Business Magazine

The Past

By The Contender @The__Contender


La Romieu Gers France

THE.PAST: "Well you did not see that coming did ya man!"
MUFF: "We planned enough of it mate!"
This is the first of 3 posts, a look at THE.PAST, the year that was 2012. 
  1. MUFF Tribe 2012 road to Financial Independence and this year's highlights. 
  2. What happened in the financial world and the impact on the MUFF investment portfolio.
  3. What we learnt as a family over the year. What did you learn about yourself?

“Those who do not learn from history
are doomed to repeat it”

George Santayana
MUFF Tribe road to financial Freedom and France in 2012
  1. Mr MUFF takes over the parental duties while Mrs MUFF goes back to work 
  2. Our eldest child left creche and started nursery school
  3. Spending was cut dramatically with no impact to our standard of living, as described in
    Father MUFF a Financial Frugality Case Study of Bringing up Baby
  4. Standard of living actually increased as we had one adult at home, which is positive for the children and less stressful for the parents (no more rushing around to pick up kids, having to book days off when they are sick and finding child care solutions)
  5. Both children have grown up immensely this year and are showing real progress - the eldest with reading and writing (just turned 4) and the youngest is a real little person now she is mobile.
  6. Saving exceeded expectations but investments were flat (see below)
  7. Investment knowledge has increased see MUFF Investment Challenges and Risk Versus Reward and Financial Independence Planner & Stock Screener
  8. The Tribe has improved its knowledge and use of alternative health practices, see Keeping the MUFF healthy
  9. Wonderful holiday in the south of France researching where to live (photo above from the Gers region of France).
  10. Started this blog! see 10 blogging mistakes - MUFF styleee!
Financial Impact of 2012

First for all those Boggle heads out there our investments came out at a slightly positive 1.5% gain compared to an approximate 7% gain for the US market.
We did exceed our savings plan but took a hit when Mr MUFF left work and hence lost his share options.
Overall this is disappointing but there is always a silver lining! First let's have a look at what happened across the world and why the MUFF investment portfolio turned out flat.
By World Region

UK: Austerity is doing its job, shame about the un-realistic growth figures (as usual) along came the double dip recession. Odd thing is that the "austerity" still means that the national debt is increasing year on year...... Nothing to see here, move on, all is well! (quick, appoint another ex Goldman Sachs employee as the Governor of the Bank of England as Merv has stopped printing to cover up the mess that the UK finances are in).
Olympics - good job and pulled the UK out of recession due to the ticket sales alone..... Record haul of medals and Sir Bradley Wiggins won Gold following on from his Tour de France success.  And UK sports personality of the year to boot. GO WIGGO!
Rain - funny that and in the UK of all places - IT HASN'T STOPPED!!! Why invest in wind power we need hydro dams!
MUFF Investments
  • Stocks generally positive for the year. Income stocks did OK (oil and gas, utilities, telecoms and pharmaceuticals)
  • Funds generally negative due to exposure to precious metal miners which have had a second poor year of performance in a row compared to the underlying metals which were both positive for the year.

Continental Europe: Successfully deployed smoke and mirrors. The PIIGS are all bankrupt and cannot print their way out of their problems. Michael Lewis's book BOOMERANG The Biggest Bust is a rollicking read on the different mentalities and games across Europe on this topic.
Merkel holds all of the cards (but even the mighty Germany is potentially slipping into recession) and has been insisting on austerity for the PIIGS. The sad thing is Germany knows how to run a country and they are struggling!
Sarko was unceremoniously dumped as French president (popularity stakes win out, sad really as at least he died by his own sword, true to his word and loves his country - being an ex lawyer speaking the truth did not pay). Replaced by the socialist Holland, promises, promises, promises as usual anything to get into power. After a bad start his opinion rating after gaining office the lowest ever - what a surprise. Time to fire some of the cabinet but not himself.
I am saddened by this. France deserves better. Its people love to debate politics. They love their culture. They love their country. Why vote in someone who clearly campaigned on tax increases and giveaways. Holland is doing his best to decree that companies cannot make workers redundant. Zombies roam the land. France needs opportunities and jobs. The word entrepreneur is French is it not? So why are entrepreneurs campaigning (The PIGEON movement) against the president?
Italy has been run by an UNELECTED Goldmanite. So much for democracy! Berlusconi wants back in to divert attention from his sexual encounters.
Spain had the ULTIMATE housing bubble and bust. 50% youth unemployment! Tough but they know if they go down so does Europe (and the rest of the worlds economies). For the time being they are trying hardball with the EU for FREE money.
At least they have the best football team on the planet and lifted the European Cup for the second time in a row following on from their World Cup success.
MUFF Investments
  • Stocks - Europe by most measures looks cheap compared to US. As we know cheap can get very cheap. Exposure to German and French utilities has been negative for the year even though  they have relatively high dividends in the 8%+ region.
  • THE PASTCurrency - Euro continued its decline against the pound. Even though the UK's finances are a mess and it is likely to carry out more quantitative easing, this trend of the Euro carrying lower may continue into 2013. The Swiss devalued the franc by 10% in 2011 and the CHF now pegged to the EUR has declined further against GBP. Can the Swiss maintain the peg? In MUFF's opinion this is likely for the foreseeable future but will they keep it if Europe gets into more trouble? Negative for the year
Japan: Nuclear melt down worries and  new high tech robots have been all across the web (but the mainstream news stations have gone quiet). If anyone has the technical know how to deal with this one it is the Japanese. We all hope for a quick positive outcome from this one for all our sakes.
Japan has too much debt and a rapidly aging society which is not a nice combination for its finances. They have started to run a trade deficit from the historical trade surplus. The government is attempting all it can to prevent deflation (New PM Abe has stated such) and QE10+ is supposedly going to be a biggie to force inflation above 2%.
MUFF Investments: NONE and no intention to buy Japanese equities even though the low PE's.
China: Continues on it new 5 year plan. They have medium to long term goals to improve China full stop. China's ghost cities prove they have a bubble.... they will fill and thrive 1.3 billion people and a large majority are still living in the countryside.
They want their children to be educated. They want the "Chinese dream" of their children having a better standard of living than themselves. To do this they need all of the new infrastructure they are building and some of these are being built in the Ghost cities. It is only a question of time before these are filled up and populated.
False flag questions: How can you have a bubble society for 1.3 billion people who are moving from an agricultural society to a modern high tech society? How can there be a bubble when the populous has a hard work mindset and want to get ahead? They SAVE in the region of 50% of their income what happens if most of this is invested in their companies (and buying companies abroad) while the west does not save and invest? Why are they setting up trade agreements avoiding the dollar and accumulating so much PHYSICAL gold?

