The Magazine of the Elite Investor Club
April 2018 £5.95
China’s Trillion Dollar Secret
Investing in Fine Art Wine as a Passion Asset Bentley Continental GT: You can, but should you? www.eliteinvestorclub.com
Making Money In Art Join us at the Royal Academy on Wednesday 25th April
Don’t be fooled by the telephone numbers being paid for some of the most famous paintings in the world. Did you know that you can have an original Damien Hirst hanging on your living room wall for less than £50K? Or an original Picasso for less than £100K? You just need to know where and how to buy them. And that’s what we’ll be covering with a select audience at this exclusive event held in the beating heart of the art world, the Royal Academy in London’s Piccadilly at 6:30pm on Wednesday 25th April. Our resident expert Aidan Meller will share the 5 ‘W’s of how to make money from art. And you can be there for just £20. Full details on the Events page at eliteinvestorart.com
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Elite Lifestyle • Welcome
From the Editor
s you can see, the topic of China’s little known ‘One Belt, One Road’ project is our cover story this month. Some of you may have seen Graham speaking about this at the House of Lords or the programme based on the talk which was broadcast on Sky’s Property TV channel last month. It’s a massive $900 billion commitment that includes 65 countries from here to China, and at the event Graham had the opportunity to interview Sir Vince Cable about the plans. You can read about China’s Trillion Dollar Secret on page 4. It’s always great to receive articles from our investors, and this month I’m pleased to include two of them. The first (starting on page 16) is from Jim Aitken in Scotland, who was inspired by one of Graham’s blogs, called Democracy is on Life Support, which can be found on page 8. It was actually the part about Leonard Cohen that prompted Jim to send this very touching story about his childhood spent in children’s homes. The great thing is that despite such a difficult start to his life, Jim is living proof that you can learn financial prudency from a very young age – despite your background. Jim is now a successful investor with a well diversified portfolio. Our other investor is Paul Watson who, together with his wife Carol, have achieved great success following the Jason Vale Juicing programme. They both look and feel great and have lost weight in the process! For anyone looking for inspiration to lose a few pounds, see their article, A Juicin’ Good Way To Lose The Beer Belly, on page 14. Finally, for those of you who are interested in art, we are very pleased to announce our new site eliteinvestorart.com where you can get information on affordable art by museum quality artists. We’ll be holding our first art event on April 25th at the Royal Academy entitled ‘Making Money in Art’. It’s hosted by Graham and art expert Aidan Meller. Aidan is amazingly knowledgable and so passionate about art – Graham and I have been to three of his talks and now have enough knowledge to be dangerous. See Aidan’s article on page 9. Hope you have a brilliant month. ◗
China's Trillion Dollar Secret • Page 4
Jason Vale Juicing • Page 14
Great Chinese Dynasties
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Elite Lifestyle • Cover Story
China's Trillion Dollar Secret Graham Rowan
ovember 2017 saw me score my hat-trick. No, not in a football match. I was always the last one to be picked for the school team as my reputation for sporting ineptitude went before me. I’m talking about being asked to speak in the Houses of Parliament for the third year running. The invitation came from the Chinese Welfare Trust, a charity that provides Mandarin speaking carers to elderly Chinese folk living in the UK. As you can imagine, they’re fishing in a fairly small pool to address a seriously under-served need. But their profile is helped by the involvement of Merlene Emerson MBE who works in the House of Lords and is very well connected. The event was a debate on the business opportunities afforded by China’s little known Belt and Road project and was held in the Churchill Room of the Palace of Westminster. Merlene managed to enlist Sir Vince Cable as chairman of the debate, as well as Minister Ma Hui from the Chinese Embassy and some Geordie guy. I took along a film crew and we recorded the event as part of a documentary, China’s Trillion Dollar Secret, that appeared on Sky’s Property TV channel 198 at the end of February. We had a handful of Elite members join us on the day, but for those of you who couldn’t make it, I thought you might want to see my talk in print.
“So, here we are in the Palace of Westminster, in a room named after arguably the greatest British orator of all time – no pressure then! We live in a world increasingly dominated by short-term thinking. Addicted to their phones, people have the attention span of a gnat with ADD. The only place presidents write down their plans is on Twitter. Wall Street only looks at the next quarter when judging the success of a company, so the management is permanently looking no more than twelve weeks ahead. What can you achieve in 12 weeks? A third of a baby? What we are desperately short of is longterm thinking. Perhaps the best example I’ve seen of long-term thinking came in 1972 when Richard Nixon asked the then Chinese leader Zhou Enlai what had been the impact of the French revolution two hundred years earlier? Zhou’s reply? “It's too soon to tell”. Now, I want to turn this room into Doctor Who’s tardis and teleport us across to the White House press room for a big announcement. Suddenly, Donald Trump and Theresa May emerge from the back room and stride up to the podium. They announce the building of a Transatlantic Tunnel linking Plymouth to Massachussets, to be called the Mayflower Motorway in honour of the Pilgrim Fathers. There will be a special fast track lane in the middle of the motorway with a gold lined entrance and white gloved attendants in the toll booths. This part will be known as the Trump Lane and will carry a $5000 premium.
