Inflation: Friend or foe?

It might be unwise to extrapolate too much from this week’s inflation data on both sides of the Atlantic. This is peak bounce back. Like the surge in corporate earnings that we will see in the results season that started this week, the rise in inflation is largely a matter of arithmetic. The world shut down a year ago and is re-opening today. This was always going to distort the figures.

Take the biggest contributor to this week’s rise in UK inflation, transport costs. The recovery in the oil price has been dramatic, and petrol at 130p a litre versus 106p a year ago reflects that. But this is a return to a more normal world from one in which producers were, briefly, paying others to take oil off their hands and the cost of a barrel of crude was, for a short time, negative. Likewise, the increase in second-hand car prices is largely about a temporary semiconductor shortage affecting the production of new cars. This too shall pass.

So, while the inflation prints in both America and here have been significantly higher than forecast this week, we should not assume that central banks on either side of the pond are necessarily wrong to believe that price rises are transitory. The peak may be a bit higher than predicted but their assumption that inflation will settle back in due course could turn out to be correct.

Let’s hope so. It would certainly be reassuring to those of us whose memories stretch back to a time when we last misjudged the inflationary straws in the wind. Central banks, notably the Federal Reserve under former chair Arthur Burns, ignored the warning signs of rising prices in the late 1960s and early 1970s, and we know how that ended. Inflation never looks like being a problem until it is a big one. It’s far better to keep the genie in the bottle than to have to stuff it back in again.

This week I took questions from investors about my quarterly Investment Outlook. The most popular topic by a country mile was inflation: should we worry; what can we do about it; where are the opportunities? Reading those questions, it struck me that inflation is not a one size fits all problem. Depending on our age and circumstances we will experience inflation in different ways.

For my parents, now in their eighties, inflation was just a given, a part of their world view. They would prefer to spend money today in the knowledge that it would be worth less next year. They were happy to take on seemingly eye-watering mortgage debt because they knew that within a few years, rising house prices and salaries would reduce the burden to a more manageable level. The conventional wisdom was to buy the most expensive house you could stretch yourself to afford.

The biggest difference between my parents’ experience and mine and that of my now adult children, is that inflation was not really their problem to solve. They worked in the public sector (Air Force, teaching) so their salaries and subsequently their pensions were a political rather than a commercial decision. The 1970s was a dreadful period for asset prices – both shares and bonds performed terribly, as investors questioned whether capitalism even had a future. But the collapse in valuations between the mid-1960s and 1982 was an ‘out there’ kind of problem for a family in the embrace of the state.

For my generation, on the brink of what we hope will be a long and healthy retirement, the prospect of inflation is a much bigger concern. I hesitate to complain too loudly because, like many people in their fifties, I too have been a beneficiary of rising asset prices. My children smile through gritted teeth when I tell them that we put down £3,500 to buy our first, inner London, flat in 1989.

But, while there are some people my age who will enjoy an inflation-linked final salary pension scheme, they are few and far between. Most of us are setting out on a new kind of financial journey in which the onus will be on us to make sure that what we have managed to accumulate in the last 30 years of our working lives can last out the next 30 years of retirement.

The most important determinant of our ability to do that in any sort of comfort will be whether this week’s inflation numbers are indeed a temporary spike or the first signs of history repeating itself. If you don’t know the Rule of 72, now would be a good time to familiarise yourself with it and to pass it on to your kids.

If you want to know how long it will take for rising prices to halve your spending power, simply divide the current inflation rate into 72. At just 4pc a year, half-way between this week’s headline inflation rates in the US and here, it will take just 18 years for the pound in your pocket to be worth 50p. At 6pc inflation, it will take just 12 years. You will need to have put aside a great deal for that not to matter.

It is my children, all now in their twenties, that concern me more. They have the advantage over those heading into retirement that their incomes can rise in line with prices. Let’s hope they do because that has not been the reality for many since the financial crisis. And they are starting out with property prices high and interest rates low, the mirror image of my experience 30 years ago. I suspect they will look less kindly on inflation than their parents and grandparents have been able to.

Governments like a bit of inflation. Central banks think they can achieve it. It’s the rest of us who will have to deal with the consequences if they can’t.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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5 top investment truths

Many of us have probably received in our in-boxes spams for get-rich-quick-schemes with promises of making great amounts of money, effortlessly. If only getting rich was so easy.

Rather than pipedreams being sold by spammers, here’s a list of 5 investment principles that have stood the test of time.

