We will begin to compare tradable assets which, based on previous blogs, we consider recommended in the current climate.

But firstly, what do we define as the current and future climate?

1. Frequently volatile in the short-term
2. Record government deficits threatening the most “secure” of investment products
3. Poor equity performance
4. A forecast for a high inflationary environment post QE alongside continually weakening currencies.

As a result we believe that inflation hedging investments in tradable assets are the way with which we can best preserve our wealth.

Two excellent choices therefore are gold and wine. Should you only be able to invest in one or the other, which should you choose? Below is an objective comparison and at the very least, some food for thought when considering these asset classes:

• Quick income - neither are income producers unless they are bought in bulk and sold off individually (whilst also timing the market precisely) so they must be held for a period of time (typically 12 months minimum, 2-5 years usually)

• Recent performance – From November 2008-9, Gold was up 50%. The Lafite Rothschild 2008 made 45% gains in 9 months.

• Ongoing returns – the difference between gold and wine is that wine is essentially a number of products with differing shelflives and maturing ages, whereas gold is only the one product. For example, the Lafite 2008 might make 50% gains in total. You may then sell and buy a different vintage, the Mouton 1996, which also experiences 50% gains. Gold, after one 50% rise, is unlikely to continue growing at 50% per annum, as would any singular product/share/stock, etc. Therefore it will struggle to stick with those ambitious growth forecasts in the long term.

• Supply – Gold’s supply is well documented as dwindling which is likely to keep prices high, at least in the short-term and whilst markets remain volatile. It is why you see so many “cash for gold” adverts in the UK. Vintage wine supply is more unpredictable although a vintage generally decreases in availability as it gets older and gets consumed! What happens with wine is as one vintage ends, another begins, giving the investor ongoing opportunities. A good broker is an essential tool when understanding supply and the knock-on effect of when to exit the market.

• Demand – both products are likely to experience high levels of demand, at least in the short-term. Gold is the inflation hedge, and wine because its price point is perfectly poised to retain consumption from all levels of the investor spectrum. At £8,000 per case approx., the entry level investor can afford it, and so can the multi-millionaire. The rich may not be buying £20m yachts at the moment, but high quality vintage wine still represents a tiny % of disposable income. It is also worth noting that wine (along with make-up), are 2 of the best performing products in any recession. When the population feels down, they tend to cheer themselves up with alcohol.Demand for both has also had a big shake up geographically. Traditional old money is being added to in huge volumes by new money as well as emerging nation demand from high population countries such as Brazil, China and India.

• Durability/Storage – both products can come with storage and ultimately protection. Wine bottles can break, and therefore gold may be considered more durable. However, the strength of storage, plus insurance, means you are now well covered in this unlikely eventuality.

• Your economic viewpoint – Should you believe the world is going to recover, it is likely that gold has reached it peak and will not provide further returns, if not future losses. If you believe the opposite to be true, gold could, as some forecast, treble in value. Vintage wine is less likely to be disturbed by economic cycles, but one must conclude that the less demand, the more volatile the pricing could be there.

Although both products are strong investment contenders in a volatile, downturning market, gold relies on certain economic conditions to rise in value whereas wine does not. In a market that continues to go down, in particular coupled with a weakening currency and inflation, gold would continue to rise in value. However, wine would also rise as a fellow tradable asset (as has been seen with the rises in vintage value in the last 2 years).

Ultimately wine has a more subtle manoeuvrability compared to gold in that wine is not one product, it is several products, born at different times, with natural price peaks based on its age rather than its dependency on the economic cycle.

Therefore, if you can, it is wise to diversify into both asset classes. Both are strong products, but if you cannot, your economic viewpoint will be crucial as will your investment performance requirements. If you strongly believe the economy is yet to sink to the bottom (and has a long way to go as well), gold is your best bet. If you are looking for more flexibility within varying market conditions, wine is a much better prospect.

2010; a new year, a new start. But in some ways, we have been here before.

This is not the first time we have experienced a recession, and as tends to happen, governments spend their way out of them. New infrastructure projects, more public sector jobs, and that now oh so familiar phrase, Quantitative Easing, or QE. In other words, the government is flooding the markets with money to stimulate action.

Although deflation has been an equally used buzzword in 2009, as the lack of demand has in some instances had a downward effect on pricing, the smart discussions revolve around inflation, the natural consequence of “too much money chasing too few goods”. Inflation, that by-gone concept of the 1970s! In fact inflation is all around us, with a particularly constant pressure on currency over the years. How many remember when a chocolate bar was 10p?