The project will take 35 years to deliver, and will cost 17 gazillion dollars. Fanciful? I think so. And yet, that’s the scale and time span of China’s One Belt One Road plan to recreate the Silk Road of the Middle Ages for the twenty first century. Earlier this year, we saw the first fruits of that enormous undertaking when the inaugural trainload of goods from China completed its journey in deepest Essex. The ability to send goods by rail from Britain to China and all points in between is just one aspect of the One Belt One Road plan. Announced by President Zi in 2013, it’s a $900 billion commitment that includes 65 countries and projects as diverse as gas pipelines in Asia and high speed railways in East Africa. This much needed infrastructure has the potential to enrich all the countries along its route by speeding up the movement of goods, energy and people. It’s exactly the kind of investment that adds enormous value to the land and property that surrounds the new facilities. If you’ve studied the work of the 19th century American economist Henry George, you’ll know that the biggest beneficiary of new developments on this scale is the owner of land and property that surrounds them. If he was around today I would want to marry him and have his babies, because his radical idea to maximise growth was to eliminate all taxes on people and businesses (i.e. the wealth creators), and replace them with a land value tax on the owners of
❝What we are desperately short of is long-term thinking.❞ the property enhanced by all the new infrastructure. Asking the landowners in the House of Lords what they thought of a Land Value Tax was a bit like asking a turkey what it thinks of Christmas, and, not surprisingly, they vetoed the bill – the first time this had happened in 200 years. That caused a constitutional crisis in this very place that led to the Lords powers being permanently reduced in the 1911 Parliament Act. Think about the impact that Crossrail is having on property prices, land values and rents in the towns that benefit from the new stations. One Belt One Road is Crossrail on a global scale. Now, let’s not be niaive about this, China is not some global charity overcome by a fit of Mark Zuckerberglike philanthropy. This is as much about stimulating domestic growth by helping Chinese companies become global brands as it is about helping developing countries to build twenty-first century infrastructure. But make no mistake. There’s a big and growing infrastructure gap in the developed West – we are in no position to be complacent. There’s always a healthy tension between business and government. To succeed, a business needs laser focus on its goals and acts in the interests of its shareholders. A government has to consider bigger issues like health, education and defence. As Sir Vince will know far better than me, the art of politics is in the allocation of scarce resources to achieve the best overall outcome for the country. A couple of elections ago the
outgoing chief secretary to the treasury left a note on the desk for his successor – it said ‘Sorry, there’s no money left. It’s all gone…’ Infrastucture has always been a driver of business growth and economic success. Study the history of Britain or America and the impact of canals, railways and roads has been immeasurable. Ironically, the railways were built by private companies whose investors lost all their money when revenues fell short of expectations. Mind you, the landowners did okay. A century later, we saw the same bubble and bust in the technology world as the internet exploded into a global phenomenon. And yet the very infrastructure that saw early investors wiped out is now the backbone of the digital economy with Alphabet, Amazon and Facebook as its poster boys. One Belt One Road has the potential to make as big an impact on the global economy as the internet or the birth of the railways. It’s the world’s biggest project that you’ve probably never heard of. The business opportunities that infrastructure on this scale can open up are almost limitless. Savvy entrepreneurs are already finding ways to exploit the project in order to grow their business. One of my own Elite Investor Club members, Guy Weaver, sent his apologies that he couldn’t join us today because he’s at a trade fair in Guangzhou buying kitchen goods that he will then export to America to sell on a TV shopping channel. Siemens already has a $1 billion order for a power plant in Saudi Arabia as part
of OBOR, while General Electric has targeted billions of dollars in new revenue from OBOR projects. We can’t have a debate in the Palace of Westminster without mentioning the B word. Last year, I stood in these same august surroundings to discuss the shock result of the EU referendum. Although it feels like we’re stuck in the slow lane, we appear to be on the road towards Brexit and a return to British independence. For the business community, this is exciting and worrying in equal measure. When we’re making long-term investment and growth plans, the last thing we need is uncertainty on this scale. But it brings One Belt One Road into focus as a massive opportunity for UK business to steal a march on Europe and America by embracing the initiative and finding the opportunities within it. Frankly, we need all the friends we can get and we need them now. I’ve been working on ways of connecting Chinese and UK investors for 3 or 4 years now and we’re making some real headway. Like all business relationships, it needs trust, commitment, the right connections and delivering on your promises to make the partnership bloom and grow. One Belt One Road can be the catalyst for countless new partnerships in the next three decades. My advice to entrepreneurs is – don’t wait for a political lead. Don’t wait for official permission. Get involved now and see what you can build on the back of the largest infrastructure investment the world has ever seen.” ◗
Elite Lifestyle • Cars
Bentley Continental GT: You can, but should you?
ollowing on from last month’s feature on ‘Which Classic Car is the best investment’ we thought we’d look at one of the highend brands mentioned as a good investment. It just had to be Bentley, for reasons you’ll see below. To get more information I tracked down GetPatina – here’s an article written for them by Carlton Boyce about the Bentley Continental GT.
The First VW Bentley… The first Continental GTs were fitted with the mighty six-litre, twin-turbocharged W12 engine that developed 560bhp and 470lb/ft of torque. It was a technological tour de force, the gloss of which was slightly dulled by the fact that the same engine could be found under the bonnet of the VW Phaeton… A complex four-wheel-drive system channeled all that power, but it did so with more efficacy than excitement, a state of affairs that left the driver with plenty of time to enjoy the sort of interior that was designed with nouveau, rather than old, money in mind. The introduction of the new Mulliner Driving Specification a year later re-positioned the Bentley to a market that had found the original car a bit too plain, a bit too restrained, a bit too ordinary. A voice-activated in-car telephone (yep, that was the ultimate in rich boys’ toys back then) was a sensible enough option but then it all started going a bit late-period Saddam with colour-coded seat belts, drilled alloy foot pedals, twotone diamond-quilted hide, knurled chrome knobs, and embroidered Bentley emblems on the seats. A four-door Continental arrived in 2005. Given the name Continental Flying Spur, it was even bigger and more ostentatious than the car upon which it was based. The convertible GTC arrived in 2006, followed by the Continental GT Speed in 2007. The former suffered a reduced top speed compared to the tin top, and struggled to pass 189mph with the roof lowered. The latter, losing 35kgs in weight and gaining 42bhp in power
This article is courtesy of GetPatina which is an on-line repository for creating a digital history for your classic car, preserving and increasing its value. The full review can be seen at: picks.getpatina.com/2017/06/bentley-continental-gt
over the standard car, was still more of a bruiser than a sports car but it handled and went better than any Bentley that had gone before. More, relatively minor, changes came along in 2009, freshening it up and keeping sales buoyant, something the new Supersports model helped enormously. Announced at the Geneva Motor Show
by no lesser luminary than Jay Leno, the Supersports was a limited-edition with more power, better handling, meaner looks, and the ability to run on E85 Ethanol biofuel. (I know, but apparently that was a thing back then, and if Jay Leno loves it then it’s gotta be a good thing, right?) Snide comments aside, the Supersports is the best-handling Bentley of them all thanks to a Tiptronic gearbox, 621bhp, ceramic brakes and high-performance Pirelli tyres, all of which contributed to 1.29G of lateral force, a 0-62mph acceleration time of 3.7 seconds and a top speed of 204.4mph all delivered to a backbeat of high-level vulgarity and profligate consumption. The second-generation Continental GT, launched in 2011 and so too new really to be included here, is worth mentioning only for the fact that it would eventually be made available with a V8 engine from 2013. Insecure folk will insist that the W12 is the only engine to go for but I disagree. I found the V8 car to be an utter revelation, feeling sprightly and lithe in a way the earlier W12 cars never did. Slower on paper, for sure, but in the real world you’ll be having far too much fun to worry about the loss of fractions of a second and a few mph at the top end.
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Photos courtesy of Angus Taylor
Driving Every Bentley Continental GT ever built is extraordinarily fast and extraordinarily surefooted. You would have to be a major pratt to lose one but the tradeoff is that no one has ever got out of one grinning like a fool and shaking with adrenaline. Yet, if you adjust your expectations accordingly you’ll find it fast, cosseting and an utter joy to waft around in. They’re quiet, comfortable and a genuinely lovely place to spend time in. Drawbacks? Aside from the almost completely inert chassis, they’re thirsty. Very thirsty. The official fuel consumption is said to be around 17mpg overall but I doubt you’ll ever see anything better than 13mpg, with single digits the norm around town.
