I write this column from the sanctity of a village perché in Provence where I have come to enjoy some quiet time with my wife. Without the company of my teenage son, we no longer have to engage in surfing, skiing, sailing, horse-riding, bungee-jumping, etc. Instead, the most strenuous activity of the day is a morning stroll to the boulangerie, and the most mentally stretching activity is to decide whether to attend the village, puppet-assisted performance of a Stravinsky masterpiece or to go farther afield to a nearby village where La Bohème is being attempted, mercifully, without the use of puppets. All this sublime serenity came to an abrupt end, however, when the financial markets plummeted. Back to work.
The FTSE100 index, representing the share value of the United Kingdom's largest companies, has just completed its worst five-day performance since 2008, wiping £150 billion (Dh900bn) off company values. As I write this, the index stands at 5247, almost 14 per cent off its peak value of 6091 just a short time ago. Investors are responding to the failure of the European Central Bank to take charge of the debt crisis and to stop the recent crisis over Greece, Portugal and Ireland extending to the much larger economies of Spain and Italy. Stock markets in Europe have responded in a similar manner.
At an individual company level, the position is even worse, especially in the oil and gas sector where demand for its output is directly related to economic growth, and in the banking sector where there is a large exposure to the sovereign debt of European countries. Shares in Royal Bank of Scotland, the UK state-controlled bank, were briefly suspended after falling 20 per cent in a single day to a two-year low of 26 pence.
What does all this mean for the average investor? Well, if you are due to retire in the next year or so and have all your money tied up in the stock market, either directly through shares or indirectly through managed funds, then you are in serious trouble. If you want to maintain your retirement lifestyle at your previously planned level, then you will now have to continue working for a couple more years to recover from this economic crisis. If, on the other hand, as you have been approaching retirement, you have sensibly reduced your exposure to equities, in favour of bonds and other fixed-interest assets, then you will have much less to worry about.
No investor, no matter what he is planning for, whether it be retirement in 20 years or saving for a house deposit in two years, should ever be in a position where he is forced into having to sell his equity holdings at low prices to achieve his objectives. Equities are the best asset class for long-term growth but, as recent events have demonstrated, they are volatile and unsuitable for short-term investment purposes.
If you are lucky enough to be one of the chosen few who are entitled to an index-linked, final-salary pension scheme, then you will have little to worry about since your defined-benefit pension is not directly related to the performance of stock markets. However, there is an indirect relationship since the underlying pension assets will be invested in stock markets and, if they do not perform, then the company will have to make up the difference by diverting money that would otherwise have gone to shareholders. If you suspect that your company's shareholders are getting fed up of subsiding your pension pot, then you should consider transferring out of the company scheme before this happens.
None of this applies to UK public-sector pensions, since these schemes are funded by the long-suffering taxpayers who can always be relied upon to fund the unrealistic pension needs of public-sector employees. It's a bit like Greece except that German taxpayers are being asked to do the funding because the Greek taxpayers cannot afford it.
If you are a long-term investor, now is a perfect opportunity to add to your equity holdings. Equities, in general, will always outperform other asset classes in the long term and, with prices currently as low as they are, you are unlikely to get a better opportunity to buy.
If you are a short-term investor, then you need to stay in cash. With the recent failure of Lehman Brothers and Icelandic Bank, and near-failure of Northern Rock and Allied Irish Bank, storing cash safely is not as easy as you might think. However, the UK government has raised the level at which it will guarantee bank deposits in UK banks to £85,000 (Dh511,000) per person or £170,000 for a joint account. Guarantees are, of course, only as good as the quality of the guarantor. Until recently, the United States and UK governments were the guarantors of choice since neither of them had ever defaulted on a loan in several centuries. However we have recently seen the US government come within a day of failing to service its debt. These are difficult times indeed for safeguarding your hard earned cash.
Bill Davey is a Wealth Manager at Mondial-Financial Partners, Dubai. For further information on any of the above, please contact him directly at bill.davey@mondialdubai.com.
