THE GREEN THING

A friend of mine from America sent me a note the other day.  It struck a chord with me and I thought I would share it with you.

"Checking out at the store, the young cashier suggested to me, one of the baby boomer generation, that I should bring my own grocery bags because plastic bags weren't good for the environment.

I apologized and explained, "We didn't have this green thing back in my earlier days."

The clerk responded, "That's our problem today. Your generation did not care enough to save our environment for future generations." She was right -- our generation didn't have the green thing in its day. Back then, we returned milk bottles, soda bottles and beer bottles to the store. The store sent them back to the plant to be washed and sterilized and refilled, so it could use the same bottles over and over. So they really were recycled. But we didn't have the green thing back in our day.

We walked up stairs, because we didn't have an escalator in every store and office building. We walked to the grocery store and didn't climb into a 300-horsepower machine every time we had to go two blocks. But she was right. We didn't have the green thing in our day.

Back then, we washed the baby's nappies because we didn't have the throw-away kind. We dried clothes on a line, not in an energy guzzling tumble dryer -- wind and solar power really did dry our clothes back in our early days. Kids got hand-me-down clothes from their brothers or sisters, not always brand-new clothing. But that young lady is right.
We didn't have the green thing back in our day.

Back then, we had one TV, or radio, in the house -- not a TV in every room. And the TV had a small screen the size of a handkerchief (remember them?), not a screen the filling half of the area of a room's wall. In the kitchen, we blended and stirred by hand because we didn't have electric machines to do everything for us. When we packaged a fragile item to send in the mail, we used wadded up old newspapers to cushion it, not Styrofoam or plastic bubble wrap. Back then, we didn't fire up an engine and burn petrol just to cut the lawn. We used a push mower that ran on human power. We exercised by working so we didn't need to go to a health club to run on treadmills that operate on electricity. But she's right. We didn't have the green thing back then.

We drank from a fountain when we were thirsty instead of using a cup or a plastic bottle every time we had a drink of water. We refilled writing pens with ink instead of buying a new pen, and we replaced the razor blades in a razor instead of throwing away the whole razor just because the blade got dull. But we didn't have the green thing back then.

Back then, people took the tram or a bus and kids rode their bikes to school or walked instead of turning their mums into a 24-hour taxi service. We had one electrical outlet in a room, not an entire bank of sockets to power a dozen appliances. And we didn't need a computerized gadget to receive a signal beamed from satellites 2,000 miles out in space in order to find the nearest pizza place.

But isn't it sad the current generation laments how wasteful we old folks were just because we didn't have the green thing back then?"

"DON'T PANIC, MR MANNERING!"

The stock market is all over the place.  Brokers don't know if it's Good Friday or Christmas Day.  It's chaos.  Up 2% today; down 3% tomorrow; bouncing back the next day.  What is going on?  How can any sensible person invest in shares when markets are so incredibly volatile?  Well, to coin a phrase, "Calm down, dear".

Think about why you invested in the stock market in the first place and what your overall objective is.  The first thing to remember is that you haven't suffered a loss on your portfolio until you sell something.  If you're not desperate for the cash, sit tight.  It's not a good time to sell shares when the market is fluctuating between despondency and panic.   On the other hand, it might be a good time to buy.  I've quoted Warren Buffet before and I'll quote him again: "Be greedy when others are fearful and be fearful when others are greedy".

Think about what you want to achieve from your stock market investments.  For many of us the most important thing is income.   If this is your priority then you need to be looking at companies with a history of good dividends.  There are many companies paying in excess of 4% dividends year after year.  Let's take some examples:  BAE Systems is paying a trailing dividend of 6.44%.  National Grid is paying 5.83% and Vodafone 5.48%.   The fact that their share price might have fluctuated dramatically on market sentiment does not alter their fundemental business model.  They don't become bad businesses overnight, and the chances are that they are going to maintain their dividend policy.

If you are looking for long-term income that beats the ridiculously low money market rates, then seek out good solid companies paying a sensible dividend and ignore the fluctuations in the share price.  Let your children worry about the capital gain or loss, what we want is income to supplement our pensions and to hell with the price of the shares.

Be well.

MONGERS OF DOOM

‘Baby boomer’ is not a phrase that I particularly like, but then I’m not over-fond of putting labels on groups.  It also sounds a bit American, not that there is anything wrong with that of course, but it just jars a bit on my English sensitivities.  Anyway if you were born between 1946 and 1964 you fall into that category, like it or not.

Statisticians, as is their wont, come up with all sorts of information and figures about Baby Boomers.  There are the obvious implications including more competition to get into school and university, more job applicants, greater demands on social services and so on.  However, there are also more nefarious statistics.  For example, as we reached middle age we had an impact on the stock market because there were more of us buying shares with our income and savings.  It has been argued, with some logic, that we were responsible for the boom years because we bought more ‘product’ and invested more in stock markets.  House prices forged ahead because the population bulge created a demand that exceeded the supply.

