Of natural beauty and interesting markets

It’s important to get a sense of perspective sometimes. We have bigger problems than the markets at the moment. Pestilence stalks the land. Let us be thankful that the fatality rate of it is in low single figures percent-wise. So far although there have been missteps I am of the opinion that the people have handled it well, and I am quite impressed that the fragile just-in time systems of delivering essentials have been adapted quite well. The Chinese managed to keep the wheels running in Wuhan as far as the essentials of life. We do face problems with food in the medium term if Tim Lang is right. Many face more immediate problems with food due to their precarious economic situation. However, so far I have been cheered by the response of the British people. Adaptable bastards, humans, even if deeply stupid in many ways. Good luck to us.

The drop in economic activity makes some things change for the better. I live in a small town so air pollution is low here, but even so the drop in traffic makes one’s sense of smell more acute as Nature blooms. Mind you, I can also smell people (not in a bad way, I’m not saying they are crusties) from further away than 2m, particularly downwind. So social distancing may reduce the likelihood of infection, but given that smell is airborne chemicals interacting with the olfactory bulb in the old hooter it probably doesn’t preclude it. It is what it is – we need to get some exercise to avoid becoming fat as moles.

Birdsong is increasing. You’re likely to have more time to listen to it – our blackbirds are lovely at this time of year.

He will become more mellifluous as he hones his art with practice. I got to middle age before realising this. With time to reflect, it’s a little piece of magic that unfolds each year, and I will try and honour the beauty. As long as one of the neighbour’s cats doesn’t get him first… The National Trust is doing this sort of thing in a bigger way on #blossomwatch.

Enough of that. Jurgen Klopp had the right idea, I have no more expertise in epidemiology than he.

of markets and mayhem

Ah, the smell of excitement on the markets. I have cleared out some of my premium bonds, shunted into Charles Stanley before this tax year end. I borrowed nearly a year’s worth of ISA from them and tossed it in premium bonds, because I couldn’t really bear to invest in the stock market at high valuations. It looks to me like valuations are getting better 😉

I am keeping a leery eye on my Gold holdings, for once I am cheered that the buggers are in my ISA. Gold is sort of like cash but with a vague anti-stocks trend in times of trouble. Apparently the correct way to do this is with long-dated bonds. But I am simple and have seen gold do this job before, twice.

In normal times it’s a deadbeat and pays no income. But Harry Browne had a point, I am roughly back to the same asset allocation I had in 2012. Except that all the numbers are a hell of a lot bigger.

I reckon this bear market has legs, and it ain’t anywhere near done and dusted. Unlike normal stock market crashes when people simply get pissed off with high valuations and look down like Wile. E. Coyote and succumb to gravity, there actually is a genuine out of the blue problem here1, which is going to result in reduced economic activity. When a lot of customers are at home and the workforce is down and it’s a global problem then the velocity of money is likely to be less. Yes, the Fed has thrown a shedload of money at it. I’d say there still be lots of trouble ahead.

In my view this is likely to be a crash and a bear market – months not weeks. I am not an unreserved buy and holder, and I don’t have much reserve to buy in, though I do have a steady income so I don’t depend on the markets.

I am going to stick my neck out. I sold out some holdings on March 10th, to give myself some ammo. I still have 2/3 of my equity holdings, all my VWRL, and all my HYP from 2009. I am happy with these, but I cleared out everything that I didn’t love. Marie Kondo would be proud of me. And I cleared out half of an IT and all my FTSE100 holdings, although they probably aren’t overvalued. I’m just a cheeky bastard and want to buy that back either as income-paying ITs, or simply for cheaper, the FTSE100 seems to have taken an outrageous hammering since I sold. All that oil, oy vey… I have a Google spreadsheet of all that I sold, what value I sold at, and what the current -15min valuation is because googlefinace makes that easy.

Let’s just say it was well worth doing. When the aggregate gain from selling halves, then I should start to consider chuntering back into the market because obviously I cocked up and this bear market will have been shot on sight. However, my heart of darkness wants it to double, because that will also be a good time to buy. Valuations were too high before. I don’t regard the losses as anywhere near enough to compensate for the likely hit.

There is a second-order problem, however. We look at our share prices in GBP. If you look at how many GBP you need to buy the IMF special drawing rights, a balance of currencies, you see the GBP has been having a torrid time of late. You see a similar pattern with US Dollars and with gold, so it’s us, not them. This has an inverse relationship to international stock prices, so the falls in real value are about 10% worse than displayed on our screens.

How many GBP to buy IMF SDRs

Something really dreadful seems to be happening to the pound. ZXSpectrum48k seems to be on the money that the UK is more akin to an emerging market.

Now I’m not one of the people yelling that it will be like the 1930s again. It may be, while it is usually unwise to say it’s all different this time I would say the pestilence stalking the human population  is certainly unprecedented for 50 years.

I’m shorting some of the equities I do own.You can argue that’s barmy, why not just sell, but what I am shorting are my investment trusts. I am shorting half of my ASL, which is pretty much just as well, it’s my worst performer. That’s not that tough to understand, small UK companies are basically roadkill.

I am of the view this is going to go titsup a long way more. If shorting works out I get more working capital to put into my ISA over the bear market, and I can take some solace in the losses in the ISA as they are balanced in the gains on the short 😉 If the market suddenly has a fiery fit of the vapours and skyrockets to UKX=10,000 then I look a right tit and get soaked on the short, and get to sell out of my ISA to pay for my stupidity.

Bear markets are exciting. Things happen a lot quicker in them – spread betting which is my tool of choice for shorting is like an ISA in that there is no tax hit if it works, but has a high cost of carry and high costs of doing anything – it’s a dreadful TER. That doesn’t roll up so much in bear markets because of the faster action, I don’t expect to be in IG for more than a year.

Buying in again

I have some piss-taking limit buy orders in the ISA to buy things like VWRL and also ULVR that’s I’ve wanted for a while. I need to find out if iWeb let me do regular monthly purchases2, because I am also minded to buy VWRL steadily across the next six months.

Obviously I am not a strong believer in buy and hold, and I think valuations matter, and for God’s sake don’t even think of doing that sort of thing because its not passive. Just buy and hold… It does come good in the end, as long as you live long enough.

I don’t have any intention of selling any more in the ISA- the point of getting out of what I did when I did was to give me working capital which I will roughly double with extra cash this year and next. I hold some of that working capital in gold ETFs because I don’t trust the pound to hold value through this. I naturally take a hit on the turn and the annual costs on SGLP.  Bear markets are shorter than bulls. If I wanted to hold for 10 years then I’d sweat about the costs of carry and the opportunity costs, but I am chilled on that.

This needs to start working for me. I have the feeling income is going to be bought much easier in the months to come than in recent years. I want this to be a good bear market. I’ve seen this movie before.

So there. I’m probably going to be excommunicated because I’ve gone against the buy and hold shibboleth.  I learned that I had no stockpicking edge over the years. But I still believe in the importance of valuation, and it’s getting a lot better.

I also got a family member out of 100% equities and into VGLS80:20 favouring bonds at the end of January. She has about five years to go to call on that wedge, and a 100% equity allocation at high valuations felt bad. I am owed a beer in five years time. Mind you, if she buys into the bear market than I will buy the drinks, because that sort of chutzpah deserves a hat tip. I know from experience that it’s incredibly hard to do. I at least now have some metrics from tracking what I have sold 3.

But it still will be gut-wrenching and a bastard, because buying into a bear market still means looking at a potential 30-50% loss after you buy in. I can’t call the bottom, but I can call overvaluation. Bear markets fix that sort of problem within one to three years, whereas bull markets can stay up in the sky for years. I am glad to see this bull market get the order of the boot, though I am naturally saddened by the shocking human misery that was the coup de grace that pushed it over the edge.

  1. there is an argument that things like the GFC were also an out of the blue problem, inasmuch as knowledge of the rot was not widely disseminated. Some crashes are a crisis of confidence, however – October 1987 springs to mind. 
  2. Maybe they do let you do regular purchases, but I sure as hell aren’t bright enough to see how. If you know, please enlighten me! 
  3. I will see if googlefinance lets me scale that dynamically to IMF SDRs, I am tired of having to mentally offset the vagaries in the pound to get a clear picture 

Shiny shiny starts to gleam as fear rises

Fear usually means a fire sale in the markets. MedFi gives you the graphical take straight between the eyes using the gold price vs the S&P500. Market valuations have been high in recent years so I feel this one will have legs. Officially the selloff is attributed to coronavirus, so let’s start off with a bit of old Leonard, RIP.

Everybody knows the plague is coming,
everybody knows it’s moving fast

You’re going to get covid-19. So am I. Most likely in months, not years. Not sure I’m smart enough to even imagine how they’re going to isolate London, but hopefully some bright minds are on it. Let’s hope they’re not all Dominic Cummings’ weirdos and misfits with their charming views about creating a master race 😉

Our Sab, with the all-knowing clarity of youth. Bless…

Selective breeding works a treat – for us, rather than the selectively bred species. Closing that loop doesn’t seem to end well.

