Sanctions, sanity and sanctuary

Dominic Thomas
April 2025 • 5 min read

Sanctions, sanity and sanctuary

You are old enough to know that the world is fairly mad. Nations are often run by fairly despicable people, sometimes elected into power, sometimes they simply take it. At some point in life (for some this might be their entire lifetime) an opinion is formed about ‘others’ who are used as the excuse for many ills and failures. The truth is a victim of agenda and despite the cold epitaphs of November Remembrance services, nothing is really learned other than to repackage misery.

We take it as a sad reflection of “man’s inhumanity to man” that some people don’t and won’t get on, invariably due to holding a different opinion about religion or politics or both. In a capitalist world, withholding money and trade (or making it harder for both) is a way of attempting to coerce a required behaviour. This may have worked in the 1980s with sanctions imposed against South Africa; whether it has worked elsewhere is debatable. Yet it remains a rather obvious tool.

Idealists (which I am prone to myself at times) may well argue that the power of withholding custom or money from some companies may help nudge them towards better behaviour. Trying is arguably better than doing nothing.

In the investment world, screening out companies (or even countries) is not without its challenges. One man’s freedom fighter is another man’s terrorist. Perspective and narrative are up for grabs and twisted to suit.

The war in Palestine, which is horrendous, poses challenges. For some to criticise Israeli politics is to be antisemitic, which is, in my opinion, utterly daft. Anyone who has paid attention to history, knows the misery and horrors inflicted upon Jews for centuries, particularly in the last World War with the holocaust. It is more than understandable that Jewish people would wish to defend themselves. However, any reasonable person, would not consider the atrocities in Gaza anything remotely reasonable but rather more ironically fascistic.

When Government fails to address a problem, individuals are left to find ways that they might express their concern, and investors reduce or completely withdraw from particular sectors or countries. We are all investors; most people simply don’t know how things really work. If you have a final salary pension (lucky you!) then you may not be aware that money doesn’t simply appear, it is the consequence of investment in property, debt and shares in companies. You do not get to select the investment and given the size of the scheme and pressure on it to provide a guaranteed income for your lifetime and your spouse’s, there isn’t really that much invested into shares due to the need for predictable income and an inflation linked one at that.

Some protest groups have taken to highlighting “investment into Israel” or ammunitions and defence companies that supply Israel (amongst many others). They call for a ban on such holdings as an attempt to influence the behaviour of the companies and Governments concerned. I have sympathy with the sentiment, but as a member of such a scheme you don’t get to choose how and what the pension is invested in and it is enormous. The Local Government Pension for England and Wales for example stood at £354,047,000,000 (£354billion) at the end of 2023. This is a scheme where more is paid out (in pensions) than paid in (contributions by employed members). Roughly 51% of the LGPS is invested in shares. Interesting (for me) the investment costs for 22/23 were £1,726,500,000 which is about 0.4876% of the portfolio (so your portfolio – if arranged by us – gets lower investment costs than the massive pension schemes).

In 2022/23 there were 6.49million members of the LGPS, up from the previous year by 0.1million. Active members (people employed and contributing) amounted to 2.09m (32%); deferred members (former employees not yet taking their pension) 2.39m (37%) and 2.0m people (31%) drawing a pension. To say getting this balance right is difficult would be an understatement.

So, to exclusion … well one article I saw claimed that “81 local government pension funds have known complicit investments” and that £12,214,286,216 was the sum involved. Don’t forget that the value will fluctuate wildly each day (they are shares). These include Amazon and Google, I’m going to guess that you use these services so would be deemed complicit too. If I may infer that roughly half of the LGPS is invested in shares (£180bn or so) then the focus (£12.2bn) is on about 6% of the shares held (by value) – or 3% of the total value of the LGPS.

I’m not going to pretend that this is an easy problem and telling the Board of LGPS to divest itself of £12bn into other shares is either a wise, good or bad thing. Will it make any difference? Is 3% of something an issue that normally causes you distress and guilt? How much of your tax is spent on things you don’t agree with or approve of? Do you write to your MP about it?

£12bn is a lot of money, it should be enough to make most of us stop and think, but when presented as 3% – does that alter your perspective?

Sadly, the world is a chaotic, messy and often nasty place. My privileges of living here in the UK (amongst many others) are not lost on me. I don’t have the answers for the crisis, which is both decades and centuries long. Flexing an economic muscle has its appeal, but quite how much this particular issue is of significance I am afraid that I’m unable to say.