❝Aside from the almost completely inert chassis, they’re thirsty. Very thirsty.❞ electrical components located down there so don’t even consider buying a car that has any sign of water down there. The secondary battery is worth checking too. It’s there to start the car when all those toys have drained the battery after a few days of sitting idle and you can test that it’s in place, fully charged and working properly by turning the ignition key anticlockwise and holding it there for 5-10 seconds. Needless to say, a battery charger/ conditioner is a must-have piece of kit if you do pull the trigger and actually buy one.
been chavved to the max and done with the sort of conspicuous lack of taste that would have left even the original owners aghast. And yet, I quite fancy one. In the right colour and spec, and a sub-100k mileage, I could easily be persuaded to take a punt. But then as a casual acquaintance once told me, my taste in cars does tend to run to that of an unsuccessful drug dealer at times. I’d say that £25,000 should be enough to get you behind the wheel of a sub-60k mile car in immaculate condition. You might even get a short warranty too, which would help you sleep a little bit easier at night. ◗
Good, standard cars with a sensible mileage and specification sell well. They’re cheap too, especially when you consider how much they cost when they were new and the level of performance they offer. It’s not all good news, obviously. Electrical problems are rife, so be sure to play with all the toys to make sure they work. The passenger’s side footwell is a common site for water leaks, which is doubly unfortunate at there are a lot of
The early cars have dropped below £20,000 now, which could be the greatest automotive bargain of 2017. There is simply no way of going faster, more safely, for so little, assuming, of course, that you can live with the slightly awkward connotations that come with driving one. Harsh? Perhaps, but there are few better ways of showing the world your inner Wayne Rooney than by driving an old Continental. Almost every one you see has
If you are interested in investing in a Bentley Supersports car, the photos shown here are of a low mileage limited edition car that will be in The Market (the sister company of GetPatina) auction from 9th April. The Market is an online classic car auction company specialising in quality auctions for just 5% total commission – the lowest rates in the industry. See themarket.co.uk
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Elite Lifestyle • Opinion
Democracy is on life support Graham Rowan For more of Graham's opinions, visit: www.eliteinvestorclub.com/opinion
hen it came to writing songs, Leonard Cohen would not be rushed. He would start a song, tinker with it then put it away for years at a time. Out it would come again, more tweaking and maybe a second hibernation before he’d deem it ready to bring to the studio. One of the longest gestation periods belonged to a 60 verse magnus opus, ironically entitled ‘democracy’. Here’s a taster: “It's coming to America first The cradle of the best and of the worst It's here they got the range And the machinery for change And it's here they got the spiritual thirst It's here the family's broken And it's here the lonely say That the heart has got to open In a fundamental way Democracy is coming to the USA” Cohen went to meet his maker before Trump’s unlikely election victory, but he was perhaps prescient in suggesting that democracy has not yet arrived in the USA. Three recent surveys suggest the concept has taken a giant step backwards in the last decade. And not just in the land of the free and the home of the brave. Freedom House, a non-partisan independent think tank based in Washington, has just released its annual survey on the health of democracy around the world. And it’s not pretty. I quote: “Democracy is in crisis. The values it embodies – the right to choose leaders in free and fair elections, freedom of the press, the rule of law are under assault and in retreat globally. States that a decade ago seemed like promising success stories, Turkey and Hungary for example, are sliding into authoritarian rule”.
❝It’s the twelfth successive year that the Not Frees have out-scored the Frees.❞ For some years now one of my Christmas stocking fillers from Daphne has been the Private Eye Annual. The 2017 edition is the best for years, probably because there are so many politicians for Ian Hislop and co to poke fun at. One of the articles carries the headline ‘Erdogan arrests entire country’. Only a mild exaggeration for a country where Amnesty International is now officially classed as a terrorist organisation. I don’t think Erdogan campaigned on a theme of ‘Make Turkey Great Again’, but I’m ready to believe it. What I find ironic about Trump is that he speaks the language of radical change while his actions are straight out of the Washington Elite Self Interest manual. About the only thing he’s achieved is the trillion dollar tax cut which will mainly benefit his rich buddies in Goldman Sachs, while the country is in the process of meltdown thanks to the failure to agree a budget. His unbridled enthusiasm for autocrats like Vladimir Putin has emboldened others to abandon any pretence of ruling ‘by the people, for the people’. If America won’t defend democracy, why should we worry about it? The report does not sugar coat its contempt for The Donald – ‘He has cast off principles that have guided US policy and formed the basis for American leadership over the past seven decades. The past year brought further, faster erosion of America’s own democratic standards than at any other time in memory’. For the first time since they began their Freedom Index in 1972, around the same number of people are living in countries
ranked Not Free as those whose country is classed as Free. In 2017, 71 countries saw a significant decline in civil liberties and political rights, against 35 that registered gains. It’s the twelfth successive year that the Not Frees have out-scored the Frees. America, China and Russia are high on the watch list along with Saudi Arabia, Pakistan and Hungary. The UK scored an impressive 94%, level with Germany and slightly ahead of France. In comparison, as Russia heads towards another five years of Putin dictatorship its Freedom Index score is a pathetic 20%. Jeremy Corbyn’s model for socialist utopia, Venezuela, showed one of the biggest declines in freedom as increasing state control removed more civil liberties and hyper-inflation reduced its citizens to penury. Expect the same in Blighty if naïve millennials vote him into Downing Street any time soon. The honour of the biggest fall from freedom inevitably goes to Turkey – hard to believe they were a serious candidate to join the EU until quite recently. With democracy in decline and nationalism on the rise, you have to wonder where it could all lead. In a private conversation with a well known speaker, I recently asked that very question. His chilling answer? ‘I think we’re on a slippery slope towards a major war’. We desperately need powerful, visionary and persuasive advocates for democracy and human rights. Where can we turn to find a 21st century JFK, Churchill or Martin Luther King? Today’s leaders seem so shallow and self-serving in comparison Something to contemplate over your corn flakes. ◗
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Elite Lifestyle • Arts
How to Invest in
FINE Aidan Meller
uspicions of an art bubble were laid to rest when markets rallied after the financial crash of 2008, reaching record highs in 2014. With blue chip artwork getting ever scarcer as new museums scramble for top works, prices look set to skyrocket in the years ahead. But not in all areas. As the art market extends its reach from Indonesia to China and Brazil to Qatar, new investors are taking the top lots at auction, and unknown names are the ones making headlines. It’s clear that people are beginning to listen when economists claim that art can outperform the stock market. Mainstream financial portfolios increasingly include art as an alternative asset, as a method of diversification, and a way of handling tax. The relative immunity of the art market to the financial straits of this rocky period after 2008 may have proved that art could be a perfect tool for diversification. But, I hear you say, it’s notoriously risky in other ways. With a lack of pricing data, fakes and forgeries, notorious insider trading, volatility and a thin and illiquid market, who would risk it? The answer is that few should risk it alone. But, with expert opinion, investors can use precisely these inefficiencies of the market, to their advantage. And what expert opinion needs is a foot in both camps: the world of finance, and that of art. I’ve been a gallery director and collector for over 20 years as well as having several other alternative investments such as property and rare books. The truth is that 95% of artwork on the market is uninvestable and my mission is to educate investors about how to find the 5% that are big hitters. My aim is to explain what I’ve learnt from practicing art investment for over twenty years and in my talks I aim to provide would-be investors with a basic guide for investing with confidence. The first fear that needs confronting is 'fakes and forgeries’. Yes, the malicious kind do exist – as do the simply mistaken kind.
