Election impact on investment strategy

[Lootman]

Well maybe they will nationalise all private pensions, so your SIPP is exchanged for units in a new National Retirement Plan. This is to protect people from being robbed of their pensions by scams or company insolvencies and to increase security and equality by ensuring everyone gets the same return!

It will provide the state with a vast pool of assets to be used for 'investment' in public services.

This is my one real concern about pensions. Governments. Platform risk pales in comparison. I may consider stopping Sipp contributions if Magic Grandpa gets in.

Yes, the real risk is to assets that cannot be removed from UK jurisdiction. So expect property and pensions to be a soft target for Labour, because they are captive.

I have long been sceptical about pensions because they are a hostage to fortune. Governments find it impossible not to meddle with them. I have frequently foregone the tax relief going in, in favour of ISAs and other vehicles that are at least potentially exportable. Even the state pension could be means tested in the future, while NICs could be applied to the over-65's and to investment and pension income.

I am stuck with UK property, however, although I unloaded my BTLs a decade or so ago, before the "war on landlords" even started (by the Tories, of all people).

[jonesa1]

I wonder if the Labour manifesto writers look in fora like this for ideas

[widowandorphan3]

Yes, the real risk is to assets that cannot be removed from UK jurisdiction. So expect property and pensions to be a soft target for Labour, because they are captive.

Yes, most definitely. They will also want things that are cheap and easy and quick to enact - a bit like what GO did with child benefit, which yielded a fair bit of cash without needing a big added overhead cost to administer. If someone in your family earned >£50k or whatever, the end. Easy to check, hard to scam, easy money. I quite admired that approach (and didn't fundamentally object to it), even though I was a loser from it.

Interestingly, the 2017 Labour manifesto didn't have the 'mansion tax' , which it did in 2015; wonder if it will be revived? (nor did it have scrapping universal credit, notably). Or do they just go the magic money tree for everything? I suspect they will say anything to get in power, which may be JC's last chance, after all.

I'm surprised STG has held up so well in the past few days - I personally can't see it getting much stronger even if Tories seem to be doing well - and I can easily see it drifting down for all sorts of reasons. For all the ups and downs we face, I can see the appeal of 'getting Brexit done', even among those like me who don't want it. But I can't be the only person whose heartily sick of it all!

WaO

[flyer61]

Sterling is probably holding up because it looks unlikely that Corbyn will win an outright majority. However if we woke up on the 13th with a Corbyn government then Sterling would have it's vote. Marxism and a hard currency are not happy bed fellows. McDonnell will act quickly and yes unbelievably he thinks (and the echo chamber he lives in thinks) that you can control the international order. If Sterling collapsed and there is no reason to think it won't prices at the shops etc will sky rocket. Interest rate rises anyone?

I have realised that the income tax plans are not really the problem. It is the punishment wealth taxes that McDonnell will want to implement asap that will cause fools the most damage. Given we are all wedded to the state NS&I, Prem Bonds, ISAs, SIPPS, pensions various, the state records our property ownership then a top slice across this lot will be where the hurt comes.

Keep the mitigation ideas coming fellow fools! But keeping a goodly chunk of your assets not denominated in sterling seems a good place to be.

[Wuffle]

With all the negative yielding debt about, how far would sterling fall and how high would interest rates go and how much money would just 'evaporate'? How much liquid cash can there be in the world that hasn't been put into dollars already? And are you sure Diane W. and Bernie S. aren't making people at least think?
The Mail referenced in the OP is not without prejudice in this regard.
Gold and other real assets not withstanding.

[Lootman]

I have realised that the income tax plans are not really the problem. It is the punishment wealth taxes that McDonnell will want to implement asap that will cause fools the most damage. Given we are all wedded to the state NS&I, Prem Bonds, ISAs, SIPPS, pensions various, the state records our property ownership then a top slice across this lot will be where the hurt comes.

