Here we are in P12. Period 12 of the current tax year. HM Government has spent more money that it has earned and thus has had to borrow on the Bond Market to fund its operations.

The current forecast is that HM Government has had to borrow £69,500 Million.

Thus overspending by £69.5 Billion.

It has been like this since about 2000, so for 16 yearsH HM Government has been spending more than it earns, that is why the total national debt is so massive.

Total debt is about:

£1,542,600 Million = £1,542.6 Billion = £1.5426 TRILLION

[http://webarchive.nationalarchives.gov.uk/20160105160709/http://www.ons.gov.uk/ons/rel/psa/public-sector-finances/december-2015/stb.html]

The levels of debt are punishing. Interest payments have to be made to the creditors.

UK Population is about 64 million

Thus in 2015-16 the UK had to borrow £69,500 Million that means for the total UK population, the UK Government borrowed £1,085 for every person in the UK.

The Total Debt the UK carries is £1,542,600 Million thus for the 64 Million UK residents, each UKcitizen is carrying an incredible £24,103.

Clearly we are in it together.

BT Group PLC, is the most dynamic telecoms, broadband and media business in the world.

www.btplc.com

On the 8th of Feb 2016, BT PLC paid its interim dividend. It paid its shareholders 4.40p.

BT’s issued share capital on the 31st Dec 2015 consisted of 8,373,227,252 ordinary shares with voting rights. On this date, BT Group plc held 6,950,839 ordinary shares as treasury shares and thus, the total number of voting rights in BT Group plc on that date was 8,366,276,413.

So it paid out £0.044 per 8,366,276,413 shares.

So what cash left the business on the 8th Feb 2016 ?

8,366,276,413 x £0.044 = £368,116,162

Yes, £368 million was paid to the loyal shareholders of BT Group PLC

On the 3rd of Feb 2016, Vodafone PLC paid its interim dividend. It paid its shareholders 3.68p.

Vodafone’s issued share capital consists of 28,813,387,198 ordinary shares of which 2,258,276,689 ordinary shares are held in Treasury.
Thus the total number of voting rights in Vodafone is 26,555,110,509

So it paid out £0.0368 per 26,555,110,509 shares.

So what cash left the business on the 3rd Feb 2016 ?

26,555,110,509 x £0.0368 = £977,228,067

Yes, £977 million was paid to the loyal shareholders of Vodafone PLC

Some great low cost funds Legal and General.

http://www.legalandgeneral.com/investments/isas/

For 15.16 these funds look like an a good choice….

L&G Global Health & Pharmaceuticals Index
L&G Worldwide Trust
L&G Asian Income Trust
L&G Distribution Trust
High Income
L&G Global Technology Index
L&G Pacific Index
L&G UK Property
L&G International Index
European Index
Mixed Investment Fund 20-60%
US Index
Ethical Trust
Global Equity Index Tracker

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In Feb 2016, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
17-Feb-2016 1½% Treasury Gilt 2026 £2,750 Million
11-Feb-2016 3½% Treasury Gilt 2045 £1,649.9750 Million
09-Feb-2016 0 1/8% Index-linked Treasury Gilt 2026 £1,429.9650
When you add the cash raised:-

∑(£2,750 Million + £1,649.9750 Million + £1,429.9650) =  £5,829.94 Million

£5,829.94 Million Million= £5.829 Billion

On another way of looking at it, is in the 29 days in Feb, HM Government borrowed:-

£201 million each day for the 29 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2026 and 2045. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

http://asadkarim.co.uk/?attachment_id=1528

The highly regarded Life Assurance and Asset Manager, Standard Life PLC, has a Debt Investor programme to borrow money on the bond market to attract investors who are seeking a fixed income.

http://www.standardlife.com/debt_investors/subordinated_debt.html

It has 3 funding programmes:-

£500m @6.75%
£300m @6.546%
£500m @5.5%

So borrowings of £1.3 Billion paying the bond holders over 5%.

An incredible yield from a company with over £300 Billion under management

South Korea, is one of the most technically advanced nations in the world. It is home to names like Samsung, Hyundai, LG to name just three household names.

It is also home to the 3rd largest pension fund, the National Pension Fund of Korea.

With US $429,794 million under management. That is £301,200 million, which is £301 Billion.

http://english.nps.or.kr/

It is the largest investor in Korea, just look at the top ten holdings in Korean Shares:-

Samsung Elec
SK hynix
Hyundai Motors
NAVER
POSCO
KEPCO
Shinhan Group
Hyundai Mobis
SK Telecom
Kia Motors

It’s top ten holdings in International companies are:-

MICROSOFT CORP
ORACLE CORP
APPLE INC
WELLS FARGO & CO
NOVARTIS AG
ROCHE HOLDING AG
JPMORGAN CHASE & CO
JOHNSON & JOHNSON
GOOGLE INC
PFIZER INC

It’s top ten holdings on fixed income investments are:-

UNITED KINGDOM 3.250% 01/22/2044
UNITED STATES 3.125% 08/15/2044
UNITED STATES 4.500% 02/15/2016
JAPAN 1.200% 12/20/2020
JAPAN 0.800% 06/20/2023
JAPAN 0.300% 09/20/2018
JAPAN 0.200% 12/20/2017
UNITED STATES 3.375%
UNITED STATES FLOATING
UNITED STATES 4.500%

Yes, it holds UK Gilts, paying 3.25% each year until 2044, that is its top holding in bonds.

The SVM UK Emerging Fund plc in a London listed Investment Trust.

http://www.svmonline.co.uk/Navigate.aspx/Private-Investor/1/Investment-Trusts/SVM-UK-Emerging-Fund-plc

It invest in small and medium companies

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=24939

A very small investment company, with a market capitalisation of £4m

However the assets of the company per share are worth 88p and the value of the company is worth 67p.

http://www.svmonline.co.uk/ResourceModule.aspx/Pdf/SVMAllFundsFactSheetUKEmerging1215.pdf?key=7d17d931-796c-41fd-a907-fbbe7bbf994e

Thus buying shares in this Investment is effectively buying an asset worth 88p for 67p. A nice little discount.

Virgin Money is a UK Challenger Bank.
It has grown after buying Northern Rock, the bank made famous in 2007 with the famous bank run, under the ill-fated leadership of Adam Applegarth

http://uk.virginmoney.com/virgin/investor-relations/

Interesting to see it has many funding vehicles.

http://uk.virginmoney.com/virgin/investor-relations/debt-investors/global-medium-term-note-programme/global-medium-term-note-programme-terms/

£3,000,000,000 (that is £3bn) to raise cash from investors for its business, such as creating mortgages and loans.

A major securitisation programme where its loans are securitised and then sold on

http://uk.virginmoney.com/virgin/investor-relations/securitisation/mortgages.jsp

The shares are traded on the London Stock Exchange

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=30497650

£1.3 Billion is the market capitalisation.

The results are interesting

http://uk.virginmoney.com/virgin/investor-relations/results/virgin-money-q3-2015-trading-update.pdf

Mortgage Lending at £5.5 billion
Credit Card lending at £1.4 billion
Retail deposits at £23.7 billion

One can see it is has a small loan base compared to its deposits from savers, this was not the case under the previous leadership.

http://asadkarim.co.uk/?attachment_id=1458

The Hong Kong and Shanghai Banking Corporation is a massive banking business.

http://www.hsbc.com

The annual report is very detailed.

http://www.hsbc.com/~/media/hsbc-com/investorrelationsassets/annual-results-2014/hsbc-holdings-plc/annual-report-and-accounts-2014.pdf

This is a huge bank. The figures are incredible, but what is very interesting is the levels of debt that bank carries.

Debt securities in issue $95,947 million.

The bank has a bond issuance programme

http://www.hsbc.com/investor-relations/fixed-income-securities/issuance-programmes

That it uses to raise extra cash to fund its business. That cash from the bond issuance programme can be used to generate loans for businesses or perhaps to fund other operations.

http://www.hsbc.com/investor-relations/fixed-income-securities

These are all the bonds on issue.

So the bank carries $95,947 million = £67,271 million.
That is £67.2 Billion

At first that seems a lot of debt, but lets keep things in perspective.

http://www.hsbc.com/investor-relations/fixed-income-securities/credit-ratings#All Entities|All rating agencies|All rating types

Highly creditworthy.

Cash and balances at central banks $129,957 million = £91,116 Million
That’s £91 billion

Customer accounts $1,350,642 = £946,975 Million
That’s £946 Billion.

The bank’s asset base is huge

So over the weekend of Sun 16th Jan 2016, the nation of Iran has come in from the cold, with UN sanctions being lifted. Iran will start to export 500,000 barrels of crude oil. In a depressed oil market, this will only drive down the current price.

To Iran, what will 500,000 barrels of crude oil do ?

with Crude at $29.50 a barrel

500,000 x $29.50 = $14,750,000 a day

That is £10,341,700 = £10.3 Million a day.

Had currency for a nation that has been badly hit from internation isolation

Legal and General has become on of the largest fund management groups in the world.
It is the largest money manager in the UK.

http://www.legalandgeneralgroup.com

Assets Under Management (AUM) is at £717 Billion.

http://www.legalandgeneralgroup.com/investors/news_releases/releases2015.asp?newsid=260

To grow the business Legal and General has a programme to fund its investment by attacting debt investors.
Institutions who are willing to lend (bond buyers) for a safe and stable return from the Legal and General in this case.

http://www.legalandgeneralgroup.com/investors/debt.html

This is the bond issuance programme, 8 issues. A total debt outstanding of £2,500 Million. That is £2.5 Billion on a business with £717 Billion of assets under management.

The Direct Line Group is a listed UK insurance company, mad famous by the red telephone and changing the way UK consumers bought insurance.

http://www.directlinegroup.com/

Insurance is a simple business, collect in premiums to take on risk, invest those premiums and if all things being equal, pay-outs on claims are less than the premiums received.

Direct Line invests the premium income, and it is interesting to see what investments it holds:-

http://www.directlinegroup.com/~/media/Files/D/Direct-Line-Group-V2/reports-and-presentations/Q3-results-announcement-2015.pdf

Corporate Bonds £4,048.6 Million
Derivatives £143.1 Million
Local government debt £103.8 Million
Securitised debt £314.5 Million
Sovereign debt £503.8 Million
Infrastructure debt £301.0 Million
Cash and cash equivalents £1,105.2 Million
Investment property £340.1 Million

Total £6,860.1 Million

That is £6.8601 Billion

Based on the premium income, they have “put the money to work” to buy investments. that in itself generated Investment income of £41.5 Million, and those investments also increased in value by £152.4 million.

Insurance premiums create investment opportunities.

The growth of Financial Technology companies (FinTech) is changing the dynamics and dominance of traditional banking organisations.

The largest Peer to Peer lender in the USA is The Lending Club.

https://www.lendingclub.com/

With $13 billion worth of loans created,  The Lending Club has created a vehicle that offers a simple, low cost, convenient and beneficial alternative to both borrowers and investors who want access to better savings rates and lower borrowing rates.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In January 2016, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
20-Jan-2016 1½% Treasury Gilt 2021 £4,000 Million
12-Jan-2016 0 1/8% Index-linked Treasury Gilt 2046 £989.9770 Million
07-Jan-2016 4% Treasury Gilt 2060 £1,500 Million
05-Jan-2016 2% Treasury Gilt 2025 £3,000 Million
When you add the cash raised:-

∑(£4,000 Million + £989.9770 Million + £1,500 Million £3,000 Million) =  £9,489.977 Million

£9,489.977 Million= £9.489 Billion

On another way of looking at it, is in the 31 days in January, HM Government borrowed:-

£306 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2025, 2046 and 2060. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

A fantastic country that believe it or seems to have a very high national debt. Always remember Debt is not a dirty word.

http://www.gov.sg/factually/content/is-it-fiscally-sustainable-for-singapore-to-have-such-a-high-level-of-debt

This is just a wonderful and simple explanation on the balanced budget of this beautiful city state.
Investment creates wealth, prosperity and jobs.

Morrisons PLC

The UK food retailing sector is in huge flux. The established large players of Sainsburys, Tesco’s, ASDA and Morrison’s are struggling against the new entrants like Aldi and Lidl.

What is interesting is to see to understand the finances of the established players.

Morrisons PLC has grown from a northern regional supermarket to a large UK player after the acquisition of Safeway.

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10248&record_search=1&search_phrase=mor

A share price under pressure and a dividend that can not be maintained due to the stiff competition.

However when one looks at the balance sheet, one can some really powerful facts:

http://www.morrisons-corporate.com/Documents/Corporate2015/2015InterimsRNSFinalV.pdf

Liabilities

Current liabilities = £2,316m
Creditors = £1m
Short Term Borrowings £16m
Current tax liabilities £42m

Total = 2,375m = £2.375 billion

So it carries no long term debt. Such as bonds. The only money it owes are effectively its suppliers which means it has to pay them in 90 days, and perhaps short term overdraft facilities. It does not have the onerous payments to make to bond holders.

So while the cash tills keep ringing, cash flow is available to meet payment obligations. Also Morrisons PLC owns all its own land.

British Telecommunications PLC, a flagship member of the FTSE-100.

http://www.bt.com

It is by far the world’s most dynamic telecommunications corporation. It has a funding programme based on a bond issuance programme.