The odds of surviving Covid-19 seem good, so game theory shows us that in the financial aspects it’s the opportunities that are worth looking at. If you aren’t going to survive it then your investments aren’t your problem – in five years’ time you’ll know if you were hardy enough. If you aren’t then you’re not going to experience the downside of getting it wrong. You shouldn’t have money in the equity markets that you will need in the next five years.

It’s early days yet, but I wonder if the coronavirus is gaining extra traction in the markets by pushing a stale long bull run over into its natural nemesis, the bear market. We aren’t there yet, but the markets could get more interesting.

The fear/greed index has shifted into fear

If you’re under 40 this should be a cause of celebration. Firstly because you’re very low risk from covid19, and secondly because you are a net buyer for a long time. A low stock market early in your investing career is all to your benefit.


VWRL in early March 2020

Bear markets declines are steeper than bull market rises , presumably because fear is more contagious than optimism. The bull run has been very long, and for the last ten years stock markets have been inflated by funny money as interest rates have been depressed. The bloodletting could be stiff.

I am not under 40. I have now come to the end of my investing career, I was  unlikely to make a contribution to my ISA ever again, and I will only wash £2880 through my SIPP as cash to collect the free £180 a year from the government because it’s rude not to.

Unlike every other bugger in the FI/RE blogosphere, I am done, I have turned the engine off and pulled out the key. All around there are many FI/RE protagonists intoxicated with ten years of bull run, and the the air is heady and ripe, the smell of Autumn in the stock market all around although it is only Spring in the landscape. Winter is coming.

Over the last few months I had shifted my holdings more defensively, largely as a result of high valuations and my impending shift towards drawing an income from the ISA. Most of that income I can get from the natural yield, and I have a chunk of cash in Premium Bonds that I was going to slowly decumulate over the next few years to boost that ISA top-up to smooth my income ahead of getting the State Pension.

I am not a passive investor, that heavy cash/gold policy was set because I looked at the high valuations of the markets as I came up to drawing down and felt meh about it. I haven’t sold any of what I did have, but didn’t add much to the equity sections at these valuations.It’s fine to draw down from the natural yield of what I have bought.

The natural yield will probably be reasonably stable, as it is largely from investment trusts and the high-yield portfolio. But there’s a lot of gold in my ISA, which was there because of the high market valuations and the fact I don’t have decades of accumulation ahead of me.

no battle plan survives contact with the enemy

I am wondering if I shouldn’t sell some of that gold over the next few months and run the other way, into beaten down ITs. And/or take some of the cash and use next years ISA allowance, which would mean I would have less yearly income in running it down.

Valuations haven’t yet fallen to levels that are usefully lower than say a year ago – f’rinstance if you take a look at VWRL

VWRL in early March 2020

while there is a tip at the end where it has nutted down, but it’s not as if it is down to this time last year. For me to exchange some of the shiny shiny for VWRL I’d say I don’t want t pay more than say £52, as it was way back when in 2016.

If I am going to surrender some of my guaranteed income or my shiny tokens for income, ITs give a good income stream, particularly when bought at a discount due to bearishness. It’s been over ten years since I last saw that advocated, but I took action on that message – and these investment trusts have been paying me steadily for over ten years. I’d like some of those low prices, please.

So I need to take some time out and do some research, ask myself what sort of prices/discounts I would consider ITs better value than some of the guarantees of cash or gold, and start sticking some alerts out. The time may never come, in which case nothing to see here, move along now.

I’m using natural yield, not a SWR

I am not going to sell stocks to derive income. I want more income from the ISA but I don’t have to thrash it; I get over 3/4 of what I want already off the natural yield.

It’s all very well for people to sit in their ivory tower and say sell off units of VWRL to achieve your wanted SWR, but I am not going sell off units of anything, because I only started to get ahead in the markets when I stopped selling equities. I am a jumpy seller and that’s bad. But I do skew buying choices.

Natural yield is despised by people in the accumulation phase – see the stick Greybeard took in this article for advocating investment trusts. ITs form a large part of my high yield approach, much of mine were bought early in my investing career, because IT prices get thrashed more in times of turmoil as discounts open up due to their closed-endedness. Which is a bug when you’re selling and a feature when you’re buying in a down market

Written before the recent falls, this interesting throwaway line in Monevator’s SIPP/ISA article

For eight-year periods or less: save enough in cash to cover your spending needs plus an inflation top-up. The potential upside of equities isn’t worth the risk of grievous loss with so little time to bounce back.

made me change my mind about adding to the ISA for one last time next tax year, because my distance to the State Pension is of this order. I could add to my ISA to top up my income to the amount of the SP, trying to smooth my income, but I could also run down cash savings over a decade to make up the difference that way. At valuations a couple of weeks ago I’d need to spend about 30 times the desired uplift in annual income to get it from the stock market.

Using the rough rule of thumb that inflation halves your money over 15 years I’d need about 15 times the desired annual income to draw cash down over 10 years. The catch is, of course, that drawing down the cash means it’s all gone after 10 years. The plus is that it’s not sensitive to bear markets.

I normally used within five years as the sort of time horizon where one would steer clear of the markets and hold cash, but as I said above, valuation matters. At high valuations the cash-favouring time horizon drags out for two reasons.  You’re paying more for less expected income. Plus the risk of capital loss gets higher.

the smell of fear in the morning

The ermine snout twitches, wondering if there is the scent of one last chance to purchase income at low valuations. That time is not right now, but it may be soon. My investing career would then be bookended by bear markets, a fitting swansong. The first one served me well, more so than anything I could do with what’s developing. There’s only a couple of year’s worth of ISA allowance I could commit to this one so it would be more of a fillip to my income rather than a heavy lift, like the years starting from 2008.

There’s certainly mileage in yanking out some of the Premium Bonds and replacing the amount I borrowed from my Charles Stanley ISA earlier this year, that needs to happen this month. If I decide that I don’t want to buy into the ISA I can shove the money back into Premium Bonds next tax year.

To make this worthwhile I need a bloodbath in the markets. Perhaps there will be an opportunity to swap some income for about a decade into some income for longer. And I need a strong enough immune system to fight down covid-19 to carry off the spoils of war. If not – then it’s not my concern…

I’m going to take time and look at what happened to various ITs in the last crash including their payouts, what their prices were over the years I have been an investor, and determine a price that I would think was really good value to buy. And set these alerts for if/when the price falls below that. I will be looking for valuations closer to 2009-2012 than 2013 to now. The opportunity may never come. But if it does, then sometimes you just have to hold your nose and do it…

Sonos to Earthlings: All Your Base Belong to Us. We’re with Trump on the environment, BTW

I’m going to have a grumpy old man rant here, but consumerism is getting evil. Any Sonos buyer renter should be made to play Life For Rent as the first confirmation their expensive new kit works, and to remind them they have a lease on it for about five years. Because despite what you may think, you don’t buy Sonos gear. You rent it for a one off purchase cost, and get an indeterminate term of usage. They get to switch your kit off at a time of their choosing.

if my life is for rent

Sonos is an egregious example of what’s been going wrong with consumerism for a while. Disguising a rental model as a capital purchase. Se also : PCP car ‘purchase’. My Dad was right, back in the day. If you can’t pay cash for your car, look for a cheaper one, it’s a wasting asset. However, Sonos is a deliberately wasting asset.

Back in the day, you got to buy your toaster, you plug the beggar in and welcome to several decades of toast. Now if you decided to get the burnt toast out with a butterknife after a particularly excessive night on the sauce like yours truly did as a student, then all bets are off.  1 Muppetry aside, you could anticipate decades of service.

Heck, you used to be able to change the element in a kettle. Audio gear tends to last a long time, once you are out of your twenties, where either you spend enough money to be able to turn the wick up without overloading the amp thereby trashing the tweeters, or your straitened living circumstances mean you turn it down. Small children and pets are a hazard to speakers, but then they are a hazard to lots of things.

The Ermine hifi has a Naim 250 that wasn’t new when I bought it, back in the early 1990s. My speakers date from then. I owned am AR SP8 preamplifier for over 30 years which was also secondhand when I bought it in 1984, but I sold it a couple of years ago because I moved to streaming my CDs from a NAS box, changing it for Naim streaming gizmo/tuner/analogue preamp.

I can see where Sonus scores – the Naim app has a foul user interface. But at least the back end uses open standards, and I have used an alternative Upnp browser. Mrs Ermine grouses about the control interface each time she tries to use it, But since she is prepared to stream crap from YouTube via bluetooth into the system which is does well, then she is happy because she can understand Youtube and it’s free. As long as I don’t have to listen to it its fine. I can’t stand listening to music in her mode, which is to play three quarters of a track and then jump to something else. But each to their own. I am sure this would be easier with Sonos.

Sonos is the antithesis of that sort of system. It is the Apple of the audio world – you plug it in and it Just Works. You pay for that with a locked in walled garden sort of system with the service life of a mayfly, not because it’s unreliable, but because of software designed to be obsolescent as they please. So you also pay for it with highly unethical business practices, which they borrowed from Apple, which is designed in planned obsolescence. Just that Sonos took it it a new level.

Two of the components of my 1980s/1990s system were secondhand. One served me for 34 years before I sold it and it’s presumably serving someone else. The other secondhand component is still in service. I had it refurbished once and repaired2 by Naim once, but for a piece of gear which has been serving me for getting on for thirty years it ain’t bad. It also had the decency not to take out my speakers when it failed, which is good in a power amplifier.

