Craig Fookes's Blog

http://www.ftadviser.com/InvestmentAdviser/Pensions/Personal/SIPPs/Supplements/article/20100222/0dc7154e-1509-11df-95c1-0015171400aa/Sipps-Alternative-investments–Discovering-new-ways-to-strike-it-lucky.jsp

Sipps: Alternative investments – Discovering new ways to strike it lucky

• Tony Hales
• InvestmentAdviser 
• Published Monday , February 22, 2010

While many investment advisers are preparing for the FSA’s Retail Distribution Review (RDR) and trying to keep up with all the new developments in technology, more and more are being approached by Sipp clients wanting advice on alternative investments instead of just traditional fixed interest and equity investments. The advice being sought ranges from being about private equity and hedge funds to overseas holiday resort property and revenues from oil wells.

LONDON (Reuters) - More than 60 heavyweight economists have warned against premature action to cut Britain’s record deficit, contradicting calls by their peers for immediate public spending cuts after the upcoming general election.

In two letters published in the Financial Times on Friday the preeminent academics warned a “sharp shock” too soon could be damaging for Britain’s economy.

“With people’s livelihoods at stake, a responsible government should avoid reckless actions,” the signatories wrote.

Last weekend a group of 20 different economists called for the government to start tackling the problem of Britain’s record 178 billion pound deficit shortly after the upcoming election, in a letter to The Sunday Times.

They said Prime Minister Gordon Brown’s policy lacked urgency and risked a lack of confidence in financial markets.

But the latest letters warn that withdrawing stimulus measures too soon could tip the economy back into recession, rattling foreign creditors even more.

The timing of when to start tackling Britain’s record 178 billion pounds deficit has emerged as a dividing line between the two main political parties in the run-up to a national election due to be held before June.

The Conservatives have pledged immediate cuts, if they come to power in an election due by June, saying Britain could lose its triple-A credit rating and experience a Greek-style fiscal crisis if the government does not cut the deficit sooner.

But Gordon Brown has said the economic recovery is still too fragile to cut spending just yet and will only begin next year.

Signatories of the two letters included Nobel prize winners Joseph Stiglitz and Robert Solow, and Andrew Large and Rachel Lomax, who both served as deputy governors on the Bank of England’s Monetary Policy Committee.

Citywire reports:- http://www.citywire.co.uk/adviser/-/news/other/content.aspx?ID=381544&re=8401&ea=239339&ViewFull=True

The Bank of England has lifted its inflation forecast saying it now expects consumer price inflation will peak at 3.5% – well above the previous forecast of 3%.

Bank of England Governor Mervyn King said CPI inflation rose sharply to well above the 2% target in December and is likely to have risen further in January

That means the Governor will have to write another letter to Chancellor Alistair Darling explaining why inflation is more than 1% ahead of target.

Inflation rose to 2.9% in December – already well above where the Bank had said it would be in January.

King described the outlook for inflation as ‘highly uncertain’ but said it was expected to be below the 2% government target for most of the forecast period covered by the inflation report and would be at around 1.2% at the beginning of 2012.

‘Inflation is strongest in the near-term. It is likely to fall below target as the margin of spare capacity bares down,’ he said.

King said the fact that inflation had come in ahead of expectations was down to the rising price of oil and the VAT increase.

The Bank is still certain inflation is under control and will remain within target, which suggests interest rates could remain at record lows for many more months.

King also conceded the outlook for UK economic growth is uncertain and growth could be blown off course if the global economic recovery falters or domestic spending falls away.

‘The outlook for growth is underpinned by the considerable stimulus from the easing in monetary policy, and supported by global growth and the past depreciation of sterling.’

But he said the downside risks are less pronounced now than they were previously.

King also said that the Bank of England was ready to extend its asset purchase programme if necessary.

‘It is far too soon to say whether more purchases will be needed,’ he said.

‘We would buy more if needed to keep inflation on track.’

The news lifted gilt futures and shares but sterling fell back as the statement reassured investors that the central bank is still willing to prop up the market, but also suggested the Bank believes a weak currency is a useful tool in its arsenal.

