Want to work, forget it, let someone else work for you!

Dear Reader,

Today’s message has no doubt been better transmitted from daily experience than a few words from me.

Globalisation has meant that developed countries have experienced weak wage growth over the last 10 years, as developing countries have offered a considerably cheaper option.

This has not meant that prices for products have fallen. It has meant we had to borrow to keep the same quality of life and that companies have enjoyed larger profit margins.

It is likely that wage declines in developed countries will continue if globalisation continues in its current state.

If we combine the top heavy population structure that many developed economies are experiencing (i.e. larger proportion of population greater than 50 than less), then we are also likely to have an increasing tax burden. This will reduce further the purchasing power of consumers.

--It is for this reason that I often say the principal drivers of an economy are the education of its people (hence its innovation output, new companies generated, greater exports etc) and its demographics. In its purest form, this is macroeconomics . Everything else is mere detail. Good politicians must always be aware of these variables and the affect they have on a country (of course the output may not be measured for years and a particular party may never be recognised for policies that created a positive long term economic environment. Hence, few politicians practice this otherwise logical strategy until disaster happens).--

In such a difficult environment, the incentive to work for a wage will decline relative to what we have experienced during the 80s and 90s. This will no doubt cause political and economic tension, as we have already started to experience.

It is in this respect that investing in the business of high quality corporate seems more fruitful, and offers a nice hedge, against simply earning a wage. Let the corporate do the work for you! Clearly, for this to work, you need to have the capital. Start saving before there won´t be anything left of your wage to save!

Of course, investing is not something you just decide to do one day (you can, but the probability of it being successful are likely to be slim). Furthermore, if you decide to develop a criteria to become a continuously better investor, the returns will not offer the stability of a wage. Furthermore, it is important to note that from the data I receive more people have been burnt from investing than working for a wage....


Yours sincerely,

Alessandro Sajwani