Anyone worried by diving stock markets and floundering banks might be looking for a safer place to put their money. However, inflation can erode the value of cash, while piles of dollar bills can be eaten by rats. It might be useful to consider the investing strategy of Rocky Marciano. Marciano was the boxing heavyweight champion of the world in the first half of the 1950s. His record as a fighter was unprecedented. He won 49 straight fights, ended his career undefeated and made more than US$2 million (Dh7.3m), including picking up $468,374 for one bout alone, when he floored Archie Moore in the ninth round.
Rocky was well aware of how boxers throughout history had been exploited by advisers whose only aim was to separate the champ from his purse. He developed a way to keep his money safe: he didn't spend it. When out to dinner with friends, he never paid a bill or tipped. He was notorious for hiding cash in many different places, including, in one instance, a toilet. One of the reasons he became so cautious was that when he invested, it usually went spectacularly wrong. Typical deals included buying up swathes of Florida property (it turned out to be swampland, although the land has probably been drained and covered in houses that are now awaiting foreclosure); he also got involved with Cleveland loan sharks and ended up owing them more than $100,000. Much of the money he hid has never been found.
Rocky's worst investment was in hiring a pilot with little experience of flying at night. The true dangers of being rich have yet to be fully analysed, but it is surprising how many wealthy people fall out of the sky either in lightweight planes or helicopters that stop turning. Flight experts suggest that Rocky's plane crash at the age of 46 could have been avoided if he had had a competent pilot. But that, of course, would have been expensive.
In times of almost unprecedented panic, it is hard to know what to do. Should we follow Warren Buffet, the so-called Sage of Omaha? He has just put $5 billion of his money in Goldman Sachs and a further $3bn in GE. Both investments are down - his warrants in GE are worthless - but he is renowned for his long-term investing strategy. Perhaps we should follow the advice of a sage of another earlier era. Francois-Marie Arouet, whose pen name was Voltaire, is best remembered for his book Candide, or Optimism.
Written in 1759, it is a satire on the Leibnizian philosophy that everything will turn out for the best. Candide, the eponymous hero, has picaresque adventures, each one worse than the last. When he visits Lisbon, the city is hit by a fire, earthquake and tsunami that kills thousands of people; his friends are murdered; the love of his life is sold to a Jewish banker and a grand inquisitor. His philosopher, Pangloss, keeps reassuring him that it is all for the best, but Candide is no longer convinced. Like anyone who has invested in the stock markets in the past few months, he is shell-shocked. He ends the book by saying: "Il faut cultiver son jardin." This is puzzling even for those who speak French. Translated literally, it means one should cultivate one's garden. Is this an elaborate metaphor, or just an injunction to grow more French beans? Voltaire does not tell us.
But we may be right to be cautious. At the moment, yields on any number of instruments are enormous. The danger is, of course, that rather than getting paid a colossal amount of interest at the end of the year, you end up losing your shirt. This happened to a friend of mine when he put money into a Thai bank that was offering interest rates of 18 per cent. His timing was bad: it was 1998, the year of the Asian banking crisis. Bank deposits were frozen. When the bank reopened, the Thai baht had been devalued and his money had more than halved.
It was this kind of event that Rocky feared. Should he have followed Voltaire's advice and grown his own vegetables? It is hard to imagine the "Brockton Bomber" in an allotment with a hoe in his giant hands. But rather than hoarding his money, the boxer might have chosen to spend it more judiciously. A sounder investment would have involved buying a better plane or pilot. It is no good having money in the ground when you're in the ground yourself. He was apparently hurrying home to have dinner with his wife. In itself not a bad idea: divorces can be a costly business, however liberating they may feel at the time.
At times of an economic downturn, it can feel like a good idea to delay purchases and put off things like buying a new car. This might please your banker, but could be a bad decision in the long run. Not only does your purchase help the people that built it, but new cars are often built to greater safety standards, with air bags and other defensive devices. One might, for example, think it would be cheaper to sell one's Land Cruiser and buy a Smart car instead. I have yet to see a Smart car in Abu Dhabi - it's a two-seater about the size of a sofa. It is ideal for nipping into tiny parking spaces. The trouble is that driving along the Corniche, there would be a risk of getting caught between two Land Cruisers and squeezed out like toothpaste.
In these troubled times, buying a car may be a safer place to keep your money than in a bank. If anything goes wrong, you can always drive off elsewhere. rwright@thenational.ae
