by Simon Popple of Brookville Capital
I never thought I’d write an article like this.
For income we typically rely on:
- Our job
You may have other sources – but for most of us, that’s it.
The current situation has made the job market far from certain. If you feel you’ve got a job for life then well done. But someone once said:
“He who remains calm whilst everyone around them is panicking – probably does not have a full grasp of the seriousness of the situation”
The situation is certainly serious.
With unemployment forecast to rise dramatically over the coming months and the virus impacting many sectors that you’d normally view as “safe” – getting a regular income from your job is less certain than it used to be.
Moving down the list.
With so many companies struggling and no vaccine in sight, the ability to get regular, dependable dividends is not what it used to be. A few weeks ago, the Evening Standard in the UK ran an article that said 49 out of the FTSE 100 companies had either slashed or stopped paying their dividends. I’m sure this situation is similar across the World.
It would be no surprise to me if this number got worse. Potentially, a lot worse.
When my parents retired you could get an annuity that paid enough for many to live off. But those days are over.
Here is an annuity table I recently took a look at. I would probably need a pension of at least £3m to have the kind of retirement I want.
My pension is nowhere near that.
Negative interest rates are becoming more common, so I don’t want to rely on fixed income products. Especially with global debt going through the roof.
Which brings me on to property.
The darling of many private investors.
I used to think this was pretty bullet proof from an income perspective. Yes the value could move around, but if you had a property in the right area and targeted the right tenants…..you were fine.
Now I’m not so sure.
- with job security being so tenuous, are you going to be able to get the tenants you want?
Let’s say you can.
- People typically sign a 12 months lease, so if there’s a downturn it can take a while to hit the rental market. Appreciate that leases are running out on a monthly basis, but the longer this goes on, the less willing tenants may be to sign on at the same price.
A friend of mine who has several residential properties has told me he’s had to cut the rent to get his tenants. The competition are cutting rent, so to remain competitive he’s had to follow suit.
Hopefully this is just a short-term phase. But if it’s not, then property may no longer be the great income generator it used to be.
Time will tell.
Which brings me on to Gold.
For many gold has been a pariah. A non-starter from an investor perspective…..because it does not pay a dividend.
But with many gold mining companies not only maintaining but also increasing their dividend….that could be about to change.
People may start to view gold as not only a diversifier….but also a source of income – through investment in the gold miners.
If that happens, it could have a profound impact on the gold market.
About the author
Simon Popple writes The Brookville Capital Intelligence Report, a weekly report covering investments in commodities. Please go to www.brookvillecapital.com to find out more.