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The FTSE 100 has fallen around 50 points this week in volatile trading caused by the threat of a growing trade war between the U.S. and the rest of the world. As from today the EU will impose tariffs on some U.S. goods in response to the tariffs set by the US on steel and aluminium. The markets do not like it and reacted badly early this week only to recover midweek. Overall, the fall in the markets has been relatively muted which suggests that the markets do not take this too seriously for now!
The past week was quiet as is the case at this time of the year. Old favourite, Ashtead increased its final dividend by 20%.
The week ahead remains quiet. Going ex-dividend on Thursday for yields in excess of 2% for the single dividend we have Morses club (3.1%), Babcock (2.8%) and Renewi for 2.2%.
New into DividendMax at the request of a member we have IQE.
Daily Comments Roundup
The FTSE 100 has continued to rally after the sharp falls seen on Monday and Tuesday. Dixons Carphone had a poor set of results but maintained their dividend at last years level. Chemring increased its 2018 interim dividend by 10%.
21 June, 2018 (Yesterday)
Berkeley group warned investors that it had reached the peak in its profit cycle and expected profits to fall in the coming years. The FTSE 100 rallied strongly.
20 June, 2018 (2 days ago)
The markets have continued their rapid falls as the fears of an escalating trade war continued to undermine investor confidence. Ashtead Group increased their 2018 final dividend by 20%.
19 June, 2018 (3 days ago)
Markets fell sharply today in reaction to the prospects of an escalating trade war between the US and China. Fears of a repeat of the 1930’s protectionism that lead to the great depression look way off the mark however.
04 June, 2018 (18 days ago)
The FTSE 100 is bouncing back a little this morning and is trading up around 30 points in early trade. SSE and Pennon both declared their final dividends this morning.
25 May, 2018 (28 days ago)
The market is trading up slightly after a fall yesterday. A large number of companies decalared their dividends this morning.
24 May, 2018 (29 days ago)
The FTSE 100 is trading slightly up this morning as favourable market conditions continue. A large number of companies have reported this morning with no shocks and plenty of solid dividend increases with the biggest coming from Cranswick, UDG healthcare and Homeserve.
Neither of us does frugal, so we each need to make a small (well size matters, so not that small) fortune.
Our idea is simple, but not easy; we intend to use the stock market as our piggy bank and make as much money as possible, as quickly as possible without taking stupid risks.
We disagree about the best way of doing this. Humbug believes the best route is to aggressively invest in funds, riding medium term momentum. Fagin operates by ‘picking the markets pocket’ scalping individual shares.
To keep us honest, all reported under the heading of the Great British Trade Off , here in our blog and on Twitter at Humbug&Fagin@BritishTradeOff.
First of all, is it possible to define financial independence? No, I don’t think it is. Because obviously its different strokes for different folks.
A billionaire’s financial independence will likely be very different to mine; mind you one could argue that a billionaire is likely to be financially independent simply because he is a billionaire.
For me the definition is, never ever having to work for any one else ever again unless I choose to. Further, its having sufficient capital so that when its conservatively invested it still provides me with more income than I need to live on, at my chosen standard of living.
On top of that, the return should be such that there is surplus income for further re-investment to earn still more income in the future.
For extra security I also want to own a low risk but still highly profitable and cash generative ‘life style’ business to protect me from both investment risk and inflation.
I believe that there are a number of keys to achieving these objectives.
They are easy…………………………but not simple. This step-by-step approach to financial independence sets out my thinking.
KEY ONE: Income is income and wealth is wealth. Don’t confuse them.
Most people think that having a high paying job is the same as being wealthy. Yes, for sure someone who earns a lot of money could be wealthy, But surprisingly, more often than not, they’re not.
The Americans have a brilliant expression for people like this – ‘big hat no cattle’!
Anyone who wants to be wealthy and have financial independence has to get their head and their wallet in the right place. They need a clear vision of what they want and how they plan to get there.
First of all, when the money starts rolling in a good chunk needs to be saved and invested wisely.
Its fatal to get the trappings of wealth, till you’ve got the wealth.
‘Its fatal to get the trappings of wealth, till you’ve got the wealth’
The fine house, the garage full of nice cars, the hand made clothes, the 40ft boat, the trophy wife and the high maintenance that goes with her, the expensive watch, the children at private school and a social life of lavish entertaining if they are taken on before you really can afford them will mean that you never ever achieve financial independence.
If you really do want the peace of mind and security of being wealthy, rather than just appearing to be, you have to postpone these extravagances and temptations until you actually are.
Before you take on a new liability, have in your mind that you’re not financially secure and you do not have financial independence until such time as your money is working for you, not you working for your money. So do you need this whatever it is and should you be committing to it?
Never forget that the wealthy invest in assets, the poor spend their money on liabilities.
KEY TWO: You must have surplus money to invest in the first place.
Earning a high salary or owning a profitable business never hurts when your trying to make yourself financially independent, but they’re only part of the equation.
You have to structure your life (certainly in the early years) to first of all save as much of that high income as you possibly can without screwing yourself into the ground. Then you have to invest those savings into income producing assets.
See what I mean about simple, but not easy?
‘you can’t be a capitalist without capital can you?’
To begin with its a mind game, once you get your head around the benefits of deferring the gratification for a few years it gets easier.
