On the Money: Alan Steel
“On a golden autumn day returning, where each moment never is the same.
Sometimes pure joy it comes with patience, when I’m waiting on the waiting game
There must be a reason for all this inaction. Does it mean everything must change?
Sometimes I’m looking for perfection, when I’m waiting on the waiting game”
While the waiting game continues over the Brexit farce, the equally long running threats of Trump’s impending impeachment, not to mention the brouhaha over tariffs and inverse yield gap worries (whatever that all means to us mere mortals), it probably makes sense that we should get on with life.
As another song put it ..”Que sera sera, what will be will be”. Or as my grannie used to say over 50 years ago: “If it’s no one thing it’s another. If I were you I’d just get on with it.”
So let’s start by considering the stock market. There’s plenty evidence that investors are either rushing about in ever decreasing circles looking for “safety” or “holding back” from investing anywhere, “waiting until it’s clearer”. I asked one such ditherer when he would be happier to invest, when the “market” is higher or lower? He said: “higher of course”. Work that one out.
But what does history show at politically uncertain times like these? The simple answer is “not much”. A big mistake investors make is to confuse what happens in the headlines with what concerns the stock market. On election night in the US in November 2016 Nobel Prize winning economist Paul Krugman, not the sort of chap you’d want in a team of optimists, said: “If the question is when stock markets will recover, a first-pass answer is never”. How wrong can you be?!
Think of the impeachment threats over Bill Clinton in 1998, or even worse Richard Nixon’s in 1974. Now look back at what the US stock market has achieved since then, compared to waiting “until it’s clearer”, and “safely” sitting in deposits ravaged by taxes and inflation.
A few thousand are now heading into retirement without the security of either annuities that nobody wants (because they’re straitjackets, we’re told) or the much better security offered by employer-sponsored and funded final salary schemes.
Thanks to heavy promotion of “Pensions Freedoms” thousands of would-be retirees have “cashed in their pension pots” and transferred into their own plans.
Now they are slowly beginning to realise they have huge decisions to make on various forms of investment, and how to draw income without emptying the kitty, that has to last them and their partner a long, long time.
How long? Tell a chap aged 60 that on average he has 18 years before he snuffs it and he may think…well that’s easy then. I’ll just plan for 18 years.
Tell him though that he has a 50/50 chance of living much longer, and that changes the game somewhat. And if he’s married to a lassie five years younger who has a 50% chance of living 15 years longer than him, now you’re looking at providing over 30 years of income (rising?). That’s a different ball game entirely.
Now think back over the last 30 years and note down all the reasons to panic and worry about, making the wrong decisions. This is not the stage of your life for a bit of DIY and then just wing it for a few years.
Which brings me to another waiting game, every bit as dangerous. On Thursday last week I managed to catch up at last with an old friend over the lunch we’d often meant to have. Time flies as you get older, even though he’s ten years younger than me. Busy people we are.
For years I’ve tried to draw him out about his finances and plans, and often suggested he get a Will and Power of Attorney drawn up to protect his wife and family, especially as his work took him all over Asia and Africa. But this was a fun lunch, so I left it all unsaid.
On Monday however he suffered a massive brain haemorrhage, completely out the blue. Surgeons appear to have saved his life but the damage done probably means he won’t walk again. Speech will also be a problem. And it’s probable his wife will have to cope without the powers a Will and Power of Attorney would have given her. It’s all so terribly sad.
So if you haven’t a Will and Power of Attorney, get it fixed now. And if you’re sitting waiting for the best time to invest long term, the best time is now. If you’re wondering how best to sort out your pension freedom myriad choices, go and see a made-to measure specialist. Off-the-peg might be OK for suits these days, but not if you want a retirement income that gives you peace of mind for 30 years or more.
Alan Steel is chairman of Alan Steel Asset Management
Alan Steel Asset Management is regulated by the Financial Conduct Authority. This article contains the personal views of Alan Steel and should not be construed as advice. Do check your individual circumstances with your advisers.