best limiting the diversity of their portfolio.

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

What’s The Scenario if Greece Exits The Euro & Eurozone?

26 May

Greek Flag

If Greece left the Eurozone, I expect this would be bad for Greece with a hike in inflation, unemployment, panic and social unrest likely.

There are some powerful factions within the Greek political system who are clearly anti the austerity measures imposed. I, as we all, can sympathise to some extent with the plight but there is a limitation as the problem is partly home-grown – where other countries made cut backs and tough decisions in the last decade these where not in Greece.

If Greece can’t satisfy the demands of the European Union and the IMF, then they will cut off Greece’s last remaining lines of credit. Without this, Greece will not be able to pay its bills and could drop out of the euro altogether.

Who should pay for these mistakes? Is there an answer? We can’t change the past and can only deal with the current and plan for the future.


So what is opinion on this :-


Carsten Brzeski, senior economist, ING Belgium

  • Chaos.
  • Greek banks vulnerable from collapse (lack of support if problems arise)
  • Greek companies vulnerable from collapse (lack of support if problems arise)
  • Unemployment would spike
  • Expect the new drachma would drop drastically in value
  • Food and energy prices would leap (poor exchange rates worsen the situation)
  • The turmoil would undermine any opportunity for growth
  • The outlook for the Eurozone would worsen.


Michael Arghyrou, senior economics lecturer, Cardiff Business School

  • The drachma would be devalued (at least 50%), causing inflation
  • Interest rates will double and all mortgages, business loans and other borrowing will become much more expensive.
  • There will be no credit for Greek banks or the Greek state.
  • Expected shortage of basic commodities, like oil or medicine or even foodstuffs.
  • A lot of Greek firms rely on foreign suppliers, who may cut off Greek customers.
  • Greek companies could be driven out of business.
  • Greece will lose its only reference point of stability, which was its euro status.
  • The country would end up in a volatile period.
  • There would be institutional weakness.
  • The worst case scenario would be a social and economic breakdown, perhaps even leading to a totalitarian regime.


Sony Kapoor, managing director of the Re-Define think tank

  • Greeks or European policy makers talking about an exit in a casual blase way are being highly, highly irresponsible.
  • Total cost versus the total benefit remains overwhelmingly negative, both for the Eurozone and Greece.
  • A Greek exit could undo a large part of good work in Ireland and Portugal.
  • If you are a Portuguese saver with money in the bank, even if there is a small likelihood of losing that money, it would make perfect sense to move euro deposits while you can to a safer haven, like the Netherlands and Germany.
  • There would be a significant deposit flight in peripheral countries.
  • It would immediately weigh on investment in the real economy, because corporations would be very reluctant to invest anything at all.


Megan Greene, director of European economics at Roubini Global Economics

  • Cascading bank defaults in Greece would be expected
  • Everybody would take money out of Portuguese and Spanish banks.
  • A big part could be plugged by the European Central Bank (ECB) through a liquidity operation that would backstop the banks. The ECB has already done that several times and it would step up to the plate again.
  • Political contagion or unrest.
  • Greece is a small country and the rest of the Eurozone has been making provision for this for a long time now.
  • The Eurozone could survive a Greek exit.
  • The exit could be better for everyone involved if managed in a co-ordinated orderly way. 
  • If a unilateral default, an exit would be a worse option for Greece.


Jan Randolph, head of sovereign risk, IHS Global Insight

  • If credit is withdrawn by the EU and IMF, then Greece becomes a cash economy. It means the government can only pay what it collects.
  • The government starts shutting down, 10-15% of state employees don’t get paid and unemployment surges from 20% to 30%.
  • But Greece can still use the euro.
  • It would be difficult for the ECB to keep banks afloat.
  • The Greek banking sector would collapse.
  • More unemployment, as credit for companies would dry up.
  • What happens next is a political question.
  • European nations would probably not accept another Western European country descending into chaos and collapse.
  • The EU and IMF would probably negotiate some kind of aid.
  • Greece could continue with the euro.


 My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan


Greece and a Change to the Eurozone?

