Our content this month are as follows:-

• Bubbles – nothing new
• In the News
• Tips to start the year well
• Books we have read
• Quotes of the month

During the first decade of the new century, investors have been unfortunate that markets have experienced 2 bubbles. The first, early in the century, was the technology bubble which burst spectacularly between 2000 and 2002. The second, our most recent and leading to the "credit crunch", was a property bubble.

Extraordinary Popular Delusions And The Madness Of Crowds by Charles Mackay traces the history of financial bubbles and other manias and we might well reflect on the fact that it was first published in 1841! As well as the South Sea bubble it covers "Tulipomania", the 17th-century Dutch manifestation of collective financial madness.

An article in the Financial Times magazine of 23rd January has an interesting report on the price of tulips at the height of the craze. In 1637 a single Semper Augustus sold for 5500 guilders, enough to buy a mansion in Amsterdam and more than seven years income for a university professor. At the time you could buy 10,000 litres of Bordeaux wine for 100 guilders and one thousand pounds of cinnamon for less than 3000 guilders. The Dutch historian, Theodorus Schrevelius, wrote in 1648, "our descendants doubtless will laugh at the human insanity of our Age".

It would appear that bubbles of one sort or another will always be with us but they become easier to spot when you have lived through a couple.

We were recently reminded that science is the "empirical search for the truth". It seems a reasonable definition to us and the investment world has made its contribution to this search for the truth. There is a huge amount of data available, a large number of qualified people willing to undertake statistically rigorous research, which is then peer reviewed in time-honoured fashion. As far as the research is concerned, everything that has been published in the last 50 years has concluded the following:-

• Active fund management has nothing to add to investors’ returns
• Asset allocation is key
• There are three factors driving investment returns - the market, small
companies and value companies

It strikes us that you could read the newspapers, investment magazines, newsletters and tip sheets for a long time and never come across these principles. The debate at the moment is whether we should fear inflation or deflation, will there be a double dip recession? How far will interest rates rise and when? All surrounded by the usual hype about the funds of the moment, which areas of the world you should be investing in and whether property will recover any time soon.
Regardless of investment conditions, portfolios which are constructed bearing in mind the above three principles, will cope with anything the economy, the banks and governments can throw at them, as has been proved over the past 10 years, 20 years or any other time period you care to mention.

Having said all that we did find one interesting article this month, in the Financial Times of 23rd January, Matthew Vincent continues his commendable campaign to reduce fund management fees and to disclose the invidious dealing fees which are one of the biggest drags on investment performance. More power to his elbow - you can read his article by following the link below.

http://www.ft.com/cms/s/2/76900c64-0782-11df-915f-00144feabdc0.html

Are you feeling sluggish, and lacking in enthusiasm and energy? Are you feeling the effects of winter or do you think you may be depressed? Either way a few checks and minor changes may make the world of difference.

We all need to re-adjust the balance in our life and sometimes these moods signify an uneven life balance. Other signs of this could be thinking about work too much or dwelling on a particular problem all the time. Adjusting to changes can also throw us off balance. Read on and give yourself a winter MOT!

Eat well – try to avoid refined foods high in sugar even though the urge is to eat feel good foods. They will give you a short burst of energy but then leave you lower than before, due to the sugar intake providing a quick but temporary boost. Everyone can benefit from eating lots of brightly coloured foods, including fruits and vegetables and dark leafy greens.

Exercise - walk outdoors preferably in daylight for one hour per day. Walk in your lunch hour, don’t worry; the job will still be there when you get back. You will feel more awake and more able to cope with what life has to throw at you. How about talking up a new hobby like golf or horse riding?

Sleep well – make an effort to relax before bed, devote some time to yourself and the exercise will help.

Look forward to spring. Plant spring flowering bulbs in a pot and watch the spring arrive. Read a book or dig out your old CDs and listen to your music. Wear your favourite colour dance, sing, and go to the gym. Try not to isolate yourself and make an effort to socialise with friends. They will probably wonder where you’ve been and be glad to see you again.

Think about your goals for life in the short, medium, and long term.

What do you need to realistically achieve these goals? Write down a plan.

Don’t think negatively about yourself Instead of “I’m too slow” think “I am thorough” or instead of “I’m stupid” think “I am good at my job and I have qualifications”. Remember thinking negatively about yourself prevents you from accurately and completely seeing reality.

If you are struggling perhaps you need to talk things over further with a professional? Get help from family and friends, your work place and your Doctor. There is help out there. People often feel that there is a stigma attached to admitting you are not coping so well at maintaining their mental well-being. They worry what friends would say about paying to see a therapist. What would friends say if you told them you were joining a gym and wanted to keep fit? Your mental health is as vital as your physical health. According to the NHS one in four of us will be touched by depression at some point in our lives. Don’t put up with it, do something to punch holes in the winter darkness.

Pamela Hardisty, MA - Psychotherapist.
Telephone - 01543 481857 or 07814 799418

Those of you who have read "The Science of Happiness" by Stefan Klein will remember that he mentions a Buddhist monk who, on certain measures, could be called the happiest man in the world. We are not certain if Matthieu Ricard is that monk, but strongly suspect that he is. He has written a book called simply "Happiness", subtitled "a guide to developing life's most important skill" and argues convincingly that happiness is a skill to be developed and worked upon. In the book he provides exercises and tools as well as rehearsing intriguing arguments such as, does happiness make us kind or does being kind make us happy?

Emotions are examined and in particular the darker ones such as pride, envy and hatred; solutions are offered to rid us of these toxic emotions and the book is particularly strong on meditation. Once you have read of the benefits, not all of which are obvious, you may feel it is worth exploring. The book also reveals that developing this skill of happiness will probably result in a longer life - reason enough to read it, perhaps.

Available from good bookshops and Amazon.co.uk but, if you have any trouble finding it, and please contact Vickie at vickie@indexwm.co.uk

“I wish someone would give me one shred of neutral evidence that financial innovation has led to economic growth – one shred of evidence”.

Paul Volcker, attacking high bonuses and ‘innovative’ banking practices, quoted in The Sunday Times.

“We make a living by what we get, we make a life by what we give".

Winston Churchill