There are a few things that have to lock together. Unless your vision of financial independence is an extremely frugal one, you need a worthwhile amount of capital to generate the the unearned income to make it possible.
So, you need to be a capitalist and you can’t be a capitalist without capital can you?
Because of the way compounding works, the more money you have invested early in the sequence the better.
Saving and investing as much as you can in the first few years of earning good money creates greater wealth than saving and investing larger amounts later; amazing but true.
KEY THREE: Compound interest is your new best friend.
The three main income producing asset classes for all of us, are owning a business (or business’s) of our own, investment property and stocks and shares.
Getting market beating investment returns are vital; earning 12% pa from a mix of the above three is completely realistic and could likely be bettered by a canny investor.
Wealth and financial independence can be achieved over a working lifetime with a combination of aggressive saving early on and those better than average returns.
‘generate some serious wealth for yourself and achieve financial independence with noughts on’
Because of the way that compounding causes the results to accelerate in the later years of a sequence, it’s really important to start saving and investing as soon as you can.
In round figures an annual return of 12% doubles your capital every six years.
To state the obvious, by year six £50k of investments will have doubled to £100k, so far so good. But after compounding up for another twenty four years the capital has now grown to £1.6m.
Go round another six years and the initial £50k has grown to £3.2m. Interesting is it not, that’s the sort of figure that gets my full attention.
Sure I know its easier said than done to save £50k from taxed income. But if your a high earner and you put your mind to it, it can be done.
If you do it once, what about doing it another couple of times in quick succession? Do that and over time you’ll generate some serious wealth for yourself and achieve financial independence with noughts on.
Every month here at QuotedData, the investment trust analysts collate the insights on markets and economics taken from comments made by chairmen and managers of investment companies investing across the globe. We organise these to highlight what the sector’s trusts believe are the factors relevant to performance in their particular geography or industry sector.
The noise hides a supportive economic environment. Volatility was once again the principle feature of markets in May. This was largely due to heightened political risk. The Trump administration’s unpopular moves on global trade, North Korea and Iran created high levels of uncertainty in equity markets and a fall in bond yields. Italy’s new populist government also worried investors. However, the noise is hiding the fact that the global macroeconomic backdrop is relatively benign, with inflation momentarily in check and company results still positive. Therefore, despite the noise, developed equity markets rose in May. Emerging markets delivered negative returns as riskier assets were avoided during the month.
Geo-political risk is but one of the concerns for global investors. Others include inflation and overvaluation.
Fiona McBain, chairman of Scottish Mortgage, makes that point, and writes in the company’s report that undue focus on the headline topics 12 months ago might have led an investor to miss the importance of the extraordinary operational growth which was taking place at a number of the world’s largest companies.
David Stewart and Will Wyatt of Caledonia Investments sum up nicely what the other global and flexible investment companies think. Many investors remain mindful of the continuing political and economic uncertainty, despite the strong growth seen across global stock markets.
In the UK, the mechanics and implications of Brexit are unresolved, whilst higher inflation and the potential for higher borrowing costs is likely to impact consumer spending.
In the US, the Federal Reserve has been increasing interest rates and has begun the process of quantitative tightening. US Treasury yields have risen accordingly, which has historically been a warning for equity investors.
The chairman of British Empire Securities Susan Noble commented that volatility returned to equity markets in 2018 after a long period of relative calm and suggests that this may continue.
Brexit hangs over the UK economy and sterling fluctuations cause problems
The chairman of Invesco Perpetual UK Smaller Companies, Ian Barby notes that, whilst UK equity returns have been positive, the twin issues of Brexit and the direction of interest rates hang over the market and are likely to do so for some time to come.
The fund managers of Invesco Perpetual UK Smaller Companies agree but also point out that market set-backs, such as the one we saw in February, inevitably sap investor confidence but can provide interesting opportunities for long term investors. Also reporting this month is Perpetual Income & Growth.
Its portfolio manager Mark Barnet shares many views of his fund manager colleagues. He adds that the UK stock market is not expensively valued on an historical basis as demonstrated by a price earnings multiple of circa 14 times for the current year. This represents a discount to other major stock markets and is clearly indicative of the Brexit discount applied indiscriminately to UK quoted companies. He believes that, the most significant area of opportunity is within the sectors that offer direct exposure to the UK economy, notably financials, consumer cyclicals and real estate.
James Goldstone of Keystone senses a different mood in the market. He sees a turn towards more value investing, a less antagonistic climate in the Brexit negotiations and the long-awaited turning point in UK disposable incomes.
The latter two have combined to strengthen the pound and prompt a reassessment of the UK market’s position relative to international peers. The investment team at Schroders, who run the Schroder Income Growth portfolio, strike a measured tone but point out that the UK economy continues to fare better than the majority of forecasters predicted in the aftermath of the decision to leave the EU.
Thomas Moore, the portfolio manager of Standard Life Equity Income sees the market levels as “elevated”. However, there remains a wide divergence in valuations, partly as a result of the uncertain economic and political backdrop.
Steven Bates, chairman of F&C Capital & Income strikes a more positive note. He suggests that there are bound to be a number of economic and political challenges to negotiate in the coming months, but even if there are short-term problems, history suggests that with a reasonably long-term perspective the UK should be able to negotiate them satisfactorily.