The Sand Castle
Director: Matty Brown
Stars: Nadine Labaki, Ziad Bakri, Zain Al Rafeea, Riman Al Rafeea
Rating: 2.5/5
Paatal Lok season two
Directors: Avinash Arun, Prosit Roy
Stars: Jaideep Ahlawat, Ishwak Singh, Lc Sekhose, Merenla Imsong
Rating: 4.5/5
Game Changer
Director: Shankar
Stars: Ram Charan, Kiara Advani, Anjali, S J Suryah, Jayaram
Rating: 2/5
Formula Middle East Calendar (Formula Regional and Formula 4)
Round 1: January 17-19, Yas Marina Circuit – Abu Dhabi
Round 2: January 22-23, Yas Marina Circuit – Abu Dhabi
Round 3: February 7-9, Dubai Autodrome – Dubai
Round 4: February 14-16, Yas Marina Circuit – Abu Dhabi
Round 5: February 25-27, Jeddah Corniche Circuit – Saudi Arabia
THE SPECS
Engine: Four-cylinder 2.5-litre
Transmission: Seven-speed auto
Power: 165hp
Torque: 241Nm
Price: Dh99,900 to Dh134,000
On sale: now
The five pillars of Islam
The specs
Engine: Dual 180kW and 300kW front and rear motors
Power: 480kW
Torque: 850Nm
Transmission: Single-speed automatic
Price: From Dh359,900 ($98,000)
On sale: Now
Drishyam 2
Directed by: Jeethu Joseph
Starring: Mohanlal, Meena, Ansiba, Murali Gopy
Rating: 4 stars
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Some of Darwish's last words
"They see their tomorrows slipping out of their reach. And though it seems to them that everything outside this reality is heaven, yet they do not want to go to that heaven. They stay, because they are afflicted with hope." - Mahmoud Darwish, to attendees of the Palestine Festival of Literature, 2008
His life in brief: Born in a village near Galilee, he lived in exile for most of his life and started writing poetry after high school. He was arrested several times by Israel for what were deemed to be inciteful poems. Most of his work focused on the love and yearning for his homeland, and he was regarded the Palestinian poet of resistance. Over the course of his life, he published more than 30 poetry collections and books of prose, with his work translated into more than 20 languages. Many of his poems were set to music by Arab composers, most significantly Marcel Khalife. Darwish died on August 9, 2008 after undergoing heart surgery in the United States. He was later buried in Ramallah where a shrine was erected in his honour.
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MATCH INFO
Barcelona 4 (Suarez 27', Vidal 32', Dembele 35', Messi 78')
Sevilla 0
Red cards: Ronald Araujo, Ousmane Dembele (Barcelona)
The%20specs
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E2.9-litre%20twin-turbo%20V6%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E8-speed%20auto%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E536hp%20(including%20138hp%20e-motor)%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E750Nm%20(including%20400Nm%20e-motor)%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh1%2C380%2C000%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
The specs
Engine: Direct injection 4-cylinder 1.4-litre
Power: 150hp
Torque: 250Nm
Price: From Dh139,000
On sale: Now
Nepotism is the name of the game
Salman Khan’s father, Salim Khan, is one of Bollywood’s most legendary screenwriters. Through his partnership with co-writer Javed Akhtar, Salim is credited with having paved the path for the Indian film industry’s blockbuster format in the 1970s. Something his son now rules the roost of. More importantly, the Salim-Javed duo also created the persona of the “angry young man” for Bollywood megastar Amitabh Bachchan in the 1970s, reflecting the angst of the average Indian. In choosing to be the ordinary man’s “hero” as opposed to a thespian in new Bollywood, Salman Khan remains tightly linked to his father’s oeuvre. Thanks dad.
The specs
Engine: 1.5-litre 4-cyl turbo
Power: 194hp at 5,600rpm
Torque: 275Nm from 2,000-4,000rpm
Transmission: 6-speed auto
Price: from Dh155,000
On sale: now
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months