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.

A very good question if you don’t know…and you’re unlikely to as this is not a well known sector. However, as we like to do at Discover and Invest, we can prove to investors that this route offers a high level of secured income backed by some surprising macro-economic fundamentals. It is also a sector we know well and can fully manage for you. Allow me to explain….

The investment concept exists because of the need of many farmers for short-term funds. This is down to either expanding or restructuring their businesses, particularly in light of many new EU directives which require new and costly upgrades. Farmers, as is widely known, are cashflow poor but are extremely asset rich, an asset which can be used to generate an income. This asset is of course their farmland.

What many investors are unaware of is how robust farmland prices actually are. Documented evidence shows that since records began in 1945, UK farmland prices have remained steady in each of the recorded recessions and in many places have barely dropped at all in the last 2 years. Therefore it is important for investors to understand that UK farmland is not affected by economic cycles in the same way as residential or commercial property does. Evidence from a number of independent sources is available in our packs.

So why are farmland values so robust? It is a question of supply and demand. In the UK , farmland for sale is a rare occasion and an exceptional opportunity for a neighbouring farmer to expand his business. In 1945, 1m acres per year were recorded as transacted. The numbers since then have steadily decreased to only 100,00 acres, a huge 90% drop in supply. This has been in the main because farmers have moved from tenants to actually owning their own land. Farms are passed down the generations and in order to succeed, the farmer needs to expand not contract. Therefore a chronic lack of available-for-sale supply coupled with a farmer’s ongoing expansion requirements ensure that values remain robust, regardless of lifestyle buyers. What this means to investors is that farmland, as part of a farm, is a robust product when protecting capital that also produces an ongoing income.

With the lack of funding available from banks, farmers are prepared to enter into leaseback style agreements for their farmland with private investors for an agreed timeframe of typically 2,5 or 10 years. The investor buys a portion of the farmland (usually not the property) at between 50-70% of today’s market value and rents it back to the farmer at around 8% per annum; a very competitive rate in today’s marketplace. Typically the farmer will also pay for the buying costs. The farmer pays his “rent” and then buys the farmland back from investor at the end of the agreed period for the same % discount based on the then market value. Therefore this offers the investor a superb capital gain opportunity and allows the farmer to improve his business profitability in the short-term.

Strong leaseback deals will utilise an agricultural project management team, (as we do), to ensure that a new business plan is in place and so that the farmer is monitored on a quarterly basis for the investor. This ensures a smooth, hands-off and full managed product that so many investors fear they will not otherwise receive. The product is also SIPP/SAAS compliant.

With regards risks, with such a strong initial equity position, you would need UK farmland to fall by more than 30% in order for your capital to be at risk; something which has not happened since records began, nor is it likely when taking into account global demand for food and the fact that we still have not found ways of making food without the use of farmland!

So in difficult economic times, it is possible to find deliverable, high income, secured products. If you wish to find out more, please register or email enquires@discoverandinvest.com

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.

Since the commodities boom of 2007, investors have increasingly come to realise the underlying benefits of investing in farms. An often misunderstood sector largely due to an unbalanced media view point, this article hopes to redress the balance and inform

In the current climate and to help educate, below are the top 10 reasons to invest in UK Farms:

No over-supply, robust local demand

It has been said many times regarding land, and it is as true today as it ever was, they are not making anymore of it. On top of this, less and less parcels each year are coming onto the market to be sold. According to Reed Business Information’s The Farmland Market Report, there is a huge dearth of land for sale and the volume of sales has been on a steep decline since in 1950. 1 million acres were traded then compared with around 100,000 in 2008; only 10% of the previous high. This is mainly down to the fact that there are many more landowners now than 60 years ago and most do not look to sell unless absolutely essential.

As a result oversupply issues that have hit the commercial and residential property markets are highly unlikely to effect the farmland market. In fact, evidence from experts shows that farm prices remain stable in this and previous recessions and are going up slightly compared to residential property.

As for demand, levels remain strong from local farmers, who are always interested in local businesses as they tend to be “once in a lifetime” opportunities to buy. The only drop has been from lifestyle buyers, who make up a much smaller percentage of the overall market.

Excellent defensive investment against inflation

It is widely regarded that higher inflationary times are around the corner given the extraordinary levels of global government spending combined with the rare sight of extremely low interest rates at the base of a recession. The value of currency has always been eroded by inflation and the next few years may see this increase. There is much talk of a global currency in the future if fiat currencies continue to decline in value. Therefore, the smart investors are looking for tradable assets which can retain their value in more volatile times. UK Farms, and in particular the primeland that they sit on, present such an opportunity to investors.

Tax/pension benefits

Depending on the type of vehicle used, a number of tax reliefs are available to investors, such as Inheritance Tax relief. It is also worth noting that in many cases, farmed land qualifies for SIPP and SASS, the popular UK pension schemes.