A wealth tax is certainly possible, although I'm not aware that it has been formally proposed by Labour. If it is not in their manifesto then it would be aggressive to turn around right after the election and impose one. Maybe they would dress it up as something to tackle so-called "inequality"?

Moreover they don't work very well. Even tax-loving France got rid of theirs, except for property. Most of tax-loving Scandinavia doesn't have one. Some countries even have a constitution that bans the imposition of one, such as the United States, although some experts argue that it doesn't, which is presumably why Sanders and Warren are chirping about introducing one.

The government does have some idea of our individual net worth, as you say, although it is incomplete at present. For instance it knows what you paid for your house but not what it is currently worth. It knows that you have one or more ISAs but their valuation is not currently reported. And of course it doesn't know about any foreign assets or collectables, which would likely become more popular if wealth was taxed. At the moment the only time your net worth is tallied is when you die, unless you claim benefits anyway.

Presumably there would be a threshold below which wealth would not be taxed. McDonnell has stated that only the richest 5% will see higher taxes under Labour. Assuming that he's not lying then I'd have to believe that 5% of the population has a net worth of a million or more, if only because of house prices in southern England and earned pensions, so perhaps the limit would be set around there?

[fca2019]

Good article today in the YouInvest magazine on this topic, if you are with AJ Bell. "What the Big Vote means for your money". A lot of the themes raised are discussed, with a summary including:-

If Labour Wins
*potential weakness in utility, transport and infrastructure
*business could clash with labour over tax and employee ownership plans
*stock market weakness in the short term

If Cons majority
*pound could rally
*UK focused companies could surge in particular banks, housebuilders, leisure groups, retailers
*stocks marked down for labour-specific fears could rebound

[SalvorHardin]

Good article today in the YouInvest magazine on this topic, if you are with AJ Bell. "What the Big Vote means for your money". A lot of the themes raised are discussed, with a summary including:-

If Labour Wins
*potential weakness in utility, transport and infrastructure
*business could clash with labour over tax and employee ownership plans
*stock market weakness in the short term

I'd add if Labour majority:
*huge fall in sterling (possibly up to 25%, i.e $1 = £1)
*big rise in interest rates all along the yield curve (not just the base rate, I wouldn't be surprised to see the base rate jump from 0.75% to 3% and to see a 200bps increase along the yield curve)
*stockmarket weakness in the medium term (McStalin's proposal to steal 10% of the shares of most quoted companies and delist those which don't meet his "green standards" is going to weigh heavily on share prices for several years)
*capital controls imposed to limit the flow of sterling into other currencies

as Hayek said "If socialists understood economics they wouldn't be socialists"

[ayshfm1]

My first memories are of the early 1970's, rolling backouts, the endless strikes. Defined my political opinion for life. The problem with todays electorate is those of us who experienced the likes of Corbyn are becoming steadily outnumbered by those who haven't.

Part of me thinks it's about time todays entitled whipper snappers had a dose of the real, unreformed left that Corby represents.

[ayshfm1]

On an investment note those formative years taught me to be very wary of paper money.

My Grandad owned a Garage (repaired cars, taxi firm, car hire etc) and he flogged it I think in the 60's and as far as I can tell bought a house and put the rest into premium bonds/cash at the bank etc - no real in investments anyway. It appeared he got was what at the time a lot of money for it. When he died in the 1980's the cash elements had been destroyed by inflation, at least the house was worth a few bob.

Corbyn will likely cause a lot more inflation than we've been used to, so don't stay in cash.

[tjh290633]

My first memories are of the early 1970's, rolling backouts, the endless strikes. Defined my political opinion for life. The problem with todays electorate is those of us who experienced the likes of Corbyn are becoming steadily outnumbered by those who haven't.

Part of me thinks it's about time todays entitled whipper snappers had a dose of the real, unreformed left that Corby represents.

Mine were the 1940s, war years then rationing continuing into the 1950s.