This attracts investors who are looking for an income, such as pension funds, income funds such as unit trusts and insurance companies.

http://www.btplc.com/Sharesandperformance/Fixedincome/index.htm

What is obvious to see, is BT’s debt reduction programme.

http://www.btplc.com/Sharesandperformance/Fixedincome/net-debt.jpg

The current outstanding debt that is maintained by BT is:-

UK Sterling: £2,600 Million
UK Sterling Index Linked: £250 Million
US Dollar: $5,670 = £3904 Million
Euro: €1,000 = £752 Million

That is:

(£2600 + £250 + £3904 + £752) Million = £7,506 Million

Fixed income investors are benefitting from lending money to the world’s most pioneering and market leading carrier.

Tesco PLC, is the largest UK supermarket retailer, that is in the middle of fixing it’s finances, after accounting issues. It has huge assets, for example sold 14 sites a few months ago and raised £250m

http://www.tescoplc.com/index.asp?pageid=17&newsid=1222

Tesco finances its operations through a combination of retained profits, long and medium term debt capital market issues, commercial paper, bank borrowings and leases, with the objective of ensuring continuity of funding.

http://www.tescoplc.com/index.asp?pageid=32

Tesco’s principal medium to long term funding is through its £15bn Euro Note Programme.
When you look at the bond issues one can see the debt it is carrying:-

EUR 5.389
GBP 3.097
US$ 2.5

In total of a facility of £15bn is has issued:

£4.05 + £3.097 +£1.72 = £8.867 Billion

This has tapped over 50% of its funding programme. Every little helps.

http://asadkarim.co.uk/?attachment_id=1426

Glaxo SmithKline is one of the UK’s largest firms.

http:/www.gsk.com

It is huge.

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10042

A £67bn company. With leading medicines to fight HIV/AIDS, to everyday products such as Sensodyne, Aquafresh, Panadol, Beechams, Corsodyl, Day & Night Nurse, Nicorette, Macleans.

Earlier in the month, the famous and highly regarded fund manager Neil Woodford called for GSK to be broken up.

http://www.bbc.co.uk/news/business-35259184

Interesting to know the cash that GSK actually holds:-

http://www.gsk.com/media/841910/q3-2015-results-announcement.pdf

£5,908 Million. Yes, £5.9 Billion, a nice buffer for any potential opportunities.

Prudential plc is an international financial services group with significant operations in Asia, the in US (Jackson National Life) and the UK (M&G Investments). They serve around 25 million insurance customers and have £505 billion of assets under management.

http://www.prudential.co.uk/

To fund its operations it has a bond issuance programme

http://www.prudential.co.uk/investors/credit-investors

Interesting to see the levels of debt that The Pru carries:-

EUR 20m
GBP 3585m
US$ 2800m

That is in UK£

£14.8m + £3,585m + £1,917m = £5,517 Million

So £5.5 billion of Debt.

Now with £505 Billion under investment management, if that was invested in say some investment product that was yielding 2% for example, that would give a return of £10.1 Billion.

So just the investment return is more than TWICE the debt that Prudential is carrying, which is why the credit ratings of Prudential are so high.

Marks and Spencer PLC, the most famous name on the UK high street, paid its shareholders on Friday 8th 2016 its bi-annual dividend.

http://www.marksandspencer.com

It was 6.8p per share that was paid to shareholders.

Marks and Spencer capital consists of 1,629,051,928 ordinary shares.

This the cash it paid out to its shareholders was:-

1,629,051,928 x £0.068 = £110,775,531

Yes £110 Million left the business to pay the shareholders

One of the single largest shareholders is William Adderley, the founder of Dunelm.

https://en.wikipedia.org/wiki/Bill_Adderley

He has 49,311,140 shares in Marks and Spencer PLC. (that is about 3% of Marks and Spencer PLC)

That means on Friday 8th Jan 2016 he was paid:

49,311,140 x £0.068 = £3,353,158

Yes, £3.35 Million. A great investment.

The Government Pension Investment Fund of Japan is one of the largest investment funds in the world.

http://www.gpif.go.jp/en/about/

With 135,108 Billion YEN = £777 Billion under management one can see why it is one of the largest funds on earth.

http://www.gpif.go.jp/en/fund/pdf/2015_q2.pdf

They have 8 categories of active investments and have selected 21 active investment managers and 6 passive investment managers.

Global Aggregate managed by:-

Goldman Sachs Asset Management
Schroder Investment Management
Sompo Japan Nipponkoa Asset Management
Nomura Asset Management
BNY Mello Asset Management
PIMCO Japan
BlackRock Japan
Prudential Investment Management
Manulife Asset Management
Mizuho Asset Management
Morgan Stanley Investment Management
Legg Mason Asset Management

U.S. Aggregate managed by:-

DIAM Co
FIL Investments

Euro Aggregate managed by:-

BNY Mello Asset Management

U.S. High Yield managed by:-

Nomura Asset Management

Euro High Yield managed by:-

UBS Global Asset Management

Emerging Markets Local Currency managed by:-

Ashmore Japan

Emerging Markets Hard Currency managed by:- 

Alliance Bernstein

Inflation Linked managed by:-

BNP Paribas Investment Partners

Passive investment managed by:-

State Street Global Advisors
Nomura Asset Management
BlackRock Japan
Mizuhu Trust and Banking
Sumitomo Mitsu Trust Bank
Resona Bank.

The UK Supermarket group Sainsbury’s has a bank.

http://www.sainsburysbank.co.uk

Started in 1997, as a joint venture with The Bank of Scotland, who is now owned by Lloyds Banking Group, it is now moving to a standalone bank, that is wholly owned and run by Sainsbury’s

[http://www.j-sainsbury.co.uk/media/2475918/sainsburys_bank_ar_2015_-_final_-_jul_15.pdf]

Balance sheet total assets £4,237 million (£4.2 Billion)

What is interesting is that the deposits from savers make up £3,488 million, and has loans of £3,032 million to customers and only is dependent on wholesale funding of £171 million.

Also interesting to see that Sainsburys Bank has Bank of England Reserve account balance of £773m.
What this tells us, is that the bank has deposited cash from its day to day to day operations with The Bank of England. That is 22% of all its customer deposits.

The Sultanate of Oman holds the strategically important position at the mouth of the Persian Gulf. With a population of 4.3 million, this nation has benefitted from good governance and the wise investment of its natural resources.

It produces 943,000 barrels of oil per day. The UK with a population of over 60 million produces 850,000 barrels of oil per day. So what is the value of Oman’s daily crude oil production ?

943,000 barrels of oil per day.
Crude oil is $36.46

Thus:

943,000 x $36.46 = $34,381,780 a day.

That is £23,398,000 a day, £23.3 million a day.

Barclays Bank PLC has various funding mechanisms to fund its daily business operations.

http://www.barclays.com

It can use deposits from customers to create mortgages and loans for example. It can borrow (issue bonds) on the open market to raise more cash, to create more loans or use that cash to fund business expansion, such as opening new branches in emerging markets.

It also uses other financial instruments such as subordinated debt and preference shares to raise cash to fund its operations

https://www.home.barclays/barclays-investor-relations/treasury-and-capital/subordinated-debt-and-preference-shares.html

One can see the funding levels it needs for its business.

EUR 8,351,730,000
GBP 13,798,949,000
YEN 35,000,000,000
US$ 28,301,458,000

That is in UK£

6,130,590,000 + 13,798,949,000 + 199,783,000 + 19,260,200,000

= £39,389,522,000

Yes, that is £39.3 Billion.

And this is just one funding programme at Barclays.

The FTSE 100 mobile phone operator is Vodafone PLC

[http://www.vodafone.com]

To fund it day to day operations, apart of its revenues from sales, it has a funding programme based on borrowing on the bond market.

Two funding mechanisms.

http://www.vodafone.com/content/index/investors/debt_investors.html#

Interesting to see the levels of debt that Vodafone is carrying.

It’s US Dollar Programme:

$22,739,400,000

It’s European Programme:

€9,236,350,000
£4,436,350,000
Y3,000,000,000

Thus, the total:-

$22,739,400,000 + €9,236,350,000 + £4,436,350,000 + Y3,000,000,000

That is in UK£

£26,696,669,300

Yes £26.69 Billion, in outstanding loans. Investors (creditors) are willing to lend Vodafone huge quantities of cash, for a stable income. This is what income investors such as pension funds are looking for, lending to a creditworthy business.

The Northern Venture Trust PLC is managed by NVM Private Equity.

http://www.nvm.co.uk/

The fund is now 20 years old, started in 1995. (The year Oasis released What’s The Story, Morning Glory)

http://www.nvm.co.uk/investor-area/nvt/

It holds investments in these firms:-

4.50% Buoyant Upholstery
3.90% Kitwave One
3.30% MSQ Partners Group
3.10% Lineup Systems
3.00% Biological Preparations Group
3.00% Silverwing
2.90% Weldex (International) Offshore Holdings
2.40% Volumatic Holdings
2.40% CGI Group Holdings
2.20% Closerstill Group
2.20% Wear Inns
2.10% No.1 Traveller
2.10% Agilitas IT Holdings
2.00% Entertainment Magpie Group
2.00% Graza

41.10% Total

These 15 investments make up 41.1% of the total fund.

Look at the yield: over 7%

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=13006&record_search=1&search_phrase=nvt]

Today, 13th Jan 2017, Marks and Spencer the most famous and highly regarded UK retailer that is on most UK high streets paid its Jan 2017 dividend.

http://www.marksandspencer.com

It paid out 6.8p per share.

The Company’s capital consists of 1,624,723,081 ordinary shares with voting rights

http://otp.investis.com/generic/regulatory-story.aspx?newsid=823533&cid=228

Thus is paid out:

1,624,723,081 x £0.068 = £110,481,169.51

That is £110m in cash

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10057&record_search=1&search_phrase=mk

A yield of over 5%

Aviva PLC is one of the largest UK insurers. Recently just bought Friends Life.

www.aviva.com

It is interesting to see how Aviva finances its day to day operations.

http://www.aviva.com/investor-relations/credit-investors/

When one looks at this we get:-

$m 1615m = £1095m
€m 2750m = £2027m
£m 4522m = £4522m

Total = £7644 million = £7.644 Billion

Total debt of £7.644 Billion.

But when looking deeper into Aviva it has £328bn of Assets.

Shell is one the largest energy companies in the world. An Anglo Dutch company.

[http://reports.shell.com/investors-handbook/2014/consolidated-data/statement-of-income.html]

Revenue of $421 Billion = £285 Billion

it is about to buy the UK’s BG Group
[www.bg-group.com]

One major finance mechanism for Shell to invest in its energy projects is to raise money is by issuing debts on the bond market.

These are Shell’s listed debt.

http://www.shell.com/investors/financial-reporting/bonds-and-credit-ratings.html

when one looks in detail you get this:-

CHF (m) 1325 = £899m
EUR (m) 12950 = £9548m
USD (m) 33250 = £22557m
GBP (m) 500 = £500m

That is the total outstanding debt on Shell’s bonds.

That is when converted into UK£ = £33,504 m = £33.5 Billion.

So at first glance that is a lot of cash £33.5 billion but then when looks at the revenues of £285 billion, then servicing the £33.5 Billion of debt can not too tricky.

The nation of France is one of the largest produces of electricity.

555.7 TW/h to be precise.

With about 64 million people France produces 555.7 TW/h while the UK with 60 million people produces 335 TW/h.

The reason for the large number in France is that the bulk of electricity in France is produced by nuclear, which is constantly running. So France is able to meet all its in country needs and export excess capacity to its European neighbours.

Chesnara plc is engaged in the management of life and pension books in the UK and Western Europe.

http://www.chesnara.co.uk/

The strategy is simple:
“Our mission is to deliver value for shareholders, while maximising returns to policyholders”

Thus manage books of pensions and life companies, and wise investment management of the assets will leave shareholders with a decent return.

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=103970

Look at the yield….

Yes, 5.5%. Incredible return to investors.

India is known for its incredible food and its rich heritage of tradition and culture, but not known for oil. However, India has 0.3% of the world’s crude oil reserves.

This represents 5.7 Thousand Million barrels that are in the ground on the Indian Subcontinent.

That is 5,700,000,000 barrels. Today crude trades at $36.78 a barrel.

So what are India’s oil reserves worth  ?

5,700,000,000 barrel  x $36.78 a barrel = $209,646,000,000

in UK£ = £141,610,000,000 = £141 Billion.

The genius of Warren Buffet, the head of Berkshire Hathaway. A long term investor.

A great quote that represents his long term view is:-

“If you aren’t thinking about owning a stock for ten years, don’t even think about owning it for ten minutes”

Just a superb quote.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In December 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

17-Dec-2015 1¼% Index-linked Treasury Gilt 2032 £700 million
08-Dec-2015 3½% Treasury Gilt 2045 £2,199.970 million
02-Dec-2015 1½% Treasury Gilt 2021 £3,750 million
When you add the cash raised:-

∑(£700 million + £2,199.970 million + £3,750 million) =  £6,650 Million

£6,650 Million = £6.650 Billion

On another way of looking at it, is in the 31 days in December, HM Government borrowed:-

£214 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2032 and 2045. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

Anglo, the nation in the south west of Africa, a member of Organisation of Oil Exporting Countries.[13 nations make up OPEC countries]

Today, Angola produces 1,712,000 barrels of crude per day. To put this into context, the UK produces 850,000 barrels a day.

So what is 1,712,000 barrels of crude worth ?

Today crude oil trades at $37.62 a barrel.

1,712,000 barrels a day x $37.62 = $64,405,440 a day.