Angela Lascelles of OLIM, the managers of Value and Income Trust, believes that the valuation of UK quoted equities, on an average yield more than twice the yield on long dated gilts, offers a reasonable balance between macro-economic and political risks, and attractive income returns.
Chairman of Shires Income, Robert Talbut, writes that markets are likely to be sensitive to any further restrictions on global trade and, in the UK, the progression of Brexit negotiations. After strong synchronised global growth through 2017, there are some signs that momentum has lessened in 2018 and how this evolves will be important to the outlook for equity markets.
In addition to many of the points raised above, Glen Suarez, chairman of Edinburgh Investment Trust writes that, as well as finding value in the UK, they are also looking at companies here that are focused on global growth.
Investors are dealing with volatility and US dollar strength but Asian companies remain robust.
Equities have rebounded as quickly as they had been sold off, reports Allan McKenzie, the chairman of Edinburgh Dragon, but believes that volatility could remain elevated as major central banks move towards normalising monetary policy. He also expresses concern about the impact of a possible US “trade war” and over-tightening of interest rates by China. He points out however, that Asia is in good shape and he is optimistic for the future.
The investment managers of Schroders Oriental Income agree and, from a stock picking point of view, are not worried about the outlook for the companies in their portfolio for the rest of the year.
The investment managers of JPMorgan Asian note the points made by Allan McKenzie and add that foreign investors’ asset allocations to Asia have and will continue to support the region. As in other markets, the managers express their concern about strength of the US as a risk.
There is volatility in Europe also, but here too it exposes opportunities
“Over the six months to the end of March, numerous events have conspired to reintroduce volatility to stock markets, which had seen little for some time” reports Michael MacPhee, chairman of the European Investment Trust and he says that this can unearth investment opportunities.
Craig Armour, investment manager for the company, goes on to say that the prospects for economic and corporate earnings growth in Europe remain positive, although trade friction between the US and China could act as a brake on growth.
The opinions of the chairman and investment managers of Baring Fund Managers’ Baring Emerging Europe differ from that of the European Investment Trust. His comments chime with the comments offered by the chairmen and investment managers of Asian companies: that the threat of protectionism and rising interest rates in the developed world are a concern.
President Trump’s tax cuts and increased fiscal spending will no doubt stimulate US economic growth for at least the next two years
North Atlantic Smaller Companies’ chairman, Peregrine Moncreiffe, offers some helpful insights into the US economy. Quantitative easing is complete and interest rates and inflationary pressures are both rising, not least because wages are finally increasing in real terms as the labour market starts to meet capacity limitations. Equity markets have performed well but are now looking expensive in valuation terms
Japan is an island of relative calm and consistency
Both the chairmen of Aberdeen Japan and JPMorgan Japanese agree that Japan has a degree of stability about it, in terms of politics and the performance of the economy. The chairman of JPMorgan Japanese, Andrew Fleming notes that any global economic downturn will have an impact on Japan given its cyclical characteristics.
Neil Gaskell, chairman of Aberdeen Japan points out that, Prime Minister Shinzo Abe has been under a bit of pressure in recent times and this may dent his government’s ability to reform. Andrew Fleming, however, suspects that if Abe is replaced, reform will continue without him. The investment managers of both companies expect higher degrees of market volatility and growing susceptibility to World events.
Country Specialists: Asia Pacific
US Trade Sanctions will have Global repercussions but less for Thailand than elsewhere
Nicholas Smith, the chairman of Aberdeen New Thai Investment Trust, thinks (as do many), that an escalation of retaliatory measures in response to President Trump’s ‘America First’ policy could have global repercussions. However, he points out that intra-regional trade in Asia continues to make great strides, supported by growing populations and rising disposable incomes.
Over 60% of Thailand’s exports go to its regional neighbours. This should shield the Kingdom to some extent from any deterioration in demand for its products from further afield.
The Thai currency, the Baht has strengthened to a four-year high against the US Dollar and this is causing some concern.
John Misselbrook, chairman of JPMorgan Chinese, reports that, in spite of increased volatility in markets and concerns over escalating trade friction with US, the outlook for Greater China equities remains positive in the current economic environment, supported by the Chinese government’s continuing structural reforms. The fund managers remain positive about the stability, reforms and changes being brought in the 13th National People’s Congress session held in March.
“India’s economy has been growing more rapidly this year than it did in 2017, but the headwind of high valuations has meant that the stock market has made no progress” writes Richard Burns, chairman of JPMorgan Indian. The fund managers remain cautious about the Indian equity market, not least as the country is entering an election cycle. They point out that “…while forecasting election outcomes is fraught with risks, we can safely predict increased volatility”.
Fund managers in the debt sector sound a cautious note
The (current) portfolio managers of Invesco Perpetual Enhanced Income state that they remain cautious. Despite rising over the past six months, bond yields remain low in historical terms and continue to price in little room for disappointment in terms of earnings and economic data. The portfolio manager of Chenavari Toro Income Fund notes that investor flows into fixed income and corporate bonds have slowed right down and he expects volatility to return.