Although there is a split between forecasters, significant evidence points toward a higher inflationary period and an increasingly weak Sterling/Dollar fuelled by unprecedented government debt. Current house price rises, driven by a lack of available supply are likely to be short-lived rather than upward demand (as sellers wait for prices to go back to “break even” levels) , as the resultant supply increase will outpace demand does increase through higher interest rates. The stock market is having one of its roughest periods on record. Therefore, where can investors look for not only safety, but also results?

In volatile times coupled with vulnerable and weakening currency values, tradable hard assets become investments of choice. The likes of gold, silver, farmland, wine and stamps have proven to retain value in tough times as the measurement and value of cash becomes uncertain. Regardless of the measurement of exchange, or currency, these products show value and become excellent locations to park and secure wealth whilst the world begins anew.

Throughout January and indeed 2010, we will explore inflation hedges in more depth, with the next blog giving investors a comparison of the available options. There are some cracking opportunities even in these times, so I look forward to welcoming you back for another instalment in the next few days.

Anyone living here in the UK will know of the current issues facing the country with regards to unemployment, it is on the news, radio and in the papers every day and has been pretty much for the past year or so.

According to the National Statistics, the unemployment rate was 6.5 per cent for the three months to January 2009, up 0.5 over the previous quarter and up 1.3 over the year. The number of unemployed people increased by 165,000 over the quarter and by 421,000 over the year, to reach 2.03 million. The unemployment level and rate have not been higher since 1997.

The recession, of course, is not restricted to the UK; in fact it seems to be a lot harder in other countries than we are currently seeing here. In all four corners of the globe, unemployment generally seems to be rising, with some countries reporting a sharp increase in job losses.

We thought we would have a look at some of the key countries around the world and see how badly the recession is affecting them.

USA

Over in the USA, in March 2009 the unemployment rate hit 8.5%, which equates to around 13 million people now unemployed in America. According to the BLS (U.S. Bureau of Labor Statistics Division of Labor Force Statistics ) In March, the number of unemployed persons increased by 694,000 to 13.2 million, and the unemployment rate rose to 8.5 percent.

Spain

The BBC website reported that Spain’s unemployment rate, which was already the highest in the eurozone, hit 13.9% in the last quarter of 2008. In real terms, this meant that around 3.2 million were reported out of work in the later parts of 2008, which will of course have risen in the first quarter of 2009.

Germany

The BBC once again lead the reporting news, with its website informing us that Germany’s unemployment rate rose to 8.6% in March of this year as the global economic downturn continued to tighten its grip on Europe’s largest economy. This equates to 3.4 million people, an increase of 69,000 on the last quarter.

China

One of the leading online newspapers for China, ChinaDaily.com reported that China’s urban registered unemployment rate jumped for the first time in five years to 4.2 percent as of Dec 31, the Ministry of Human Resources and Social Security. They also went on to say that during the fourth quarter of last year, the number of registered jobless urbanites jumped to 8.86 million, 560,000 more than that in the third quarter.

Australia

Australia’s unemployment rate jumped to 5.7% in March from 5.2% the previous month, the biggest monthly rise in 18 years, official figures have shown. This means that the unemployment total increased by 52,900 in March to 650,900. “We predict the peak in the unemployment rate will be between 8 and 9% in the second half of next year,” said Besa Deda, chief economist at St George Bank.

Just by looking at five different countries on four different continents, I think it is clear to see that every country is suffering, with some suffering more than others. Unemployment trends have always been somewhat of mystery if it doesn’t effect the reader, but overall it is quite clear to see that unemployment is up, jobs are down and the amount of businesses closing their doors continues to rise.

And with the news yesterday that some people think it will take to 2012 to recover, now is a great time to look for alternative investments, as these could possibly give you the income to survive the next couple of years.

The UK has been greeted on its return to work today with the news that mortgage approvals rose 4% in the month from January to February this year.  Good news most will say.  However, the question that remains is is the UK market beginning its recovery, or is this simply a blip in an otherwise continuing downward spiral?

A number of property indicators in 2009 have suggested some form of recovery is under way.  From my own network of contacts in the property industry, January and February were certainly upbeat months.  So who is buying?  It seems it is a combination of first time buyers and property investors keen to take advantage of what they see as value in the market. There is certainly an increased level of demand from first time buyers who, having previously not been able to get on the ladder and have saved in the meantime, and now in position to take advantage of lower prices.