MUFF Investments: Funds in China (and India) have been relatively flat to negative on the year another disappointment considering the high growth numbers coming out of their economies. India's stock market is one of the most expensive in the world based on the cyclically adjusted PE measure. Happy to continue to hold for some diversification.
US / Canada: 2 parties same results, who has the most lobby money? Lots of drilling to produce fracked shale oil  Cheaper energy for US manufacturing which is having a bit of a revival. Jobs are being created at a slow rate. The US federal budget deficits persist at 1 Trillion + a year (sounds like a big number does it not?) .
MUFF Investments.  
  • Stocks: Solid dividend players have continued to deliver unfortunately the energy stocks have declined in price (yield went up so we bought some more - accumulating on weakness). Precious Metal Miners have disappointed despite the higher metals prices - these are a hold.
  • Currency: Dollar has been the go to currency. The fiscal cliff has been averted (partially for the time being....) and QE to Infinity (and beyond) continues.
    As there is a global race to the bottom in the currency stakes the dollar may continue to perform on a par against main currencies such as the EUR, YEN, CHF, GBP as they are being debased as well.
    The Canadian Loonie on the other hand is considered to have some commodity backing in the form of the rich Canadian natural resources. Housing in Canada is widely reported as overvalued (a bubble?). We actually looked at a possible move to Canada and the prices of average homes were comparable to London....too high for a country with copious amounts of land to build on in our opinion. No direct holdings of the currencies.
Protection portfolio: We hold ETF's in the precious metals and both had another up year around 7%
Tribe Key Learning's 2012
  1. Keep an open mind - We always want to listen to other people and their ideas. They are fascinating and much more real to life than talking about the X-Factor or some other "entertainment program". We have learnt quite a few things about child upbringing, ideas on education and places to visit we would never have heard of otherwise.
  2. Move on - THE.PAST is still pulling on us and THE.PRESENT is great but it is THE.FUTURE where we are going. We have had to persist with our plans - we have had the usual doubts; give up what we have for the unknown? We could do this instead of that. We could play everything "safe" with our investments.
  3. Be courageous - yes we have made some decisions and are proceeding with plan regardless of what is going on in the world. If we did not do this we will be in the same place next year and then have the same convesation with ourselves. NO! Not the MUFF tribe we are giving at a go and will rise or fall on the sword as the saying goes and so be it!
  4. Challenge ourselves - Mrs MUFF stepped up to the plate to help run the Sunday School Class at the local church We encourage the girls to try new things at every opportunity.
    We were amazed by our daughter's presentation to her class, she had to tell her classmates (all 4 year olds) about the day she spent with the class bear. She also impressed us when she stood up at the Christmas play and said a few words from memory infront of all of the parents. Our not so little 15 month year old is already pushing the eldest around in her wooden cart and telling mommy and daddy that she wants to read a book or to be taken for a walk.

  5. Enjoy the day - It is great to survive another day so why not enjoy it at the same time? Two young children is a challenge and a joy at the same time. Yes we are being frugal and can refrain from splashing out on treats. Yes we can be a little too serious and thoughtful.
    Keeping a positive outlook (it may be a buzz word that is banded about, but it is for good reason), considering our achievements, being encouraging and supportive to the kids are enjoyable. Going to the park and spending time as a family are enjoyable. Eating meals together is enjoyable. Playing dolls house together is enjoyable (except for MUFF - I'm a bloke :o)
 What did you learn last year perhaps a recap will surprise you?
Every negative has a positive and positive actions make changes for the better. We cannot dwell on THE.PAST. 2012 is finished. We live in 2013 THE.PRESENT. This is our time to enjoy life and is the topic of the next post. 
The MUFF Tribe wish you all a HAPPY NEW YEAR - If you have any comments or ideas for the site please leave a comment below.
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