Category Archives: Money Matters

Money matters

Gold – you’re indestructible…

David Foot finds hope among the bitter pills and pessimism

SOMETIMES IT’S EASY to sit down and write a piece for the Whistler. Sometimes, it is difficult. Today is the latter. Generally, I have some sort of handle on what is going on in the financial world. Alas, I really have no idea of what may happen, in the next few months. Events have an unerring ability to shock and surprise, and markets react in peculiar ways to events. 

It feels like we’re stumbling towards the edge of a cliff. We’ve certainly been in situations before where, despite things looking gloomy, everything has turned out fine. Maybe I am suffering from too many months of “lock-down misery”, but I feel increasingly worried about the direction the UK is heading. 

The two massive factors influencing the near future of this country are what the long-term effect of the pandemic will be, and what will our trading relationship with the rest of the world be, after the “transition period” ending our relationship with the EU. What effect it will all have on world markets are complete unknowns. 

My short-term pessimism and long-term optimism, tell me that things will be horrible, but all right in the end. I may be wrong, but I fear that despite a mini-boom in house prices, due to the pent-up purchasing power,, there may well be some “bitter pills” to swallow – once the artificial stimuli are gone and things settle down. 

The long-term economic effects of coronavirus may prove to be much worse than we are currently given to believe. The willingness of our Government to flout international law, fills me with woe. How will those, with whom we wish to make trade agreements, look upon our nation, if our leaders cannot obey their own laws? Our future relationship with our biggest trading partners looks increasingly shaky. What happened to “the easiest trade deal in the history of trade deals”? Enough. If I dwell further on the subject, I’ll be in grave danger of making myself bilious.

One of the (few) investment upsides of this horrid virus, is that the price of gold (historically, a hedge against unstable markets) has increased a little more than somewhat. This probably has little effect on most of us, but one interesting aspect has come to my attention. 

One of my clients lost a gold bracelet and as part of the claim procedure had to get a valuation for a replacement item. It wasn’t expensive and was covered by the “unspecified personal possessions” section of their home insurance. Or so they thought. 

Fear not, this is not a horror story. However, it is something that is worth remembering. The replacement value was more than the “single item limit” on the policy, not by much, but the replacement cost was more than twice the original cost. If you have jewellery, particularly items that you wear away from the home, and you want to ensure that it is adequately covered, check the replacement value every so often. 

The insurer paid the claim in full, but insisted that the replacement was specified on the policy, to make sure there would be no problem, in the future. They’re not all monsters! Until next time.

The Price of Gold and Social Distance

IT SEEMS ONLY MOMENTS after concluding my last article, and entreating our erstwhile readers to enjoy the sun, that the settled spell of quasi-Mediterranean weather turned considerably more like Scandinavia, than Cote d’Azur. Maybe I’ll keep off the weather, and stick to matters monetary, for a while. I last wrote of our not really knowing what was going on, and how the future would pan out. I would like to think that we have a little more of an idea now, although things are far from over, in your writer’s humble opinion.

It is fair to say that we have made great progress in the fight against Covid-19 and things are starting to look considerably more positive than a couple of months ago. That said, by the time your noble Whistler hits your letterbox, we could easily have experienced an increase of cases, as Leicester has, as the reopening of pubs and other social areas have brought people together (and the odd bits of sunshine, have brought crowds to the beaches).

Economically, we still have a long way to go. I fear that there will be plenty of pain for us to endure, over the forthcoming year or so, even if things go well. It is looking increasingly like there will be a No Deal Brexit, with all the ramifications that may come with that scenario, and the fallout from the pandemic, may be with us for a long time after the virus itself has been consigned to history.

I said last time, that I thought some companies and markets had been oversold, and that seems to have been true. By way of an example, at the time of writing, Halfords share price has risen by 31% since the battering it received in mid-March and the FTSE100 index is up by some 20% over roughly the same time.

The price of gold has gone up since the troubles hit, as it has long been used as a hedge against uncertain financial conditions, with iShares Gold Producers ETF up by some 60% in the same period. But volatility has returned with a vengeance as the markets try to come to grips with the potential outcomes of the virus, economically, socially and geographically. To use the Halfords example again, at one point during the last four months, the share price had nearly quadrupled after having fallen by over 75% in the preceding months, but has dropped by some 20% in the last week or so.

I’ve recently spent time advising friends and clients as to what they can do, to help them to get through these difficult times. Clearly, there are some that will have been unaffected by the virus both medically and financially, but many people have suffered. Consider the Self Employed Income Support Scheme if you haven’t already, and there is a second tranche due.

