Hopeton Morrison, Contributor
My article on why is is it easier to accumulate wealth overseas than it is in Jamaica seems to have stirred a hornet's nest and last week my mail box was full of both bouquets and brickbats. It is an important discussion and the edited letters that follow make a far stronger statement (both for and against) on this issue than I can.
A knowledgeable local reader writes:
Dear Hopeton:
YOUR RECOMMENDATIONS for an investment strategy is almost spot on except for the omission of foreign currency denominated equity investments. The AIC mutual funds being marketed by NCB Capital Markets is an example. The Jamaican currency just isn't a good store of value. The facts you provide fit together logically and your figures seem accurate but they point out an interesting anomaly. We have had inflation of 578 per cent over 29 years and devaluation of around 3,000 per cent. That means that there is either something wrong with the way we calculate inflation, the prices of items in the CPI basket are being manipulated or the published inflation figures are bogus. The United States has not had massive deflation over the period.
These figures also indicate that U.S. (or other stable) currency in a safe under your bed was a better investment over the past 29 years than the main JSE index (almost three times as good). Is that assessment correct?
The difference in an individual's earning capacity in a booming economy with a high demand for his skills is of course the main reason. The second reason is a lower overall cost of living for a frugal person. That is, the cost gap is huge for those items we spend most of our earnings on.
PS: Personal anecdote. My two brothers living in America have a combined net worth that dwarfs that of the four (including myself) living in Jamaica. I can give you details but suffice to say that skills set, job title, investment choices had nothing to do with it. It is all location and I will likely immigrate too.
HM: Your questions about the inflation figures and how they are calculated are not new. We are aware that some negotiators from trade unions are very suspicious of our inflation figures and make it an issue in their wage negotiations. But that is an issue for another column altogether.
On the matter of whether one would have been better off putting U.S. dollars away rather than investing in the stock market over the past 29 years we will need to do some data analysis and this also will feature in a future column.
Eddie, writing from the U.S. takes a somewhat different stance on this issue from our local reader above:
Dear Hopeton:
"I read with great interest your article in The Sunday Gleaner of September 26, 2004. While I agreed with all that you outlined regarding investments and especially the way it's diversified and allocated, there are underlying reasons why the headline 'Why is it easier to accumulate assets abroad?' seems to hold true.
Inflation is a vicious monster and it can be seen from the vivid way you carried out the analysis over the period of time. I've lived here in the U.S. for the past two years and have been travelling here for almost six years. While inflation and interest rates here are for the most part low and predictable, accumulating wealth here is not as easy as it might seem. Real estate value has skyrocketed over the last five years.This makes home ownership more costly, although interest rates were at all-time lows.
With that said, it is a reality that people work very HARD here sometimes two and three jobs for 'survival' with little or no time for self and family. That's a hard fact. It's not as easy as it seems from the outside.A lot of times people overstate their achievements here and it comes with a price. All in all this is what makes the big difference here.
The other thing is that people seem to get this extra impetus and motivation to succeed probably when the realities outlined above kick in.
Eddie
H.M.: Your argument here Eddie is a sound one. Nothing to add.
Another U.S.-based Jamaican takes the debate a step further:
Dear Hopeton:
While I do not pretend to have all the answers to the point about relative asset accumulation by Jamaicans at home and abroad, I wish to point out some relevant factors. Jamaicans abroad are exposed to cultures where thrift is valued. In Jamaica people seem to mostly live for the present: trendy clothes, higher end automobiles, etc., all intended to show that they have arrived whereas the buyers are up to their necks in debt. I have seen many Jamaicans in the U.S. wearing cheap clothes even on formal occasions but their children are in U.S. universities. Also, many Jamaicans lost their life savings after the financial institution meltdown of the '90s. (As a result) Many Jamaicans do not trust local institutions so they now place what financial assets they have in some credible local savings institutions whose interest rates cannot compensate for Jamaican inflation and a weak Jamaican currency.
'DMcL'
Finally 'VK' a returned resident was far more forthright and took me to task on a couple of issues. Her edited letter follows:
Dear Hopeton:
I found the writing excellent but there is one thing that I totally disagree with.The sentence saying that it is easier to acquire a home in America or Canada is totally incorrect. I do not know if you meant for persons who are well educated and are doctors, teachers, bank managers or the like, but I cannot see the ordinary Jamaican who is semi-skilled achieving this in one year.You are giving people the wrong impression of these countries.
I have lived in England and the U.S. and I could not have bought a house within a year of arriving in those countries. I do know, for instance, that in England where I resided for over 36 years that I could not have achieved this. If you want to get a 100 per cent mortgage, with no deposit then fine. That way you would have a hell of a repayment. Or maybe you can find the deposit of £40,000 and have a cheaper mortgage and then where are you going to find a deposit of that amount in one year in England?
I agree that in America perhaps you can achieve that in that there are places where you can put down US$100 and move in. But you have to have a good job, good credit, and be able to pay the huge mortgage repayments.
Please do not give people here in Jamaica the idea that having a home is so easy in the UK and America because that is not so. Do not give the idea that there is an easier life in England and the U.S., because I know it takes a lot of hard work and dedication to achieve certain things in those countries.
I have come across many people here in Jamaica who have this idea that I will make it in five years in England and be able to return to Jamaica and buy a home cash in five years. I often tell those people to go and try it you will see.
England and America are fine places with lots of opportunity for the young, but it is not easy.We are blessed here in Jamaica and we do not know it.'
VK
H.M.: All I will say on that 'VK' is that you are a great ambassador for the land of your birth and we need many more like you at home.
Hopeton Morrison is general manager of St. Thomas Cooperative Credit Union Ltd. and lecturer in the School of Business Administration at the University of Technology. Please send comments and questions to: hmorrison@stccu.com
