David Cowell Rant: RBS

by | Oct 7, 2016

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Adam and Company will become the ring-fenced legal entity for Royal Bank of Scotland’s (RBS) Scottish business. The move was part of a raft of changes with RBS banking brands and structures. RBS will transfer most of its existing personal, private, business and commercial customers to Adam Co. Natwest Holdings will become its ring-fenced bank in the rest of the UK, with Coutts and Ulster Bank sitting under this umbrella. It expects the transfer to complete by mid-2018, at which time Adam & Company PLC will become Royal Bank of Scotland PLC. Are they banking (!) on people having very short memories?

Prime Minister Theresa May has pledged to take action against financial advisers who help the rich avoid tax. In a speech at the Conservative Party conference today, she singled out financial advisers along with accountants as targets in the government’s clampdown on tax avoidance. May says: “If you’re a tax-dodger, we’re coming after you. If you’re an accountant, a financial adviser or a middleman who helps people to avoid what they owe to society, we’re coming after you too. Yet another ignoramus who doesn’t know the difference between avoidance and evasion. Yet another load of puffery to cover their tracks. The answer is simple: drastically simplify the tax system and make sensible laws. The problem actually is that there aren’t the parliamentary draftsmen  who know enough to be able to do it.

UK GDP growth for the second quarter of 2016 was revised up to 0.7%, while service sector data for July also surprised on the upside, with output rising by 0.4% between June and July and nearly 3% for the year.


Sober thoughts from Lombard Street Research: “My concern is with the apparent dependence of current high valuations on negligible interest rates. This concern is customarily expressed via p/e ratios, which are high, if less so than at the 2000 peak, for example. But the most reliable criterion of value in the US stock market is what we call the real value index, which goes back to 1871 and takes the S&P, and re-invests dividends while removing the effect of inflation….. $1 invested in 1871 is now worth nearly $15,000 after 145 years. Yet…the deviation has never been more than 100% up (i.e., 2-times) or 60% down (i.e., 2½-times) from the exponential trend rising at 6.6% p.a. that has achieved this huge gain. Right now, we are slap on the long-run trend.

Why are we on-trend after such a limited period below it, when the cycle has typically lasted 30 years and, consistent with this, the curve was above-trend for 12 years from 1995 to 2007? The answer, given a very disappointing economy, has to be ultra-low interest rates, courtesy of the global savings glut and via the agency of the central banks’ ease. My point in the note was that this ease has indeed produced a wave of corporate borrowing that has to an unusual degree financed buybacks rather than capex – in effect, the current valuations are only feasible through ultra-cheap money as the market should be below-trend, not on it. Take away those ultra-cheap dollar rates, as Yellen will have to at the short end and then Draghi at the long end (via Bund yields), and you get a weaker market.”

Aviva has been fined more than £8.2m by the FCA for failings in its oversight of outsourced providers in relation to protecting client assets. The £8.25m fine was given to Aviva Pension Trustees UK and Aviva Wrap UK. The FCA says Aviva failed to put in place appropriate controls over third party administrators to which they had outsourced the administration of client money and external reconciliations in relation to custody assets. The obvious answer is to use one firm that does it all…such as us. In a new government announcement, Aviva UK Life chief executive Andy Briggs has been appointed as the government’s new older workers’ tsar. He is obviously the right person.


A little silver-haired lady calls her neighbour and said, “Please come over here and help me. I have a killer jigsaw puzzle, and I can’t figure out how to get started.” Her neighbour asks, “What is it supposed to be when it’s finished?” The lady says,,,

“According to the picture on the box, it’s a cockerel.” Her neighbour decided to go over and help with the puzzle. She showed him where she had the pieces spread all over the table. He studies the pieces for a moment, then looked at the box then turned to her and said, “First of all, no matter what we do, we’re not going to be able to assemble these pieces into anything resembling a cockerel.”

He then took her hand and said, “Secondly, I want you to relax. Let’s have a nice cup of tea, and then,” he said with a deep sigh …………


“Let’s put all the Corn Flakes back in the box.”

Have a good weekend.

David Cowell, Director, Myddleton Croft Investment Managers



Leeds, 0113 274 7700



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