That is £43,192,400 day. Yes, £43million a day.

Canada is a natural resource power house, with its huge tar sand reserves, but also it has massive electricity production due to its huge investment in hydro electric power stations due to the nations geography and waterfalls.

Canada is one of the largest electricity producers of electricity.

It produces 615.4 TW/h in 2014 with a population of 35 million people.
Now the UK produces 335 TW/h in 2014 with a population of 61 million people.

What this shows is that the Canadians are not super consumers of electricity, but they produce more than they consume, and so export huge amounts across the border to the USA. A huge market for the Canadian electricity sector.

The Leverhulme Trust was established by the Will of William Hesketh Lever, one of the great entrepreneurs and philanthropists of the Victorian age. The Victorian businessman and entrepreneur William Hesketh Lever first brought his creativity and energy to the manufacture and marketing of Sunlight soap which was being sold in 134 countries only a decade after its launch. The name Sunlight Soap, comes from the town where the factory was build, Port Sunlight, on the Wirral.

www.leverhulme.ac.uk

On his death in 1925, Lord Leverhulme left a proportion of his interest in the company he had founded, Lever Brothers, in trust for specific beneficiaries: to include first certain trade charities and secondly the provision of “scholarships for the purposes of research and education”. The Leverhulme Trust was established. In the succeeding years, Lever Brothers became a cornerstone of Unilever, a major multinational company, created in 1930 by the merger of Lever Brothers with the Van den Bergh’s margarine company of the Netherlands. The Leverhulme Trust’s shareholding thus became part of Unilever plc

Since 1925 they have provided grants and scholarships for research and education; today, they are one of the largest all-subject providers of research funding in the UK, distributing approximately £80 million a year.

How is that £80million funded ?

Simmple.
£2,027,713 under investment management. That is £2.2 billion.

Today they own 5% of Unilever.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10094&record_search=1&search_phrase=UL]

£37bn in value, The Leverhulme Trust have thus £1.850 billion in Unilever shares. That is a lot of Persil, Surf, Lipton, Carte D’or, Knorr, Marmite, Pot Noodle, Vaseline, Ben & Jerrys, Domestos, Cif, TRESemme, Cornetto, Colemans Mustard, PG Tips, Stork, VO5, Hellmans, Flora…..

The movement of investment management is to a new world of online platforms. A new one that is offering investors a world of opportunity the world of Ethical investing is Ethex.

https://www.ethex.org.uk/

It gives investors options to investment in traditional ethical products but also crowd funded programmes.

Very interesting to see the backers:-

https://www.ethex.org.uk/how-we-are-financed_52.html

A non-profit based organisation with high ethics at the heart of the operation

China. An incredible nation, of history and culture. Today it is the second largest economy in the world, it is the power house of the global economy, home to names such as CCTV, Huawei, ZTE, ICBC, China Mobile, Ping Insurance and Bank of China.

To fuel the growth, the nation has been using debt to finance its expansion.
The numbers are non-trivial.

$1,980 billion Central Government
$2,720 billion Financial Corporations
$2,075 billion Non-Financial Corporations

US $6,776 (this is about 33% of the US National Debt….)
UK £4,540 billion = £4.54 TRILLION

So one can see that the debt of the finance and commercial sector totally overshadows the Central Government debt.

These are huge figures. Evidence of the global addiction to debt.

France is the home of some of the most important science and mathematics. Fourier, Laplace, and Lagrange to name just 3 names whose work touches our lives each day. The home to incredible food and culture, What is interesting to know is the levels of debt the French nation is carrying.

In total the debt is $3,999 Billion dollars.

That is broken down by:-

$1,510 million by Financial Corporations
$587 million by Businesses
$1,901 million by The French Government

$3,999 Billion dollars = £2,660 Billion pounds = £2.66 Trillion.

Yesterday, Wed 16th Dec, the US Federal Reserve raised interest rates.

http://www.federalreserve.gov/newsevents/press/monetary/20151216a.htm

The Federal Open Market Committee has raised rates for the first time since 2006. The impact of this, is very clear, imagine having debt that is denominated in US Dollars, now the cost of servicing that debt has gone up . If you have cash, say outside the US, in a currency that is NOT in US Dollars, it is now potentially more lucrative to move the money to the US to gain on the upward interest rate.

This now signals an end to cheap credit. The risk is now that rates are on an upward trajectory, those carrying heavy debts will have to pay higher interest payments.

The highly regarded life assurance giant and asset manager is Standard Life. The largest employer in the beautiful city of Edinburgh, it has become a massive player in fund management

[http://ukgroup.standardlife.com/content/news/articles/2015/281015Q3AUAandflowsupdate.xml]

Today, they manage £301.9bn.(that is about 20% of UK GDP).

What is interesting to know, is that Standard Life, also manage the money purchase pension plans for many companies.

http://www.btretirementsavingscheme.com/

BT, [www.bt.com] the most dynamic telecommunications corporation in the world, has a money purchase pension scheme for its staff, that is a Standard Life product.

The Ground Rents Income Fund is a £100m London listed investment company that investment in ground rents on land, effectively buying freeholds on land.

[http://www.groundrentsincomefund.com/]

Brooks Macdonald Funds Limited are the investment advisors.

http://www.brooksmacdonald.com/

What is interesting about The Ground Rents Income Fund is the major investors:-

21.23% Architas Multi Manager
12.95% Brooks Macdonald Asset Management
9.51% Ruffer
5.92% AXA Framlington Investment Managers
5.87% Old Mutual Global Investors
4.66% Vestra Wealth
4.61% Transact

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=2737711

A yield of over 3%

The Northern Power Grid in a UK company that runs the electricity distribution network that delivers power to customers in the North East, Yorkshire and northern Lincolnshire.

http://www.northernpowergrid.com/

It known as a DNO, a Distribution Network Operator, delivering electricity to end customers.

What is interesting is to know who the owner of Northern Power Grid is.
It is the investment company Berkshire Hathaway, run by one of the world’s most successful investors, Warren Buffet who is one of the world’s richest men.

http://www.berkshirehathaway.com/

http://www.northernpowergrid.com/about-us

A measure of a country’s economic development is the amount of electricity that is generated by the nation to meet the economic needs of domestic and commercial users.

India accounts for 5.1% of global electricity generation. It produces 1208.4 Terawatt/Hours. Each year India has needed over 9% more electricity that the year before, a good bench mark for the current economic growth enjoyed by the country.

To put this 5.1% figure into perspective, that represents one of the top 5 nations for electricity production. India produces twice as much electricity as Germany and three times more electricity than the UK.

Of course, UK and Germany could be potentially more efficient, but as a quick benchmark, one can see the rapid economic development of India based on the nation’s electricity generation.

The world is hooked on oil. Total oil consumption is 92,086,000 barrels a day. (that is 92million)

But what is the total reserve in the ground ?

It is: 1700.1 Thousand Million barrels. That is : 1,700,100,000,000 to be precise.

That is broken down by these regions:

13.7% in North America
19.4% in South and Central America
9.1% in Europe and Eurasia
47.7% in The Middle East
7.6% in Africa
2.5% in Asia Pacific

Now using  92,086,000 barrels a day, with reserves of 1,700,100,000,000 barrels in the ground, that equates to 18,462 days which is 50 years if we consume at the constant rate of 92,086,000 barrels a day and no new reserves are found.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In November 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
18-Nov-2015 2% Treasury Gilt 2025 £3,347.4600 Million
12-Nov-2015 4¼% Treasury Gilt 2039 £1,500.0000 Million
10-Nov-2015 0 1/8% Index-linked Treasury Gilt 2058 £769.8750 Million

When you add the cash raised:-

∑(£3,347.460 Million + £1,500.000 Million + £769.875 Million) =  £5,617.34 Million

£5,617.34 Million = £5.61734 Billion

On another way of looking at it, is in the 30 days in November, HM Government borrowed:-

£187 million each day for the 30 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2025, 2039 and 2058. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

TIAA-CREF is the Teachers Insurance and Annuity Association – College Retirement Equities Fund of North America. TIAA–CREF was created in an Act of the New York State Legislation in 1918 as a stock life insurance company for the purpose of providing retirement pension income for academics in American academic institutions.

 https://www.tiaa-cref.org/public/about-us/investing/financial-investments

With £639 billion under management is one of the largest players in the investment management business.

In the UK it is estimated that well over £1 Billion worth of foreign coins (at least by conservative estimates) is sitting in UK homes, cupboard draws, doing nothing.

Fourex is a new platform that can convert this into UK Sterling (and Euro’s)

http://www.fourex.co.uk/

Just an amazing innovation, that now will free up potential cash that can go to charity or put back unto the UK economy

http://asadkarim.co.uk/?attachment_id=1336

Germany is one of the most prosperous countries in the world. Home to famous names such as Siemens, Audi, BWM and Daimler Benz to name just four. What is interesting to know is the levels of debt the German nation is carrying.

In total the debt is $3,369 Billion dollars.

That is broken down by:-

$1,471 by Financial Corporations
$141 by Businesses
$1,756 by The German Government

$3,369 Billion dollars = £2,216 Billion.

The TR Property Investment Trust is a £930million London Listed Investment Trust

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=13847&record_search=1&search_phrase=TR Property]

A yield of 2.6% in these near 0% interest rates.

10% of its holdings in UK Property
38% in UK Property Shares
52% in European Property Shares.

http://www.trproperty.com/

Started in 1905, listed today on the FTSE-250.

http://asadkarim.co.uk/?attachment_id=1325

Japan’s government spends more money that it earns in taxes and duties. It thus has to borrow huge quantities of cash to fund its operations.

The total debt of Japan’s national government is $8,362 Billion.

Now Japan’s annual GDP is $4,602 Billion.

Thus the Debt to GDP ratio:

$8,362 Billion / $4,602 Billion = 181%.

This is not sustainable for the long term.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In October 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

27-Oct-2015 2% Treasury Gilt 2025 £3,299.9700 Million
15-Oct-2015 0 1/8% Index-linked Treasury Gilt 2026 £1,500.0000 Million
06-Oct-2015 4½% Treasury Gilt 2034 £1,500.0000
01-Oct-2015 1½% Treasury Gilt 2021 £4,397.6500
When you add the cash raised:-

∑(£3,299.9700 Million + £1,500.0000 Million + £1,500.0000 Million + £4,397.6500) =  10,697.62 Million

£10,697.62 Million = £10.697 Billion

On another way of looking at it, is in the 30 days in September, HM Government borrowed:-

£345 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2025, 2026 and 2034. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

The Henderson Far East Income Ltd is the London Listed £333m Investment Trust.

[https://www.henderson.com/ukpi/fund/201/henderson-far-east-income-limited]

It’s top 10 holdings are:-

3.0% Korea Electric Power
2.9% HKT Trust & HKT
2.7% SK Telecom
2.7% Macquarie Korea Infrastructure Fund
2.4% Macquarie Group
2.4% Capitaland Mall Trust
2.3% Mizuho Financial Group
2.3% Coal India
2.3% Bharti Infratel
2.3% Mapletree Greater China Commercial Trust
[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=12194&record_search=1&search_phrase=henderson]

6.3% Yield

Venezuela has 17.5% of the world crude oil reserves. That equates to 298.3 Thousand Million Barrels of Oil.

That means, with this level of natural resource wealth, Venezuela should be a very rich and prosperous country, like Oman or Norway.

What is the value of 298.3 Thousand Million Barrels of Oil ?

That is: 298.3 x 1000 x 1,000,000 = 298,300,000,000

What is the “crude value” of this ?

Crude Oil trades today at $47.54 a barrel.

Thus:-

298,300,000,000 x $47.54 = $14,181,182,000,000

That is £9,192,560,000 = £9.192 Trillion

That is about 6 times the UK’s Annual GDP. Yet Venezuela does not seem to the prosperity that the oil wealth should bring.

A way of looking at the debt of the United States of America is to get a break down of its outstanding loans. What organisations are borrowing money to fund operations and its value.

$15,614 Billion is borrowings from The USA’s Federal Government (US Treasury T Bonds) = US National Debt

$14,896 Billion is borrowings from The USA’s Financial Corporations

$5,232  Billion is borrowings from The USA’s Non-Financial Corporations (Regular Corporation)

Thus total debt is about £35,700 Billion = $37.7 TRILLION.

US GDP is about $17,348 Billion. Thus TOTAL Debt to GDP is about 200%.

In 1999 this paper was published:-

http://asadkarim.co.uk/wp-content/uploads/2015/10/70417.pdf

Everything over IP, written by myself and Peter Hovell. It was predicting the growth in IP Networks which now dominate our lives from Television on demand, smartphones to how we communicate on smartphones and tablets.

http://link.springer.com/journal/10550/17/2/page/1
This paper was re-published in 2006, in the 25th Year Edition of the British Telecommunications Technology Journal.

http://link.springer.com/journal/10550/25/3/page/1

What we never predicted was how technology could affect the economy. Imagine what could happen if Google do pioneer driverless cars ?
What will happen to the landscape, when it comes to the employment prospects for drivers ?

We just have the potential of mass automation that will destroy jobs, unless we take steps now to create new jobs and new opportunities.

CATCo Reinsurance Opportunities Fund, is managed by CATCo Investment Management Ltd.

http://www.catcoreoppsfund.com/

The investment objective of the Fund is to give its shareholders the opportunity to participate in the returns from investments linked to catastrophe reinsurance risks. The portfolio is diversified across a number of non-correlated global risk categories which limits the amount of capital at risk with respect to a single catastrophic event

A market capitalisation of £215m.

