Don’t Panic In A CRISIS!
Nov 13, 2016
If you would prefer to listen to me read this blog post, please click on the play button.
Having purposefully just returned from America on Monday two days BEFORE the American election I had an inkling that things might get a little crazy. And listening, watching and frantically texting the friends of mine who gave a care on Wednesday I must admit I got pretty agitated and a little excited as well.
There were four MAJOR things that happened on Wednesday 9th November of note:
USA just elected trump (a capital T is like respect, you have to earn it) - Having just spent three weeks travelling around California I think I got a pretty good feel for what the people were thinking because being an inquisitive person, I asked those I met. Firstly they were embarrassed about their election process and then they were very very secret squirrel about who they were voting for (hence the polling getting it wrong I suspect). We did sit in a spa with republicans who were looking forward to trump bringing back manufacturing so they could buy USA made; whilst both admitting they drove vehicles manufactured in other countries. Their son was nursing a broken arm which cost them a $5,000 insurance excess and their insurer paid the rest of the $45,000 bill for ONE NIGHT in hospital! And I met a nice democrat who was appalled that her entire family was voting trump. As a woman I find his remarks about half of his population so blatantly offensive and repulsive. I wanted Clinton to break that glass ceiling and even though she did not quite get there she has certainly made it easier for the next woman who wants to climb up that particular ladder. Many I spoke to didn’t want to see an unpredictable older white male running the show. And although his victory speech talked about unity, every minority in the USA must have been hiding under their bed come Thursday morning. Canada is probably at the hardware store this very minute buying enough fencing materials to put a wall up to stop and influx of Americans considering moving north.
I bought a Lotto ticket - granted I spent the minimum of $4.80. I could not tell you the last time I bought a ticket but I thought “hey why not, I could find a use for $44 million!” I found so many pennies in the States so my luck was surely high right? The statistical odds of winning were similar to lightning striking me not once but twice on the same day. Unsurprisingly, like the million other people who bought a ticket I didn’t win and that $4.80 would indeed have been better spent buying two more units in my Index Fund. The get rich quick strategy is out the window again and I’m just back to steady saving today. Which is a shame because my $15,000,000 gift to my daughter’s school was going to make the place so AWESOME. Sigh.
New Zealand united - did anyone notice that too? I’m not talking about a new political party but instead how we appeared to all collectively agree on something for once, that trump would be a big unknown if he won and that the majority thought it was laughable when he even put his name forward. That gave me heart and tells me we are more united that the United States at this particular moment in time. What a great opportunity to talk to friends, whanau and neighbours about such an exciting topic.
A great friend had a birthday and I FORGOT! I pride myself on remembering significant birthday dates but got swept up in the election day and missed this one. So, HAPPY BIRTHDAY my dearest friend, you know who you are. You may all hear from her down the track as she is also a cool and calm investor in individual shares and I’m extremely keen to interview her to find out what she does and why. I spoke to her a day after her birthday and she said her shares were ‘down slightly’, as expected, but nothing to panic about. So calm in a crisis. However, she did put a dent in her car this week and THAT made her panic!
Moving on though folks. This is Sunday and you are probably sick of hearing about US politics. And as another friend pointed out when I was appearing incredulous about the election results for a country that I don’t have any say in whatsoever... “the sun will come up tomorrow and like Y2K nothing will be different”. Well, I was up at 6.00 am the day after, looking out the window and it was very cloudy with a chance of rain. So he was half right, but indeed he was onto something as the sun was out by lunchtime and after a tumultuous 24 hours the financial markets were getting used to the idea of a trump presidency as well.
The big question for me now is what happened to my money during all of this?
As you know I don’t have any rental properties which apart from changes in interest rates and tenants cooking up P are more immune to international turmoil. I own my own home and have chosen to invest in a variety of other ways instead. So, major events such as international instability is the very thing that scares people away from investing in the stock market. It is the very thought of a loose cannon like trump having such an influence over world economics that makes people fear a stock market crash. But every month there is a new global or national event to spook us and if we panicked each time then where would we be? So, what happened to me? Can I afford groceries this week or has my wealth been knocked back?
Short answer is yes and a little bit.
I’ve been away from my computer for about four weeks so have not been watching, well, anything really (except for what the NZ dollar was up to as this had an effect on our travels). But when I compare our financial position this month to last month it has dropped. The majority of the drop is the money I took out to pay for our holiday, about $15,000. A no brainer really, travel is expensive. A term investment ended just prior to this holiday so that money was used for the trip. Now that I’m back I will be reinvesting the remainder, still deciding where exactly. Here is how other investments are looking, these are the ones most likely impacted by the unknown quantity that is trump:
Kiwisaver down 1.5%,
Smartshares down 4.8%,
Meridian shares down 2%
Gold was up one minute and down the next depending on where trump was at! It was all over the place, the graph looked like one of the roller coasters at Disneyland in fact. Cash on hand, bonus bonds etc of course don’t change because they earn very little interest and rarely win a prize (sad but true)! And I don’t factor our house in my investments at all although it is quietly creeping up in value with capital gains.
SOOOO, this probably confirms what I knew anyway. You need to spend less than you earn and for the last month we have spent A WHOLE LOT MORE than what we earn and that is mostly what shows up in my figures. My networth has dropped by the cost of a holiday really and just a little bit more. But oh my it was soooo worth it! Like the retired person who spends their whole life saving, they then find it hard to turn around and start spending the capital. Going on holiday was similar. I’m frugal by nature and having to fork out money for dinner in a restaurant every night AND provide a tip is hard to swallow. But, I’m on holiday, I’ve planned for it, I’ve saved for it, I’m sick of cooking and it is time to stop worrying about the cost and enjoy it. And that is exactly what my family did. If the figures didn’t stack up prior to departure I would not have booked it. I have never regretted spending on travel and the amazing experiences it gives you; where else could you sit in a spa with three republicans having a good old chat???
Once home we immediately slip back into our old habit of frugality, spending less than we earn. But it is not a sacrifice, we genuinely want for less and spend a whole lot less these days. Markets will have great things happen and your net worth will rise far higher than the money you invested, at other times it is the opposite. No one knows what the next four years will bring but from all of the listening, reading and talking I have done I’ve come to understand that this is entirely normal.
The Wise Woman Mary Holm* continually points out that you invest for the long game and you accept that the rise and fall of the market is normal and expected. Don’t stress people. You can’t predict the market so it would be unwise to jump in and out of it when things get a little bumpy. This last month I have seen a fall but the reverse of this is that I have had many many months where the growth has far surpassed the money I have directly invested. And standing back and taking a look at things over the long term our net worth has increased by 54% over the last six years. I’m a distance runner, not a sprinter and slow and steady appears to be winning the race. Cool as a cucumber, thats me.
Having an amazing week!
Happy Saving!
Ruth
* Mary Holm favourably mentioned my blog on Radio New Zealand on 27th October with Jesse Mulligan which has sent my subscriber list soaring. YAY and welcome, welcome, welcome to you all! It has created some great conversations which I’m loving. Read me, write to me, ask me to look into things your want to know more about. I appear at the end of the show at 27:40 minutes in.
Click here to listen:
