“It took us three years to find someone to manage our wealth, and we can now sleep at night! ”

Darren and Ruth Johnston (Semi-retired entrepreneurs) (N Wales) (2011)

Is it a bird? Is it a plane? No its Super Equities Man! Up, up and away?

Posted by jdavis on August 3, 2009

This was emailed ONLY to clients and the professional advisers who work with us. Then after a few weeks we put it up on the site.

 

News from USA:
“NEW YORK (AP) -- Citigroup Inc., one of the biggest recipients of government bailout money, gave employees $5.33 billion in bonuses for 2008, New York's attorney general said Thursday in a report detailing the payouts by nine big banks.

The report from Attorney General Andrew Cuomo's office focused on 2008 bonuses paid to the initial nine banks that received loans under the government's Troubled Asset Relief Program last fall. Cuomo has joined other government officials in criticizing the banks for paying out big bonuses while accepting taxpayer money.

Citigroup, which is now one-third owned by the [US] government as a result of the bailout, gave 738 of its employees bonuses of at least $1 million, even after it lost $18.7 billion during the year, Cuomo's office said. The bank's top four recipients received a combined $43.7 million.

Bank of America, which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million and the top four recipients receiving a combined $64 million. Merrill Lynch, which Charlotte, N.C.-based Bank of America acquired during the credit crisis, paid out $3.6 billion, including a combined $121 million to four top employees.
Bank of America earned $2.56 billion in 2008, while Merrill lost $30.48 billion. Cuomo's office said Merrill Lynch doled out 696 bonuses of at least $1 million for 2008.

Goldman gave 953 workers bonuses of at least $1 million, with its four most highly compensated employees receiving a combined total of nearly $46 million. JPMorgan gave 1,626 employees at least $1 million, and its top four recipients received a combined $74.8 million. The two banks each gave more than 200 employees bonuses in excess of $3 million.”

I see absolutely no difference in the UK’s banking sector. However, the government minister, Lord Myners’ proposal that we are told of big earners is yet another smokescreen. Limit their leverage and split retail from investment banking and make the latter take ALL the risks. Will it happen? Not on your nelly. Should it? Of course.

Do you remember the Not The Nine O’clock News Sketch – Gerald The Gorrilla?  “Wild? I was absolutely livid”

Watch Gerald the Gorilla here. Enjoy!

 

Well, as we thought, the summer stock market blues were just a mild case of swine flu!

The market continued to drive forward. Of course its built on sand. Eventually the various government stimuli will cease and the market (and houses) can do what its wanted to do all along. Sort itself out! Without the political meddling of those who are trying to look generous with our future huge taxes. They don’t care – they’ll not be in power for the next decade! All they’re trying to do is limit their political losses next year. Actually, it’s the same all over the democratic world. Obama, for example, needs to meet his pre-election promises – which include looking after his main supporters, namely, the big banks. See above.

If only they’d left it all alone. We would have had a short sharp (deep) recession, ending maybe next year or the year after. Instead, we will have a decade (a lost one, like the Japanese) of, at best, below trend growth but probably a horrible depression. Already, in the UK, the fall in GDP is the worst since the War. And that’s with all this ‘stimulus’ which they said would stop us having economic problems. They were wrong. Obviously. To paraphrase Scotty from Star Trek (Did you know the actor was actually Canadian?) “Cap’n, you cannae change the laws of… economics!”

So, the S&P 500 has risen, as we thought it would (see our blogs of 20 March and 23 June) from 666 to c 1,000: a rise of 50%. That is one heck of a stock market rally in just 4 months and 3 weeks. Its far too steep to be realistic. In other words, it is not backed up by economic fundamentals. (Every time I write the number 666 in this context I have to smile – the manipulators were having a huge joke. Right?)

I’m starting to wonder how far it will go. To the end of last year and in March I suggested 40-80% ie to between 930 and 1200 (roughly 4750-5250 on the FTSE 100). As we rise steeply, I now have to wonder for how long the rise will actually continue. We now wonder if we are fast approaching the next peak. The FTSE stands, as I type, at c. 4700. It has risen 600 points (c 15%) in just 3 weeks.

We are vigilant, as ever, to the medium term mass wealth destruction taking place (not amongst our clients!). We said to a few clients just last week that we expected a further 10-20%. However, we did a lot of work this weekend and we saw the market take off like a rocket this morning and if this week turns negative we could see this starting a big break down for a few months. (Sell in May might be Sell in August this year…)

Within a relatively short time, we will likely make a recommendation to trim portfolios of market-correlated holdings. It could be this week or next that we recommend to clients, whose holdings are most correlated to the stock market, to shave a little off the top. In other words, reduce exposure to the stock market. As ever, we will make bespoke recommendations.

It is entirely possible that the market could rise further to 1050-1100. Then we will be likely to recommend to trim further.

No doubt we’ll be ever vigilant to preserve capital and grow it when we can.

The name of our game is to hold on to capital until the true bottom presents itself in 2010-2012 (on the basis that the markets slump is similar to the 1930s crash. So far it is very closely following that route). Then, as we get lower and lower your risk of loss reduces further and further by re-entering. Then, we can start going back into the market and the decade afterwards should be very interesting indeed and, hopefully, super profitable. We see every reason to expect this – if you can hold onto capital during the falls then you will buy much more, with the same amount, at much lower prices.

That, in a nutshell, is what we are currently aiming to achieve for clients. Long term growth with preserved capital after this medium term slump.

Please remember, investments can fall as well as rise. And they will!

Please also remember, no trend goes in a straight line. Otherwise it would be called a straight line! The trend in houses and stocks is still very much down, in our view.

Comments

"Please also remember, no trend goes in a straight line. Otherwise it would be called a straight line! The trend in houses and stocks is still very much down, in our view." oh dear (10th Sept 2009) looks like your wrong again Jonny!!

Posted by Baz on September 10, 2009 at 4:41 p.m.

On what basis Bazzy? If we are right that the trend is still down then this short term contra trend rally is exactly that. How can you be SO SURE we have had the bottom and are now rising ad infinitum?

Posted by JD on September 22, 2009 at 6:12 p.m.

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