The good thing is that you can cover yourself with a basic understanding of art authentication systems. And, speaking of ‘authenticity’, although there’s no confusion about the meaning of the term now, it didn’t used to cover artwork in reproductions – etchings, acquatints, engravings, and the like. Although we can call reproductions ‘authentic’ today, that special ‘something’ that an artwork has is as important as ever, and can be vital for investment potential. However, there are, of course, exceptions to this rule, too. You can find these by thinking about the importance of the artist and of each specific reproduction. Individual prints by Picasso for instance – and especially signed ones – are being snapped up so quickly by museums that they’re actually becoming very rare, and prices have soared. Works from The Saltimbanques Suite (1904-05) have reached seven figures. It’s not just that Picasso was only twenty-three when he made them that makes them valuable. They come from the so-called ‘Rose period’, which his maybe the trendiest few years of Picasso’s entire career. Though perhaps counter-intuitive, following the money and buying the most expensive, most popular artists is actually normally a great investment decision. That being said, it’s also important to keep your eye on the slightly less ‘recognised’ works. These, for Picasso, are his late works. That the maligned late works of important artists have tended to become ‘recognised’ as valuable later on can bolster your confidence on this point. Lampooned in his day, late William Turner is today used to credit the artist with the development of Impressionism. Once mocked as the sloppy productions of an old man past his prime, these works (much like Monet’s late waterlillies) are now the crème de la crème of the auction block. In fact, Picasso’s late work has something of the same freedom and unrestrained expressive energy of a late Monet or Turner.
Disclaimer: Information provided in these art talks and related materials is general in nature and does not constitute financial advice.
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Biographical as always, Picasso’s late work reflects his new situation, living with his new muse, Jacqueline Roque in the quiet rural region of the Mougins. Here, far from the flashbulbs of Cannes, Picasso takes on his most mythic guise. Frequently barring Jacqueline from his house, he immersed himself in work, producing such prodigious quantities that his printer and great friend – Aldo Crommelynck – routinely resorted to working nights to keep up with him. Aldo, in fact, was one of the few people to be welcomed into Picasso’s private life in these later years. With his gaunt frame, piercing eyes and long, spindly fingers stained with ink and nicotine, Aldo was as eccentric as he was passionate. Attracting the likes of Leger, Rouoult, Miro, and Matisse, Aldo’s technical brilliance and instinctive understanding of an artist’s intentions had seen his business boom. For Crommelynck, however, it would seem that only one man mattered. Packing up his practice in the city and opening the ‘Atelier Crommelynck’ near enough to Picasso’s house to carry prints back and forth through the night, Aldo dedicated their entire practice to Picasso. This etching above, currently available at Aidan Meller Gallery featuring a dedication by the artist to Aldo, is testament to the fruitful collaboration between the two men. Amusing and lively as ever, and punning on art historical references, with ruffs and formal poses that suggest portraiture of elite patrons, the piece is undeniably by the modern master. Immediately recognizable as an example of this prolific period, the etching encapsulates Picasso’s preoccupation with artistic production through the iconic subject of the model and artist. For more information about art investment go to eliteinvestorart.com or come along to my talk ‘Making Money in Art’ at the Elite Investor Club’s event at the Royal Academy of Arts on April 25th. ◗
Elite Lifestyle • Food & Drink
Wine as a T
he fundamentals of fine wine investing come down to two factors: supply and demand: as fine wine matures and improves with age, it becomes more desirable – and therefore valuable – over time, while the consumption of fine wines increases the rarity of certain vintages, pushing the price up as more investors seek out fewer bottles. And the situation is compounded by an ever increasing global demand for this particular asset. In fact, international banking firm Morgan Stanley has published a report on the status of the global wine market, concluding that a worldwide shortage of wine is imminent. Demand is already exceeding supply, and in 2012 the shortfall amounted to some 300 million cases. Their statistics show that global wine consumption has been rising steadily since 1996 – except for a modest fall between 2008 and 2009 in the wake of the financial collapse – and currently stands at around 3 billion cases. By comparison, total production is estimated at 2.8 billion cases, despite global wine production reaching a seven-year high in 2013.
❝Some producers of grand crus in Burgundy make only one or two barrels in a vintage.❞ 10
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Passion Asset Supply and Demand & Determining Value
The system of various Appellations d’Origine Contrôlée (AOC) strictly limits which wines can be grown and where, and how they are classified, which also restricts the volume available – there are no more grand cru vineyards to expand into in Bordeaux, for example. The same applies in Burgundy where grand crus and premier cru vineyards are fixed and limited in size, and so some producers of grand crus in Burgundy make only one or two barrels in a vintage. In fact, in the 20 years to 2011, production in the great estates has been flat to down, a phenomenon which has been compounded by the fact that producers have become more quality conscious. With the best vintages
historically providing the best returns, and the increasing transparency of the market with information on tastings and critic scores evermore easily accessible, it would seem that producers have recognised how essential it is to maintain and improve the excellence of their brands. Indeed, according to the Wine Institute, wine production in France, the biggest producer of fine wine, dropped by 12.52% in the years from 2009 to 2012. This means that the best wines are highly restricted in supply and face increasing demand, which has pushed their value ever higher. The price of a fine wine can be affected by a number of factors, well beyond the simplicity of it being heralded as a good vintage from a reputable producer.
The market is constantly evolving; more information is available to collectors than ever before – including a wealth of statistical data – upon which to base purchasing decisions. At Cult Wines, we consider the following criteria to be a minimum benchmark by which to judge a wine’s value and investment potential. • • • • • • • • • • •
Brand Producer History Vintage Quality Critic Score Vintage Production Supply (availability on the market) Historical price performance Comparative price analysis Market Trends Drinking Window Scheduled re-scores
The degree of importance that we place on these differing criteria varies, but are all vital in building up a picture of a wine’s investment merit. By combining both quantitative and qualitative analysis we are able to determine where there may be an opportunity to buy an undervalued wine or one which is in line for price growth, and by understanding how each of the criteria can impact upon a wine’s price evolution our specialist advisors can determine which wines are best suited to your personal portfolio. ◗ Article courtesy of Cult Wines Ltd. For a free copy of their new 2018 investment guide ‘Learn how to Profit from Fine Wine Investment’ please go to: www.wineinvestment.com/elite 11
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Elite Lifestyle • Money
The 3 Phases of Emerging Technologies… The Standard Bubble Wave… And why $10T is when Siam starts to get nervous
t’s important to note that although you’ll hear a lot of people saying things like Blockchain is the new technology behind Bitcoin, that’s not exactly the case. Blockchain tech or Distributed Ledger Tech (DLT) has been around for decades now. So really, Bitcoin IS the new technology that happens to use a Blockchain. In any case, when you have a new disruptive technology out there such as Cryptos, they tend to flow through three main stages.
The Punt Phase This is when something bursts onto the scene with visionary potential, just like when Bitcoin and its Whitepaper was released in 2009. Although it was a revolutionary moment in history, Bitcoin was well and truly in the Punt Phase. This is basically when a new tech emerges but we have no idea whether it will last 2 minutes or 2 years. As such, only the Pioneers and super Early Adopters will begin playing with it. Good examples of techs that never transitioned through the Punt Phase was Betamax, HD-DVD and Virtual Reality. Although VR is now making a rapid comeback 20 years later! During this phase the prices are volatile and it’s such a high investment risk which is why institutions and the Big Money won’t give it the time of day and people generally dismiss it as a fad. Just like the Internet back in the early 1990s! Or the invention of the internal combustion engine car back in the day. Bitcoin was in this phase from 2009-2016.