Then came the 1960s starting with the cancellation of TSR2, on to the 1970s and then the Thatcher years. Every Labour Government left a situation from which we had to be rescued. Harold Wilson's "The pound in your pocket", Jim Callaghan's "Crisis, what crisis", as Healey made a smart U-turn.

I certainly do not want any Corbynomics.

TJH

[TheMotorcycleBoy]

Well I don't know what "events are currently priced in" but our 20 month old portfolio seems to be rather buoyant at present. Marshalls Plc (MSLH) and Next (NXT) are still very high as is Spirax-Sarco (SPX), XP Power (XPP) and Softcat (SCT), two fairly recent additions have also climbed very recently.

I'm struggling to find cheap things to top up. Probably DGE or ULVR.

Neither am I, as a US-stock buying newbie finding any bargains on the left of the pond. I'm reckoning that the S&P 500 has priced in Impeachment and cessation of trade-war........in fact maybe that's why my SPX and XPP are up.

One never seems to be short of week long theories in the world of private investing.

Matt

[TheMotorcycleBoy]

Good article today in the YouInvest magazine on this topic, if you are with AJ Bell. "What the Big Vote means for your money". A lot of the themes raised are discussed, with a summary including:-

If Labour Wins
*potential weakness in utility, transport and infrastructure
*business could clash with labour over tax and employee ownership plans
*stock market weakness in the short term

If Cons majority
*pound could rally
*UK focused companies could surge in particular banks, housebuilders, leisure groups, retailers
*stocks marked down for labour-specific fears could rebound

This is interesting - but who could we price (and gauge £ vs $) a hung parliament?

[TheMotorcycleBoy]

Sorry for the spam. It seems that mumblings about a base rate cut is what may have caused some of my foli to rise.

[ayshfm1]

a bit like what GO did with child benefit, which yielded a fair bit of cash without needing a big added overhead cost to administer. If someone in your family earned >£50k or whatever, the end. Easy to check, hard to scam, easy money. I quite admired that approach (and didn't fundamentally object to it), even though I was a loser from it.

WaO

I've never seen figures published on the net impact of that little ruse. I know it absolutely changed my behaviour, my wife and I still claim it (small accident last year meant I have to pay some of it back in tax, that aside an I've collected it despite the 50K limit). The cost of me engineering being able to keep it meant that GO needed circa 20 two child families losing theirs before he made good the tax I was no longer paying. Wouldn't have needed a great many people like me to have rendered it a tax loss overall.

[TheMotorcycleBoy]

On an investment note those formative years taught me to be very wary of paper money.

My Grandad owned a Garage (repaired cars, taxi firm, car hire etc) and he flogged it I think in the 60's and as far as I can tell bought a house and put the rest into premium bonds/cash at the bank etc - no real in investments anyway. It appeared he got was what at the time a lot of money for it. When he died in the 1980's the cash elements had been destroyed by inflation, at least the house was worth a few bob.

Corbyn will likely cause a lot more inflation than we've been used to, so don't stay in cash.

I'm not sure if this is slightly off-topic but the times when we last had bad Labour governments with high inflation it was in the 70s (yup I was around then!), wasn't one of the big causal factors in those days the strength of the British Labour Unions? Remember that's what my Dad put it down to, the unions wanted more, and their rises inflated prices, and that caused a "vicious circle" of wage and price rises. But now have not nearly all of those unions been destroyed? (i.e. by Thatcher).

In other words, the point I'm trying make (not as a die-hard socialist I might add!) is that to form an association between any possible JC government with high rates of inflation seems to miss this key difference between then and now. Is that a reasonable critique?

Matt

[scrumpyjack]

But Labour is committed to hugely increasing the power of the unions so that will reinstate one of the main causes of '70s inflation.
Also a Labour gov will result in a sharp drop in the pound which will kickstart inflation as the price of imports rises. In the '70s the kickstart came from the jump in oil prices as well as the fall in the pound.

