Thursday, 18 February 2010

"Saving: Just Say No" says Govt and Bank of England

Hopefully amongst the readers here are those who do not live by taking out endless credit card debt to pay off the last loans; or perhaps I am being optimistic.

However, assuming there are one or two of you who don't spend every penny of income it is a hard decision today to decide what to do with it. After all, CPI is now at 3.5%, it will fall back later this year, but it means that the best savings accounts only manage to offer to meet inflation for you. So by saving your money you are not adding to your wealth in any sense, merely storing it. This is before the taxman decides to take his share, pushing you into a loss.

Worse, the Pound is down 25% agains the Euro and Dollar and not likely to show any market improvement over the longer term. So now any savings measured on global basis will be well down over the past two years.

The Government is continuing to conspire against savers - so what to do?

Well, my choice is to long and short lots of shares in the market and this makes for quite a good return but requires concentration and is risky if there is a big downturn again - which is not that likely, but might still make the probable list.

So this leaves funds, perhaps Real Return funds the best of which do about 10% a year and don't drop too much except in cataclysmic crash. Or perhaps emerging market funds which buy shares in companies not in £'s but dollars and also in coutnries not suffering from the oppression of insane Government like the UK. As these can be put into an ISA you can even avoid tax on the shares and dividends.

Other choices are paying down debt like mortgages and any other debt and this would certainly be top of my list. However whatever happens don't save in a Bank acccount; it will only make you poorer as that is the Government's wish.

15 comments:

Budgie said...

We cannot say we were not warned. The statist socialists' wheeze for paying for their recession was (is) to tax savings accounts. After all, their logic goes, if you have savings you are too rich already. It is part of the socialists' strategy to turn us all into hand-to-mouth serfs.

Jambo said...

NZ Gov bonds are giving 6%. I made my bet before the currency got totally trashed which gave a couple extra %. Probably not as good as your clever share trading! But I'm a bear of little brain ;)

Blue Eyes said...

I'm lending all my spare cash to the government!

Bill Quango MP said...

O/T but Nicky Winterton on radio 5 is doing incredible damage to MPS.
It like the 'people are jealous of my big house' quote all over.

MPs may need to keep their heads down again for a bit. "David Cameron is not entirely in touch with the members of parliament on this. He does not represent me"

whoops!

Obsidian said...

Some of Winterton's comments are on the local rags website - apparently he cannot differentiate between being banned from travelling first class and having to pay for it himself...

As for saving, due to a family illness I gave my parents a large lump sum and to say thanks they effectively gave me the house, so I shall be paying the mortgage off that for them.

Other than that, online poker, careful perusal of shares (unlike some other readers I would heartily appreciate the odd tip!) and having a crack at learning how to long/short...

Mark Wadsworth said...

I'm with Blue Eyes on this one.

And to paraphrase Budgie:

"We cannot say we were not warned. The Home-Owner-Ists' wheeze for paying for their recession was (is) to take even more wealth from businesses and savers in order to prop up house prices.

After all, their logic goes, if you own a home, all you care about is house prices, and not trivial things like employment or encouraging people to save and invest in the real economy. It is part of the Home-Owner-Ists' strategy to turn us all into debt-slaves (even if you don't owe anybody a penny)."

John East said...

I'm surprised nobody has mentioned commodities or gold.

PJH said...

Other choices are paying down debt like mortgages and any other debt and this would certainly be top of my list...

That's all very well if you have other debt to pay off.

The only debt I've got at the moment is credit card debt on a credit card that gets paid off in full every month.

Oh - and a 5-year 0% loan on laser treatment I had last year. No point paying that off early, especially if inflation is going to skyrocket.

Anonymous said...

to take Obsidian's last point a little further. Any tips on how to start shorting / going long on a budget e.g. suitable brokers would be appreciated. A beginners guide would be excellent. Might even make an interesting blog sub-category?

ta.

John East said...

Anonymous,
I use TDWaterhouse (http://www.tdwaterhouse.co.uk/). I don't know if they are the cheapest, but they've served me well over the last 5 years. You can open an ISA trading account with them if you wish, and trade North American and European shares as well. Commission is £12.50 per trade falling to £9.50 if you trade more frequently.

I don't sell short, but have traded in short ETF funds on occassion.

James Higham said...

Hopefully amongst the readers here are those who do not live by taking out endless credit card debt to pay off the last loans; or perhaps I am being optimistic.

I was suggesting just the same, myself.

Anonymous said...

Does anyone else think we're going to see sterling exchange controls imposed at some point?

This economy is becoming a complete basket case. To my untrained eyes, the situation here is far worse than it is in the States: worse deficit, less safe currency, higher inflation, more unemployment, house-price insanity has returned, etc.

Anonymous said...

Anon 1148: well once Argentina helps itself to the Falklands (a year or two, you just watch), that will be the only one of Maggie's achievements that they haven't undone, so no doubt it will be in their sights.

I wonder how much worse things can get. I suppose there will, actually, be a General Election this year? Or will Gordo find a reason to invoke civil contingencies?

Budgie said...

Mark Wadsworth - since when did Home Owners start setting the bank rate and controlling the economy? And here's me thinking we've had a socialist Chancellor for the last 13 years. Just goes to show how wrong ordinary home owners are in the new model socialist order.

I know - it's not Labour's fault it's the people's fault - let's elect another.

Sky said...

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