The UK presents an extremely secure environment

Due to the UK’s property and land laws, the country is considered one of the safest environments to invest in globally. Although returns may be higher in emerging markets, those investments quite often carry a very high degree of risk.

Undervalued due to weak Sterling

Not only is the UK secure, but its prime farmland can be considered undervalued. The first of these reasons is down to the currency movements. Sterling has declined sharply over the last 18 months, which effectively means the country has a “30% off” sale sign over it. International investors who buy now will have the benefit of profiting from any reverse currency movements as the economy improves.

Buy at 70%, re-mortgage at 100% of the valuation

The second reason for the argument of value is that farms can be picked up in the UK at around 70% of their valued price. This presents not only a capital gain opportunity but also presents a liquidity opportunity. Banks will lend at 100% of the valuation which means an equity release is entirely possible.

8-15% yields achievable

Depending on the project, 8% yields are achievable in the UK; with leaseback deals buying at 60% LTV, the yields are as much as 15.9% based on a project available right now. Compared to the options available in the UK ie. Bank deposits 1%, volatile stock market, property yields dropping below 5%, income is a particularly pleasant current upside for investors.

Buyback option can provide extra investor security

One facet of investment that is always of concern is the exit strategy. If a lease agreement is in place, investors can have extra security that the tenant farmer will buy the farm back at an agreed price level 2,5 or 10 years into the future. If they cannot, this would trigger an event of default, which raises the next benefit of farm investments.

Strong evidence shows farms sell quickly

Again, mainly due to the lack of supply in the marketplace, farms and farmland usually takes 3 months to sell from agent instruction. If you are investing through the right companies, there should be an all-in-one solution available in terms of managing and selling the farm, either by choice or in event of default.

Investment period as little as 18 months

If the farm has been purchased and leased back to the farmer, the investment period can be as short as 18 months. Therefore tie up of capital is the same period unless you are able ot release equity and also allows for potential capital gain opportunities.

Therefore there is a lot to like about farming and agriculture from an investment point of view, particularly in today’s market.

‘Lafite prices climb as investors pile into wine’. Telegraph, 1st August 2009

Great news to tell you about, wine investing is the place to be! Our clients received information regarding the outstanding yield curve for the ‘1982’ vintage with strong evidence and support for the nearest equivalent ‘1996’ and ‘2003’vintages to potentially emulate performance. As of the last two months the ‘96’ has seen a hike of 11.76% which now means it is up 19% since March, the ‘03’ likewise by 4.7%……We conclude that both these wines as well as some select counterparts are trading at higher prices and are now entering a period of likely significant growth based on the same supply and demand characteristics previously outlined.

The wine investment market has rallied since the beginning of the year as the industry index for the top 100 wines moved by 1.5% per month; however the star performer amongst these wines has clearly been Chateau Lafite Rothschild. Several vintages have provided strong, tax free returns this year and more significantly, two of the vintages strongly recommended to Discover & Invest clients have performed as we had predicted.

Therefore a strong argument for the increase in further value remains and is also being echoed by the financial press, as demonstrated by the recent Daily Telegraph article below:

‘Lafite prices climb as investors pile into wine’. Telegraph, 1st August 2009

The graph below gives some perspective on the Lafites, particularly over the last year or so of turbulence. The relatively low price point for this luxury item compared with cars or yachts means its basement point is quite high. In other words, demand remains robust because buyers at both ends of the wealth spectrum are able to buy and continue to speculate.

The US Dollar has weakened overnight following reports the US government may nationalise major US banks as a result of the financial crisis. Sterling has staged a minor rally following the publication of retail sales figures for January and EU leaders met over the weekend to discuss economic strategy ahead of the G20 summit in London in April.

Pound Sterling - UK markets

Sterling has strengthened overnight, climbing to 1.45 against the US Dollar and gaining 1.6% on the Yen amid news that the US government may nationalise major banks. The news fuelled a round of risk aversion but this failed to strengthen the traditional safe havens and Sterling gained on its major currency partners overnight.

PM Brown has announced a £14 billion credit injection into Northern Rock and the bank is to start lending again, expected to take on £5 billion worth of mortgages this year. This is a reversal of earlier government decisions and comes tempered with the warning that banks should end risky speculation and return to their more traditional role as ‘stewards’ of people’s money. Retail sales figures on Friday boosted the Pound as they rose by 0.7% for the month of January taking annual sales up by 3.6%. However this comes at a time when retail analyst Experian predicted 10% of high-street stores will be empty by the end of February and more solid trends may be visible in quarterly statistics. Nationwide housing prices are released in the UK today with new mortgage approvals out tomorrow.

