"Ain't that a shame?"
A good few days ago I phoned my Aunt Irene to wish her a Happy New Year. It would have been much nicer to have paid her a visit but she lives in British Columbia, a good hour and a half’s drive from Vancouver. Now in her mid-eighties she’s a bit deaf, gets her words mixed up, doesn’t get out much these days and spends far too much time watching television news programmes. (Just to place her in the family tree, she’s the oldest surviving child of Grannie McKay).
If I want to find out about any bad news happening in the world I just phone her. She can tell me it’s snowing heavily in Scotland when it isn’t. She knows everything there is to know about North Korea, Trump, and all the World’s economic trials and tribulations. It worries her “sick.” I keep reminding her that “they” only report bad or fake news, but she keeps falling for it.
We blethered about New Year Resolutions. Hers was to look on the bright side for a change and find a new set of false teeth for under $5,000. Then she asked, “aren’t you heading to Anna Maria Island in Florida? You’d better pack jumpers.” Thanks to a “Polar Corset,” she informed me, “oranges are freezing on the trees and fish are dying in the sea.” And this “Polar freezing thing” is caused by global warming she explained. How come? “Nae idea son but that’s what experts say.”
I put her right. It’s Australia we’re going to, not Florida. In March, not now. It’s a Polar Vortex, not a lady’s winter undergarment. As to the Vortex, had she any idea when the phenomenon was first recorded? “No”.... It was in 1853! …. “Yer kiddin me.”… No, seriously! (But like the mainstream media, accuracy over natural disasters or geography isn’t Auntie Irene’s strong point).
For example, a few years ago before our first trip to Anna Maria Island she phoned to warn me about the unusual extreme cold there and advised packing jumpers. (Polar-neck sweater?) “And what about that earthquake?” she asked. What earthquake? “The one in California” she replied adding, “that’s no far awa’ ye ken.”… (I did say that geography wasn’t her strong point)… undeterred she continued “it wiz a bad yin and measured 5.8 on the Rectum Scale.” Squeaky bum time?
According to analytical eggheads with nothing better to do at this time of year, most of us making New Year Resolutions give up on them before the month’s out. Apparently every year over half of us slip too quickly into the same old bad habits. Now you’d think that financial improvements would be high on the list of any resolutions made. Like saving more. Investing properly. Setting goals. Taking action. Sitting down with an experienced financial adviser. Sadly not.
Financial resolutions lie buried in the top ten of “popular” resolutions. 40% want to exercise more. A third fancy losing weight. Another third plan to eat more healthily….no more deep-fried Mars Bars then? And one in six ashpire to drinking lesh alcohol. However, resolving to be better organised financially is buried deep down in tenth place along with affordable new false teeth, and filed under “other.” No wonder too many reach retirement underfunded and so down in the mouth.
Don’t think I’ve mentioned economist Dr Ed Yardeni before in my monthly letters. I first came across him in 1986. I still recall an article he wrote way back then, describing investors as optimists and depositors as pessimists, claiming that economic progress was always down to optimists. Last month he was interviewed on CNBC News on a morning that US markets had fallen by 0.4%, and the interviewers were wetting themselves with excitement over an imminent stockmarket crash.
Their questions featured words like “concerns,” “down,” “problems,” “worries” and “tax reform failures.” Yardeni reminded them that this Bull Market had survived 58 “panic attacks” so far and he saw no reason why the S&P 500 index couldn’t hit 3100 by the end of 2018. “That’s another 20% from here” one cried with shocked disappointment written over his face. But Yardeni quietly reeled off a few facts including strong global economic growth to support his views. You’ll be glad to know he’s in good company. His belief that there’s still scope for this 9 year old bull market to keep plodding on is shared by Ned Davis who today confirmed that all 47 world stockmarkets are in strong positive mode. First time in years. A normal (positive) year ahead says Ned, but expect a few down days, which no doubt will reinvigorate pessimists.
The media’s obsession with bad news may well explain the staggering amounts UK “savers” have lying in deposit and other “cautious” areas. In September over £270 billion lay in Cash ISAs, £150 billion in National Savings, £185 billion in non-interest bearing Bank Accounts, £170b in accounts that pay 0.1% or less, not counting the billions lying in Money Market funds and Private Pension funds earning nothing at all. 58 “panic attacks” doing their bit to stoke up investors’ fear levels.
Twenty years ago I was introduced by a long standing English client to a friend of his. All his savings were in cash. Describing himself as risk-averse he couldn’t believe I’d recommended he invest some in Global and UK Equity Income funds. Didn’t I know “the stockmarket was at a record all-time high? Wasn’t I aware that experts including Alan Greenspan (US Fed chairman, and the then media darling) over a year earlier had warned of irrational exuberance?” Sadly he stayed in cash.
A wee quiz… Guess how many all-time highs there’s been on the FTSE100 since that meeting in 1998? Then have a guess at how many all-time highs there’s been since on the (US) Dow Jones Index? Finally have guess at how many all-time highs there were last year on the Dow?
FTSE100 since 1998, 52 All-time highs. 16 in 1999, then nothing until 2015, since when there’s been another 36 of which 24 came last year. Dow Jones since 1998, 237 All-time highs, of which 197 came since 2013, 71 of which happened last year…an all-time record number. (source NDR) (And despite 58 panic attacks as Ed Yardeni explained).
And when we hear of All-time highs, commentators never mention inflation or reinvested dividends. If price inflation was added to the index to make it a “real” all-time high, the FTSE100 would be way over 11,000. As to reinvested dividends, let’s look at what effect they have on the FTSE over the last 20 years. The index as reported on telly is up 52.3%. With reinvested dividends it would be up 199.15%. Over the same period, net of all charges, one of our long term favourite income funds, Invesco Perpetual High Income fund, is up 546.88%. (Source Lipper Stats). So much for passives.
Ain’t That A Shame for the many thousands of savers out there, scared by headlines and “panic attacks,” missing out for far too long on decent returns on their hard earned savings. Last year was no different. 2017 was also a bad year for some of my favourite singers. Yes, you will have guessed I’ve been a Fats Domino fan since I was 16. It’s a shame that Fats died in October aged 89.
1978 was the year I first saw Tom Petty in concert. He died suddenly shortly before Fats. Some heartbreaker all right, he was only 66. Still, he left us with lots of great songs. A favourite is “The Best Of Everything”. Reminds me of what we try to do at ASAM…. best tax free investing, best research, best fund managers, best spread of risk, with the best “fantasy football team” approach. And the best folks here to look after you. It wouldn’t surprise me if the best is yet to come.
Belated Happy New Year to you. Enjoy 2018