Given the excellent performance of global markets over the last few months, I am mightily relieved that at various points over the last year I have managed to at least partially overcome my intense bearishness and recommend a few investments.
There is Japan which has finally recovered enough (hitting an 18 month high) to not be embarrassing any more; gold, which has as usual been a satisfying success; a few defensive investment trusts; and some international equities with the kind of global franchises that give them a chance of holding their own whether there is a double dip ahead or not.
All these are investments that should, to some degree, protect your purchasing power should the next global crisis involve a nasty dose of inflation.
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But, if you've got your Isa stuffed with all that lot already, what should you do next? I suspect the answer is absolutely nothing.
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A note out from Dylan Grice at Socit Gnerale this week points out that, based on the Shiller price/earnings (p/e) ratio one of the few valuation techniques that appears to work S&P 500 valuations are "back in their top historic quintile". This has historically been "a strong signal of poor long-term returns."
Europe is "less egregiously expensive" but still not cheap enough to make for a compelling investment case. Overall, the markets are as risky as ever but the returns on offer look to be lower than usual.
In fact, research from SG's quantitative team suggests returns of around 1.7% a year for the next decade. That doesn't seem worth taking much risk for hence the idea that most investors are currently best off doing nothing.
Or if you can't bring yourself to do that, says Grice, at least "take a holiday, if you can."
Before you do, however, note that you can't ever expect a fund manager to implement a 'do nothing' strategy for you. Eclectica manager Hugh Hendry was criticised a few years back for keeping a large percentage of the assets of a European fund he was running in cash.
And most fund managers, probably rightly, consider asset allocation decisions to be your problem not theirs. I asked First State guru Angus Tulloch who is pretty cautious at the moment about this in the current edition of MoneyWeek magazine.
His answer? That he holds only around 2% of his funds in cash on the basis that his investors make the decisions about where their money should be and "we operate within that decision."
Good fund managers will buy good-value quality stocks for you. But, however bearish they may be, they won't actually take your money off the table.
Further bad news comes from the fact that doing nothing with your money isn't particularly easy anymore. Until recently, we had the Investec High 5 account to fall back on. This paid the average of the top five rates offered in the best buy tables. So, if you handed over your cash, you never had to worry that you were being ripped off on your interest payments you weren't.
But that account has been pulled, presumably because paying good rates all the time is expensive.
That leaves anyone trying to protect their cash from the ravages of inflation and the taxman once again at the mercy one of the most rapacious industries known to man: UK retail banking.
Anyone in any doubt about this description need only look to the "super complaint" just lodged with the Office of Fair Trading by Consumer Focus.
It points out that, even as the best buy tables for savings accounts are offering 3% plus, the average rate on a cash Isa is a mere 0.41%. Some of the more devilish institutions are currently paying 0.1% on their accounts and even First Direct long my favourite of the retail banks has a standard variable rate of a mere 0.2% on its e-Isa.
Also irritating is the fact that, even in the best buy tables, Isa rates consistently come in just below the non-Isa rates. Why? The providers know that we'll still get the Isa account because, after taking the tax benefits into account, we'll still be mildly better off with it despite the lower rate. Yet another way the taxpayer is subsidising banking.
All these pathetic rates and the frequency with which good rates become pathetic rates mean that having cash on deposit now involves almost as much proactivity as being invested in equities. If you don't want to be done by your bank, you have to monitor rates constantly and deal with the endless bureaucratic hassle created by the banks when you want to move. It is very boring indeed.
The banks are constantly blahing on about how they want to have relationships with us and how they want us to be loyal to them. Both these aims could be very easily achieved. If they consistently provided us with fair and reasonable interest rates on our cash, I guess we would be pretty happy to stick with them. The fact that they won't rather suggests that outsize profits come long before personal relationships on their wish lists.
This article was first published in the Financial Times.
