A rare treat to be found at Singapore airport (apart from the bright lights and beguiling shops) is the availability of some UK newspapers. I was thus able to enjoy The Observer, while Beth tucked into The Sunday Times. After two years away from the old country, it is slightly alarming to get a glimpse of what awaits us when we return in August. A random reading of the lifestyle sections of these Sunday newspapers seems to portray a country in which the ‘average’ person owns at least three homes (including a flat in London and a substantial holiday home in Cornwall); is worried about their state pension and the cost of petrol; and has recently set up a business that is now turning over 40 million pounds.
As someone earning 100 pounds a month, with no career prospects as such and no holiday homes to speak of, this is liable to induce status anxiety. Also, I cannot quite understand how someone with a second home would be seriously worried about the state pension. As for the price of petrol, it still seems very good value compared to olive oil, milk and mineral water, none of which will propel your vehicle very far. In fact, in spite of all the moaning in the newspaper, it seems that the good people of Britain are having a fairly comfortable existence.
Apropos of nothing in particular, I refer you to an article in the ‘Your Money’ section of the ST, which pondered the state of house prices (what an innovative idea! I expect the editor was very impressed with that suggestion. ‘A think-piece on house prices, in the Sunday paper, what an original idea!’ she must have exclaimed). Anyway, the article quotes one ‘expert’ who is bearish about prices, thinking they will increase by about 4.5% per annum over the next couple of decades. The journalist then presents the counter argument from a bullish ‘expert’ who makes the panglossian prediction that ‘over the next 10 to 15 years prices will increase 100%!’
As I have not much else to do in Maumere on a Tuesday afternoon, I read this article again, and recalled something I learned many years ago called ‘the rule of 72’. This dictates that any rate of interest divided into the number 72 will return the total number of years it will take for a value to double (assuming compound rates apply). So, if we take the more ambitious of the analysts predictions (prices double in 10 years), then this gives us a rate of 7.2% per annum, which is a long way from the ‘double-digit growth’ that the journalist said the bullish pundits were predicting. However, if we take the outer marker of the expert’s prediction, that is 15 years, then the annual rate of return is just 4.8%. So, in one sense the difference between the bearish and bullish pundits is just 0.3% per annum, which I guess is not such an exciting headline for the article.
Come to think of it, it doesn’t make for a very exciting blog entry either. Normal service will be resumed tomorrow…
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