Twelve months ago, the outlook for property as a procyclical asset class with a core income driver was positive – less so today Global trade wars, geopolitical upheaval or Brexit are unlikely to impact REITS without Retail
Hugh Seaborn, chairman of TR Property Investment Trust, has toned down his opinion of property over the last 12 months. He is still positive, but property investors have to be more vigilant. This is because the differences between well performing tenants and poorly performing tenants is widening.
Marcus Phayre-Mudge, fund manager for the company has noticed how quickly property investors are “spooked” by changes in market conditions or news flow. He sees a clear Brexit drag and is more confident at this point on the outlook for European property.
Medical REITS, MedicX and Assura, Warehouse REIT and long lease specialist LXi all feel that they will not be greatly impacted by Global trade wars, geopolitical upheaval or Brexit.
However, companies such as Drum Income Plus REIT, NewRiver REIT and LondonMetric warn of the exposure to cyclical sectors such as retail.
Bryan Sherriff of Drum Income Plus REIT writes that regional markets remain in good health, as is investment volume and demand. Allan Lockhart, chief executive of NewRiver REIT reports that, in their view, the headwinds experienced by the retail market in recent months will continue, and it is likely that in the near-term there will be further retailer consolidation, particularly in the department store, mid-market fashion and casual dining sub-sectors of the market.
NewRiver says that it has deliberately limited its exposure to these sub-sectors, which it says are under significant structural pressure due to changing consumer habits.
The outlook for the private equity sector remains positive
The outlook for private equity remains positive but it depends on what the exposure any company, listed or otherwise, may have to global economics. Michael Bunbury, chairman of HarbourVest Global Private Equity, writes that markets have been extraordinarily strong since their nadir in March 2009 and inflation has been subdued. Business conditions in many economies generally remain benign.
Biotechnology & Healthcare
The outlook for biotech remains positive. Healthcare remains out of favour
Andrew Joy, chairman of Biotech Growth, writes that the outlook remains positive, thanks to current low valuations, continued M&A activity, strong innovation and a favourable regulatory environment. The investment managers of Polar Capital Global Healthcare comment that, following the failure to repeal Obamacare, the healthcare sector remains out of favour.
The political outlook in the US remains unpredictable. Both companies comment on larger biotechnology companies. Polar Capital believe it is important to focus on company fundamentals and in particular on companies with high cash balances.
Biotech Growth expect that the relative underperformance of major capitalisation biotechnology stocks within the sector and of the biotechnology sector against the wider market have both reached close to their limits.
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Please click here to access the full macro commentary report for June.
Hamish Chamberlayne, Portfolio Manager for Janus Henderson’s Global Sustainable Equity Strategy, discusses 2018’s news flow and the long-term trends that are shaping his investing.
What are your key observations about 2018 to date?
There is strong evidence that investment trends continue to favour those companies transforming the world for the better. Our belief is only those companies that are committed to building a sustainable economy are likely to thrive in an environment that is rapidly evolving.
News flow this year bears witness to continuing momentum in clean tech investment.
China plans to invest $368 billion into renewable energy projects by 2020, and it is now the world’s largest electric vehicle (EV) market.
In the Middle East, SoftBank’s Vision Fund, which invests in disruptive future technologies, has announced it will help back a $200bn 200GW solar power development in Saudi Arabia.
On the topic of plastic pollution, the BBC Blue Planet II series received world-wide acclaim for highlighting the terrible impact that plastic is having on our oceans.
Our strategy has very little exposure to companies contributing to these issues, but we will be engaging with the few holdings where there is some plastics usage in their products.
What are the key themes that are shaping the markets in which you invest?
Taking a broad view of the market, it is apparent that the fastest growth subsectors are increasingly aligned with sustainability.
We are finding exciting opportunities in areas such as cloud computing and artificial intelligence, the electrification of transport, energy efficiency, smart cities, industry 4.0, sustainable infrastructure, financial services, education and research, and healthcare.
We view these as long-term trends that should transcend both economic and political cycles, giving us confidence in the duration of future growth.
As well as aiming to select stocks for their positive impact on the environment or society, we also avoid investing in those companies that we view as having unsustainable business practices or as having a negative impact on our world.
For example, our strategy is deliberately low carbon. We strongly believe the death knell has sounded for big oil, given overwhelming scientific consensus that burning fossil fuels is driving irreversible climate change. Oil is also the primary raw material in plastic production.
Where are you currently seeing the most opportunities?
Our strategy remains skewed towards the Knowledge & Technology and Efficiency themes, where we continue to identify compelling investments.
Many of our investments are addressing more than one of our sustainability themes.
For example, semiconductor companies are having a transformative impact on many areas. These include medical technology and health diagnostics, electric and autonomous cars, smart cities and factory automation, renewable energy and energy efficiency, and water and environmental services.
Semiconductors are the backbone of a smart and connected world, and the industry is evolving from serving computing and smartphone markets to being adopted in a growing number of industrial and Internet of Things applications.
Gigawatt – a measure of power that is the equivalent of a billion watts
Industry 4.0 – a name for the current trend of automation and data exchange in manufacturing technologies. It includes the Internet of Things.
Internet of Things – the interconnection via the internet of computing devices embedded in everyday objects, enabling them to send and receive data.
Low carbon strategy – a strategy that seeks to limit its exposure to companies that produce fossil fuels, or that burn fossil fuels significantly within their business and supply chains. The burning of fossil fuels produces carbon dioxide, one of the major gases identified by scientists as causing climate change.
