Invest News

Elections, interest rates… Interested? Oh, I try not to be cynical and jaded, I really do. It's a tough job. And every month I try to think of something new to write in a newsletter to you. After all, it is supposed to be a "news” letter, isn't it? But as the World's Wisest King once said, "Generations come and go, but nothing really changes…History merely repeats itself. It has all been done before. Nothing under the sun is truly new.” (King Solomon, in Ecclesiastes Chapter 1)

Kill the King! Back in ancient times, they had more interesting elections than what we do now… If the people became sick of the tyrannical ruler, they usually stormed the castle with pitchforks, killed him and made some new bloke into the king. It makes a polling booth seem quite boring.

Every few years, Australians elect another leader; either the same bloke, or the same party, or a similar politician from another party. Our friends the Americans do the same thing, with a two-party vote very three to four years. What changes?

The interest rates will probably be raised by 0.25% in Australia, and by 0.25% or 0.50% in the USA. Housing markets will drop slightly as rates rise and the share-market will rise, on news of tax cuts. No ruler will be impaled on a pitchfork, and life will return to normality. Yawn. What's news, really?

Newspapers will show polls rising by 3 points, or new election promises that are phrased differently to the last promises that were given by politicians in the last 20 years, or 2000 years. Newspapers will tell you that someone got killed, gold prices went down two cents and company shares went up by two cents. Some celebrity couple split up and there is a new gadget that you simply must buy.

Newspapers do this every day, because they want you to buy a new paper every day. Truth is, celebrities have been splitting up since well before Elizabeth Taylor-Fortensky-Hughes-Burton-Wilding-Hilton-Todd-Fisher-Warner made it fashionable. Politicians have been making promises since the first He-Man promised to protect the villagers from the invaders. All the villagers had to do, was to give him weapons, an army, build him a castle, and give him several wives and 10% of all they produced for the rest of their lives…

Nothing ever changes, much… Prices of goods, including dwellings, foods, companies, precious metals and widgets will continue to rise and fall with supply and demand and the vagaries of the economy. It was like this when we had the horse and cart, was the same through the Industrial Revolution, and is the same in our new-fangled "internet e-economy”. Nothing is new under the sun.

Why are you still reading? Are you learning anything yet? Nothing is new: what is there to learn? Boring "news”, predictability, death and taxes, prices go up. Watch the slow growth of prices Should we be concerned that gold is down 2 cents? No. It will go back up, and at some stage it will be worth double what it is now, and eventually, it will double again. Anyone with a few grey hairs has probably seen the value of their first house double over time, and maybe seen it double and double again. Good shares will do the same thing over time.

Does the upcoming interest rate rise mean that we should all sell our houses? Not unless you want to. Do the tax-cut promises of the US and Australian elections mean that the economy will boom and we should all buy shares? Not unless you want to. Should we ignore the daily news and concentrate on annual trends? Absolutely!

Take a look at the last ten years, and what has happened to the cost of living.

Tobacco products are up 115% since 1994 (time to quit?) Average insurance premiums have increased 104% since 1994. Cost of lamb and mutton is up 83% over 1994 levels Price of eggs, up 71% in ten years Cost of education up 69% in ten years Price of vegetables up 62% since 1994. And how much did the average wage rise by in the last decade? Since 1994, the average wage has increased by just 55%...

Interesting, isn't it? Even the last twelve months has seen the cost of Health Care rise 7%, the cost of childcare rise by 13% and petrol also up 12%. A bag of tomatoes rose in price by 13%, and oranges increased by a whopping 300%. That was in the last year…How much did your wage go up in the last year?

What have you learned so far? In researching all this, I learned that some things do, in fact, change… But they change in predictable patterns. When you understand the patterns, you either say "Uhuh” in acceptance (as King Solomon did) or you scream. Understanding that the cost of fruit and vegetables and meat has gone up by more than the average wage increase, may make you say "hmmm”. It may prompt you to find a better job, or may make you want to overthrow the government with a pitchfork. My advice, predictably unchanged, is "INVEST”. I have seen the price of properties double in less than five years, I have seen the price of shares double in less than five years, and I have seen clients who became wealthier through their investments than they did through their jobs.

Invest into something good, long-term, stable and predictable. Invest into something that actually pays you a real income each year, not just something that promises it will double in value.

Good dividend paying blue-chip shares will always rise in a slow and steady boring way; the same way that a good rental property will increase in value over time (hopefully by more than the price of eggs ).

Tortoises and Hares Do not get drawn into tax-schemes, buying unfinished (and un-rented) properties "off the plan” or buying shares in companies that make big promises without delivering actual earnings. Play it safe. Yes, it's boring watching your investment rise by just 7% each year. But 7% every year compounded means that you will double your money every ten years. If food only goes up by 60% or 80%, you will still be able to feed yourself.

More Timeless Wisdom from Solomon: "There is another serious problem I have seen in the world. Riches are sometimes hoarded to the harm of the saver, or they are put into risky investments that turn sour, and everything is lost. In the end, there is nothing left to pass on to one's children. (Eccles 5:13-14, NLT)

"Wealth from get-rich-quick schemes quickly disappears; wealth from hard work grows… Good people leave an inheritance to their grandchildren…” (Proverbs 13:11 & 22a, NLT)

"Even so, I have noticed one thing, at least, that is good. It is good for people to eat well, drink a good glass of wine, and enjoy their work--whatever they do under the sun--for however long God lets them live. And it is a good thing to receive wealth from God and the good health to enjoy it. To enjoy your work and accept your lot in life--that is indeed a gift from God. People who do this rarely look with sorrow on the past, for God has given them reasons for joy. (Eccles 5: 18-20, NLT)

Tips: How could I say it better than the man of the month? "Eat well, drink a good glass of wine and enjoy whatever you do for as long as you live”. Just get good advice from your doctor and your Financial Planner, so that you can afford to live long and prosper. Invest. Jeremy

This article and its attachments are not intended to constitute any form of financial advice or recommendation in relation to securities. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision.