Growth Explained

Growth is the process of increasing in size – growing; broadening; thickening; widening; extending; lengthening; swelling; magnifying– you get the picture. MMPI has been wailing for several years now that without growth there is no hope. This week we saw some growth from 2 distinct sources – an expansionary budget and an old reliable MMPI construct.

Political commentators; opposition parties and sceptical doubters have all accused the government of giving away too much in one area and not enough in others. MMPI is not a political animal and has no desire to pick holes in Minister Noonan’s elaborate budgetary plan. Simply, we believe it marks a turning point where growth is firmly back on the agenda; and that makes a welcome change.

The other source of growth was MMPI’s Escalator Series 18 (Kick-Out 4), which matured this week after 12 months with a healthy 10% return from investing in the EuroStoxx50 index. The growth is tax exempt for pension investors and is liable to capital gains tax for personal investors @ 33% – a helluva lot lower than the retention tax on deposits. An interesting result from the performance of Series 18 is that it returned 10%. Whereas a direct investment in the EuroStoxx50 index for the same period returned only 8.5%. There’s another demonstration of growth.

But back to the budget – Government intervention is a very hot topic. Even though we live in a civic society that allows freedom of expression and respect for individual primacy; we accept (whether unconsciously or not) fairly draconian rules that are laid down by the legislature – many of which are untested by the democratic process. A nonchalant visit to the pub determines that you cannot smoke; you cannot throw your butt on the ground outside; you must pay a hidden tax for your drink; you cannot drive home if you’ve been drinking; you cannot accept a lift from a designated driver unless the car is taxed and insured. In extremis, some people object to these impositions but by and large the majority conforms.

The elephant in the room, when it comes to conformity, is the health budget. Expenditure on health has a significant impact on the current finances of the country but it has an insuperable effect on future budgets because of the law of compounding. It is fruitless for a health minister to try to curtail expenditure in any given year when the costs continue to rise exponentially over time. Health is the elephant that will not reform unless a drastic re-think is implemented. This represents the wrong sort of growth – Ireland plc should tackle this issue NOW.

But back to MMPI again – the latest investment maturity was one of 7 products that matured in 2015 – all but 2 of them showed admirable growth ranging from 7% after 6 months to 23% after 12 months. The other 2 suffered pre-set maximum losses of just 5%. We have high hopes for one more early maturity in December; promising 8% growth after 12 months. QED, (that’s Latin – Ed).