SRI – sustainable and responsible investing
Sustainable economy – economic development that attempts to satisfy the needs of humans but in a manner that helps sustain natural resources and the environment for future generations.
These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.
Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
The information in this article does not qualify as an investment recommendation.
Generation Rent is a popular term used to describe young adults, normally between the ages of 18 – 35, who live in rented accommodation because of high house prices. They are generally regarded as having little chance of becoming homeowners. However, how do the UK’s Generation Rent compare to others around Europe?
In November 2017, Countrywide data showed that an average of 7.6% of homes listed to let had previously been listed for sale, which in turn has led to an increase in people renting in the United Kingdom. However, in Europe, Germany leads the way when it comes to the percentage of the population living in a rented dwelling, with a huge 54.3%.
We’ve recently seen dynamic changes on the residential property market across Europe, with the average square metre cost of a property varying significantly. The United Kingdom still has the highest per square metre average transaction price in Europe of €4,628, despite a decrease of 9.0% due to the pound’s depreciation. This in turn has made it hard for new buyers to get onto the property ladder.
Comparing the average cost of 4,628 EUR/m2 in the UK to other nations in Europe, you can get more space for the equivalent value elsewhere. This leads to higher rental costs, once the properties find there way onto the rental market
Back in the UK, we saw the average rental cost increase by 2.55% between August 2016 and 2017, with the South East being the only region to become more affordable with a percentage decrease of -0.2% in rental costs.
In the previous 10 years, the increase in house prices has outpaced the rise in average salaries. This has led to first time buyers not being able to raise a deposit to purchase a property, which has led them to rent
However, research from the Yorkshire Building Society has shown that buying a home in Britain has become more affordable across 54% of the country over the past decade (07-17)
It’s Portugal’s Golden Residence Permit Program that was named the best residence-by-investment program for the third year in a row. The program achieved a score of 79 out of 100 after being assessed on ten indicators: citizenship requirements, compliance, financial requirements, processing time and quality of processing, quality of life, reputation, taxation, time to citizenship, total costs, and visa-free access.
An international immigration and citizenship law expert, Dr. Christian H. Kälin, points out: ‘The Global Residence and Citizenship Programs report is an indispensable tool, not only for all those interested in alternative residence or citizenship but also for professionals such as private client advisors, private bankers, and lawyers, as well as for governments operating investment migration programs.’
What exactly makes Portugal an appealing country for investors? And, what benefits do Portuguese residents get? This brief guide will shine the spotlight on the country’s Golden Residence Permit Program and also look into other investment opportunities available within the nation
What is Portugal’s Golden Residence Permit Program?
The program is not available to Portuguese nationals or nationals of the EU and the European Economic Area. Non-EU nationals have the opportunity to obtain residence status and contributes towards their eligibility for a citizenship application following six years as a legal resident.
When a permit is granted, the owner is entitled to:
Benefit from family reunification. They — may also gain access to a permanent residence permit and Portuguese citizenship in accordance with the current legal provisions.
Enter Portugal without the need for a residential visa.
Live and work in Portugal — bearing in mind that the minimum residence requirement to qualify for the renewal of a Golden Residence Permit is seven days in the first year of residence for entitlement to the first renewal and then 14 days over the two subsequent two-year periods required for the next renewals.
Apply for Portuguese nationality, via naturalization, in compliance with Nationality Law requirements.
Travel visa-free within the Schengen Area.
The Golden Residence Permit Program proved popular soon after it was introduced. Between the scheme beginning in 2012 and BBC News spotlighting the program on March 19th 2014, the Portuguese government stated that 734 permits had been issued — generating over EUR 440 million in the process through property sales, investment in capital, and the creation of new jobs across Portugal.
The appeal to Portuguese investment
Are you an investor? Whether you are eligible for a Golden Residence Permit or not, there are so many reasons Portugal should appeal to you.
The cost of living in Portugal is something that is sought after. In fact, it’s one of the lowest in the EU today. Its business-related costs and labor costs are both considerably lower when compared to many other Western European nations too, while the country also has one of the lowest crime rates throughout all of Europe.
In terms of geopolitics, Portugal is well-situated with relations with Africa and the Americas on top of those with Europe. Not only is the nation an EU member, but it also still has close ties with Angola, Brazil, Macau, and Mozambique and can be a gateway to other Portuguese-speaking markets.
The country is not short of IT and physical infrastructure. Meanwhile, property investors will have many appealing locations to choose from; Portugal plays host to many sites of natural beauty, owing to its various rivers, mountains, and clean sandy beaches.
For investors of property, they must bear in mind that their customers will cover many walks of life. For instance, Portugal proves very appealing to tourists — surely helped by the fact that the nation enjoys over 300 days of sunshine each year — and has a quality of life that is favorable to those looking for a peaceful destination to retire to. This is not forgetting the sports fans, who are likely to find Portugal attractive for being the largest area covered by golf courses in the whole of southern Europe.
Wondering where in Portugal to invest? The capital city, Lisbon, is a cultural melting pot, helped along by the fact that the annual Web Summit conference attracts tens of thousands of business people to the district every year. Meanwhile, the island of Madeira was shown in a recent INE report to have the second highest rate of recent property value growth and the Algarve is an area of Portugal that is regularly in demand.
