Sunday, 15 June 2014

The TSB IPO - Fancy buying a pukka bank?

The 17th June is the final day to decide whether or not you're participating in the TSB IPO. Once you've downloaded and spent the rest of the day reading the 300pg load of nonsense document you'll be none the wiser about what to do.

TSB is being sold off by Lloyds as punishment for being shafted by Brown and being forced to save HBOS during the Great Financial Crisis, they subsequently went broke and had to ask the state for survival funds. TSB was previously a mutual, then a bank and then succumbed to the excitement of the big bank mergers of the 80s-90s. What we are seeing now is a reversal of those big mergers and a general expansion of the number of banking entities as the new regulators attempt to encourage more competition and fewer companies that are too 'big to fail'.

So TSB - any good?

Here's the GOOD stuff about it:

- It's supposed to be a purely retail bank so no mucking about in the filth of investment banking. 
- It is supposedly being sold on the cheap, at least the PR tells us it is 'priced to go' at about .7-.9 of book value.
- It makes money - about £170M last year and on course for £200M this year.
- It won't be tainted with any mis-selling dramas from the last few years.
- Long term holders will get 1 share for every 20 held each year for the next three years. 

The BAD stuff:

- It revealed last week 45% of its mortgage loans are interest-only. This is INSANE. That's about 45% of its mortgage loans that it will never get its money back on.
- Competition is heating up. Tesco, M&S, Metro, etc. are all chasing new business too.
- Interest rates are on the move up. Mr Carney says so. Expect default rates on loans to rise as they do.
- There is some confusion as to how much they are paying for IT which is a huge cost for banks. Lloyds are currently subsidising / paying for it - when that arrangement ends, TSB will have to pay full whack.
- No dividends until a long time away - 2018.
- They tried to sell it a couple of years ago to Co-op for a boat load less. It wasn't worth £900M then, it's not worth more than that now.
- The market is fairly high at the moment. IPOs are dime a dozen as private equity groups look to cash in at the top of the cycle.
- Only 25% of the shares are being sold. Lloyds will retain the rest and look to sell them all over the next 12 months (I think that's the timeline, they have to sell soon I know). This enormous overhang of shares means there will almost certainly be a better time to buy (if you're keen).
- It's a bank. They can't be trusted. They're almost certainly lying about everything.

More stuff to read from others here:

Investimouse is staying out of this. There's almost never any way a private investor can make money out of IPOs unless the seller wants you to. Remember, it's a bank. They want your money and they don't care how they get it.

Thursday, 15 May 2014

Updates on the Team Dave Fund of Fun-ness Portfolio

With the FTSE ticking along well and no serious dramas kicking off in the world (except poor old Ukraine who everyone seems to have turned their back on) all seems quite serene in the portfolio.

Updates on some of the holdings:
- Took the opportunity to top up HSBC when it dipped under 600p last week. Seemed wrong not to.
- Infinis has dropped 20% since purchase. Most of me says sell, but the reasons for buying in the first place stay sound - growth, industry consolidation. There has been no news. I think people are just bored. It has guaranteed to pay out big dividends this year and next so no reason not to be in it. Hope I haven't missed something. Maybe debt is too high?
- Schroder Real Estate had a successful placing which I contributed to. With shares at 50.25p, it was an instant 2p gain which has since gone higher. They are continuing to turn around this company and I'm hopeful that the problems of the past are behind them.
- Middlefield Canadian Income was bought at 98p. Seemed a no-brainer with 1.25p every quarter in dividends. The board thought so too and bought 50,000 shares at the same price along with a director who bought 100,000 at 102. The price has now crept back up to NAV at 108p. Nice one.
- Emerging markets seem to be recovering slowly and as I have quite a bit in two holdings (an ETF and
- Man Group continues to be the dog in my holdings. Only keeping it for the dividends now which I hope will be massive this year. They announced a second quarter of net inflows to their funds which means things are on the improve but it still feels like a basket case. I'm not sure any financial institution is investable other than HSBC at the moment. Even with RBS announcing make-believe profits again, there isn't any way you should be putting your money in any of them at the moment. Barclays unbelievably did another placing recently, announced sackings of 15,000 bankers and simultaneously reduced in real terms their dividend. More evil than any corporation that has ever bestrode the planet.
- the Saga IPO is uninvestable too. Too much debt, of which they are only paying back a tiny bit. Plus it will almost certainly list at between 17-20x earnings with no growth in the last three years. Madness - you can put your money in Beazley (or any of the other growing insurance companies), pay between 9-10x earnings and get fantastic dividends too. The only people getting rich at Saga are the private equity companies and the directors. Save your money people.

There's been no sales of any holdings for a while.