I think inflation will come back as a very real risk (well it has never gone away completely - even 3% inflation salami slices away at purchasing power after a few years).

[SalvorHardin]

I'm not sure if this is slightly off-topic but the times when we last had bad Labour governments with high inflation it was in the 70s (yup I was around then!), wasn't one of the big causal factors in those days the strength of the British Labour Unions? Remember that's what my Dad put it down to, the unions wanted more, and their rises inflated prices, and that caused a "vicious circle" of wage and price rises. But now have not nearly all of those unions been destroyed? (i.e. by Thatcher).

In other words, the point I'm trying make (not as a die-hard socialist I might add!) is that to form an association between any possible JC government with high rates of inflation seems to miss this key difference between then and now. Is that a reasonable critique?

The oil price rise in October 1973 by Arab nations, after Egypt and Syria attacked Israel, had a lot to do with it. As did price controls - politicians back then thought that artificially limiting prices to below market clearing levels would increase supply (it decreases it). Then again many of today's politicians think the same, see rent controls and McStalin's proposals to force people to sell their rented properties at well below market value.

The trade unions aren't dead, they're just resting. Back then trade union thugs who couldn't read without moving their lips were dictating government policy; the non-trade union public had to take it and wait to vote Labour out in 1979. Not anymore; the internet has revolutionised people's ability to organise and fund legal actions to an extent that was unthinkable in the 1970s.

The biggest drivers of inflation under a Corbyn government will be the collapse of the pound and McStalin printing money.

[TheMotorcycleBoy]

Salvor, Scrumpy

I'm not sure if this is slightly off-topic but the times when we last had bad Labour governments with
high inflation it was in the 70s (yup I was around then!), wasn't one of the big causal factors in those days the strength of the British Labour Unions? Remember that's what my Dad put it down to, the unions wanted more, and their rises inflated prices, and that caused a "vicious circle" of wage and price rises. But now have not nearly all of those unions been destroyed? (i.e. by Thatcher).

In other words, the point I'm trying make (not as a die-hard socialist I might add!) is that to form an association between any possible JC government with high rates of inflation seems to miss this key difference between then and now. Is that a reasonable critique?

The oil price rise in October 1973 by Arab nations, after Egypt and Syria attacked Israel, had a lot to do with it.

Ah yes. Sorry that's true. I've certainly read about that since the 70s.

As did price controls - politicians back then thought that artificially limiting prices to below market clearing levels would increase supply (it decreases it). Then again many of today's politicians think the same, see rent controls and McStalin's proposals to force people to sell their rented properties at well below market value.

Hmm. I see. That is indeed an interesting proposition.

You make some fair points SH!

But Labour is committed to hugely increasing the power of the unions so that will reinstate one of the main causes of '70s inflation.Also a Labour gov will result in a sharp drop in the pound which will kickstart inflation as the price of imports rises. In the '70s the kickstart came from the jump in oil prices as well as the fall in the pound.

I see what you mean. They'll probably give back power to people, a la Citzen Smith.

Ok. I can now see that similar inflationary forces could well be created. Personally whilst I don't think a JC majority is particularly likely, anything could happen, and indeed in the case of both the 2016 Eu ref, and the 2017 GE, the pollsters of the days made some miscalculations.

In terms of my own investments, I'm somewhat of a small fish, by comparison to a lot of your peeps. I tend to rationalise that if my ISA is tanking, then it's not so much my judgement, since my Fidelity Pension (which is largely in equities) will be suffering similarly.

So in conclusion, I guess if we get JC and high interest rates + inflation, then for me, when this does actually happen....if at all, then I guess I should consider steering our savings in the direction of government bonds?

Matt

[richfool]

So in conclusion, I guess if we get JC and high interest rates + inflation, then for me, when this does actually happen....if at all, then I guess I should consider steering our savings in the direction of government bonds?

Matt

Yes, but which Government's (country's) bonds?