Considering these reasons, it is no surprise that Portugal is a nation that catches the eye and attention of so many investors. Will you be next to invest in the country?
The ‘right to be forgotten’ – a key element of the new GDPR regulation that has been dominating the news agenda for much of the past few months; aAs of Friday 25th May 2018, anyone should be safe in the knowledge that if they ask any organisation to have their personal data deleted, that organisation does so and if requested, can provide proof of such a deletion. This means even if you are standing in the queue to buy a Happy Meal from McDonald’s, you can ask to see the footage from the security camera records that have filmed you and request that they it is deleted from their systems.
In the wake of the Cambridge Analytica and Facebook debacle, how can individuals be truly satisfied that their data has been eradicated when requested. BTL recently judged a hackathon at the Consensus blockchain conference in New York, where we challenged developers to build applications on our Interbit platform that can delete data.
We had teams that opted to use Interbit purely on the basis that they can build applications that allow data stored on our blockchains to be permanently erased. One such application was for predicting sports outcomes for betting purposes, where users could build betting profiles and be ranked according to their performance.
But blockchain’s immutable attribute means that any data stored on a chain cannot be deleted. This is particularly the case with public or open blockchains such as Bitcoin and Ethereum. Business requires blockchain technology to be more flexible and so we have built Interbit to be able to specifically meet GDPR’s requirement of the ‘right to be forgotten’.
In fact, we would go as far as to say that you can only truly meet this requirement with such a blockchain solution. If we look back at our betting profile application that was built at Consensus, if a user wishes to leave the service, their entire profile and history could be deleted due to the way Interbit allows data to be segregated across multiple chains within single applications. Delete a chain, data is gone, for good.
So you can only be assured of deletion of data if the chain that that data that is stored on is erased. A succinct and concise explanation of how our Interbit platform works is provided by the IT industry analyst Jason Bloomberg who writes: ‘BTL’s architecture is like no other I’ve seen, and it is the only one that succinctly deals with the GDPR ‘right to be forgotten’ requirement: to forget a user, simply delete their blockchains’ – click here to read his article.
It is no surprise that privacy is such a contentious issue at the moment. Recent research we commissioned highlights just this where 279 technology professionals in the UK and US said that ‘data privacy’ was their highest priority right now, ahead of ‘business operations’ and even ‘revenue growth’.
By segregating data across multiple private chains, not only does this facilitate compliance with GDPR, but total privacy of data can be achieved unlike with public blockchains where metadata is visible. There is also the inherent security that a blockchain network provides making it incredibly difficult to tamper with, steal or hack user data, without any need for backup.
In fact, backups of systems are incredibly risky for businesses in today’s GDPR world as any deletion of data requires each and every system to be opened up and the data punched out from a number of different sources – such a technical headache goes away when using blockchain as the network automatically ensures all copies of any data that is to be deleted, is indeed removed.
How can you have multiple blockchains in any one application? Interbit’s unique ‘chain joining’ capability allows this so where the business requires it, user data can be segregated accordingly across many different chains that can be joined (to use in technical jargon they are ‘interoperable’), which allows for total privacy and the ability to be forgotten.
Current computing systems are not well designed to operate and meet the guidelines set out by GDPR. They leak and where data is stored in just one place, it makes it an easy target for cybercriminals. The new computing paradigm of blockchain can ensure GDPR is implemented successfully.
How businesses can benefit from blockchain: BTL CEO Dominic McCann on Sky News - YouTube
BTL Group is listed on the Toronto (TSX) Venture Exchange – here
The government cannot give to anybody anything that the government does not first take from somebody else – writes The Saltydog Investor
I was reminded of the above statement when reading the recent proposals being put forward by David Willetts, where he was suggesting the gifting of money to every young person under the age of twenty five -‘Millennials’. A ‘get you started’ gift to set them on the way towards economic freedom.
It would have to be spent towards the purchase of a house, their pension or some such sensible objective. He was suggesting that this was necessary to balance up the unfair financial advantages that had been heaped upon those people born just after the war – ‘Baby Boomers’. I really struggle with this idea, and certainly can’t envisage how it would stand a snowball`s chance of being administered correctly without whole scale fraudulence taking place.
However, I do firmly believe that there needs to be a rebalancing of wealth between the haves and the have nots in Britain. I should also say that I do not know how this can be achieved, only that in my book it must be earned not gifted. Young people with the correct work ethic and good education need the right environment to be able to create wealth not only for themselves, but for the country. The alternative, a hard-nosed Marxist type approach, I find quite frightening.
The following nine points I have taken from a John Redwood article laying down the main points of the Marxist doctrine.
The abolition of all private property.
A heavy progressive income tax.
The abolition of all inheritance rights.
Confiscation of all property of rebels and emigrants.
Centralisation of all transport and communication into the State`s hands.
Wholesale nationalisation of the means of production and State planned farming.
The establishment of industrial armies with equal requirement of all to labour.
Shift of people into towns with erosion of distinction between towns and country.
Free education for all, with abolition of child factory labour.
With the exception of the last item, which should be a given, I wonder just how many of other points lie on the ‘to do’ list of our present Labour Party leader? Of course I do not believe for one minute that all are on the list – the passage of time has overtaken and outdated some, but not by any means all!
