I am delighted to see the end of the tired and seemingly inept and corrupt dynasty that has been in power in the US for what feels like a very long time. But the gales of waffle about what the new team will do and how they are going to return the world to prosperity and peace by next Thursday put me in mind of an English king getting his trousers soaked by a rising tide.
Many people around the world do not yet realise it, but they are now at the foot of a very long and steep learning curve. The most famous of them all is the US president elect who has begun a series of meetings, where it will be explained to him just what comes with the chair next to the window in the Oval Office. Since neither candidate displayed much grasp of the concept “insolvent” during their campaigns I would just love to be a fly on the wall when the fellows from the treasury show him the empty cash box and the list of foreign creditors. From that meeting he moves on to meet the uniforms who are bursting to bend his ear about bigger and better toys for killing people he didn’t know he was supposed to hate. By the end of these briefings he may well decide that the campaign motto of “change” is more appropriate to changing his mind about wanting the job.
Other folk losing their footing, even on the nursery slopes of their learning curve, are investors who are discovering that however welcome and history-making the new man is, he is also a left-wing politician and believes passionately in the Robin Hood model. This translates into more and bigger taxes and more and bigger government officials who are eager to help distribute the cash to needy cases that they believe they alone can identify. Provided, of course, that their own needs are first addressed with suitable salaries and perks.
And then there are the millions of folk on this continent who believe that because the new chap has relatives here, we can expect Airforce One to appear in our skies at any moment. It will of course be stuffed with sacks of folding money and instructions to the crew to fill the upturned palms that are such a part of the local landscape. Quite a lot of learning going to happen here too I think.
Central bankers world-wide seem to be missing the point. Interest rates are being slashed – has our own man been watching and taking notes – in the hope that people will borrow money and spend it. One article suggests that the planet is moving towards a zero interest rate scenario. As a hungry member of the baby-boomers-now-reliant-on-income-from-savings brigade this is a terrifying prospect! Also terrifying is that the very people who half a dozen years ago sewed the seeds for this mess by encouraging banks to lend without asking questions are now the ones gracing the screens with remedies against recession.
It is always hard to understand share prices, but oddly enough in this turmoil where the indices are 40% and more off their highs it seems reasonable to expect that on a five year view, portfolio returns could be respectable. If they turn out to be negative on that time scale then we are all indeed doomed and I will be long gone. Gentle buying at this time would not be discouraged but don’t expect miracles by Christmas.
Thank goodness there is some rugby to watch this weekend. The cricket has been dire and the wind is blowing so hard down here in the kingdom that any activity on the beach is a non-starter. I am not the shape to consider kite surfing.
James Greener
7th November 2008.
