Reflections

This morning finds us over 8500 miles from the office, watching the sun rise over the Timor Sea off the Northern Coast of Australia. We are on our travels again, this time in celebration of 40 years of marriage. A ruby wedding anniversary! It is a little unsettling as my memories of ruby wedding celebrations centre around old couples, St. Gregory’s Social Club (famous as the club used for Peter Kaye’s Phoenix Nights) and finger buffets.

It seems apt to reflect on our married life so far, our journey, on a journey. A cruise, especially one like this one which will cover thousands of miles, is the perfect metaphor for our own personal journeys. They say travel broadens the mind. By definition – “It emphasises the idea that seeing and experiencing new places and ways of life enriches one’s perspective, helping intellectual and emotional growth”. Travel on a six star cruise ship certainly broadens the girth.

The only constant ….. is change.

Anyone who has travelled on the oceans and seas can tell you the sea is always there, it is constant, but it never remains the same. At times it looks almost oily and flat, reflecting the dark end of the spectrum, appearing charcoal black. Then again in shallower waters the sand beneath reflects a beautiful turquoise hue. However the real elements of change are the tidal flow and wind direction. At times working with the ship in the direction it is heading, allowing for a smooth passage. At others working against the ship making for a “sporty” period, which can last for hours or even days. Our life’s journeys’ also inevitably pass through calm and stormy periods.

Which brings me nicely to our investment journeys. Investment is a journey, it starts will a little saving, a lot of time with a lot of compounding, producing the growth. Next comes the spending period after we have stopped saving, probably alongside some gifting to family and finally if we are lucky enough, passing what we haven’t managed to spend or gift in our lifetimes.

Plan | Save | Grow | Spend | Gift | Pass. Our website strap-line.

From The Bridge

Currently although this ship can travel at around 18 knots if pushed, we have slowed down to around 12 knots after a short period of Middle East uncertainty which we decided to sit out in a sheltered bay. We are now making good progress but we are entering uncertain waters. At index levels, like looking just at the surface of the sea, the US stock market levels look good, mainly due to the oversize US AI stocks being brought back into investors favour. It isn’t surprising given the promotion and the recent healthy quarterly earnings statements.

However as we guide the ship, we need to remember to look below the surface for hidden dangers. The recent period of the majority of US market constituents catching up with the growth of the magnificent seven seems to be at a turning point. Less shares are maintaining recent highs. Price rises caused by the surge in the cost of oil is now feeding through to the wider economy. The threat of inflation rising quickly from here will undoubtedly threaten many companies, especially those with a large transport component.

The US is more immune to the long term effects of the war in Iran, than Europe and much of Asia. I’ve studied intensively the US oil self-sufficiency position. Some report that strategic reserves of diesel are running low, whilst more detailed analysis confirms there is no problem. The US both imports and exports refined diesel. Expect the exports to stop to ensure sufficient supply to meet US demand. Unfortunately that leaves economies like the UK’s in a precarious position. We rely on oil imports, particularly diesel and aviation fuel (more highly refined diesel) to keep the lights on and the factories open. We have become price-takers instead of price-makers of energy. Decades of governmental greed and short-sightedness have undermined our strategic position. For example as a UK Ltd Company we pay 25% of our profits in Corporation Tax. Oil companies pay an unsustainable 78%. Would you run a business like that?

As the ship continues into the summer season we expect the seas to remain constant. That is, they will continue to constantly change. There are potential storms ahead emanating from the Middle East, mixed in with the potential to completely run aground in UK waters. We continue to check the forecast.

Global Sovereign debt markets are usually an accurate forecast. Unfortunately they are all indicating future pressure, especially around the UK. Put simply the UK continues to spend much more than it brings home. The UK “Credit Card” is looking under stress, with our lenders demanding that we pay more interest if we want to borrow more. Obviously brought about by our low productivity, high benefits, high taxation and uncertain political outlook. As UK citizens it is saddening, but I’m sure you will agree with this captain’s position. Should we “invest” in uncertain UK debt? No thank you.

Our Journey Continues

Though waters calm and rough. In bright sunshine and dense fog. Our personal and our investment journeys remain inseparable. The quality of our future journey depends on maintaining the level of our investment returns. Sometimes we can push ahead, sometimes slower makes sense. Travel gives us perspective, we see new opportunities when we lift our heads from our desks and devices. So a toast, which I’ve obviously stolen from our current Captain.

There are tall ships, There are long ships, There are ships that sail the Sea, But the best ships are friendships, And may they always be.