Speculation Phase You then have the Speculation Phase and the defining moment for a tech to enter this second phase is when there’s a tidal mindset shift towards it and the whole environment realises that this isn’t
a fad after all and that it’s 100% here to stay. As such, the Early Adopters pile in trying to accumulate early market share, capital pours in and innovation takes off! Bitcoin and Cryptos as a whole entered this phase around mid-2016. Here you’ll get the most explosive of price action and air time on the media as a result. We saw a prime example of this around 1996 with the Internet and it was suddenly off to the races with tech start ups raising silly money with no real plan or team. Ultimately this mad rush ends up with a big popping of the bubble (The Tech Bubble Crash of 2000/01) but believe it or not, it’s actually a healthy process for the technology. Due to the crazy amount of capital and talent that is attracted to it, you normally see the fastest improvements. The public obviously comes into pop it, but this is good. The big tree shake only leaves the proper companies left in the market. This is when the Tech strolls into the Established Phase.
Speak to most Fund or Pension Managers now about investing in Bitcoin and they’ll laugh at you like an idiot. They’ll say you’re hair-brained and delusional. But give it time, eventually all Funds will have an allocation and the whole of Wall Street will have spun their spider web of financial instruments in order to skim off their commissions. Things like Futures, Options, ETFs and other derivatives.
Understanding the Bubble Wave
The Bubble has popped. Everyone is now aware of it, the public have no doubt been burned by the bubble but it’s now an established Asset class or mainstream tech. Even though after the Tech Bubble the Internet industry was decimated, all of the crap and scams and Ponzi schemes that was leeching of it was burned off and what was left was an open sky for the technology and a bit more regulation from the authorities. Cryptos aren’t here yet and unfortunately everyone needs to get burned by the popping of the bubble before they enter the Established Phase. When Cryptos enter this, it will be a mainstream investment asset class which institutions will have a portion of their capital in.
Over the years, Bubbles have fascinated me to the point where I’ve become a bit of a historian of Bubbles as these phenomena will happen in any market for as long as humans exist. But the key thing for you to remember here is that despite the nature of Bubbles and that a lot of people invariably get burned, they present 3 of the greatest personal wealth building opportunities out there. Profiting as it enters exponential growth, shorting it (profiting as it falls) when the arse falls out of the market and then profiting from the slow but beastly rally once the devastation has settled. For example, would you like to go back in time and buy Apple and Amazon stock in 2002 during the aftermath of the original Tech Bubble crash? I know I sure as hell would!
So those are the 3 Phases to be aware of. Right now, we are in the Speculation Phase which sees the craziest of action and hype. It’s actually the phase I like to enter into an asset because I know it will survive and is more like VHS instead of Betamax. Also, the greatest possible gains in the shortest period of time are within this Phase. But don’t kid yourself, it’s ALWAYS one hell of a rollercoaster ride! Something definitely not for the faint hearted! But don’t let this volatility deter you. This is why you should apply some Risk Capital to this and then just sit on it.
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Return to 'normal'
Greed Bull trap
Media attention Return to the mean
First Sell-off Bear trap
So this is The Standard Bubble Wave. You have 4 distinct phases. 1. The Stealth Accumulation Phase where the Smart and BIG Money, the Billionaires and visionaries identify an undervalued asset and start to build up a position. For example, Billionaire Bunker Hunt in the 1970s feared the decline of the Dollar and started buying up physical Silver at around $6 per ounce. He bought so much that he effectively cornered the market and by 1980 it had spiked to $49.45. 2. You then have the Awareness Phase where other sophisticated investors pick up the bread crumbs left behind by the Big Boys and also identify the undervalued asset. So they start to pile in. At this point you’ll eventually see a nice increase in prices towards the end of this Phase and it’s this increase which acts as a Batman light in the sky for the general public. In terms of other assets being in the Phase, Cryptos are now towards the end of this and also the super material Graphene is early on in this Phase. Graphene is just 1 atom thick, tougher than any metal, more flexible than anything. It’s so strong that it would take the weight of an elephant on top of a drawing pin to pierce a sheet of Graphene the thickness of cling film! But before you get any ideas, it’s way too early to invest in at the moment. There’s no proper killer commercial application for Graphene yet and they’re still figuring out how to make it at scale.
Source: Dr Jean-Paul Rodrigue • Department of Global Studies & Geography, Hofstra University
3. You see the Public are always like a moth to a flame. They will see news articles about great returns, friends getting rich and a massive pang of FOMO kicks in. Fear Of Missing Out. This is when they then start to flood in. So the 3rd Phase is the Mania Phase which I actually prefer to call the Media Phase. A large reason why the public are ploughing in is no doubt due to the Media and Social Media. We saw this in the run up to the Sub Prime Mortgage Collapse in 2008. As depicted by the amazing book/film, The Big Short, in the US, strippers had whole portfolios of properties yet they didn’t understand a single thing about the mortgages they were on! Cryptos are tip toeing into the Mania phase now but it’s currently being held back by an abundance of scams, exchanges crashing and fake news. Once the exchanges get their shit together and the whole User Experience becomes WAY simpler, as in simple enough for your Aunt Doris to buy Cryptos, that when we’re off to the races! 4. Then you have the Blow Off Top or Dissipation Phase. It’s pretty evident what happens here. Basically a lot of people get financially and emotionally wrecked. Right now Cryptos are making the Early Adopters lots of money and I believe it will pop around mid-2019. Well, if I had to give my best guess it would be around mid-2019, but a better
gauge to use would be market cap. As it stands, the Crypto Market Capitalisation (all the money that is flowing around this open market) is $650B. When you compare this against the rest of the world main markets this is tiny. Cryptos are $0.65T, Gold is $7T, Global Stocks are $70T, Global Bonds are $100T and the Currency market is the big dog at $1.4 Quadrillion! That’s $5T per day! Cryptos really are insignificant at the moment. My personal Crypto portfolio grew from $25k to $1.1m in the space of 4 months when the market cap shot up from $130B to $650B. This is happening to people across the globe. Imagine what will happen when some breadcrumbs fall down from the Stock and Bond markets? A few Trillion would barely make a dent in them. Lastly, the thing about The Standard Bubble Wave is that this applies to all bubbles. Whether it’s Cryptos or Wheat futures. Bubbles can happen anywhere and everywhere. Right now the Crypto bubble isn’t the only one kicking around. We have a Motor-loan Bubble, Student Debt Bubble, Sovereign Debt Bubble, Pension Bubble, Currency Bubble, Bond Bubble, Stock Bubble and Personal Debt Bubble. In fact, there hasn’t been a time in human history with so many concurrent bubbles and the exciting prospect is that all it takes is just one bubble to pop which will initiate a chain of events that may pop every other bubble. ◗
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Elite Lifestyle • Health
A Good Way to Lose the Beer Belly Paul Watson
