Scotland on Sunday
Saturday 5 November 2011

By Alan Steel

If it's not one thing these days it's another. No sooner has one economic bogeyman disappeared but another pops up to take its place. It happens year after year. And what a year this has been.

Just think of what happened. You've probably forgot all the problems in Brazil with flooding and mudslides. The violent protests and uprising in Tunisia is probably a distant memory, as are the terrorist bombings in Russia. That was January.

And then Egypt's Government was overturned in February. According to experts it would cause massive oil price rises which could bring down the West. Before we knew where we were, Libya was up in flames.

March was even worse. Who can forget the Tsunami in Japan - thousands of people killed, and massive disruption to the World economy? We held our breath as a nuclear disaster was narrowly avoided. Then the Middle East crisis spread further. All that in three months.

Since, of course, we've had problems with US Banks, Europe, the impending collapse of Spain and Italy, possibly even France, and obviously Greece. The other day a 30 odd year old London based personal finance "expert" says this is the worst it's ever been especially if you are a teenager, or in your mid 20s.

When I was a teenager, unlike others we had an inside toilet. We didn't have a fridge. There was the back lobby for milk, but it was so cold you could have kept it in my bedroom. No central heating, no double glazing, one coal fire. No car, no phone, a television with two channels. No foreign holidays. Actually no holidays unless you count an afternoon trip to Fife.

When I was 15 we all went to our beds one night not knowing if we would ever see each other again. US and Russian relationships were so bad they were threatening each other with atomic bombs. Half the World was Communist, most of the rest dictatorships and what was left was in a mess. But you know something, we made it through, big style.

So when you hear experts on the TV saying things have never been as bad as this, and it's going to get worse, remember they're probably talking rubbish.

I can't tell you how bad things were in the 1930s, but I can tell you about the early 1970s. Five months after I became an adviser in 1973 the World came to an end in the shape of the October stockmarket crash. The FT All Share Index fell 73% to 62 in the January of '75. Today it is just under 2800.

If you could get a mortgage you paid 13% interest rates. They were up 65% in only 2 years. If somehow you were an investor, your savings were ravaged by inflation which was heading to 26%, a year later. Aye, it was easy eh!

Well we survived, thrived in fact. But every day experts still moan about recessions and double dips. Do you know the average economist predicted 15 out of the last 3 recessions, and tell us we're in one when we're not?

Remember according to Ronald Reagan, "an economist is someone who when they see something happening in practice will say - ah but it wouldn't work in theory".

One way we were lucky back then was we didn't have wall to wall 24 hour 7 days a week Television news programmes, pumping out scary stories. BBC has Bad News at Ten, and a ticker tape that runs along the bottom entitled - 'Breaking News' - they should call it 'Breaking Spirits'!

Apparently stockmarkets have gone nowhere over the last 10 years. They call it the lost decade. But if you follow the best managers you will have positive returns of over 120%.

Back in '75 I came across the Brian Clough theory of building the spine of a football team to become champions. He believed you sign the best goalkeeper, the best centre half, a hard tackling midfielder, and up front, the best striker.

And I'd suggest that that's the way to manage money today as it has been for a long time now. Build your team around that and you can forget all the nonsense you see night after night on telly because these are teams that win through thick and thin.

Alan Steel is

Chairman of
Alan Steel Asset Management Ltd

www.alansteel.com