Sonos – and nothing I have is truly mine…

The Ermine doesn’t do Cloud. I loathe Cloud with a vengeance, because I have been suckered by it too many times. If it needs Cloud inherently, like a web server, that’s fine.

Sonos are taking this to a new level, however, and that’s because they have remote control of your gear in your home. I hate Cloud and Software as a Service3 and shit like that because if it needs Cloud so they can milk you again and again. No. Foul ‘ole Ron was right4. Buggrit, buggrem, spying on me with Rays.

I don’t have a mobile subscription. I don’t use Netflix, or Spotify, or any of that sort of thing. My CDs are ripped to the NAS and if I unplug the ADSL feed I can still play music. I don’t want service providers in my life unless there’s a good reason. Yes to electricity and gas and broadband. No to Alexa, Ring networked doorbells, Hive central heating controllers. And evil bastards like Sonus who use Cloud to brick your older equipment by remote control. Presumably you need a connection to them, else you could blackhole whatever Sonus gear phones home to. If you’ve got them by the balls, their hearts and minds will follow as that fellow in the Nixon admin said. And you pay for that?

Sonos is hardware as a service. They want you to upgrade all the time. You aren’t going to be using your Sonos gear in 30 years. You’ll be lucky if you are using it in five. The piss-taking bastards say if you have an old component in your system then you can’t even upgrade newer ones. That’s just nasty. Oh sure, you can get a 30% discount if you set your old component to recycle mode, which bricks it.

Nobody recycles electronics. We send it to some Godforsaken part of the world for people to strip out the precious metals at massive cost to their health. At least if you ebay the sucker, then someone else gets to use it. My 30 year old preamplifier is still in service somewhere. WTF is wrong with Sonos? Nearly all of the challenges in audio engineering have been solved. You will need to change the head unit which gets your compressed cloud music as things change. The network bit and the distributed speakers and associated clobber presumably all run uncompressed audio. That’s not going to change for the next 30 years. Some of this Sonos crap you build into your house, for God’s sake. Do you really want to remodel your house because Sonos says so?

Sonos. Just say No

Because all it takes for evil to triumph is for good men to stand aside. For that sake of your grandchildren. To stand against the needless waste. And to cut greedy bastards and shady business practices off at the knees.

I’d generalise this wider. I don’t tolerate Apple anything. Not because it doesn’t work, or doesn’t look lovely. Again, a controlled walled garden ecosystem makes for a far better user interface. It’s just that you get to pay a thousand pounds for your bloody phone or computer every five years, because the cheeky buggers orphan old equipment, just because they can. That’s when they aren’t slowing them down ‘to be easier on the elderly battery’. Here’s a radical idea, Apple – hows about making the damn battery replaceable, you know, like it’s been done for all the decades since battery-power shit was invented, until you decided to fetishise ‘thinness’ as an excuse to glue you consumer gizmos shut so not bastard can fix them. Evil bastards. And then you weep crocodile tears about how you really care about the environment and talk rubbish like this

downloaded from https://www.apple.com/uk/environment/ 23 Jan 2020, doesn’t square with my experience, in particular about updating older devices.

So WTF have you orphaned my damn Ipod Touch and glued the battery inside? Last as long as humanly possible, FFS…

And as for Sonos, the service life of audio gear should be measured in decades, not years. And nothing on earth at all should be intentionally made obsolete by remote control, you evil bunch of punks.

  1. The hot tip here is to unplug the thing first. I had assumed the switch was in the live side but it was on the neutral side despite this being a Class 1 device. Still, at least I got that slice of toast out, after the flash as the element vaporised. And we had a gas grill that you lit with a match. so we were still good for toast. And fish fingers. What on earth could go wrong, eh? 
  2. Turns out I could have fixed this myself. Symptom was it blew 10A mains fuses. I popped the lid and didn’t spot any charred components or magic smoke escaping, so I assumed the power transformer had a shorted turn, and these are a custom component I couldn’t buy. Turns out one of the discrete bridge rectifier diodes had failed short. My hasty assumption cost me a couple hundred quid, which served me right for jumping to conclusions ;) 
  3. Adobe Creative Cloud, we’re looking at you. Evil courses through Adobe’s corporate veins 
  4. Terry Pratchett, Discworld ISTR 

extreme FIRE and how to live well

Monevator has a diverting ding-dong started last year that tried to split off the financial independence from the retire early part. I get it, nobody should be made to retire early if they don’t want to. I didn’t take part in it because much of it was a rhetorical construct. In the end being FI is necessary for you to retire, but it’s not sufficient reason. If you don’t want to retire, well, just don’t.

This is a particular case of the general question how does one live well?

This has occupied philosophers and religions since we found ways to have the opportunity to ponder such questions. There are as many answers as querents.

These answers diverge more as you get older. You had much more in common with your schoolmates that you do with the people you work with at 30. This divergence in aims, goals and lived experience continues throughout life. The branches of the decision trees fan out to more and more widely spaced points as they cascade. You are the product of all those decisions as well as what happened to you outwith you control.

FIRE is one aspect of this general problem, but first we should acknowledge that life is a journey, not a problem. It involves change. Your fifty-year old self is not the same as your 20-year old self. If you had good fortune and played your hand well, your fifty-year old self with be deeper, happier, wiser, more tolerant and gentler than your 20-year old self. If not, well, all sorts of other outcomes are possible. By no means all are bad, people are adaptable as hell, provided they don’t ossify first.

Let me call this “out in 20 years approach” extreme FIRE, xFIRE, in  homage to the grandaddy of FIRE, Jacob Lund Fisker, of earlyretirementextreme. He was a great exponent of FIRE ASAP, and his manifesto gives you it straight between the eyes

I posit that most people can attain financial independence in less than 10 years and in less than 5 if they are truly determined. I also submit that many people are not willing to make the necessary changes.

I lapped this up, because guess what? I wanted out in 3 years. Yesterday would have been better, but the numbers showed 3 years. He was a great inspiration.

Worked for me. But I didn’t do it starting at 20. I had almost paid off my house. I had a decent company pension scheme. I was 12 years from normal retirement age, at the then white-collar retirement age of 60. So while I used a lot of ERE’s xFIRE methodology, I built it on a very different foundation.

If you are 20, that option is really tough, and the risks are very high because your retirement is 40 years long rather than the more normal 20.

If you’re a footballer, you better get it done and dusted by the time you are 35. If you work in industries where burnout is rife, like law, finance and IT, look around your office. If there’s nobody over 50, don’t aim to be the 50-something exception in 20 years’ time. Don’t fight the obvious evidence.

Everybody else under 30, take a step back. and think. There are two main columns to the FIRE methodology.

Don’t be a financial muppet

The first is ‘don’t be a muppet’. Don’t buy anything with debt except a house and the tools of your trade, which may include education though not always. All else pay cash and do without until you have saved enough.

Fail to do that and stick it all on 20% APR revolving credit card debt and the best that will happen is you only pay 20% extra for everything you buy. It’s that simple. Don’t be a muppet. There are other aspects of don’t be a muppet to do with consumerism and spending. All of these, twentysomethings, knock yourselves out and take it all the way. There is absolutely no downside apart from the months of cold turkey when you catch up with your previous muppetry and pay it down. If this is unrealistic (the debt is high multiples of your monthly salary) then seek outside help with the Citizen’s Advice Bureau, Debt Stepchange or the Money Advice Service.  Just make sure it’s a non-profit and never consolidate loans on your mortgage. You heard it here first. JFDI. It’s never too early or  too late to stop being a muppet.

You will observe nobody’s talked about early retirement so far, and financial independence ain’t on the horizon. It is a necessary but not sufficient condition for FIRE to stop being a muppet, but even if you are happy to work till you drop start off with not screwing up. Anybody wanting to lend you money is looking to make money out of you, and their gain is less money you can spend on what you want. Don’t be a muppet.

The second column – take back control of the track of your working life

There’s significant privation to be gone through in becoming finacially independent (FI) earlier than normal in the FIRE sense. It appears Monevator’s definition of RE means people want to quit the rat race after 20 years1. You’re looking to do it in half the time it will take most of your colleagues. You want a good reason for taking such an iconoclastic path. All other things being equal2 your peers will have a lot more disposable income than you. Humans are social critters, you’ll feel that. I only did it for three years, I felt it!

This is all part of this “what does living a good life” conundrum, and people seem to miss out that fact that what looks like a good life changes over your lifetime. It’s more obvious in the early stages: Living a good life at two means not shitting on the carpet, but that’s probably not quite enough to make the grade at fifteen. Once we’ve nailed the muppetry, to see if the view of xFIRE is worth the climb, we need to broaden the frame of reference.

The seven stages of life

What does a well-lived life look like? It depends.  I did sciences rather than arts, and philosophy is firmly on the humanities side of the Two Cultures so I start from the wrong side of the tracks. But a general education, a life’s worth of reading and an inquiring mind hopefully compensates a little for my absence of Oxbridge PPE…

There’s a lot of woo in this, but the stages of life are found across human endeavour and through the ages – Shakespeare’s All the World’s a stage, Joseph Campbell’s Hero’s Journey, Carl Jung’s work on individuation.  In the spirit of holding contradictory viewpoints a la Scott Fitzgerald, I thought I’d run with it, because the metaphor speaks to the human condition.

