Investing in The United Kingdom - An Amateur's Introduction

Author: Jeremy D. Parsons 2021, November 15th and 2022, January 15th - still unfinished notes and links sorry!

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Preface Proviso

This page is not professional investment advice and some of it is probably badly wrong. I have made many mistakes and lost thousands of Pounds of my own money and you probably will also do so too: even if you are mostly wise and careful (there are many reasons why perfect investing is impossible). This article was written out of shock, late in 2021 an early 2022, because these are unusual, unprecedented, almost insane times both with regards to investing and also the very meaning of money itself. Much financial advice that was written in normal times is not relevant now. Even in normal times, please be careful, and never trust anyone or anything completely; not even your banks, governments or any real professional financial advice. Everyone makes mistakes and much is inherently deeply unpredictable but, even worse, there are also many criminals and liars looking for gullible investors. Some of my biggest mistakes have been from believing that highly-paid professionals did know what they were doing or that markets really did reflect fundamental values: they really often do not! The world of finance and investing is crazier than you might believe and markets can stay irrational longer than you can stay in profit - especially for the next year.

Please do not be offended by the discussion of ways to make money without hard labour. Some say that "The love of money is the root of all evil" but actually Nature is full of parasites, predators, callous behaviours and territorial or breeding fights to the death, life is never fair, and, by contrast, Adam Smith explained back in 1766 how working hard and getting paid is fundamental to much greater good and that government interference in trade is usually detrimental. The most beneficial government roles are justice, policing, maintaining international trade routes free from pirates, controlling stable currencies, fighting abusive monopolies and enforcing environmental standards. Some software and internet companies naturally fall into monopolies so there is some question about whether competition can always be maintained - especially in the USA which benefits more than any other country.

The best things in life are still free and we will all die one day so it is most important to have fun, enjoy life, youth, health, freedom and to help others with education, advice, and, if they are grateful, even charity/taxes but everything that a government spends starts as profits in a business and that must never be forgotten.

Good News First

First, the good news: in general, in the real world away from lunatic finance, many factors combine to make the future better and richer than the past: education, science, innovation, clean water, policing, vaccinations, diagnostics, drugs, stock markets, free trade, communications (especially, 4G phones and The Internet), women making better choices about whom will father their children and a general reduction in tribal conflict, wars, ignorant stupid government etc. all make life better for most people as time passes by and increases in capital can help. Also, old investments are not always lost: roads and good city designs from even Roman times are still obvious in the UK today (house prices in old Roman cities are higher than purpose-designed modern towns). The best universities built some of their finest buildings centuries ago. Not all purchases depreciate in value as horrifically quickly as an uncooked prawn or a new car do.

In normal times, the most important concepts to understand are around positive feedback and compound gains: specifically that investments owned now are normally worth more than money in the future due to the opportunities of investment and the marvels of compounding gains reinvested into the future offering gains off gains: good investments generate more gains for more investments feeding a virtuous circle of ever increasing wealth and hopefully happiness too. At its simplest, if one earns more than one spends then one always gets richer. Psychologists have noticed that how long a child can wait before eating a cookie (delayed gratification) is a better predictor of future professional and financial success than any other psychological measure! My simplest advice is to wait for a financial crash and then start gradually buying a UK FTSE 250 Index tracker with zero costs or less than 0.5% charges inside an ISA tax-free wrapper. Anything more sophisticated requires good timing and a good choice of country and industry in which to invest. To have better investment returns than simple indexes requires that you be able to predict the future better than most people or at least be able to predict where the richest or the majority of people are going to put their investments or spending cash in the next day or next year. Predicting the future is famously hard but doing it better than most people is even harder.

Investing in 2022 is Batsh.t Crazy

Now the bad news: this might be a really bad time to start investing, especially in US stocks which is precisely where most of the largest gains were made during the last 20 years. Those huge gains will not repeat over the next 10 years and we are now in an unreal fantasy finance world called "The Mother of All Bubbles" or "The Everything Bubble" The Financial Times and Jeremy Grantham do a great historic review of just how crazy the American stock markets can be: https://www.youtube.com/watch?v=Y_yRgMgBis0

What is so unusual about investing in 2022 ?

The very clever Niall Ferguson has written a book about pandemics and disasters and he even predicted the last one: the GFC: Bloomberg on Niall Fergusson, and weforum, and, the Guardian less friendly review. The astronomer royal: Sir Martin Rees gave the most accurate prediction for the pandemic but Bill Gates also did well which is an improvement of his first edition of the "Road Ahead" book which apparently may have ignored the Internet!

George Soros is one of the greatest investors of all time and one principle of his approach is to try to predict major global events one year ahead to be ready for what others may consider is a surprise. He has unusually good connections globally and surrounds himself with unusually intelligent, educated and international staff. He still makes mistakes and you could never out-think him but you could try to rapidly mimic some of his general focus but you would be late and only aware of the part of the story that he wants to tell. Everyone will try to promote ownership of what they already own - there is no advantage to keeping secrets - except for the timing of the sale.