US Dollar - US Markets

The Dollar has weakened for the third consecutive day on speculation that the US government may bail out major banks even further. The Dollar is down 0.74% on the Canadian Dollar and has also declined the Pound, Euro and other major currency partners.

Dollar weakness comes after Christopher Dodd, Chairman of the Senate Banking Committee announced that nationalisation of some banks may be necessary. Wall Street and equity markets fell to multi-year lows and the Dollar declined against the Euro and Yen. The Philadelphia Fed survey on Friday showed manufacturing has slumped to a 19 year low and a survey of business economists has shown the US recession is the worst in three decades. Consumer spending accounts for 70% of the US economy and this is expected to decline by 2.3% this year. There is no data out in the US today.

Euro – European Markets

The Euro has also rallied against the US Dollar, currently sitting at 1.28 after attempting to break 1.30 overnight. The Euro has also gained on the Yen and is currently trading at 0.88 against the Pound.

Leaders of Britain, France, Germany and Italy met over the weekend to formulate a position ahead of the G20 meeting to take place in London in April. Tighter market regulation and an end to risky speculative investments are expected to top the agenda. European leaders also agreed the IMF’s emergency fund for debt stricken countries should be increased to more than $500 billion. ECB President Trichet is to give a speech today.

Other Currencies - Highlights

The Australian and New Zealand Dollars have appreciated for the fourth consecutive day against the Dollar on speculation that the US Government is to increase its stake in the major US Banks. The Yen also declined amid speculation over the deteriorating Japanese economy expectations that export demand will continue to slump. This weakness could eventually undermine the safe haven status of the Yen. Minutes from the Bank of Japan’s February meeting are released today. The Canadian Dollar has gained against the US following weaker American equities and reports that Canadian core inflation fell by 0.4% in January. Canadian retail sales figures are due today.

The fifth of November 2008 is a day I will remember for some time. Now I know what you’re thinking, that’s the day a few centuries ago when a certain Mr Fawkes decided to try & blow up the powers that be, right? Or maybe that I went to a rather spectacular fireworks display? Neither of these were the case in this instance. That morning at around 10am our Ambulance Trading investment opportunity was emailed to one of our partner’s databases. I can remember telling my colleagues that I will be happy if we can generate 15-20 enquiries – after all, enquiry levels must be down as we prepared to head into recession.

After the eightieth enquiry had landed in my inbox just after 6pm you could say I had encountered my busiest day yet at Discover And Invest! Over the course of the following few days more filtered through ensuring that yours truly was putting in some seriously long hours!

Amongst this number was a variance in terms of quality, from those who were too afraid to hold a conversation over the phone to those who invested. In between were all extremes; those whose level of liquidity fell below the entry level, those who had no real interest, those who absorbed the information never to be heard from again, agents sniffing around and those who I simply could not contact! As all the enquiries are submitted in the same format, it’s impossible to gauge the level of quality until contact is established.

Investing is very similar in this respect. There are still so many opportunities out there ranging from property to bonds to shares to alternatives etc. How does one accurately appraise each individual opportunity? Which ones are most likely to do what they say on the tin and provide the promised returns? Which ones are the scams? Which ones are the big gambles?

Whilst there are no blueprints for what’s good and what isn’t, it’s fair to say that the usual rules apply. Over the course of sifting through the enquiries I received, the level of questioning was considerably higher than I expected – good! This goes to show that investors are doing their research, it shows that they are familiarising themselves with the workings of the opportunity, and it shows that where applicable they are using their experiences –both good and bad – to base their decision as to whether or not to take it further. Whilst this continues to be the case, those marketing the decent secure opportunities are certain to prosper.

Excuse the title, but it had to be done.

Whilst most of the country has had a day off work, day at home as the schools are closed or some time contemplating life sat at an airport or train station wondering why it had to be today, Discover And Invest is in the midst of selling investment properties to its clients.

We managed to get into the office today, cold, wet and slightly bitter at the infrastructure of our great city, but still, we made it in.

A day of snow is no longer something that frequents that often, so the initial smiles, cheers of laughter and sense of a winter wonderland soon disappear into the realisation that today, we wont be going to work as the trains, buses and planes are not operating and we will in fact be sat at home wondering how the likes of Canada, Russia and most of Northern Europe plough on (excuse that one) through the snowy chaos and operate normally on a daily basis.

The serious consequences of this unusual day well become all to clear towards the end of the morning when businesses started to comment. The disruption caused by the heavy snowfall will probably cost UK businesses around the £1bn mark, business groups have estimated. The Federation of Small Businesses (FSB) said that 20% of the UK’s working population, or 6.4 million people, would be unlikely to be able to make the regular journey into work.