24 May
So with the Greek election (take 2) looming only weeks away, the questions is – will Greece remain in the Eurozone? Personally, I believe if they left it would be both political and financial suicide but that is just an opinion. For the Eurozone such an option is unthinkable and hugely damaging – let alone the fear of the domino effect (so who would be next) and I guess that would/could lead to the end of the Eurozone.
Drachma may become legal tender in Greece again
It seems clear that there is growing support for the opinion that the current strategies for resolving the Eurozone Debt Crisis are doomed to failure. The most likely scenarios are :-
  • a Greek exit, or 
  • a rapid shift to a fiscal union.
If Greece is anything to go by, the current approach of forcing austerity on crisis economies and preserving their membership of the euro leads to dissent by the voting population. If we look at the voters behavioural changes, this seems to have led sentiment towards more extreme parties, both on the left and on the right.
In recent opinion polls, the majority of Greek voters (in excess of 75%) want to remain in the Eurozone (but also reject the austerity programme). The issue being, if there is a change/relaxation of the agreed commitments would send a destructive message to all other member states who are part of austerity programmes. This could lead to financial markets losing confidence, outflows of funds from Greece and other associated economies would accelerate, yields on financial instruments would sore. If this was the case it would be realistic to see the Euro could unravel and collapse.
A Greek Exit
A Greek default and exit from the Euro could have dire knock-on effects possibly leading to similar financial disasters in Spain and Italy. To prevent this contagion would require the ECB to lend several trillion euros to banks, and the available funds in this scenario are unlikely to be sufficient to cope with the fallout.
A Rapid Shift to Fiscal Union
This is expected to avoid the risk of contagion and financial collapse in at least some of the peripheral nations. This would require a substantial move towards a more centralised or federal style control of Eurozone government revenues and expenditures. This includes the concept currently being negotiated of Eurozone government issued bonds on behalf of all member states collectively.
If Brussels were to take over the debts of Greece and other struggling peripherals the immediate credit crisis would recede and the Eurozone credit would establish itself alongside US Treasury debt as one of the foremost debt markets in the world.
The outcome is stability but the unknown – is at what cost, both short and long-term?
This is in direct comparison of the current situation, where the current approach has led to  the Eurozone capitulation to the need to bail out Greece, Ireland and Portugal has undermined the monetary union, and the risk of contagion to Spain and Italy now threatens its very existence.
My contact details are :- rel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Relief Rally or the Start of Something More?

22 May

Yesterday saw stocks rebound from last weeks losses – the debate is whether it’s just a quick relief rally or the start of a new move higher?

In order to break that gravitational pull, we’ll need evidence suggesting the worries are at least containable and that the market and growth contractions realistically are expected to reverse – yes, I mean sustainable growth. I am looking for signs the rally is sustainable.

Personally, depending on information and data in the next few days, we have the potential to see a rally at least short-term. The question I want answered currently is, “Is all the recent bad news and woes already priced into the market?” Although, on the time horizon, there are other factors that could start worrying stocks – the so-called “fiscal cliff,” combination of budget cuts and tax hikes for next year, issues around China’s growth story, etc.

The worries over the Eurozone hangs over the market and any further negative headlines could easily derail the market’s rally if this recent positive market move is the start of a rally. The European leaders summit Wednesday could well be a good barometer to this risk.

The G8, over the weekend, helped give markets a bounce after leaders embraced Greece, saying they want it to stay in the Eurozone and they would also seek ways to motivate ways to create and stain global growth. China also helped, with Premier Wen Jiabao staing that China will focus on boosting growth.

Some believe that with the efforts taking place, we may have seen the bottom of the recent correction on Friday, but it is not clear-cut. The opposite opinion on the situation provided by some analysts is, “we’re not there yet” and believe “we‘re going to be in more of a ‘sell in May and go away’ trend”. Here, the belief is the summer is going to flatten out, then we come back in the fall. If this is the case we easily could have another month of the current market trends.

My contact details are :- tel  029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Taxation of Collectives within an Offshore Bond

14 May
Taxation of the collective investment when held as an asset of an offshore bond – income

Any income received (dividends or interest) within the offshore bond wrapper from the collective is deemed to be received gross. Withholding taxes may apply which may not be reclaimed.

The 10% notional tax credit issued alongside any UK dividend income cannot be reclaimed by the offshore bond provider or investor.

The income will remain in the fund, untaxed, until encashment from the bond by the investor.

Taxation of the collective investment when held as an asset of an offshore bond – capital gains

The collective would suffer no ongoing capital gains tax within the offshore bond.

Realised gains would be subject to tax when the investor encashes the bond.

Investment losses cannot be carried forward although any deficiency loss created on encashment may be available to offset any higher rate income tax suffered by the investor.