1. Asset allocation is very important

Asset allocation – how you spread your money across various asset classes like shares, bonds property, infrastructure and alternatives – helps to balance the risk and return potential in your investment portfolio, anchoring it through different economic and investment cycles.  It’s a key driver of long-term investment performance.

By including multiple asset classes with investment returns that move up and down under different market conditions within a portfolio, an investor can protect against significant losses. This is because, historically, the returns of the major asset classes have generally not moved move up and down at the same time.

By investing in more than one asset class, you’re likely to reduce the risk that you’ll lose money and your portfolio’s overall investment returns should have a smoother ride. If one asset class’ investment return falls, you should be in a position to counteract your losses in that asset class, with potentially better investment returns in another asset class.

The process of determining which mix of assets to hold in your portfolio is a very personal one. The asset allocation that works best for you at any given point in your life will depend largely on your time horizon and your ability to tolerate risk.

2. Diversification matters

The practice of spreading money among different investments to reduce risk is known as diversification. Through diversification, the overall performance of your investment portfolio isn’t overdependent on the performance of a single asset class or any single investment.

By spreading your money across a group of investments, such as in your super fund, you should be better able to limit losses when financial markets are volatile, and reduce the fluctuations of investment returns without sacrificing too much potential gain.

Asset allocation, along with diversification, is important because it can have a major impact on whether you’ll meet your financial goals. If you don’t include enough risk in your portfolio, your investments may not earn a large enough return to meet your goal.

For example, if saving for a long-term goal, such as retirement, most financial experts agree to including at least some ‘growth investments’, such as shares, for example, in your portfolio.

On the other hand, a portfolio heavily skewed towards shares would probably be considered inappropriate for a short-term goal, like saving for a holiday or buying a car.

3. Higher returns come with higher risks

Risk is unavoidable when investing. No discussion of potential investment return or performance is meaningful without also considering the level of risk involved.

If you want the potential to earn a higher return on your investments, then you have to be willing to accept more risk or volatility (ups and downs in the value of your investments). But investment success isn’t always about chasing higher returns by taking on relatively high risk – it’s about finding the right balance between risk and return that works for you.

An aggressive investor, or one with a high-risk tolerance, is more likely to risk losing some money occasionally, in order to get better long-term results.

A conservative investor, or one with a low-risk tolerance, tends to favour investments that will preserve their original investment. Conservative investors are concerned with a “keeping bird in the hand,” while aggressive investors seek “two in the bush.”

4. Your time horizon can influence your investment choices

Your time horizon is the expected number of months, years, or decades you will be investing to achieve a particular financial goal. An investor with a longer time horizon may feel more comfortable taking on a riskier, or more volatile investment because they can wait out inevitable financial market ups and downs.

By contrast, an investor saving up for a near-term goal, would likely take on less risk because they have a shorter time horizon.

5. Time in the market is more important than trying to time markets

All financial markets, including share markets, have good days and bad days. From this, it might be assumed that the key to successful investing is simply to be invested on all the good days and not invested on all the bad days.

It sounds tempting, but very difficult to do consistently and successfully, even for investment professionals.

Consider the fact that market timing entails two decisions. One decision is regarding when to get into the market whereas the other decision is regarding getting out of the market.

Getting just one of those two decisions right is difficult enough. Getting both right is a very tall order.

Market timing can be costly

One of the biggest costs of market timing is being out when the market unexpectedly surges upward, potentially missing some of the best-performing moments.

The opposite of market timing is staying invested with a long-term view as the market goes through its cycles.

Here’s something to consider: a hypothetical investment of $US1,000 in the global share market as measured by the MSCI ACWI index, made in 2010, would have grown to $US2,060 by the end of 2019.1

But if an investor missed the 30 best trading days of that period, they would have lost 99% of that return; and missing the 40 best trading days in that period would have seen the investor with a smaller amount than the original investment.

This emphasises the importance of patient capital – giving the market, in this instance, the global share market, time to grow your money rather than trying to pick the best time to invest. Even experienced investment professionals find it difficult to accurately and sustainably time markets.

One more thing

Sitting down with a financial adviser can help you will all aspects of investing, including investing your super.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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Why dividends make sense in an inflationary environment.

The fallout from Covid-19 put pressure on corporate dividend payments in many sectors and markets. Now, as economies recover and earnings bounce back, dividends worldwide are poised to rebound. At the same time, while widespread fiscal stimulus may push the global economy into a period of higher inflation, history shows how dividend-focused investment strategies can provide sustainable income in a reflationary environment.

