Investment Publications
May 2010 - GBIM Newsletter
"And the Wolf shall dwell with the Lamb" - Isaiah 11:6
Electorally a Conservative / Liberal Democrat coalition may be the making of both parties. Assuming they can make it work. If there is truth to the suggestion that Labour proposed the television debates to split the vote for change, then they have been hoist by their own petard.
A cross party consensus for dealing with the high level of indebtedness in the UK is essential. The entire country will suffer the consequences of the buy now, pay later obsessions of both government and households during recent years. It would be a travesty if the inevitable austerity allowed Labour to bounce quickly back into power.
Investment Advisor - Absolute Returns
"For those keen to re-enter investment markets, absolute return strategies could be just what they are looking for, but it's vital to know what works and what doesn't"
Judging by the flood of absolute return products into the market recently, you would be forgiven for thinking that this is a new phenomenon or approach. In fact absolute return strategies have been around for many years.
Winter 2009/2010 - GBIM Newsletter
“Annual income twenty pounds, annual expenditure nineteen, nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
Mr Micawber had recently been imprisoned for debt. While we are not suggesting that Gordon Brown should be sent to the Marshalsea, we do need to heed the lesson on husbandry. The key to investing, when many parties are short of cash, is to recognise that those with cash will emerge stronger. This belief drives our current investment strategy.
UK Base Rates
It is highly unlikely that the Bank of England would raise interest rates until after QE has finished. And then only after a pause to see how money and bond markets, lending and sterling react.
Read more...Banking Reform
The debate upon banking reform in the UK has so far been woefully inadequate. The various commentators have been discussing narrow aspects of the issue, when what is required is a holistic plan. The long term outcome of reform needs to present a balance between two imperatives: on the one hand global economic and social development can benefit enormously from constructive credit provision, and this should not be thrown away; on the other hand the cost of a failed credit system is too great for us to allow it to be repeated.
Read more...A Personal View June 09
I am sure that I am not alone in feeling exasperation about the void of reasoned public discourse on the subjects of political and economic leadership in the UK.
As is the wont of our commentators and operators in these fields they pontificate only on small issues rather than fitting them into a bigger scheme. No doubt the larger landscape is intimidating for them, because it involves questioning their own status quo. Unfortunately this is not forgivable because they claim to be leaders. They seem to lack moral courage, and a plan, both of which leaders should have.
Read more...Summer 2009 - GBIM Newsletter
Equity prices probably reached their nadir in March, since when investors seem tohave thrown off their fears that we were entering a period of depression, and nowthink that we shall merely have suffered a deep recession. There has been talk of‘green shoots’.
Analysts appear to be assuming that growth rates in the US and the UK will returnto trends of the last decade, and that profitability will revert to the historic mean; webelieve this is overly optimistic.
Read more (PDF)...G20 and All That
As expected, the G20 leaders all smiled for the cameras and said what clever folk they had been. So what did they achieve? Probably two things: first, by bolstering the IMF, they have underpinned international trade, and alleviated concerns about weaker trading partners in general, and Eastern Europe in particular; second, the psychological effect has been to boost confidence, where none previously existed, among those looking for an end to global financial travails.
Coincidentally there were some other shots in the arm. Economic statistics reported last week broadly suggested that a deceleration of the bad news is occurring. The agreement between Obama and Medvedev to restart nuclear arms reduction talks is also very positive. And in America so-called mark-to-market rules have been suspended, taking some pressure off the banks.
Read more...Quantitative Easing - What is it and why is it important?
We are familiar with the normal Bank of England policy of changing interest rates, which deals with the price of money. When the price of money falls there is typically an increase in demand for it, and thus an increase in the volume of money in the economy. Unfortunately, in the current state of nervousness about financial conditions, the volume of money in the economy has been contracting, despite falling interest rates. It is hoped that "quantitative easing" might resolve this.
Read more...Winter 2008 / 2009 - GBIM Newsletter
Historically low interest rates are causing serious concerns for savers for whom bank deposits and interest provide a substantial part of their assets and income.
Traditionally cash is the only risk-free asset available, although recently we bought UK Treasury stocks (gilts) for many clients, to capture interest payments as we expected interest rates to fall. This strategy has been successful, and prices have risen sharply. So what next?
Read more (PDF)...Bulletin - The Credit Crisis Part IV
With whom does one start? Self-acclaimed "prudent" Gordon Brown is now exposed as not understanding husbandry at all. The Government finances enter recession already substantially overdrawn, without including their off balance sheet items of PFI debt and unfunded state pensions. The combination of this week’s stimulus, falling tax revenues and higher social security payments have at least caused the admission that taxes will have to rise. In the medium term, new issues of government debt will flood the market.
Presentation on Asset Allocation to Intermediaries in Salisbury
On Wednesday 12th November 2008
Bulletin - The Credit Crisis Part III
The extraordinary banking debacle may have reached its endgame. While it is difficult to feel remotely confident of this, it is positive to see globally coordinated actions rather than just words or narrow national agendas. Concerns have now moved forward inevitably to the outlook for global growth, which has been exacerbated by the paralysis of lending.
Bulletin - The Credit Crisis Part II
While western financial and legislative authorities strive to contain potentially excruciating outcomes from the banking crisis, what have we been doing?
In our view the economic impact of the crisis is initially deflationary; we also believe that the danger of shorter term inflation is past. Thus interest rates in the UK and elsewhere should begin to fall soon, and they should continue falling for some time. We should not be surprised if they reach 3½% by mid-2009.
The Bail-Out
A summary of what the $700 billion bail-out is, putting it into place, effect upon banks and the likely impact upon the wider economy
"The bail-out reduces the probability of a deflationary spiral. Inflation becomes a risk only if the increase in money supply is accompanied by an acceleration in monetary velocity, which seems improbable given the fact that the economies remain highly leveraged, and that banking rules will become tougher."
Bulletin - The Credit Crisis
In the US Fannie Mae and Freddie Mac, the largest American mortgage institutions, have been nationalised; Lehman Brothers, the fourth largest investment bank, has failed; Merrill Lynch has been sold to Bank of America; and AIG, one of the world’s largest insurance companies, has been kept afloat by a credit line from the Federal Reserve, and the US Treasury has taken an 80% stake in exchange. In the UK our largest mortgage provider, HBOS, is believed to be in merger talks with Lloyds TSB. A few months ago Northern Rock was nationalised.
August 2008 - GBIM Newsletter
The Path of Inflation and Interest Rates in the UK
The Bank of England’s mission is to ensure that inflation meets its target of 2% in the medium term. For many years domestically derived price increases exceeded this level, but the overall inflation figures remained acceptable as the prices of many imports fell consistently.
Read more (PDF)...Note: The factsheets and commentary provided above deal with historical views or positions held by GBIM for its clients and are not investment recommendations. You should consult your investment manager before acting on any of the foregoing information.