Its Not Harry

Comment and opinion for retail investors in the UK

Mark Potter

Midweek (a)musing – melt down, down under

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I note that the Reserve Bank of Australia, which like most central (state) banks had been buying bonds to support the economy, has reported a loss of about £30 billion on those assets. Now I have said that there would be pain in the bond markers, but that is more than a headache.

Not a ‘gudday’

The reported comments of the bank’s deputy governor suggest there is talk of the bank being insolvent, but of course his bank, like other state banks, can print money so that would not happen.

If the bank retains the bonds to maturity (the notional loss is based on the collapse in current market value) then the losses may be reduced. In any case, Australians will have to pay in some way: either they will have higher taxes or public service costs, or possibly a higher level of inflation.

As the new UK Chancellor proposes to borrow astronomic amounts of money but does not want his own monitoring body (the OBR) to tell UK citizens what the implications are, there might be reasons to be nervous.

Midweek Musings – getting your fix, part two

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(published early!)

Last week, I outlined the main factors that might be relevant to a decision to add some fixed income funds to an asset mix in the current financial and economic climate.

Having a general idea that bonds (the general word for fixed income assets) are once again an interesting asset class is one thing, but that is not enough of a reason to rush out and buy a mix of bond funds.

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Midweek Musings – ‘gilty’ feelings, part one

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Having offered a succint(ish) refresher on the basics of fixed income investing in the Digging Deeper section of my Monthly Briefing, I have had some feedback from subscribers that some further guidance on researching fixed income funds, and the logical basis for any decision making, might be welcome.

Back to class – it’s September!

This is a big subject and one where I have not offered much training even to those taking my intensive training programme, simply because over the last couple of years, it gradually became obvious that there was an increasing risk (now demonstrated) in owning any fixed income assets for the majority of investors, so no point in spending a lot of time trying to grasp the complexities of an asset class that you could safely ignore!

In essence the textbook case for owning bonds to lower risk had been undermined and it was clear that fixed income assets would not offer much protection when the bull market cycle ended.

As we are now well past the end of the bull market and what was anticipated has come to pass, now is the time to get up to speed on this most technical of the major asset blocks.

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Midweek Musings – how low can we go?

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We’re are all doomed, Captain Truss

As Ms Truss gets started as Prime Minister, its seems that there is nothing but a gloomy few months to look forward to in Britain. Investors are certainly taking that view because I read that nearly £7 billion has been withdrawn from UK focused investment funds this year (Source: FT).

Of course, the withdrawals might be all by UK investors scared of markets (amateur investors always withdraw money when markets have fallen sharply, according to most research) but it is likely that some of that money has been re-allocated elsewhere by international investors. A recent international bank economic forecast had the UK as the most likely region of the world to suffer a recession.

To a degree, none of the above is evidence of anything concrete – it is just behavioural. However, the human psychological behaviour of market participants is, in my view, the main driver of market valuations.

Economics is only of relevance insofar as it puts some words and fairly naive theory around the living conditions (especially financial aspects) of us all and that might help predict our behaviour!

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Watching Brief – September 2022

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Pottering About

August was the football commentators’ legendary ‘game of 2 halves’.

The month started with a continuing rise in the value of the major stock markets and even a flurry of meme stock silliness in Bed, Bath and Beyond, exploited ruthlessly by one Ryan Cohen (his actions now being the subject of a class law action, I read). 

The month ended with a very negative reaction to the Fed’s hawkish line on interest rates (surely no real surprise?) and markets losing all the gains they made over the last few weeks.

Have the pessimists turned out to be right? 

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Only fools and horses (and meme stock buyers)….

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A storyline

Delboy Trotter is in the pub with the usual crowd. He is bragging that he has just acquired 500 units of the latest computer gaming toy (the Mistboard console to be precise) that is going to be massively in demand and is in short supply due to global ‘logical’, as he puts it, (logistics) difficulties, retailing at £125 a pop. He only paid £100 a unit and they are already being touted on Ebay at £150 plus. The discussion moves on.

A week later, Del is back in the pub and blathering on about the same subject. The dudes ‘in the know’ reckon that the computer gaming console he stocked up on is going to be selling for at least £250 by Christmas because a container load of them fell off a ship coming out of Taiwan and 200,000 units were lost.

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