Companies and profits

Real investment can mean starting a company making some great new product that improves the happiness of everyone. There can be much science, technology, research, development, and it all takes time, intelligence, hard work and capital. However, in the real world: competition, marketing, mind manipulation, psychology, fraud, rich friends, loose capital markets and founders personalities can all be even more important. The principle divide to understand is between growth companies and value companies and the simplest measure of profitability is the price to earnings ratio which is very different between the two types of company. The fundamental problem with US stock market prices at the start of 2022 is that there is a horrible delusion that Alphabet, Google, Facebook, Meta, Apple, Tesla, Amazon, Yahoo, Microsoft, and all the other high-tech companies can all be high growth forever and across each others areas and still be priced at high multiples of earnings and eventually large profits. The price to earnings ratios of British companies are much better than American ones now and US future profits are not guaranteed. It is like the whole of the USA has become an optimistic dream of future profits and the US dollar when we know for sure that the collapse of the value of the US dollar is consistent and guaranteed and the stock markets are insanely priced and divorced from reality.

It is almost like the short-term and long-term certainties are running in opposite directions but must necessarily collide at some point. In the short-term a stock market is a popularity measure or "Voting machine" but, in the long-term, it is a more predictable "Weighing machine".

Previous Bubbles and Crashes

Financial Fraud and Crashes

Many crashes and cases of financial fraud were apparent to many people for years before they were actually believed. The Financial Times was pursuing investigations into the Wirecard scandal and were being threatened with legal action by the very German regulators who failed to check their own responsibilities. One American investigator had written to the American financial regulator with good statistical analyses hinting at fraud for years for Madoff became known as the biggest Ponzi scheme ever.

Scott McNealy - is one of the greatest technology leaders of all times and was always an entertaining speaker who also lead my favourite tech company (Sun Microsystems) and donated to the World both: the Java programming language (and environment) as well as LibreOffice - the greatest free office suite and I use them every day so I am happy and grateful to him. In a Bloomberg interview in 1999, Scott McNealy, then CEO of Sun Microsystems, told investors paying 10x Price-to-Sales for his company that:

“At 10-times revenues, to give you a 10-year payback, I must pay you 100% of revenues for 10-straight years in dividends.
    That assumes I can get that by my shareholders. It also assumes I have zero cost of goods sold, which is very hard for a computer company.
    That assumes zero expenses, which is hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that expects you pay no taxes on your dividends, which is kind of illegal.
    And that assumes with zero R&D for the next 10-years, I can maintain the current revenue run rate.
    Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those underlying assumptions are?
    You don’t need any transparency. You don’t need any footnotes.
    What were you thinking?”

Money

Americans often worship four different things: democracy, capitalism, God and the US Dollar. Unfortunately, in 2021, flaws emerged in most of them. However, there are still four things that are certain in life: Death, Taxes US government deficits and always: Argentinian sovereign defaults. America itself cannot go bankrupt because the Federal Reserve Bank can always print more dollars and the whole of the USA might currently be worth over 300 trillion dollars so the government deficit has not destroyed the currency completely so far but Mark Carney who was head of both the Canadian and British central banks has been asking for what we should choose to replace the USD as the Worlds reserve currency.

Euro Crises

There is likely to be an immediate funding crisis for Italian government debt as soon as the emergency EU debt buying ends in March 2022. Italian debt interest rates will either rise rapidly or Italy will be left without funding - almost like going bankrupt because they are not allowed to print Euros or their own parallel currency (though this has often been discussed). Only the European Central Bank can print Euros. The German government may decide to allow the EU to give Euros to Italian retirees or Italians who choose not to work but the German people may reject the debasement of the Euro and their own savings. France has not had a balanced federal budget since the 1970s. President Macron is not an idiot and he has tried to end French disadvantages and laziness but he has faced unions, farmers and Gilet Jaune protestors. French people are unusually smart and well educated and France is one of the finest countries in the World but French train drivers can retire at 50, ballet dancers get a pension even earlier whilst, by contrast, the rest of the World, and especially China is becoming more competitive each year. Most Euro funding comes from Germany and a little from other smaller countries like the Netherlands and Finland. Germany is owed over a trillion Euros via a deficit in the European Target2 banking system. Why would anyone with large savings choose to keep it in an Italian bank when there is a prospect of an Italian default or devaluation when, by contrast, the alternative is that Germany leaves the Euro and so revalues in a new Deutschemark which could only increase in value relatively? There is no barrier to currency movement within the EU but there is a large difference in risk so money could move rapidly and so accelerate any weaknesses.

Currency movements are difficult or impossible to predict given that they represent the sum of all knowledge and futures of two trading countries but, on the other hand, if the relative currencies are at some extreme relative position, for no particular reason, then one can still assume that their relative values will revert back to nearer the historical mean value at some time in the future. The US Dollar overtook the British Pound Sterling as the main currency of international trade after the Second World War but now more goods and services are priced and traded in USD than is actually bought by the USA itself. This gives the USA the exorbitant privilege of providing and printing the main reserve currency but it may be replaced in the future just like the US Dollar replaced the Pound Sterling.

It would appear to be incredibly stupid for a non-US resident to choose now as the time to invest in US equities given their high P/E ratio as well as the USD currency risk. The US has a large trade deficit with Europe and especially Asia. If foreigners stopped buying over-priced US equities and financial products, then the USD would fall in value even faster.

Inflation: Gold has not changed. Inflation represents a devaluation of all currencies. The British Pound may be the longest surviving currency but relative to Gold, it has not done well and also not done well relative to the USD.

Value Vs Growth Vs Meme Stocks

Stock market prices are driven by the two strong emotions of fear and greed. Psychology is very important and is also called "Animal Spirits" in economic academic discussions.

I have no idea what will happen to the value of the Pound or any share on any day or even any month: it is almost random noise or often the result of deliberate manipulation by wealthy Americans. By contrast to European stock markets, which have some low levels of taxation (Stamp Duty at 0.5%) on share purchases to reduce the volatility and to pay for some regulation, Most American markets are both completely untaxed and lightly regulated. This lack of friction and regulation allows "day traders" and High Frequency Traders to use low-latency microwave links try to forward deal every trade and to profit from small noise or artificial manipulation over the short-term. Some cheaper US stockbrokers sell your trading bid information to outsiders which can cut your gains slightly. Some large trades happen outside the exchange or may be disguised as thousands of small trades. Sir Isaac Newton said that "He could predict the motion of the heavens, but not the madness of people!" 19 of 20 largest Internet companies are American. Meme stocks can trade on hype or even revenge as groups of investors try to hurt hedge funds profits deliberately.

Wisdom of markets - Index Trackers

Some whole industries go through repeated cycles of growth and collapse and those hard times can last for years and kill off most profits and bankrupt most of the companies involved. Examples of such industries include airlines and car manufacturers. Warren Buffet in particular said that he would never buy airline stocks because they need so much capital and often go bankrupt. Unfortunately, he forgot his own advice when he was aged in his 90s so later sold his American airline stocks in 2020 at a large loss during the lockdowns following the Covid-19 pandemic. AirFrance/KLM was bailed out by over ten billion Euros, airlines are the opposite of good long-term investments because of competitors subsidies, government controls and periodic destruction. Most American car manufacturers go bankrupt permanently or periodically which seems to have been forgotten by retail Tesla investors. Elon Musk remarked that he knew it was very hard to start a car company in America but he eventually realised that it was even harder, much harder than expected.

Assets - Things that can be bought and sold:

Company Valuations

American optimism and Internet growth stocks has resulted in the rate of return on UK investments over the last 20 years being less than half that of the same money invested in USA stocks.

Optimism is by definition a delusion, possibly a dangerous illusion like the Afghan man clinging to the outside of an American cargo C5 Galaxy aeroplane - young men are the most insane due to Testosterone suppression of sensible fears. Young men are also prominent in financial companies. Taking risks can lead to big rewards but the risks are still there. If countries, and whole economic systems are built on optimism, then we know that something will go badly wrong eventually. Assuming that positive feedback loops will always ensure waves of new and better technologies instead actually creates obvious risks that any part of a huge chain or web of complex interdependencies must never - ever - fail in any way. One only needs to see inside a Rolls Royce jet-engine and to know how technology has gone into each hole in each blade on each of three shafts and that it was engine computer chatter that was the last signal from the missing Malaysian jet, not from anything in the cockpit. Donkey and bicycle transport is much more robust. The continual optimistic delusion almost ensures a catastrophic outcome at some point whilst injection of just enough reality and forward thinking to the actual possible realistic outcomes can inject sufficient safety to keep the good times rolling much longer. Some people watched the sales of Nokia mobile phones and assumed that that mathematical trajectory could continue forever whilst in reality, once everyone had two Nokia phones and Apple and Android popularised the capacitive touch screen phone, then Nokia, in its original form, was bought and destroyed by Microsoft.

I have no idea about any particular funds except their past performance which is often and now a poor guide. Warren Buffet is famous for owning many Apple and Coca Cola shares but apparently Coke have halved their profits whilst the share price has doubled so USA shares are just horrible madness now, except relative to other USA investments which are as crazy as a box of Mississippi frogs. Funds change shares held and their managers work on your behalf balancing choices or you can buy the company shares directly yourself. However, what works for 9 years out of 10 could still kill you in year 10 so there is always the proviso: "The past is no guide to future investment gains.". If there was a hurry to sell one day and partly he just buys other funds including Buffets Berkshire Hathaway which gets better returns directly! Falls are usually bigger and faster than gains. Slides often have a first and second stage so don't rush to buy everything the day after a big fall in stocks, wait two days at least for even a small general investment. Because I always only buy good company shares, I have been burned by buying too early after the start of a share price drop: I see the safe profits & dividends so I never lose money but when others panic, but I am forced to wait a year for sanity to return and I could have doubled my gains and had no anxiety by just waiting a little longer on the way down. This is sometimes termed "Catching a falling knife".

