Terrifying financial jargon is designed to bamboozle us into submission in the belief that the spouter of such stuff a) has a superior intellect and b) is working on our side. Yes, really, this is what all too often masquerades as ‘advice’. Eyes glaze over, nodding dog syndrome kicks in, and before we know what’s happening we convince ourselves that a) we’ve understood what’s been said and b) we sign on the dotted line.
The more esoteric the vocabulary, the higher the fees and commissions - usually. The more aspirational the goal – think ultra-high net worth banking – the bigger their slice. The more cutting edge – think ‘frontier markets’ – the more lavish the cake. Do not despair. Banking and finance is just basic arithmetic, and most things can be explained on the back of an envelope. What you need is someone who speaks your language – and is prepared to spend the time with you. Bringing things back to the here and now, maybe even suggesting that it isn’t worth robbing Peter to pay Paul.
Cue the jargon: ‘Long only’ means you can only buy an asset. ‘Long/short’ means you buy one piece of paper and against it sell a related other you don’t already own, hoping to profit from increased deviation between the two. ‘Momentum’ investing is spotting a trend, crossing your fingers, and hoping it’ll keep going.
Are you nodding off? The first example is the value of foreign currencies. A kid on holiday can spot the zeros on a banknote and realise it only buys an ice-cream; and that on returning to the same resort next year, prices have changed. I suggest you give them a ‘vacation bonus’ to spend, then calculate once home the real cost, helping them get to grips with relative values.
Money matters. Sterling (a weakling since the referendum) gained significantly in the second half of this year against the Brazilian real. The receptionist at my GP surgery is off there now to enjoy some winter sun she can afford. My foreign correspondent daughter who’s based in Sao Paulo has seen her (sterling equivalent) rent drop by £70 this month alone. Her French flatmate, who earns in reais, is struggling to pay the mortgage on her Paris flat.
This year the Thai baht was an outperformer, despite the key interest rate being back at a record rock-bottom 1.25 per cent. Southeast Asia’s second largest economy, which grew out of tourism, saw GDP slip to 2.4 per cent from 5 per cent last year – and no inflation.
Another surprising success story this year has been the Russian rouble. Hate or laugh at President Putin, it’s an important economic and military power. Across the Baltic Sea, last week Sweden’s Riksbank reversed its negative interest rate policy taking it to zero, possibly in an attempt at preventing further krona weakness.
In Israel, where the government is facing a third general election in less than a year, the shekel is a leopard which changed its spots. Once a perennially devaluing currency, it’s now a two-way street. Again helped by tourism, and much more so by a thriving tech sector,the country’s on the move. Many may not like the politics and the underpinnings of this young country, but look around Europe and you will see something similar. Think Bulgaria, Macedonia, Montenegro and Slovakia.
