We are indebted to you…

For your support this year as 2018 comes to an end. It is also worth noting that one of our concerns is the amount of debt the private sector has built up, notably in the US where cheap funding costs have enabled many companies to borrow cheaply to buy back their own stock and in the process, leverage their balance sheet. We expanded on this in our recent blog centred on General Electric (GE), see ‘Credit Where Credit is Due’.

The amount of debt held by non-financial corporates in the US as a percentage of the US’s Gross Domestic Product (GDP) is high and looks like it will lead to a widening of BBB (the lowest investment grade) spreads as the graph below sourced from the Wall Street Journal’s Daily Shot illustrates.

Environment, Social and Governance issues and the whole topic of sustainability are dominating financial press content which isn’t easy given the political shenanigans taking place worldwide. Nevertheless, it’s a topic and indeed a theme we take seriously in the way we invest and who we invest with. We are ESG aware but we see a lot of ‘ESG labels’ attached to products that make us scratch our heads. Consequently, we thought it was worth re-publishing the United Nations grid of sustainable goals to avoid confusion.


To be clear ESG does not mean Extra Sales Growth as some would have it.

Passive Dilemma – thought provoking comments from one of the founding fathers of passive investing

Speaking at the Berkshire Hathaway Annual Meeting on Saturday, 4 December 2018, Vanguard founder, 88 year old Jack Bogle, warned, “If everybody indexed, the only word you could use is chaos, catastrophe.”

Time is your friend; impulse is your enemy.’ -John Bogle by  TORLEY  is licensed under CC BY-SA 2.0

He went on to say, There would be no trading,” Bogle told Yahoo Finance editor-in-chief Andy Serwer. “There would be no way to turn a stream of income into a pile of capital or a pile of capital into a stream of income… the markets would fail.”
“We have too much trading in the market,” Bogle said. “The index really just neutralizes x-percent of the market…”


We write this the morning after a failed Conservative Party ‘no confidence’ vote. There is much commentary on the matter but we are nevertheless getting closer to the deadline. For what it’s worth, our view is as follows:
The Brexiteers have distanced themselves but will still be vocal. It remains to be seen if Theresa May extracts anything concrete on the Northern Ireland backstop over the next few days. At the time of writing, that seems unlikely which would mean that her ‘deal’ will not get through the House of Commons and come 21 January 2019, parliament will have a greater say in controlling the Brexit process between then and 29 March 2019. This should reduce the chances of a ‘no deal’ in favour of either staying in or whatever deal was last agreed with the EU. There doesn’t seem too much appetite for a second referendum at the moment, the public would seem to prefer that a democratic process works its way through their chosen representatives – fair enough. After 29 March 2019, how long will May stick around? Can the Conservative party govern and if not, a general election looms which may explain the rather lukewarm bounce in sterling this morning.

These are not reflecting any personal biases within the team at TBAM, as stewards of you and your clients’ wealth, our job is to deliver sterling returns without taking undue risk. We do however feel that national interests should override party politics. Of course, by the time you read this, the landscape may have shifted again.

Your Money

While tempted to have more sterling, less US dollars in Dynamic and Growth Funds, we are not in a rush to do so but are mindful that sterling has fallen a long way and we, as mentioned above, do not want to expose either fund to too much currency volatility from a sterling base perspective.
Elsewhere, there have been no changes to the holdings in either fund during the month to date. We are looking at increasing our allocation to an existing long/short equity manager while reducing a long only European equity manger in Growth. We are in the process of modestly increasing the allocation to one of our thematic managers who held up well in the October financial market maelstrom. We remain watchful and cautious, cognisant of slower global economic activity and wage inflation in developed economies where tight labour markets are aiding the worker as seen in average earnings, especially in the US and also in the UK.

Adviser Charging Share Class

Many of you will have seen Kevin Payne’s recent email concerning changes to share class names in order to better describe their functions and the addition of an Adviser Charging Share Class. We are conscious that platforms are an extra cost and that cost can be excluded by coming to us directly. The Adviser Charging Share Class will be available from 3 January 2019 and an adviser portal will be rolled out later in January to enable greater access to valuations and transacting which will assist in aggregating data for your clients.

And Finally…

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