RETURN TO THE 1970s

Solomons-financial-advisor-wimbledon-blogger

RETURN TO THE 1970s

There has been a fair bit of talk about aspects of our current political rhetoric that threaten a return to the 1970s. Whilst my early childhood was pretty care-free in that time, there is little of the 70s that I would welcome back.

Insert a film set in the 70’s. A bleak story of a character that everyone’s limited television of the time cannot fail to recognise. “Funny Cow” has a title to offend and a story that will offer little other than despair as it pushes all the stereotypes and clichés of the time. The miserable family existence that passes for life in a northern town. The wife-beating, loud-mouthed husbands and the hollowed shells of wives that have turned to the new prison of alcoholism. Yet sadly this is very close to her story.

Solomons IFA review of Funny Cow the movie

A galaxy far, far away…

If you are inclined to revisit the 70s then this film is a reminder that it really is best left consigned to the past and a collection of good memories when we were all younger. The times were very different and have thankfully changed for the better. It seems like a long time ago… a galaxy far, far away… yet in practice it’s just 4 decades ago, closing in on 5. In reality that is the sort of time that most investors save and then live off their investments.

Short-term memory

The changes in our lives are not always easy to see but flipping through your photograph albums (remember them?) is a useful reminder of our journey. When it comes to investments, the opposite happens. We are constantly bombarded with a moment by moment update of the markets, what has changed in the last 5 minutes, rarely does anyone report or assess the long-term value of investing, billboards, newspapers, emails and websites are all set to the short term, as if this tells us anything of value. In reality the valuable information is surely only the long-term results. What has happened over not 3, 6 or 12 months, but over 10, 15, 20, 25 years. However, that requires a patience that most of us have been taught to ignore.

Here is the trailer for “Funny Cow” it’s well acted, (Maxine Peake is very good) but frankly unless you want to watch misery unfold for a lengthy 102 minutes, (the irony isn’t lost on me) a better use of your time would be to sort out those photos you still haven’t put into an album… or had one printed.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

Email me to get in touch

Remembering Montmartre 1899

It is 1899 and I’m at the latest Secret Cinema event, transported back in time to Montmartre, Paris in 1899, arriving at la vie Boheme – the Moulin Rouge. We are greeted by Monsieur Zidler and shortly bump into a certain Henri, one Henri de Toulouse-Lautrec with friends and then serenaded by a new young writer. We marvel at the guests, who like ourselves are not themselves, but suitably attired for their profession in 1899.

Most will not be familiar with Secret Cinema, it is, after all, secret and has a tag line, reminiscent of Fight Club – Tell No One. The concept is simple – gather a crowd of film lovers to come along to watch a movie together. The twist is that its immersive to the extent that there is a successful attempt to create the feeling of being in the movie, with not simply “sets” but landscapes to explore. Engage, (in character) with the actors who perform their screen roles before and during the screening of the film. It’s a lot of fun.

Champagne Lifestyle

Sadly not all in Montmartre was 1899 – the prices certainly were not. A bottle of Champagne (well why not? after all Monsieur Pol Roger died in 1899 and Jules Medot founded the Champagne house Louis-de-Custine in 1899) at the Moulin Rouge was £40 and as we all know that doesn’t go terribly far… So pandering to my slightly sad interest in inflation, I wondered what the price of Champagne was in 1899 and whether it was possible to re-inflate it back to 2017. Sadly the £40 price tag for a bottle of Champagne in 2017 wasn’t deflated to the 1899 price of just 33pence (best attempt)…..probably just as well, £40 then would have bought 121 bottles. Inflation is arguably the most underestimated element that any investor must contend with and must be factored into any sensible financial plan.

Returning to the 70’s?

Many are currently suggesting that due to Brexit and the unfathomable Mr Trump, we are (collectively) in for a bumpy ride, perhaps something akin to the 1970s. If this does indeed become the case, presumably we can expect power cuts, strikes, industrial meltdown, oil price hikes and rampant inflation (well, by British standards anyhow). Personally, whilst I’m not pretending that everything is well, I don’t have a bleak outlook and find many of the scaremongering, nothing other than a tune for peddling. It is probably obvious to you by now that I’m not a fan of Mr Trump, or Brexit,

Inflating the figures

Anyway, back to the inflation issue and the 1970s. Remember that for the power of your £1 to remain the same it needs to keep pace with inflation. How inflation is measured is of course hugely contentious. We tend to use CPI and RPI as the most common metrics. That said, there often seems to be a disconnection between the rising prices of things you personally pay for and what the Office of National Statistics say they are. This isn’t a political jibe, if most of your spending is on utilities, then it’s likely that your personal rate of inflation is rather higher.

How do you remember the 1970s?

For the record, £100 at the end of 1970 was £364 by the end of 1980 because of the inflation (RPI) in the 1970s, which increased 9%, in 1971 then 7.6%, 10.6%, 19.2%, 24.9%, 15.1%, 12.1%, 8.4%, 17.2% and 15.1% in 1980. This represents an average annualized inflation rate of 13.3%. The FTSE All-Share achieved an average annualized return of 12.2%. So didn’t quite keep pace with inflation and saw some huge market declines (-28.6% in 1973 and -51.6% in 1974) Any investor that lost their nerve at the end of 1974 would have missed out on the 151.4% recovery in 1975. These huge changes eventually ushered in a fundamental change in monetary policy and “Thatcherism” in an attempt to control the supply of money and inflation specifically.

Think and act life-long

The advantage of standing back and considering a long term approach is that the short-term volatility of a year or even a decade reinforces the rarely practiced investor skills of discipline and patience.

If you are interested in Secret Cinema, here’s the promotional trailer. Click here for the link to their website, where you can find out about many of their immersive film experiences, but tell no one…

Dominic Thomas
Solomons IFA

Email me to get in touch