Golden Year….

Monday 7th January 2019

Golden Year….

A New Year has dawned. The season to be jolly has been and gone for another 12 months….

For many, now it is the season to curl-up into a quivering ball of regret and wait for the postman to push credit card statements and store card balances through the letterbox….

‘Did we really spend so much?’ some will ask….

‘That can’t be right,’ others will exclaim….

Others will take things badly. Perhaps sobbing gently. Or wailing like banshees. ‘We’ll still be paying for this Christmas when the next one comes around….’ 

That’s the trouble with the have-it-all-now and pay-for-it-all-later deal. It all has to be paid for eventually….

And when that time comes, what you’ve had in advance has inevitably lost value (and charm) in the meantime. It no longer seems to be worth what you’re now being asked to stump up for it….

  • New year – record highs!!

Just as work inevitably expands to fill as much time as you can give over to it, household expenditure inevitably expands to gobble-up all available credit….

By credit, of course we mean debt. And heading into 2019 British households have plenty of that stuff to be going on with. Particularly debt of the unsecured variety (debts other than mortgages)….

The latest figures produced by the TUC tell us that total unsecured debt rose to £428 billion in the third quarter of 2018….

In case you aren’t aware, that’s  a  record high – and well above the £286 billion of debt that British households had strapped to their backs ahead of the global financial crisis in 2008….

As a share of household income, unsecured debt now stands at 30.4%. That’s another unwelcome all-time-record-high performance….

And to put that figure into its proper perspective, unsecured debt represented 27.5% of household income ahead of the shuddering crash that derailed the whole world and its banking systems back in 2008….

That figure is now 3% higher. And, when you’re talking hundreds of billions, that 3% represents an eye-watering increase in money that must be paid back….

The message conveyed by these figures is clear: millions of British households are reliant on borrowing to make ends meet….

  • Buckle up….

In a strong and healthy economy, growth is driven by buoyant consumers spending wages….

In January 2019, the British government instead appears to be relying on spiraling  levels of spending on credit-cards, loans, HP agreements, store cards and  other forms of borrowing to stimulate the economy….

But don’t worry. These politicians simply must know exactly what they are doing. After all, that’s why we voted for them. Didn’t we?

But seriously, don’t worry. We are as certain as doubting Thomas that banks and other financial institutions are lending money responsibly and that the mistakes of the not-too-distant past will not be revisited or repeated in the not-too-distant future….

We are as sure and certain as an investment banker’s bonus that the days of insatiable greed, criminally-reckless lending and a belief in some God-given entitlement to a government-endorsed and taxpayer-funded bailout are now matters of ancient history….

And, of course, we are entirely confident that hard-pushed and heavily burdened British households operating in a climate of wage stagnation and breadline brinkmanship are good for every single penny they are borrowing, have borrowed and are yet to borrow in the weeks and months ahead….

All that said, be sure to wear a seatbelt. When the wheels come off this runaway stagecoach, it ain’t going to be pretty – and the consequences will be felt far and wide….

  • March of the prognosticators….

Early January is the time of year when the common-garden prognosticator traditionally crawls out of the woodwork and commits his thoughts to the inside pages of newspapers and magazines – eagerly telling readers which stocks it will pay to own in the year ahead….

It’s a breath-taking exhibition of clairvoyance and precognition. Some refer to it as sorcery….

Years ago, these people might well have been up at the Witch Trials….

Here is this season’s offering from This is Money – the Financial website of the year….

Or there’s this from the Guardian…. And this from City AM…. And this from the Independent….

I did have a few more of these things put by  for your enjoyment, but I appear to have mislaid them….

Not to worry. No harm done. These things are probably the next best thing to useless to you anyway….

  • Thrown together….

I don’t mean to be an old fuddy-duddy. But these things are not the product of rigorous research or passionate belief….

They are thrown together to fill space during a quiet period in the news cycle….

…. Like the latest New Year miracle diet….

…. Or the fascinating New Year resolutions of the rich and the famous….

It’s just stuff that fills a page. Everybody pitches in with a half-hearted pick or a hunch or some whisper they’ve heard  on the City grapevine – barring those editors and writers too hungover to turn-out and put a shift in….

Trust me, this isn’t the kind of ‘expert’ advice you want to be backing with hard-earned money….

But we are good sports at Money Truths. We wish all the prognosticators the best of luck with their 2019 stock selections….

Our best guess is that they are going to need it….

  • Going down….

Markets worldwide took a headlong dive in 2018. Here in Britain, the FTSE 100 ended the year 12.5% down on 2017….

That was the worst year for the FTSE 100 since 2008 and the fall saw £242 billion wiped off the value of companies listed on the Index….

The markets have rallied a bit since. The eternal optimists take this as a sign that the ‘correction’ is done with and things are about to get back to normal….

Our take on it is this: bull markets don’t go up in a straight line and bear markets don’t go down in straight line either….

Instead, they go down and they go up. They go down. They go up again. They go down again….

2018 was a bad year for stock investors. The worst for a decade. But stocks still ride high and there is a long way to fall yet….

The general direction of travel this year – ups and downs taken together – will be down….

  • We are bears….

Some don’t think it will happen. That or they can’t confront the possibility….

‘Back Britain’ says the Telegraph – telling readers they should invest in UK shares  this year….

Seb Jory at Tellworth Investments reckons now is one of the cheapest times to invest since 1996. He says: ‘Investors should be licking their lips….’

On New Year’s Eve, The Motley Fool advised readers: ‘Ignore the gloom. The FTSE 100 could still hit 8,000 in 2019!’

This is just a selection of bullish opinion. There is plenty more out there. But in the first week of January 2019, Money Truths remains a bear….

Our take is that all we have heard, seen and felt so far have been warning tremors. The real quake is yet to come. The real damage is yet to be done….

We don’t know what might set this great market-levelling event off. Perhaps Brexit, or the household debt we talked about earlier. Maybe Trump can wreak more havoc this year than he did last. Most likely it is something we cannot and will not see coming….

My bottom-line in the first week of a New Year? Gold is a better place to be right now than stocks. Gold is real money and does well during financial crisis. Owning physical gold is one way to get exposure. Investing in a gold-themed ETF is another….

More on this next Monday morning….

That’s how it looks from here. Happy New year….

All the best,

Dave Gibson

Money Truths