Magic Money – Can We Print Ourselves Rich?

18.12.2020

So, as we all gear up for Christmas in what has been probably one of the most testing years for a very long time, I thought I would ‘throw’ out of few of this week’s news headlines:

  1. Biden’s victory confirmed by electoral college
  2. Barnier says Brexit deal could be agreed this week
  3. London heading for Tier 3 rules
  4. Gas boilers to be banned within 15 years
  5. Government launches crackdown on social media

Not really a ‘slow’ news week! Let us hope we have a Brexit deal to celebrate before Christmas and a return to a new normal in 2021.

Considering the repercussions of the Covid crisis and the huge sums borrowed by Governments around the world, I am reminded of a conversation I had with a new client a few weeks ago. As my title suggests, I wanted to share with you an alternative theory reported in ‘The Week’ publication after my client discussion (pure coincidence) to increasing taxation to pay for the vast sums borrowed.

Thinking back to my A Level economic classes (many years ago!) I am reminded of John Maynard Keynes, the famous Economist who advocated the use of fiscal and monetary policies to mitigate the adverse effects of economic recessions and depressions. The advent of the global financial crisis of 2007-2008 sparked a resurgence in Keynesian thought. Keynesian economics provided the theoretical underpinning for economic policies undertaken in response to the financial crisis of 2007–2008 by President Barack Obama of the United States, Prime Minister Gordon Brown of the United Kingdom, and other heads of governments.

When Time magazine included Keynes among its “Most Important People of the Century in 1999”, it stated that “his radical idea that governments should spend money they don’t have may have saved capitalism. The foundation to my economics qualification can now be tested with an alternative theory.

The New Theory – in traditional economics the idea of printing money to solve a nation’s problems is near universally seen as a bad one. By contrast, Modern Monetary Theory or MMT – proposes that nations that issue their own currencies can freely create and spend their own money; and that this is a useful economic tool, which need not devalue the currency, create inflation or lead to economic meltdown. In the MMT worldview, the established idea that high public debt is a drag on economies and a burden on future generations is turned on its head. Proponents argue that, on the contrary, private citizens and businesses tend to do better in countries running high levels of government (or fiscal) debt. Taken to its logical extreme, MMT allows high spending without taxes or borrowing – a truly radical idea sometimes derided as the ‘Magic Money Tree’.

As we move towards the Spring budget, it will be interesting to see if Rishi will follow the traditional economic route or embrace this new theory.

On that note, I wish you all the very best for the coming festive season and new year.

David Buchan

David Buchan
Finance Director

Goodbye 2020

11.12.2020

It is about that time now when we tend to reflect on the year that has gone and have a peek through the Christmas baubles to see what may happen in the forthcoming year. Coronavirus and its fall out have ripped through all areas of the economy and society at large, so it is at least pleasing to hear that yesterday has been named ‘V Day’, as the UK grandmother Margaret Keenan received her jab as part of the mass vaccination programme. It is a big step in the right direction, and we wish her many years of good health and happiness.

Looking back, our IronBright investment principles have been tested to the full this year. I have had many conversations with you during the year covering a range of issues, but one of my long standing clients summed it up in his usual understated manner, “it could’ve been worse”.

At one point I must confess I thought it might well be, but I am pleased to report that all but 3 of the 21 portfolios that we manage is, at the time of writing, in positive territory year to date. A sample of the portfolios’ performances is seen below:

As you know I am not into crystal ball gazing and tea leaf reading so you will not receive any investment forecasts for 2021 from me, other than I expect markets to continue to return value to investors who hold for the longer term and that markets will continue to surprise us from time to time, both on the upside and downside. I looked back at many of the forecasts from the usual pundits in the financial press for this year and whilst some were right and some were wrong, they were either right or wrong for all the wrong reasons! None foresaw the global pandemic and what happened so beware commentators who know ‘for sure’ how best to position your portfolio for 2021.

What I am excited about for 2021 is the launch of IronBright’s range of Sustainable portfolios that are now available. I was tempted to show off their respective backdated performance figures but thought better of it as any portfolio that was light on oil stocks, banks and airlines had a pretty good year. Notwithstanding this there is now a strong investment case to use such portfolios along with the ethical and moral stances many of you wish to take when investing your money. We will also be switching, where appropriate, existing active funds on a like for like basis into sustainable funds in the Core Satellite portfolios over the course of the next 12 months. Have a chat with your adviser at review time?

We have a fantastic team at Brunel who have stepped up to the plate during a very difficult year and I remain very proud of them, so on their behalf I would like to wish you and your family a very Happy Christmas and a fabulous New Year.

Steve Brady

Steve Brady
Director

Reasons to be positive

4.12.2020

As I write this short note, we have just ticked over in to December. So those of you who were not sharing Pete’s enthusiasm last week for an early Christmas this year, it’s ok now, it’s now acceptable. Go get that tree. Put those lights up. No need to tell Alexa to “STOP” when Mariah Carey comes on.

This morning has seen the Pfizer/BioNTech covid-19 vaccine approved by the relevant authorities in the UK and we expect doses to arrive next week with roll out soon after. This is great news and for the first time in a while many are starting to see a way out of this mess.

In November, the FTSE 100 index had its best month in at least three decades. The rise of 14.5% is in line with the best month on record in January 1989.

The RFU has announced that 15 a side full contact rugby matches can recommence. (This is massive news in the Rylett household)

Yes Damien. That’s all very well, but where is the bad news? Well, I’m not giving you any. As an antidote to the Cerberus that is KPR, I’ll give you nothing but positive news.

Cerberus? KPR? What’s he talking about? In Greek mythology Cerberus is a three-headed dog that guards the gates of the Underworld to prevent the dead from leaving. KPR, which stands for Kuenssberg – Peston – Rigby, is it’s modern equivalent, tasked with keeping the “news” permanently negative to prevent positivity from arriving.

It is normal at this time of year to look back and take stock. Then draw a line and look forward to a new year, a new beginning. I’m happy to share my personal reflections. My relationships with friends, family and colleagues are stronger as a result of this pandemic. I have found out more about myself over the past 9 months than in any other period of my life. I am better educated and fitter (both physically and mentally) than I was before. I have more purpose and more importantly, I am happier.

There are so many positive things that have happened in the world that have slipped under the radar. Watch this short video to see what I mean and I hope that you agree.

Marcus Aurelius, Roman Emperor said “Don’t lament this and don’t get agitated.”

He was referring to that feeling we get when something happens. “It’s all over now.” “All is lost.” What follows are complaints and pity and misery – the impotent struggle against something that has already occurred.

Why bother? We have no idea what the future holds. We have no idea what’s coming up round the bend. It could be more problems, or this could be the darkness before the dawn.

There is one thing we can be sure of: whatever happens, we’re going to be ok.

Best wishes to you and your families for a very happy Christmas and a prosperous New Year.

Damien Rylett

Damien Rylett
CEO

Brunel Capital Partners is a sister company of Pilgrim Financial Planning