Are we getting toppy? Certainly the pull-back in tech and bio stocks in the US is a warning to them. At the moment though with the FTSE on an average of 14.5x earnings and paying around 3.5% in divs, there is no point having your money anywhere else.

Plenty of great things on the blogs around the world at the moment. As ever, I am in awe of the writing on Monevator and hang on everything Paul Scott has to say in his daily roundup on Stockopedia.

Tuesday, 1 April 2014

Book Review - 'Young Money' by Kevin Roose


Just recently finished this book so thought I'd share a few comments on it. You can of course read loads more reviews of it at Amazon if you like.

Kevin Roose is a New York magazine journalist and has a few other books to his name during his career, so has developed a style of writing that aims to give you the impression he has become embedded in his chosen field. In this book his target is to expose the world of investment banking from the viewpoint of the young graduates entering it. Following eight graduates over about three years during some of the most turbulent times ever in finance, we learn about their work lives and some small tidbits of the effect it has on them. It's an easy read, with small chapters that rock along very quickly following one of the participants at a time.

The majority of the graduates have come from ivy league universities at which investment banks tour in the year's preceding graduation to find their next crop of interns. Quite a bit of the book is given over to how the prospects are groomed at this stage, promises that are made, and the role of the university, the courses, and indeed the pupils role in expectations of a job after university. Kevin attends some of the career fairs at the schools to find out more about how the banks attract the highest talented students to apply for their roles. I've just done a quick troll of the internet for some of them and they seem super sophisticated affairs with huge websites devoted to them at each university.

What to wear to a Career Fair - Penn State advice
What's fairly frustrating with the book is that for the most part, none of the participants know each other so there's no chance to discover them as a group. Also with eight participants we don't really get to find out too much in depth about any of them. I guess Kevin has attempted to get a cross-section of new graduates and he has chosen people from different backgrounds (within what is obviously a limited scope, as the banks involved only select the creme-de-la-creme of society). In fact, really what you witness is how homogenous the group of supposedly disparate people are. They are all motivated by only one thing - money.

We learn that to get this money the investment banks require them to work ridiculous hours every week and that all of them work seven days a week. This un-written extreme hours contract exists between the bank and the newly hired graduate analysts / brokers for two years. At that point almost all the graduates are broken and exhibiting extreme behaviours, whether that be drink / drug related or stress disorders, and their relationships with family, friends and significant others has disintegrated. They are then expected to leave the banks and move to private equity, hedge funds or traditional finance companies. It's pretty short term based thinking that reflects badly on the banks and is fairly typical of their behaviour over the last 20 years. God knows how they think they're ever going to be stable entities without any long term thinking or career based occupations for their supposedly carefully picked graduates.

This short-termism is having an effect on the career goals of the graduates themselves. Most of them realise that they chose poorly at the beginning of their career and half of them leave to pursue other interests, specifically in the world of technology. I've written previously that the internet firms would steal the world's best minds from the other high paying jobs and this book confirms that this is happening. The world of startups, equity and being able to control your time involvement in the firm is extremely tempting after the jack-booted investment bank stereotypes many of them discover.

There's no ground breaking information here. I think everyone knew that i-bankers are expected to work mental long hours. However, as a book it romps along. Short chapters with interesting snippets of work behaviour. eg. crazy unreasonable bosses, excessive behaviour, amazing deals. We get snippets of the graduates outside life but don't get to know them terribly well, certainly not well enough to actually care about any of them. Most will recognise themselves in some of the characters - the inflated perception of one's abilities and talents when first leaving university and within weeks you discover that you know absolutely nothing about the real world can be disheartening, and the best bits of the book are when the individuals involved have that realisation.


The chapter on Fashion meets Finance is the most interesting; funny, clever and eye-opening. This is an event set up for hot girls to meet men involved in finance. It's as barbaric, money grabbing and sugar daddy seeking as it sounds and yet apart from one year at the height of the GFC its been a popular event. Unbelievably there has even been one in London last month. I have no idea it it was a success or not.

As a whole Young Money is worth a read.

Wednesday, 19 March 2014

Portfolio Adjustments - March 2014

Over the course of the last month Investimouse has sold out of Tangent Communications (TNG:L), the London based digital media and print company. Results are good, a better dividend is expected this year and they are starting a share buyback in the coming months. Bought at 9.1p, sold at 11.3p - so a rise of about 25%. I hope I don't regret selling early but a recent RNS which stated that there were over £3.5M in phantom options payable to two directors in the coming year spooked me. That would completely wipe out profits in the group and made it a bit uninvestable until those are gone.

Investimouse also sold out of Coms (COMS:L), a superb little earner, which in just over a month doubled in price. Suppose I could have held on for more of the recovery but feel that the valuation had started to get miles away from itself.