Switches made within the bond will not generate a tax charge.

Principally, where a collective is held within an offshore bond, the policyholder is only liable to tax when they encash the bond.

Encashment of the bond by the policyholder

On encashment, assuming a chargeable gain has been made, a chargeable event would occur and the investor would be liable to income tax on this gain at their HIGHEST MARGINAL RATE.* However, personal allowances and the 10% tax band** would be available where earned income levels were sufficiently low. A basic rate taxpayer would be liable to tax at 20%.

* Finance Act 2009 increased this to 50% for trusts and for individuals with income in excess of £150,000 from April 2010.
** Bond gains are deemed to be savings income.

This article is based on interpretation of the law and HM Revenue & Customs practice as at March 2010. I believe this interpretation to be correct, but cannot guarantee it and the Tax Relief and tax treatment of investment funds may change in the future.

 I do not accept any liability for any action taken or refrained from being taken on the basis of the information contained in this or any related article. With all tax planning, it must be reviewed on each person’s personal circumstabces and the information provided in this article is for information purposes and is not advice nor recommendation.
My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Markets Plummet – An Overview

10 May

We have seen markets plummet since the elections over last weekend, down to lows of 2012 as investors took flight from stocks at risk of being dragged down by troubles in the Eurozone. This sell-off  seems to have been triggered, at least in part, by fears that a planned coalition government in Greece will tear-up the austerity deal underpinning the country’s recent €240billion (£190billion) bail-out.

The FTSE 100 Index saw £26 Billion wiped off its value following a further slide of over 100 points. This is a third day running of major sell-offs across most stock markets following concerns over the future of the Eurozone.

Alexis Tsipras, whose Syriza party came a surprise second in Sunday’s poll, is insisting his country’s bailout deal with the EU and IMF is ‘null and void’.

As well as uncertainty over Greece, fears that Spain will need to bail out its banking sector caused that country’s 10-year bond yield to soar again above the ‘unsustainable’ 6% level. This is perilously close to the 7% interest rate on government borrowing that prompted Greece, Portugal and Ireland to seek bailouts.

Financial analysts said the current market turmoil was likely to continue. It appears unlikely that a Greek coalition would be formed considering the rhetoric from the various party leaders, so uncertainty was likely to reign for a while.

‘The worst case scenario for the EU is if Greece leaves the Eurozone and undertakes a disorderly default. It is difficult to see why the country would do this but then again it only takes one angry politician to change history – Greece is staring into the political and financial abyss. Whilst a less likely scenario, if it did happen it could have huge ramifications for the rest of Europe.

A default for Greece looks likely and a departure from the Euro in the next 18 months is expected – this scenario has in excess of 66% outcome expectation – good chance of happening. Greece would not be allowed to walk away from its debts and financial obligations, if it leaves the euro. The likely scenario would be it would be given a greater period of time to repay its debts. The sanctions against Greece, if it attempted to renege on its debts, does not bear thinking about.

These are grave concerns and the ramifications for the Eurozone, global economic prosperity and stock markets are huge.

Investing is about taking best advantage of the market cycle while avoiding the periods of market panic – I am pleased to say, we hold a defensive strategy across all my clients and so we have avoided the worse of the declines and are well placed to benefit from the market opportunities expected to be created by the current market turmoil.

My contact details are :- tel 029 2020 1241, email, twitter welshmoneywiz, linkedin Darren Nathan

Market Outlook This Week

26 Apr

The Good News – the market snapped the losing streak at only two weeks, with a modest gain last week.  

The Bad News – that’s pretty much the only good news.


Economic Events

The retail sales for March and last week’s economic numbers were net-neutral. Stocks did well to finish the week with a gain and I expect the pessimists may have more to shout about shortly.

On the positive, retail sales numbers showed that consumers spent more in March. Unfortunately, that’s the only decisively ‘good’ news there was last week.

Otherwise, the news reports were uneventfully neutral.

From the negative side, the UK as well as the most of Europe are back in Recession (its official), existing home sales fell, continuing unemployment claims rose and prosperity generally looks under pressure. These will raise both concerns and possibly fears for the future.

Last week’s economic numbers weren’t compelling and explains why the market remained pretty neutral.  If the coming week’s numbers aren’t better, it’s seems less likely that stocks will build on last week’s growth and further drops are become more expected.


