Keep calm and create wealth
Expect the unexpected: The polls in the USA got it seriously wrong – why? It is only a sample of the population (many of whom were ignored) and people lie! Few (sane?) people will publicly admit to endorsing the racism, bigotry and misogyny espoused by Trump but when it comes to the secrecy of the ballot box, it became obvious that there were millions of closet Trump supporters. This has ushered in a whole new world of uncertainty, just like the Brexit vote did, and just like Nenegate did here. It has taken us nearly a year to recover from Nenegate, and the UK is still shuddering. When it comes to your wealth – protect your risks, diversify every aspect. Wealth is what is left when you have consumed your income.
Populism is here to stay. The protest vote against the status quo in government is turning the tide everywhere, including here. Brexit is a good example (trust the Americans to one-up the Brits! This result is Brexit to the power 10). This outcome is a result of emotion and not reason. “We, the people” are sick to death of lobbyists, special interest groups, bloated government payrolls, erosion of real purchasing power and having to reskill into new jobs. The only voice that growing ‘disaffected’ group has, is to vote for something different, however nauseating that might be. The major threats? If you work for, or supply , government- diversify and seriously reduce your risk exposure or risk your wealth. Wealth Opportunities – Small business, the Health industry, Service industries, On Demand, Customisation.
It’s not cool to be clueless: Hillary’s email fiasco hit her hard and should be one of the biggest lessons anyone, of any age, needs to learn. If you refuse to climb on the technology bandwagon, and keep up with it you’re going to get hurt. As a retiree your banking costs will climb, but more onerous than that – you will open yourself up to being conned out of your wealth and taken advantage of. In your working life you will not be able to be as productive as someone who embraces technology – forced early retirement is calling! Most of the growing jobs and professions require a good understanding of technology. This is even more true of ‘passive’ income opportunities. Keep your work and home social media presence separate.
Old Norms are irrelevant. Not just that, but they change so fast and are so fickle you have no hope of fitting in. Family values just aren’t important anymore – who would have thought that a rampant xenophobic misogynist, twice married to an immigrant and children from 3 mothers would become the President? More than half of the children born in the States today are born out of wedlock, and 50% of marriages end in divorce. How do you even define ‘family’ anymore? When change happens so rapidly only way to thrive is to be flexible, mentally and physically. This also applies to your wealth. Don’t lock yourself into investments for years and years (or pay a nasty penalty to change). Protect your cash flow with a decent emergency fund (ring fenced and earning some interest, and not ‘in my bond’ or ‘in my credit card’.) Diversify!
Never underestimate the power of social media. Hillary spent tens of millions of Dollars on traditional media – TV and Print. The Donald didn’t have the money to do that (and he sure as hell was going to spend as little of his own as possible) so he ran a grass-roots, social media based campaign and it prevailed. The new era of marketing is all about content, new approaches, different thinking, controversy and playing the devil’s advocate. Look at the Facebook sites of the major brands – they are just the same rubbish you see in print, duplicated in the social medium. The social interaction from their followers? Almost 99% negative or complaints. The opportunity for you, your brand and the company’s brand is in providing useful, actionable content not pretty pictures and advertising.
Look after number one. Populism is not a throwback to socialism or communism – it is still finding its feet and almost defies definition right now. Swathes of the population are jumping off a cliff and will try and build their wings on the way down. Nobody thought about the long term implications of Brexit, nor Trump. It will be messy. It is about equality of opportunity for everyone. The Trump win was a huge triumph for orange people everywhere. Huh? Right, there is only one. Equality means that someone loses… Who? The business leaders who create the jobs? Herein lies the biggest problem, how do you balance the budget? Cutting taxes is enormously popular, but the pool of taxes to draw from is not finite. What is going to give – probably social benefits to start with? This is already happening in the UK. Our South African social safety net is very thin and if you don’t look after yourself your future is going to be very uncertain. The State pension, for example, is R1500 pm. There are several ways you can look after ‘number one’: Make sure you’re always employable – upskill and reskill all the time; Protect your income from temporary or permanent interruption; don’t put all your investment eggs in one basket and get healthy (medical costs from lifestyle diseases, even with medical aid, can financially cripple you).
Emotion rules. The US elections were the nastiest in living memory. It was thin on policy, and over-weight on hate and emotion. Politics and the Economy are inextricably linked. As soon as you mix money and emotion it gets messy and impossible to predict. Where possible, remove emotion from your wealth decisions – that is what financial advisors and planners are for.
Change for the sake of change: All over the world where there are well entrenched democracies, the parties take turns at the trough and this is no exception – but… Trump has never towed the Republican party line, so expect more fireworks to come. Obamacare will be dumped and replaced with Trumpcare. Republicans will be able to appoint up to 3 new Supreme Court justices (a lifetime appointment) which could see a reversal of Roe v Wade (Women’s reproductive rights) and Gay Rights. The big danger is what is being thrown out with bathwater – if it is the baby, the bathwater, rubber ducky and the bath itself, then you have to worry. This is not much different to your wealth and risk portfolios. Don’t change for the sake of change, or because it is all your broker can offer you. Most policies and portfolios can be fixed right where they are.
Listen, listen, listen. The frustration of the working class Americans was repeatedly ignored. Exit polls from the US election show that 2 main issues were the driving force behind the voting. Immigration and Trade Deals. (Brexit anyone?) Clearly none of the politicians in the West have taken these issues seriously, and on both sides of the pond, voters are prepared to throw everything under the bus in order to protect their jobs. Bear in mind that this is on the back of the lowest unemployment in decades, so the jobs are there, but not the jobs they ‘want’. They want a King Canute to wind back the clock, close the offshore factories and bring manufacturing back. They want to maintain status quo personally but remove the government status quo (you’re allowed to be confused!). The average hourly wage in China is about $3, but many States in this election voted in a $15 minimum wage – those jobs are never coming back. Combine this with the fact that there has not been a “normal” recovery post 2008, real income have not risen and job insecurity and temporary jobs are the new normal. If you listen to your customers, colleagues, family and friends properly you won’t be caught unawares by change.
Action: Markets, the economy and interest rates are likely to be uncertain globally for at least the next 3 months. Protect yourself by diversifying everything, and getting your own house in order. If you need any help give me a shout.
Author Dawn Ridler – the Wealth Ecologist©