The only safe ship in a storm is one with strong leadership: Thoughts of Saltydog Investor

This applies as much to politics, business, and life, as it does to sailing. It is going to be very interesting to see how history reviews the pandemic years, and the influence the media (unelected, overpaid and over here) has had on our decision makers. Only time will tell whether the vast amount of money needed to survive has been well spent.

 


I am not in any shape or form, by training or inclination, a financial expert. In the past however, I have been relatively successful in finding export markets for the products our factories manufactured, and I believe that investing money is not a dissimilar challenge. It is being able to recognise when the circumstances are favourable and likely to leave you with an opportunity for gain.

In times of uncertainty, as we are experiencing today, my instinct has always been to move a significant amount of my investment into cash, which in today’s world of zero interest earns you nothing. Recently, I received an email from one of our long-term subscribers asking whether I had ever considered purchasing an annuity. I have to admit that I had not, believing that the insurance company (mirrored on Dick Turpin) would be taking an unreasonable amount of money for setting up this arrangement. The following is the email that I received.

“Your comment about maintaining your funds without major risk prompted me to consider the philosophical question of the purpose of my funds. Are they for my consumption over the remainder of my lifetime? Or are they capital?

If my funds are for me to consume during the remainder of my lifetime, then, clearly, their value is of great importance. If this is the case, after reaching the age of 80 (thankfully still decades away!) I would consider an annuity. For people in their fifties and sixties, annuities represent appallingly poor value for money because long-term interest rates are very low and life expectancy is maybe another 25 or 30 years. By the time you hit 80, however, life expectancy has been whittled down to maybe ten or twelve years, so you might get a 9% or 10% return on your money for the rest of your life; and it is guaranteed. If you are concerned that the insurance company will profit greatly, should you expire six months after buying the annuity, you can always stipulate a minimum payment period e.g. five or ten years, even if you die during that time.

If on the other hand, I view my funds as capital, to be passed on to the next generation after I breathe my last (net of taxes where necessary), then my investing horizon is still long-term and I can still aim to grow my funds.”

I ruled out an annuity for myself many years ago, and it has never occurred to me to dwell on the subject since. Now having read the above email, it is obvious that for some people’s situation, and at my grand age, my own, it must be well worth looking at the arithmetic, in order to see whether it would be an advantageous route to take. Of course as per the point made in the email above, I must first decide whether I am working for my offspring or myself and that is not a difficult question to answer!

The Money Week magazine has long recommended the Personal Asset Trust (as did one of our subscribers) as a safe alternative to cash, making the point that over recent times it is averaging a steady 6% return, whilst avoiding the major downs of the market place. Looking at the one, three, five and ten year graphs this fact is not entirely obvious. It did however raise another question; its present price is £493.50 per unit. So, a £10,000 investment would buy you twenty units. That, quite wrongly, I find off-putting and it would stop me making this investment. The logic however says that a 6% gain on any value of unit is still a 6% gain. Perhaps I should review my thought process and concentrate on the potential of the fund?

The last month has seen my own portfolios take quite a knock. Not only the elements that are akin to the Ocean Liner portfolio, but also my investment funds that are clearly technology and also USA based. I have assumed that most of this retraction has been associated with the poor influence of Covid on this economy, and a potential reduction in taper relief, the threat of rising interest rates, and a fear of inflation thrown into the mix, so it is not a surprise that there has been a step backwards.

My recent excursion into UK funds has however shown an amount of resilience, and hopefully the next lot of Saltydog numbers will give me more confidence to stay invested in the UK, also in funds such as Hydrogen One Capital Growth. There is also an ETF recently launched by Legal and General called Hydrogen Economy ETF. I have not done any research into this yet but as you know it is in an area which is attractive to me.
 

The last few weeks have been really frustrating and irritating

 
Firstly, my fourth and hopefully final operation to replace what remains of my aorta was cancelled due to one of the team having Covid. It is now re-scheduled for the twentieth, not that I am complaining, but it does mean psyching myself up again.

Secondly, the French President, ‘Micron’, is really getting my goat. My first job as a boy was on trawlers fishing up around Iceland. Sixty-five years later, most of the thriving UK fishing ports have become redundant due to E.U. rules. Yet today, Micron believes that French fishermen are entitled to special treatment and wastes no opportunity to degrade the United Kingdom.

Finally, I am sick and tired of my glasses steaming up whenever I wear my Covid mask. Although I absolutely agree with wearing them, it does totally restrict my visibility. Last week I went shopping at Sainsbury’s with my wife and later, to my surprise, came out with somebody else’s wife!
 
Best wishes and good luck with your investments.

Douglas.

Founder & Chairman

saltydoginvestor