Page 43 - DIY Investor Magazine | Issue 36

Not much has been said about this, but it’s a real issue and one that will be paid for by each of us, the taxpayers.
Closer to home the retail bond market continues to disappoint. Issuance is a distant memory although International Personal Finance did come to market with a roll-over issue paying 12%. With a coupon like that, there isn’t much more to say!
The market also saw its first default, from rugby club Wasps; quips about bondholders being stung are to be resisted!
The club has pledged to continue to pay the 6.5% interest payments as it seeks to refinance, but this highlights the danger of investing without protection of the Financial Services Compensation Scheme.
A review of investments in 2022 wouldn’t be complete without mention of crypto markets which have fallen over 50% from their peak in 2021. Despite this, the crypto market cap is estimated at over $1 trillion, which mystifies me. I have yet to meet anyone who can explain what a cryptocurrency is without defaulting into jargon and displaying their own lack of understanding.
‘I HAVE YET TO MEET ANYONE WHO CAN EXPLAIN WHAT A CRYPTOCURRENCY IS WITHOUT DEFAULTING INTO JARGON AND DISPLAYING THEIR OWN LACK OF UNDERSTANDING’
The saga of Sam Bankman-Fried and the collapse of FTX sums it up. When it came to it, his, its ‘not-my-fault-because-I-didn’t- know’ says it all.
Also we mustn’t forget Su Zhu and Kyle Davis the founders of Three Arrows Capital which brought us the double whammy of a leverage driven hedge fund investing into crypto. Inevitably this also collapsed.
Another fashionable investment that was found wanting this year was the ARC ETF run by Cathie Wood.
Last year, on the back of big bets on Tesla and crypto, she appeared to be able to do no wrong, this year the fund is down around 65%. Undeterred she still promising yesterday’s trades will come good tomorrow.
Another remarkable failure is Thurrock Council: A modest sized Conservative county-council who contrived to lose over £500m lending to Irish home builders and loan companies.
Of course no summary of 2022 would be complete without mention of Liz Truss and ‘Crazy’ Kwarteng, whose short-lived tenure as PM and Chancellor will go down in history for all the wrong reasons. Their financial statement collapsed the pound and Gilts, and almost did for pensions, too.
Estimated cost £22bn; for once words fail me!
‘BUMPY TIMES AHEAD’
The bull market post the GFC is well and truly over. For many it never started. Sentiment across markets is bleak, especially with each piece of news endorsing just how dire the economic outlook is.
David Solomon, the CEO of Goldman Sachs, speaking to Bloomberg has warned that there are ‘bumpy times ahead’, as central bankers try to crush inflation without crashing economies.
He continued, saying we face a ‘very uncertain time’, with monetary and economic conditions changing very quickly, which is slowing economic activity.
Goldman’s economists predict global growth will slow in 2023, to 1.9% growth.
The big question is whether central banks can orchestrate a soft landing, as they tighten monetary policy to combat inflation, Solomon warns:
‘I think that’s so uncertain. I think there’s a possibility of that [a soft landing]. But I certainly think we could see a recession in 2023 also, so I think you’ve got to be cautious and prepare.’
Have a Happy Christmas, and a safe and prosperous New Year – and look out for my new column.
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Dec 2022
DIY Investor Magazine ·