The colourful language of money

Money-to-burn

The financial masters of the universe employ a varied narrative to describe their activities. On the one hand there are their wildly over-optimistic, it's a sure thing type of statements ("Save with us for a lovely nest egg for a rainy day") which makes one feel that all that they touch will turn to gold. And we know where that has led. On the other there are the heavily mitigated statements they feel obliged, or are compelled,to attach to everything they say: "Past performance is no guide to future performance. The value of your investment may go…blah blah". Neither seem to adequately capture either the reality of what usually happens and both obscure the role they play in what happens, and what they actually do to our money between us giving it to them and us asking for it back. One suggests certainty. One explicitly says otherwise.

It could be argued that long before this particular economic crisis started to play out the language of money, the discourse of personal finance, deployed by financial institutions was fraught with contradictions. One the one hand the back room activities of banks and fund managers have to be kept off stage – they are complex and possibly beyond the ken of the average joe, On the other, these funds need to convey something front of stage that makes what they do seem simple, consistent and knowable. Much advertising in the financial services sector has therefore tried to 'own' semiotic spaces that are 'organic' or natural (egg), or to tie themselves to an individual's own sense of narrative or biography (Lloyds – 'for the journey').

Financial products get wrappers – nicely branded, sugar coated fig leaves which disguise the complexity or just the inherent tedium or blandness of the world of money as created by institutions. The other function performed by this language is of course to cover the tracks. Stocks picked by those charming people managing your pension "drag on the portfolio" – for which read "left a ruddy great hole"; the Bank of England is considering a course of "quantative easing" – that, to you and me, means printing money. All of which language games leaves me and you divorced from the world of money and from the institutions to whom we must entrust tour cash if we're not to put it under a matress.

Very rarely does one find a financial institutions obeying William Wordsworth's injunction to "speak the real language of men [sic]" and in so doing tell it how it is.

Looking recently for somewhere to put a few bob, I was recommended a little company called Ruffer. Just reading the following made me want to throw my money at them – and it turns out they were 6% up last year – which is somewhere near a miracle.

During the month a number of deals took place. We made a profit by buying Rio Tinto extraordinarily well, and selling it badly – what could have been quite a major success for us was little better than a plate of smoked salmon, but it felt good at the time. We sold down the last of our Swisscom, at satisfactory levels. We increased our gold exposure by buying Goldfields of South Africa and Newmont. We have switched some of our steady Japanese holdings (in the last month it was the retailer Seven & I) into more financials – in this case, Mitsubishi UFJ. Both these moves were satisfactory in helping the performance along. The centre of our thinking remains that the deflationary forces, which are now fully understood and quite possibly discounted by the consensus, will, counter-intuitively, express themselves through inflation. Although we imagine that deflation must result in prices rising, if currencies are compromised, then prices will go up in that debased currency. The obvious example is Germany’s Weimar Republic when it took a wheelbarrow of money to buy a week’s groceries. Looking at money as a unit of account, there was a great deal of money in Germany at that time, but looking at the Mark as a store of value,there was effectively no money there. An economy with no money in it is a caricature, not of inflationary conditions,but deflationary ones. It is extremely unhelpful that this situation is called ‘hyper-inflationary’. Englishmen of a certain age know exactly what a deflation with the superimposition of a debased currency feels like, since that was exactly the situation that prevailed in the second half of the 1970s in Britain. In nominal terms prices everywhere went up, investments either went sideways or somewhat down, but everything except the wages of union members went down in real terms. This time, the working man will join the plutocrat in Breadnwaterville. Only lucky holders of the Ruffer Investment Company will know what it is to lie among the udders of plenty, and the honey bees of pleasure. May I apologise in advance if this dream turns out to be somewhat ephemeral?

Of course, this is not a recommendation and the value of your investment may go up as well as down. But at least they speak a language that is honest, they admit their mistakes and provide historical context for what they're doing.

3 Responses to The colourful language of money

  1. Harry says:

    Apologies if this is a duplicate post, my computer crashed (Windows Vista!).
    I think Ruffer are a very good investment firm amongst many very bad firms and I have considered contacting them myself.
    Do you know of a firm called Full Circle who apparently made over 10% last year and who have an approach that seems to work in all conditions… but they do appear to be much smaller than Ruffer, which might be a concern. A good friend of mine uses Full Circle and she is a big fan.
    Now that cash is a waste of time I am considering asking someone like Ruffer or Full Circle to manage my nest egg. I would appreciate your comments. Harry.

  2. sinead says:

    You’re right, the financial institutions talk to us with smoke and mirrors. However, is it enough to put our money in the same kind of institutions, even though their chat is less dubious? all investment firms have problems, because they very things they buy and sell are in trouble.
    Should we not be thinking of another way altogether of retaining and adding value? Try an exercise in thinking about adding value and exchanging things we need in our lives, without thinking about money/cash. If our cash is being hammered, we will all need to add value and find other ways of exchanging it.

  3. Harry – I wouldn’t get into the game of recommending one company over another…an individual’s circumstances and all that. That’s why most people offering advice actually get paid for it – within a bounded set of contexts they have knowledge to share (and charge for) – even if that knowledge is paid for by the client by buying products which the advisor is incentivized to sell to them.
    Sinead – have you seen http://www.zopa.com – this is something that I was obliquely involved in through conducting ethnographic research on money a few long years back with Bruce David – http://www.oikonomics.typepad.com/. This was conceived as something different, people lending to other people and borrowing from each other. It is getting lots of press right now since it provides great returns on money lent with low default rates – since anything you lend is spread out across a large number of borrowers.
    and for everything else there’s Mastercard.