October 2016 - Nightmare

On 24th March 2015 Germanwings Flight 9525 was deliberately crashed by the co-pilot killing all 150 people on board. There are few of us who fly were not affected by the recordings of the screams of the passengers and the shouting of the pilot who was outside the cockpit trying to break in with an axe. Well last night I awoke in a sweat because I was on that plane except this time the plane was being flown by Theresa May. We know that there is going to be a crash but no one is taking any notice of those of us outside who are trying to hammer the door down. I heard the brexperts saying: “Don’t worry these modern planes can bounce”, and “It will be bumpy but we will be better after the experience.” I am really feeling for my clients whose continual comment is: “I didn’t vote to leave so why should I be so much poorer?” I have tried to put their minds to rest but what I haven’t told them is that you may not have seen anything yet. One retired client with about £200,000 in cash who likes to travel was almost in tears when he said that his cash had gone down in value by about 15% -- “that’s a loss over three months of about £30,000 off my retirement plans he said”. He went on to tell me that he should have listened to me and put more of his cash into investment because his investment portfolio had gone up by almost 10% over the last year. I didn’t disillusion him but all we try to do when we invest is to beat inflation and make a bit more and managing to do that with what is to come will be challenging for all of us. When Article 50 is triggered and the banks start relocating from the UK who knows how low the pound will go. A month ago the experts (the ones that I respect) had suggested that we could reach parity with the Euro by the end of the year, well that was reached last week in some Exchanges and now there is talk of it going much lower perhaps 80 pence to the Euro instead of the £1.30 that is was on 31st of May. So putting on my financial advice hat what do I recommend: You keep your money invested in one of our low cost, highly diversified, portfolios. These are risk rated to each of you and they aim to keep any volatility to a minimum. They have a global presence so that they have some shielding from what is happening in the UK. I am very pleased that all of my clients are very happy about their investments but there is little that I can do about the suicidal team in control. If you have cash it is not too late to invest because the fall in the value of the pound has some way to go. (As an alternative you could get ‘a bigger axe!’ – I’m going to the Birmingham Liberal Democrat Conference in Birmingham next month which is the first time that I have been involved in politics.) One of my concerns is the possibility that Mark Carney, The Governor of The Bank of England, will not stay around too long. He has been one of the voices of sanity but has come under increasing criticism from the ‘brexperts’ some of whom are saying that we need higher interest rates. If he goes and interest rates go up you may think that would be good for your cash savings but that will fuel inflation even more and your savings are unlikely to keep up. If you have debt then it may be the time to look at getting a good fixed rate. My nightmare didn’t go that far but I vividly remember Black Wednesday on 16th September 1992 which resulted in interest rates going up to 15% (that would add about £1000 a month to an average mortgage). The chancellor then was Nigel Lawson, a leading Brexiteer, and I listened to him again last week – he is living in world of his own and thinks high interest rates could help the economy. The only ‘good’ news that I’ve been given over the last few months was from my business adviser when she said: “clients need good independent financial advice more than ever and you are going to be busy.” She is absolutely right though I wish that I was helping clients in calmer more happy times.