In many countries, financial advisors have no regulation or training requirements so one should always assume that they have no special crystal ball or knowledge of future events or prices. Theory of efficient markets - all known information should already be included in the price of any asset at any moment but markets cannot see the future as well as the past and pricing can be drastically wrong - even the best studied and biggest companies on the FTSE 100 index can change price by a factor of 10 within a few years. Buy low, sell high - means buy when there is total disaster occurring or expected and sell when everything looks perfect but that is the opposite of human instincts. It seems more natural to buy good companies after they have shown themselves capable of growing and/or making profits for many years already and which are confidently predicted generally to have great futures.

You can do your own proper company analysis by researching the financial history directly at Companies House where all UK registered businesses must file their annual statements. Trying to value a company is harder than it first appears because sentiment changes so rapidly, because different potential buyers value different parts of the company differently, because of government actions, wars etc.. Also, even multiplying the current share price by the number of shares issued only gives an apparent valuation on the particular day when perhaps one percent of the company value changed hands. If one tried to sell a higher proportion in one day, the overall company value would appear to fall and, at the opposite extreme, an attempt to buy all the shares in a takeover would result in a much higher valuation as many owners would hold out for a much higher price: by definition: they only hold those shares because they are more optimistic than all the others whom have already sold. Other difficulties valuing a company come from short-sellers who are deliberately hoping/encouraging a share price to fall but who may themselves get caught out in a short-squeeze like happened when Volkswagen was buying Porsche when short-sellers made huge losses and the price of Porsche shares shot skyward suddenly. Accountants can offer an official "Book value" for a company which can vary widely from the actual apparent valuation.

Stochastic variation: smaller companies will be at the top of the largest percentage increase list but it is easier to understand the largest companies because their business model is obvious and also well studied by analysts.

Buying Cheap UK Stocks

American banks are printing more money and so are doing more private equity takeovers 2021 is a record breaking year for private equity deals in the UK, as so called corporate raiders target cheap British companies on the stock market. Private equity (PE) refers to finance firms that invest in private businesses or do deals to take public companies private and are associated with asset stripping and job losses. Low interest rates have created a dream environment for private equity. The UK is an attractive place to go shopping. The legacy of Brexit crushing share prices and profits and the large numbers of simple industrial and heavy industry stocks has bored fickle short-term investors in recent years. Consequently, many UK listed companies look cheap compared with international competitors especially as fiscal stimulus ends and profits become attractive again.

UK supermarkets like Asda and Morrisons have already been bought up by foreigners and Canadian pension companies are buying UK utilities. Other British companies that have fallen to private equity include: mechanics AA; infrastructure firm John Laing; St Modwen Properties; fund administrators Sanne Equiniti; private jet firm Signature Aviation; insurer LV; aerospace company Senior; and pan-Asian takeaway chain Itsu. Refinitiv noted that there have been 401 private equity deals so far this year in the UK worth more than $49.8bn: the most ever recorded (since 1996). The second highest was in 2018, when 297 companies went private. BT used to be the UK national telecomms company but already it has large chunks owned by foreign companies and more purchases or even an outright take over are rumoured. “The FTSE 100 is the worst performing major equity index since the UK Brexit vote in June 2016,” says Russ Mould, investment director at AJ Bell. "Unpopular equals unloved and unloved equals potentially undervalued."

When Warren Buffet selects which company shares to buy, he usually selects companies with low capital requirements, some special value, or protective moat, good cash generation and especially: good management who work hard for their shareholders. Charismatic company leaders can become famous but, in general, when studied, usually less charismatic bosses are more successful companies over time. Charismatic bosses can also force bad behaviours and psychopaths are happy to directly absolve their workers for their illegal, immoral or stupid actions. Fraud, liars and cheats - are everywhere in business and especially in large American companies like Enron, Madoff, WorldCom and even the most financially aware Nobel prize-winners and top bankers have made huge mistakes: LTCM and Lehman Brothers were run by some of the smartest financial wizards in the World. America does have an oversized number of frauds and the Securities Exchange Commission (SEC) has failed many times even when directly warned about fraud. "Treason doth never prosper"

Oil and Energy Prices

The United States always has a recession every time that oil prices rise. Saudi Arabian energy giant Aramco has seen its profits jump almost four times boosted by a rise in oil prices as demand recovers: the world's biggest oil producer, said net income rose by 288% to $25.5bn (£18.4bn) for the second quarter. The USA is printing USD and spreading them across the World so an American recession can hurt many other countries. The USA decided that trucks were not cars used for personal transport and so taxed and regulated them differently (less tax, lower pollution regulation) so Americans ditched their cars for huge, heavy, inefficient trucks. Truck and car driving in America causes congestion, pollution, death and financial destruction. Americans lose huge amounts of wealth trying to impress each other with less and less convenient transport choices. Riding a bicycle or pedelec is always the best private way to travel around a city above freezing temperatures. Los Angeles had one of the best tram networks in the World but government regulation of tram fares reduced tram company profits and therefore tram company valuations. To stimulate car purchases and to remove a competitor, US car manufacturers bought up the Los Angeles tram companies then destroyed them causing the worst congestion and pollution problems but making profits for the car companies for a while.

