CEO corner
By John Spiers
Although we correctly predicted in October 2006 that securitised debt would lead
to large losses for banks and hedge funds, the impact was far greater than I had
envisaged. Furthermore, the traditional hedges, apart from cash and gilts, did not
work and so 2008 proved to be the worst year for UK investors since 1974, the year
after I commenced my career. Mr. Market took no prisoners and many of the
leading investment managers in the world were humbled. Some, it transpired, had
not even been managing money at all but publishing fantasy performance figures.
It seems clear that
we are moving into
a new era. There are
signs of some new
opportunities arising
out of the wreckage
and here at Bestinvest
you can be assured
that we are striving
to help you rebuild
your wealth.John Spiers
As I write, the outlook for UK plc in 2009 appears worrying and not helped by the
most incompetent Government economic policy since 1976. Another IMF rescue
may be needed and the recovery this time will be much longer. In fact it may not
happen at all. Sadly it’s hard to find many centres of international excellence in the
UK these days. We’ve feasted for too long in the Get Rich Quick diner rather than
building up world class businesses.
It seems clear that we are moving into a new era. We cannot yet see clearly how
the land will lie but the use of debt finance is going to be much less prevalent in all
areas. The Government will (unfortunately) account for an even larger part of the
total economy. Further afield (but perhaps not that far) regimes will be toppled
but capitalism will survive, albeit in a rather emasculated form. Capital values will
become largely irrelevant; the overwhelming need will be for reliable income, just
as it was prior to the 20th century. Remember Mrs Bennet’s reaction to her
daughter Elizabeth’s engagement to Mr Darcy in Pride & Prejudice: “Ten thousand
a year, and very likely more! ‘Tis as good as a Lord”.
At the present moment it appears to us that high grade corporate bonds may
be a good source of such income but at some point commercial property, let
on long leases to strong tenants, will also regain some attractions. The income from
shares superficially appears very attractive but many dividends are likely to be cut
quite sharply in 2009.
Overall, we can draw encouragement that we are an island race that has
historically proved adaptable to adverse conditions. Already there are signs of
some new opportunities arising out of the wreckage and here at Bestinvest you can
be assured that we are striving to help you rebuild your wealth.
We know that our report card for 2008 would read ‘Could have done better’ and that
is exactly what we intend to do.
Happy new year.
JOHN SPIERS
Chief Executive
Back to top