The performance is incredible.

http://markets.ft.com/research/Markets/Tearsheets/Summary?s=BMG1961Q2095:USD

Looking at the Bank of International Settlements website, one can see the scale of the debt that nations are carrying

http://www.bis.org/statistics/secstats.htm

Looking that the UK, the numbers are worrying.

http://www.bis.org/statistics/c1.pdf

$2,539 bn = £1,656 bn = UK Government Debt:
$2,739 bn = £1786 bn = UK Financial Corporations
$594 bn = £387 bn = Non-Financial Corporations

TOTAL = $5,877bn = £3,834bn

Large numbers…..that is growing each day with punishing interest.

The Ediston Property Investment Company is a £140m investment trust listed on the London Stock Exchange.

http://www.ediston.com/about-us/

The investment company owns hard physical assets, of buildings and land.
These are assets are:-

Merchant Square, Merchant City, Glasgow
Jarman Square, Hemel Hempstead
No. 1 Pinesgate, Bath
Gallagher Shopping Park, Port Glasgow, Strathclyde
Phoenix, Station Hill, Reading
Pallion Retail Park, Sunderland

and many more in its overall portfolio.

A dividend yield of 0.9%

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=35869764&action=

The AXA Framlington Biotech Fund is an incredible fund that invests in the health and bio tech sector.

[http://retail.axa-im.co.uk/funds/axa-framlington/axa-framlington-biotech-fund-r-gbp-413/performance]

Year on year performance is amazing.

The Top Ten Holdings are:-

Gilead Sciences
Celgene
Amgen
Biogen Idec
Vertex Pharmaceuticals
Illumina
Alexion Pharmaceuticals
BioMarin Pharmaceutical
Salix Pharmaceuticals
Incyte USA

Today the fund is worth £360m

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In September 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
16-Sep-2015 2% Treasury Gilt 2025           £3,250.0000 Million
08-Sep-2015 3½% Treasury Gilt 2045        £2,000.0000 Million
02-Sep-2015 1½% Treasury Gilt 2021        £3,750.0000 Million
When you add the cash raised:-

∑(£3,250.0000 Million + £2,000.0000 Million + £3,750.0000 Million) =  £9,000.00 Million

£9,000.00 Million = £9.0 Billion

On another way of looking at it, is in the 30 days in September, HM Government borrowed:-

£300 million each day for the 30 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2021, 2021 & 2045. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

The Chinese economy is the 2nd largest economy in the world.
They are the largest producer of electricity in the world.

China generates 5649 Terawatt/Hours a year.
This accounts for 24% of total global electricity production.

The UK generates 335 Terawatt/Hours which is 1.4% of total global electricity production.

To put this into context, the UK’s annual production of electricity equates to a tiny 6% of China annual production. This now shows the size of the Chinese economy.

The B in BRICS stands for Brazil.

No surprising that the state oil company Petrobas is one of the largest oil companies in the world. Brazil accounts for 2.9% of world production, and produce 2,346,000 barrels of oil per day.

What is worth of the Brazilian Economy ?

2,346,000 barrels of oil, oil is worth per barrel $48.37 so this equates to $113,476,020 which is £74,709,300.

Yes £74million a day is the “Crude Oil” value to Brazil.

The Temple Bar Investment Trust is a London Listed £700m investment trust. Managed by Investec Fund Managers, founded in 1926.

http://www.templebarinvestments.co.uk/

HSBC Holdings Plc 7.3%
GlaxoSmithKline Plc 6.3%
Royal Dutch Shell Plc B 6.3%
BP Plc 5.4%
Grafton Group Plc-UTS 4.8%
Royal Bank Of Scotland Group Plc 4.0%
Lloyds Banking Group PLC 3.7%
British American Tobacco 3.4%
Direct Line Insurance Group PLC 2.8%
BT Group Plc 2.6%

The top ten account for 46.6% of the £700m fund. Very positive to see that The Temple Bar Investment Trust PLC, is holding investments in high quality companies like the world’s leading media and telecommunications corporation, www.btplc.com.

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10323&record_search=1&search_phrase=temple

It gives a yield of 3.7% which is quite generous in these 0.5% times.

It is currently running at a discount of 3% meaning one is buying assets of £1.00 for just £0.97

http://asadkarim.co.uk/?attachment_id=1276

At 6months old, Ayana Karim.

The rapid growth in Peer to Peer lending is creating new ways to buy properties.

Property Partner is a new scheme that allows investors to buy a stake in a UK property that is on rent. Giving the investor to collect a rental income.

https://www.propertypartner.co/

This is a clever mechanism for investors to reduce risk by spreading the risk across a portfolio of properties, that are managed by Property Partner.

Double digit income is what is currently achieved.

The world’s only super power is the USA. A measure of a nation’s economic might is the amount of Electricity the country produces.

The UK produces 335 TW/h (TeraWatt/Hours)

The USA produces 5202 TW/h (TeraWatt/Hours)

That is over 15 times more than the UK

The USA produces 18.3% of the world’s electricity, the UK makes produces 1.4% of the world’s electricity.

VPC Specialty Lending Investments is a newly London Listed Investment vehicle from the Victoria Park Capital of the USA.

[http://vpcspecialtylending.com/]

This investment fund is based on lending to Small and Medium Enterprises, the funds are generates from loans from Peer to Peer platforms, such as AssetzCapital

[www.assetzcapital.co.uk]

It is really an investment fund for income seeking investors.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=39482532]

The yield in credible.

[http://vpcspecialtylending.com/vpc-pdf/vsl_newsletter_july-15/]

Yes 8.1%

Not entirely surprising as it is generating business loans, that command a higher level of debt interest.

The latest evolution in Peer to Peer lending has come from the P2P pioneer AssetzCapital

www.assetzcapital.co.uk

The Quick Access Account

https://www.assetzcapital.co.uk/our-investor-accounts/qa-account/

The Quick Access Account offers 3.75% on money invested in high quality loans.
The capital is also backed by a Provision Fund to give even greater security.

The Advance Frontier Markets Fund is a £87m London Listed Investment trust.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=232655]

It is effectively a fund of funds that investments is what could be seen as high risk markets.

85% if the fund is made up of 20 investments:-

VinaCapital Vietnam Opportunity Fund
Sustainable Capital Nigeria Fund
Sustainable Capital Africa Consumer Fund
PineBridge Sub-Saharan Fund
Africa Emerging Markets Fund
BofAML Fondul Proprietatea Romania
Ashmore Middle East Equity Fund
Africa Opportunity Fund
Advance Copernico Argentina Equity Fund
PXP Vietnam Fund
SCM Vietnam Fund
SCM Africa Fund
Sturgeon Central Asia Equity Fund
iShares MSCI Frontier 100 ETF
Qatar Investment Fund PLC
EFG Hermes – Saudi Arabia Equity Fund
MENA Alchemy Fund
Picic Growth Fund Pakistan
DB MSCI Bangladesh
MSCI Pakistan
Avaron Emerging Europe Fund Estonia

Very interesting to see who are the major shareholders in The Advance Frontier Markets Fund are:-

Lazard Asset Management LLC who own 15.93%
Universities Superannuation Scheme Limited who own 9.81%
South Yorkshire Pensions Authority who own 7.32%
Wells Capital Management, Inc. who own 5.07%
1607 Capital Partners, LLC who own 5.04%
MAM Funds plc who own 4.99%
British Airways Pension Investment Management Limited who own 3.88%
Investec Asset Management Limited who own 3.69%

The United Arab Emirates, a geographically small collection of states such as Dubai, Abu Dhabi etc., and yet it holds 5.8% of world’s oil.
Home to one of the largest investment companies, the Abu Dhabi Investment Authority, the nation’s sovereign wealth fund. It has cleverly used it oil’s wealth to build this investment fund.

Today, the UAE has proven reserves of 97.8 Thousand Million Barrels of Crude Oil.

What is that worth ?

97.8 Thousand Million Barrels = 97.8 x 1000, 1,000,000 = 97,800,000,000

Now crude oil today is trading at $47.74 =£31.00

Thus:-

97,800,000,000 x £31.00 = £3,031,800,000,000

£3,031 Billion = £3.03 Trillion.
That is about 200% of the UK annual GDP.

The TwentyFour Select Monthly Income Fund is a London Listed investment trust that pays a monthly income.

[http://www.twentyfouram.com/funds-and-services/twentyfour-select-monthly-income-fund]

A £141m investment fund, that is paying a dividend yield of over 3%.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=26656574&action=]

The actual gross yield is incredible, at over 7%

It holds quite non-liquid credit instruments, but these holdings offer a generous return:-

NWIDE 10.25% 06/29/49 (Nationwide Building Society PIBS) that pays 10.25%.
COVBS 6.375% 12/29/49 (Coventry Building Society PIBS) that pays 6.375%.

A very nice little fund that offers an amazing income.

For year and years foreign exchange is been controlled by banks. Perhaps one has to question if customers are getting the best rates.

Now as the internet offers greater connectivity, we are seeing new ways of exchange. It was 20 years ago that EBay came onto the Internet to transforming buying and selling.
Now we see a new way of currency exchange:

www.weswap.com

This is just a way of connecting people and exchanging money between these connecting parties. So put it simply, rather than buying currency from a bank “we swap2 changes your money directly with other people abroad.

We Swap call it Social Currency.

It is best explained like this:-

Asad Karim (.co.uk) is going to Germany on business. He needs to exchange his pounds into Euros. Yousaf Hafeez is coming from Germany to the UK. Yousaf needs to exchange his Euros into Pounds. Now with We Swap these two guys can swap their money. Simple.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In August 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-
20-Aug-2015 4¼% Treasury Stock 2036 £1,644.0950 Million
11-Aug-2015 0 1/8% Index-linked Treasury Gilt 2058 £681.9000 Million
04-Aug-2015 2% Treasury Gilt 2025 £3,000.0000 Million

When you add the cash raised:-

∑(£1,644.0950 Million + £681.9000 Million + £3,000.0000 Million) =  £5,326.00
Million

£5,326.00 Million = £5.326 Billion

On another way of looking at it, is in the 31 days in August, HM Government borrowed:-

£171 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2025, 2036 & 2058. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

The HM Treasury backs National Savings and Investments

www.nsandi.com

Premium Bonds are the flagship product that offers the opportunity to win from £25 to £1,000,000 each month.

No interest is paid on the bonds held, instead the holders are offered the chance to win a “cut of the interest pot” and that pot is divided into prizes.

The Odds of winning are 26,000 to 1. (=1/26,000)

The number of prizes that are on offer: Sept 2015 are 2,131,445

With these two figures supplied by National Savings and Investments, one can calculate the total cash invested in Premium Bonds:-

Total Number of Prizes = (Total number of eligible bonds) / (odds for the draw)

Thus:

Total Number of eligible Bonds =  (Total Number of Prizes)  / (odds for the draw)

Thus total number of eligible bonds = (2,131,455) / (1/26,000)

= £55,157,570,000

That is £55 billion. Yes, £55 Billion invested by UK savers in Premium Bonds.

The Cambridge University Endowment Fund looks after the University’s long term investments.

[http://www.admin.cam.ac.uk/reporter/2014-15/special/06/06-FMI-2014-SectionN.pdf]

With £2,292 Million under management, that is £2.29 billion. (in 1990 it was £250 million)

The Cambridge University Endowment Fund long run objective is to achieve or exceed an average annual rate of total return (i.e. income and net capital gains), net of all costs and before distributions are taken into account, equal to RPI plus 5.25%,

Spread over 6 assets classes:

Public equity £1,451.0 million
Private investment £223.7 million
Absolute return £264.8 million
Credit £73.2 million
Real assets £241.1 million
Fixed interest/cash £38.2 million

8 Fund managers look after this portfolio.

Over the six years since 30 June 2008, the fund has an annualised return of 8.6%.

The income from its investments are incredible.

Net capital gains £202.7m
Dividends £16.6m
Rent £7.1m
Interest £2.1m

Total income £228.5m

Not bad when you consider it started in 1958 with £4.5m and today is £2,292m. Acorns and Oak trees springs to mind.

The UK has proven oil reserves of about 3,000 million barrels of oil. To put this number into context, the UK “owns” about 0.2% of world reserves

It is useful to know today’s value of the UK oils reserves.

3,000 x 1,000,000 = 3,000,000,000 barrels of oil

The price of Crude Oil is $48.55 a barrel.

Thus:-

3,000,000,000 x $48.55 = $145,650,000,000
That is £93,179,000,000

Or to simply say £93 Billion is the value of the oil in the ground in the UK

UK Mortgages Limited is a £262m investment fund. It was only recently launched in July 2015

It invests in a portfolio of good quality UK residential mortgages.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=41993839&record_search=1&search_phrase=UK mortgages]

Managed by Twenty Four Asset Management
[http://www.twentyfouram.com/]

It aims to deliver an investment yield of over 7%, and pay this dividend each quarter.

The reasons for this investment being an attractive offer to income seeking investors is that high quality mortgages are seen as a safe investment for the following reasons:-

-Secured lending against important personal asset (one’s home, people will pay the mortgage and go without other things, rather than loosing homes home)

-Very low default rates and lower loss rates relative to other forms
of debt
-Annual loss rate during 2008 credit crunch always below 0.2%
-Repossession process is transparent and predictable
-Loss only incurred firstly after default and then only if property
recovery is lower than value of mortgage loan

So one can see the potential upside on this fund.