Your twenty-year old self should be different from your fifty-year old self, else you aren’t doing something right. I would hate to have the concerns of my twenties now. I struggle with some of the reincarnation bits of that, but compared to the Immortalist society freezing their heads in search of the Elixir of Life 3, who am I to call it.  Savant cryogenicist man-children like Ray Kurzweil  didn’t invent this. Old men looking for the Elixir of Life is a search thousands of years old, ever since terror management theory became a thing in the Palaeolithic.

Old men have been looking for the Elixir of Life for millennia. This is the White Rabbit making the Elixir on Life on the Moon, from ancient China

What I liked was the resonance with my observation of humans changing over the stages of their lives. I have passed through some of these stages – the forecast of a fall in grades in the third stage (adolescence) surprised me, but it was true of me in the lower-fourth, and looking back, for those reasons. As indeed was the quarter-life crisis, which overtook me at university in my second year undergraduate level. All those angsty Millennials writing in the paper have a point that some things are tougher now, but being twenty to thirty is always hard because you’re taking on a lot of change, most of which is new to you, and you are changing your social role in the world.

The adult stages of life are indistinct in our culture, but they are still there, unsignposted. The modern world is delaying some of these stages of life compared to previous generations. “Adult” children seem to remain dependent on their parents beyond 30 to a degree that would have been shocking in the past.

The adolescent to mid-life FIRE-aspiring you must throw switches that route your life differently from your peers. But the facts of FIRE don’t change – if you haven’t got your shit together and started along the track by the time you are 30, you ain’t retiring by 45. Retiring by 55 is ten years early and very doable. 50 can be done with serious effort, but ERE does have a point. Most people won’t want to take the hit.

So young pup, give up a little bit of life now if you can, so your older self may have a choice, though I confess I am with Monevator – don’t kill yourself to get out in 20 years.

I am closer to Monevator than I thought on xFIRE, even though I used it

I disagree with him on some things, like that work is a meaningful part of life in and of itself. In one respect I agree. There’s a nasty hair-shirt streak developing in the xFIRE ethos.

My younger self would have struggled with suck it up, work sucks, keep your eyes on the horizon in my 20s. At the start of your career you have greatest freedom of action and least to lose by trying a different track. To sign away twenty years of your life to trying to get away from a working situation you detest is selling yourself short. You owe it to yourself to ask if that’s the best you can do.

I lived the counterfactual view: 20 years of your life is far too long to stay somewhere mediocre when you only have maybe 40 healthy years left – get a new job first, your house is burning down! I was OK with London apart from the price of rents and houses, but I wanted more money and more interesting work, so I changed job three times in the 1980s, improving my situation both in terms of pay and congeniality.

I never solved the housing cost problem so I left London, because no job I could get was going to solve the housing problem for me. I’ve spent a lot of time bitching about work here, but for 27 out of thirty years I was okay with work. There was enough interest, people were good in the main, and particularly in the early days at The Firm I was learning a lot of interesting new things from some really bright people. I could still have made a decent fist of being a gentleman aristocrat if I’d had a trust fund, but work wasn’t a terrible second best.

I used xFIRE at the end, but that’s a very different thing from using xFIRE for 20 years. What’s wrong with xFIRE from the get-go is that you are telling your young self that the next 20 years is going to be hell. Form may follow thought. Just as work isn’t a panacea or even a serviceable reason for living, it may not need to be hell either.  Provocatively, perhaps xFIRE is more suited to desperate old gits at the end of their working lives than Page 1 of the Book of Working Life for twenty-somethings 😉

There’s a Jungian stages of life aspect to this too. Susan Roberts says

The young person’s task is to get into the world

Early adulthood asks us to establish ourselves in society — through vocation, relationship, and a stable material life. Now the idealistic youth must bank his or her fires in order to adapt to the world on its terms. Hopefully, in all the striving for worldly accomplishment, the twenty- or thirtysomething will not lose sight of the original vision, but find ways of working his or her gifts in spite of the compromises demanded by reality.

suck it up, work sucks, keep your eyes on the horizon is an avoidance technique. In the world but not of it, not quite failure to launch but probably not engaging. While I reject wholeheartedly that work is the non plus ultra of meaningful achievement in the second half of life, perhaps it has its role in the first half. Roberts’ description is a decent account of the accommodation I found with work – I wanted to rise above the first technician job, the second studio engineer job, I wanted to design, to innovate, to originate, which is why I eventually aimed at research. I did not lose sight of the original vision. For twenty years I lived it.

Having given that point, I am now going to take a pop at some things that are red herrings in my view.

well-paid part-time as FIRE-lite? Yeah, right

Here’s a canard. You don’t have to go nuclear on your career, you can just do some well-paid part-time work. Nothing I have experienced in three decades of the world of work supports this view. There are inherent problems with part-time – other people will be learning faster because they are full-time. They will get better quicker other things being equal. People bitch about there being a penalty for taking time out of the workforce but it’s not rocket science. Practice makes perfect.

I lived this prejudice. The Firm was dead keen to reduce its costs by encouraging part-time working in the 2009 crash. I didn’t entertain the idea for a heartbeat. If my career was flaming out, then at least full-time I could make the most of the last years – three years gone part-time was probably equivalent to another ten years shelf-stacking at Tesco to make up for the money I wouldn’t earn. I’d still be there. There was a second fear, because if they can get along fine with only half of you, there’s an obvious extrapolation to be made.

Of course we officially applaud people taking time out to do more important projects in their lives, but if it’s my business that takes the hit when you’re telling me that your choices in life are more important to you than my company I hear the message. I’m likely to take the line that I’ve very happy for you, but don’t do your important project at my cost. Fortunately, I’ve never been anywhere near being in charge of HR with such unreconstructed views, but I didn’t originate this, and I’ve seen some small companies stiffed that way. There are some great paying part-time jobs, but not as many as full-time. Why is this? Part-time cleaners are interchangeable. Part-time CEOs? Not so much. It’s also a right pain in the arse for full-time workers to interface to the particular part-timer with domain knowledge on job-shares and continuity sucks. Which are all part of the reasons why part-time work generally pays less, if you don’t want to hear it from me, hear it from the office of national statistics4.

If you want a high rate pay, go full-time for better odds. Low pay is 2/3 median, high pay is over twice the rate at 1.5  median

So when Monevator nonchalantly says you can save yourself the trouble of saving up a quarter of a million pounds if you can earn £10,000 p.a. for the lifestyle you want, I think WTF? I can’t even think of something I could do to earn £10k p.a., other than work in a shop. I could probably earn more than that if I worked full time, but from what I’ve seen of the world of work it has become more demanding and always-on rather than less. Don’t fancy that much.

OTOH, if contracting is your taste, then I can see there is much less of a problem. I believe indeedably uses this method, favouring recreation in the warmer months and work in the colder ones. Hats off to him for innovation.

Some of that objection to part-time is I have no desire to go contracting. Contracting comes with self-promotion and always hustling, and I’d rather crawl over broken glass than hustle. I have done occasional hit and run jobs since retiring. I earned an higher hourly rate with one than my working self ever did, but not on a sustained basis. And having to do 10k worth of that a year gives me the creeps, indeed having to do anything for x amount of money gives me a very bad feeling indeed. What part of financial independence am I missing here? FI for me is not having to sell my time for money. End of. To paraphrase Kate Moss

No consumer shit tastes as good as financial freedom feels

I have enough to buy more consumer shit than I want, and arguably consumerism is/should be a little bit less important as you get older. Erich Fromm summed it up in the title of his book, To Have to To Be. When you are young, Stuff makes more difference to your life, because you start out with now’t – you first kettle and your first chair and your first house make a huge change to your lifestyle. That lessens with time.

There is an argument that stuff bought you better security in the past than it does now

The percentage of workers who are freelance instead of salaried grows each year. House prices are prohibitive in any place with a strong labour market. […] the greatest wealth now comes from the accumulation of invisible capital, not physical stuff: startup equity, stock shares […]

Meanwhile, crisis follows crisis and mobility now feels safer than being static, another reason that owning less looks more and more attractive.

Some of us are cut out for that part-time required sort of FI-lite (thin FIRE? sputter? unFIRE? extinguished? never ignited?) , but I’m not one of them. I had a working life as a full-time employee with no break between getting my first job and leaving work for the last time other than a one-year MSc.

I’m an all or nothing guy here. It would be a bit rough to work thirty-five hours a week for less than my money does sitting on its backside. That isn’t a good message for me. Easier to work a decent job at a decent rate and parlay your savings into a decent stash than work some shit job.

Now that’s just me and my unreconstructed ideas about work that were probably set forty years ago. I could see the rationale for elective spend, if you need to work part-time for essential spend then you ain’t FI. If part-time working nets you 10k so you can go on holiday more often and that lights your fire, then have at it.

Do what thou wilt, and harm ye none.

Your time gets more valuable as you get older

Supply and demand. There’s less of it left, bud. The young just don’t get this, because, well, they’re young.