To replace these Infinis Energy (INFI:L) is now in the fund purchased at 246p earlier in the month. Think it could be an excellent long term hold for both yield and growth. As an energy play it's always going to be a little at the mercy of government whims but it has decent growth plans with new power plants expected to add another 500MW of generating capacity. It may also end up being an excellent consolidator of all the other little renewable energy firms in the UK.

In addition more money was put into Merchants Trust (MRCH:L) and new money was found for a small stake in Middlefield Canadian (MCT:L) which I hope will be a nice safe high yielding trust. Paying guaranteed 1.25p quarterly dividends it yields at around 5% at the moment which should do me fine for the next few years.

Tuesday, 4 March 2014

Portfolio Review - 2013

Man,its been ages since I posted on Investimouse. Shame on me. I've still been active in the market and trying to make more money through investing, saving and financial austerity, yet the real world, and work have intervened to stop me posting.

Anyway, how did 2013 go for the Team Dave Fund of Fun-ness portfolio?


The fund ended up 20.51% in 2013. Damn pleasing and the best performance since 2010. Considering the number of fixed interest holdings and dividend income shares I have now this seems a very impressive performance. But how did it do against the benchmarks? After all, unless you compare yourself to the market, you may as well have been buying a single FTSE100 tracker or similar.

According to Google Finance:
- the FTSE100 was up 13.9% for 2013.
- the All Shares Index was up 16.2% for 2013.
- the S&P500 was up 38.1%
- the World Index was up 26%. (although I'm not sure if this is accurate - struggling to find a perfect measure).

Clearly the place to be was the US in 2013. I've been gradually reducing my exposure to the US (mistake!) as I felt it was incredibly over-valued. The PE for the S&P is a good 25% above the average and that has to mean that things are going to go wrong soon, or so I thought.

The continuing improvement in the World Index continues to nag me. My portfolio consists of a bunch of investment trusts and low cost emerging country tracker funds that could probably all be done away with and replaced by the iShares World Index ETF.

Investimouse holds its shares in the Team Dave Fund of Fun-ness ISA through the iWeb platform. Loads of changes are happening right now due to the implementation of RDR in the UK, basically meaning we all pay a bit more for buying funds, holding shares, etc in our ISAs. I'm sure this wasn't the intention of the good natured law makers but that's what is going to happen to me. I've investigated moving the ISA again but feel that overall iWeb will probably still be just about the best platform to stay with for the size of my holdings. Plus the drama of it all when moving last time from iii to iWeb has put me off ever wanting to do it again!

The last time I had to shift platforms I produced a Google spreadsheet that was a big online hit with people caught up in iii's platform fee charges. This time the good folks at Monevator have an excellent comparison tool that could help you with figuring out who to hold your shares with and place your transactions through.

Monday, 4 November 2013

Bogleheads - What's that all about?



There's a thoroughly decent article which is worth a read over at Forbes magazine from last week on the cult of Bogleheads.

Bogleheads are a group of people (now numbering in the hundreds of thousands) who have adopted Jack Bogle's methods in their investing and everyday life. Their site is nothing to look at but is full of useful gems of information, tips and deals, and good wholesome advice. Most of it is focused on the Amerian market

Forbes has broken down their credo into the following 10 points. I won't elaborate further on them as they're explained in the article but the headings alone give decent advice for a prosperous life.

1. Live below your means.(Big fans of that here at Investimouse)
2. Cost matters.
3. Buy the market/diversify.
4. Don’t look at past returns to gauge future performance.
5. Never try to time the market.
6. Stick to your goals.
7. Save as much as you can, as early as you can.
8. Look at the big picture.
9. Automate good behaviours.
10. Minimize taxes.
Lots of good passive investing advice really. Keep your costs low, invest regularly and often, don't try to time the market and keep diversified.

Tuesday, 25 June 2013

Can we predict the next financial crisis?

Here's a recent TED talk from risk economist, Didier Sornette. Didier runs the Financial Crisis Observatory which has plotted a set of early warning signs for unstable, growing systems, tracking the moment when any bubble is about to pop. Not just bubbles in finance but all over the place throughout different systems in the world.

It's worth a watch if only so you can either:
a) marvel in amazement at his predictions,
b) shout bullshit at the screen, or
c) be astonished that there doesn't seem to be any actual science or presentation of what, how or why he declares anything a bubble and the mathematical point at which it will break.

The comments on the video are excellent and you should jump in and join the discussion there. Most interestingly, he puts up a slide on the bubble of human population and then doesn't actually talk about it. Clearly this is the biggest and most damaging bubble that mankind faces and it would be interesting to find out more at what point the human exponential population explosion bubble is going to pop...