ollowing on from our article last month about The Juice Master, Jason Vale, we tracked down club members Paul and Carol Watson to tell us about their own personal experience of juicing, and also how they got involved with Elite Investor Club. Paul has recently become an ambassador for EIC, so you’ll see him at many of our future events and can have a chat with him about wealth or health as you like! Over to Paul… “We’ve been Elite members for about 18 months now and we run a successful property business, but how did it all start? We were both corporate career people – Carol worked at NatWest bank, and I worked for a number of Bluechip FMCG companies including Gillette and Procter & Gamble. Through my career, we had the opportunity to live and work in Europe, and so became ex-pats for 13 years spending time in Frankfurt, Geneva and Dusseldorf, before returning to the UK in 2010. In late 2013 after a redundancy for me (I was then the main income provider for the family), we decided to turn our focus to a “lifestyle business” and in early 2014 began building a property portfolio. It was not just any Buy-to-Let property business though. We joined a franchise (Platinum Property Partners) which specialises in coaching, mentoring and support to build a portfolio of Houses of Multiple Occupation (HMO’s) for young professionals. That is how Elite connected with us... In the autumn of 2016, Graham Rowan was working on his TV series “Make Your Money Work” and one episode specifically focused on Property Investment. In the light of Clause 24 Tax changes, and some considerable landlord bashing by the media in recent years, Graham has on a number of occasions talked about the
“death of Buy-To-Let”, and particularly amateur landlords. Graham’s view, which we both agree with, is unless you have a specific strategy to follow, making a significant income from property is becoming increasingly difficult. Now, four years after joining the franchise, we have implemented its successful model, and built up a Surrey-based portfolio providing a six-figure income from our property business. Graham had contacted the franchise, who put him in touch with me and we filmed a piece for the program at two of our properties. I was then connected to Graham, and to the Elite Investor Network. Like Graham, as an individual who has in the past been burned by IFAs and the stock market, I was already taking responsibility and self-control of my financial affairs. We have set up a Director’s Pension (more at elitepensions. org) and are now trustees of that pension, allowing us to make investments in the “alternative investment market” including some of the projects that EIC offer. The filming took place on 27th October 2016, and when ‘Make Your Money Work’ went live on Sky in January 2017, we watched it with interest. Naturally, the content of property, and making our money work was of interest, but something else was triggered by the program. The appearance on TV made me more aware of how I looked to others, and that I needed to shed a few pounds! Around the same time in January of 2017, the National conference for our franchise business took place. There were workshop sessions about franchise partners enjoying a semi-passive income, having a good lifestyle businesses, achieving work life balance etc. While there was a focus on wealth-building,
there was also discussion about the need for health to enjoy the wealth. There was an interesting and motivating talk at the conference by Richard Davies, one of the Franchise principle shareholders, about healthy eating and in particular, juicing. Carol had always been quite active and is passionate about dance. She has been a member of her local Gym since returning to the UK in 2010. But this was the aligning of the stars to really take action, and get both of us onto a more healthy focus for our lifestyle. We were introduced to the concept of Juicing – consuming large amounts of healthy fresh fruit and vegetables in a juice, or smoothie format. Drinking the juice allows all the nutrient goodness to be ingested faster, and means you can consume far, far more goodness than you could ever hope to eat. We were advised to try a 5-day juicing regime – buying the juices online which are delivered frozen to your door. For our first order we also received Jason Vale’s book about juicing. He advises to read the book before you start, so that you are mentally prepared for the detox your body is about to undertake. Removing toxins like sugars, caffeine, and salts can do amazingly positive things to a body, and it helps if you know what is going to happen before you start… Most people take three days to detox, and you may feel rough for 24 hours as your body adjusts to life without the previous ‘bad-stuff’. By Day 4, you are on the up again, and feeling great, energised, sharper and more focussed by Day 5. We also recommend watching the films “Super Juice Me” and “Fat, Sick and Nearly Dead”. They have opened our eyes to the value of nutrition, not food in a diet. Over the last year, we have made an effort to change a number of things in our life style…
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Jason Vale (centre) with Paul and Carol Watson
• M uch more fresh fruit and vegetables – mainly drunk as juices and smoothies. • Eat more salads, and meals with freshly prepared vegetables. • Less red meat. • We used to drink a reasonable amount of red wine. This has lowered, and we now enjoy more Gin and Fever Tree. • Exercise has increased. We started simply, by having a walk every morning initially for 30 mins, then after a month, increased it to 45 mins, then after another month up to 60mins. We found it quite easy, and with the combination of the exercise and the juicing, we had far more energy. Consequently setting the alarm 30, 45, and 60 minutes earlier in the morning was not hard to do. We now have the alarm set for 6.00am every day, and having done our walk, or gym class, or workout by 7.45am. Breakfast (a Juice), shower, and the ‘business day’ starts for us around 8.30am. There is no doubt that having someone to ‘keep you on track helps’; a partner, significant other, or just friends. In our case, we both wanted to lose weight, and get healthier. Of course there are days when you are tired, have less time or are less motivated to do exercise. But that is when your partner/friend or accountability buddy can help. One of the best bits of advice we were given, and would give to others is: You must enjoy doing whatever you are doing for your healthy lifestyle. If it is not enjoyable, you will not make it a habit, and will not want to keep doing it over a long period. So if the gym is not for you, pick something that is; walking the dog, playing tennis or cycling. Through buying Jason Vales frozen juices, and reading his books and magazines, we became aware of Juicy
Oasis. It is a heath resort in central Portugal owned and run by Jason Vale and his team. Luckily, we had the opportunity to visit Juicy Oasis in February this year. Our week at Juicy Oasis, was a truly awesome experience. The week had been organised by Steve Bolton, the founder and chairman of Platinum Property Partners, who has also been a personal mentor to us. At Juicy Oasis, you are on a juicing detox regime. With 4 juices per day for a full week there is no ‘solid food’ in sight. In cooler months, they swap the evening juice for a freshly made delicious soup. Each day began with Yoga at 7.00am. (I had always been sceptical about yoga, but thoroughly enjoyed the experience, and now agree it is a great way to wake the body up and get it going for the day.) Then after a quick ginger shot it was off for a 5-10K walk, through forests and hills. Back to the hotel by about 10.30am for a breakfast Juice. The day’s other activities then began in earnest consisting of: Beach Volleyball, Spinning, 5-a-side football, Jason’s own version of handball (called Throwball), stomach core exercises, and our most favourite of all, Rebounding (Me too. Graham and I used to be the UK importers of Needak rebounders – DR). Doing an exercise routine to music, whilst bouncing on a mini-trampoline. It took a couple of days to master the technique and be confident you were not going to fall off, but from the Tuesday onwards we smashed it! To complement all these activities, the resort itself has many treatments to choose from, ranging from a Cryogenic freezer to colonic irrigations and a range of different massage treatments. In the Spa treatment area you also have indoor and outdoor hot-tubs. There is an amazing large sauna – which can comfortably accommodate