As a well-known vinyl record from my youth said

You are young and life is long and there is time to kill today.
And then one day you find ten years have got behind you.
No one told you when to run, you missed the starting gun.
So you run and you run to catch up with the sun but it’s sinking
Racing around to come up behind you again.
The sun is the same in a relative way but you’re older,
Shorter of breath and one day closer to death.

I would agree with Pink Floyd that the fourth stage, midlife, is where may people stall. Overly invested with the meaning that served them well for 20 years up to then, they freeze rather than abdicate that source of meaning. For some (more often chaps) it’s work, for some it’s the contents of the nest that if done right should become empty in the natural order of things.

At least becoming overly invested with work doesn’t do anybody else any harm. Helicoptering your kids can seriously arrest their development, much must happen between the third (adolescence)  and fourth stage else Philip Larkin’s prognostications of This be the Verse may come to pass. You will recognise those children later on – arrested at the puer aeturnus stage. The gold of character is at times forged in the furnace of adversity.

As an example I did not gain understanding from the crisis of confidence in my third year at university. After many years I did eventually learn to let it go, it was a product of time and stage, not a curse set to play out again and again.

Had an external force alleviated it, however, then like getting a childhood illness in adulthood, the injury may have been worse because the transformation would not have happened. I wonder if our Western societies fail us in having no real rites of passage across the stages of life, particularly those early ones. Passing your driving test or getting your first credit card don’t really match up to slaying a boar, or a walkabout. With no model of transformative challenge, is it any wonder that Western adults can freeze at the crossroads of midlife, clinging to the empty shells of old forms that have served in the past, but now stand in the way of change?

Midlife is a big hazard, because you are established enough that you can get away with stalling it, clinging on to past glories. Compared to the fusillade of transitions across childhood, you’ve settled in steady as she goes for 20 years and think you have it sussed. The words of Carl Jung indicate the problem: What is great in the morning will be little at evening and what in the morning was true, at evening will have become a lie.

The problem isn’t that the world changes. You do. Worse still, the tendency is to regress, to capture a lost youth but without the innocence. This inflates the sales of sports cars and persuades flabby men with a beer gut that their Russian bride thinks he’s 21 year old hunk.

In her section finding lasting values in the afternoon of life, Susan Roberts says:

Few of us today have the financial resources to become renunciates, and so we may have to keep working into our elder years.

Hmm, having this option is what FIRE is all about. It’s an option, and just like a stock option, it is an option, not an obligation to retire early –

But whatever our outer activities may be, our attitude needs to change if the afternoon of our life is not to be one long process of decline and ourselves to become embittered old people.

[…] a flowering of its qualities of imagination, depth, and understanding. With nothing to prove and no one’s approval to seek, the old person may gain a delicious freedom to return to the original vision first kindled in him or her in youth. He or she may then become a character, a wise old man or woman, and ultimately an ancestor, a bearer of values that outlast the fleeting concerns of the present moment.

To reach this point, one must submit to the archetypal tasks required by each stage of life. By allowing the deep processes of nature to work on us, the acorn of our destiny may grow into the mature oak tree of our fully-realized individuated self.

Clinging to the chimera of you are what you do may not be the best way of doing that. But in my observation fewer than half of those who make it to old age achieve individuation.

And yes, I am making the case that perhaps the meaningfulness of work is a truth that may be more of the morning of life than its evening. It was in my case. It was much more important to me at the beginning of my career, a big part of who I was, neither of my parents had gone to university and my Dad worked with his hands. As I grew older it mattered less, I have now rendered unto Caesar the value of a working life, exchanging my human capital for financial capital. It is time to move on, to embrace the seasons.

It really doesn’t matter whether you retire or not at some point earlier or later than anybody else. To make it possible5 your  younger self needs a motivational story. “just suck it up for as long as you have been alive and there will be a pot of gold over the rainbow” is not inspirational.

If your older self thinks the same about work as your younger self your development has become arrested, and you will not individuate. The hazard of that is of a long process of decline and ourselves to become embittered old people. You may, of course be fortunate enough to avoid physical decline and die in your sleep. You may project all your energies into the grandchildren. It is not mandatory to deepen as you get older. Just try and avoid the embittered Victor Meldrew, eh, for all our sakes.

Your older self may come to the same conclusion about early retirement as your younger self, but if the reasons are different, that is good. Let the option lapse. Give your freedom fund to your kids, or the cats’ home, or shovel it out of a helicopter over your home town. Your younger self will have lived a bit less large. Insurance against adversity always costs.

I have seen people who fall apart after retiring. Often they fall because their sense of meaning is bound up with work. What was true in the morning failed them in the evening. Some struggle because they are skint, or they become infirm. Some fail to maintain their human relationships and web of life, or don’t build these up before they retire. There are many ways to screw up in life, ain’t that a thing? That perhaps many fail does not mean all will fail.

Happy New Year to y’all, and a cautionary tale of work I came across.

I had been in the States working on a project when it became apparent that an internal takeover was going to bust my project in Feb 2009. Americans look after their own, while The Firm now owned that subsidiary this work was going to move over there and out of my division. Project work was drying up due to the financial crisis.

Your job gets more brittle as you get older

One of the problems you tend to have as you get older is that you specialise more. You also get paid more, if you are any good. That makes the shape of the sort of holes you are going to be a good fit for quite specific and therefore rare. Monevator nonchalantly says

get a new job first, your house is burning down!

That’s a young man’s game. It might be an argument for living in London6 rather than Ipswich, because your pool of potential alternative employers is larger. Selling up and moving would cost me a year’s wages, and we owned a smallholding at the time. I just didn’t have the get a new job option – there wasn’t more than 10 years of work to play for. So I chose to play a weak hand, as it happened quite well.

I was fortunate enough to be able to use a different legacy skill for my final project, But before I got that project, I faced this exchange which summarised the working environment. Let’s call the chief scumbag Graeme F, he was my division head’s boss7. GS stands for generally satisfactory, the performance management mark of 3/5 (average). My boss had made mine “needs improvement” before I got that work. I had already applied for voluntary redundancy, though it would have been premature. The shithead GF demanded a conference call with me and my division head just before 17:30 hours because he “had some news he thought I’d be interested in“. These are notes made at the time – the first thing I did next day was buy a telephone recording coil so I would have an incontrovertible record of that sort of intimidation should it happen again.

Friday March 6th 2009

GF: [We are] Raising the bar next year. will be harder to improve GS

Me: This sounds like a threat to me (this was verbatim, I could hear the bullying sneer in dear Graeme’s voice.)

GF no, effectively saying how it is

Me: okay carry on

GF: you cannot get [voluntary redundancy] on a GS

Me:  outline that I am going away from that anyway, outside opportunity needs [VR] to work, time has passed, [The Firm] looking better, new projects etc

GF: but we may be able to do something else for you

Me: ok

GF: offers three months’ salary plus gardening leave to go

Me: that is not enough

GF: seems taken aback

Me: I will not change the course of my life for such a small amount

GF: reiterates stuff about raising the bar

Me: I say ok I hear what you say, sorry if the news didn’t get to you, wasting time etc

Graeme didn’t meet his target that day. Three months VR after 20 years was derisory, plus I would have lost an advantageous Sharesave. I was at the very outset of a three year journey out, I couldn’t get there from here. Another entry in the log celebrates my division head (who brokered this delightful meeting as the offer of a great opportunity) getting the bum’s rush without VR. How did that happen?

Finished at fifty is a thing

They even made a TV programme about it. All sorts of people will holler in yer ear if you don’t like you goddamn job so much go get on your bike git a new one you lazy bum. Hello IDS, Digby Jones, I’m looking at you . The trouble with that specialisation is my division head was shit outta luck as far as finding another job for a division head at a FTSE100 like The Firm. There weren’t any, and there was a large pool of competitors – the guys the CIO had let go in the days before. The CIO’s management style was to call all division heads one after the other into the office, and ask each one to describe a weakness of the just departed fellow. A commenter elsewhere described the CIO’s modus operandi as

replacing British IT workers with resource from India here and remotely –  decimate the workforce.

Lots of guff about new tech, agile, under the hood it will be nothing but using the cheapest IT workers they can get.

That sort of environment, young fellow, is why your older self needs a RE ejector seat and parachute. He may earn more as he gets older, but his position gets more brittle as it gets more specialised, and more susceptible to hatchet men like that CIO.

I was able to switch direction out of IT and use a legacy analogue RF electronics skill on my final project, which is how I was left standing after that division head left. More by luck than by judgement, a specialism that fitted another set of odd-shaped holes was in demand at that time. So after three years I brought the damaged wreckage of my career to a successful landing and was even glad-handed on my leaving do as having left on a high. It could easily have gone differently, and I would be stacking shelves rather than writing this.

You don’t forget that sort of learning in a hurry. What I learned was never rely on selling your time for money again, it makes you a hostage to fortune.

Even if that hadn’t happened, I was already past the apogee of life, and hopefully the individuating self would have gotten the message through:

Self, you need to start looking for new ways to be, because what is great in the morning will be little at evening and what in the morning was true, at evening will have become a lie

In my life one of those things was work. Had that crisis not happened I would still be working, running on the old default assumption of working to NRA. In hindsight that would have been a dreadful waste of my time.