Should Mr. Corbyn come to power it will be a life changing event for the country and for investors such as ourselves. This must be considered a possibility with Brexit Remainers and Leavers in open warfare and prepared, it would seem, to bring the Conservative Party down. I am non political and generally take the view of a ‘pox on both their houses’. You would hope that it was not beyond the grasp of politicians to produce a manifesto that gave protection to the old, and encouragement and incentive to the youth and middle-aged of the country to work and be sensibly rewarded, without reverting to extremes both on the right and the left of the political spectrum. This is unlikely to happen so perhaps now is the time to be working on an investment plan to cope with a potential radical change in government direction, and the need to protect one`s financial future and that of our dependants.
I am of that age where the future is now in the hands of others, and I am becoming a reluctant spectator. For instance when I hear the William Tell Overture I am reminded of the TV programme ‘The Lone Ranger’, so perhaps that means I am hankering for the past. I don’t know about others of you that can remember this programme, but I was always rather suspicious of the Lone Ranger’s relationship with Tonto, and also it was never explained what he meant when he kept saying “Kimo Sabe”?
Co-Head of Equities – EMEA and Asia Pacific at Janus Henderson Investors
Last year saw global growth accelerate at its fastest pace since the financial crisis as this long-running bull market defied expectations and found another gear.
It was a period of synchronised global growth reminiscent of yesteryear – a brief boon for global stock market investors. But with growth inevitably cooling in 2018, the challenge now is to assess where the momentum is strongest and which firms are going to thrive.
With a mandate to invest globally, The Bankers Investment Trust enjoys the privilege of buying stocks without limitations regarding market cap or geography. It is an enviable position, but it also requires a broad depth of expertise across regional markets.
My job is to tie together the knowledge of seven stock pickers, each with deep regional expertise, and guide the overall weighting and direction of the portfolio. Right now, we think the US economy is on a strong footing to outperform other markets in the short- to medium-term, but we think valuations are expensive.
‘the US economy is on a strong footing to outperform other markets’
Given these expensive valuations, we are underweight US (27%) relative to our benchmark (51%) – the FTSE All-World Index. The Trust might be underweight US, but North America still makes up the largest geographical exposure in the portfolio, followed closely by the UK (25.4%).
Therefore, we are taking a very selective approach to the US in order to capitalise on a number of macro-level drivers that we think make the US an interesting market.
Perhaps the most eye-catching event for global investors was the approval of President Donald Trump’s tax reforms towards the end of 2017, which was the first major legislative triumph for the outspoken president. It was also the country’s biggest tax system overhaul in 30 years. We expect his corporate tax reductions to spur on wage growth and fuel a pick-up in consumer spending during the next 12 months.
Talk of a trade war with China might spook some investors, but I’m on the fence. I don’t think a trade war between the world’s two largest economies benefits either country and looks more like a push to force the Chinese to open their economy.
‘aim is to create a portfolio of undervalued companies which enjoy a sustainable competitive advantage’
Whether or not a ‘trade war’ does develop, there are some things that we are confident will keep the US on track, such as the strong domestic economy and a clear pickup in capital expenditure. This growth may be dampened by further US interest rate rises but I expect the Fed to stay behind the curve by limiting the number of interest rate rises this year.
Another positive for the US is the recent revival of the dollar. Since the lows of 2012, the trade-weighted dollar (against a basket of currencies) has appreciated by almost 40%, albeit in 2017 it weakened against most currencies.
There are longer-term concerns about the country’s national deficit rising, but it’s not something to worry too much about now and as growth picks up around the world the deficit could naturally decline.
A hold forever approach
Broadly speaking, the valuation of the US stock market appears elevated on most measures relative to its history. Our North American team remain very conscious of this and continue to abide by a strict valuation discipline.
Although they operate with a “hold forever” mind-set, meaning each company is bought with a view to owning into perpetuity, each holding must demonstrate sufficient upside over the next five years to earn a place in the North American portfolio.
The aim is to create a portfolio of undervalued companies which enjoy a sustainable competitive advantage and operate in structurally growing end markets.
The majority of the portfolio is tied to the following five long-term secular trends, which the team believe to be underappreciated by the wider market; the transformational effect of the internet, healthcare innovation, paperless payments, energy efficiency and emerging market growth.
Take healthcare innovation, which is important given the America’s ageing demographic – the country’s population aged 65-and-over reached 50 million for the first time in 2016 and is expected to continue growing as the ‘baby boomers’ reach retirement.
Considering this, we look for companies that aim to provide solutions to the challenges brought on by an ageing population. For example, California-based contact lens manufacturer The Cooper Companies is a stock we like because one of its revenue drivers stems from the growth in multifocal lenses, which are widely amenable to an ageing population.
Given the relative expensiveness of US equities, we have sold more than we have bought in recent months. The additions we have made to the portfolio come from a diverse range of sectors but importantly all share a common feature: a sustainable competitive advantage, which allows for reinvestment at a high rate of return. Some of our recent additions include luxury cosmetics manufacturer Estee Lauder, computer gaming company Electronic Arts, freight hauling railroad Union Pacific and software giant Microsoft, which is a rarity in the tech sector for its 2% dividend.