Americans also destroy their wealth through spending on healthcare

Property

The fastest ways to make money are normally illegal and dangerous but, in the UK, government control of land use since the 1940s has created an artificial lack of new accommodation and a legal opportunity for enormous profits: If one owns a piece of agricultural land (approximately GBP 21,000 per Acre) on which planning permission is granted for building homes, the value of that acre rises to almost GBP 2 million! The uplift in value/price all goes to the farmer as a bonus; none of it goes to the local authority planning department that approved the change of land use or back to government to pay for new bike paths, roads, schools, drains etc. (Source Ministry of Housing, Communities and Local Government)

One could try doing all the land buying and building oneself but that is hard work and stressful as anyone who has watched the TV show Grand Designs knows for sure. Alternatively, one can just buy shares in successful land and house building companies.

Ethical investing

It always feels good to know that your money is directly helping something that you care about similarly to working in a hospital assisting the sickest people in society. However, everyone will die one day, Albert Einstein might not have been a good hospital cleaner and leaving the best investments for only selfish people to own actually rewards the most selfish people even more. Owning a little of an unclean company lets you gain any profits from it to give or spend directly on our green healthy future. Leaving bigger profits for someone else to spend on petrol, pollution or conspicuous consumption is clearly not clever. However, large fund managers and the richest folk should never invest in dirty companies unless they plan to nudge those companies for the better.

Green investing and solar power

This Guardian Green Investing story is a nice introduction to cleaner investing. I invest in solar power through community solar projects in Australia and I promote solar power through www.filsolar.com. I also bought shares in Drax which switched from burning coal to cleaner carbon neutral or carbon negative wod chips - see below:

Investing News

Please note that many people use The Motley Fool website and Reddit for financial news and gossip but I have often found that the stories might be factually correct but limited in scope so offering a potentially biased overall balance particularly before some rich American investor wants to do a large trade in the opposite direction to the story.

Investing Guides

My personal investing history

I knew nothing about investing initially and even tried to prevent my own family from doing anything so crazy or risky as buying shares when banks were offering over 7% interest on savings accounts. However, studying and working in Cambridge, I gradually learned that there were some amazing local opportunities. I did some research and made a list of requirements of what I thought would make a good first investment company:

  • New local Cambridge company with rapid growth
  • High technology but definitely useful with good products in demand
  • Reviewed by the Financial Times newspaper and I knew people who worked there so both outsiders and insiders thought it was a good company
  • Ionica

    So my first share purchase was: Ionica - a digital phone company that was so popular that they had no room to add new customers to their network in Cambridge. Unfortunately, Ionica went bust two years later! By good fortune, a few years later, I found myself sat next to the ex CEO of Ionica (A super smart and nice guy named Nigel Playford) sat in a tent next to a beautiful Pennine waterfall after a friend's wedding and also read around the cause of the crash. Apparently, the huge Canadian company (Nortel) that supplied the base stations to little Ionica was six months late with a software update causing Ionica to miss a stipulated customer growth target by a tiny margin which caused a commercial bank to pull their financial backing causing Ionica to disappear. It was such a waste of a good company and even my friends who lost their jobs did not have a bad word to say about their boss. It was a good investing lesson and a warning to anyone that depends on external financing that your supporters can suddenly turn around and kill you.

    Not Tesla

    I have never owned shares in Tesla despite loving the company and even naming my computers after Elon Musk in 2013 because the early Tesla company give a similar warning lesson to anyone brave enough to start a company with large capital requirements: Tesla came within a day of bankruptcy twice and Elon knew funding might get tight but had had reassurances from previous financial backers that more funding would be available. However, on the last day before bankruptcy, two of the previously supportive investors turned around and said they would not actually be providing any more capital: not because they thought Tesla was a bad company, quite the opposite, they loved it but knew that it would be much cheaper to own completely after it had been forced into insolvency! now however, Tesla has cheap plentiful capital reserves and could also be profitable at normal levels for a car manufacturer.

    So the Tesla share price is nothing to do with current profits or company insider valuations since Elon Musk himself tried to sell Tesla at a fraction of its current price to Apple boss Tim Cook but, by contrast, Cook could not even be bothered to answer the begging phone call from Musk and is setting up his own car company in a project codenamed Titan. Elon Musk also told everyone that he was thinking of selling the company for a small fraction of its current valuations (Musk also lied/exaggerated that he had buyers lined up so he was reprimanded by the US SEC for stock price manipulation). There were also many end-of-year sales pushes that Musk has explained were necessary to keep Tesla afloat when they were only selling the Model S. One might also consider that most American car manufacturers go bankrupt occasionally, especially during the GFC (though Ford did not). The Tesla model 3 seems to be a good car but one of the first Model S Plaid models burst into flames and, later, Will Prowse returned his Tesla Model S Plaid after less than one day of use due to both a main drive unit failure and a door handle failure. Car manufacturing has never been an easy or good route to excess profits.

