When value and magic run out….

Tuesday, 18th June 2019

When value and magic run out….

Fly too close to the sun and you run the risk of the heat melting the wax that attaches the wings to your body….

The subsequent fall to earth will be both spectacular and devastating….

Students of Greek mythology will know that Icarus found all this out for himself via painful experience….

Students of the markets will recognize that Neil Woodford is currently experiencing an ‘Icarus’ moment of his own….

  • A star turn….

For a long time, fund-manager Neil Woodford could do no wrong. He flew high – a mere small dot circling in the blue sky overhead….

He banked big profits for his investors at Invesco between 1988 and 2014 – profits well ahead of those posted by the opposition….

So much so, he was seen in financial circles as a man with the Midas touch….

His performance was widely feted, his sage pronouncements much-coveted, and his every market move pored over, analyzed and frequently duplicated….

Woodford was ‘smart money’. The man it paid to follow. A luminary among lesser money-managers. A ‘star’ in the financial universe no less….

When he branched out to form Woodford Investment Management in 2014, he enjoyed the backing and support of Hargreaves Lansdown – the  largest investment platform in the country….… Click here to read more

On the retreat….

Tuesday, 4th June 2019

On the retreat….

Bonds are pretty dull fare….

The character Jared Vennett (played by Ryan Gosling) in the film The Big Short summed it up better than I can….

‘If banking was boring, then the bond department at the bank was straight up comatose. We all know about bonds. You give ‘em to your snot-nosed kid when he turns 15; maybe, when he’s 30, he makes a hundred bucks. Boring.’

But boring or not, the bond markets are sometimes instructive….

They sometimes have something important to tell us….

And now is one of those times….

  • First, how bonds work….

Before we get into the nitty-gritty, it’s important to understand how bonds work….

I’m no expert, but here are the basics we need for our purposes today….

When you buy a bond, you are basically lending the bond issuer money. You buy at the current price and the lender pays you what is called a yield – like interest….

For the purposes of this column today, the important bit is this: the yield of a bond is inversely related to its current price. If the price of a bond falls, its yield goes up. If the price of a bond goes up, the yield falls….… Click here to read more