Nick O’Connor – Capital and Conflict (Great Britain) –
Thank you to everyone who wrote in about our special income project. It really struck a chord.
Remember, this is something we’re developing in response to cries for help from a certain portion of our readership: people who’re suffering on the wrong end of zero interest rates and government intervention, and need to find a reliable source of income.
I outlined the context to this in last week’s letter. But the short version is, extremely low deposit and annuity rates and a welfare system you can’t put your faith in are problems that aren’t going to get better soon.
If you’re retiring in the next ten to 15 years, you need to figure out how to generate income in this environment now. Don’t assume things will “normalise” and rates will suddenly go back up to 5%. Chances are they won’t. You need a solution and you need it now.
I knew this was a big problem. But the number of replies in the Capital & Conflict mailbag proved just how many people are affected!
Take this note, for instance:
I think that’s a decent analysis of the problem. And yes, we’re probably all guilty of not quite saving as much as we could. But really it’s a story of living in a system that has been distorted to transfer wealth from savers to borrowers.
More than that: the people who control the system are either massively indebted themselves (government) or make money when people borrow (banks). Borrowing in itself isn’t always a bad thing. But when the system is twisted to favour one group of people so heavily against another… it’s hard not to feel angry.
Not everyone shared that view though. Take this note:
Hmmm. I’m 50/50 on that one.
Self-reliance and taking control of your own life and future is probably the single most important principle when planning for retirement. In fact it’s true in everything. Take responsibility for your own decisions and don’t rely on the government, or anyone else, to have your back.
But there’s another element to all of this. Lots of people who’re staring down the barrel of a much poorer retirement were careful with money. They didn’t over borrow. They did save for a rainy day.
The problem is that state intervention in the market warped the system to mean those savings wouldn’t return as much income as they’d once thought. Where ten or 20 years ago a £250k pension pot might have provided a decent – if not extravagant – income, today it’ll likely provide half that. Perhaps even less.
That’s the injustice. It’s like a football team believing it needs three points to win the league, then being told in the 89th minute it actually needs six.
By the way, Tim Price and I talked about this idea on camera on Monday. Tim was outlining what he sees as a major threat to the wealth of every single investor in the country this year – whether you’re retired or not, and whether you invest in stocks, bonds, property or anything else.
I’ll share Tim’s warning with you next week. Look out for it.
But here’s a preview: it comes down to the fact that the people “in charge” of the economy fundamentally misunderstand it. We call it the machine metaphor: thinking of the economy as a machine with levers and pedals and gauges that can be operated to make it run faster. Of course the economy isn’t. It’s much closer to a natural ecosystem, made up of the free decision-making of millions of people.
In the machine economy, you become a cog. The state becomes the operator. It’ll pull whatever levers it can to try and make the machine run the way it wants. If that destroys a cog, so be it – the machine itself is more important.
So what can be done?
Is there even an answer to the great income crisis? Where can you generate the income you need today?
Well, some people certainly believe it’s impossible:
I think 18%-20% is out of the question.
But 4%… even 6% or 7%… is possible.
At least according to one of our experts here at Southbank Investment Research. When we asked our team how to generate a big, reliable income today – he came back with an unusual response. It doesn’t involve traditional stocks, bonds or commodities. And it doesn’t involve trading options or anything like that.
It’s an alternative source of income that could – could – be the solution to this problem. I want to find out. And I want you to help. I’m setting everything up so that we can put our expert’s idea to the test in real time. If he’s right, you could see the results (large amounts of investment income) materialise in your brokerage account this year.
I’ll share details on how to get involved in that project as soon as I have them. It won’t be long. Keep your eyes peeled!