Can I start this weeks’column by asking a simple question which won’t be intrusive or painful and you don’t even have to share your answer unless you really want to drop me an email with your response. “How has the recession or let’s call it an economic downturn, affected you?”
See, I told you it wasn’t that complex and assuming you’re a middle class type of reader from a decent background (well you live in a premier university town with low unemployment and all sorts of thriving businesses), I have a good idea of what your answer will be.
The last three years for me have been quite good, in that I’ve grown my wealth management business, looking after a small, but clever and sometimes demanding client base, consulted for a few hedge funds and more recently helped restructure a city based concern who then asked me to become Chairman.
I’m of course not blowing my own trumpet, as I know friends and contacts who have achieved much greater things, but it sets the scene and so stick with me as last week all this changed, which I caveat as being within the context of our small ‘family world’, not in a wider sense.
My 8 year old twin daughter undertakes jobs in return for her pocket money, which you would from parents who place an understanding of the value of money pretty high up on our ‘education for kids’agenda. So during half term, before joining me and the boys at our holiday home in Suffolk, my wife opened up the garage, dragged the hose around to the front of the house and turned on the garden tap for my daughter to water the four flowering tubs.
30 seconds later and my wife had gone into the house to turn off the last of the appliances, but my daughter rushes in, taken aback shouting that “a man had just run onto the drive, entered the garage and jumped on Daddy’s bike and peddled off!”
Fast forward a few days and of course with hindsight we could have chained the bike up or maybe my wife could have stayed outside or even chased the guy in her car, but this was 2pm on a sunny Wednesday afternoon.
So putting aside the rush of emotions that went through my head which I won’t document, when receiving a call whilst sat on the beach, I tried to think about the positives and finished off with the ramifications, as it was obviously not premeditated and merely opportunistic, but none the less burglary.The positives in my mind were that we all learnt that we need to take a bit more care when looking after our belongings inside and out of the house, although I think for my children and perhaps my wife who unlike me wasn’t born in East London and didn’t grow up on a notorious council estate, the incident probably had more impact.
I’ve now accepted that my bike was probably exchanged for perhaps less than 10% of its worth and purchased a few cans of lager or crack cocaine, to then be sold at a car boot sale or broken up and disposed of in bits.
It’s cost me financially, as there is an insurance excess and no doubt next year when I come to renew my policy all my no claims discount will be wiped off and so within a couple of years Aviva would have got back the cost of my replacement bike, so that’s the negative.
The ramifications are that in these days of data collection, Chelmsford has another crime reported, claims information gets updated and people in my area risk getting higher premiums for all sorts of insurance. In order to pay that claim the insurance company’s reserves get depleted, albeit fractionally, but as I’m sure my bike wasn’t the only one stolen that day, profits reduce, dividend payouts come under pressure and reduces the values of our investments.
My daughter thankfully moved on after a day or two, as not only was it mine not her bike stolen, but she had more important things to consider, such as looking forward to 8 girlfriends arriving for a sleep-over the following Saturday to help celebrate her 9th birthday.
On reflection, my daughter blamed the recent fall in GDP for the rise in unemployment and crime, but loved her birthday cake!
Since the beginning of June the FTSE 100 has lost around 3.5% of its value and many of you will again be asking yourself if you should cash in those investments and go back to trusty, if not loss making cash.
I’m sorry, but I don’t have an answer for you, as although economically things look grim there are very few alternatives given that the return on cash given the current inflationary environment is negative.
The last time I rode my bike (yes, it’s eating me up very slowly), I came off having hesitated in some woods when following rather more agile and fitter middle aged men up and down hills and over tree roots. After dusting myself off and catching up with the pack who partially hid their amusement, I received a tip from who I assumed was the most experienced rider which was not to look down, but instead look forward.
During the remainder of the ride I did just that, enjoyed it much more and didn’t come off.
Whilst I’m an advocate of monitoring investments and taking stock of what is here and now and what represents danger to capital, it’s also worth considering the longer term.
If you can accept that when putting a portfolio together it won’t always be plain sailing, but try to understand the potential underlying volatility as then you’re forearmed. So long as you have a vision and confidence that the end outcome has a decent probability of being achieved, I don’t think you’ll go too far wrong, but as the last 2 weeks show, be prepared for choppy waters and if it feels like you’re drowning, call me.