Members of final salary (Defined Benefit) pensions are not able to select funds, but of course are able to lobby the Board about their concerns. For those of you with an investment-based pension, we can discuss screening policy at any time.

If you are seeking a personal opinion, then I would say that lobbying is a good approach to the problem, but it isn’t an easy or straightforward process. Arguably, UK Government (or broader) sanctions might have more of an impact. Demonstrated by the fact that Mr Musk’s remarks and gestures have not gone unnoticed and have resulted in a dramatic change in Tesla’s valuation.

References:

https://lgpsdivest.org/
https://lgpsboard.org/index.php/membership23

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Sanctions, sanity and sanctuaryJemima Thomas2025-04-08T11:14:04+01:00

Market turbulence

Dominic Thomas
March 2025 • 3 min read

Market turbulence

If you have followed the news, you will appreciate that global stock markets have been falling sharply over recent weeks. This is in response to the wave of changes and abandonment of normal policy by the new, rather insane US Government.

Your portfolio will have fallen. It will recover, the question is really how much worse will things get and how long before they recover. To which the answer is, “I don’t know” and nobody knows.

I would remind you that we have seen significant falls in market values every year (on average -15% every year at some point), it’s simply that some years you and the media pay more attention.

You can view your portfolio in our secure portal or on the platform portal that we are using for you, typically Fundment, Nucleus, Parmenion or Transact. However I would caution against doing so regularly as this will merely increase your anxiety, which isn’t good for your health or your financial plan.

Many of us realised that Trump was not someone to be trusted, based on his actions over many years, but despite his very odd decades-long special relationship with Putin, it seems that there are still swathes of Americans who are unable to discern this (even if it smacked them around the face with a kipper). Denial and distortion of facts and reality are in evident supply, unlike truth and justice.

In terms of helpful and reassuring information and our approach to evidence-based investing, JP Morgan produce data about the worst declines in valuation during each calendar year. Admittedly, this is the FTSE All-Share not the global market, but the principles are exactly the same. It’s a chart that you would have seen before in our client magazine Spotlight.

The chart shows the grey bars as the final return for the calendar year since 1986. It shows that of the 39 completed years, 27 (70%) were positive, 12 (30%) were negative. That means that roughly one year in four is negative. The red dots indicate the worst or deepest decline in each of those years. Every year has a ‘crash’. The average drop is 15% and the median (the middle value when all lined up in order) drop is 12%.

This knowledge hopefully provides some comfort about the reality of ‘drops’ each year, but the message is really – don’t panic, stay in your seat. Admittedly you could say “sell it, get me out” but this will actually realise a loss (make it real rather than notional) and it is unlikely that you will re-invest at a point that is any more favourable, if you do that’s probably luck rather than skill.

We have built your financial plan making allowance for these scenarios. Investments do not grow in straight neat lines; they are erratic. The greater the proportion you hold in equities (shares), the more volatile, but also the greater the reward over time. Your plan is designed for your entire lifetime and beyond.

As of now (March 17^th 2025), the global equity market is down -3.75% since the start of 2025. Global Bonds are up +0.85% and a 50/50 portfolio is down -1.73%. The numbers in pounds will look considerably worse than this, they always do because you relate to pounds in terms of your income and spending rather than your capital, but it is healthier to consider it in percentage terms. The chart below shows the Year to Date (YTD) figures for Timeline Tracker 100 (green) 50 (yellow) 0 (red).

Looking at a longer term perspective helps provide some context.

None of us like to see portfolios hit heavily, it is unnerving. As I have said, this is currently down to the politics of the US Government, with proposed tariffs and appointing billionaires to act as parodies of Bond villains providing ‘advice’ to the White House. Personally, I hope that he is removed from office as soon as possible, but it is also clear that the Vice President is perhaps even worse, possessing very little understanding of how the world works.

Generally in life we tend to assume that wisdom is correlated with age. At the age of 78 I find no evidence that Trump possesses any. Mr Vance at age 40 certainly hasn’t acquired any yet.

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Market turbulenceJemima Thomas2025-03-20T16:51:04+00:00

The State of This

Dominic Thomas
Nov 2024 • 1 min read

The State of This

When a clown moves into a palace, he doesn’t become a King. The palace becomes a circus.

Today I must once again face the struggle to recognise that I cannot control very much at all. I cannot control how people vote either here or in another country. I have to come to terms with the sadness, anger and disappointment that for reasons I simply fail to understand, Americans have voted for someone who wouldn’t be fit to work in any organisation I have ever been involved with. In my sector, the regulator would not permit a position of authority to such a person and hopefully not even a license to practice. Think about that for a moment.

