Say Goodbye to the Naughty Noughties - Welcome to the Lean (and probably Mean) Teens

By Justin Urquhart Stewart 09:30 21- Dec -2009

I suppose the end of a decade was never going to have the impact of the end of a millennium, but its passing is barely being whimpered let alone celebrated. Perhaps we will look back at this first decade of the new century as being the ‘Noughties’ marked by the financial, consumer and property excesses that eventually exploded with such catastrophic consequences.

Compared to the roaring 20s, our ‘noughties’ don’t seem to be as exciting, but that will be for history to judge in years to come. Certainly we had huge excesses leading to extreme levels of over-confidence and complacency stating that it was all going to be ‘different this time’. You may recall being told that the packaging of debt, including sub-prime debt, was in fact going to reduce risk by spreading it. Well to an extent it did - it spread the risk like noxious manure, and sprayed the damage far and wide. But did anyone want to know about the risk or warn about it? No – as Chuck Prince, the then CEO of Citigroup, said in 2007, “but as long as the music is playing, you've got to get up and dance. We're still dancing.” Well he was – and now the bank’s value has been decimated.

I am grateful for the combined experience and intelligence of our asset allocation committee for countering such complacency and highlighting the growing risks of the recession, sub-prime debt and of course warning of the farce that was the Icelandic banking structure.

So, what next? Well, as ever, some are always able to find predictions of Armageddon over the next few years and especially around the Mayan calendar predictions of 2012 which run out in that year. This, I can only assume, is the ancient version of your Duracell battery running out in your alarm clock. It is fairly pointless planning for such catastrophe, as being the last one standing in your ‘sou’wester’ clutching an ISA application form and your ‘go-go hamster’ will be of little benefit as you float aimlessly amongst the cosmic debris that was our planet.

So rather than worrying about a polar shift courtesy of the Mayan priests, perhaps we will be seeing a financial polar shift in business and political influence from West to East. This could be either a great positive move for global economic advancement, or alternatively the trigger for increased trading protectionism by the economic blocs of the USA and the EU against the aspirations of the Chinese nation. 

The key issue here will be the attitude of our politicians as to whether they are going to be barn storming populists defending ‘pork barrel’ local economic issues, or pragmatic statesmen willing to work against the populist views for the greater good of the larger economic environment. Surely pragmatism should win out, but if you look back at the background to the dreadful protectionist Smoot Hawley Act of 1929 in the US, you can see that many politicians realised the danger of such a policy but mid-term elections for democratically elected populists proved an easier route for cowardly demagogues. Could it happen again? Sadly some of the current comments from US congressional backwoodsmen do not read well, and quite a number are pointing in an accusing manner at the trading rival and old ‘enemy’ of China – and dare I say some would no doubt refer to them as ‘Red China’. Of these two nations, I realise that one is more right wing and that the other is more left wing – the trouble is I have no real idea which is which.

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Another theme for the Lean Teens will be that of taxation. Just in case none of us had noticed taxes will be going up – and by quite a lot for quite a while. As a result, every penny of benefit that we can legitimately squeeze from our allowances and tax free facilities will be proportionately far more valuable than ever before. From income tax allowances and ISAs through to grandma’s heating allowance, all of the family’s entitlements can be brought to bear to fairly minimise your tax payments. This of course is one of the effects that few politicians seem to appreciate – the more you tax, the more effort will go into minimise exposure and payments: whereas the lighter the taxation often the less effort is made and as a result often the tax take can increase. 

However, I would like to think that this period of austerity will drive us through towards some better personal financial disciplines. A combination of well founded cynicism in the financial services industry with a fear of not having enough in the future will, I believe, help us have a more considered and responsible approach. I would urge everyone to think across their family and not just as an individual. As a family we should all usually have greater assets and a stronger and larger financial balance sheet – as individuals we are lonelier souls, and financially more vulnerable and easily picked off by product salesmen.

Thus this decade I believe, will be the era of the Financial Planner. These professionals are still rare beasts who provide a service rather than a product sale, and are therefore rewarded as professionals and not salesmen. Within the decade I believe having your financial planner will be as common as having your own private financial GP, and frankly the sooner the better for all of us.

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And finally.........December 14 — Why Santa’s a bloke. A 44-year-old Florida woman was arrested by Boynton Beach police yesterday and charged with resisting arrest without violence. According to the police report, Officer Alex Lindsey was interviewing a woman last evening while investigating a disturbance when she began yelling at another woman "so loud that it caused the female I was interviewing to start screaming." After refusing the officer's request to stop and leave the area, the lady was arrested using a ‘bent arm takedown’. She was then cuffed and taken to the police station for processing but was released without having to pose for a mug shot. Her name? Ms Merry Christmas!

May I also wish you a Merry Christmas, or a Happy Hanukkah or just a jolly good holiday. 

Justin A. Urquhart Stewart
Director
Seven Investment Management Limited