The doom mongers are now predicting the opposite affect.   As we come up to retirement we are more likely to downsize our houses, consume less ‘product’ and we are likely to sell our shares to finance our retirement.  This apparently is going to result in depressed stock markets in those countries that actively participated in the Second World War.  Some doom mongers are predicting a fall in the American S & P 500 of something like 40% over the next 10 years or so.  Pessimists in general are having a field day.  Not only are stock markets going to be affected by Boomers selling shares, but companies will be less profitable; P/E ratios will fall; double-dip recession is inevitable, and all this is on top of a very shaky financial situation within the EU likely (according to the doom mongers) to bring about the demise of the Euro and/or the EU itself, at least in its present form.

So, what to do?  Where to invest?  How to rebalance our portfolios?  The answer is to buy pharmaceuticals; cruise companies; care home providers and other sectors that are likely to benefit from an aging population.  You might also like to think about  income generating asset classes.  Consider investing in areas like South America; sub-Saharan Africa; the Middle East or the northern parts of Southeast Asia (ex-Japan) where working populations are expanding.

On the other hand, be an optimist and say to hell with it all and just enjoy your retirement.  The next generation are unfortunately going to bare the brunt of this demographic anomaly because the longer-living Boomers are rapidly spending their inheritance.

It’s a hard life.

HOW TO RETIRE WITH £100,000.

My friends at the Motley Fool have worked out that, if you are currently 45 years old and want to retire at 65 (or any other 20 year horizon) with a £100,000 nest egg, then you need to save £6.28 a day.

You need to put this amount into an ISA and get an average return of 7% a year.  After 20 years you will have £100,000 to supplement your pension.  The power of compounding. 

£6.28 a day doesn't sound like a huge amount, but the 20 year time horizon might be a bit of a problem.  Would be for me, I know that!

Something for you middle-aged youngsters to think about.  Time seems to go by much faster after your mid-forties.

Be well.

PENSIONERS ARE WORSE OFF

You don't need me to tell you that, but there has been some alarming news from Prudential that indicates how 'worse off' we really are.  According to them our cost of living is going up some 44% faster than the Retail Price Index.  44%!! 

Apparently this is because we spend a lot more of our available income on things that are rising much faster than the inflation rate.  Things like fuel and food. 

Anyone with extra savings held in cash is likely to be worse off by £278 over the next 12 months as their spending power is reduced by increasing inflation and ridiculously low interest rates.  And this is  relates to the average savings pot of £19,664, so if you have more than that in savings you're be losing even more spending power.

Pensioners on fixed incomes are suffering disproportionately to the working population and facing higher levels of inflation according to the Pru.

Don't we know it.

Time to take another look around the Retirement Revenue site and get some ideas for trying to make up the difference.

Be well.

Weather

Been away for some time visiting grandchildren in New Zealand and having a bit of a holiday, so no blogging for quite a while.  Back now, enjoying the European summer - I think it was in April and May.  June was terrible and July not much better.  If you have an interest in the weather (and who doesn't), one of the best and most accurate forecasts around can be had at http://xcweather.co.uk.  I have no connection with them at all, but find their forecasts easy to understand and amongst the most accurate.

Not that this has much to do with income in retirement, but it's useful information for all that.

By the way, did you see the price of gold above $1,600?  Told you so.

Hope you're well.

PENSIONERS LOSE OUT - AGAIN!

The combination of rising inflation and low interest rates invariably hits pensioners the hardest.  Because most pensioners have paid off their mortgage they don't benefit from low interest rates.  In fact it's quite the opposite, low interest rates hits savers.  On top of this, the Bank of England have failed in their duty to hold down inflation to the government target of 2%.   In December the Consumer Price Index rose to 3.7% with the Retail Price Index (a more realistic measure for most of us) rising to 4.8%.

And it can only get worse; utility bills are on the increase, petrol is rising inexorably towards £6 per gallon, VAT is now 20% and National Insurance goes up in April.  This all adds to transport costs which lead to higher prices in the shops.

Recent figures suggest that people over 65 are worse off by more than £700 a year - that's nearly £14 a week.  Any trade union worth its salt would be up in arms if its members lost that kind of money.

Sorry to sound depressing, but I tell it as it is (at least in my opinion) and the only glimmer of hope on the horizon is that the Bank of  England are likely to be forced into raising rates earlier than previously expected.  Some economists are suggesting a rise in the first half of this year.  Don't get too excited though, the rise is almost certain to be only 0.25% which isn't going to amount to much in terms of income on savings.

 Maybe we should give more serious thought to finding another source of income.  Another £1,000 a year is barely going to make up for our current losses.

Be well.