I can control my responses, which is far easier to say (and write) than it is in practice. I can acknowledge my feelings of rage and the decisions taken, for which I have a variety of colourful terms, but I will not give way to my ire here.

Despite being a sad moment (and from my perspective a very dangerous one) for most of the planet, I remain committed to positive change. To doing the little that I can to improve life for those in my orbit and where possible those outside of it.

We will be here, at the ‘coalface’ of the struggle between your values and value, between enough and too much, between lack and excess, between conflicting feelings and realities. The nuance of life in all its glory, the choices that each of us make on a daily basis as we step forward into an unknown future, which has today become a little more precarious than it was yesterday.

We only have time, the important things are those that unite and bind us as humans, which are surprisingly simple and often forgotten.

Hope not hate.

Life is brief, his tenure will end.

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The State of ThisJemima Thomas2024-11-06T13:47:33+00:00

You’ve Been Trumped

Solomons-financial-advisor-wimbledon-blogger

You’ve Been Trumped

When I ask most people when they wish to retire, they tend to say “65” some say earlier than that, but certainly most say 65. So whatever one thinks of the recent election in the United States, it is worth remembering that clearly the a new top job posed no obvious concerns for either Hilary Clinton (69) and Donald Trump (70) the latter will now replace Ronald Reagan as the oldest US President elected (who was 69 in 1981 at the time). Mr Obama, for the record turned 55 in August and so would only just have qualified for the new pension freedoms here in the UK.

The unease about Mr Trump is largely due to the rather reckless and aggressive things he said as a candidate. Naturally many of these have been taken at face value and it is hard to see how he would make a worthy world leader given his apparent lack of self-control and overly inflated ego. Indeed his understanding of “hate” and “harassment” must surely be out of whack. His own words before and since the election delivered in a tone precisely the opposite to that of the actors at a New York theatre, who respectfully offered their legitimate concerns to Mr Pence, yet he took this as an affront and has repeatedly demanded an apology, something that he has not offered himself to anyone for any of his rants. However, sadly, he will be the 45th President, assuming the 70-year-old can live with the stress and legal challenges until January. He is arguably one of the least suitable people to be President, but of course history reveals a lengthy list of similar psychopathic leaders.

The Great Con Trick

Mr Trump has estimated wealth of over $3bn yet seems to have persuaded the majority of key voters that he is anti-establishment. Yet this is a man who has only once elected finally settled a fraud case about his “University” – essentially proving that justice in America is for those with cash and who can make problems disappear. If ever there was an example of the 1% “elite” getting their way and deluding the masses, this must surely be it. Perhaps the Hamilton thing was simply his way of trying to distract people from yet another example of his utter hypocrisy.

Swallowing Camels

Talking of delusional, many of his voters were conservative evangelical Christians (some not all), who by any measure must fall foul of straining a gnat to swallow a camel, turning considerably more cheek and “blind eye”, perhaps due to some sense that he represents “family values” (ironic given his background) but by which is meant… there’s one way to do this thing called life.

A Deep Sense of Inadequacy

His credentials in business are somewhat questionable, having made a fortune and lost one, with six of his businesses declared bankrupt (Chapter 11) between 1991 and 2009, all of which came about from over-borrowing. He invariably claims that business isn’t personal, though excels at telling anyone how personally talented he is. In essence Mr Trump already had a fortune and then borrowed money as a landlord to make a larger one. His high-rise Trump Tower buildings presumably provide any psychotherapist with ample material.

Pandora’s Box?

Naturally, I do not know Mr Trump personally, so I am not in a strong position to assess the information we have about him any differently from anyone else. He does not appear to be a man able to remain calm in a crisis, indeed he merely stirs and promotes phobias of those who seem to need little prompting, perhaps due to ignorance or genuinely miserable lives that need to blame anyone and anything that’s different… and I am, like others, concerned that his election “normalizes” extreme views of a very unpleasant nature.

It’s possible that he might be a decisive President and able to get things through both Congress and the Senate, now that they are “rigged” in his favour, much as they have clearly been working against the interests of Mr Obama. His stated aims are alarming, he has surrounded himself with people who appear to also struggle with inflated egos and at this stage it is hard to see who will provide the wise counsel that he will certainly need.

Of course, quite why people voted as they did, for something different or just someone they thought was tough on TV I shall leave to the pundits to decipher. We will calmly review investments in light of information as it materializes.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

You’ve Been TrumpedDominic2023-12-01T12:18:59+00:00