Investors face Scotland exit risk unprotected as ‘Yes’ win seems unlikely

Less than two months before Scotland’s vote on independence, investors in financial markets seem largely unmoved, as the complexity, the costs and expectations of interest rate rises discourage taking action against a possible victory for the ‘Yes’ side.

“Investors are completely not positioning themselves for the potential of a vote in favour of independence,” said Insight Investment’s head of currency Paul Lambert, speaking to Reuters.

The ‘No’ voters are ahead by about 20 points, excluding the undecided, which seems to be enough to convince many investors that anything else is too remote a possibility to worry about. Bookmakers too consider a ‘No’ vote as highly likely, offering odds of just 1/8.

Morgan Stanley’s strategy team has been rare among banks to put a figure on the chances of a ‘Yes’ vote – 25%, ascertaining that sterling and UK government bonds would come under some pressure if Scottish leader Alex Salmond’s nationalists won the vote, while Citi advised clients to try to offset any potential losses by buying credit default swaps on UK government bonds.

A Yes vote would have huge implication to Scotland as they wouldn’t have a currency , a lender of last resort and membership to the European Union is highly doubtful . £ would loose 10% of its value if the Yes would win .

Still over 6 weeks to go and a lot can happen .

The worst thing I can be is the same as everybody else. I hate that. Arnold Schwarzenegger

Very me .

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deVere clients to receive up to 74% as maturity generates highest ever returns

deVere Group is pleased to announce that an exclusive Autocallable Note from Morgan Stanley – the 5 year Autocallable Note on 3 Indices – has matured with the highest ever returns after 48 months in operation. In addition to receiving their full capital back, deVere clients invested in this note are due to receive returns of up to 74%.

On the valuation date the S&P 500, FTSE 100 and Euro Stoxx 50 indices were all above their initial strike date levels.

This Morgan Stanley Autocallable Note is just one of a unique range of structured products offered exclusively by deVere Group.

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Success is not final, failure is not fatal: it is the courage to continue that counts. Winston Churchill

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Ukraine – 1y Bond yields hit 20% as tension increases

I am following the Ukraine situation closely, with the escalation of the military conflict in Eastern Ukraine deteriorating the outlook for both Russia and Ukraine are tightly linked. There needs to be peace to restore confidence in the market and end the bloodshed. Military action with the separatists is leading to more casualties on both sides and significantly hinders the possibility of peace talks between the Kiev leaders and Donbas rebels. Russia’s failure to reach out to Kiev could have serious consequences on Russian economy, the intensification of military action prompted another round of sanctions against Russia, which may pave the way to Level-III (sectorial) sanctions by the US and EU/European and allies countries.

The downing of the Malaysian civilian aircraft could increase the risk of harsh sanctions imposed on Russia quite substantially as more western countries tend to blame separatist rebels for the incident and, also, Russia for the alleged failure to do more for a de-escalation of the situation in Eastern Ukraine. Russia could be sanctioned due to lack of leadership of the situation many people are observing.

Sanctions applied by the block countries led by the US greatly increase the degree of uncertainty, which is the ultimate goal of the sanctions. Uncertainty has ability to scare the market or pace the market and individuals in a corner. Despite the disclosed sanctions against a few major Russian industrial names look rather limited at first glance, and only concern long-term credit and capital, besides their direct impact on particular companies such sanctions also broadly increase the uncertainty factor for western companies and banks doing business with Russia. Many foreign partners of Russia prefer to sit back during this period, which will reduce the amount of new deals and trade. Phasing in of Level-III sanctions on behalf of the EU is now much more likely than some 3 months ago.

With rising cost of the military operation and the economic disturbances in Eastern Ukraine likely to result in higher liabilities for the state and costs for businesses operating in Donbas. This in turn will increase public and private liabilities due to falling revenue and the rising costs of debt servicing. This could create a negative spiral, that could possible see default if things don’t get better.

S&P recently lifting its rating outlook from negative to stable, I see this decision as primarily based on assumption of large western political commitment, thus on assumption and not on fact.

Ukrainian Bond Yields 1 Yield hitting 20% still below the 26% we saw in Dec 2012, indication of market sentiment is always shown in bond yields before anywhere else.

Lets see what comes from the ongoing talks but something needs to don’t to ensure the humanitarian and economic issues are sorted before things escalate further.

Tony Evans

25/7/14

Success is often achieved by those who don’t know that failure is inevitable.” – Coco Chanel

Success is often achieved by those who don’t know that failure is inevitable.” – Coco Chanel

Positive mental attitude , hard work and a focus on the goal .

Millennial missed huge returns in stock market and could affect their future

Greed and fear moves the equity market more than any other market in my opinion, stock market is up 17% in a year. Remember in 2009 and everyone thought the world was going to end. The market is up a massive 197% since the March 2009 low.

It’s not timing in the market that delivers a return. It is time in the market.

Warren Buffett said it best:

“Be Fearful When Others Are Greedy and Greedy When Others Are Fearful”

What I have seen is a lot of individuals under the age of 32 haven’t participated in this rally and this could have serious consequences for their financial futures.

There is a mind-set amongst the millennial. Uncomfortable with choosing the stock market as their preferred method of investing they have the same attitude as their grandparents, risk averse.

The most preferred investment for millennial is cash, which is crazy in an era with inflation and low yield it could possibly be the worst in true return.

Millennial are not investing, they don’t have the pensions that their parents had and have a bigger burden of accumulating wealth on their own for their retirement needs. Particularly in an era where life expectancies are getting long, health care costs are going up, so they have a bigger financial outlay but are saving less.

This is an interesting trend I see in the market place that the generation that will have the largest financial burden are saving the least.

Tony Evans

Tokyo

24/7/2014

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