en-GB http://www.joslinrhodes.co.uk Joslin Rhodes are Independent Financial Advisers who provide unrivalled advice and support for our customers who are seeking mortgage advice, selling a house or who are looking for honest and trustworthy financial advice. Copyright 2010 Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/unacustomed-public-speaking-45.html There is nothing quite so cringe worthy as the office retirement speech. Forced to stand in front of your peers, clutching a bunch of flowers and an Elizabeth Duke carriage clock, expressing your heartfelt sorrow at the thought of not seeing them again. All this before skipping out the door to a life of carpet bowls, Werthers Originals and an unhealthy obsession in those weird products advertised in the back of the Sunday Mail magazine that you always wondered who on earth bought. Unfortunately, for many people who intended to retire about now, a few spanners have been thrown in the financial works. Firstly, unless they moved their pension funds into deposit investments prior to the downturn, the value of their pension fund is likely to have fallen. This means that they have less of a pot than they perhaps expected. The second whammy is that the said pension pot will provide them less of a pound-for-pound income now, than at pretty much any other point in history. To understand why, we need to know how pensions produce an income. When retirement looms, at least 75% of the fund that has been accrued, is used to purchase an annuity. The basic principle of such things is that you give a lump sum to an annuity provider and in return they will guarantee you a fixed regular income until the day you die. They will very much hope that you are hit by a bus on the way home, as they get to keep the money you gave them. Conversely, you hope that you live longer than Bruce Forsyth and bleed them dry. Annuity providers work on the same principle as bookmakers. In order to calculate how much income they will pay you, they first need to work out when you are going to die, and they are uncannily good at it. Your death date is based on your postcode, gender and lifestyle habits. If you reside in Dorset then the life expectancy for a male is aged 80. If however you were brought up in the shadow of ICI on fried bread and dripping, then it is aged 74. If that concerns you, (especially if you happen to be 73) then think yourself lucky you dont live in Glasgow where it is age 68. To put that in perspective, life expectancy in Iraq is currently 67. Lifestyle habits have a dramatic affect on the annuity rate also. The poorer the health, the higher the income. Smoking, drinking and obesity are all good when it comes to getting a higher annuity rate. Admittedly the trade off is that you are going to die much younger, which can be disappointing, but think how much more you will have to spend in the meantime. Also life expectancy doesnt care much for the niceties of equal opportunities. Hence men die on average five years before women and in turn they get a more attractive annuity rate for their trouble. All of these issues affect the rate that you will receive, but the overriding factor is interest rates. This is because the annuity provider invests the money in order to provide you with your income, and the greater return that they can get, the greater amount they can pay you. In this era of low interest rates, annuity rates are also punishingly modest and given that once purchased an annuity cannot be changed, those that need to buy one now can be locking in a bad deal until their dying day. So what options are there? The most obvious is to defer taking an annuity and carry on working, assuming you didnt burn any bridges during your retirement speech and Argos will give your colleagues a refund on the clock. If and when interest rates and fund values rise, then the figures may look more attractive. There is one sure-fire way of increasing your pension income and that is to shop around for the best annuity rates as you are not obliged to take the one offered by your pension provider. In fact you are positively encouraged not to do so as it is likely to be very poor value when compared to the open market. Other options are. well none really unless you fancy moving to Glasgow and starting on the Capstan Full Strength. 2010-03-11 11:47:39 http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/unacustomed-public-speaking-45.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/unacustomed-public-speaking-45.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/zero-tolerance-tell-it-43.html It is a sad fact that four out of every ten marriages in the UK end in divorce. It is a sadder fact that only one in ten of us will change banks during our lifetime. The relationship we have with our banks is a long and some would say, destructive one. We start as childhood sweethearts, meeting on the high street on a Saturday morning. The promise of a free schoolbag and an Adam Ant poster was all it took and before you knew it you had a young saver account. Fidelity, or lack of it, is always a problem. Your bank is forever flirting with new customers and promising them the earth. Cheap deals, free stuff, but what about you the loyal partner? No more gifts for you or candlelit dinners. The rot sets in pretty quickly. The infidelity wouldnt be so bad if it wasnt flaunted at you all of the time. Have you ever popped into your local branch, on those rare occasions when it is open, to pay in a cheque. The golden rule seems to be one cashier to service existing customers for every