It’s easy to be a doomsayer now. Times are tough, and likely to get tougher. UK PLC is in decline. But it will rise again, and sooner than you think.
The doomsters have it. They are ruling the roost.
Those people who’ve been predicting the house price collapse for years have been proven correct.
Those people who’ve been predicting the banks have been too greedy, and over-exposed to the housing market, have been proven correct.
Those people who’ve been saying the stock market is over-valued and just a gamble have been proven correct.
Those people who’ve been predicting we’re headed for a recession have been proven correct.
Well Done Doomsters
I say to those people who’ve saved themselves a considerable amount of money by staying out of the housing market and by staying out of the stock market, and/or selling up before the crash, well done and congratulations. You’ve saved yourselves some serious money.
I say to those people who have continued to live within their financial needs, studiously saving money where they can and those people who didn’t run high on credit card and/or loan debt, well done and congratulations.
When all about you are living the life of riley, living off the money banks were all too eager to throw at you, you’ve remained realistic and focused. You have saved yourselves some serious money, some serious stress, and ultimately, your actions will stand you in great financial stead in the years and decades ahead.
For the rest of us, me included, shame on us.
My mistake has been to remain invested in shares. It has been a painful and expensive time, watching your portfolio fall by 30%, 40%, 50%. I’ve stopped counting by now, but I would guess my losses would be in that range. It doesn’t make me feel much better, but I suspect I’m not alone.
The Great Blame Game
Today, the doomsters still hold the upper hand. They are the people who are predicting house prices could still fall a further 30%, that the stock market could still fall a further 50%, that we are in for a long and very deep recession and one we may struggle to ever escape.
There is seemingly no shortage of people who are willing to blame the government for the current predicament. Whether it be the council tax, VAT, income tax, inheritance tax, the health system, education, the welfare system, immigration, housing, foreign policy or whatever, they are willing to blame them and it.
It’s human nature I guess. When things are tough, when people are doing it tough, they are only too quick to be pessimistic. Right now, there is no doubt things are tough, and little doubt they are likely to get tougher in the next 6-18 months.
The threat of unemployment is the biggest cloud hanging over individuals today. If and when people lose their jobs, immediately their living standards, including the very house they live in, are in jeopardy. And you don’t need me to tell you finding a new job during a recession is a far different challenge than many of us have been used to over the past 15 odd years.
Getting Out Of This Pickle
I say to the doomsters – have your day. You deserve it. You’ve been waiting for times like these for years. Blame Gordon Brown, Tony Blair, John Major and Margaret Thatcher. Bemoan the long and slow death of British manufacturing. Curse the City fat cats who got us into this mess, yet will be more than comforted by the huge salaries from years gone by.
I also say to the doomsters – beware of extrapolating the recent past far into the future. It’s consistently the biggest mistake stock market investors make, and therefore the biggest mistake amateur economists and expert doomsters make. Right now, it is hard to see how UK PLC will get itself out of this pickle.
But I feel confident it will. The City of London and its huge international finance presence will rise again, this time in somewhat of a more measured fashion, at least until the next credit bubble, due in 15-20 years' time. Budding industries like biotechnology and technology will rise and rise. There is no reason why we can’t challenge the USA in those fields.
What we can’t do is challenge the manufacturing cost efficiencies of a country like China. Our cost of living is simply too high for our products to be competitive on the local and world stages. End of story.
These days, intellectual property (IP) is our main asset. Companies like Autonomy (LSE: AU.) and ARM Holdings (LSE: ARM) are excellent examples of successful British IP companies.
We have a strong entrepreneurial spirit, although it arguably could be stronger. Companies with great leaders, strong products and good finances will expand abroad organically or though acquisition. Some of our biggest companies today, like BP (LSE: BP.), Vodafone (LSE: VOD), Astrazeneca (LSE: AZN), BG Group (LSE: BG.) and Tesco (LSE: TSCO) are doing or have done just that.
Two Choices For These Tough Economic Times
These are tough economic times, and they are set to get even tougher.
The doomsters might be right – the FTSE 100 index might be headed below 3000, we might be headed for a long Japanese style L-shaped recession, our finance sector might never bounce back, our best people might leave our shores, frustrated at government policy and/or the general negativity and lack of opportunity, the NHS and education system might never be best of breed, despite billions being poured into them over the years, etc. etc. etc.
Life is never plain sailing. There is always a new challenge just around the corner, whether that be a career, education, health, wealth or family challenge. When confronted with such challenges, I reckon you have two choices…
1. You can go back into your shell, put on your doomster hat, fill your cupboards with tinned food and bottled water, worry about the future, blame everyone else for the past, and generally a somewhat negative existence, and assume to government will fully fund (and more) your living and health expenses into your old age.
2. You can treat the challenge as an opportunity. Work harder. Work smarter. Be positive. Have faith in yourself and your fellow citizens. Change your career. Re-educate yourself. Look forward with optimism. Take control of your own future.
I’m in the second camp. Change is good. This global financial crisis has changed some things, including the size of my share portfolio! I’ve learnt some good lessons. Rather than wallowing in what might have been, I’ve moved on. It’s no use crying over spilt milk, and what is done is done.
No Shame In Owning Shares In These Companies
When it comes to investing, you can join the doomsters, those worried about the stock market plunging yet further, worried about the recession from hell, preparing for a 3 day working week complete with electricity black-outs, worried that UK PLC is a basket case.
Or you can look on the brighter side. You can have faith in UK PLC, its people, its intellectual property, and its government. And you can invest your hard earned money in the future growth of UK PLC, at prices we’ve rarely seen.
My colleague Maynard Paton, our resident share tipster over at our premium Champion Shares newsletter said to Members of his service just recently…“I don't know when the credit crunch will be resolved. But I am sure it will be resolved, by which time I predict the stock market will have already turned and moved somewhat higher…I hope you won't feel any shame owning these or any other Champion Shares recommendations when the bottom of the market comes.”
Who knows? The stock market may already be past the bottom. Now there’s a comment for the doomsters to lick their lips over. Go for it below!
> Maynard Paton is a believer in intellectual property, and has recently recommended 4 companies as buys for Members of his market-beating Champion Shares tipsheet. You can Champion Shares for free today for 30 days with absolutely no obligation to subscribe, guaranteed!
> Bruce Jackson doesn’t have a beneficial interest in of the companies mentioned in this article.
