I often write on Quora.com, where I am the most viewed writer on financial matters, with over 646.1 million views in recent years.
In the answers below I focused on the following topics and issues:
- Are house prices going to go down in 2022 when the interest rates go up dramatically and fewer houses are bought?
- Will UK banks close accounts of non-residents in the UK? I am a foreigner. I have money on my account and I have no visa yet to return. Any suggestion if the news is true?
- Why do so many once very wealthy families so easily lose their wealth?
- Why are the rich getting richer and the poor and the middle class getting poorer?
- Why do some investors fail to beat the market? What are some of the most common mistakes they make?
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Are house prices going to go down in 2022 when the interest rates go up dramatically and fewer houses are bought?
In 2022, housing went up in most countries. Bonds and stocks went down.
In 2023, it is the opposite. Bonds and stocks have gone up. Real estate is falling in many countries.
That includes the UK, Hong Kong, South Korea, China and beyond.
What is more, the bigger pain might be ahead, as more people are taking off fixed-rate mortgages.
What is interesting about the post 2008 world is how valuations went up a lot in some markets, and down in others.
In the UK, house prices went up in London, but fell or stayed stagnant, at least adjusted for inflation and wage growth, in many countries.
In the graph below, taken from Economics Help, it shows that London house prices have skyrocketed relative to incomes, whereas the UK as a whole (and especially the North) hasn’t got back to 2008-era levels of unaffordability.
Likewise, in the US, the biggest increases were in big cities.
Prices skyrocketed in many parts of Asia, New Zealand and beyond.
When I was in Shenzhen sixteen years ago, you could buy an apartment for $60,000 at the time. Now the same place could cost ten times more in some instances.
Then you have other global cities, like Dubai, which has seen stagnating prices, despite the recent upswing:
In a less extreme way, we have seen similar trends in the stock market.
US, and especially tech stocks, have skyrocketed.
In comparison, some markets, such as ASEAN, have very low price-to-earnings and CAPE ratios and look cheap.
So, we might see investors looking for value in real estate and stock markets, considering these discrepancies.
We already partly saw it last year, when many people left big cities during Covid and bought in the smaller, cheaper, cities.
Why do some investors fail to beat the market? What are some of the most common mistakes they make?
In fairness, it isn’t easy for the average non-professional investor to beat the market.
Only about 20%-30% of stocks on the S&P500 and other major indexes beat the market in any given time period.
From those that do, many don’t beat it during the next time period. For example, Lehman Brothers beat the market for a number of years and then went bust.
Or big tech beat the market in the late 90s and after the pandemic, but also had bad periods last year or in the early 2000s.
The graph below show how the S@P Dow Jones Indices LLC shows how the extreme winners influence the returns
If a few companies do 1,000% returns, that completely distorts the indexes average returns.
The Financial Times also showed recently how a few stocks are trading at high price-to-earnings ratios.
So, beating the market by buying individual companies isn’t easy, at least long-term.
Then there are others who try to beat the market by staying in cash and then entering to buy the index.
In other words, they buy the S&P500 or whatever index they are interested in, but wait until the market has crashed.
The issue with this is markets are very unpredictable in the short-term, even if the long-term has always been good.
Look at the least few years. In 2019, most people were pessimistic at the beginning of the year and the US markets did 30%.
Then Covid-19 happened in 2020 and many markets did 17% for the year, despite a 50% fall in the middle!
So, the sensible, non-professional investors, don’t try to beat the market. They might try to match it or reduce their risks rather than trying to beat the market.
For instance somebody who is 50% in the markets and 50% in bonds and other assets likely won’t beat the market, but they will reduce risks.
Will UK banks close accounts of non-residents in the UK? I am a foreigner. I have money on my account and I have no visa yet to return. Any suggestion if the news is true?
It happens a lot, including to British people who live overseas.
I saw on an expat Facebook group recently that Santander and Barclays are increasingly closing down non-resident bank accounts.
Other banks do the same if they suspect you are living overseas.
The best thing to do is:
- Have international banking. Even if you are one of the lucky ones that doesn’t get your account closed, you should bank offshore if you live offshore. Offshore in this context merely means outside of your home country.
- It is good to have diversification in terms of bank accounts. Even if you live in the UK, you can have accounts closed, especially if:
- You are a politically exposed person (PEP)
- Business accounts where you are trading internationally.
- Business accounts in sensitive areas such as online gambling.
- You are high profile
Even today I heard that Nigel Farage has had his accounts closed.
This is an apolitical post, so isn’t meant to criticize or praise Farage.
Yet I make this point because his predicament isn’t as unusual as people (or he himself for matter) assume.
3. Have investment accounts outside the UK as well. You shouldn’t, legally speaking, contribute more to ISAs if you move overseas.
Best to try to not get away with doing so.
Basically, diversification of bank and investment accounts is for the best.
Why do so many once very wealthy families so easily lose their wealth?
A few years ago in China, there was a trend for disliking the “Fuerdai”, which was an expression for the second-generation nouveau riche.
Some of these kids were burning wads of cash and engaging in other crude behaviour which annoyed most locals.
We see this in many societies.
Educating the next generation about sensible money management is more difficult if they have never struggled.
Beyond that, there is the succession issue. Anybody who has watched the drama “Succession” will recognize the politics involved in family wealth.
Finally, we have to remember that inheritance tax, inflation and multiple children having a slice of the pie dilute the money over time.
If somebody gets $10m as an inheritance, for instance, that sounds like a lot.
But after they pay inheritance tax, they could be left with less than expected.
Then, if the money isn’t managed properly, inflation and the cost of lifestyle could seriously dilute the cash.
Investing a large inheritance isn’t as simple as it seems as I mentioned on the article below.
We see the same with former athletes. Most are broke within a few years of retirement after the money dries up.
Why are the rich getting richer and the poor and the middle class getting poorer?
Firstly, it isn’t clear what you are saying is true.
Globally, the number of people who are poor has been going down for decades.
The stats from Wikipedia/Our World In Data are clear:
The middle class has also been skyrocketing, as this stat from Virtual Capitalist shows:
What is true is that it isn’t a one-way bet.
There have been some individual periods where poverty rates have increased.
Whenever basics like food and fuel increase in value, like last year and 2007, the poorest suffer.
Then there is another issue.
In some developed countries, such as Japan and some in Europe, the outsourcing of manufacturing to cheaper countries from the late 1970s onwards hollowed out the middle class.
Wealthier people are dependent on asset prices, not selling labour.
Therefore, anybody who holds assets, regardless of whether they are ‘rich’ or merely wealthy, isn’t as easily affected by these trends.
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Adam is an internationally recognised author on financial matters, with over 694.5 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.