    Also consider Volkswagen and Toyota who both manufacture about 10 times as many cars as Tesla and have greater manufacturing and sales experience but they only command profit margins of 10% at best and both are moving rapidly into electric car manufacturing. Also currently, Volkswagen EVs outsells Tesla in Europe (though Tesla is building a German car factory). Then we expect all the Japanese and Korean manufacturers to move half of their production over to EVs and the other Chinese manufacturers are already well ahead of Tesla in terms of numbers of EV sales.

    Tesla currently has a problem that they do not build their own battery cells: they buy cells from Panasonic, Samsung and others, whilst the Chinese BYD company make the best current battery cells: their own "Blade" battery which is much safer and durable than the Panasonic/Tesla NMA which is basically a bomb without a detonator and not safe except relative to normal petrol cars which carry large tanks of horrifically dangerous petrol (but that does nothing without Oxygen and an ignition source). A Panasonic/Tesla cell can explode if short circuited or heated above 200 Celsius. So Tesla is going to face terrifyingly larger competitors from 2022 onwards and BYD and Volkwagen in particular will make both the best cars and the batteries but also sell them much cheaper than Tesla.

    The performance of Tesla cars is excellent but not as good as some Porsche EVs and the new Lucid car company produce the gorgeous EV Air GT cars which offer both more power (1111 horse power) and longer range: over 500 miles between charges. Tesla has large gross profit margins on its cars currently and a huge pile of cheap capital so as long as foolish Apple buyers cannot buy Apple branded cars, they might pay a 30% premium for a Tesla just like they love to pay a 50% premium for handicapped Apple iPhones. Tesla removes many normal car controls and displays which may make Apple customers feel comfortable in their designer strait-jackets. Apple iPhones have no headphone socket, no FM radios, no USB-C port (a legal requirement in Europe), no Bluetooth transfer of photos to the person sat next to you on a beautiful mountain or isolated beach, no expandable storage, normally only a single SIM card, no replaceable battery, no Infra-Red beaming, no optical zooming, no choice of Web browser engine, no choice of app store etc.. Insecure Apple iPhone jewellery buyers might be able to buy an Apple car by 2025 - maybe they will remove the steering wheel too? I would buy a BYD today but I never buy new cars because they depreciate so quickly. If I was crazy rich, I would buy a Lucid GT Air or build something like the TU Delft solar cruiser. Tesla cars are still good for charging at Superchargers on long journeys but Porsche and Lucid may be better sometimes because they can use higher voltage batteries and 350 KWatt chargers. Tesla and Nissan helped accelerate EVs but Tesla cars are not worth the money now and competitors could really hurt Tesla car profits within 2 years time.

    Tesla is not just a car company: they also sell energy storage products and solar panels with installation as they took over SolarCity in the USA. Tesla have developed some pretty solar roof tiles but they are not cheap and not suitable for many roofs: they do not work for complicated roofs (due to shading, diode and tile cutting problems) whilst their normal commercial solar panel business has rapidly halved in size and is being sued by some big customers for causing roof fires from their (unnecessary DC optimizers and flammable plastic connectors).

    The Tesla energy business is a good one and can provide excellent frequency management service and load balancing for their delighted early customers but profitability is not clear currently because they need to buy all the Lithium cells from Samsung or other mainstream Lithium Ion suppliers and they sometimes burst into flames during commissioning tests. If Tesla was able to buy CATL or BYD Lithium Iron Phosphate cells, Tesla Energy could make a much safer and longer lasting product at a better profit margin but, obviously, anyone else could also buy those same cells from the same suppliers and compete in the same business so there cannot be a large profit margin. Similarly, BYD is already selling electric buses, electric cars (including the excellent cheap new Dolphin car half the price of a Tesla Model 3), Batteries, and grid storage energy products etc. so Tesla might not be able to compete with better cheaper commercial Chinese products who make their own cells, batteries and everything else that they sell.

    Not Cambridge Silicon Radio

    When I lived in Cambridge, I shared a house with a young South African woman who worked as a secretary to two of the top directors of a Cambridge Bluetooth radio company called Cambridge Silicon Radio (CSR). She was being worked off her feet and came within an inch of resigning for a quieter life but I had enough investors acumen to beg her to stay and so keep her share options for as long as possible because those shares would buy her a nice house one day in the future. Luckily, she took my correct advice but, sadly, I could not buy those shares myself because they were not publicly traded then.

    ARM

    I knew that ARM would be a good company to own and did quite well a few times but I also tried to predict the impossible: good times to sell ARM so that I could buy back more shares later at a lower price - unfortunately, as expected, I often got the timing wrong and missed out on big gains, got shy from looking foolish but did still finally manage to own some on the day that Japanese Softbank finally bought the whole company and took it private with an afternoon 40% gain which was nice but I had missed a 10-fold gain that would have been mine if I done nothing and just sat on my shares for three years. ARM was a classic growth company with a real appeal from rich American corporations filled with freshly minted USD and so Nvidia has spent a year trying to buy ARM from Softbank, not for USD 40 billion like the old deal for nearly twice that price. Capital is absurdly cheap in 2021!

