The Hill Of Affluence

The whole object of this book is to encourage and guide you, the reader, to be able to enjoy a lifestyle of your choice when you retire. We all have different ideas, but the one thought we have in common is to achieve contentment. Set your goals, whatever they may be, and strive to achieve them. To do this you must avoid the politics of envy. Imagine you live on a hill. Down in the valley below you live most of the world’s population. As you move up this "hill of affluence" you reach your own position and above you there are fewer and fewer people. In fact, if you are reading this book you are already on this hill and well above the valley. I just want you to reach a point where you are content with your lifestyle and do not resent the fact that some people live above you. In fact, their multi-millions may make them less content, but the point is you should appreciate the fact that you are where you want to be. Be grateful that you are about 95% of the way to the top and be considerate to the vast bulk of the world's population who live in the valley below you. I said in my introduction it is essential for all investors to have a basic knowledge of politics and economics. Now I am going to tell you how to deploy this knowledge when it comes to investment planning. The main difference between the current US and European economic strategies is their completely opposite approach to lifting their economies out of recession. The US is sticking to the Keynesian theory of spending their way out and do not worry about increasing the debt, whereas Europe has instituted severe austerity measures to reduce debt. It is unlikely that both can be right but only time will tell. It is a real economic enigma! That is a very brief overview of the major democracies of the West. The Middle East is likely to remain in a state of total confusion for many years. The other important geographical area that concerns investors is the Far East. The largest economic engine now being China, which is a Republic but not like the Western Republics. It is controlled by seven men who have truly autocratic powers. It will play a large part in the future as far as investment is concerned but for now it is complicated by currency convertibility and lack of corporate governance and visibility. As far as economics is concerned, investors have to make their own assessments. We can only be guided by economists' forecasts but I find it particularly difficult now because of the extreme difference that exists between America and Europe. As I have previously stated, in my opinion economics is an imprecise art yet governments have to some extent be guided by the majority view. They juggle figures around to suit their purpose and can always blame unforeseen events if their policies to not work out! One thing is certain we will eventually rise out of the current recession and return to a period of inflation. Oh dear! The bane of all economists and politicians. Life is seldom smooth! Do I have a theory to cope with these political and economic ups and downs? Well, yes I do, is the simple answer. Apart from the ups and downs due to political and economic conditions, it is necessary to realise what really destroys wealth and then devise a system that will aim to minimise the effects. The destroyers are two. Both are grey and depressing, like the warships of the same name. We will call them D1 and D2. D1 is taxation. As the old saying goes "There are only two certainties in life: death and taxation". There is nothing we can do about the former but we owe it to ourselves to minimise the latter. This book, as I have stated before, cannot advise on taxation because every nation, and every citizen within each nation, has different rates of taxation to contend with. The point to realise is that tax can play havoc with retirement plans. It is vital therefore to seek advice from a tax specialist as the best way to minimise it is by legal tax avoidance planning. I say "tax avoidance", which is very different from "tax evasion", which is illegal. D2 is inflation. There are so few periods where there is deflation. Even in severe recessions such as the one we are in at the moment, inflation is running between 1½ and 2½ percent. Our retirement planning must therefore take this into account. So, having decided how to best minimise taxation, we now need to plan our actual investments to cope with inflation. This is where the "Tilden Theory" comes in.