At the height of pandemic-induced uncertainty in the markets last year, many companies came under economic or political pressures to cut or suspend dividends. Dividends declined by around 3 per cent across the S&P 500 Index in the US and fell further in Europe.

As a response to the pandemic, economic policymakers have cut interest rates and formulated massive fiscal stimulus programs – including a historic US$1.9 trillion recent stimulus package in the US alone, with potentially more on the way. Such a massive and coordinated policy response has increased expectations that the economy will enter a period of higher inflation.

This week’s Chart Room looks at the long-term relationship between dividends and inflation. Periods of inflation can be challenging for income-seeking investors, as inflation eats into the real purchasing power of bond coupons, which are generally fixed at a certain level. By contrast, dividends are a share of the corporate profit pool, and so when profits are rising, they can rise too. This growth means they can increase in line with, or ahead of, inflation, protecting the real purchasing power of these income streams. Since 1900, the 10-year annualised growth in dividends across the S&P 500 has outpaced CPI growth nearly three-quarters (73 per cent) of the time.

The market’s recent focus on themes like ‘stay at home’ and, more recently, ‘reopening and reflation’ has seen many stocks which don’t fit into these buckets falling out of favour. We think this is particularly true in defensive sectors like consumer staples, utilities and healthcare, where some high-quality companies with good dividend prospects now look undervalued. For income-focused investors, that means it’s a great time to take the long view.

If you have questions and would like your financial situation to be evaluated, please email us on with your contacts, for an exploratory meeting, at our cost, not yours.

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How to help your parents and still save for retirement

How to help your parents and still save for retirement

The financial impact of COVID may have cut into your parents’ retirement savings, or perhaps they just simply didn’t save enough to last the distance.

Whatever the reason, if you’ve now found yourself with parents you need to help, you may be wondering how this will affect your own retirement plans.

So, here’s a few things you can do to help both you and your parents improve your chances of retiring comfortably.

Analyse your parents’ assets and savings

It can be tough to start a conversation about money with your parents, but it’s one of the most important conversations you can have to understand their retirement savings.

Having access to their financial information will give you a better understanding about their situation. More importantly, you’ll know if you’re going to be required to help them financially.

Ideally you want a clear picture about their current assets, savings and debt status plus an understanding of their income and expenses. There are budget planners and phone apps you can use to help get control and visibility around spending habits. You may also want to use a retirement calculator to give an idea of how long their money will could last.

If you find they don’t have enough income to support their retirement, there may be things they can implement to change it. This could include cutting down expenses, moving to a more affordable home or renegotiating their debt. It’s very important to make sure they are maximising any social security entitlements they may have too.

Review their health insurance

Healthcare costs are becoming increasingly onerous so it may be advisable to review your parents’ health insurance. It’s important they have enough cover for medical expenses, long-term care and other retirement costs.

Seek professional help

Enlisting the help of an expert, such as a financial adviser, may alleviate some of your pressure.
Better yet, financial advisers can assist in developing appropriate strategies to ensure you’re meeting your own retirement goals as well as your parents. They can also investigate what tax concessions, or other government benefits, your parents may be entitled to.

Perhaps most importantly, a financial adviser can help you take a holistic view. They can look at your parents’ situation and your own and work out strategies that optimise both outcomes over the long-term.

For example, you may need to reduce your current spending to help your parents retire more comfortably. That’s a short-term cost to you – but if it means your parents can keep important assets like the family home, you may benefit from that in the long-term. A financial planner –trained, impartial and able to see the big picture – can be a big help.

Set clear boundaries

It’s an admirable thing to help your parents but be clear about what that help consists of – for example it’s one thing to help out with their bills occasionally, but it’s another to have your name placed on loan documents!

If that isn’t the type of help you had in mind, it’s important to communicate that – and stick to it.

Invest in your own retirement

There are retirement calculators you can use to see if you’ll have enough saved to maintain the standard of living you’d like in retirement.

If you find you need to make financial adjustments to increase your retirement savings, one option could be to contribute more to your super on a regular basis using your before-tax or after-tax income. There are tax benefits that come with this too.

For example, if you contribute some of your after-tax income or savings into super, you may be eligible to claim a tax deduction. This means you’ll reduce your taxable income for the financial year and potentially pay less tax, while adding to your super balance. It’s a win-win.

These types of contributions are capped at $25,000 per financial year however. If you choose to contribute over this amount, you may be required to pay more tax.

Bottom line: We all want to help our parents if they’re struggling financially, but it’s important to think of your own situation too. And don’t forget, money isn’t everything—one of the best things you can do for your parents is to spend quality time with them while you’ve got it!