    Bad timing

    I stopped buying shares after the 2007/2008 Global Financial Crisis (GFC) which was actually just a rich country crisis as China still grew 40% in the following few years. I was so stupid to abandon the UK stock market when they were at the cheapest: it was the very opposite of good timing! Warren Buffet has often advised that the best time to buy stocks is when there is "Blood on the streets." - not literally of course, just that following the simple advice to buy low and sell high necessarily means that one will be buying stocks when others are panicking and think that those stocks are useless and must be disposed of immediately at any price, and similarly, once everyone has finally noticed that a company is growing well, successful, with nice profits and the share price has reached a peak - it might actually be a good time to sell or reduce ownership.

    Lloyds Bank

    That is Lloyds retail bank, not Lloyds of London the insurers. My largest current shareholding is this bank stock which has a price which has recently been on a roller-coaster ride and I made as many losses as gains but I am still optimistic that it will repay my faith by March 2022 because I follow Willie Suttons advice (he was a bank robber) and I believe Lloyds is absolutely full of cash. Do not trust me on this: I own many of these shares so I would like you to buy them from me at a high price in 2022. The current price today according to Yahoo is 46.5 pence and the P/E ratio is below 2 (not correct surely?) whilst that of Tesla is above 600 so, if one was interested in profits today, Lloyds would be hundreds of times better to buy, but no one buying Tesla cares about profits today. Lloyds Bank page at Morning Star - a useful financial information website.

    Perhaps huge profits have become unfashionable ? The P/E ratio for Lloyds bank is listed at Yahoo as being less than 2. Other financial websites suggest a ratio around 6 is closer to reality. Most financial information is either wrong or badly out of date but the companies publish their own results quarterly.

    Barratts Housebuilder

    I also own UK housebuilder company shares: particularly Barratts because it is the UK's biggest and perhaps best with a perfect five star quality rating for the last five years. It also has a profit margin over 20% and the UK has an official housing shortage. I assume that the biggest threats to profits from Lloyds Bank and Barratts housebuilders are actually from the UK government policies like special bank taxes and panicked lock-downs which should never have applied to outside construction workers in fresh air.

    BT

    I know nothing about most UK companies. If you have some inside knowledge of companies doing well because you see a retailer selling something in fashion and large crowds of shoppers then you might be ahead of the rest. Doing the same as all the other investors but just a day ahead of them will always yield nice profits. BT, the British National phone and telecomms company has many problems with its pension and government oversight of old promises but it is also investing and expanding to provide a long-term investment in one of the most important infrastructures of the UK. Over 10% is owned by Deutsche Telekom (a similar German company) and over 15% (and growing) by a clever French telecomms investor and manager (Patrick Drahi from Altice). Given that the current BT share price is low and the British Pound Sterling is low, one might assume that these international experts know real value when they see it and that they have taken time to know the company properly. All you need to do is to copy the expert and you might get a similar benefit with none of the financial analysis effort.

    Drax

    Drax used to be the biggest emitter of polluting Carbon Dioxide in Europe but when they announced a shift to burning clean woodchips and some government support, I bought shares in what should have been a boring clean energy company but then the UK government withdrew support, coal burning continue and the share price halved as Drax tried to go ahead with the switch away from coal but paying using its own profits instead. The drop in profits halved the share price and I was nursing large nominal losses until late 2021 when the UK began running out of electricity (15% used to be imported from neighbouring countries) but the largest French interconnector was damaged (France has cheap reliable nuclear power), the Natural Gas price increased 5 times (most UK electricity generation comes from gas) and the UK gas reserve almost disappeared so suddenly the Drax investment in alternative fuels which are both cleaner and easier to store looks both clever and valuable to shareholders and the whole UK economy for many years to come so Drax doubled its investment in wood chip collection and shipping. I didn't predict any of these ups or downs. I had followed Drax because of my interest in renewable energy (I run a solar power company) and because I had followed the work of Rothamsted Research on willow tree coppicing and now medicinal chemical production.

    Bad Government

    Governments can destroy any business anytime that they like either deliberately or accidentally like through lock-downs. Populist politicians may choose to attack energy companies, banks or any company making a profit for shareholders. Fintech companies and foreign competitors may also arrive to challenge Lloyds. A stupid voting population will almost always guarantee bad government. Comparing North Vietnam against South Vietnam before unification, North Korea Vs South Korea currently and East Germany Vs West Germany should immediately reassure anyone with an open mind that socialist policies are very attractive intellectually, and for promoting ideas of fairness, but capitalism with free trade and accountable politicians will always lead to much better efficiency and higher living standards. However, rich countries will cause more energy pollution.

