Wednesday 27 March 2013

Cypriot Implosion & The Budget.

Cracks in the Euro zone experiment have become evident once again, this time centering on the island nation of Cyprus. My shares in Lloyds Banking Group have taken a bit of a nose dive since this news was initially broadcast (about 15% fall), and there will probably be increasing downward pressure if a Cypriot bank run occurs when their banks are finally reopened. If prices are driven low enough I might view this as an opportunity to increase my exposure to the sector.
My views on the Euro zone haven't changed much since my first blog posts on the topic in Jan 2012, check out the links below if you're interested. EU policy makers are being very slow to address the problems they are facing, which is increasing the likelihood of an eventual currency breakup. Personally I think Cyprus would be much better off ditching the Euro in favour of their old currency, which would cause a painful devaluation but make them competitive once again.

The UK Budget was largely unexciting, although the Chancellor did announce policies intended to stimulate growth in the housing sector. One of these was a ''Help To Buy'' scheme directed at first time buyers that will offer up to £3.5bn for shared equity loads towards mortgages. Buyers who put up a 5% deposit can get another 20% from the Govt. The loan will be interest free for the first five years with a ceiling price of £600,000. Also there will be a ''Mortgage Guarantee'' scheme that intends to incentivise lenders to offer people with smaller deposits better mortgages. They will guarantee 20% of the loan on properties worth up to £600,000.
Although I disagree with these meddlesome strategies the Chancellor is employing, I was quite pleased to see that it gave the house builder's shares I own a huge boost. I have now sold my holdings in Telford Homes which have made over 100% profit in a few years and also Persimmon Homes which has made over 150% over a similar time frame.
I still hold shares in Taylor Wimpey and Barratt Developments but will look to offload these as well in due course. At the moment I’m holding the proceeds of the sales in cash.


Monday 11 March 2013

Aviva Slash Dividend - March Portfolio Update

I've been doing a bit of portfolio spring cleaning this month, have sold Redrow and Aviva. The catalyst for the Aviva sale was a downbeat article in the Sunday Times, turned out to be good timing as they announced a dividend cut a few days later and the share price fell substantially. I suspect this is part of a 'kitchen sinking' operation from their newish CEO to make himself look better over the medium term for 'growing' the dividend once again and returning the company to profit. This is lame, self serving management in my opinion. Anyway I managed to sell at 346p which banked me a nominal capital gain; it's been a decent investment though as I've had 3 years of bumper dividends circa 8%.
I bought Redrow just over two years ago, they were the last house builder I purchased, and the sector had already risen quite a bit by then, but I still made just shy of a 50% profit on them.

I've now split the proceeds two ways. Last Monday I bought some more Fidelity Special Situations China Investment Trust, have about 5% of my portfolio in this now and think it will do well in the long run. It's already up a bit from the 91.5p I paid.  With the other half of the money I bought Cairn Energy today at 291p. They were tipped in the Investor's Chronicle a month ago due to their decent discount to NAV. They've had a torrid few years and are out of favour with investors, but have made some changes that should bring some stability to revenue. I'm hoping they will rise on good news over the next few years.

Wednesday 6 March 2013

Central Bankers - Clever People?

Below is a link to an old Youtube video of Ben Bernanke. He and his peers (King etc) were blind to the risks of loose monetary policy back in 2005, and it is obvious from his subsequent actions that the penny still hasn't dropped.

Why on earth do we trust these people with our monetary policy? They have no clue. If they worked in private sector banking with Bob Diamond and Fred Goodwin they would have been sacked like dogs long ago.