Denis Ferguson R.I.P.

A quick personal note to thank all clients, industry colleagues and friends who expressed sympathy with me in various ways on the death of my father, Denis Ferguson on 21st October 2008. Your support is greatly appreciated.

Dad was very ill for some months and particularly so in the last few weeks of his life, so I suppose we were as prepared as we could be. But nothing prepared me for the overwhelming sadness I felt when he eventually died, or how much I miss him even after just a few short weeks.

That said, I feel lucky to have enjoyed a great relationship with Dad and how long I did have with him, given that he was unusually old when I was born. The fact that he lived to see and know all his five grandchildren was also a bonus. I'm tremendously proud of his many achievements in life and the very positive influence he had on mine.

Government's sub-prime lending

I had a look at the Government's new Home Choice Loan initiative. Mortgage brokers were invited to apply for an agency to arrange these mortgages on behalf of clients for commission.

Frankly, I think the whole scheme is a bad idea. One of the conditions that a customer must meet before applying for one of these loans is that they can "provide evidence via a broker that they could not obtain sufficient finance from two banks or building soceties".

Let's be clear - if two banks or building societies decline you for a mortgage, it's because they don't think you can afford it, or might have trouble affording it in the future. You might want to take heed of that and wait until a property comes along that you can afford.

The Government is effectively becoming a sub-prime lender. Such lenders specialised in offering loans to people who had been declined by "High Street" prime lenders. We have seen that sub-prime lending in the US was a major contributory factor to the current credit crunch. Why on earth would the Government be entering this market now?

We decided not to even apply for an agency to distribute these loans on behalf of the Government, on the principle of it.

Walls Street Journal bullish on Irish stocks

Respected US publication the Wall Street Journal published this piece yesterday entitled "Ireland's Battered Stocks Deserve Investors' Attention".

http://online.wsj.com/article/SB122531416450181339.html

Nice to see that not every overseas commentator is downbeat about Ireland Inc.

Report Published on the Pensions Green Paper

We made a submission to the Government last June on the future of Irish pensions, as part of the Green Paper submissions process. See here.

All the submissions have now been received and examined. The Consultation Report has now been published and can be viewed here. Warning - it's a 3.2MB download, so only recommended for those with faster internet connections unless you want to nip off to have a cup of tea while it downloads.

Nice to see some of our suggestions featured in the report.

Article by Warren Buffett on why he is investing now

Here's a link to read an article by Warren Buffett, originally published in the New York Times on Friday 17th October 2008. In it he details why he's actively buying US shares at present and if valuations continue at their current level, why he'll have 100% of his personal net worth invested in US equities shortly.

This is a man who has over 60 years' investing experience and who has accumulated a fortune that makes him the wealthiest man on the planet.

It might give some food for thought to anyone who's thinking about suspending their pension contributions or switching to cash due to the current market turbulence.

http://www.cnbc.com/id/27231171/

More investment wisdom from Anthony Bolton

Here's some more words of wisdom from Anthony Bolton, President - Investments at Fidelity.

"The events of this week will be remembered for a while. But I feel we are entering the final phase of the bear market. It started with the downturn in financials, then consumer cyclicals and the next stage was the industrial companies. The last stage will see commodities affected, a process which we have already started to see. I felt that until commodities got broken the bear market could not end. While commodities have suffered some retrenchment in the last few months, I believe they are still over-owned and that there is some way for them to fall before their valuations are justified.

While this is the second bear market of this decade, there are some key differences between them. The TMT boom was all about valuations but the one we have recently experienced was all about return on capital and earnings expectations. However, we are still in a phase where earnings expectations are too high and that has to change.

I believe that some of the most oversold areas of the market, financials and consumer cyclicals, could offer the most potential as the market recovers. However, a focus on balance sheets will remain vital. This year and next year it will be essential to own well financed companies; those companies which have a lot of debt will find it very difficult to renew their arrangements.

Unfortunately, investors tend to get sucked in when prices are high and shaken out when prices are low. If you are going to invest in equities, you have to be prepared to wait it out. I certainly do not believe investors should be selling in these conditions.

Finally, for investors who are thinking of entering the market I think it is important to remember that the market is likely to recover before the economic indicators improve. Therefore, if you wait for the economic indicators you may miss out on the strong rebound that often heralds the start of a new bull run."

Bolton’s opinions are not to be taken lightly. From 1979 to 2006, he ran Fidelity’s UK Special Situations Fund, which returned 20.3% per annum, versus the FTSE All-Share return of 7.7%.

There's a further piece by Bolton here.

Pensions Green Paper

The Government invited submissions to its Green Paper on pensions from interested parties. Here's ours.

Pearls of wisdom from Warren Buffett

I'm a fan of Warren Buffett, billionaire investor and philanthropist. Here's a link to another blog with transcripts from a recent Questions and Answers session he did for a group of university students. When a man who's arguably the world's most consistently successful investor offers seome investment advice, it's worth a look.

Click here.

A view on the stock-markets

This is an extract from a recent statement by Anthony Bolton, Managing Director of Investments at Fidelity. Anthony is someone for whom I would have huge respect as he's a very successful, very experienced and very level-headed investor.

“In my three decades of stock-market investing, I have experienced many economic cycles and extraordinary events. The circumstances behind the current volatility might be unique, but investors’ reactions to them have many parallels to those I have witnessed in the past. The market falls around the middle of 2007 were clearly prompted by concerns over financial liquidity in credit markets. Six months on, the credit crunch is now taking its toll on growth in the broader economy, in Europe, the United States, Japan, and other parts of the world.

The actions of central banks may help to restore stability to stock markets, and I remain optimistic about the long-term prospects for equity investing. Investors should be prepared to ride out these fluctuations and take a longer-term view. Today’s volatility comes at the end of a bull run for world stock markets that has lasted much longer than the average. There is no reason to suggest that another bull run won’t follow at some point.”

How Independent is your broker...really?

Happy New Year to all our customers and friends.

That time of year again - reviewing business for 2007 and wondering where it will all come from in 2008.

In January last year I published details of where the mortgage business went to in 2006. See this post. This year, I've done the same exercise and expanded on it.

In 2007, we placed mortgage business with six lenders and no one lender got more than 32% of our overall mortgage business. In the same year, we placed life/pension/investment business with eight companies and no one company got more than 44% of our life/pension/investment business.

While many brokers will claim independence, the acid test is how many can confirm that they actually placed business with fourteen different financial institutions on behalf of clients in a business year? Be wary of so-called brokers who only place business with two or three companies - you've got to ask why.