Suddenly, the joys of London seem a very long way away, says David Cowell of Yorkshire-based  Myddleton Croft Investment Managers. And maybe that’s not such a bad thing?

Scientists say London has the highest concentration of cocaine in sewage of anywhere surveyed in Europe. Why publicise it? All over London there will be uncovered manholes and people sniffing sewage.

Beware! The yield on the 10-yr gilt has reached 2%, meaning that since the end of March it has lost over 4%.


As of 31 March, the number of IFAs and wealth managers buying investment companies via platform showed a 13% increase on 12 months previous. Best execution? Best price? It seems to me that these people haven’t addressed  the problems that platforms have in dealing with live prices.

Financial Services Compensation Scheme chief executive Mark Neale has invited firms to submit suggestions for “fairer” alternatives to the lifeboat scheme’s funding model. Here’s a biggy: it is totally unacceptable that the treasury walks off with over 1.4 billion of fines; an amount which would not only provide a secure base fund for the FSCS but bring down the unsustainable cost of financial services regulation. I repeat that this is in fact an extra tax on the industry without it having been either publicised or debated. Perhaps we ought to re-enact the Boston Tea Party by printing off thousands of copies of the FCA rulebook and dumping them in the entrance to the H of P. No taxation without representation.

The head of the FCA says that it is meet and right that their senior employees should walk out of their job into the private sector with little or no decent interval. He rightly states that there needs to be a free flow between the two but he conveniently fails to mention that there is a large incentive for these people to err of the gentle side for a firm which could be offering a plum job in the near future. I would be interested in his thoughts on squaring  this circle.


After a few months of underperformance, UK Small Companies look cheap:

MC smallcap

Courtesy of Fidelity


Caledonia is said to have beaten bids for Seven IM from a range of private equity firms, including Anacap, Corsair Capital and Graphite Capital. Seven IM, head by chief executive Tom Sheridan (pictured), manages £7 billion and the deal is expected to come in at around the £100 million mark. Caledonia is likely to acquire the stakes owned by Zurich and Aegon, which own 49% and 15% respectively. It is also a large shareholder in Close Brothers. I seem to remember that they had a large slug of Gartmore. Who?


“For example, if you invest £1,000 into a Bond, with 8% fixed interest per annum over a four year term, this means you’ll receive £80 interest per year for the next four years, or £320 in total. When the bond matures after four years you’ll get your initial £1,000 investment back.” From a firm wanting to raise £1m from Joe Public. Not a lot of mention that it is totally unsecured and that there are at least a couple of secured bondholders above them in the pecking order. It seems that in certain areas, caveat emptor still applies.


US Corporate profit margins have now dropped below 8% for the first time since 2009. Margins, as measured by after-tax profits divided by nominal GDP, hit an all-time record of 10.06% in 4Q2011 but since then, margins have since steadily fallen to the its current level of 7.97%. We have been saying for quite a while that with high P/Es, either the P must come down or the E must go up to regularise matters. There are signs that this may have started to happen but the jury is still out.

According to LSR, Germany’s unintended benign rebalancing means: a) German household savings should shrink now baby boomers are retiring; b) The influx of job-seekers from east and south Europe is boosting cap-ex, and c) China’s medium-term shift away from excessive metal-bashing curbs  German exports of machinery. Add to that news that, at current rates, by 2020 their population will be older than most of the rest of western Europe by a good margin which reinforces point (a) and means they will have to spend more, boosting European consumption. The chart below shows that even after the spurt this year, European equities are not dear:

MC chart June 5


Courtesy of Schroders

Achieving ‘late middle age’ has its good points. My wife brings me the daily newspaper, I turn to the announcements page and smile every time my name isn’t there. Having just celebrated (?) a birthday, I was contemplating life and its meaning when a thought came to me: How did I get over the hill without ever getting to the top?

Have a good weekend.


David Cowell


For and on behalf of Myddleton Croft Investment Managers

1 Woodside Mews

Clayton Wood Close


LS16 6QE

Tel:        0113 274 7700

Fax:       0113 274 7711

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