three sales people prowling up and down the queue trying to sell you something else that you dont need. You generally hope that if your spouse is going to cheat on you, that they at least have the decency to do it behind your back. Unfortunately the abuse doesnt stop there. The regulator found that for many years they have been selling us things that we didnt need and that wouldnt pay out when they were due, and they were fined millions for it. This would be almost forgivable if it was a genuine error but it turns out that in many cases it was a deliberate ploy, driven by sales targets and greed. At least Dick Turpin had the courtesy to wear a mask. Normally when you catch you spouse cheating there is at least some penitence shown by the guilty party. Perhaps flowers, expensive jewellery, a sudden interest in DIY. In the relationship with our bank however, they still protest their innocence to the contrary even when caught red handed. The Financial Services Ombudsman is the body that overseas complaints in the financial services industry. Any complaints that cannot be resolved between the customer and the company are referred to the FOS for adjudication.  A bit like the Jeremy Kyle show but without the tracksuits and Ugg boots. There are 100,000 companies that the FOS overseas and in 2009 it dealt with around 140,000 complaints in total. Of these over half, yes half, related to just seven banks. You dont see those figures on the TV adverts do you? To compound this, over 61% of the complaints were found in the customers favour. This means the bank had already investigated and rejected the complaint, yet was overruled by the Ombudsman. You would assume that most people would deem this kind of relationship to be one not worth having but no, we battle on, trying to save the relationship for old times sake. We point to the fact that they provide us financial security in an uncertain world. In the last few years however, even this myth has been well and truly debunked. It turns out that they have been spending the housekeeping money unwisely. In fact they have been taking our money and gambling with it. Then, whether they won or lost the gamble, they have been paying themselves huge bonuses. Their greed for these bonuses caused them to gamble too much and it all went wrong. They lost all of our money and nearly brought the whole financial structure down with them. Of course at the time they said they were really, really sorry and could they borrow some more money from us to stop them going bust. Like love struck fools we said yes. Surely, now they will change their ways we thought. But alas no, just eighteen months down the line they are again paying themselves huge bonuses again despite the fact that they havent paid us back yet. So, if your Adam Ant poster has started to fade and you feel neglected, unloved, and you just dont talk anymore, maybe you should switch your Direct Debits to somebody who loves you for who you are. 2010-02-05 17:29:13 http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/zero-tolerance-tell-it-43.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/banks-13/zero-tolerance-tell-it-43.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/meteors-doesnt-stronger-42.html As the recession continues to bite the effects are still being felt in all corners of the world, especially in Britain. Unfortunately, we are the only G20 country still in recession. We were first in and last out. It should be expected really as queuing is practically an Olympic sport for us Brits. We therefore thought that it might be time to look on the bright side of life, and consider the benefits that recessions bring. Yes, believe it or not recessions are a necessary evil in the economic cycle, and good does come of them. Eventually. It is said that capitalism is based on nature, with a survival of the fittest ethos. In fact Mother Nature makes Margaret Thatcher look like a bleeding heart  liberal. As Darwin identified, nature works on a very simple basis. It tries many different experiments and keeps the ones that benefit survival, discarding any that dont. Nature also recognises that its main aim is the survival of life itself, and it is brutal in its nonchalance about the survival of individual species, let alone single beings. At times throughout history the tree of life has branched off into a cul de sac. The dinosaurs are a good example. They evolved up to a point and enjoyed a period of total dominance, and then in evolutionary terms did absolutely nothing for 80 million years. No fire, wheels or tools. Not even a Skoda. Eventually nature decided that enough was enough and the accepted theory is that a large meteor landed in Mexico causing global devastation and the extinction of the dinosaurs. Some small mammals however did survive and went on to evolve into bigger mammals and ultimately the human race. The point being, is that the slate needed to be cleansed in order for new and improved species to evolve and continue the evolutionary path. Given that our capitalist society is modelled on Mother Nature, then recessions are also a necessary evil. In good economic times some poor companies and organisations may prosper, when they may otherwise have not. They survive with poor products, broken business models and shoddy service because in the good times we stop asking about quality and focus only on quantity. Even the banks stop asking the right questions and pump in more money to meet their short term sales targets. When a downturn strikes, these companies are often the first to be killed off. If