We are all headed for different waystations on the branching railway lines of life, maybe this will be different for you. But if you see no things that were desperately important to you in the morning of your adult life become less so, then ask yourself how you are so invariant in the face of change. The sun is making its way across the arc of your life. Change with it, for the moving finger writes, and having writ moves on.

  1. I am a RE failure by that definition, I worked for 30 years, so 10 years behind schedule. I am still a long way to getting my State Pension, and not even at the NRA for my works pension 
  2. One of the tenets of the FIRE movement is that not all things are equal and many people spend like muppets or carry revolving debt. All this is true, but you just can’t bring the difference in lifestyle down to zero by spending smarter though perhaps it won’t be half their disposable income. 
  3. For some reason unbeknownst to me extremely bright materialist rationalists are drawn to cryogenics likes moths to a flame (for example). It is possible I am just too dumb to understand, but it seems obvious to me you must not lose state. I do not find it impossible to conceive that humans could live forever, but I’d say you must not die first. Reanimating a hunk of meat strikes me as a hiding to nothing. Sure, future alien visitors might be able to recreate humans from DNA like Jurassic Park, but these would be new humans, not the deceased living again with all their past memories and foibles, in the same way as your children don’t remember your schooldays, first love or skills in Latin though they may look like a mini-you. 
  4. ONS ASHE Fig 5 
  5. Parents can try, but there be dragons in that territory. The dead hand of parental capital coming at some unspecified time to transform their lives easily robs the children of agency, because it doesn’t seem worth it for them to make the effort to try and save something that will be lost in insignificance to the inheritance. There is a similar problem with the legions buying lottery tickets – Lady Luck seems to be a harsh mistress when she pays out, because the recipient has not learned the value of the windfall. No idea how the aristocracy used to fix this problem, though it seems they did as many estates have been in the same ancestral hands since 1066 
  6. Just kidding. I left London in 1988, and my career went titsup in 2009. That’s twenty years of outrageous London prices I haven’t had to pay in rent, I left there because I couldn’t afford to buy a house. That Guardian millenial’s lament that “House prices are prohibitive in any place with a strong labour market.” held true before. I had a decent job and savings, but I was living in one room. 
  7. Researching this on Linkedin, it is probable that Graeme F was a hired gun brought in from elsewhere in The Firm to ping people out from my campus. I guess like management consultants on the cheap, outsiders will be more ruthless because they don’t know anybody locally 

A Friday the 13th fright

I wake up on Friday the 13th to find the serial liar and philanderer has bagged a clear win. Guess that’s a clear vote for Brexit then. Bring it on, it’s what people still really really want, and at least this time there’s a sort of actionable form of Brexit on the table. I did not contribute to this result 😉

A serial liar in the wild

Yes, I’d have preferred a hung Parliament and a second referendum/revocation. However, that was clearly a minority sport, and this time it’s clear, and it’s for something actionable, unlike the original misbegotten EU referendum which was for an undefined negative. I still despise the weakness of that referendum to settle a catfight in the Tory party, its lack of needing a supermajority for constitutional change etc. But now it’s clear that it’s unequivocal and it’s what most people want, so let ’em have it.

The financial aspect

Can’t really understand why, on sparking up Iweb, I am significantly better off. Sure, I bought IGWD which is sort of VWRL hedged to the pound, and it has gained some due to the lift in the pound due to some Brexit clarification. But most of my holdings are international equities or indices, and one would expect them to tank in £ nominal terms, giving back some of the gains I received earlier.  While I do hold a fair lump of IGWD it isn’t enough and hasn’t changed so much, However I do have a fair amount of VMID, and that shifted more.

Against my gut judgement I’d invested all my ISA bar about £2k. The Santa rally seems to have come early this year. Will it stick, or will the rising pound reverse the Brexit boom I got a couple of years ago? In the end I will probably be better off that my £ denominated pension income is worth more in terms of the value of foreign stuff that I can buy even if my ISA takes a gut punch. Maybe next year will be the time to buy relatively beaten-down in £ terms foreign assets with my last ISA contribution fo all time.

I predict Brexit won’t be done within five years

Sure, we will be non Europeans, hopefully out by Jan 31st. Will we have a finished trade deal by 2025? Nah. In the words of one of pifflepaffle’s alleged heros when talking about another European adventure1,

this is not the end. It is not even the beginning of the end. But it is probably the end of the beginning.

  1. concerning the battle of Al Alamein but against Rommel 

passive investors, are you destroying your children’s world?

Most of the brouhaha about the rise of passive investing comes from the intuitive feeling that passive investors are only along for the ride, they don’t know or care ‘owt for what the companies they hold passively are up to.  Insofar as they are not engaged shareholders, they don’t guide the companies they own collectively, and the burden of shareholder feedback falls upon a smaller band of active investors.

Most of the argument about this in the FI sphere is a concern on corporate governance and returns, and there are various forms of rebuttal. The dumb passive billions are like the carriages on a train following the remaining active engines, but they switch to a different locomotive depending on the outcome, the fickle bastards. So it comes out alright in the end, is the received wisdom – the passive crew are amplifiers to the results of the active guys, rather than sponsors of their yachts. So the dumb money is safe1, because it follows the smart money.

The Anglo-Saxon business model eats the future, quoth the British Academy

who make the case in an extensive report that the narrow definition of the aims of the corporation in the English-speaking Western world makes companies focus on making money to the exclusion of all else. They are required by law to make as much money as you can for your shareholders. There is an implied “by legal means”, but globalisation means that there is a race to the bottom because what’s legal there isn’t necessarily what’s legal here. That this has been damaging to Western working populations can be seen by the changes in the workplace, particularly since the global financial crash – disaffected Western aspirations voted for Trump, and Brexit.

One of the problems of globalisation is that it has massively reduced the leverage of government regulation. The UK government could regulate to reduce practices that harm the environment, but the activity so discouraged will then migrate to a jurisdiction that doesn’t have such scruples.

On the other side, as buyers we qualify our investments by the desired rate of return. This is marginal enough as it is – the common assumption is a 4-5% real return on investment integrated over decades. The corollary of that is that you need a capital of 20-25 times your desired annual income. Shift that down to 2 to 3% and that starts to become 50 times your desired income; doing that in a 30 year working life starts to look really tough.

A quick spin through the top components of a whole world index fund

Do big firms eat the future? A glance at the undesirable practices of the biggest components of a well-regarded recommendation of world index fund VWRL isn’t happy reading for those with a social conscience:

Apple Inc: Failure to adhere to Chinese labour laws. I’d charge ’em with price-fixing, planned obsolescence, anticompetitive practices, non-replaceable batteries2 and refusal to engage with third-party or DIY repairs. Pictures of workers and pollution here

MSFT: I couldn’t dig up that much dirt. Yesterday’s men, they tried to rule the world and failed, though they were done for antitrust offences ISTR. Bill’s still rich as Croesus

AMZN: So bad Wikipedia has a page dedicated to AMZN criticism. Closer to home they treat people like shit in distribution centres. I think their riposte boils down to ‘treating people like shit is part of our business’ and while it’s true that I left work because I was treated like shit at a critical juncture, it’s notable that for the vast majority of my working life treating people like shit wasn’t a widespread part of my work experience or that of people I know.

FB: Suborning the political process, getting rich on fake news, making sociopaths of us all, aiding and abetting Dominic Cummings, refusing to stop meddling in elections by showing different things to different people. Selling personal data to the highest bidder, lying about it until caught. The problem was manifest from the get-go as the youthful Zuck described his punters as dumb f**s. Evil courses through the company’s veins. If I were God for a day social media is a class of product/service I’d uninvent and rewire human brains so it could never be dreamed up again. Yes, it’s nice that Grandma in York can keep in touch with the grandkids Down Under but the collateral damage in terms of human misery is appalling IMO

JPM: I couldn’t come up with any dirt but they paid a $13bn fine for something to do with the GFC. Presumably they have enough money to pay decent lawyers to get them off the hook, so it must’ve been bad.

Two lots of Alphabet, Google’s holding/parent company: How’s that ‘Don’t be evil’ thing going down with y’all? Oh and this

on Youtube, owned by Google. It’s either irony, hubris or advertising, and I am not clever enough to determine which. Orwell called it forty or fifty years too early with “if you want a picture of the future, imagine a boot stamping on a human face – for ever.” Usual charges against Big Data, suborning the common weal, all that stuff. I’m kinda tickled that the Google search of what’s wrong with Google assumes you have technical problems, rather than searching for the central heart of darkness. Chapeau for the subtle control of framing, guys. What’s wrong with Google? Nothing to see here, move along now.

JNJ: I couldn’t dig up that much dirt.

VISA: I couldn’t dig up that much dirt.

NESTLE: Baby Milk Action. ’nuff said, although the £25 Kit-Kat should get an honourable mention just for taking the piss, I can’t make the case that it’s evil.

It may help me retire early, but I’m not sure I can actually feel good about owning VWRL. Perhaps I can tell myself that’s only 12% of the market cap (and mainly American) and that the levels of evil were dropping as I went down the list to the smaller fry, but to be honest I’m not sure I want to know what the rest of them get up to after this exercise!

