Ten commandments while we ride the financial rollercoaster
PAUL JOHNSON
Ilaugh when the rollercoaster markets and the wickedness of accountants lead supposedly sensible people to question the future of free enterprise. The trouble is, most people know no history. it is my trade. We have been here before. The last time was the late 1970s, on the eve of the Thatcher–Reagan revolution. A combination of factors led to such gloom in Western business circles that I felt obliged to speak out in favour of the fundamental solidity of the market system. I made a speech, 'Can Capitalism Survive?', and the fact that the title ended in a query tells us a lot about the panic of those days. 1 gave the speech first at the celebrated Bank Credit Analyst conference in New York in May 1978, and subsequently in cities all over the civilised world. It was printed and translated and published in pamphlets and magazines in many countries. I said, briefly, that capitalism had created the modern world over 200 years, had been the most beneficial event in human history, and had totally transformed for the better the living standards of most of humanity. Of course it would survive, provided we all, and especially the United States, had the sense to keep our faith in it. A year later, Margaret Thatcher achieved power and the recovery of confidence in the capitalist system began. A quarter-century on, communism and collectivism are lost causes, the market rules everywhere, and the world economy is three times bigger, in real terms, than it was in the 1970s. So what's the worry?
Naturally, many are concerned about what will happen in the short term. But the prudent and those of modest expectations need not be anxious. It is another matter for the risk-takers and the ambitious (I do not say greedy). If you are used to getting high returns, and have deployed your resources accordingly, there may be grief ahead. As Virgil puts it, Quid non mortalia pectora cogis, Auri sacra fames! Last week I heard my pals Taki and David Tang, both financial sorcerers (if perhaps a little of the apprenti kind), anxiously discussing over lunch the future of funds yielding more than 20 per cent (I am content with 5). An intellectual superwoman I know, whose investments realised a 100 per cent profit in the last 12 months, is now quite flustered by the prospect of what the high-rollers are calling meltdown. I don't believe St Paul when he says, The love of money is the root of all evil' — I can think of at least half-a-dozen urges which are worse — but it is certainly a cause of sleepless nights.
The way to ride the markets and slumber soundly is to have reasonable expectations. Here are my ten commandments of finance. First, remember what King Hezekiah (if it was he) noted in the Book of Ecclesiastes: 'Wine maketh merry: but money answereth all things.' And by money he meant the clinking stuff, not paper. At times like these, I recall one of the aphorisms of that wise old bird Sir Denis Thatcher, which he repeated to me last week: 'Remember, Cash is King!' So it is, and Ace, Queen and Jack too. Keep liquid, like the blood in Nigella's deep-freeze.
Second, never borrow money. I don't go in for overdrafts, mortgages or loans — never have. I even, these days, decline advances from publishers until the book is finished. I pay all bills by return of post (if you can't, you're overspending). Yet every week I get nasty little brochures which offer to lend me money. These usurers abound in an 'I-want-it-now' society, and make a good living out of the mugs; they are gilded drones; Ignavum fucos pecus a praesepibus arcent, to quote Virgil again. Banks are only marginally better in their lending mode. Recently mine made a mistake in transferring money from one of my accounts to another, and debited me nearly 150 for being overdrawn for six hours!
Third, never lend money. When I lived in bohemian Paris in the early 1950s, I was one of the few in our circle with a regular income, and learnt the justice of Polonius's advice to his son. In the end I used to give the would-be borrowers money if I had it, and they deserved it — a practice I have continued ever since. A willing gift, graciously received, cements friendship; an outstanding loan undermines it. Jimmy Goldsmith had a different dodge. Daily approached for loans, he always replied, 'Love to, old boy, but I'm fully invested!' (Not true, of course, for he shared my cash principle.)
Fourth, if you really want something which exactly suits you (a house, a painting, furniture, etc.) and can raise the cash without borrowing, buy it, whatever the price. In no time you will have forgotten what you paid, and will enjoy your purchase every day. Never buy the second best just to save money — it will irritate you for the rest of your life.
Fifth, never gamble. As Tom Stoppard says, 'Life itself is a gamble at terrible odds — if it was a bet you wouldn't take it.' So why add to the misery?
Sixth, unless you're in business, never read the financial pages. They merely give you ideas, usually bad ones. Invest your money so that you never need to think about it.
Seventh, don't buy paintings because you calculate that their value will rise. It won't: it will go down. Buy paintings because you love them and want them in your home.
Eighth, Malcolm Muggeridge said to me, 'As you grow older, dear boy, your means are bound to contract, since you earn less and help your children and grandchildren more. So learn to do without: give up wine, tobacco, dancing girls. Make your old clothes last. Why travel when you've been there already? Learn to love our delectable countryside more. Once you're past 70, the only things you should buy are books. And second-hand ones, too.' Admirable advice.
Ninth, don't fall for the old fallacy that you need more money to buy time. Even if it were true (and most billionaires I know have less time to spare than the rest of us), remember Dr Johnson's remark in The Idler: 'Money and time are the heaviest burdens in life, and the unhappiest of mortals are those who have more of either than they know how to use.'
Tenth, and finally, the only purpose of money is to enable you to lead a useful and honourable life in dignity. And dignity does not mean a private jet; it means a clean shirt every day, and the occasional flowers for those you love,
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