you consider that two of the most infamous early casualties of the recession were Woolworths and MFI. Both of these companies had business models that in less opulent times would have been found out long before they actually were. Woolworths were famous for pick n mix sweets which nobody ate anymore and for selling music which had moved to something called the Internet. MFI had their heyday in the eighties and the profits saw them through the nineties before they became a comedic caricature of themselves. If you follow the companys financial history they were dying a slow but certain death for the preceding ten years. If they had been an animal, the RSPCA would have stepped in long before the recession finally put them out of their misery. The next batch of companies to struggle are those who had a good product or service in the past but who have rested on their laurels for many a year, finding it too easy to make money without really trying. Some will see the light and reinvent themselves; others will go the way of diplodocus. And then there are those that will once more rise to prominence as consumers gravitate to quality. It is no coincidence that John Lewis and Marks & Spencers this week posted strong results during the worst economic year for decades. So whilst we suffer the recession we must also remember that some good will come of it in the end. After all without that meteor you would still be grubbing around in a little hole trying not to get eaten by a velociraptor. 2010-01-08 09:45:55 http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/meteors-doesnt-stronger-42.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/meteors-doesnt-stronger-42.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/why-its-nifty-to-41.html Life is like a box of chocolates apparently. Well actually Forrest Gumps dear Ma was wrong, because its actually like a stick of rock with many layers of contrasting flavours. In our twenties we enjoy the freedom of limited responsibility and start our careers with high hopes of making a difference in the world. In our thirties we swop that freedom for nappies, sleepless nights and big mortgages. Forty brings teenage children and normally some kind of mid life crisis involving a leather jacket, a motorbike and a badly misjudged goatee. When we get to fifty however, life is supposed to level out. The kids have left home or are at the tail end of their education and the term left on the mortgage should be in single figures.  There is a glimmer of light at the end of the tunnel and all thoughts of making a difference in the world have been replaced by a simple desire to just get through life alive. Many quinquagenarians may however be feeling a little left out at the moment. It seems that every other age group is being thrown some sort of financial lifeline to help them through the economic downturn. Twentysomethngs have had an increase in the stamp duty threshold to assist first time buyers. Thirty & fortysomethings are enjoying the lowest interest rates in history, which is helpful as they have the largest debt liability in history. Its not even as though you get a bus pass and a winter fuel payment until you are in your sixties. Finally however, the hand of mercy has been extended to all people who can claim to remember William Hartnell as Doctor Who. Alistair Darling has extended the ISA allowance for those who will be aged fifty or over before 5th April 2010. The Cash ISA allowance has been increased from 3,600 to 5,100 and the Stocks & Shares allowance from 7,200 to 10,200. ISA stands for Individual Savings Account and they incur special tax advantages. Normally, income from savings will pay tax at either 20% or 40% depending on whether the investor is a basic or higher rate taxpayer. Growth on investments is also charged as a capital gain at a flat rate of 18%. It is best to think of an ISA as a protective blanket that can shield part of your savings from the beady eyes of the taxman. Each year you are granted a new allowance that means that the blanket can be extended over more of your investments. The key thing to remember is that if you dont use your allowance in the tax year, then it will be lost forever. This means that if you are over fifty, you only have until April to use your increased allowance for this tax year. The ISA allowance comes in two parts. The cash ISA element only covers cash based deposits and the Stocks & Shares ISA covers non cash based investments. Confusingly, the Stocks & Shares ISA is not limited to Stocks and Shares. It can actually hold many types of investment including fixed interest funds, corporate bonds and commercial property as well as equity based funds so there is no excuse not to use it. If you are in your fifth decade on this mortal coil then your thoughts may also be wandering towards the possibility of retirement. These may either be realistic thoughts based on sound financial planning or a harebrained scheme born of desperation as you gaze wistfully out of the office window. In any event, under current legislation you may take the benefits from your Personal Pensions from age 50, but this is also about to change. From 6th April 2010 the earliest you may take your benefits will be increased to age 55. Therefore if you are currently aged between 50 and 55, you only have five months left if you wish to take any pension benefits, including the tax free lump sum. Failure to do so will mean at least a few more years of window gazing. 2009-11-13 10:27:04 http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/why-its-nifty-to-41.