On the other hand if you try and stick to being ethical you get slaughtered in the markets. Sin pays. You can read countervailing arguments, but it’s people talking their book. It is interesting to observe that ethical investment screening locks you out of nearly two-thirds of the UK’s largest firms. This suggests ethical passive investing just isn’t possible in the UK market. Passive investing only works if it is representative of the market by capitalisation, and a third just isn’t representative. Turn the telescope round and the British Academy chaps have some point – two thirds of the top British firms are harming the public good somewhere.

Maybe nobody will be able to retire in future if this is cleaned up, the rate of return will be so dreadful you just aren’t going to live long enough to save enough to get out of the rat race. Historically, capital accumulated very slowly across a human life, to the extent that dynastic and ancestral capital ruled society. You still see the background radiation of this in that 25000 landowners own half the UK. and the largest share of a third is the aristocracy, where the land has remained in the same families since William the Conk declared himself owner of all of it after 1066 3.

The problem is that money is power, and power corrupts. Most of these firms get an edge through scale. With the exception of FB, they all provide a useful or valued service, they just happen to cut corners in parts of their operation, and globalisation weakens limits on their ability to cut those corners in dark places. We’ve seen some of this movie before – the robber barons of the Gilded Age, and a lot of the pollution and abusive work practices echo what happened4 in the industrialising West in the last century or two. Tim Worstall would probably say that sort of exploitation is a price worth paying. It worked in the West and it’ll work for the global poor.

Globalisation was good for humanity in general, but not for most people in the West

In the article the crisis of capitalism Milanovic argues that

The western malaise is the product of uneven distribution of the gains from globalisation. When globalisation began in the 1980s, it was politically “sold” in the west – especially as it came together with “the end of history” – on the premise that it would disproportionately benefit richer countries. The outcome was the opposite. Asia in particular was a beneficiary, especially the most populous countries: China, India, Vietnam and Indonesia. In Europe, as in the US, it benefitted the 1%. It is the gap between the expectations entertained by the middle classes and the low growth in their incomes that has fuelled dissatisfaction with globalisation and, by association, with capitalism.

Harvard isn’t noted for being a hotbed of Marxist anti-globalisation thinking, but their Dani Rodrik made a similar case in 1997 in his book Has Globalisation Gone Too Far5, observing that lower-skilled wages have fallen in real terms in the US and then Europe since the 1970s. This fall predated my entry into the workplace. I did not observe this at first, because my experience of the workplace was different from my father’s6. He was a maintenance fitter, I worked in industrial research. The suckout took thirty years to reach me, but reach me it did – I retired eight years earlier than normal retirement age for The Firm to escape this deterioration in the workplace.

It’s quite chastening to see that the pathologies dragging us down now were foretold in 1997, exactly as I reached the halfway mark of my shortened working life. Of course, the problem with working out which portents of doom to heed is that  there are so many of them, most of the things that could go wrong don’t go wrong. The bear case always sounds smarter. It’s still eerie to see that over twenty years ago a forecast of the troubles we  face now was written:

Globalization is exposing social fissures between those with the education, skills, and mobility to flourish in an unfettered world market―the apparent “winners”―and those without. These apparent “losers” are increasingly anxious about their standards of living and their precarious place in an integrated world economy. The result is severe tension between the market and broad sectors of society, with governments caught in the middle. Compounding the very real problems that need to be addressed by all involved, the knee-jerk rhetoric of both sides threatens to crowd out rational debate.

The standard answer to that from Calvinist work-is-good-for-you believers is adapt to creative destruction, get on your bike, or die, suckas. Bollocks to that – life is about more than work, I don’t want to hustle for the rest of my days, because I loathe hustle and self-promotion. Had I been born ten years later, that escape route wouldn’t have been an option open to me.

There’s no good reason to put up with a deteriorating workplace if you can buy manumission from The Man. Arguably the stagnation in living standards since I left work meant I haven’t gotten relatively poorer as a result of rising wages in the time I have been out of the workforce. Observation shows that in the West, and in Britain in particular, work is getting more shit for most people. Rodrik was right.

There’s a case to be made that Brexit was partly a rejection of globalisation, the line that if I am going down, you lot are going down with me. Time will show if they get what they wished for. Let’s hope they like it, eh? They’re not going to get a do-over.

Globalisation is much more popular in Asia than in the West, according to Milanovic

But the dissatisfaction with globalised capitalism is not universal: a YouGov survey showed a very high degree of support for globalisation in Asia, with the lowest support in the US and France.

It stands to reason – it has been a win, particularly for the Asian middle class.

Who has gained from globalisation, 1998 to 2008. Tea-leafed from Milanovich’s report in the Harvard Business Review, “Why the Global 1% and the Asian Middle Class Have Gained the Most from Globalization”

Right-wing nut-jobs like the Adam Smith Institute’s Tim Worstall makes a cogent case that globalisation has been a good thing for humanity in the round. He is probably right in that nobody has experienced an absolute terms retrenchment7, but if I had followed my Dad into a blue collar job and Tim showed up in a bar telling me “chin up old boy, your end of the boat had to go down for the greater good, but though you can’t buy a house your telly’s sharper and your phone isn’t screwed to the wall like your Dad’s” then he might end up with a robust and physical riposte, because I don’t particularly care about humanity if I am feeling shat on. He’s also got an answer to the tosspot8 David Attenborough yammering on about environmental issues and that there is no problem that exists in the world to which the right answer is ‘more human beings’, basically don’tcha worry your little head about that, capitalism will fix that too.

Even on a white-collar income, Dani Rodrik’s declining trajectory is shown in my life. I discharged my mortgage ten years later in life than my Dad did, on his single household income. The arrow of time still points in the same direction, the retrenchment in home ownership9 in more recent generations. Worstall would say so what, Millennials will live longer than previous generations, and they have far more choice in what to spend their incomes on. If he makes the case in some hipster east London bar through a mouthful of smashed avocado on toast, he may be met with some pushback in the form of “as long as those things we can afford don’t include buying a house or having children, yes”.

Is your passive FI/RE dream eating your children’s future?

The British Academy lays out the charge on page 27, Corporate Financing that the arm’s-length passive ownership is not only detrimental to the common weal, but it amplifies the actions of bad actors

Traditionally, corporate financing has been concerned with the interests of investors alone. Stock market listed companies in the UK and US are dominated by dispersed passive shareholders who do not provide the active engagement with companies that is associated with larger share blocks in other countries around the world.

In particular, universal shareholders who hold the global portfolio of shares through index funds have risen to the fore. To the extent that there are engaged investors, they take the form of short-term hedge fund activists who hold blocks of shares in companies for an average of between two to four years.

What is for the most part missing in the UK and US are long-term, engaged holders of blocks of shares who act as true owners of corporate purposes . Since one cannot have a relationship with the anonymous, the absence of identifiable holders of blocks of shares undermines the provision of long-term relationship forms of equity finance. The result is not only insufficient governance and stewardship by investors but also a deficiency of committed owners of corporate purposes.

I am not clever enough to see if they are right, but at least some of that seems to have a grain of truth to it. This bell has been tolling for some time – 8 years ago I watched the programme Finished at Fifty that showed a stark contrast between the lifestyles of a Chinese middle class aspirant in an economy with rising prospects and a fifty-year old Brit who had already been offed from one job, carried too much mortgage for his stage of life, lived high on the hog and wasn’t looking at the road ahead. Some of the anger I had in that post is because I saw myself in him, and I was half-way through extricating myself from that sort of folly. We hate seeing in others the dim reflection of our Shadow, and that was why watching this berk do what I had done two years before got on my tits so much…

The stench of decline in the West has grown worse since that programme, in the English-speaking world it’s names are Trump and Brexit, and they harken back to making America Great Again and its Mini-Me Brexit Putting the Great back into Great Britain Again over here.

Putting the Great back into Britain

It just ain’t gonna happen, guys. Sic transit gloria mundi. Well, it’s going to happen for the better off, but although I am over halfway up the UK wealth scale10  I am nowhere near safe from that firestorm, and I don’t even have the right to live elsewhere any more11 any more because of these nostalgic dreamers of Imperial glories past selling their jingoistic story.

Jacob Rees-Mogg will do all right out of it

Jakes will do all right out of it. Of course he’s not influencing Somerset Capital Management‘s investment decisions since he’s an MP. So that’s all tickety-boo and above board then. But the engine of globalisation is driven by our money as well as his. Perhaps I am closer to Tim Worstall than I like to think. It’s not a good feeling.

