Sunday, 2 February 2014

Suit you sir?

A visit to my tailor highlighted to me the importance of trust and humility in professional relationships

ONE look in the 360-degree mirror was all it took to notice.

Tailor Anand has created fine bespoke suits for me for the past 18 years or so. Measurements were taken off my latest block – itself built up from the complex series of measurements taken by good tailors every two or three years. But at that first fitting, the jacket did not look right. It seemed to allow too much room in the girth so I asked Anand if he could tuck the waist in slightly to give it a more tapered look.

He stood behind me, gently put his hands on my 'love handles' and said: 'Mr Warren, I can work miracles with the fabric, but only you, sir, can work magic with these. I can do no more.' He turned me around, pulling the fabric tighter as I had asked, only to reveal two unbecoming bumps on my sides. I conceded the point and we continued the fitting.

As I was walking away I pondered the significance of the way in which plain truth had been delivered, kindly and without malice. I was not humiliated, upset or angry with Anand. In fact I was rather amused that he had, after all those years, felt that at that moment that he had the freedom to convey to me a misconception I had about my appearance in such a delicate manner. It made me think about the relationship people have with their money, their attitude towards it, their goals, their misconceptions, what outcome they wish for and how these factors may affect the decisions they make. To use as a metaphor, how the suit would land up fitting.

Do they take the time to establish what they want it to look like, how they want it to fit? Do they invest the time working to convey this to the 'tailor' and, more importantly, do they have a tailor they trust? That fitting galvanised me into losing two stone and I have gone back to have a new block made and have shared with Anand what he had inadvertently done for me, in making me realise that I had as much of a responsibility to him as he had to me. He could have made me look as good as he could; however without my input I doubt I would ever have been truly satisfied with the result. So it is with investments: the professional and their client must interact if they are to achieve the desired outcome.

Monday, 13 January 2014

Week in review Jan 10 2014

Last week saw gains in the equity markets in the US, UK and Europe due to growth in consumer spending (mainly through holiday sales) which continue to be a major driver in the economic recovery in these regions. Retail sales (ex-car sales) in the US grew .4% for the second month according the economists’ forecasts. The Fed and most of the financial world got a surprise as the US unemployment rate fell to a five year low. However, the unemployment number was more negative than positive as workers leaving the labour force were a major factor in the jobless rate plunge. Has the Fed’s target 6.5% jobless rate become irrelevant? No, the rate is nothing more than a view which will be taken into account along with other variables, and with the ‘shrinking labour force’, the rate set in 2012 might need to be adjusted or a new target variable found.

In the last quarter of 2013 speculation on when the Bank Of England (BOE) would raise interest rates grew as the UK’s economy continued to strengthen. However, recent industrial data suggested stagnation in November, dampening the momentum of the country’s growth which means that GDP growth in the fourth quarter may not be as strong as previously anticipated.  The BOE held its benchmark rate at 0.5% and its asset purchase plan at £375b last week, with the country’s trade deficit narrowing to a five month low as exports to the EU grew. The UK property market continued to support the country’s economic growth as housing prices rose by 5.2% in 2013 on low borrowing costs and government incentives. We look to the January 14 inflation report to give a guide on Governor Carney’s potential decision on interest rates and the potential of the economic recovery.

There has been a lot of news coming from the European region as Ireland returned to the bond markets after completing its bailout program. The German unemployment rate fell for the first time in five months while the jobless rate remained unchanged. However, it was the regulators that topped headlines as the Basel Committee on Banking Supervision adjusted the leverage ratio after “thoroughly analysing data”. The committee’s changes to the leverage rule, eased proposals on how lenders determine the size of their off-balance sheet activities as the original plan would have penalised low-risk financial activities and created a liquidity trap (i.e. banks stop lending ).