For the last couple of decades, the Anglo-Saxon world has been swept by wave after wave of speculation. Where we used to trust in long-term savings vehicles, and assume that putting away money into regular deposit accounts was the best way to deal with our cash, we now leverage ourselves up to bet on property; we spread bet endlessly and we trade.
Here at MoneyWeek we get emails from perfectly ordinary people asking about everything from how they can bet on the differing spreads on European sovereign debt, to how best to buy repossessed houses in Florida and get exposure to the Canadian currency. And, of course, tens of thousands of Brits own houses all over Portugal, Spain and Bulgaria – some just as holiday homes, but most with the expectation of somehow cashing in too.
It sometimes feels a bit bonkers. But it is in fact entirely rational. Why? CLSA’s Russell Napier thinks it is all about pensions. For most people, real wages haven’t budged for years. And in many cases they are now going down. Note that in the three-month period to the end of March this year, average wages rose by 1.9%. That sounds fine, but if you take account of the fact that the Retail Price Index is now rising by more than 4% a year, you realise that most people’s purchasing power is not rising, but falling.
Add that neat bit of misery into the dismal performance of most equity-related investments over the last decade; Gordon Brown’s raid on pension dividends; and the sad demise of the final salary pension system in the private sector; and you will begin to see the problem. Unless you are one of the very highly paid it is absolutely not possible – via the conventional routes – to ever save enough for a reasonable lifestyle now and a decent retirement.
That’s why we feel that if we ever want to stop working we have no choice but to speculate. It’s why I’m already getting emails from readers wanting to know how to buy cheap houses in Greece. And it is why our new government, should it have financial stability as one of its aims, might like to have a go at sorting out the chaos that currently passes for the UK’s pensions system.