8-10 people in at a time, with a glass wall, offering the most panoramic view of the hills and forests across the wide flowing river. Beautiful. When you are cooked and need to cool down, their infinity design swimming pool is deliberately kept at three degrees to allow you the hot sauna to chill down experience. Jason joined us for the full week. He is an amazingly funny person with a personality that can only be described as a cross between Norman Wisdom and Lee Evans. A lover of 80’s music, Jason led many of the spin classes, and rebounding sessions. He also shared his awesome knowledge about nutrition and juicing and gave us a masterclass in juicing techniques, tips and tricks to make juicing and smoothies varied, interesting and healthy. Since returning from Juicy Oasis, we have actively incorporated more juicing and heathy nutritional food into our diet, and upped the exercise, by joining our local gym. Without question juicing and what we have learned from Jason Vale, and the experience of spending a week at his retreat has set a course for us to have a healthier (and therefore happier) future. We cannot overstate the impact juicing and Jason has had on our lifestyle over the last year, and how much of an important role it will play in our future. Over the last 12 months I have lost 15kg, and Carol has lost 8kg. One of the best bits of it all, is all the new clothes that we have had to go out and buy. Carol is down two dress sizes, and I now has the pleasure of choosing ‘slim fit’ shirts. I never thought that would happen. For more about juicing or Jason Vale, visit www.jasonvaleofficial.com. Or feel free to contact us either through EIC, or at firstname.lastname@example.org or email@example.com ◗
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Elite Lifestyle • Stories
From Children’s Home to Financial Freedom with a little help from Leonard Cohen…
A recent comment by Graham about the late singer/songwriter Leonard Cohen struck a chord with one our investors in Scotland, Jim Aitken. Jim felt that the quoted passage from Cohen’s Democracy song could still be prophetic in America’s evolution to ‘Genuine Democracy’, since he wrote with vision from the heart about what he thought and saw was past, present and future. However, Jim recalls the influence that Cohen’s music had on him when he was younger. Not only that but Jim’s story reinforces how anyone, no matter what their background and circumstances, can become a savvy investor…
rom the age of one, until I was sixteen, I had been in Residential Care in various children’s homes around Scotland, apart from two years repatriation with my mother and disastrous choice of a step father (whom I never saw again), and a short spell with foster parents. The last establishment, run by the Church of Scotland, which had been my home for six years, was run by a superb couple who tried to create a family atmosphere for the 20 plus children in care who had come from broken families of varying problems. The media is full of stories about historic child neglect (and worse) in places of care, so I am delighted to break the mould. The couple’s caring influences helped form all the children’s attitudes, outlook and lasting habits in life. Whilst there, we were all encouraged by my ‘Uncle’ to save regularly, however little, from our meagre, weekly pocket money into our own Post Office savings account. At ten years old, I agreed it was prudent to save, but hadn’t a clue what I was saving for. I just went along with it and I didn’t miss the small weekly hit. Although I must admit I did feel the satisfaction of watching my savings grow and reach various milestones, however small. Children in a care environment rarely got the chance to own and keep something personal to themselves. However, an opportunity arose for me to do so. I mentioned offhand that my friends all had bikes at the local park, whereas I had to walk or run everywhere. I was advised that I could buy my own bike from the
money I had been saving. It had never occurred to me that my savings were there to buy something for myself… What a new feeling it was to dip into to my accrued ‘Penny Pot’ for the £4 readies to buy the standard green, all steel, Raleigh bike from a friend whose parents had bought a brand new racer for his birthday. The great thing was that I still had an amount left in my account! My “Tank” and I were inseparable! (See photo on page 18) With pannier bags attached, it transported me to a scout camp in Northumberland and back no problem, albeit at a snail’s pace! I had great use from it for a couple of years, but in a weak moment, I was persuaded to give it to a lad who could not afford a car to get him to his work. Not good business; but it was a good thing to do. Meanwhile, back in the home and the Superintendent taught me to play the double bass and we had great times playing at ad hoc events. Having access to Jimmy Shand and Classical music LPs helped make these enriching, happy and carefree days. The lively music and free expression for the first time in my life, gave me contentment and security. As a teenager, I raised money for extras, doing the usual teenage jobs – delivering papers and lemonade and as a butcher boy on Saturdays. I was still encouraged and committed to weekly saving, but still had no idea what I was steadily saving for – by now it had become ingrained into my psyche. Not many kids from an upbringing in care go to university and I was no different!
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By the age of twelve, I had attended nine schools. There was no Learning Support in schools at that time, to enable me to catch up or fulfil potential, so I was not expected to progress to Tertiary Education. I was advised it would be in my best interests to look for a trade; which I did, successfully securing an Engineering apprenticeship with a large local company. Unfortunately, after a few months working, I was told I was too old to stay in the Church of Scotland Children’s Home. The newly appointed Superintendent quite bluntly stated that I had to leave the place which had settled me, and become my first real home. No Local Authority help in finding a place to stay was offered. Luckily a work colleague knew a lady who had a spare room, so I moved into digs locally, then on to a private let of a small studio room with shared toilet in the entry. I was not in control of events – merely reacting to what was thrown at me, with no idea where it would all lead. Life was becoming a challenge and I had to wise up fast! Surviving on an apprentice wage for four years was a constant juggle as to what were to be my priorities each week. I needed every penny to cover all living expenses; from transport, meals, clothes, laundrette, clubs, etc. Fortunately, the “Saving” seed had been planted, and I duly arranged with the wages office (from day one) for a percentage of my wages to be put into a bank account. I exercised one of my maxims that, “What you do not see, you do not miss!” and “Save regularly, however little”. Although not earning much, with every wage rise, I always increased my savings input. It was painless and fruitful!
❝I realised that financial acrobatics are possible to the initiated few! ❞ Realising that I was completely independent and had no financial fall back position to rely on, I had to create my own security for the unexpected and rainy days, which would definitely lie ahead. I just accepted that I was different from my friends who gave their parents a token amount towards their upkeep, but were still financially supported for fashion, cars, social expenses, holidays, etc. Proudly, I was never in the red and from a situation of having less money than my peers to survive on, I was grateful my basic practices helped create the healthier bank account. I didn’t feel very buoyant, with no obvious (status or financial) progression on the horizon in the foreseeable future. Reality hit that it would take years until I could afford the usual trappings of a car and house that everyone else but me seemed to have. Unfortunately, friends knew I had savings. One such friend was given a ‘Loan’ to buy a car which ended up being a ‘Gift’ since he never again referred to it. Another, who kept his debt from his wife, swore me to secrecy on his ‘Loan’. Both apparently suffered amnesia or translated the word ‘Loan’ into ‘Gift’, and our close friendship dissipated as fast as the money. Meanwhile, I was learning that ‘Living in a room’ is fine as a haven and somewhere to rest your head, but could be a dour place in long spells alone, in bad weather, on Sundays or if you are ill. Surviving on the basics was priority!
