Phew, looks like we made it. We survived the Mayan do-dah after all and the 500-ton asteroid a couple of weeks back that apparently missed us by a whisker.
A whisker in this case being 140,000 miles. Now all we have to do is get through the “fiscal cliff” and it’s plain sailing. Or is it?
We survived the rampant fears of a year ago too, and that’s not including annual predictions of a Scrooge-like Christmas.
Remember the expert predictions for 2012? Inflation would swamp us. Stock markets would go sideways at best. Europe would collapse. China was heading for a hard landing, whatever that means, and Greece was such a basket case that new drachmas were secretly printed and ready to go any minute. The PIIGS – Portugal, Italy, Ireland, Greece and Spain – were so deep in soapy bubble that there was no hope. The US dollar would go into freefall, Central bankers hadn’t a Scooby, debt was too high, and we’d be in recession for far longer than it will take Rangers to get back to the SPL.
Funny then that this little Piggie called Spain beat the market , as did the little Piggie that stays in Rome, and all the little Piggies sang He He He all the way home. So while investors were buying record levels of “safe“ bonds and sitting in deposits earning zilch, stock markets produced double-digit gains just about everywhere, with risk-takers doing best. Italy’s stock market since last June has trounced the World Index by 28 per cent, with Spain not that far behind. And if you have time, check out how well Ireland is doing on the trade surplus front.
It’s almost impossible to predict what’s likely to happen on a 12-month view, but surely there’s a better way for investors to choose asset allocation than be driven by annual fears pumped out daily on news Channels. Some 30 years ago I attended an investment/tax planning seminar in London. The star of the show was a wee man, retiring after a lifetime advising investors. His parting shot was that you should use economic commentators as a guide to how to successfully invest – on an inverted basis. In other words, do the exact opposite to what he said and you’ll not go far wrong.
Economically there’s little doubt that things are improving globally. It’s no fluke that since stock market indices bottomed out in March 2009 some, including the S&P500, have doubled in value, and that ignores reinvested dividends. Europe is likely to surprise the miseries, and over the Pond there are massive game changers swinging into action, namely Generation Y, the rebirth of US manufacturing, and oil and gas discoveries which will wipe out the US trade deficit faster than a speeding bullet.
But take great care, for our toothless financial regulator, the Financial Services Authority, has unleashed on an unsuspecting investing public a new set of rules that’s supposed to benefit investors but is destined to do the opposite. Instead of simply removing industry conmen who mislead and mis-sell to their clients – and believe me, it’s not difficult to stop them – they have gone down an obsessive road which is doubling charges to the end user: the investor.
And at the same time advisers are reducing their service and workloads by dumping clients into multi-manager funds carrying even more unnecessary charges. So my message for 2013 is this – look forward to another decent year for equities, be prepared to buy them on bad days, scrutinise very carefully what you are paying in charges and then shop around.
Have a good year!
l Alan Steel is chairman of Alan Steel Asset Management