Getting low cost exposure to international markets has never been simpler.

Investors want access to sectors such as:-
Financials, Consumer Goods, Industrials, Healthcare, Technology, Consumer Services, Oil and Gas, Basic Materials, Telecommunications (shares in world class players like BT Group PLC) Property and Utilities.

Also with this, investors want exposure to countries such as:-
The United States, Japan, Switzerland, Germany Canada, France, Australia, South Korea and The Netherlands.

These needs can be easily captured in ONE fund:

The Legal and General International Index Fund.

[http://i.legalandgeneral.com/consumer/investments/products-and-funds/index-tracker/investments-productsandfunds-indextracker-fund-internationalindex.jsp]

This fund gives exposure to these markets by tracking the performance of the FTSE World ex UK Index.

A £587 million fund. Its top 10 holdings are:-

Apple 2.12% of the fund
Exxon Mobil Corp 1.03% of the fund
Microsoft Corp 0.95% of the fund
Wells Fargo & Co 0.85% of the fund
Johnson & Johnson 0.79% of the fund
General Electric Co 0.79% of the fund
JPMorgan Chase & Co 0.74% of the fund
Nestle S.A. 0.68% of the fund
Novartis AG0.65% of the fund
Procter & Gamble Co 0.63% of the fund

Peer to Peer lending is becoming more and more high profile. As investors are looking for a new asset class with better returns, and also as banks shrink balance sheets, financing for Small and Medium Enterprises is getting harder and harder.

Thus we are seeing a real growth in peer to peer lending for businesses, and a high profile operation is Assetz Capital.

They have just launched a new fund called the Great British Business Account (GBBA)

https://www.assetzcapital.co.uk/our-investor-accounts/gb-account/

Yes, a return of 7% and back by a provision fund. Like any investment, there is a risk to one’s capital, but with Assetz Capital they take security on loans generates, and with this fund, an upfront provision fund has been set up to provide added security.

The UK has a very large energy industry. Electricity is a primary resource.

in 2014 the UK power generators (power stations) produced 335 TeraWatts hours of electricity.

335 TeraWatts Hours= 335,000,000 MegaWatts hours

Now to put a monetary value on this is quite simple. The average price for a delivered megawatt hour is about £100 per MegaWatt hour.
Yes £100 MW/h

Thus:-

335,000,000 Megawatts x £100 = £33,500,000,000

Yes, that is £33,500 million = £33.5 Billion.

That is equivalent to 2.23% of UK GDP.

On Wed 5th August 2015, the FTSE 100 insurance giant, Legal and General [www.legalandgeneral.com] published their half yearly results.

[http://www.legalandgeneralgroup.com/media-centre/press-releases/2015/grouppressrelease-2015halfyear-operatingprofitup18netcashup11roe19.html]

Legal and General a pioneer in low cost index tracking funds is now a massive player in the asset management industry.

The results are incredible.

Assets Under Management stand at £714.6 Billion.

To put that figure into context that is about 50% of the UK Annual GDP.

It’s major shareholders are:

Blackrock, Inc 5.1% holding

AXA 4.3% holding

The Capital Group Companies 5.0% holding

http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10055&action=

A yield of over 4% on the stock for a company that effectively owns over 5% of every UK listed company.

As Iran is accepted back into the world community, this nation of incredible history has a huge untapped economic potential that could become a regional super power.

If one looks beyond the 1979 revolution, Iran’s history is amazing. The brilliance of Omar Khayyam is an example of the rich heritage.

[https://en.wikipedia.org/wiki/Omar_Khayy%C3%A1m]

Today’s Iran’s riches are based on its raw materials.

Reading the BP Statistical Review of World Energy

[http://www.bp.com/content/dam/bp/pdf/Energy-economics/statistical-review-2015/bp-statistical-review-of-world-energy-2015-full-report.pdf]

one can see the potential of Iran.

Proven Oil Reserves of 157.8 million barrels of oil, that is 9.3% to the world’s total reserves.

So if all the oil was extracted and sold today what would it be worth ?

157.8 thousand million barrels = 157,800,000,000 barrels

Crude oil today is worth $53.06 = £34.01

Thus:

157,800,000,000 barrels x £34.01 = £5,367,223,076,923

Yes, £5.367 Trillion. That is about 4 times the size of the UK annual GDP.

One can see the potential value of Iranian oil.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In July 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

15-Jul-2015 0 1/8% Index-linked Treasury Gilt 2026 £1,500 Million
07-Jul-2015 3½% Treasury Gilt 2045  £1,924.9690 Million
02-Jul-2015 2% Treasury Gilt 2020 £4,124.5670 Million

When you add the cash raised:-

∑(£1,500 Million + £1,924.9690 Million + £4,124.5670 Million) =  £7,549.536 Million

£7,549.536 Million = £7.549536  Billion

On another way of looking at it, is in the 31 days in July, HM Government borrowed:-

£243 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2026 & 2045. All long term borrowings, we are mortgaging our futures, but at least “We Are In It Together…”

Today, Fri 31st July, Lloyds Banking Group [http://www.lloydsbankinggroup.com/] is going to pay a dividend of £0.0075.
Yes, 0.75p per share.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10056&action=]

A dividend yield of 0.9%.

How much cash will this dividend cost Lloyds Banking Group ?

[http://www.lloydsbankinggroup.com/investors/share-price-info/detailed-share-price/]

71454.656 million shares in circulation.

Thus: 71454.656 x 1,000,000 x £0.0075 = £535,909,920

Yes, £535 million is the cash payment that Lloyds will make to the shareholders.

Just to remind us, HM government owns 14.98% of the Bank:

[http://hsprod.investis.com/servlet/HsPublic?context=ir.access&ir_option=RNS_NEWS&item=2133305960955904&ir_client_id=1503]

So HM Government will get £80.2 million from the dividend.

The Wellcome Trust is a global charitable foundation dedicated to improving health by supporting bright minds in science, the humanities and social sciences, and public engagement.

www.wellcome.ac.uk

Sir Henry Wellcome (1853-1936), was the founder of the The Wellcome Trust. Today, its annual spend on research increased from an average of £28 million in the 1980s to £650 million in 2007.

Total public equities £9,546m
Long/short hedge funds £1,073m
Cash £639m
Absolute return & buy-out £2,532m
Growth & venture £3,579m
Property & infrastructure £2,011m

The Trust’s £18.0 billion investment portfolio provides the income for its funding. In 2014 Trust’s spend on medical and scientific research was £674 million based on its investment income. Long-termism is fundamental to the thinking of the Wellcome Trust. Directly held investments now account for 42% of its investment portfolio. A landmark transaction this year was the purchase of Farmcare from the Cooperative Group Ltd, which at a stroke made it the largest lowland arable farmer in the UK.

It holds £2 billion in property investments, of which  is made up of residential interests of £1.2 billion, focused in super-prime London, such as the South Kensington estate. They hold 1,720 apartments in South Kensington, which is generating a “a nice little earner from the rent”.

Apple the computing pioneer has an incredible balance sheet.

[http://files.shareholder.com/downloads/AAPL/485763627x0x789040/ED3853DA-2E3F-448D-ADB4-34816C375F5D/2014_Form_10_K_As_Filed.PDF]

Looking at the 2014 annual report, on page 24 one can see the cash holds:

$155,239 million = $155.2 billion

Today that figure is actually $178 billion = £114 Billion.

That is approximately the about the same as how much the UK Government borrows each financial year to finance the budget deficit.

Norway is one of the world’s richest nations.
The reason for its huge wealth is down to its oil and the careful investment management of the money.

Norway set up a fund to manage its oil wealth, it is called the Government Pension Fund Global, sometimes known as Norway’s Sovereign Wealth Fund. It started this fund, in 1995, that is only 20 years ago.

http://www.nbim.no/en/the-fund/

The figures are incredible.

Over 7000 Billion Norwegian Krona = £560 Billion Pounds.

That is about 35% of the total annual GDP of the UK.

60% is held in Equities
35% in Bonds
5% in Property

Caledonia Investments is a £1.3 Billion London listed Investment Trust.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10152]

Its juicy dividend is 2.1% in these near Zero interest rate times.

[http://www.caledonia.com/]

it’s wealth comes from the Cayzer family who built their wealth from shipping and protected there wealth by creating the Caledonia Investment Trust, which today is 48.5% owned by the Cayzer family.

The top ten holdings are:

Capital Today China (Private equity fund)
Park Holidays (Caravan parks operator)
Cobehold (Investment company)
TGE Marine (LNG engineering)
AG Barr (Soft drinks)
Bristow Group (Helicopter services)
The Sloane Club (Residential club)
Choice Care Group (Care homes provider)
Close Brothers (Financial services)
Polar Capital (Fund manager)

The top ten holdings equate to £664m.

Also the share price of Caledonia Investments is running at a discount, of about 14%. This means you are buying £1 worth of assets for 86p.

Not a household name, but Aerion Fund Management is the former investment arm of British Gas, that used to manage the pension contributions of the workers of British Gas, and then after many de-mergers and acquisitions at British Gas (British Gas, Lattice Group, Transco…..) the investment arm has become the fund management arm of the National Grid pension fund.

http://www.aerionfm.com/

The total funds under management amounted to £17.3 billion.

6 asset classes are where the monies are invested:

7% in Alternatives
7% in Property
18% in Equities
3% in Private Equity
1 % in Cash
64% in Bonds

As one can see nearly 2/3rd of the fund are in fixed income (bonds). Which one can understand, when the fund has to pay out each month to the former workers (pensioners) of National Grid and British Gas, it needs investments that pay out a fixed income, thus bonds.

The FTSE-100 is the flagship index of the largest UK Companies.
Famous names like HSBC, BP and BT the most dynamic telecommunications group in the world, to name just three from the one hundred that make up the FTSE-100.

A fund that invests in the FTSE-100 in the Legal & General FTSE-100 Tracker:

[http://i.legalandgeneral.com/consumer/investments/products-and-funds/index-tracker/investments-productsandfunds-indextracker-fund-uk100.jsp]

This fund has £280million invested in the UK’s top 100 firms.

What is interesting to see, in the climate of 0.5% interest rates, by investing ones money in this fund, you get a yield of about 2.5%.

The top ten holdings are:

HSBC Holdings 7.09% of the fund
BP 4.73% of the fund
Royal Dutch Shell ‘A (Dutch listing)’ 4.34% of the fund
GlaxoSmithKline 4.09% of the fund
British American Tobacco 3.9% of the fund
AstraZeneca 3.45% of the fund
Vodafone 3.25% of the fund
Royal Dutch Shell ‘B’ 3.21% of the fund
Diageo 2.70% of the fund
Lloyds Banking Group 2.46% of the fund

What you see is that that the FTSE-100 is dominated by HSBC what makes up 7% of the index then the two Shell’s (one company, two classes of shares for Dutch tax reasons), and Shell is (4.34% + 3.21%) and then followed by BP that makes up 4.73%.

These 9 companies make up 39.22% of the FTSE-100. Yes, 9 companies account for nearly 40% of all the index.

The former industrial and chemical giant, and a former member of the FTSE-100 was Imperial Chemical Industries, known as ICI.

Today ICI has vanished but its legacy lives on, in the name of AstraZeneca, the pharmaceuticals are of ICI that was spun out from by its demerger to create Zeneca and the rest of the business was sold to Ineos and the remaining business such as Dulux, Polycell and Hammerite was sold to the Dutch chemicals company AzkoNobel.

The pension fund is still supporting former workers of ICI.

http://www.icipensionfund.org.uk

With assets of £8,602million  = £8.602 Billion.

The fund has to support:

417 Contributing members
47,586 Pensioners
9,816 Deferred pensioners

The £8.6 billion is managed by these fund managers:-

Alinda Capital Partners LLC
Ashmore Management Company Limited
BlackRock Advisors (UK) Limited
Genesis Investment Management LLP
Insight Investment Management (Global) Limited
Intermediate Capital Managers Limited
M&G Investment Management Limited
PIMCO Europe Limited
Rogge Global Partners Plc

The money is split across these asset classes:-

Liability linked Investments
Developed Market Equities
Emerging Market Bonds
High-Yield & Other Global Bonds
Leveraged Loans
Emerging Market Currencies
Infrastructure
Property

What is very interesting when one reads the small print of the pension fund of ICI, when ICI was bought, AkzoNobel guaranteed all ICI’s pension obligations.

The Kuwait Investment Authority is the investment arm of the government of Kuwait.It is the world’s first and oldest sovereign wealth fund

http://www.kia.gov.kw/En/Pages/default.aspx

The Kuwait Investment Authority was founded in 1953 to manage the money and income from the Kuwait Government’s financial surpluses after the discovery of oil.
It is thought too hold over £192 Billion  = US$300 billion of assets, and is thus is one of the largest Sovereign Wealth Funds in the World.

The wealth of Kuwait comes from it’s oil exports.

By looking at the BP Statistical Review of Energy

[http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html]

Kuwait  produces 3,126,000 barrels of oil a day.

Thus, with oil at $60.55 per barrel = £38.79.