    The British government made a terrible mistake changing the law to allow customers investments to be stolen by accountants and bankruptcy/insolvency scavangers. I never joined the Beaufort stockbrokers but they bought a company called SimplyStockbroking and so took over my account, then The American FBI created a sting operation which affected just one of hundreds of brokers at Beaufort and so the UK regulators forced every account to be closed and raided by PWC when there was nothing wrong with the accounts. The errors compounded horribly until ShareSoc intervened with some sanity but PWC and some lawyers paid themselves one thousand Pounds per hour doing nothing. UK investment brokers are no longer safe from the UK regulators.

    Do not try to research or follow every company like professional analysts might do or like Warren Buffet and his team looking for a bargain. It is not worth your time and the "Efficient Market Theory" says that you are wasting your time but I have seen even large, well studied and famous companies like Rolls Royce Aero have share prices change by orders of magnitude over less than two years just because a small proportion of share owners panicked and appeared to devalue the whole company.

    All government spending comes from businesses either directly in business taxes or from salary taxes like national insurance, PAYE income taxes or from consumption taxes like Value Added Tax (VAT).

    UK Tax Saving Ideas

    Paying taxes is the hallmark of civilisation and should always be supported. However, The British government encourages everyone to save for their own future and especially their own retirement pensions by offering tax-breaks which they want us to use. SIPPs, ISAs and Lifetime ISAs are wonderful simple wrappers around any normal investment and which shield you from paying or even reporting income which is a great time saver. ISAs are definitely the way to start investing now as the Conservative government of Boris Johnson has just raised both National Insurance NI payments and taxes to the highest proportion of UK salaries since the second World War:
    1. Individual savings accounts (ISAs): Use your annual individual savings account allowance of £20,000 each tax year, or it will be lost forever. Isas allow you to earn interest and dividends free from UK tax, and withdrawals don't suffer any capital gains or income tax. If you leave the country, they still continue but cannot be added to.
    2. Pension contributions and SIPPs: Tax relief on pension contributions is a real boost especially to taxpayers, with higher allowances for paying into pensions and higher tax reliefs
    3. Salary sacrifice: If your employer allows you to make pension contributions via salary sacrifice, you can benefit from immediate tax relief and a national insurance saving on these contributions.
    4. Gifts to your spouse or civil partner: Capital gains tax (CGT) allowance is around £12,000 per individual per year so it can be useful use the annual CGT allowance of your partner too.
    5. Gifting out of excess income: Gifts made in the seven years before death may still attract inheritance tax (IHT) but gifts of up to £250 per person would likely be exempt, as would gifts for weddings or civil partnerships within set limits. An avuncular relation might want to provide for university fees or maintenance. Formal planning might be needed.
    6. Venture capital trusts: Higher-risk richer investors might use Venture Capital Trusts (VCTs) especially for longer-term benefits and for innovative new smaller companies. The investment needs to be held for at least five years to retain the tax relief.

    Cheating and Speculation Versus Investing

    In the short term, and without understanding, speculation and investing appear similar. With low taxes and short periods, it is often possible to make more money by exploiting, noise, volatility or direct market manipulation. However, over longer periods and with more and larger traders, then it is more likely that stock prices will actually reflect fundamental profitability better. Good long term investors can do very badly relative to speculators and manipulators over short periods. The daughters of famous international bankers have made money than their fathers pumping and dumping cryptocurrencies and other fundamentally worthless magic numbers. As long as one can convince someone to buy your rotten shares or magic numbers then speculation can profit.

    Insider dealing should be the easiest way to make money as it uses private knowledge of future profitability and friends sometimes do help each other - often for free - but it is usually illegal and it can be very easy to track on electronic exchanges but prosecutions are not common.

    The very richest people tend to be: clever manipulators/monopolists or at best: great investors, or great entrepreneurs who can see the future and who then work so hard and invest so much that they arrive as the leaders in the new age. Some of their large returns are a just reward for helping everyone but when I learn about natural monopolies in evil companies like Facebook/Meta, and how many helpful people Mark Zuckerberg used and abused to get to his position of domination, I am certain that much of his own wealth should be gently taxed away. Stories of genocide in Myanmar being fed by Facebook and the Internet takeover in The Philippines are very scary indeed. When Bill Gates ran Microsoft it used to be the most evil company but now they only stamp on freedom in smaller ways and no one would use any Microsoft software if they were not forced to do so. I just wish that Microsoft used their monopoly and wealth to actually put a little effort into producing better software - they are shameless failures and the World would be entirely better off without them because the free and open alternatives are better. Learning about the illegal abusive monopolistic behaviours of both Intel and Nvidia is a painful reminder of how some businesses have acted badly against consumers.

    Do not forget the basics

    Remember the King of Tonga who trusted his American financial advisor who, unfortunately, ran off with most of the country's foreign exchange reserves one day. However, that might have been expected since he was also the official court jester and, even later, whilst I was there, some kind Australian accountants were trying to implement the country's first double-entry accounting system for the national bank!

    Remember the old proverb that 'A fool and his money are soon parted'.



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