Money news, advice and predictions for savers and spenders. This week: do shares really make good Chrismas presents?
By Jeremy Gates
Could a quarter of Britons really be thinking of giving some shares in leading companies to loved ones - believing they will gain value in the long run?
Apparently yes, says Lloyds TSB wealth management: half its sample of 2,000 adults see stock market investment - "a gift that keeps on giving' - as better than gloves, slippers and socks.
Nearly half those questioned said they would like shares as a gift, as an encouragement "to get involved in the stock market", says Lloyds TSB.
Are they mad, after the disasters which hit investors in 2008? Some of Britain's most successful funds halved in value, and two hot tips in December 2007 - Russia and pre-Olympics China - were among the biggest nightmares.
Tony Ahearne, who compiles fund performance charts at Moneyspider.com (www.moneyspider.com), says the highly-rated Artemis UK Smaller Companies fund is one of the biggest disasters: £7,000 invested five years ago was worth £18,000 in December 2007, and just £6,349 a year later.
Amidst the wreckage, one of Britain's top share 'gurus', Anthony Bolton, who ran Fidelity Special Situations fund for 28 years until 2007, is calling the bottom of the market; he thinks FTSE100 hit bottom at 3,781 in November, and sees a 2009 rally led by banks and commercial property.
Ironically, Bolton spoke as Lloyds TSB shareholders were invited to buy more shares in their giant new bank after the merger with HBOS; after the latest HBOS losses, most are likely to run a mile than take the offer up.
There may be one positive argument for shares in 2009: if interest rates really hit zero, dividend income of 5%-plus on shares could cheer up those who have bothered to save.
Barbara-Ann King at Barclays Stockbrokers says: "Despite ongoing market volatility, it is encouraging to see investors continuing to see value in equities.
"While a third of investors still believe cash is king, nearly half believe equities are better value following interest rate falls."
However, even the experts - like top New Star fund manager Tim Steer - admit that haywire markets are a sign that all the normal investment rules have been suspended. Nobody knows if FTSE100 will be 3000 or 5000 in a year's time.
The New York hedge fund fiasco suggests many skeletons may emerge as asset values fall. 'Bottom fishing' in sectors hardest hit - like banks, bricks and mortar, cars - is a gamble which could easily wipe out your entire stake.
Jeremy Tigue, fund manager at Foreign & Colonial Investment Trust, one of Britain's oldest funds, says: "2008 has been an unprecedented year, and one we hope will not be repeated in our lifetime.
"Busts in banking and commodities were bigger and faster than anything ever experienced before, and one following the other had the effect of a double tsunami on market stability and confidence."
Tigue predicts a dire 2009 for the UK economy, with Europe not far behind.
"Emerging markets are probably the most interesting area for 2009 and some will have a terrible year - notably Russia and other oil dependent markets", he says. "Asia should be able to weather the storm better, depending on the resilience of China."
Tigue backs the US to be the first out of the slump.
Independent financial advisors (IFAS) seem to agree. Research by JPMorgan Asset Management found 51% favouring investment in US shares, compared with Emerging Markets (25%), Japan (18%) and Europe (just 6%).
The problem with UK-based shares is that few see them going much higher, as rising unemployment slashes spending power. Big firms operating globally may reduce this problem.
A survey from the Association of Investment Companies (AIC) shows that 54% of fund managers expect FTSE100 to finish the year between 4500 and 5500, but 23% fear it will close below 4000. The market is currently around 4250.
If these projections are anything like accurate, the safest bet for 2009 is almost certainly funds managed by professionals. Investors determined to use their ISA allowance in equities can drip-feed money by instalments, to gain from surges and dips in the market.
Mick Gilligan, head of research at brokers Killik & Co, says: "In 2009, investors are likely to treat any short-term stock market recovery with scepticism, fearing it is only a temporary respite from the long-term bear market.
"Hold stocks that will participate in rallies, but won't lose out if an upturn proves short-lived. We think Vodafone and Cobham fit the bill, while appetites seeking greater risk might link BHP Billiton .
"The ideal fund for this scenario is run by someone who has capital preservation at heart, while looking for the upside when an opportunity presents itself. Jupiter Financial Opportunities and Odey European fit the bill."
Gilligan also tips the Cazenove UK Target Absolute find, up 5.9% since launch in July against a FTSE decline around 20%, along with two Eastern funds: First State Asia Pacific Leaders and First State Asian Equity Plus.
So far as individual shares are concerned, many have been oversold in hedge funds' frantic dash for cash and are too cheap. But finding these companies might be best left to the professionals.
Richard Hunter at Hargreaves Lansdown says the direction of the US dollar is crucial to investors in 2009, with the hope that Obama-led initiatives can lead the world out of recession.
"As such, nimble investors maybe able to benefit from any further dollar strength in companies which are dollar-focussed, like Glaxo, Wolseley, WPP and Carnival Cruises, and exit in the event of dollar weakness", he says.
Hunter also likes the defensive nature of pharmaceuticals - notably Glaxo and Astra-Zeneca, up 3% and 14% respectively in the past six months against a FTSE100 fall of 30%.
Hunter also gives guarded support to BP (yielding 4%-plus), Royal Dutch Shell 'B' shares, Tesco and British American Tobacco.
But he warns: "2009 could be a year where trying to time any recovery is pure speculation".
At Barclays Stockbrokers, equity strategist Henk Potts is also thinking globally: he tips AstraZeneca (target value 3300p); Vodafone (185p); BP (620p); and Standard Chartered Bank (1000p) focussed on Asia.
There's an interesting batch of suggestions from the largely bombed-out financial sector in is week's Investors Chronicle magazine: asset manager Jarvis Securities, interbroker dealer Tullett Prebon, down 70% in three months, hedge fund manager Polar Capital, life assurer Chesnara and insurance giant Aviva.
I recently topped up my personal holding in Chesnara, which buys life assurance funds and makes payouts on maturity. With a yield of 15%, it has held up pretty well through this difficult year.
A much bigger player bet, in the financial sector, might be Alliance Trust, the Dundee-based investment company which narrowly qualifies for FTSE100 membership it shows a wide gap between price and net asset value (NAV), pays a dividend of 4.3% and is being restructured by new boss Katherine Garrett-Cox.
Alliance Trust is among the picks for 2009 from Alan Brierley, head of investment at investment bankers Collins Stewart, who warns that: "The UK is facing the mother of all boom and busts, which makes the global outlook look almost sanguine."
Brierley thinks Alliance Trust was smart in cutting its exposure to shares before the autumn sell-off. His other favourite funds include Edinburgh Investment Trust (currently 306p), which has been handed over to top Invesco Perpetual fund manager Neil Woodford, Finsbury Worldwide Pharmaceuticals (523p), and Perpetual Income & Growth (181p).
There could be as many as 10m small shareholders, and only those of stern stuff can be looking forward to 2009. According to Capita Registrars, the total value of private shareholdings peaked at £209bn in May 2007, had plunged to £161bn by July 2008, and may be barely £140bn today.
However, Capita chief executive Michael Kempe is not entirely gloomy.
"A lot of small investors were smart enough to get out of the banks a year ago", he says. "They got into oil, gas, and other better-performing stocks. Many have done better than some professional managers."
:: INFORMATION: Hargreaves Lansdown (0845 345 0800); Killik & Co (0207 337 0400); F&C Management (0207 628 8000); Collins Stewart (0207 523 8000).
POUNDNOTES
:: As the over-60s feel the squeeze, equity release withdrawn from bricks and mortar could double from £1.2bn in 2007 to £2.4bn in 70,500 plans drawn by 115,000 homeowners in 2013, says Norwich Union (NU), the largest provider and part of Aviva.
NU says homeowners in South-East England collected £342m in 2007. By 2013, that will be almost £700m.
The other big spenders in 2013 will be in South-West England, where £370m will be taken in equity release; and the East Midlands (£147m). Around £128m will be withdrawn on London properties, against £63m in 2007.
NU's Anthony Rafferty says: "While economic turmoil has been detrimental to many parts of the UK economy, it may actually stimulate growth in the equity release market."
:: Only around 17% of homeowners bother to buy Payment Protection Insurance (PPI) to guard against redundancy, says Sara-Ann Burgess of British Insurance, which continues to offer unemployment cover at £3.40 per £100 of monthly benefit.
Burgess says: "Those under notice of redundancy will be unable to buy PPI, but it is available to anyone employed in any sector across the UK. Rumours abound that people working in 'at risk' sectors such as manufacturing, construction, financial services and now retail will be turned away, but this is rubbish."
British Insurance: 08450 175 178.
:: Even 8-18 year olds are getting jittery about the 'credit crunch', says pensions and insurance group LV=, which says four in ten children - about 3.5m in total - are already bracing themselves for fewer or cheaper presents from parents, family and friends.
:: Former Blue Peter TV star Valerie Singleton has joined a small group of friends and colleagues to launch a new website www.discount-age.co.uk, which intends to save lots of money for over 12m over-60 year olds in Britain.
Though the website is free, a membership fee of £10 must be paid for those who want to enjoy "a growing number of exclusive additional benefits and discounts".