Many property investors, who will abide by the “buy low, sell high” philosophy, see an opportunity to buy up stock previously out of their reach.  Due to the increased numbers of repossessions, the Below Market Value (BMV) industry has certainly exploded in the last 3 months, with investors looking to buy at anywhere between 20% and 30% below market value on second hand property, and as much as 60% below market value for unsold developer stock.  These factors, combined with a stabilising in mortgage rates and products has led to increased enquiries, sales, and therefore the improvement in nationwide data released by various bodies.

In addition to this, lower interest rates have meant homeowners, specifically on tracker mortgages, have in some cases more than halved their monthly outgoings.  The government can therefore argue that lowering rates has put more money back in some people’s pockets.  However, it has been well documented that rate cuts have not, in the main, been passed on, so the financial easing has not affected the whole homeowner market.

So where are we?  Well general economic data would suggest the bottom has not quite arrived.  Job cuts are still being made and mainstream lending does not appear to have improved much.  Coupled with the facts that repossessions are still rising and general transactions between homeowners are still low would suggest that there is a blip in the market.  However, supply and demand are still fundamental when looking at the property market.  As prices fall, demand generally increases, and there is no doubt that demand has increased in 2009.  One could take a further view that if property prices continue to fall, the demand will continue to increase from both increased levels of first time buyers and investors looking for even better deals.  Therefore, it is my opinion that the property market will find a natural recovery point in the not too distant future.

It would seem that as the sun comes out, the days are longer and the weather takes a turn for the better, good news seems to be emerging from one of the nations leading Building Societies, with figures showing house prices and mortgage lending rising in March, compared to the previous month.

Nationwide have reported that in February 2009, the average house price was around £147,746, but the March figure has just emerged at £150,946, which is just under a 1% increase, at 0.9%.

I think it’s fair to say this is quite an unexpected rise, but does this really indicate we are heading into calmer storms and leaving the hurricane recession behind us? According to Nationwide, it is very early days, as they described the change as a “surprise bounce” and warned against concluding the market had turned.

Commenting on the figures Fionnuala Earley, Nationwide’s Chief Economist, said:

“Spring brought a surprise bounce to house prices in March. The price of a typical house increased for the first time since October 2007, rising by 0.9% during the month and reducing the annual rate of fall from -17.6% to -15.7%. This brings the price of a typical house to £150,946. The moderation in the annual rate of fall is somewhat distorted by conditions last year and so it would be unwise to draw strong conclusions from the significant slowdown in the annual rate of fall. Equally, while the rise in prices in March is welcome, it is far too soon to see this as evidence that the trough of the market has been reached.

The Bank of England has already taken strong measures to ease the tensions in economic and financial markets by cutting rates and commencing quantitative easing. However it will take time for these to work through into the housing market before we can expect a sustained recovery in house prices.”

To add to the good news about house prices, Nationwide also revealed to the country that Mortgage Approvals were the highest since May 2008, with February seeing mortgage approvals rise to 37,900, nearly its highest level for a year.

The more houses that are sold and purchased, the more money is pumped back into the economy, so these two pieces of news are not only a great joy to hear, but also tiny bits of gold dust that we need to start collecting in the years ahead.

So, in a year of mass redundancies, economic doom and gloom and of course the lack of any money to spend on the nice things, we say thank you Nationwide and may you bring us more good news next month, the month after and the following months that come.

You see, we like good news, it just feels better.

As soon as I finish this blog, it will take its place in history. Admittedly, it won’t be up there with world wars, births of monarchs and world cup winning football teams, but it will indeed have its own place in history.

A funny subject for an investment related blog? Probably, but as an investor, history plays a massive part in the way we invest, but is it always an accurate version of what really happened. Yesterday will almost always define how we approach tomorrow.

Let’s roll back to a week last Wednesday. I tend to play a few arrows with a good mate down my local pub (this really is going somewhere, I promise). It was one of those nights where every dart I threw was a winner and for once I walked away the darts champion of the 7th of January 2009, for my local pub and our game anyway. All said and done, I won, that is history, it is there for both me and my friend to reminisce to the grandkids about if we achieve nothing else as life moves forward.

This is not a rant I promise, but as we prepare for another massive match tomorrow, we had a quick chat about times and venues, then nothing more than a passing comment was motioned into the conversation, he said I won 3 – 1, whereas I think I won 3 – 0. He is sure, I am sure, there was no cheering audience or passing local to back either of our opinions up. The fact I won is there, we both agree, but as to the score, we both have different opinions. So this one piece of history is covered in doubt, possibly controversy, and although history dictates that I won the game, the score is still up for debate, even though it happened only 6 days ago.

