Dear All,
I hope you are well. The current very hot weather can be glorious for some but can also be pretty uncomfortable for others. Whichever group you are in, this weather will eventually pass. And it is the same for the fairly lousy investment returns we have had this year. Bond markets have had a particularly appalling first six calendar months. Most of the press releases I have seen talk about the worst year for bonds since 1973. But I see Deutsche Bank has gone a step further by estimating that this is the worst first half of the year since 1788. I do not have easy access to the relevant databases to check that out.
I do not plan to repeat the other commentary we have already published on bonds. Overall, our portfolios (your portfolios) have lost money. But the loss is not very unusual. Think back to 2007 and that first client appreciation event.
Internationally our focus continues to be on the unfolding tragedy in Ukraine. I sense that even though this is on our doorstep, it is just beginning to lose its appeal as front-page news. Other tragedies are truly relegated to the middle pages – when did we last hear much about females in Afghanistan?
Domestically we are following the leadership battle in the Tory party. I have just one smart alec comment: there are quite a lot of hopefuls invoking Margaret Thatcher as a tax cutter – yes, she inherited a basic rate of tax of 33% (and a marginal rate of up to 98%) and cut it to 25% (and the higher rate was cut to 40%), but VAT was increased from 8% to 15% – most economists agree that the overall tax burden actually increased under the Thatcher government, particularly in the early years. As usual, I am hoping for less polarisation and more understanding as well as nuance.
Sterling has experienced a sharp decline relative to the US dollar (down from around $1.40 a year ago to $1.20), and as I write the US dollar and the euro are almost at parity. Extraordinary times. Or are they? My colleague Ross Badger can remember when the (tourist) rate for USD and GBP was at parity (1985).
We will continue to use academia as the source for our investment approach. We continue to have great faith in capitalism, and in the next generation’s ability to manage our globe and to come up with new ideas that will generate further wealth.
We have moved on from the passive vs active debate – neither approach is the best. The recent gyrations will in time be a blip on a graph but active managers, as a group, have not protected their clients from falling markets. We will continue to use a systematic approach.
We know that some clients are concerned by recent events. We are seeking to communicate with you all by using different channels but if anything is concerning you, do give us a call. Despite the fabulous benefits we reaped from Zoom and the like, I am thoroughly enjoying meeting clients old and new face-to-face. So, if you would like a discussion (face-to-face, by telephone etc.), do not hesitate to contact us. Recent recruitment means we have more capacity for these discussions and for taking on new clients.
We enjoy hearing from you.
Thank you,
Ben