Vincent’s Blog: If your brain is your Chief Investment Officer, fire yourself

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We need to talk, seriously. It is time to sit down and evaluate your performance with yourself and someone from Human Resources. It seems to me you have been underperforming your stated and agreed objectives for a long time. It has come to my attention you spend considerable time on other things than your formulated job description. You always seem to forget we are in it for the long haul and not living according to a day-to-day carpe diem strategy. Furthermore, since when has the way you dress, what you drink, eat, drive or place you live/ vacation to do with our investment strategy? But above all else, the one thing that really is the breaking point for our working relationship is what you have been doing with our liquid assets. Why is most of our cash sitting in a bank account melting under the force of negative real rates like a creamy Italian gelato on a hot summer’s day? Have you seen the interest rates? Do you know what inflation is and what real rates do to your purchasing power? Do you think our sports club membership or grocery shopping never increase in price?

I know, we are always in a hurry and have little time or energy to spend on managing more stuff in our lives. As hurried shoppers in a crowded supermarket we quickly compare the prices of different offerings and move one to do other things. Products we don’t know we’d rather leave alone. Time is money right?

Well yes that is correct but not in the way most of us look at it. You see: most of us just leave their cash in ordinary savings accounts and cannot be bothered to move it. Maybe the amounts are not big enough to demand attention or the sheer choice of alternatives is overwhelming. The Federal Reserve Bank (FED) points to US$8 Trillion sitting idle in savings account across the US and The Economist estimates a sweet €2 Trillion (US$2.2 Trillion) sitting idle in German savings accounts. Those two amounts put together will buy you almost all the companies in the S&P500 index. Mind you, this happens at a time when some banks “offer” negative rates on bigger amounts in savings accounts. Wow, if negative rates won’t get you motivated to move your cash, then what will?

Still, you need to think and take the time to evaluate your options. Most of us don’t seem to take time to pay attention to details when it comes to financial management. You are now facing a sure loss and there’s nothing worse. So sit down with your inner Chief Investment Officer and have a frank conversation. Maybe it is time to part ways and look for fresh ideas. There is enough choice out there and yes that constitutes a problem in itself, but if you remain inactive you are in for that sure loss!