3,126,000 x £38.79 = £121,266,292

Yes, Kuwait’s crude oil generates £121million a day. One can now see where the money flows into the Kuwait Investment Authority for it investment operations.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In June 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

11-Jun-2015 3½% Treasury Gilt 2045 £2,199.9520 Million
09-Jun-2015 1/8% Index-linked Treasury Gilt 2024 £900.0000 Million
02-Jun-2015 2% Treasury Gilt 2025 £3,250.0000 Million

When you add the cash raised:-

∑(£2,199.9520 Million + £900 Million + £3,250 Million) =  £6,349.95 Million

£6,349.95 Million = £6.3495  Billion

On another way of looking at it, is in the 30 days in June, HM Government borrowed:-

£211 million each day for the 30 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2024, 2025 & 2045. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…”

Lindsell Train Investment Trust PLC is a £100m investment trust, run by Lindsell Train.
[http://www.lindselltrain.com/]

Its holdings are:-

Lindsell Train Limited
Barr (AG)
Diageo
Lindsell Train Japanese Equity Fund
Unilever
Nintendo
London Stock Exchange
Pearson
Heineken
2.5% Consolidated Loan Stock
Reed Elsevier
eBay
Treasury 2.5%
Finsbury Growth & Income Trust
Lindsell Train Global Equity LLC
Mondelez International
Kraft Foods

Interesting to see the investment trust also owns a large percentage of the fund manager itself. Thus has “skin in the game”.

A yield of 1.3%

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=31089]

Interesting to see who are the major shareholders:-

Rathbone Investment Management Limited
Brewin Dolphin Limited
Hargreaves Lansdown Asset Management Ltd
Alliance Trust plc
Mr N Train
Mr M Lindsell
Finsbury Growth & Income Trust PLC
Mr D Caldecott
Troy Asset Management Limited

Mr. Train and Mr. Lindsell both significant shareholders, again showing they are putting their money where there mouth is. Putting their own money into the fund, so their personal wealth is tied up in the future prospects of the fund.

From the CEGB: The Central Electricity Generating Board under the stewardship of Lord Marshall, today, the UK has a very fragmented market.

Electricity demand is about 350 Tera Watt hours = 350TW/h of demand per year. This is broken down into 7 large groups who use the energy, who are:

The Energy Industry
Industrial Use
Transport
Public Sector
Commercial
Agriculture
Consumers

Interesting fact that the energy sector uses 25TW/h (7% of total power), but then when one thinks of Hydroelectric, huge quantities of electricity is needed to pump water into the higher lake after the power station has produced the power. Or other sectors like oil refineries use massive amounts of power too, so that 7% figure is easy to comprehend.

There are about 9 fuel type sectors that make up the power:

Coal
Oil Biomass
Natural Gas (Combined Cycle Gas Turbines)
Hydro-Electric
Solar
Nuclear
Wind
Liquid Natural Gas (Gas Turbine and Open Cycle Gas Turbine (GT and OCGT))

The UK is very unusual in terms of the large amount of international ownership in the industry.
We have E.ON & RWE npower are German companies, then we have EDF Energy which is a subsidiary of Electricité de France and Scottish Power is part of the Spanish company Iberdrola.
The UK has only a few UK owned companies, Centrica (British Gas), Drax Power and Scottish & Southern Electric to name just 3 of the largest.

Who are the UK generators that feed The National Grid:-

RWE npower
E.On
Scottish & Southern
Scottish Power
GDF Suez
EDF Energy
Centrica
Drax Power
Eggborough
Immingham CHP (Conoco Phillips)
Macquarie Investment Funds (Baglan Bay and Sutton Bridge)

A very interesting sector, and if you want more information talk to Tom Martin !!

Nigeria, the largest economy in Africa. It is country of great diversity and culture. Its oil reserves are huge.

From the BP Statistical Review of World Energy:-

[http://www.bp.com/en/global/corporate/about-bp/energy-economics/statistical-review-of-world-energy.html]

One can see Nigeria’s oil wealth. It has 37.1 thousand million barrels of oil in its proven reserves.

What is that worth ?

One Barrel of oil is today worth $63.05 = £40.11

So 37,100,000,000 barrels x £40.11 = £1,488,081,000,000

That is a large number, = £1,488 Biion = £1.48 trillion, that is equivalent to the whole of UK’s annual GDP.

The United States Central Bank is known as the US Federal Reserve, often called the US Fed.

[http://www.federalreserve.gov/]

Since the onset of the Global Financial Crisis, the a little reported fact in the main stream media is the growth in the size of the Federal Reserve Balance Sheet.
This has been driven by the bailouts, the Federal Reserve buying securities such as mortgage back securities and of course quantative easing, buying US Treasury T-Bonds

[http://www.federalreserve.gov/monetarypolicy/bst_fedsbalancesheet.htm]

By reading page 12 here:

[http://www.federalreserve.gov/monetarypolicy/files/quarterly_balance_sheet_developments_report_201505.pdf]

One can immediately see the size of the US Federal Reserve Balance Sheet.

A more up to date version is here:-

[http://www.federalreserve.gov/releases/h41/current/h41.htm#h41tab9]

Yes, total assets of $4,451,663 MILLION.

That is NOT a typo, that is $4,451 Billion = $4.451 Trillion

The US Annual GDP is about £16.77 trillion

Thus the US Federal Reserve Balance Sheet Assets = 26% of US GDP.

The Allianz Technology Trust PLC is a UK-listed investment trust that aims to achieve long-term capital growth for its shareholders by investing in technology stocks worldwide.

Its Top 10 holdings are:-

7.9% in Microsoft
5.2% in Palo Alto Networks
5.0% in Apple
4.3% in Amazon
4.1% in Splunk
4.0% in ServiceNow
2.9% in Visa
2.9% in Netflix
2.5% in Western Digital
2.3% in SunPower

This gives a total investment of 41.1% in these 10 firms.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=11984&record_search=1&search_phrase=att]

Interesting to see the share price of about £6.20 and the assets have a total value of £6.47 per share. This means the fund is trading at a discount. Or another way of look at it, is that you can buy assets worth 647p for only £620p.

HM Government has now signalled the sale of its majority stake in The Royal Bank of Scotland plc. The UK Tax payer owns over 80% of the bank, via the state investment company UK Financial Investments.

In 2008, as the height of the financial crisis, the UK government had to immediately pump in £45bn to keep the bank afloat.

The RBS balance sheet in 2008 was:-

Total assets £2,401,652m
Yes, £2,401 billion = £2.4 Trillion. That was larger than the UK GDP in 2008.

The RBS balance sheet in 2014 was:-

Total assets £1,050,763m
Yes, £1.050 billion = £1.05 Trillion.

One can see in the 7 years since the financial crisis that RBS balance sheet has more than halved, via all the disposals that have taken place.

The Woodford Patient Capital Trust is the latest investment trust launched by Neil Woodford, the revered fund manager who made his name at Invesco Perpetual before setting up his own fund management company Woodford Funds

[https://woodfordfunds.com/]

The latest fund, Patient Capital is a £900m investment trust

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=41149626&action=]

One of its first investments was Sphere Medical PLC.

[http://www.spheremedical.com/]

A £25 million AIM listed company.

Time will tell on the investment performance of The Woodford Patient Capital Trust.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In May 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 3 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

27-May-2015 1/8% Index-linked Treasury Gilt 2058 £745.3830 Million
21-May-2015 4¾% Treasury Gilt 2030 £1,750.00 Million
14-May-2015 2% Treasury Gilt 2020 £4,098.8140 Million

When you add the cash raised:-

∑(£745.3830 Million + £1,750.00 Milion + £4,098.8140 Million) =  £6,594.20 Million

£6,594.20 Million = £6.594 Billion

On another way of looking at it, is in the 31 days in May, HM Government borrowed:-

£212 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2030 & 2058. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…”

The Annual Report makings interesting reading of Barclays PLC

[http://www.barclays.com/barclays-investor-relations/results-and-reports/annual-reports.html]

The three largest shareholders are:-

Qatar Holding LLC 6.65%
BlackRock, Incc  5.02%
The Capital Group Companies Inc 4.96%

The balance sheet is large….

Total assets £1,357,906 Million. That is £1.357 Trillion. (about 89% of the UK GDP).
Cash and balances at central banks £39,695 Million (£39 Billion)
Customer accounts £427,704 million (£427 billion are deposits from customers)
Loans and advances to customers £427,767 million (£427 billion are loans to customers)
Trading portfolio assets £114,717 million (The banks trading assets from its day to day trading operations)
Derivative financial instruments £439,909 million (yes, £439 billion in derivatives)
What is incredible is the amount of derivatives on the balance sheet, larger than the actual deposits from customers. The assets of Barclays are nearly the size of the total annual output (89%) of UK GDP. Our banks are too big to fail.

The UK is suffering from massive house price inflation.

The total value of UK homes is worth £5.75 trillion. That is over 2.5 times UK GDP.

London homes aloneare worth £1.485bn, that is nearly 100% of annual UK GDP.

The reality is that their is more demand for housing than supply, which is driving up prices. Also with such low interest rates, the demand from buy to let investors means, houses are being bought by investors for rental income, this reducing the numbers of houses for sale.

Nigel Wilson, the CEO of Legal and General one of the largest UK asset management houses [www.legalandgeneralgroup.com] has written a very powerful artice in The Telegraph to explain the situation.

[http://www.telegraph.co.uk/finance/newsbysector/constructionandproperty/11641911/Its-not-just-first-time-buyers-who-need-help-in-todays-housing-market.html]

Until the UK builds more houses, the situation will not get better. This needs political will.

The Witan Pacific Investment Trust is a £175m investment fund listed on the London Stock Exchange. Its aim is to provide shareholders with a portfolio of equity investments in the Asia Pacific region with the aim of outperforming the MSCI AC Asia Pacific Free Index

[http://www.witanpacific.com/]

Three fund managers look after the portfolio:-
Aberdeen Asset Management 44.9%
Matthews 44.4%
GaveKal 10.7%

The largest holdings are:

Japan Tobacco 2.8%
Taiwan Semiconductor 2.2%
China Mobile 2.0%
Toyota Motor 1.8%
HSBC 1.7%
AIA 1.7%
Oversea-Chinese Banking Corp 1.7%
Singapore Tech Engineering 1.6%
Pigeon Corporation 1.4%
Samsung Electronics 1.4%

A dividend yield of 1.7%

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=11837&record_search=1&search_phrase=witan]

The bond purchasing programme undertaken by the Bank of England, spent £325,000 million, yes £325 Billion. This is known as the Quantative Easing Programme.

What is rarely reported in the media is the long term consequences of the programme. So the Bank of England created £325 billion of new money, used this cash to buy assets from the clearing banks, such as UK Government Gilts (UK Government Bonds), High Quality Corporate Bonds. These assets are bought by the Bank of England, the clearing banks then get relieved of these assets of their balance sheet, and in return get newly created cash from the Bank of England.

It is hoped that this fresh new cash is then pushed into the economy by creating loans for businesses, individuals and mortgages.

However has £325bn then injected into the economy ?

It is likely to be a figure much higher, perhaps 3 times that of £325bn. Why ?

Simple, the money multiplier. The £325bn that hits the balance sheet of the clearing banks, is lent out. This cash then hits other banks, and that gets re-lent. It is the foundation of our banking system, Fractional Reserve Banking, so in reality, perhaps the Quantative Easing Programme that created £325 bn could have created over £1 Trillion in credit.

We see rising assets prices in UK Housing, UK Shares. Is there a link ? Definitely Maybe.

The US Federal Government, runs a budget deficit, it spends more than it earns.
To fund this gap, it issues T-Bonds (Treasury Bonds), debt issued by the US Treasury to bridge the gap between income and expenditure.

The US National Debt is huge.

[http://www.usdebtclock.org/]

As you can see over $18 TRILLION is owed by the US Federal Government.

Over $6 Trillion is owned by foreign investors. What this means is that foreign investors are the creditors to the US Government.
So when you look at the $6 Trillion, this is over 30% of total US National Debt is held by foreign investors.

China owns the biggest chunk of U.S. foreign debt at $1.3 trillion, followed by Japan at $1.2 trillion. Just these top two creditors constitute a huge portion of US Debt.

Each day in the news we hear that Greece faces problems meeting its debt repayments to its creditors.

What is the amount it owes ?

The country is 323 billion euros in debt (£235 billion) – more than 175% of its GDP. That is €323 Billion

Its creditors are:

€20 billion The European Central Bank
€25 billion Spain
€32 billion IMF
€34 billion Other Eurozone Nations
€37 billion Italy
€42 billion France
56 billion Germany.

Total of €323 Billion = £235 billion

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In April 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

29-Apr-2015 2% Treasury Gilt 2025  £3,000 Million
21-Apr-2015  3½% Treasury Gilt 2045  £1,924.980 Million
16-Apr-2015 0 5/8% Index-linked Treasury Gilt 2040  £1,283.940 Million
08-Apr-2015 2% Treasury Gilt 2020  £4,010 Million

When you add the cash raised:-

∑(£3,000 Million + £1,924.980 Million + £1,283.940 Million + £4,010 Million) =  £10,218.920 Million.

£10,218.920 Million. = £10.2 Billion

On another way of looking at it, is in the 30 days in April, HM Government borrowed:-

£340 million each day for the 30 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2025, 2040 and 2045. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…”

We see today that raising cash for corporates is done by debt issuance (bond issues) and currently this is the preferred method of company financing. Effectively due to the tax treatment of debt companies are given incentives to borrow instead of building strength on the balance sheet.

Apple issued bonds to finance a share buy back. Cynically speaking by undertaking a share buyback it reduces the numbers of shares on issue, and thus boosts the earnings per share.