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investments-10/why-its-nifty-to-41.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/i-am-spartacus-no-40.html So it seems that this will be the general election of doom with each party attempting to outdo the other with their prophecies of impending hardship, plagues and general armageddon. The rhetoric from the various party conferences all assured us that the only way to prevent this, is to offer ourselves to the sword of sacrifice and hard choices, as Brown and Cameron engaged in a game of one-upmanship as to who could be the more deserving martyr. One of the issues involved in this was which party would make us work the longest with various headlines screaming that we would now have to work to 68 and the ensuing groans of angst from the workforce at large could be heard up and down the country. The problem with this, is that it is the biggest misrepresentation of a statement of fact since we last obtained a quote from a low cost airline. What it actually means is not that you wont be able to retire until three years later than expected, but that you wont receive your state pension until then. Lets put this into perspective. The current state pension is 95.25 per week, or 152.30 if you are a couple. Thats not a lot to pay gas, electric, water, phone, council tax, insurance etcetera, oh and food and clothing every now and again as a treat. Consequently, unless you have made serious private pension provision or are one of the last few left who has an employers scheme, then it matters little whether the state pension age is 68 or 108. Either way you are likely to be getting measured up for a big orange apron and taking a crash course in DIY power tools in order to make ends meet. It was also with bittersweet irony that this all happened in the same week that the courts ruled that an employer has no legal obligation to employ someone beyond age 65. That means that between the ages of 65 and 68 you will have no right to work and no right to retire. Consequently, Eastern Europe may need to beef up its border patrols as all our pensioners will be hanging under a truck trying to claim asylum in Poland. To go slightly off subject we would like to bring a certain Charles Ponzi into the discussion. In 1920 the Italian immigrant started selling postage coupons to unsuspecting investors with the promise of substantial returns. Unfortunately the monies were never invested and the incoming cash was used to pay out wonderfully high returns. Hence the term Ponzi scheme that refers to any scam that uses new investor money to pay out fake investment returns to existing investors. There have been many versions of the Ponzi scheme over the years however they always fail because they run out of new investors and eventually collapse, as Bernie Maddoff and 'Women Empowering Women' will tell you. Fear not though because our heavily regulated pension industry has strict rules which mean that all pensions must have enough assets in them at all times to meet all of their liabilities. If they fall short at any point then the employer is obliged to plug the gap. This legislation was introduced after the Maxwell affair in which the Daily Mirror owner borrowed substantial funds from the pension scheme to prop up his ailing companies, which subsequently failed leaving thousands of employees without their pensions. There is only one pension scheme that is exempt from these robust regulations that exist to protect the public. It is allowed to operate without any assets or investments and it uses the cash it receives from new investors, to repay existing investors just like Charles Ponzi did. The name of this scheme? The State Pension.   2009-10-16 13:44:20 http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/i-am-spartacus-no-40.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/pensions-12/i-am-spartacus-no-40.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/they-think-its-all-39.html Here at adviser Blog we like a good horror film. Ever since Salems Lot weve never looked at a rocking chair in quite the same way. Have you noticed however, that they all follow a certain formula? Firstly the unsuspecting victim enters the haunted house in the middle of a stormy night. As they go from room to room the creepy music builds to a crescendo and finally they enter the basement where.. Tiddles the household cat jump out and startles everyone. We all then breathe a sigh of relief. Unfortunately for the hapless victim however, thats when the nasty man jumps out with the chainsaw and the hockey mask. The current economic meltdown has played out very much like a horror film although if we look more closely, there are more than just anecdotal similarities. Recessions are fuelled by anticipation (or pessimism to be more precise). When we are in a Bull (rising) market everyone is confident and that feeds into the market, which increases the price, which increases the confidence which..you get the idea. A Bear (falling) market operates in reverse. Pessimistic investors sell their stock, which depresses the price, forcing more to sell and the spiral continues. The point is, that investors make decisions now, on what they think is going to happen at some point in the future and this creates a lag. Therefore we see the results now of how we felt six months ago. Its a bit like stubbing your toe in the middle of the night. You know youve done it and you know its going to hurt, but you get a second or two to think about it before the pain actually hits. Recessions