Didier Le Menestrel

French paradoxes

In 1991, at the University of Bordeaux, Dr Serge Renaud published his hypothesis of the “French paradox”, highlighting astonishing results. Indeed, despite high consumption of fatty foods, France, and especially, the south-western European region, has a far lower rate of cardio-vascular disease compared with other developed countries. In his view, modest consumption of red wine could explain this strange trend. A report on the subject in the highly respected CBS show, 60 Minutes, then led to a more than 40% surge in red wine sales in the US over one month!

Various studies published at the start of this year highlight the French paradox and the apparent statistical contradictions of the irreducible Gallic. For the first time in its history, France now has 65 million inhabitants. Whereas in 1985 it was on a par with the UK and Italy, contrary to its neighbours, France has enjoyed stable and robust demographic growth and now has over three million more citizens than the UK and almost five million more than Italy. Another record, the birth rate of 2.01 children per woman in France in 2010 means the country has not seen so many newborns for 35 years. And while we are still trying to work out the secret of French women who combine maternity and a career and also boast exceptionally long life expectancy, certain demographic calculations suggest the entire German population could disappear within 12 generations!

So, is France the champion of optimism and faith in the future? Alas! France is also the world’s largest consumer of antidepressant drugs. While Vietnam won the prize for confidence in its economic future (1), France was at the bottom of the pack with 61% of French people believing that 2011 is set to be a year of economic difficulty. A world record in pessimism.

But in another paradox, the January 2011 INSEE indicator on the business climate in France was well ahead of its long-term average and back at pre-crisis levels. In the same vein, company creations, encouraged notably by the new tax-advantageous self-employed status (auto-entrepreneur) reached a record level of 622,000 in 2010 (2) in a hitherto unseen bout of entrepreneurial fever!

These very Gallic contradictions between extreme optimism and pessimism are also found in the make-up of household assets. Just as the French government is aiming to tax assets that cannot be relocated, a study by the Treasury shows that French assets (€10,060bn) are made up of 61% property and just 9% of marketable securities (equities and bonds) whether directly owned or in the hands of fund managers. A surprisingly low level for so-called “productive assets”! In comparison, despite a higher number of home-owners in the US, property only accounts for a quarter of US wealth. Virtually all of the remaining 30% of French assets is made up of financial investments aimed at financing projects and preparing the future.

At a time when uncertainty at pensions is becoming increasingly rife, who could believe that property or gold can perform the same way as they have over the past decade? You know our conviction, namely to root out projects and corporate heads who know how to best allocate capital in a changing world. This is no paradox but remains the safest way to grow savings and assets.
Let us adopt the French paradox then: consuming a few shares every day is an excellent remedy for the health of your savings!

Let us adopt the French paradox then: consuming a few shares every day is an excellent remedy for the health of your savings!

(1) BVA survey for Le Parisien newspaper, January 2011
(2) Insee, January 2011