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Investment Notes

Follow our regular updates to stay up-to-date with current financial planning and investment issues. We regularly publish press clippings, articles and thinkpieces that we think might be of interest to our clients.

On May 30 we published “UK Economy – Green Shoots” anticipating the improvement in the economy that has become clearer to see in the last few months. Data for the second quarter showed growth of 0.6%, a very healthy pace, house prices all over the country have begun to pick up, and shorter term sentiment indicators are showing a clear improvement in confidence across all sectors of the economy. This note examines the sustainability of the recovery.

Returns from the UK commercial real estate market have arrived at a critical inflection point. A year ago, the average rental yield on commercial property across all regions and types of property was 6% per annum. However, capital values were declining by about 0.5% per month, giving a zero total return to investors.

In 2009, in the face of a global economic crisis, the major economies of the world came together and acted in concert to ease monetary policy aggressively. Together with fiscal stimulus in the US and China, these policies helped to prevent the world from slipping into depression.

Ben Bernanke’s discussion of the Fed’s policy intentions in the press conference following the Federal Reserve meeting on June 19 was a shock to markets, with all asset classes around the world falling sharply in response.

The end of bear markets are periods when investors are delighted that they do not own a certain type of asset. This usually means that the performance has been very poor for a long period of time, and for reasons that most investors believe will persist.

Over the last ten quarters to March 2013, the UK economy has produced essentially zero growth due to a combination of (i) the UK government’s austerity plans encompassing both spending cuts and tax increases, (ii) severe economic weakness in the Eurozone, the UK’s largest trading partner, (iii) weakness in North Sea oil production due to essential maintenance work, (iv) a large bank

The starkest lesson that should be taken from the Cyprus crisis from all in the eurozone is that no bank deposit is guaranteed. It is always ultimately a loan from the depositor to the bank with the possibility that your government may mitigate any loss. Depositors with more than €100,000 in local Greek, Portugese, Spanish and Italian banks should now be giving serious consideration to moving their money to stronger banks in safer countries, as also might those with less than €100,000.

For the last quarter of a century, Germany has been open to monetary union with the rest of Europe, provided that three conditions were satisfied.

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