Bigger concerns lie with expected Q1’s GDP growth estimates and the more positive recent forecasts are looking over-optimistic and could fall back, seeing revisions in excess of 10%. Order books are likely to have the typical knock-on effect, and durable orders are likely to fall, as well — not good for stock market valuations. I expect that this could see further revisions in consumer confidence.

Here’s hoping that we see improvements in the jobs figures but if this doesn’t happen the compounded effect of negativity will be dire.

I struggle to see where optimists can suggest opportunities lie.

Although, volatile markets create opportunities and I am well placed for a market drop giving me the opportunity for the market confusion to create buying opportunities – buy when others panic and out of favour sectors where some real returns may exist.


Stock Markets

It’s pretty clear that the market’s direction has changed.  Both the 20-day moving average line and the 50-day moving average line are now pointed lower.  While it’s certainly possible – and likely – we’ll see bullish days even while the trend is technically bearish, one or two bullish days doesn’t snap a bigger losing streak.  Only a close above the 20-day line would suggest the overall trend had turned bullish again – I don’t expect this until the negative news has been priced into the markets.

Looking to the CBOE Volatility Index (VIX) (VXX) (VXZ) – we are waiting for a spike in the commonly called fear index from the lows we are currently experiencing. So clearly there is little downside potential but huge upside risk. So what does that mean in English – there are many reasons for the stock markets to drop and an increase in fear could see this drop but how much of a drop?

based on historical data – possibly a 9% drop but reality and common sense dictates that the drop may be more or les severe and will be influenced by sentiment and the economic data.

In fact, the VIX’s 20-day average is about to cross above its 50-day average line for the first time since late last year. 

Things are definitely changing, and not for the better.

Remember every market cycle creates silver linings  – and opportunities to profit. I think the next few weeks will be key.

My email address is :-, tel (office) 029 2020 1241

twitter welshmoneywiz, linkedin Darren Nathan

A Day of Panic

24 Apr

Political uncertainty and disappointing data in Europe raised fears the Eurozone could struggle to push through austerity measures and may stay in recession until late in the year.

The Dutch prime minister resigned from office on Monday after Dutch officials failed to agree on budget cuts, while France’s Socialist presidential candidate Francois Hollande, who promised to renegotiate a European budget pact, won in the first-round of elections. The third place win by Marine Le Pen shocked internationals as this showed growing support for xenophobic strategies, which undermines the fabric of a single european market.

Adding to that, the euro zone’s business slump deepened at a far faster pace than expected in April.

Financial markets have been unnerved by the rise of Francois Hollande, previously best known as the partner of Ségolène Royale, French president Nicolas Sarkosy’s defeated opponent in the last French election.

The economy is at the centre of the election campaigns in France. Although far from the plight of peripheral Eurozone countries, it is struggling with weak economic growth, 10% unemployment, straining public finances and a population unwilling to give up on cherished pensions and welfare benefits.

Both Hollande and Sarkozy advocate a financial transaction tax, which would have a far bigger impact on the City of London than on the Paris bourse.

We await for round 2!

My email address :-, twitter welshmoneywiz, linkedin Darren Nathan

It’s Official, S&P Confirm UK’s Soverign Debt Rating – AAA

16 Apr

The wealth status of the UK have been confirmed as AAA by rating agency Standard & Poors. This confirms their opinion on the UK as being wealthy, diversified, open with suitable debt management and controls in place.

They have confirmed they see the UK’s economic policy will continue to focus on closing the fiscal gap, with the potential of controlling the problems, with the likelihood of resolving the issues while providing a suitable infastructure where prosperity is plausible. The UK is seen to benefit from a large liquid market for  government debt issuance, entirely funded in domestic currency at long  maturities.

The agency believes the UK government will implement the bulk of its consolidation program and economic growth isn’t expected to fall below current projections.

The Good News – Standard & Poor’s have highlighted strong demand for long-dated gilts from both domestic and non-resident institutional investors.


The Bad News – the steep correction in the fiscal accounts is expected to cause a drag on economic growth; household spending is likely to be weak; and the UK will post modest real GDP growth (est. 1.6%  between 2012 and 2015).

These are only estimates and will be reviewed regularly as there are many factors, which could significantly affect these figures, assumptions and estimates but for now the general view is GOOD NEWS.

My contact details are detailed in the header – email, twitter welshmoneywiz, linkedin Darren Nathan