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All this talk of raising capital gains tax is ominous news for zeros.
By ‘zeros’ I mean of course zero dividend preference shares – that class of investment trust shares that lost investors millions back in 2002 and were responsible for the biggest scandal to hit the industry.
The zeros have recently been experiencing something of a comeback – despite their dodgy history – thanks to the fact they are taxed as capital gains not income. A lot of the zero shares launched in the past year have been in response to private client wealth managers, who in turn were responding to pressure from their investors.
Now, it looks like the brief resurgence could be already thwarted. Analysts at Numis Securities said today a rise in CGT ‘appears negative’ for zero dividend preference shares – a view that was also expressed by analysts at Oriel last week.
Of course, there has to be an investment case for the zeros too – with some, such as those from Ecofin, attached to attractive, stable companies. It is early days – but it will be interesting to see how strong the demand for zeros is after the emergency Budget on 22 June.
I might be sitting more than 3,000 miles from Washington DC, but even from here I can detect the rank stench of hypocrisy. President Obama, not content with bashing banks, has now started on Big Oil. He wants to make BP pay every cent of claims arising from the Deepwater Horizon disaster, and has intimated that he will back a bill that raises – retrospectively – the liability limit for claims from $75m to $10bn.
Now, it’s entirely possible that BP may have been negligent, or cut corners. Memories of the blast at its Texas City refinery in 2005, where its safety standards did fall short, are still fresh. But it’s also plausible that one of its subcontractors – rig operator Transocean, or well casing contractor Halliburton – was to blame. Or that the blast was simply bad luck on a spectacular scale. But Congress has, it seems, already tried and convicted the British company and is now working out the punishment.
“UK markets have slumped as the uncertain outcome of the general election unsettles investors”. That’s the general tenor of mainstream press commentary today.
It’s wrong. As our economics writer points out today, gilts are no lower today than they were a month ago. Yes, shares are down – but not by as much as they are in other countries. Sterling might have fallen against the dollar, but it’s still comparatively high against the euro. Much as it might irk our self-important politicians to hear it, the rest of the investing world isn’t that interested in their partisan bickering.
The value of sterling has nosedived after reports suggested that no main political party had been able to establish a sufficient majority in the election.
The pound hit a 12 month low against the dollar (falling as low as $1.4597) and fell 3 per cent against the euro to 1.1547. But why has it fallen so far?
It’s been the key phrase of the last week of the campaign. But while the possibility of ‘a hung parliament’ has only ever had a very remote chance of happening, now it is moving slowly closer towards reality. Whilst hung parliaments are very rare, the opinion polls are suggesting that this is the closest run election in a generation.
And everyone has an opinion about it. From the Sun’s blunt headline on the prospect of a coalition government, “Well Hung…and Shafted” to the FT’s own thoughts on why the third placed party, which most polls suggest is currently Labour could still dominate the Commons.
Private investors themselves are becoming increasingly concerned about the potential impact on their investments of a hung parliament after the election. Markets do not like uncertainty and can become more volatile ahead of any general election.
No, not the 1986 falsetto hit by Prince, nor the ludicrously over-theatrical American stadium rockers. Kiss is an acronym beloved of web programmers and sundry other Californian software nerds – and one that investors would do well to take on board. It stands for Keep It Simple, Stoopid.
And the benefits of keeping things simple are plain to see. In last week’s Investors Chronicle, we saw that John Baron’s two investment trust portfolios, each comprising just 16 holdings, have comfortably beaten their benchmarks over the past year.
John Maynard Keynes once compared the exercise of picking stocks to a beauty contest. The relative attractions of both stocks and catwalk models are subjective, he argued, but to a degree, their value is determined by their popularity with the audience.
Here, Andrew Bell, chief executive of the investment trust Witan, offers an analysis of how Keynsian theories apply to today’s markets. Here’s an extract from his blog.
The process of abstraction can go on and on, as the selection moves further away from making your own judgments of beauty towards an assessment of popular fashion or psychology. In the process, your face would lose its sun tan.
The end of the tax year is almost upon us which means the deadline for investing in an equity Isa for 2009/2010 is also close. But before you invest your allowance, here are a few key questions you should ask yourself*:
“The grannies lose their blouses…it’s the American investors we have to worry about.” This remark was widely attributed to Shriti Vadera, a Treasury adviser, as the government prepared to push Railtrack into railway administration in 2001. The disparaging reference to private shareholders as “grannies” whose interests could safely be ignored, irritated many at the time. But shareholders in Railtrack did at least receive recompense for the effective nationalisation of the company.