The pound was down 0.34% against the euro at €1.1353 and down 0.29% against the dollar at $1.5671.

The FTSE 100 was up 56.4 points, or 1.1%, at 5168.26, also taking heart from strong gains across Europe as hopes of a rescue deal for Greece once again show how willing policy makers are to help the markets.

I completed the first part of the mortgage qualification “CeMAP” on 07  February 2002, by then I had then decided that one day I would like to have my own firm and secondly, I wanted to be (what seemed like the holy grail back then…) an Independent Financial Adviser.

Many Independent Financial Advisers, that I meet at business networking events, stand up and introduce themselves as being “able to select from the entire market place” – this is of course factually correct.

There are four main points that I believe make Future Secure Wealth Management Ltd Different.

Firstly, yes, we are Independent Financial Advisers, and can select products from the open market.

However, I have developed a research process that helps me to narrow down the entire open market place of investments; to a much shorter list of funds that can demonstrate that they have produced “cost-adjusted, out-performance of the benchmark”

Although I appreciate “cost-adjusted, out-performance” is a very technical term, I believe we can identify investment funds where the managers have delivered real value for money, when considering the performance delivered and costs incurred.

I have developed a “brand” for this process, and have protected it with copyright; I believe it is a really strong asset for Future Secure.

Secondly, I am truly grateful to my clients for choosing me, for their financial advice.  I want to recognise this by giving my clients (free of charge) shares in the company.  This (as far as I can tell) is unique in the Financial Services Industry.

There are also two other points that I would like to share with you, these will follow shortly.

With regard to timing, our business has been again growing rapidly in recent months following some difficult times during the height of the recession.  Around October 2009, after extensive research we (Soph and I) decided that we wanted Financial Ltd to be the new home for our business.

Financial Ltd, is not a household name by any stretch of the imagination, nor do I expect ever to be.  They are, however, hugely respected in the Financial Services Industry for  providing back office and compliance services to IFA’s in a transparent and highly ethical manner.

I counted 357 IFAs firm that are currently “Appointed Representative” of Financial Ltd, I believe that we are in good company.

My sincere thanks goes to those at SH for all that they have done to support us for the last three years.

I am hosting a launch event on 11/03/2010 at 6.30pm at the Weston Homes Community Stadium, Colchester.  I am inviting all of our clients and business contacts to come along, for a glass of wine and a brief presentation on the details of Future Secure Wealth Management Ltd.

If you would like to come, please let me know on 01206 752108  or email craig@futuresecurewm.co.uk

I am proud to be a member of the Colchester Castle BNI -Breakfast Business Networking group.

We have entered an International competition to promote our group using Youtube/Twitter

You can follow our group @BNI_Colchester

I have blogged previously about the potential impact on gilts with the ending of the Bank of Englands Asset Purchase Facility.

It was announced at todays Monetary Policy Committee (MPC) meeting that they will not be extend programme

Bloomberg figures source http://www.bloomberg.com/markets/rates/uk.html

Citywire reports http://www.citywire.co.uk/adviser/-/news/other/content.aspx?ID=380587&re=8330&ea=239339

The Bank of England said today that it has decided not to extend its quantitative easing programme.

The news, which was widely expected, came as a relief to the increasing number of market watchers who have been afraid about the stickiness of inflation.

But it also unsettled investors nervous about the future direction of a whole range of asset classes as the world begins to tighten monetary policy.

The Bank has spent £200 billion buying up assets since its quantitative easing programme - known as the Asset purchase Facility – began last March. It had used up all that money by early this week.

Fears that the end of quantitative easing would see a collapse in the demand for UK government debt though seemed unfounded as gilts issued this week have been highly sought after – even without the Bank of England in the marketplace.

It remains to be seen whether appetite will remain so high over coming months.

With initial estimates suggesting the UK struggled to grow in the fourth quarter all eyes will now be on how well the economy can grow without further monetary support. 

For now, interest rates remain at record lows of 0.50%.

The Bank of England’s Monetary Policy Committee will today announce whether it is to suspend the quantitative easing programme, end it or request more money.