Small businesses can access the Bounce Back Loan Scheme, where the Government will support a loan from a panel of lenders, from £2,000 up to 25% of the business turnover (or £50,000 whichever is less) over 6 years, with no repayments due in the first 12 months. The interest rate is only 2.5% p.a. As an individual, you could consider using a mortgage payment holiday to enable you to repay more expensive borrowing, like credit cards or overdrafts (remember that overdraft interest rates, are due to soar). Individual circumstances will dictate what is suitable, however, as one size does not fit all.

Stay safe, stay well and keep your fingers crossed for no second spike.

David Foot

Column: David Foot

Here I sit, putting finger to keyboard. The sun is shining, the birds are singing, the sky is blue. You would think that all was well in the world. Barely any traffic noise. The water is clear, the air is fresh, and maybe, we are just starting to creep out from the horrors of arguably the most disruptive – non war – event, that has occurred in this country, in the last 100 years. Tens of thousands of lives have been lost, hundreds of thousands of businesses have closed, some never to re-open, and our lives will be changed forever. Maybe only slightly, for many, but nothing will ever be quite the same again.

Sure, our Nescafé, PG Tips, Best Bitter, Pinot Noir, or whatever your preference, will taste the same. But will you still get it from the same place? Our major supermarkets will still exist, but they are increasingly losing custom to the “discounters”, and will those that in their new working from home environment, have gone back to using local stores (where they have been open) remain loyal, or revert to their “big shopping” habits? Will our local pub(s) be open as before, or will their punters carry on drinking cheap booze, at home? (a Director of a large “PubCo” of my acquaint, recently said that up to 50% of their pubs might not reopen). My point (thank heavens, I hear you say) is that none of us know what effects this pandemic will have on the world (and thus the share values of the businesses in it) as we know it. However, it may be worth putting things in perspective. As I write, there have been some 6 Million confirmed cases of Covid-19 worldwide, with 360,000 deaths. Sadly, around 38,000 people have so far lost their lives to it, in the UK. In the “Spanish Flu” pandemic of 1918/9 some 50 Million souls lost their lives, 228,000 of them in the UK. In the Battle of the Somme, some 125,000 British soldiers died: one battle alone. Not to detract from the horror of losing someone to Coronavirus, many cases of which, some will say, could have been avoided. Just to illustrate the relevant scales.

Maybe it is because our world has changed so much, in the last 100 years, that the effects of this disease are having such an effect, and may well have in the future. Our High Streets are already changed, some beyond recognition. Even more shopping has moved “online” during the lock-down, how much of that will never return to the old-fashioned way? How long will it be, before we are happy to be squeezed in together, in “pile ‘em high, sell ‘em cheap” aircraft, or on public transport, without being concerned about what we might catch? After the World Wars, and the last pandemic, people just “got back to normal”. Now we are being threatened with “new normals” whatever they may be, and we will just have to wait and find out how different they are.

From an investment perspective, most share values have taken quite a battering, and probably the greater part of those will bounce back, to some degree. People have been eating and drinking, and will continue to do so, so the producers have, in the main, fared reasonably well. They should continue to do so. My feeling is that a fair amount of larger company shares have been “over sold” and will recover, in time. Well managed UK Investment Trusts might well prove to be worth a punt, particularly if they have an element of “gearing” (they have borrowed, to invest) as this tends to make them fall more in falling markets, and vice versa. My usual warnings: don’t invest money you may need in the short term, always expect to invest for at least five years, and don’t “keep all your eggs in one basket”. So much has changed, since our last edition. Until we see how much has changed again, in the next couple of months, enjoy the sunshine!

David Foot

Don’t Panic

SO, HERE WE are. The UK has officially left the European Union (although the machinations have only just begun) and we are in the transition or implementation period. There are three potential outcomes at the end of this transition period. A UK-EU trade deal can come into force, and it will take time to adjust to all the changes to be made. The transition period may also be extended; or lastly, the UK could exit with no deal. What may happen at that time is impossible to know for the time being. However, it is interesting to note that our stock market has lagged behind most others since that unforgettable day in 2016 when 52% (of the 72% of those eligible Brits who did actually bother to vote) voted to leave. Continue reading Don’t Panic

Over My Shoulder . . .

Welcome back to the fabulous world of Whistler finance in this shiny new decade. I am minded to have a quick peep at the past and, given that I wrote my first piece for The Whistler in 1999, a little of what has happened since then. Those of you who have suffered this column for any length of time will know my penchant for investing little and often and spending time in the markets, rather than making an attempt at timing the market. So, what better than a quick look at the performance of one of my favourite investment vehicles – the Investment Trust (IT) – since the beginning of the century? Let’s take a look at some of the top-performing ITs of the century so far. While we should all know that the past is not necessarily a guide to the future, the New Year allows us a glance over the shoulder at the past and get, maybe, some insight to the future. Continue reading Over My Shoulder . . .