Emerging market proxies
Our North American exposure is well diversified across sectors with technology (c. 24%) and financials (c. 21%) afforded the largest allocations.
That said, the financials exposure is potentially misleading as most of us think of banks and insurers when we say financials, but much of our exposure to the financial sector consists of electronic payment institutions like MasterCard and American Express, and conglomerates like Warren Buffett’s Berkshire Hathaway, for example.
‘we look for companies that aim to provide solutions to the challenges brought on by an ageing population’
These companies are positively involved in the long-term socioeconomic trends, particularly the transition to paperless payments.
The trends we refer to are not specific to the US or North America, but the region is typically at the forefront of innovation – perhaps only rivalled now by Asia’s growing technology sector. One of the key trends that guide our stock selection is emerging market growth.
This is most easily demonstrated in the chart below, which shows that although North American stocks account for the largest geographical weighting (27.7%), the companies in the portfolio generate most of their revenues from emerging markets (30.9%).
We could invest directly in to emerging markets – and we do, albeit with only 2.4% of the portfolio – but I like to invest in companies listed in developed markets because they typically have higher quality accounting, audits, governance and lower leverage on the balance sheet. We look for firms in developed markets that have strong business operations in emerging markets, where consumer spending is expanding at a rate only possible with a growing middle class.
The Bankers portfolio will continue to look globally for quality companies with strong drivers in place for future earnings growth but will continue to maintain a strict discipline in terms of the share prices we are willing to pay.
After a stellar 28% return in 2017, the BSE Sensex (down 2%) and the NSE Nifty 50 indices in India been a disappointment in 2018 to date writes Matein Khalid
The emerging markets convulsions in May were compounded by the political shock for the BJP in Karnataka. The financial markets have also been alert due to the oil price related slippage in India’s current account deficit (every $10 rise in Brent means a 0.50% rise in the Indian CAD), the depreciation in the rupee, poor bank earnings due to increased provisions, distress in small caps/SME, earnings downgrades in 2018, outflows by foreign funds from Dalal Street and the increasing realisation that the RBI was far too dovish on inflation and will have to do a policy U-turn that will mean at least two more rate hikes to take the policy rate to 6.75%.
India is the most expensive major emerging market in the world at 20 times forward earnings, an unjustifiable metric at a time when earnings growth expectations are inflated, tax collection has dismal (thus a rise in the fiscal deficit) and interest rates are set to rise.
While a positive monsoon and strong private consumption creates opportunities in Indian equities, my preferred strategy is to short the Sensex at 35600 and the Nifty at 10800 for a 8 – 10% correction that is highly probable this summer.
Note the Nifty Midcap 100 index has fallen 13% in 2018, a classic response to higher rates and lower investor flows. This index has the potential to fall another 20% in 2018. Q4 earnings growth was dismal, a 8% decline due to increases in bank provisions. Ex financials, Nifty sales was up 15% and profit after tax was up 5 – 7% in 4Q, a decent if not blowout performance.
‘India is the most expensive major emerging market in the world’
Bank provisions rise when their asset quality deteriorates and this is a chilling omen for the short term simply not priced into the stratosphere valuations of both the Sensex and the Nifty.
Inflation due to high commodities prices will also force the Reserve Bank of India (RBI) to go hawkish at its next monetary policy conclave, even though it raised interest rates on June 6. This will exacerbate weakness in earnings growth in media, consumer, healthcare and cement shares.
Pharma faces competitive and regulatory headwinds in the US. Telecoms and cement lack pricing power. Obviously, Indian IT will be a beneficiary of the depreciated rupee and the spectacular bull market in Silicon Valley tech shares. The Modi government’s focus on urban housing and rural spending is bullish for infrastructure stocks. The rise in gross refining margins and high oil prices is bullish for energy shares.
I doubt that the Nifty can rise much above 10800 in the current macro milieu as a rise in interest rates, a rise in political risk and fall in earnings per share (EPS) growth is an argument for a lower valuation multiple, possibly as low as 16 – 17 times forward earnings.
However, there is no reason to expect a bear market in India, even if the BJP faces a credible threat from a united opposition in the 2019 general election and the 20 – 22% estimates for 2018 earnings growth are way too high. Sectors to avoid like the plague?
Telecom, pharma and real estate, where Modinomics assault on black money has triggered a “Black Death” in asset values. It is far easier to pinpoint stocks that will be credible buys after a 8 – 10% market correction. My preferred stocks in India are Mahindra and Mahindra, Maruti Suzuki, HDFC Bank, Nestle, Infosys, TCS, Spice Jet, and Apollo Hospitals.
While I can easily envisage Maruti Suzuki trading at 10,000 rupees sometime in 2019, I prefer to buy its shares somewhere in the 7400 – 7600 rupee range. Maruti wholesale volumes are growing at a 26% rate while there is robust demand for the new hatchback model Swift across India, with waiting periods and minimal dealer discounts.
The firm operates at 100% capacity utilization even as Suzuki will expand its Gujarat plant next year. Maruti Suzuki is one of the most exciting revenue/margin growth stories in India. It is entirely possible that the shares trade at 28 times fiscal 2020 estimates or 10,000 rupees in the next twelve months. I concede this is one of the world’s most expensive auto stocks yet its earnings predictability and sheer growth potential justifies its premium valuation.