The committee will know that a wrong move today could lead to money markets refusing to take up the buying of gilts as the quantitative easing programme comes to an end. This could also have a meaningful impact on the political parties’ ability to make spending promises in the run up to the general election.

The committee, which appears more divided than it has been in a number of years since the surprising recent spike in inflation, effectively faces three choices.

It could end the quantitative easing programme altogether, arguing that inflationary expectations are now outside of its target 2% range and the output gap alone may no longer control it. This would however be likely to require the governor Mervyn King to change his mind significantly and recent speeches indicate that is unlikely.

It could, as many believe is most likely, simply suspend the quantitative easing programme and make no comment about whether it may re-open it in future.

Or it could suspend the asset purchases but formally request another £25-£50 billion from the government to use it if deems it necessary in future.

Economist Simon Lewis from Monument Securities argues that if it simply suspends without requesting any more money for future use that could have a meaningful impact on gilt prices: ‘If they do really pause without such a request, then we suspect that short-dated gilt yields will only rise marginally, but for the curve beyond five years, yields will rise and the curve will steepen.

‘This will probably be a saw tooth (zig zag) move, as there are some frustrated buyers out there, but over a period of 2-3 weeks, we would think that a minimum rise of 30 basis points in 10 years and longer, with the risk of 45 – 50 basis points is likely to materialise.’

The Bank of England must of course balance the risk of creating a crisis in gilt markets with the risk that if it were to go too far in stating that more QE is likely down the line it could damage public confidence in the UK’s economic recovery.

Lewis said: ‘The truth is that it is far too early, especially after publication of disappointing 2004 fourth quarter GDP data and the realistic prospect of a ‘double-dip’, for the MPC to raise interest rates. At the same time, with the US Federal Reserve due to end its asset purchases in this quarter, it would be counter-productive if the MPC further expanded QE. The message would be that, for all the Government’s positive rhetoric, the UK economy is in a uniquely weak position.’

The worst recession since the 1930s should be officially declared over tomorrow. Economists are almost certain that the Office for National Statistics will reveal that the UK’s economy grew by about 0.3 per cent in the last three months of last year, leaving Britain the final major economy to have emerged from recession. Gross domestic product (GDP) is 6 per cent below its 2008 peaks.

An apparent rush to the shops to beat the increase in VAT on 1 January, the Government’s vehicle-scrappage scheme, and a revival of exports are thought to be boosting output. The widely anticipated announcement will mark the end of 18 months of continuous economic decline that has cost the economy £100bn in lost output, and has seen 1.3 million workers made redundant and 50,000 families lose their homes through repossession. Last year was the worst year for the British economy since 1921.

However, economists are warning that a “two-speed” recovery may sharpen the North-South divide, as cuts in public spending hit the north of the country harder than the south. Across the nation, too, output is unlikely to return to pre-credit-crunch levels of output for many years, as the economy labours under the burden of public and private debt, and faces the reversal of the unprecedented monetary and fiscal boosts administered over the past year or so.

In an interview yesterday, the Chancellor, Alistair Darling, was restrained about the nation’s prospects, saying: “I don’t know what the figures are because I don’t get them until Monday, but I remain cautious. There is still a lot of uncertainty around.” Nonetheless, ministers are likely to be relieved that the Chancellor’s Budget prediction – repeated many times since April – that growth would return “around the return of the year” has been proven correct.

Official caution about the strength of recovery reflects the depth of the recession and its special nature. Unlike most previous economic downturns, usually provoked deliberately by governments attempting to restrain inflation, this is the first since the 1930s where shortage of private sector credit – and indeed the near-collapse of the entire financial system – was responsible for a slowdown, with deflation, the biggest fear during the earlier parts of the crisis.

The Bank of England Governor, Mervyn King, cautioned some weeks ago that the end of recession would not be a moment to “get the bunting out”, warning that the economy faced a long, hard slog to rebalance itself and find new engines of growth. The Bank’s latest forecast is that output will not return to 2008 levels before 2011.

Mr Darling reiterated his tough stance on public spending and, in particular, on the pay of highly rewarded workers in the state sector. He said: “In some quangos, local authorities and other organisations, the level of pay, especially at the top end, and bonuses have reached the stage where they don’t pass what I call the next-door neighbour test. If you cannot justify them to your neighbour, you’ve probably got it wrong.”