also come in different shapes and sizes? Oh yes, there is no standard recession and you never know which type it is, or was, until its over. You can have a V shaped recession which means there is a sharp plunge followed by a quick recovery. Then there are U shaped recessions involving a more sustained downturn before growth returns. The L shaped recession is the worst kind as they go on forever. Just ask Japan. And finally there is the W shaped one. Its actually like a VW, but that isnt a letter in the alphabet so we make do with w. If you can remember back to 2006 there was a bit of a wobble and we all panicked as we thought that the bubble may be about to burst. Lots of important and knowledgeable people like Gordon Brown told us not to worry because everything was fine and they had eradicated the boom and bust era. That was the first dip. Then came 2007 and it all went a bit pear shaped. The big bust that we were told couldnt happen, happened. That was the second dip and is where we are now. Now we are being told that everything is fine again and the green shoots of recovery have started. That may have something to do with a general election next year and the spin doctors attempting to portray an image of Gordon Brown galloping to our rescue astride his trusty steed. Not an easy image on the eye we admit. We may therefore be tempted to loosen up a bit. To dust off the savings accounts or buy that new car weve been eyeing. All of which helps to fulfil the prophecy of recovery, push the markets up, and we all think everythings going to be just fine. But as any self respecting B movie star will tell you, thats exactly when youre most likely to be parting company with a limb or two. So if it does turn out to be a W recession you may just want to keep a tight grip on that popcorn. 2009-09-17 10:31:59 http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/they-think-its-all-39.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/the-recession-8/they-think-its-all-39.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/absolute-return-funds-thats-38.html There is a lot of focus at the moment on Absolute Return funds, especially amongst people who rely on their savings to produce an income and have been through denial, past disbelief and are stood at the fork in the road between depression and selling a kidney. In a sentence, an Absolute Return fund is one that aims to generate a positive return, whatever the market conditions. So what kind of sorcerers magic is used to create such results? In the words of the great L'Oral, heres the science bit Traditional investment funds aim to generate their growth in the long term by benefiting from a rise in the markets. This is known as going long. Shares are bought when they are low, held for a while and then sold at a profit when they have increased in price. The disadvantage being that growth is only produced when the markets rise, and a loss is made if the markets fall. To understand true Absolute Return funds we also need to understand short selling, which has a bit of a pantomime villain image. This is completely unwarranted and you can no more blame a companys failure on short selling, than you can blame the passengers on a bus for it being driven over a cliff. Shorting is a way of betting that a certain share price will go down in value, and making a profit if it does. Imagine your next-door neighbour goes on a three-month cruise and leaves his house keys with you so that you can water his tomato plants. Whilst he is away you sell his house for the market value of 100,000 and pocket the cash. Over the next three months the housing market goes down and you then buy it back the day before he returns for 90,000, before returning his keys and dead tomato plants. Youve just made 10,000 profit by shorting. Some of the sharper readers may have noticed the potential flaw in the process. If prices go up, then you have to buy it back for more than you sold it for, which is not a good place to be. So, the secret is to go long and short at the same time. Say you think that Asdaco supermarket is going to announce good trading results and you go long on their shares in the knowledge they are likely to rise on the news. However, you also go short on the shares of their rival Morriburys, because their share price is likely to drop on the news of their competitors triumph. If you have predicted it correctly then you gain on your long, and also on your short. If you get it half right, and the whole retail sector goes up or down, your position is protected because what you lose in your long positions, you should gain in your shorts and vice versa. Naturally, if you get it all wrong and your long shares dive and your short shares rise then youre going to look like a bit of a ninny, but thats why investment fund managers drive Porsches. By getting the selection right, a gain is made irrespective of market conditions hence the term absolute, or target fund. The fund will set out its targeted return, which could be anything from 5-15%, and it will aim for this return no matter what the markets do. Beware however, of funds that pretend to be absolute funds when in fact they are nothing more than a traditional long fund, with a bit of window dressing and snazzy marketing literature. 2009-08-03 13:58:41 http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/absolute-return-funds-thats-38.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/investment-income-11/absolute-return-funds-thats-38.