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When it comes down to savings, head East

Roddy Kohn explains why investing in China is a no brainer, given the havoc being wreaked on Western economies by the pandemic.

As if the future outlook couldn’t look bleaker, this weekend’s politics help foretell of worse to come. You see, it doesn’t matter if your politics are blue or red (and even less if they are yellow) because the truth of the matter is, when the country was begging for better leadership, better vision and better cohesion to pull us out of the swamp called Covid-19, we get served up more of the same silliness from politicians.

The country is sadly divided. The politicians comfortable in their rhetoric; the Tories talking of pay freezes for the public sector and Labour talking about the need for public sector pay rises should be considered funny. After all, we are in the middle of a crisis. A country in flux. A people leaderless. A future uncertain. Therefore, to talk of public sector pay increases or the need to go on TV and talk of pay freezes suggest to me one of two things.

Number one would have to be a deliberate attempt by the major parties to generate a TV spat, so as to distract the plebeians from yet more bad news about Christmas with Covid. My second guess is the story is simply dreamt up by the media outlets, with the consent of the political parties, as good sport for the weekend’s politics programmes and the respective parties’ debating skills.

It would be if both sides weren’t serious. At a time when most non-public sector workers worry about their jobs, their mortgages and their businesses, the idiotic politicians don’t have the common sense to see the elephant in the room. It’s called the deficit. That deficit is excruciatingly large. There are a few ways in which the mounting debt could be tackled, but the most probable solution will be higher taxes. More taxes equals less spending. Less spending means fewer jobs. Fewer jobs means less productivity, and so on.

Based on Office of Budget Responsibility (OBR) statistics, the government has allocated £178 billion for the NHS and £116 billion for education. These numbers alone beggar belief. One wonders what costs £116 billion in education? Worse still, the shortfall between the government’s expected tax take and expenditure is already at a £200 billion deficit this tax year, and with another five months to go, we can see where this is all leading.

So when it comes to your savings here’s a word to the wise… head east, my friend, head east.

We live in a time where, whatever the colour of your political flag, the people in charge of waving it are wallowing in the luxury of spending more taxpayers’ money, irrespective of the social and economic turmoil it will bring. Taking with them the high moral ground of “saving the NHS” (Conservatives) or “boost the pay of public sector workers” (Labour,) Britain is heading for a rocky and uncomfortable future. And Brexit is still to come.

So if your pensions are skewed to the UK equity sector, as many will be, you have to remind yourself that with pension annuity rates at their lowest for 50 years and taxes soon to be at their highest in decades, how will your financial future fare? The simple answer is badly. The decisions you make now are perhaps the most important you will ever make. Setting aside Trump’s remarks about China’s role in the spread of Covid, if your portfolio doesn’t have at least 10%  invested there, your money is likely to suffer.

It’s very reminiscent of a previous crisis the French faced, in June 1940, when the Nazis arrived in Paris. The citizens were devastated, shocked, saddened and appalled. The brave French Resistance fighters sacrificed everything for their country, while many politicians became collaborators. As sure as eggs are eggs, the very people making such important decisions about our future will more likely than not thrive. Your savings might not.

• Roddy Kohn is a chartered member of the Securities Institute and Managing Director of KohnCougar.

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