Job creation 20  years ago during the telecoms and technology boom was financed by Equity raising, of course these new start ups had little hard assets to issues bonds but one thing for sure, the equity raising of the 1990’s had massive job creation.

Finally, when one looks at all the debt financed private equity deals, one has too accept once the company is acquired by a private equity fund, what then happens is massive cost cutting to meet debt repayments, or asset selling to repay the debt pile and in both cases, these actions can destroy jobs.

Perhaps wealth creation is better at creating wealth and prosperity by equity fund raising.

Governments and Corporates raise cash to fund their activities via the process of issuing bonds. It is just another term for borrowing money, and thus getting into debt.

The Debt Market is vast. The global bond market is worth £59 Trillion ($90 US Dollars).

This debt is accruing interest to the creditors, such as fixed income investors like pension funds or ibsurance companies.

£59 Trillion is a lot of debt.

The UK has a structural debt. The current general election campaign is not talking about hard figures.

This is the reality. In 2015/16 the UK will borrow nearly £80 billion pounds and pay in interest on the total UK National Debt the grand total of £46 billion pounds.

That interest payments adds zero value or benefit to the economy, it is the creditors to the UK Government who get the benefit.

The Bankers Investment Trust is a £700m London listed investment fund, managed by Henderson Global Investors. It was established in 1888.

[https://www.henderson.com/ukpi/fund/168/the-bankers-investment-trust-plc]

It pays a 2.3% yield on the shares

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10127&record_search=1&search_phrase=bank]

Its largest holdings are in:-

BP
Catlin Group
Walt Disney Co
Delphi Automotive PLC
Galliford Try Plc
Apple, Inc.
British American Tobacco
Sports Direct International Plc
Itv Plc
BorgWarner, Inc.

With over 100 years of previous performance, it is an incredible little fund.

The Monks Investment Trust PLC is a £947m London listed investment trust.

Managed by Ballie Gifford from Edinburgh,

[http://www.bailliegifford.com/individual-investor/fund-selector/monks-investment-trust.aspx]

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10244]

A major shareholder is Investec Wealth Management

Launched in 1929, today it’s investment is global:-

United Kingdom 16.5%
Europe 14.7%
North America 34.5%
Japan 9.4%
Developed Asia 2.5%
Emerging Markets 10.5%
Fixed Interest 7.1%
Net Liquid Assets 4.8%

Its top 10 holdings are:-

Holdings % of Total Assets
1 US Treasury 0.625% 4.7%
2 IP Group 3.9%
3 Anthem 2.2%
4 Restaurant Brands International 2.2%
5 Taiwan Semiconductor Manufacturing 2.1%
6 Alnylam Pharmaceuticals 2.0%
7 Visa 1.8%
8 The Priceline Group 1.7%
9 First Republic Bank 1.7%
10 Martin Marietta Materials 1.7%

This makes up 24.0% of the portfolio.

On the 8th April 2015, Shell 8 April 2015, announced the takeover for BG plc. The cost to Royal Dutch Shell is £47 billion

[http://www.shell.com/global/aboutshell/investor/news-and-library/2015/recommended-cash-and-share-offer-for-bg-group-plc.html]

To put things into context, Royal Dutch Shell plc one has to understand the size of Shell.
Royal Dutch Shell’s share capital is made up of two types of shares: Shell A and Shell B

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=133655&record_search=1&search_phrase=shell]

Shell A is worth £78 Billion

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=133755&record_search=1&search_phrase=shell]

Shell B is worth £50 Billion

BG Group is the exploration and production arm of the 1986 new floated British Gas

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10017&record_search=1&search_phrase=BG]

BG plc is worth £40 Billion

Anglo American PLC, is the London listed mining giant, that is the majority shareholder in the diamond producer De Beers.

It is based in South Africa, and produces gold, platinum, diamonds, coal, base and ferrous metals, industrial minerals to timber and coal.

http://www.angloamerican.com/

Paying 5.7% yield, it is an incredible payment to shareholders.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10001&record_search=1&search_phrase=aa]

Interesting to see that the giant money manager BlackRock owns over 5%.

[http://otp.investis.com/clients/uk/anglo-american/rns/regulatory-story.aspx?cid=49&newsid=501699]

in 2014 its outstanding debt was £12,871 million (£12.8 billion).

[http://www.angloamerican.com/investors/fixed-income-investors/credit-ratings-and-ratios]

At first glance, this seems high, but then one has to consider its revenues.

[http://www.angloamerican.com/investors/financial-results-centre/key-financial-information]

Total revenues of £30,988m (£30.9 billion), so with such huge cash flow, servicing debt on £12.8 billion is not that difficult.

A massive company with a diversified portfolio of raw materials.

Today, Monday 6th April the UK liberates defined contribution pension schemes. What this means is that funds that were destined to buy annunities can now be used by the pension investors for whatever they want to do.

So how much money is currently in pension funds?

1,800 billion pounds. That figure is larger than the annual GDP of the UK wbich is 1,500 billion pounds.

The F&C Global Smaller Companies investment trust, is a £500m listed investment fund, that gives exposure to smaller companies all over the world.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=11839&record_search=1&search_phrase=FC]

A fund, that has paid a dividend that has grown in 44 years in a row.

[http://www.fandc.com/fandc-global-smaller-companies/]

Its top ten holdings are:-

Aberdeen Global Japanese Smaller Companies
M&G Japan Smaller Companies Fund
Manulife Global Asian Smaller Companies
Scottish Oriental Smaller Cos Investment Trust
Aberdeen Global Asian Smaller Companies
Utilico Emerging Markets
Intl FCStone
Wellcare Health Plans
Microsemi
Mercury Systems

The portfolio is broken down:-

North America 40.2%
UK 28.3%
Continental Europe 11.3%
Rest of World 10.6%
Japan 8.0%
Cash & Fixed Interest 1.6%

A great little fund.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In March 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

19-Mar-2015 2% Treasury Gilt 2025  £3,024.8740  million
12-Mar-2015 1 1/8% Index-linked Treasury Gilt 2037  £933.2100 million
10-Mar-2015 3½% Treasury Gilt 2068  £1,649.9850 million
03-Mar-2015 2% Treasury Gilt 2020  £3,500.0000 million

When you add the cash raised:-

∑(£3,024.8740  million + £933.2100 million + £1,649.9850 million + £3,500.0000 million) =  £9,108.07 Million.

£9,108.07 Million = £9.108 Billion

On another way of looking at it, is in the 31 days in March, HM Government borrowed:-

£293 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2034 and 2045. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…”

The revered name in British engineering is Derby based Rolls Royce.
A member of the FTSE-100. [www.rollsroyce.com]

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10072&record_search=1&search_phrase=RR]

With a market capitalisation of £17.5 billion. The annual report makes interesting reading

[http://www.rolls-royce.com/investors/financial-results/annual-report.aspx#yr-2014-annual-report]

Order book £73,674 m (yes £73 billion)
Employeed of 54,100
Total assets on the balance sheet of £22,224 m
In 2014, they applied for 600 patents.

The major shareholders are:

Invesco Limited 4.99%
Harbor International Fund 4.02%
The Capital Group Companies, Inc 4.99%
Aberdeen Asset Managers Limited 5.16%
They offer a yield of 2.4% in these 0.5% times

Ayana Karim Pictures:-

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http://asadkarim.co.uk/?attachment_id=1079

Ayana Karim: Monday 23rd March 2015

The UK Government like the USA and other major G8 economies, spends more than it brings in as income from taxation. This has resulted in a massive structural debt, over 80% of debt to GDP.

Even though we see unemployment beginning to fall, the public accounts show that the government is still heavily borrowing, and dependent on the bond market to bridge the gap between its income and spending commitments. So how can this be when we have falling unemployment.

The reality is that many new jobs are now low skilled and low paid or zero hour contracts. This has resulted in the actual tax collected by government to be very small, so income into government from the improving labour market is not feeding into improving public finances. Until we face thus head on, the structural debt will continue to command punishing interest repayments (today at over £30 Billion a year) and we must accept that we actually need we high skills and high wages to create wealth and tax revenue, and that only comes from investment.

HSBC, The Hong Kong and Shanghai Banking Corporation has been making the headlines for all the wrong reasons.

[www.hsbc.com]

The financials are HSBC are useful to know:

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10048&record_search=1&search_phrase=hsbc]

Its Market Capitalisation is £107,879m
(£107 Billion).
The dividend yield is 6%.

An international bank, whose annual report makes interesting reading:-

[http://www.hsbc.com/investor-relations/investing-in-hsbc/latest-financial-information?WT.ac=HGHQ_Ir_h1.2_IMS_On]

Profit before tax was US$22.8bn =

The balance sheet size is vast.

Total reported assets were US$2.6 trillion = £1.76 Trillion = £1762 Billion.

Yes, that is larger than the Annual UK GDP. So the balance sheet assets are over 100% of the UK GDP.

The Worldwide Healtcare Trust is a £900m investment trust listed on the London Stock Exhange.

[http://www.worldwidewh.com/]

Investing in the global healthcare sector with the objective of achieving a high level of capital growth.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=12000&action=]

Managed by OrbiMed

Its top 10 investments are:

HCA
Bristol-Myers Squibb
Biogen Idec
Gilead Sciences
Amgen
AbbVie
Regeneron Pharmaceuticals
Actavis
Merck & Co
Ono Pharmaceutical

This makes up about 31% of the entire fund. Total holdings are 64 investments.

The UK has a diverse mix of energy supply.

http://www.gridwatch.templar.co.uk/

The above is the status of National Grid.

The UK’s energy production is based on these sources:

• Gas: 40.4%
• Coal: 32.3%
• Nuclear: 17.6%
• Wind: 2.9%
• Hydroelectric: 1.7%
• Bio-Energy: 3.4%
• Imports: 0.7%
• Oil: 1.5%

Interesting to see the dependence on Gas.

Legal & General PLC [www.legalandgeneralgroup.com] is a major player in the UK Financial Industry.
A member of the FTSE-100.
A £16 Billion company.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=10055&action=]

On 4th March 2015 it published its 2014 results. The numbers are incredible.

[http://files.shareholder.com/downloads/LGEN/1718128473x0x813527/C4270F74-53C4-42C2-BC63-37E169FB365E/2014_Year_end_FINAL_03032015.pdf]

Assets under management = £709 billion
(UK GDP is £1500 billion, so L&G plc have assets under management that is equivalent to 47% of the UK GDP).

A dividend yield of 4%.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In Feb 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 2 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

11-Feb-2015 3½% Treasury Gilt 2045 £1,750.000 Million
04-Feb-2015 0 1/8% Index-linked Treasury Gilt 2024 £1,200.000 Million

When you add the cash raised:-

∑(£1,750.000 Million + £1,200.000 Million ) = £2,950.00 Million

£2,950.00 Million = £2.975 Billion

On another way of looking at it, is in the 28 days in Feb, HM Government borrowed:-

£105 million each day for the 28 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2024 and 2045. All long term borrowings, we are mortgaging our futures, but at least “we are in it together…”

The UK Government spends about £2 Billion a week on the NHS. This equates to £104 Billion a year.

UK GDP is about £1500 Billion (1.5 Trillion).

Thus we spend 6.93% of our national income on health. This is actually quite a low ratio.

In these low interest rate times, where can you find 7% for your cash ?
Simple. Green investment opportunities.

[https://www.assetzcapital.co.uk/green-account/]

Assetz Capital the world leading Peer to Peer investment platform of business loans as the Green Energy Income Account.

The fund even as a Provision Fund to protect the money of investors.

7%……

The Green Energy Income Account diversifies the money invested across green investment funds again to maximise exposure across different investments and to reduce risk.

7% in a 0.5% base rate climate where we are now even seeing deflation.

RBS is The Royal Bank of Scotland and NatWest, as well as through a number of other well-known brands including Citizens, Charter One, Ulster Bank and Coutts.

We are only a few months away from The Royal Bank of Scotland publishing the 2014 annual report.

[http://investors.rbs.com/2013-at-a-glance/download-centre.aspx]

Here was can see the 2013 annual report. Some salient facts are found there:

Page 174.

Cash and balances at central banks £82,659 million. (yes £82 Billion)
Loans and advances to customers £440,722 million
Derivatives £288,039 million
Total assets: £1,027,878 million (yes that is over £1 trillion, about 67% of UK annual GDP)
Customer deposits £414,396million  (yes £414 Billion of customer cash in accounts)

The size of the bank’s balance sheet is vast.

The economics of renewables will have the ability to creates more jobs than other sources of energy. Most of these will be created in the struggling manufacturing sector. Clear to see, the making of new substations, wind turbines and solar cells for example which will pioneer the new energy future by investment that allows manufacturers to retool and adopt new technologies and methods.

E2V was formerly EEV of Chelmsford, (English Electric Valves)

http://www.e2v.com/

For a period it was a part of the UK’s General Electric Company, (GEC), known as Marconi Applied technologies, and then in 2002 a well thought out management buyout supported by 3i following the collapse of the renamed GEC as Marconi plc due to the poor leadership of Lord Simpson.

In in 2004 the company floated on the London Stock Exchange.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=104140&action=]

A £405m valued company, today is a UK plc success story in high technology in the areas of aerospace, defence, space, medicine and security.

A dividend yield of 2.4% for a technology company, this is incredible. A major investor is RIT Capital Partners plc (The Rothschild Family) whose wealth is managed by RIT Capital Partners.

The Renewables Infrastructure Group (TRIG) is listed investment company seeking to produce long-term, stable dividends, by investing in a portfolio of 29 predominantly operational assets which generate electricity from renewable sources, with a particular focus on onshore wind farms and solar photo voltaics parks.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=11834937&record_search=1&search_phrase=trig]

A £426m investment fund.

Managed by Infra Red Capital Partners, [www.ircp.com] a major shareholder in The Renewables Infrastructure Group is Investec Wealth & Investment Limited.

As the UK economy moves from a fossil fuel based electricity producer, we seeing massive investment in green technology, and remember, the fuel for renewables is free.

The Legal and General Worldwide Trust, is designed to give worldwide exposure and access to a range of Legal & General funds in a single investment vehicle while offering long-term growth potential.

[http://www.fundslibrary.co.uk/fundslibrary.dataretrieval/documents.aspx?user=landgdoc&type=custom_field.www_landg_co_uk.factsheet_UTD&sedol=B032C40]

A £102million fund, its top 10 holdings are:

Legal & General UK Smaller Companies Trust 15.13% of the fund
Legal & General UK Index Trust 9.62% of the fund
Legal & General Dynamic Bond Trust 8.70% of the fund
Legal & General US Index Trust 7.82% of the fund
Legal & General European Trust 7.18% of the fund
Legal & General UK Alpha Trust 6.97% of the fund
Legal & General European Index Trust 6.46% of the fund
Legal & General North American Trust 5.92% of the fund
Legal & General Pacific Growth Trust 5.82% of the fund
Legal & General Japan Index Trust 5.73% of the fund

As one can see it gives international exposure to global markets and indices.

Another month, guess what, take a lucky guess, it is the same old story, HM Government, spends more money than it receives via taxes and duties. Another deficit month, thus to bridge the gap, needs to borrow on the bond market.

In January 2015, the HM Government had to borrow money to meet the difference between tax revenues and public sector expenditure. The term for this is The PSNCR: The Public Sector Net Cash Requirement.

There were “only” 4 auctions of Gilts (UK Government Bonds) by the UK Debt Management Office (http://www.dmo.gov.uk/) to raise cash for HM Treasury :-

06-Jan-2015 2¾% Treasury Gilt 2024  £3,024.940 million
07-Jan-2015 0 1/8% Index-linked Treasury Gilt 2044 £1,040.780 million
15-Jan-2015 4½% Treasury Gilt 2034 £1,889.840 million
20-Jan-2015 2% Treasury Gilt 2020 £3,750.000 million

When you add the cash raised:-

∑(£3,024.940 million + £1,040.780 million + £1,889.840 million + £3,750.000 million) = £9,705.56 Million

£9,705.56 Million = £9,705.56 Billion

On another way of looking at it, is in the 31 days in Jan 2015, HM Government borrowed:-

£313 million each day for the 31 days. We are fortunate, while the global banking and financial markets still has the confidence in HM Government to buy the Gilts (Lend money to the UK), the budget deficit keeps rising. What is also alarming, is the dates these bond mature 2020, 2024 2034 and 2044. All long term borrowings, we are mortgaging our futures, but at least “we are in it together….”

This is an economic hypothesis that show a potential relationship between government tax revenue (income) and the rates of general taxation in the economy.

What it simply means is this:-

Punitive tax rates may not generate much additional tax revenue for the government if people respond in ways that result in less taxable income.

So for example if the country raises ist tax rates so high, people may stop working, as it is not worth the effort as the government will effectively take all their income in a form a taxation. Or individuals will resort to tax avoidance strategies to hide their wealth. Thus zero or little tax revenue.

Like wise, if taxes are super low, then people work harder, but then government makes no gain on this hard work and productivity boost, as the taxation rate is so low.

Thus it makes it hard for governments to the right balance on taxation. The curve itself is linked to Arthur Laffer, but Laffer himself has pointed this work to the academtic work from the 14th century Arab Muslim social philosopher Ibn Khaldun

http://en.wikipedia.org/wiki/Ibn_Khaldun

Flowing water is a valuable renewable energy source, and the most modern hydroelectric power stations are capable of converting at least 90% of their energy into electricity. (The other 10% is lost as noise of the flowing water, friction creates heat as the water flows down the pipes).

The Committee on Climate Change which advises the HM Government estimates that hydroelectric power could theoretically contribute up to 8 billion kilowatt-hours (kWh) of electricity per year to the UK’s energy needs.

Hydroelectric power stations in the United Kingdom accounted for 1.65 GW of installed electrical generating capacity, being 1.8% of the UK’s total generating capacity and 18% of UK’s renewable energy generating capacity.

The reality is that storing electricity is actually quite hard, you can have chemical storage, such as a battery, or converting Potential Energy to Kinetic Energy. This is the essence of Hydro Electric.

Large-scale hydroelectric power stations need to dam valleys to create reservoirs in which to store water. For the installation to include pumped storage – a technology that improves the reliability of the power station by storing energy for later use – two reservoirs must be situated close together, but at different heights.

Not many sites in the UK meet these conditions. Most of those that do are in the Scottish Highlands and are already home to large-scale hydropower schemes. These schemes generate about 1.4% of the electricity used in the UK, but due to the lack of other suitable sites, this figure is unlikely to increase significantly.

This is a non-exhaustive list of UK Hydro Electric Sites:-

Clachan
Cruachan Dam
Dinorwig Power Station
Errochty
Ffestiniog Power Station
Glendoe Hydro Scheme
Glenlee
Glenmoriston
Inverawe
Kendoon
Lochaber
Maentwrog Site
Rannoch
Rheidol
Sloy
Tongland
Tummel
Aigas Power Station
Bonnington
Carsfad
Cashlie Power Station
Cassley Power Station
Ceannacroc Power Station
Culligran Power Station Unit 2
Dinas Power Station
Dolgarrog High-Head Power Station
Dolgarrog Low-Head Power Station
Earlstoun
Finlarig
Grudie Bridge
Invergarry Power Station
Kilmorack
Kinlochleven Hydro Power Station
Livishie Power Station
Mossford Power Station
Nant
Orrin
Orrin Power Station
Pitlochry Power Station
Quoich Power Station
Shin Power Station
St Fillans
Torr Achilty Power Station
Achanalt
Alt na-Lairgie
Ardverikie
Beeston Weir
Black Rock
Braevallich Hydro Station
Broken Cross Muir Hydro
Callop
Carnoch
Chliostair Power Station
Chonais
Cuaich
Cuileig Power Station
Culligran Comp Set
CWM Rheidol Hydro Dam
Dalchonzie
Deanie
Douglas Water Power Station
Drumjohn Power Station
East Aberchalder
Elan Valley
Eredine Hydro Project
Falls Of Unich
Fasnakyle Power Station
Foyers Fall Power Station
Foyers
Franklaw Hydro at Franklaw Water Treatment
Garrogie Power Station
Gaur
Glenn Dubh Hydro
Inverar Hydro
Inverbroom
Inverfarigaig
Inverlael
Kerry Falls
Kielder Power Station
Kilmelford Power Station
Kingairloch Hydro
Lairg
Lednock
Little Loch Roag
Llyn Brianne
Llyn Celyn
Loch Dubh
Loch Eilde Mor
Loch Ericht Power Station
Loch Gair
Loch Turret WTW
Lochay Compensation Generator
Lochiel Estate
Lubreoch Power Station
Lussa
Maldie Burn
Mary Tavy Power Station
Mucomir
Mullardoch Tunnel
Nostie Bridge
River E Power Station
Siadar
Sron Mor Power Station
Stonebyres Power Station
Storr Lochs
Striven Power Station
Trossachs
Urlar Hydro
Victoria Falls Station

Yes, 109 sites in the UK

The Riverstone Energy Investment Company [http://www.riverstonerel.com/] is listed on the London Stock Exchange.
A £690m investment fund, that is focussed on energy and power-focused private investments. Founded in 2000. Riverstone conducts buyout and growth capital investments in the exploration and production, midstream, oilfield services, power and renewable sectors of the energy industry.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?csi=16480172]

Its top ten holdings make up 59% of the investments

Corp.
Canadian Non-Operated Resources
CanEra III
Castex Energy
Eagle Energy Exploration
Fieldwood Energy
Liberty Resources II
Origo Exploration
Riverstone Credit Opportunities
Rock Oil Holdings
Sierra Oil and Gas

As global energy demand continues to be on an upward trajectory, that growth is relatively slow in depressed markets of Europe, future growth is being driven by emerging economies – led by China and India – according to the latest edition of the BP Energy Outlook 2035.

[http://www.bp.com/en/global/corporate/about-bp/energy-economics/energy-outlook/outlook-to-2035.html]

What BP reveals is that global energy consumption is expected to rise by 41% from 2012 to 2035 – compared to 52% over the last twenty years and 30% over the last ten. 95% of the growth in demand is expected to come from the emerging economies, while energy use in the advanced economies of North America, Europe and Asia as a group is expected to grow only very slowly – and begin to decline in the later years of the forecast period.

The major use of fossil fuels are now converging, with oil, natural gas and coal each expected to make up around 27% of the total mix by 2035 and the remaining share coming from nuclear, hydroelectricity and renewables. Amongst fossil fuels, gas is growing fastest, increasingly being used as a cleaner alternative to coal for power generation as well as in other sectors.

The name Petronas is the state owned Malaysian Oil giant, that we see as the major sponsor of the UK’s Lewis Hamilton

[http://www.mercedesamgf1.com/en/]

Petronas is a giant.

[http://www.petronas.com.my/]

One just has to look at Malaysia’s oil production. Today the south east Asian nation produces 657,000 barrels of crude oil a day.

With crude oil at $48 a barrel which equates to £31.73 a barrel.

657,000 barrels of crude oil x £31.73 = £20,846,610

That is £20million a day from Malaysia’s crude reserves.

However, with the falling price of crude oil, countries like Malaysia whose economy is quite dependent on oil exports as a source of income, the falling price of the commodity, means its income stream is falling.

https://www.youtube.com/watch?v=-0kcet4aPpQ
Money, get away
Get a good job with more pay and your O.K.
Money it’s a gas
Grab that cash with both hands and make a stash
New car, caviar, four star daydream,
Think I’ll buy me a football team
Money get back
I’m all right Jack keep your hands off my stack.
Money it’s a hit
Don’t give me that do goody good bullshit
I’m in the hi-fidelity first class traveling set
And I think I need a Lear jet
Money it’s a crime
Share it fairly but don’t take a slice of my pie
Money so they say
Is the root of all evil today
But if you ask for a rise it’s no surprise that they’re
giving none away

“HuHuh! I was in the right!”
“Yes, absolutely in the right!”
“I certainly was in the right!”
“You was definitely in the right. That geezer was cruising for a bruising!”
“Yeah!”
“Why does anyone do anything?”
“I don’t know, I was really drunk at the time!”
“I was just telling him, he couldn’t get into number 2. He was asking
why he wasn’t coming up on freely, after I was yelling and
screaming and telling him why he wasn’t coming up on freely.
It came as a heavy blow, but we sorted the matter out”

The Aberforth Smaller Companies Investment Trust is a £1bn investment fund that specialises in the small companies domain.

[http://www.shareshop.hsbc.co.uk/shareshop/security.cgi?username=&ac=&csi=10856&record_search=1&search_phrase=aberforth]

It was launched, and floated on the London Stock Exchange, on 10 December 1990, managed by Aberforth parters,

[http://www.aberforth.co.uk/]

[http://www.aberforth.co.uk/aberforth-smaller-companies-trust/aberforth-smaller-companies-trust.htm]

1 JD Sports Fashion £40,013,000 3.5% of the fund (Retailing – sports goods & clothing)
2 QinetiQ Group £32,300,000 2.8% (R&D and consulting services)
3 Vesuvius 3£0,316,000 2.7% (Metal flow engineering)
4 FirstGroup £28,204,000 2.5% (Bus & rail operator)
5 RPC Group £28,073,000 2.5% of the fund (Plastic packaging)
6 St. Modwen Properties £27,942,000 2.5% of the fund (Property – investment & development)
7 e2v technologies £27,624,000 2.4% of the fund (Electronic components & subsystems)
8 Shanks Group £26,532,000 2.3% of the fund (Waste services)
9 Spirit Pub Company £24,972,000 2.2% of the fund (Managed pub operator)
10 Flybe Group £24,856,000 2.2% of the fund (Airline)

Top Ten Investments are worth £290,832,000 which equtes to 25.6% of the whole fund.

What is interesting is that the management team are major holders in the fund, so have a vest interest in the success of the fund, and also the fund yields 2.2% to investors.

The bond and stock market for a long time has allowed companies, investment funds and individuals to raise money on the world’s capital markets. This investment mechanism that has allowed the creation of jobs and prosperity.

Now the on-set of high frequency trading, buying and selling shares in micro seconds has been best described by Charlie Munger, vice chairman of Warren Buffett’s Berkshire Hathaway as “bunch of rats admitted to a granary”

[http://en.wikipedia.org/wiki/Charlie_Munger]

These high frequency traders are effectively abusing the market, entering a market for self-gain, and actually delivering very little for the market. Yes perhaps liquidity is added, but it seems incredible to think owning a share in a company for a few seconds adds any intrinsic value or brings any benefit to the company whose shares are being traded.

A great quote from Jurassic Park, “just because you could, you never asked if you should“, and this is the question that has to be asked in the capital markets where these high frequency traders are legal and able to use technology to make money, but are actually damaging the real abilities of the market to raise funds and generate investment.