Douglas McWilliams, the chief executive of the Centre for Economics and Business Research, gave warning that recoveries in regional economies such as those in Wales, Scotland, Northern Ireland and the North-East of England would be slowed down by the expected fiscal retrenchment.

“The model of financing public-sector jobs in the North from taxes in the South has irrevocably broken down,” he said. “That means many regions face a painful adjustment while the private sector in these regions re-establishes itself.”

LONDON (Reuters) – Britain’s top share index was flat in early trade on Friday, with weakness in banking issues and energy stocks balanced by a recovery from miners and strength in heavyweight Vodafone (VOD.L).

By 4:25 a.m. EST, the FTSE 100 .FTSE index was up 1.52 points at 5,336.62, having fallen 1.7 percent in the previous session, taking its weekly decline so far to 2.3 percent, which would be the biggest weekly fall in 6 weeks.

Banks were the biggest sector falls in early deals, echoing the performance of their U.S. peers overnight after U.S. President Barack Obama said banks should no longer be allowed to own, sponsor or invest in hedge funds for proprietary profit.

Barclays (BARC.L), Royal Bank of Scotland (RBS.L), and HSBC (HSBA.L) fell 0.5 to 3.8 percent.

Worries have already built up over the state of the industry following a glut of disappointing earnings news from U.S. banks in the past week.

ICAP (IAP.L), the world’s largest inter-dealer broker was the top FTSE 100 faller, down 6.1 percent on worries the move will curb its business.

Oils were weaker with crude stagnating around $76 a barrel and the uncertainty over the demand outlook.

Royal Dutch Shell (RDSa.L), BP (BP.L) each fell 0.4 percent, but BG Group (BG.L) rose 1.6 and 0.8 percent respectively.

Profit-takers moved in on the pharmaceutical stocks, which were among a select group of stocks in positive territory in the previous session on hopes Obama’s healthcare plan will stall and as investor risk appetite waned.

AstraZeneca (AZN.L), boosted on Thursday by a Morgan Stanley upgrade, shed 0.4 percent.

MINERS RALLY

Miners were mainly higher in choppy trade, bouncing back from heavy losses sustained on Thursday following news that Australian miners will face billions of dollars in new taxes.

Rio Tinto (RIO.L), Xstrata (XTA.L), BHP Billiton (BLT.L), Anglo American (AAL.L) and Eurasian Natural Resources (ENRC.L) were the biggest risers, up 0.1 to 0.6 percent.

The sector has been under pressure amid fears that China could tighten fiscal policy.

“There has been an element of bottom picking this morning given the clearout over the last few days,” said Manoj Ladwa, senior trader at ETX Capital.

Mobile telecommunications firm Vodafone (VOD.L) contributed the single most points to the index, up 0.8 percent recovering losses sustained on Thursday.

Selected defensive issue were higher, with Imperial Tobacco (IMT.L) and British American Tobacco (BATS.L) up 0.4 and 0.1 percent respectively.

Retailers were also in demand. Kingfisher (KGF.L) rose 1.9 percent after Morgan Stanley upgraded the stock to “overweight” from “equal-weight,” and Marks & Spencer (MKS.L) added 0.6 percent.

No important U.S. economic data are due on Friday, but another batch of fourth-quarter earnings will be key for investors, with General Electric (GE.N) and McDonalds (MCD.N) the main features.

Inflation increased to 2.9% in December, a rise of 1% since November.

According to the Office of National Statistics, it’s the biggest Consumer Price Index jump since records began in 1997.

The other inflation measure, Retail Price Index, is also expected to have gone up sharply, increasing from 2.1% in November to 2.4% in December.

Energy price falls at the end of 2008 have been largely blamed for the rise, with the cut in VAT in December from 17.5 to 15% also said to have played a part.

The surprise figure is expected to signal the end to quantitative easing and the BoE governor will have to write to Chancellor Alistair Darling this month to explain why inflation has risen above the Monetary Policy Committee’s 2% target