Planes were grounded at most airports, the trains were running less frequently than a retired Olympic athlete and the buses, well, let’s not go there. We are in a recession, every day of trading is so vital to trying to emerge from this financial gloom and yet thanks to a little bit of snow and cold weather, the country will lose around a billion pounds for every day it can not operate.

For most it will be a nice day at home and for the kids, it’s something most will have not seen before on this scale. But for the City of London, businesses of the UK and indeed the whole economical situation of this country, the problems today will cause many more problems down the road, when the cost of this will only really be felt.

Wouldn’t it be great to say we will learn our lessons from this? Wouldn’t it be just amazing to learn from the issues we have faced and make sure it never happens again? Well, we have all been here before and will be again, and no doubt we will all be talking about the same things over and over this time next year or maybe sooner. One day, we will see some snow, put on our jackets and jump on the train to work and arrive on time, oh, and at the same time save the country losing another billion pounds!

If you’re a global investor, there is one country in the world today that is screaming value for money… and it’s the UK.  Why so I hear you cry?  Well, there are two main reasons why, the same two reasons in my view that has made the USA a value for money buy over the last 2 years.

The first reason is a weakening currency; typical of an economy in a downturn, one that is importing more than it is exporting or of one that is printing vasts amounts of money, or  potentially all three.  The weakening of a currency, relative to your own means better value purchases.  Many Brits indeed found that to be the case when buying American over the last few years at as much as 2 Dollars to the Pound.  Times they have a-changed though!..Xe.com tells me that 1 British Pound Sterling buys me but 1.38 US Dollars, a fall in the last 9 months of around 60 cents, or in percentage terms,  approx. 31%!!!  So if you’re making an investment purchase in the UK, there is certainly inherent value compared to even the most recent past.

The second major reason is falling house prices, which begins to give this type of investment market inherent value too.  Property prices have fallen approx. 20% from their peak 18 months ago, and therefore considered better value.  Discounts are also being offered in the region of an extra 20% on distressed and new build sales, which provides further value.  Therefore investors are  taking the view that these discounts provide built-in equity in case we have another year of falls.

Finally, rental yields are now in the region of 8-9%, which means on the typical mortgage, cashflow positive deals of around the £100 ($138) per month mark are starting to appear.  With interesting new 12 month insurance policies available from major brands to protect rental income, these deals are incredibly attractive.  Some valuers will even pay for your valuation for you so no expenses are necessary until you know you can get a mortgage and the valuation is accurate.

So it’s easy to see why property investors are taking the view that the current UK deals are great value, income producing straight away and extremely secure.  On top of this, a long term view means the profits are much more substantial than in a boom.  We are all taught to buy low, sell high.  Well here is the chance to put the first part of that equation into practice…whether it is property, or an alternative investment, companies like Discover and Invest can help you to see why the UK is worthy of your attention.

My morning started with Take That on the radio telling me this could be the greatest day of our lives, and then a report from the British Bankers Association informing me that the mortgage lending rose in December, indicating the start of a possible recovery for our shattered economy. Coincidence?

With nine out of ten news stories indicating the end of the financial world, it is refreshing and relieving to finally hear some positive news on this cloudy Monday morning.

Figures indicated that approvals for house purchases in December were around 22,000, up from around 17,300 in November. This figure is still 46% down on this time last year, but to see an extra 5,000 mortgages approved in what is traditionally one of the weakest months for selling houses, is excellent news and a sure sign that investors and home buyers are now starting to understand it is a great time to buy, with some amazing bargains on the market.

2008 was undoubtedly a lot harder for mortgage lenders and estate agents than the previous few years, with borrowing at a much lower rate, and the BBA backed this up.

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

“This first opportunity to compare 2008 with 2007 shows that gross mortgage lending by the main high street banks totalled £170bn, some 23% below 2007’s total of £221bn. However, lending by the rest of the mortgage market was half the previous year’s total, showing how mortgage lending became much more concentrated during the year. The banks approved less than half the 2007 number of loans for house purchase, reflecting falling demand from households facing greater economic uncertainty and double-digit falls in house prices over the year which led to a wait-and-see mentality.

“Consumer credit was very weak in December as people reined in their credit card spending, despite early Sales and heavy discounting by retailers. This consumer caution was also reflected in personal deposits, which rose strongly.”

There are obvious problems at the moment but we are starting to see a rise in house sales, more mortgage companies offering more products and a general raise in enquiries reported by many estate agents. The question that will be asked is will this continue for the next few months or even the year, or will this rise only last a couple of months before things take another turn for the worse.

We will not know until it happens and I am sure there are more ups and downs ahead, but we must take notice of the fact that more people are now buying homes than in November, which in turn will not only help the economy but also give some relief to the many companies related to property.

With Discover and Invest launching our first Property Investment deals next week, this news is more welcome than a cold beer on a summers evening.