It cannot fail to have escaped your notice that this weekend has marked the 10 year anniversary of Lehman Brothers collapse which led to the global financial crisis. It’s the theme which is behind the Sunday Telegraph Money section’s report on how to spot the next bubble. Harry Brennan’s article takes us through five phases starting with ‘displacement’ – ie when investors are attracted to something novel, then it’s ‘boom’, ‘euphoria’, ‘peak’ and finally ‘bust’. The article explains that bubbles can be hard to spot but that there are many factors causing concern at the moment.
Sticking with the theme of financials, The Financial Mail on Sunday Money section has the Polar Capital Global Financials Trust in its fund focus column this weekend. As Jeff Prestridge reports, since coming to the market in July 2013, its share price is up more than 50 per cent – and co-manager Nick Brind is convinced that there is more investment return to be earnt from a portfolio that is heavily skewed towards banks and the US.
There are some positive words from Brind quoted in the article as follows: ‘Of course, as a fund manager, there are always concerns that markets may not go in the direction you expect. But fundamentally, at its core, the world’s banking system is better capitalised than it was ten years ago when the collapse of investment bank Lehman Brothers brought the world’s financial systems to its knees.
‘Whichever financial matrix you use, the financial sector is less risky than it was and therefore more attractive as an investment proposition.’ Let’s just hope he is right!
The scourge of repossessions seen in the 1990s housing crash is set to return, experts warn. That’s the rather worrying message from Sally Hamilton, writing in the MoS. Interestingly, this is nothing to do with Mark Carney’s comments to a special meeting of the cabinet last week about the possible implications of a no deal Brexit – and worst case scenario of a 35% fall in house prices (mind you, Carney has subsequently stressed that this is by no means a BoE prediction of what will actually happen!). Instead, Hamilton highlights a key trigger for the anticipated rise in arrears is the conversion of state benefit ‘support for mortgage interest’ to a loan. As she explains, this benefit had previously protected thousands of vulnerable mortgage borrowers from accumulating arrears and ultimately losing their homes. It had been available to those on income related employment and support allowance – and also pension credit. It meant interest on their loan was paid by the Government direct to the lender. For those on unemployment benefits this kicked in after a 39-week waiting period on loans up to £200,000. For those on pension credit there was no waiting period but help only on loans up to £100,000.
If eligible claimants want to continue receiving support, the cash is still paid direct to the lender. But since April, the benefit is treated as a loan with a variable interest rate of 1.7 per cent. The loan must be repaid either when the borrower’s property is sold or on death. Apparently, the uptake of this new loan procedure has been rather slow, which is causing concerns that it might soon start to feed through into higher arrears figures. And we all know where that can lead.
As every adviser knows, making sound investment decisions is not easy. No one has a crystal ball and diversification is key. Writing in the Sunday Times Money section, Ian Cowie is reviewing his first five years as a serious DIY investor.. He reminds readers that he took the big leap from investing relatively small amounts to managing a seven figure pension fund – which he calls his “forever fund”. He admits to having both winners and losers but this week focuses on the winners – his most successful investments which have become the top 10 holdings by size in his portfolio. Overall his portfolio has beaten the FTSE 100 returning 63% including dividends and costs over the five years. The winners include a number of direct equities such as McDonalds, Adidas, Apple and Fever-Tree plus a few investment trusts- Polar Capital Tech, Baillie Gifford Shin Nippon and Worldwide Healthcare Trust. As he candidly explains, whilst his experience shows that DIY investors are capable of obtaining decent returns, how things will fare as and when markets fall is another matter. Next week he is reviewing “Cowie’s clangers”. No doubt it will make for interesting reading!
Finally, we’ll spare you the details of the lead story in the Sunday Times Money section – all about dodgy car park operators and new code which it is hoped will rein them in. However, if this is something which you want to know more about, you know where to go to find out.