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/which-union-do-the-37.html Employment rights have come a long way in recent decades. We are all guaranteed a minimum wage, a limit to the number of hours we can work and trade unions to fight our every battle. So what would happen if say, your employer decided to reduce your salary by 70% over a six-month period. With no notice. Youd probably be a tad upset and an urgent call to your union rep would ensue. Strikes would be called, sympathetic and worried co-workers would come out in support and if it were in France, there would probably be some good-natured management kidnapping as well. There are however a category of people who have suffered exactly this and have absolutely no recourse. No union, no picket lines, no clenched fist waving at the management. The forgotten group to whom we refer are the retired savers who rely on their capital to provide an income. This time last year a fair but modest 6-8% return per year could be achieved with careful planning and a good tailwind. Today however, achieving 2.5% is difficult and this has meant a substantial drop in income for a lot of people. They are left with little option but to either live on a much-reduced income or to start drawing capital to subsidise their living costs. Neither of which is much fun, nor sustainable in the long term. You will be glad to know however, that there are ways to achieve a solid income from your investments. It is really just about taking a structured, cohesive approach to building a savings portfolio. Professional advisers and Wealth Managers like Joslin Rhodes will tell you that the secret is to break down the process as follows. Firstly, tax. You should aim to use as many of your tax allowance as possible. This means utilising your ISAs and ensuring that if you are a couple, both of your personal allowances have been used. Also, many people fail to use their Capital Gains Tax exemption, which allows you to make gains of 10,100 each per year without liability to tax. Non tax-efficient investments mean that you will be liable to basic rate tax at 20%, and 40% for higher rate taxpayers. Oh, and just because youre a non-taxpayer doesnt mean to say that your investment isnt paying tax in the underlying fund, which you cant reclaim. Secondly, dont put all your eggs in one basket. Build a portfolio of different products, with different providers to dilute your risk and spread your assets. For the majority of those seeking income, their risk profile will be at the cautious end of the scale. This means that the majority of the holdings should be spread between cash, fixed interest, corporate bonds, structured products, and absolute return funds which are a relatively new concept, designed to give a fixed rate of return, irrespective of the markets. The key point is that each one is a different type of asset in a different sector. When one sector is performing poorly another is likely to be flourishing. Conversely, if you have all your money in one place then you are taking a large risk. If that investment provider or asset type suffers then you are going to suffer with it. Above all, the best advice we can give is not to just plonk your money into a deposit account and expect it to produce an inflation beating income. It will, but for the bank, not you.   2009-07-17 13:13:00 http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/which-union-do-the-37.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/which-union-do-the-37.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/mortgages-1/climate-change-interest-36.html Heres a question for you to get the brain juices flowing. How long ago was the last Ice Age? a) 8,000 years ago b) 120,000 years ago c) 1 million years go OK, its a trick question because technically they are all wrong. Why? Because we are still in an Ice Age. Albeit towards the latter end of it, but an Ice Age all the same. That is why we get to go skiing and Eskimos live in igloos. Climate change as we all know is the single biggest threat to our civilisation (remember when it was still called global warming? Even catastrophes get a branding makeover these days). The basic premise being that the earths temperature will rise, the ice will melt, and we will go the same way as the dinosaurs. As Al Gore points out to us, if you look at a graph of the earths temperature over the last 100 years there is a definite upward trend. We all know the reasons why and the evidence is hard to ignore. Even the scientific community are in general agreement. More importantly civilisation as a whole has embraced the concept and the challenge that lies ahead, to the extent that non believers are the minority. Anyone who has had the audacity to ask for a plastic carrier bag at the supermarket checkout and been made to feel like they had just clubbed a seal to death in front of a primary school outing will agree. If however the graph is extended to 65 million years it paints a different picture. Historically the earth has on average been much warmer than it is today. In fact during the Paleocine Epoch the oceans were between 10 and 15 degrees Celsius. OK so what does this have to do with interest rates you may ask? The link is that in the current economic climate (did you see what we did there?) we have the lowest interest rates since economic time began. Which is very nice if you borrow and not so nice if you save. There can be a feeling however, that when offered a shiny new fixed mortgage rate at about 4-5%, that its a little bit high. Surely we think, it should be in the region of 3%. To be fair, if the lenders werent increasing their