  1. I am sure one day there will be someone with enough cash to be able to flush this dumb money by pumping and dumping enough stocks along the index rebalancing cycle, but it hasn’t happened so far that we know of. 
  2. The battery works on a chemical process and has a finite number of cycles before it loses capacity. Once upon a time you could change the rechargeable battery in a mobile phone just like in any other electronic doo-hickey. Apple led the way by glueing the damn thing inside the case, so you get to throw the whole thing in the trash when the battery is knackered. 
  3. The Domesday Book of 1086 is the first and last comprehensive record of land ownership in England. Unlike any other self-respecting European country the cadastral records of the modern Land Registry don’t cover 14% of the country because the aristocracy don’t want you to know how rich they are. Land is their preferred method of preserving capital across the generations. Estates aren’t sold when inherited, so they can do this on the Q.T. 
  4. for instance the Dhaka garment factory fire of 2012 has echoes of the Triangle Shirtwaist disaster in NYC a hundred years earlier 
  5. Yeah, that’s an Amazon link. I am part of the problem, as I’m sure are most of you. Don’t like His Jeffness? Google it…oh never mind 
  6. My Dad retired just after his 65th birthday, having worked at that company for 23 years, but he started work at 14, so he worked for 50 years in total. 
  7. I find this hard to square with the increasing signs of overt poverty in the UK, the increased amount of visible homelessness, the food banks that Iain Duncan-Smith regarded as just the third sector picking up the slack rather than the direct result of his vile disdain for the lower orders not being able to ride out the five-week delay built into Universal Credit welfare reforms pour encourager les autres. But let’s not pick the fight with Sir Tim Worstall, eh? 
  8. If you’re about to pound the keyboard giving me what for about the dastardly disrepect shown to Sir David, may I respectfully suggest to you that your irony detector has failed in service. 
  9. You can make the case that home-ownership isn’t as well suited to modern insecure working patterns. The trouble is that the rental market is too skewed to favour landlords in Britain, with virtually no security of tenure what with the section 21 eviction at short notice without reason, though there are moves afoot to change this. That won’t take things anywhere near the sort of security of tenure German renters have, for instance. 
  10. the median UK household wealth is about £260k according to the ONS 
  11. I suppose I could buy Maltese citizenship but Brexit has shown just how frail supranational entitlements of residency really are. You gotta admire Maltese chutzpah, when the EU gave them a bollocking for selling citizenship they simply raised the price (to more than I can probably afford) and said that that was all right then. Malta’s got other serious problems – it is far too close to obvious geopolitical hazards, the government seems to have issues with journalists who find out too much. Before Brits point fingers at those Maltese fly-by-nights note that the UK government sells citizenship on a sliding scale of £2,000,000 to £10,000,000. Interested? Apply right here on gov.uk. The extra £8M readies buys you three years off the settlement delay, and you can fast-track the application for 500 nuts (on top of the £1600 fee).  We don’t give you all that US bollocks about moral turpitude. Acts of baseness, vileness, or depravity in the private and social duties which a man owes to his fellowmen are absolutely fine with us. As long as you do your crime and skip the country where you perpetrated it within 12 months, or your criminality is more than 10 years ago we’ll whistle a dancing tune and welcome you and your money with open arms. What’s more, unlike those money-grabbing Maltese the money is still yours, all we ask is you lob it in a UK bank and convert it to sterling. Ta muchly. Obviously if you wanted to get EU citizenship you are SOL, but £2mill ought to get you a suitable gated pad with a concierge, so you don’t need to fear the revolting proletariat in the years to come. Toodle pip old boy and the best of British luck in sharing your ill-gotten gains with us investing sagely. 

Crafty Klarna card bites savvy student

Fintech is a jazzy name for innovation in ways of providing you with financial services. It usually involves a mobile phone, which should never be involved in anything valuable to you, because of the ease with which ne’er-do-wells can run off with your phone number via a SIM swap. But it doesn’t have to. The trouble is in the word innovation. A lot of innovation is put into parting you from your money. It began with Access being your flexible friend, helping out Money when you run out of month. The song’s still the same after 30 years, but innovation is there to riff on the tune.

The problem is that innovation means that your usual spidey sense for scams or bad outcomes doesn’t work. Take Klarna, f’rinstance. Classic piece of fintech, it’s designed to reduce friction in spending for the young. I’ve already had a grouse about Klarna this time last year in the YOLO train-wreck post, and now there’s this story about a young lady who has only just discovered the impact of Klarna on her credit score.

Our Klarna victim

Your grizzled scrivener has a sneaking admiration for Erin, because at 21 she is keeping an eye on her credit score and seems to be managing her general finances with a competence that my younger self failed to achieve. I had to chase earning more to assuage the leakage from my pay packet into things like beer, music and high living. OTOH my younger self was still not so far from the principles my parents had instilled

Don’t spend more than you earn, son, and if you have to do it, only for non-wasting assets. Do not borrow money for consumption

Klarna seems to be a specific case of a new class of fintech, basically designed to part the poor from their money, by salami-slicing the sticker shock over time. It comes with instagram-friendly puffery but the basic premise is that £100 sounds high, so make it four lots of £25. It is absolutely true that it’s easier to pay off four lots of £25 from four pay packets than one lot of £100.

Always pay cash for your thneeds

What you must not do, however, is to then go and do that another three times that month, thinking to yourself it’s only £25, I can easily manage that.  Because four lots of £25 is just as tough as one lot of £100, but now you’re stuck doing that for four months rather than one. This is the fundamental scam behind all these slice-it-and-dice-it buy-now-pay-later schemes, they’re trying to get you to spend more.

The rule is simple. Always pay cash for thneeds. What is a thneed? The Lorax had this taped way back in the 1970s. It’s something that you think you need, but the subtext is you don’t really. And it destroys the environment in some way. Fits fast fashion perfectly.

In the personal finance world we call these Wants, as opposed to Needs. There’s nothing inherently wrong with Wants, they make life a bit more interesting and colourful. But you should never borrow to buy Wants. Pay cash. Or use a credit card but pay it off at the end of the month.

If you can buy it with Klarna, it’s a Thneed. You can’t buy food, or toilet bleach with Klarna. Take a butcher’s hook at Klarna’s Instagram. It’s lifestyle, not substance. Strapline

The Pay later people. Highlighting UK retailers smoooth enough to offer Klarna.
Shop our Instagram here

For God’s sake don’t borrow to buy shit like that. If you have money left over at the end of the month, fine. Head on over to MSE’s Demotivator first, however, to find out how many weeks you have to work a year to buy this garbage.

The trouble with Klarna is it’s a ragtag mix of different products

Pay in full in 30 days? It’s a charge card. Pay in 3 instalments? It’s a personal loan application, but for a pissy small amount. Worse still, use the instalment procedure often, and you look like a deadbeat trying to get loan after loan after loan, which means any self-respecting financial institution is going to be very wary of lending you money. If you’re going to take on a hard credit search, then borrow a decent amount of money in the thousands, don’t piddle about with £100 here and there.

Sure, you don’t pay interest if you pay over three months. But you hurt your chances of getting a loan, credit card or mortgage. Here’s a radical idea. Save up for your thneeds before you buy them. There are things in life you do have to borrow money for, and they are important enough (housing, a buffer against losing your job etc). Don’t screw your chances of getting to borrow when you need to for saving a couple of month’ interest on your thneeds. If you must buy your thneeds before you have the money use a credit card, preferably just after you’ve paid off the balance. You get a month and a half of interest-free credit if you pay it off, and if you don’t, then at least it doesn’t crap on your credit score.

Klarna is the fintech version of your grandmother’s catalogue shopping

Back in the day there used to be catalogues of consumer crap and thneeds and clothes delivered to working-class neighbourhoods. These advertised some ghastly object, say for £50. It wouldn’t say this was £50, it would say that this was 50p a week over three years. Their hope was to reduce the sticker shock so people would think that’s only 50p, I can afford that for a while, let’s have it. Then they get to pay nearly £80 over the three years. Klarna is using that sort of principle. It’s not quite Brighthouse, which is the online version of the catalogue scam.

Fintech credit is bad, but fintech isn’t inherently bad.

New ways of borrowing money are bad for your wealth IMO. There are established ways of borrowing money: mortgages, bank loans and credit cards. We are used to them and they are reasonably regulated. We don’t need new ways of borrowing money in funny ways, particularly for Wants.

However, some sorts of fintech are good IMO. I use Starling Bank. Starling means I can buy things in foreign currencies without eating the stupid fees that old-tech banks charge, just because they can. The ability to switch off the card and re-enable it has some value, as does the immediate itemisation of card purchases including contactless. All good stuff. Fintech is doing some good stuff with investing, reducing transaction costs.

If you can’t Pay Now, then Don’t Pay

Klarna. The Pay later people.

The red flag is right up there. Pay Later is always bad for your financial health in some way. If your current self can’t pay now, what do you know about your future self that means they can pay later? Particularly when your future self is only a month away? When was the last time you saw a mortgage advertised as Pay Later? That’s what it is, but at least it’s on an appreciating asset. Nothing you can buy with Klarna is an asset, it’s for consumables. Pay cash for that sort of thing, or use a credit or debit card and pay it off in full. If you can’t do that you can’t afford it, and your next-month-older-self won’t be able to afford it any better than your current skint self. Buy your consumer shit just before the end of the month, with cash or a debit card 😉 Then you know you can afford it. Want to buy a consumable that’s dearer than a month’s spare cash? Here’s a radical idea. Save up for it beforehand. No spare cash? Don’t buy it.

Klarna. Just Say No. Erin can buy several sizes, try them on and return the ones that don’t fit using a regular credit card. If she’s buying enough that five of each size is maxing her credit card limit then perhaps she needs to think about her fashion habit, but she’s probably OK.

For sure if she screws up she will end up paying interest, but it sounds like she’s organised enough to avoid that – just don’t buy fashion in the week before her statement is produced, or have two credit cards, one with a statement date at the beginning of the month and one in the middle, and use whichever one has been billed most recently. And make sure to pay them off. In full.