I did not realise at the time, but my enjoyment of music had ebbed until one day a friend asked if I had heard Leonard Cohen. His sister was an air hostess, who was introduced to his music on regular American stay overs. She brought his first two LPs over before they were released in Britain. Because of my situation, I thought it ironic that one was called “Songs from a room”. He had written them mostly whilst living in a simple room on a Greek Island. The other was “Songs of Leonard Cohen”. Both are classics and a good starting point if anyone wants to dip their toe in his most enduring material. I was not into Pop Music and the Top Ten, so his relaxed performance, simple melodies, message and easy listening appealed to me. A loan was agreed and I played them religiously. I had recently bought a £4 record player from a friend who had run out of food and money halfway through the fortnight his parents were on holiday abroad – the poor soul was never taught prudence nor even had an account of his own to rely on. Leonard’s style suited my mood, although you had to decipher his lyrics at times. I got to know his songs, word for word. To me his unique, relaxed delivery resonated with my circumstances and gave me a lot of pleasure in ‘my time’. Cohen freely admits that he was not a great singer: saying that he was a poet, who was encouraged by his producer to sing his own songs as only he could. He was unfairly cast as a ‘Razor Blade’ case by the ignorant few who were untouched by his talent. →
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Elite Lifestyle • Stories
It took media exposure of Alexandra Burke singing his song “Hallelujah” on The X Factor to bring his undoubted talent to worldwide prominence. I’m proud to be one of the first to appreciate his seemingly effortless and unique gifts which were eventually acclaimed by most. I have read many fan’s tributes who were similarly lifted by his music. To me, Leonard Cohen was ‘My Friend from a Distance’, who helped me through testing times. I think we all have, and need, a personal something which lifts our Mojo. I still took pride in prioritising expenditure, and did not buy anything until I could pay up front. I lashed out for an old BSA motorbike to get me to work. I loved its sound and smell! Needless to say, holidays were not on the menu, apart from a week’s Scout Summer Camp as a Leader. Budget not able to cope with full driving lessons, I asked the Instructor for half lessons. He quizzed my circumstances and agreed half lessons during his lunch break on Saturdays: They always ended up the full hour. I learnt that if you want a bargain, ask for one but a sob story helps, if you are convincing enough! After my apprenticeship, I secured a job making machines in Jersey, then on to the Merchant Navy for a couple of years. All the time I was saving, but ignorant about investing for a more favourable rate of interest! When I got married, at least I had the deposit saved for our first flat. Continuing saving allowed us to upgrade four years later to where we live now. We paid a knock down price of £13,500 and it is worth around £200,000 now. At the age of 29, I had harboured the notion of becoming a teacher. Appraising our financial commitments, and with a child on the way, it was obvious that we could not afford for me to give up my job for full time study. My wife argued that if I did not do it then, I probably never would. For once, I listened to the Oracle! However, after a year studying, we didn't just end up in the red – it was flashing ‘Belisha Beacon’ territory!
Our bank manager called us to a meeting but would not alleviate our financial situation regarding mortgage payment reduction nor extension. We were allowed basically an open–ended overdraft with increasing monthly Interest payments for two years. So much for the ‘Friendly and Helpful’ bank manager! Two years after qualifying as a teacher, and exercising strict fiscal measures and frugal living, we had not managed to reduce our interest debt in the slightest. I decided to re-mortgage our property to include double glazing and the overdraft was gone, at the expense of a slightly longer payment term. I realised that financial acrobatics are possible to the initiated few!
We now started to accrues savings from increasing disposable income. I dabbled in shares successfully and reinvested all dividends in a variety of companies I followed. Most selections were fruitful and steadily increased the portfolio value. However, my first share was a tip from a friend whose Tech company’s stock was only rising! Yes, it went belly up during the Dot Com Crash (Tell me about it! – GR GR). About eighteen years ago, I explored other forms of investment, of which hotel rooms in English resorts and French Leaseback Property interested me due to their passive nature of regular return, bricks and mortar and uplift on maturity. I was still to take my first investment step. Total procrastination took place, but this is how I came into first contact with Graham… I wonder how many of his original French Leaseback followers have progressed actively with him now! Nearing retirement, I needed to exit the insecurity of shares. Passive income seemed the most remunerative, alternative way forward. I am invested through Graham and elsewhere, and constantly consider the next ideal opportunity for maturing funds. My portfolio is diversified now with interests in shares, hotel rooms, care homes, property bond loans, silver, housing in Romania, timber, cemetery plots, VCTs, Nordic engineering and special care centre. It may end with a well-diversified portfolio, but it all starts with the discipline of saving. If you can live within your means and save the rest, that’s the cornerstone of creating wealth. At the risk of sounding like an old fogey, I’m not sure the millennial generation gets it! ◗
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Elite Lifestyle • A-Z of Investing
e’re racing through the alphabet in the A-Z of investing now. This month we reach the letter O and it’s one of those financial instruments that can supercharge your returns in either direction. Because O is for Options. What makes options so powerful is the concept of leverage. You pay a small sum of money to buy the right, but not the obligation, to buy or sell a particular asset at a given price on or before a given date. It’s most often used in the context of stocks and shares, but you can be far more creative with options than that. Take the property market for instance. You could see an investment property you really want to buy, but all your money is tied up until an endowment policy matures in three months’ time. You could negotiate an option to buy the house for £300,000 on or before September 30th. You agree a premium of £3,000 for this option. During those three months lots of things could happen. Maybe they discover oil in the back garden and the land is now worth £1 million. You have a binding contract with the right to buy for £300,000 so you trigger the option, sell it to the oil company and trouser the £700,000 difference. Alternatively, plans for a Cross Rail station show that the home will now have a railway line ten feet from the
back garden and a multi storey car park overlooking the bedrooms. You can simply let the option lapse because, although you had the right to buy, you didn’t have an obligation. OK there’s a £3,000 loss to take on the chin, but compared to paying three hundred grand for a worthless white elephant it’s a ‘get out of jail free’ card. The point is, a mere £3,000 stake put you in charge of a £300,000 asset for three months. That’s leverage. In this case we had a buy option which is referred to as a ‘Call’ option. The other type is a ‘Put’ option, where we have the option to sell an asset at a certain price on or before a certain date. The call is effectively a long position where you hope prices will go up, while a put is a short position where you’re betting that prices will go down. The amount you pay for an option is the premium, and the actual price that would trigger the option is the ‘strike price’. Your call option is ‘in the money’ if it’s above the strike price, while a put option is in the money if the price goes below the strike price. Why do people use options? Two main reasons. The first is speculation. If you believe there’s going to be a strong movement of a price in a given direction, the leverage of options means you could add an order of magnitude to your profits. Imagine the fortunes that were made with put options as the oil price collapsed in
late 2014. Or if you bought call options in Apple just before the announcement of a new wonder product like the iPhone. Equally, get the call wrong and you’ll lose ten times as much as if you’d just bought the shares. That’s why you should only speculate with money you can afford to lose and preferably after having training from people like Marcus de Maria and Siam Kidd. The second use of options is employed by many sophisticated investors and it’s called hedging. This is more like an insurance policy. Let’s say you make your main investment in the shares of ITV because you think they are undervalued and likely to rise quickly. But, just in case you’re wrong, you take out put options that will be triggered if the price falls. Either way, you can make money IF there’s a significant price movement. This strategy is less successful if the price just stays flat. A final use of options that I’ll mention to any business owners reading Elite Lifestyle is employee stock options. That’s an off market transaction between employer and employee, giving the staff member the right but not the obligation to buy shares in the company they work for at an agreed, usually preferential price. A great way of aligning everyone’s priorities. As you become more experienced in investing, I’m sure there’ll be a place for options in your trading strategy. ◗
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