margin to pay for all the bailouts then it probably would be, but thats for another article. If we go back to the early nineties when interest rates were on a bit of a rollercoaster the definition of normal was somewhat different. Some of you may remember the time when you sat in front of the news waiting for the next interest rate announcement with a mortgage statement in one hand, a calculator in the other and the homeless shelter on speed-dial. One client we came across, which in the interests of confidentiality we shall refer to as Mr Lucky, had taken a 15 year fixed rate at 13.5% because at the time, it was better than normal and he thought that interest rates were going to continue to go up. Had he been offered a 5% fixed rate then he would probably have traded in his family to secure it. The point that we are stumbling towards is that the perception of what is normal can be skewed depending on the time period it is compared against. In Ice Age terms the temperature of the earth is currently below normal and it can rise quite a bit and will still be below normal, although it will have wiped out mankind in the process, which is unfortunate. The average interest rate over the last ten years or so has been relatively low and this is what we deem to be normal. If we widen the scope to thirty years however, then current and recent interest rates are abnormally low. So if you are perusing your next mortgage deal and feeling a little bit disappointed about what is on offer then it may be worthwhile refocusing your benchmark by looking back more than the last ten years for a comparison to normal. Just ask Mr Lucky.  2009-06-09 16:21:22 http://www.joslinrhodes.co.uk/financial-adviser-blog/mortgages-1/climate-change-interest-36.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/mortgages-1/climate-change-interest-36.html#comments http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/running-damage-wealth-35.html The art of making a profit is a fairly simple affair in theory. You buy something at a one price, add value to it in some form, and then sell it at a higher price. When investing, the same premise applies. The difference is that the price of the assets, normally shares, can go up and down of their own accord. The value that you add is in the timing of the buying and selling. Most people would agree that the basic foundation of achieving growth in your investments is to buy when prices are low, and then sell when the price is high. Easy, job done. Well, no not really. Our human nature is programmed to make us want to do exactly the opposite and can be demonstrated by looking at just about every economic crisis in history. In 1929 the Stock market had been rising for many years due to technological improvements in the trading system. This in turn had allowed normal people to access the stock market in a way previously unknown. The market rode on a wave of enthusiasm, optimism and unswerving belief that it only ever went up. Theres a great story about Joe Kennedy, JFKs father, who was a prolific stock market investor in the 1920s and 30s. Shortly before the crash Joe Kennedy sold every one of his shares. At the time this must have looked like one of the biggest misjudgments since Eve decided she was a bit peckish. When later asked why he had sold his entire holding he replied that on the way to work that day he had been given some share tips by his Shoeshine Boy. It was at that moment that he decided the market was so overvalued that a crash was inevitable and marched into his office to tell his crestfallen broker to sell. The point is that as the share prices had risen in the previous years, more and more people had bought into the market at an ever-higher price. When the crash came, everybody wanted to sell which forced the price down and then they wanted to sell even more. The direct opposite of the basic principle that seemed to make so much sense a moment ago. This is all down to our basic human nature which promotes conformity. We take comfort in the actions of others. If we are unsure about something then we look to see if other people are doing the same thing. The more that are, then the safer we feel in doing it ourselves. Basically we dont like to run against the herd. But we dont need to go back to 1929 to see evidence of this. As you may have noticed, there have been a few problems with the economy recently. Consequently the FTSE has dropped by around 35% in the last two years, although it has seen a bit of a rally recently. When Woolworths had a closing down sale and offered a 25% discount on Pickn Mix there were near riots. In fact on the news reports one elderly lady was seen executing a near perfect half nelson on another unsuspecting shopper who had the misfortune to position themselves between her and the Liquorice Allsorts. Yet when shares are available for a third less than they were, there is no such violent frenzy for FTSE tracker funds. In fact the main temptation with investors is to sell or move into something a bit safer until prices rise and then start buying again. Ironically the market needs these investors otherwise those who buy when it is low and sell when it is high, would have no-one to buy from and sell to. So the next time the herd is choosing which direction to go you may just want to consider turning left when they turn right. 2009-05-11 15:52:41 http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/running-damage-wealth-35.html Joslin Rhodes http://www.joslinrhodes.co.uk/financial-adviser-blog/stock-market-9/running-damage-wealth-35.html#comments