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(pictured: Alan Kohler)

As Alan Kohler points out, taking on a little more risk in retirement is very different from taking it on when you’re younger. So what’s his advice to retirees? Go 100 per cent fixed interest or similar, he says, which also means you have to save a lot more money before you retire.

In an entertaining session at the annual Morningstar Individual Investor Conference in Sydney last Friday, Kohler and Peter Warnes, the head of equity research at Morningstar Australia, both said about the current environment those famous words: “This time it is different”.

Kohler, the broadcaster and publisher who recently launched his latest newsletter, ‘The Constant Investor’, said: “This is the most dangerous of worlds”. He hesitated to say: “this time it’s different” because it was usually accompanied by the words: “it’s the end of the cycle”. But there were at least two different things about the current environment and what had gone before it:

• Interest rates are lower than they have ever been. We have had a bull market in bonds for 35 years. Bonds peaked in October 1981. And by coincidence the bear market before it also went for 35 years. It is different now because we have negative interest rates, which we have never had before. It’s an extreme cycle, Kohler said.
• What is going on in technology is also extreme. It is not cyclical, it is secular, driving down costs in almost every industry… The “sharing economy”, for instance, including Uber and Airbnb, uses the existing stock of capital.

Warnes said: “It’s very very different this time. It’s why central banks around the world have quantitative easing and asset-buying programs. It is totally different to any cycle previously.”

Warnes added a glimmer of hope, though: “I’m not saying we’re out of the woods yet, but we may be able to see the clearing… What is familiar about the environment is that there is still risk and reward.”

Kohler was down on central banks. He said they had been “stuffing things up” for years. “And I think they are stuffing it up now… They are trying to achieve an outcome that doesn’t need to be achieved. Monetary policy is not working.”

He said: “The problems with lack of inflation are technology and debt. The debt levels are depressing prices through dampening demand and technology is changing the cost structure of the world.”

Kohler told the audience that, at age 64, when he retired he wanted to have the same amount of money as when he died. That is, he wanted to live off the income from his retirement capital and then leave it to his children. He added that not leaving the kids anything was also a legitimate strategy. “You can say to yourself: the last cheque I write is going to bounce.”

He would adopt a very conservative, if somewhat old-fashioned, investment program in his retirement. He would not buy an annuity, for instance, because they are too expensive. He would have some sort of diverse fixed-income portfolio, looking to yield 5-7 per cent, which audience members suggested was probably too high an expectation.

In any case, he said: “Whenever you bet against an insurance company, you lose. That market is rigged.”

Warnes said he thought low inflation would be around for another decade and everyone had to lower their expectations.