Moving back to the investment topic, as we all sit down and plan and prepare for our investments for the next few years, how will we look back at the history of our previous investments?

Some will say its been a terrible year with house prices crashing, but the houses they owned all had tenants and the rent covered the mortgage, so does the history of 2008 define a bad year because of the house price drop, or does it indicate a good year as all the houses had tenants and we are not out of pocket in the physical sense, only in the paper value of what the houses might be worth today. If the reverse was true and they had no tenants for 6 months but their house price rose by 5%, would this indicate a good year or bad year, with a big loss of physical money, but a rise on the value of their houses?

This is where history, although it does indeed happen, can be taken and interpreted in many different ways. England winning the football world cup in 1966 did indeed happen, but for some people it was the greatest game they ever saw, for others in the crowd that day it was an immense disappointment.

Even though history may indeed make 2008 look like a terrible year for investors, we must as investors and individuals look back and look at it from a balanced point of view. If we are still standing and investing, it couldn’t have been that bad, could it?

Not exactly unexpected news this morning, but for the first time since 1997 the UK unemployment rate has risen above two million.

According to the National Statistics Website, the number of jobs in December 2008 was 31.32 million, down 203,000 on the quarter and down 284,000 over the year. This is the largest quarterly fall in jobs since September 1992. Most sectors have shown falls in jobs over the quarter with the largest fall occurring in finance and business services (down 102,000).

They also reported that the unemployment rate was 6.5 per cent for the three months to January 2009, up 0.5 over the previous quarter and up 1.3 over the year. The number of unemployed people increased by 165,000 over the quarter and by 421,000 over the year, to reach 2.03 million. The unemployment level and rate have not been higher since 1997.

Separate reports released by the British Chambers of Commerce (BCC) and CBI have both predicted that unemployment will rise above around three million in the later parts of 2009 and into 2010.

Although the news is not really a massive surprise for any of us, it is a clear indication of the struggle the country is facing with respect to keeping business flowing and people in jobs.

But, we do have to look at the bigger picture in this report. In December 2008, employment was standing around 31.32 million, which is still the large majority of this countries work force in employment. When you look at the figures, they do look worrying and deeply disturbing, but when you take into account that even if the unemployment rate does rise to 3 million next year, will still leave, at this moment in time, 30 million people still in work. Or, out of 100% of the nation’s work force, 92% should still be employed in 2010, if current reports are anything to go by.

When you compare this to other countries, the UK is actually doing quite well, despite recent indications that the UK is going to be hit the hardest by the current recession and economy downfall.

Anybody currently facing redundancy, going through it or looking for a new job after suffering it will of course see things very differently, and quite rightly so, but in the grand scheme of things, well over 20 million people out of a work force of around 25 million people will still be bringing home a wage packet for the rest of the year and beyond.

And with news of various supermarkets and fast food outlets looking to create thousands of jobs within the next few years, we should see a few more of the unemployed being able to find a job, albeit depending in your area and skill set.

Back in the autumn I was looking forward to the latest round of property exhibitions and promptly booked my tickets for a couple of them in London & Birmingham. I entered both in anticipation & left disappointed. However, my own personal feelings aside I noticed an overwhelming feeling amongst agents that the branding exercise of an exhibition stand was still very much a must, despite the lack of investors through the door.

Now before you say it, of course I attended on ‘trade day’ – day one of three which is often perceived as a big networking event where cold pitching business is welcomed as opposed to discouraged. However, upon following up conversations during the oncoming week I would ask how they felt the attendance was and they would all say the same, that it was “ok” but “no, not a great deal of leads but they’ll do”. And besides, since when would an agent take a non-client call the week after an expo!

This told me that the branding exercise of attending was still very much at the forefront of their priorities despite the economic downturn. So with another round of exhibitions just over a month away I have begun to think about attending these also. By contrast I could be right in not having enthusiasm for doing so and certainly on the basis of my attendance last time round it would be a waste of energy! However this time round I shall be there with bells on (ok, perhaps sans bells) for other purposes, more on that another time.

So between the autumn & oncoming exhibitions we have seen a fair few goings on in the exhibition scene, particularly goings. One major exhibition has downsized from its traditional venue at Excel to the smaller Earls Court whereas another has retained its choice of larger venue. For me this reflects a paradigm shift in the quality of the anticipated audience. Active investors in the market are fewer but most certainly present, so gone are the days of bag grabbing “shoppers”, which can only be a good thing.

