This could be stealing your money while you’re sleeping
PUBLISHED: 22:52 24 March 2018 | UPDATED: 22:52 24 March 2018
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To beat inflation, it might be time to open a stocks and shares ISA, suggests Peter Sharkey
“North Pole branch of Blockbuster to close” declared the Sky News headline: seven words which had me thinking “who on earth rents DVDs at the North Pole?” while I checked the date to confirm it’s not April Fool’s Day until Sunday.
The once-ubiquitous rental store (at its peak in 1989, Blockbuster had 9,000 outlets in the USA and was opening a new branch every 17 hours) announced on social media it would be closing the North Pole branch and starting a liquidation sale of its stock which will end next week.
“Kelli and her crew have done a phenomenal job and will be greatly missed,” a Blockbuster spokesperson wrote on Facebook. “Thank you SO VERY much North Pole for your years of support.”
Local media reported that about 40 people gathered at the store on the first day of the sale, hoping to nab a bargain and show their gratitude to a local institution. Forty people? In temperatures touching minus 30? It’s like discovering there’s a busy McDonald’s at the top of Everest.
Back at Blockbuster’s North Pole branch, general manager Kevin Daymude told reporters that although the store’s customer base was loyal, there simply were not enough people to keep the business going. No kidding.
On top of a dwindling customer base, the growth of Netflix and other video streaming technologies have affected the rental chain, forever associated with a time when watching a movie meant heading to your local DVD (or video) rental outlet, only to discover that two copies of the film you really wanted to hire have already gone and the third hasn’t been returned yet.
It’s also understandable that patrons of Blockbuster’s North Pole branch would prefer to rent a film because internet coverage is, presumably, hardly comprehensive, while bone-chilling weather conditions would generally lead you to conclude that it’s preferable to stay indoors and watch a movie – presumably ordering a takeaway pizza to boot. But how has the store remained open for so long?
The question effectively introduces another facet to Sky’s seven-word headline: the role assumption plays in human thinking.
The vast majority of our assumptions are accurate. For instance, it’s reasonable to assume your train will turn up to take you to work each morning, or that 95% of your daily emails are rubbish, or that England will fail to win the World Cup this summer, or that when it rains in July and August, we yearn for summers past, even though it rained then too.
You see, it transpires that North Pole is a small dot on the map – but not the one I assumed it to be. Instead, it’s a town of approximately 2,200 people situated close to Fairbanks in central Alaska.
The town got its name from a property development company in 1944 in the hope of attracting a toy manufacturer. The toy factory was never built, but the townsfolk keep Christmas decorations up all year round and every winter they receive 400,000 letters addressed to Father Christmas (at 1, Santa Claus Lane), all of which are answered by a team of community volunteers, a kindly act which makes you wish Blockbuster had stayed in town.
However, while Sky’s ‘North Pole branch of Blockbuster to close’ headline is technically correct, it’s easy to see how most people would assume it referred to the latitudinal point 90 degrees north which continues to attract only the hardiest explorers, not people wishing to rent a James Bond movie.
Humans frequently make similarly inaccurate assumptions, based upon a narrow application of their existing knowledge, so when we’re advised that inflation has fallen to 2.7%, for instance, most of us don’t take much notice. We assume that because it’s comparatively benign this month, it won’t have much of an impact upon our savings, but inflation’s corrosive effects can be devastating, even when it’s relatively low. For example, in only three years between 2000-2017 did inflation rise above 3%, yet had you held £10,000 in savings in 2000, it would need to be worth at least £16,312 today, otherwise you would have lost money.
The cost of goods and services has risen by 63.1% over the period, which means that cash savings would need to have grown by an average of 2.9% per annum just to keep pace with inflation. Any less than this and their real value has fallen.
With interest rates anchored at historically low levels, savers may wish to reconsider their assumptions regarding inflation prior to topping up their 2017-18 ISA allowance before next week’s tax year-end.
It might be time to open a stocks and shares ISA instead of allocating every penny of savings to a cash ISA.
Think of a number
Earliest date in the Gregorian calendar (22nd March) on which Easter is celebrated. Easter arrives on the first Sunday following the full moon and the vernal equinox and celebrates Christ’s resurrection. As the date fluctuates, Easter takes place between 22nd March and 25th April.
The value of chocolate Easter eggs or presents received by the average child in the UK last year. This equates to an average of eight Easter eggs (that’s 8,000 calories), consumed by chocolate-loving youngsters over four days.
Number of Easter eggs sold annually in the UK. However, only 27% of parents admit to eating their children’s Easter chocolate, which suggests that quite a few are a tad economical with the truth.
We Brits love our chocolate. However, in a world league table of per capita chocolate consumption, we sit in fourth place behind Switzerland, Germany and Austria. On average, Britons consume 9.5 kg of chocolate every year.
Cadburys produced their first bar of (dark) chocolate in 1849. Milk chocolate wasn’t available until 1875 when Swiss chocolatier Daniel Peter developed the process for making the sweeter version of chocolate. Cadbury’s Crème Eggs were introduced in 1971; today, more than 500million are sold worldwide every year.
Decorating and colouring hen, duck or goose eggs for Easter was customary in England during the Middle Ages. In 1290, the household accounts of King Edward I recorded an expenditure of eighteen pennies (about 7.5p) for 450 eggs to be gold-leafed and coloured as Easter gifts.
Peter Sharkey read economics at the University of Bristol. He worked as an accountant on three continents and has been a company director and investor for more than 30 years, building and selling three different companies.
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