If you would like competent advice in this area,  please email us at with your contacts, for an exploratory meeting, at our cost, not yours.

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Bad Blood by John Carreyrou

Just read this superb book- one of those you can’t put down. Will be of interest to those into private equity funding for bio-medics.


This true story is about developing a device, to have a blood test without using a syringe.


What is astounding, is that a young 20 something, could get leading lights like Joe Biden (when he was VP), Shultz, Kissinger, Murdoch, Matthis and other senior figures to support her for years – until she was exposed.



Coronavirus investment opportunities – what to look for in share markets

While share markets have experienced some of the sharpest falls in history, amid the Coronavirus pandemic, savvy investors have been looking out for opportunities created by recent events.

Travel, tourism, retail and universities are among some of the hardest hit sectors in Australia, due to Coronavirus.1 On the flip side, pharmaceuticals, video conferencing, entertainment streaming and e-commerce marketplaces have been coming out on top.2

So, if you’re looking for investment opportunities for long-term returns, here are five principles that may help you get started. But keep in mind, share markets are unpredictable, even when things seem to be improving they can turn very quickly.

1. Keep a long-term perspective

When making changes to your investment portfolio, it’s important to have a long-term view and plan to have your money invested for a while.

Just as we’ve seen a decline in share markets recently, historically it has recovered. From the 1987 Stock Market Crash to the bursting of the Tech Bubble in 2000, each trigger is different and the time it takes to recover varies too. It could take months or even years.

As such, if you do decide to make changes to your investments during the current volatile markets, it’s important to remember that the future is uncertain. Markets are constantly revaluing company prices with new information so this volatility is likely to remain until there’s certainty around the containment of Coronavirus.

2. Do your research

There’s a lot of ‘noise’ about the current state of the market, so keeping informed and getting an in-depth understanding about where you’re investing, is key.

Here are just a few of the things you could consider when looking at listed companies in the share market.

  • Does the company have a good track record?
  • Where does it get its earnings from, domestically or internationally?
  • How much debt does it have and when is it up for renewal?
  • How are the company’s earnings going to be affected by Coronavirus?
  • Does the business have a strong competitive advantage?
  • Does it have stable revenue and income?
  • What are its risks in different economic environments?
  • What price would you be prepared to pay for shares in the company?
  • What are the risks specific to this company, its industry, and share market more generally?

If you decide to purchase shares in a company, consider monitoring it and any share market announcements, including financial updates or results, issues affecting the industry and any competitors.

You may also want to keep an eye out for any news coverage and interviews about the business to get a feel for their current and long-term viability.

And that’s just the beginning. You need to consider how you’ll reduce your exposure to the risks of investing in that company. Most people manage that risk by investing in many companies and asset classes because their performance is influenced by different factors.

3. Look for the red flags

It’s important to distinguish between companies who have seen their share price fall as a result of market panic, caused by events like Coronavirus, and those that have fallen because they were already unstable and their weaknesses have been revealed by the economic downturn.

When identifying these undervalued shares, consider how much Coronavirus will impact the company now and in the future. It’s also important to look at the company’s balance sheet and business model to see if it can withstand this pandemic, or if it’s prospects are substantially compromised by a further drop in share markets.

Other red flags to look out for include companies with a significant amount of debt or those that may be highly affected by economic conditions.

You may also want to check the company’s position regarding ethical and sustainable investing and whether it aligns to your own values.

4. Consider contributing regularly

One of the ways to take advantage of a market downturn is to contribute a fixed amount to your investment portfolio on a regular basis.

The main benefit of this, as opposed to making a lump sum payment, is that it can help to reduce the impact of market volatility.

If you’re contributing the same amount of money as you were when markets were performing well, then when markets fall, you’re effectively purchasing at lower prices. For long-term investors, this is a great way of taking the guess work out of timing when to invest. Reality is, no one knows the best time to invest.

5. Seek support from professionals

Investment manager

You may not have the time or resources to do the analysis required to identify quality long-term investments so investing with a professional investment manager is an alternative option.

These companies have teams of experienced investment professionals doing the hard work for you and you pay them a fee for it. It’s important to consider if you’re comfortable with their investment approach and how they manage risk versus return.

Financial adviser

Obtaining independent advice from a financial adviser, before making any decisions, can help you design a plan to achieve your own financial goals. It may also provide you with a better understanding about the risks and rewards of investing and appropriate investments for you.

Bottom line: share markets are unpredictable so remember keep a long-term perspective. Given the complexities of investment decisions, it’s important to stay informed and seek support from professionals.