However the question which does remain is that are those actively in the market likely to attend an exhibition nowadays? Are they now sticking to their trusted agents and or relying more on the internet? Only time will tell. For me this is a last throw of the dice for the exhibitions. If they work then they will live on, but what if they don’t? If no-one comes through the doors, who is going to part with their decreasing budgets to attend again this autumn? However, with market share diminishing and hot on the heels of the announcement this week of voluntary administration by a household name attendee & purchaser of larger stands, those agents remaining have little option of siding with the former. Attend they will and with maximum optimism, but one thing is certain.

The question is branding more important that online marketing will be answered come the end of spring.

Selling properties, especially investment properties and buy to let properties used to be quite easy. Sorry to all the sales people out there, but it did.

Having previously worked for a property investment company, I know that it was plausible to push through 4 – 5 deals a week, very rarely without any lending problems and mortgage approvals tended to be easier than finding a Manchester United fan in London. Those were the glory days of lending and up until a year ago the level of lending was at a record high and the amount of buy-to-let mortgages that were being approved was staggering, also accompanied by some of the best rates investors had ever seen.

Some would say this is the reason we are in the midst of a recession and struggling, but that is another blog, one of which we have covered and will cover elsewhere.

Recently, I brought a couple of stunning BMV deals to the table, as we felt that after a year in which we would not touch property, we now had a couple of deals that really did make sense to the investor. This was due to better discounts, newer and an increased amount of decent mortgage rates and just the general feeling that property had hit its lowest level and was now starting to recover, according to reports from leading lenders and banking institutions.

We sold Penn Lane within a couple of days and currently have offers on the further two properties that we have on our books, but we kept hitting a common discussion with some of our investors – “would love to buy it, I am just too old, I wont get the mortgage”.

As with anything, previous misconceptions had started to creep back in to investors minds. Some of our investors tried to get a mortgage just as things were starting to look really bad and were hit with many reasons why they would not be approved, one of them being age which is in fact in relation to risk. This had then been indented into their investment strategy and they were probably now missing out on deals that they really wanted to get involved with.

We work with one mortgage broker and a quick call to them to inform them of this supposed age issue and we were met with they reply that this indeed was not really the case anymore, and in fact we could offer mortgages to people in their late 50’s and beyond. Chris then went back to the investor, forms went in, and he is now waiting to complete on the deal next week, which is a bonus not only for us, but also for the investor that a year ago was simply not able to go through with these deals any more.

In April last year mortgage lenders got edgy, they were panicking, they knew trouble was ahead and they were refusing mortgages for many reasons. In fact, I can not mention the name, but I knew of one mortgage that would not go through this time last year because the property had decking!!

With mortgage lending now recovering, new criteria are in coming into play and some old reasons to refuse are falling away.

Are you too old for a mortgage on an investment property? Ask us, you might just be surprised.

Some good news has been reported from the British Bankers’ Association (BBA) this morning, with early indications showing that mortgage approvals rose in January, with approval levels hitting 23,376 last month, up 4% from 22,416 in December.

But, as it seems with every other story that has some good news in it, there is also some not so positive reports, with the number of approvals in January still 43% lower than the same month a year earlier.

Hardly surprising in the current climate, but the fact that mortgage lending is continuing to rise month on month could be taken as a sign that we are starting to emerge from the gloomy mist which has been partially caused by the lack of lending over the past 6 or 7 months.

BBA statistics director, David Dooks, said of the latest data:

“The high street banks’ mortgage lending is still seeing double-digit annual growth, albeit in a much slower market. Lower borrowing costs and falling property prices have underpinned demand at these lenders, who are providing over two-thirds of all new mortgage lending. There is only limited demand from households for unsecured credit, while a fall in their deposits in January reflects a tendency to draw on cash or to move into alternative financial products.

“Lending to non-financial companies rose after two monthly falls, with modest increases in several industrial categories, while finance for other financial companies reversed the year-end fall in lending.”

The BBA also reported that in January, net mortgage lending rose by £2.9 billion, consumer credit rose in line with the recent average and overall company finance increased by £14.1 billion, reversing the previous month’s fall.

However, personal deposits fell by £2.3 billion as spending drained cash and savers sought alternative deposit products.

It is good to see some positive comments from the BBA, hopefully which will hopefully encourage more people to apply for mortgages who might not have previously considered applying, as they thought they did not stand much of chance in being approved. If we see another month of increased approvals for February, indications would suggest that the housing slump has reached its lowest bottom point and that the only way from here on in is up.

But, until we see the figures from the BBA and other leading bodies next month, we will take the positives from the news today and hope there is much more to come.