What will we do with our world when this is over?

As my ageing mother said a couple of weeks ago, up until this you have not lived through any crisis. This is a woman who was not yet into double digits before the second world war ended.

You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before.

Rahm Emanuel

Having switched off a fair part of the economy, it’s a fair chance to ask the question “If we started with a blank sheet of paper, I don’t know, say about May 1979, would we design to get to where we are now?”

if it was meself that was going to Letterfrack, faith, I wouldn’t start from here

apocryphal Irish joke

Let’s take a look at what we have got in the UK compared to what we had. Way back when a young Ermine entered university around that time, inflation was way up in the sky. By the time I graduated,  the economy went titsup in a big way, and it took six months to find a job. I plied my trade in a small company making electronic gizmos. Britain was a different place then.

When we wanted castings for a piece of equipment, we were able to go a couple of miles down the road to meet up with the suppliers, they could point to the part of the design that would reduce the yield, tell us why and we got to change that. The people who wound the transformers for us were in walking distance.

In my next job, I travelled by train from SE London to Cannon Street Station. No city, other than perhaps Edinburgh presents a pretty face to the railway line, but I saw light engineering firms here and there from the railway line, amongst the council estates and blocks of flats. As the decades passed, billboards went up ‘you could be home by now’ as the factories were cleared to make way for estates of ‘executive’ homes. Funny how every bugger buying a new house wants to feel they are an executive, I’d imagine a real FTSE100 CEO wouldn’t be seen dead in one of those rabbit hutches.

I inherited this pump made in east London from my Dad, we still use it when making compost to get enough pressure from our water butts to run a sprayer.

They used to make pumps in London – yes, Romford is in London, not Essex

As the entertaining wingnut David Starkey related, today’s Britain is buggered if it can make shaped bits of plastic in any quantity, for that is largely what PPE is. Sic transit gloria for the erstwhile workshop of the world. I’m sure Mr Carter would have something to say about that, once he’s stopped spinning in his grave on his sintered bearings, still serviceable after six decades or more.

Starkey is surprisingly dirigiste for a wingnut. Perhaps he hates globalisation and its inhabitants of nowhere even more than furriners. Maybe here is a way to make a success of Brexit, with hyper-localisation, though I thought we had given industrial policy up with Thatcher in favour of Ricardian advantage and the invisible hand of market forces. Too much of a good thing can be wonderful and all that.

Maybe there is a turning point here. We could draw in our horns and make more stuff, indeed balance the economy, though I don’t think that we will have employment enough for the horny-handed New Tories of the North. But hopefully we could make shaped plastic quicker… We used to have big companies that made the raw materials, with grand sounding names like Imperial Chemical Industries.

Britain decided to maximize the amount of money we could make, by specialising in finance, and tossed an awful lot of the population’s dreams and expectations1 by the wayside. Now although I blame the borked state of the housing market squarely on Mrs T and her cursed Right to Buy sale of votes, clearly the world didn’t stay static over the intervening 40 years, so you can’t blame other pathologies of modern Britain on her. But it did set the direction of travel, a focus on the numbers and Ricardian advantage. Despite the bad rap she has for manufacturing, causal inspection of the share of GDP as manufacturing chart lower down shows that it was the Rt Hon Tony Blair who was in the wheelhouse when manufacturing got run out of town.

Our finest minds went into finance, and there’s some pretty damning critiques of the desperate lack of balance in the British economy from some of these. There’s the short form from ZXSpectrum on Monevator

The UK made a sort of Faustian bargain: low unemployment for high underemployment and low skill base. Taxpayers subsidize many corporates and SMEs, through low taxation and incentives, to provide rubbish jobs on low pay. These jobs should have been offshored to EM markets years ago. It’s unsustainable for UK workers to be paid 3-5x an EM worker for something where they offer no advantage. It’s also results in terrible productivity and low capex.

I’m clearly going to have to pay more tax after this crisis. I’d much prefer to pay people UBI so that they could stare at the ceiling, than see my tax used to subsidize Richard Branson, Mike Ashley or Phillip Green. Machine learning and AI is going to make many middle class people unemployed.

and the long form with knobs on from Tullet Prebon’s Tim Morgan

In the West, a small minority prospers, principally the CEOs of companies whose profits have surged, and bankers who gain from the expansion of the lending sector. On the other hand, the majority suffers, both because of declining wages and because of rising indebtedness.[…]

Our Tim ain’t feeling any more chipper about things now, here’s what he has to say about the much-vaunted V-shaped coronavirus recession that the markets are telling you do go buy into RIGHT NOW ‘cuz everything is up in the sky and going up. There’s an updated version of Tim’s growl H/T FI Warrior which makes the same sort of Limits To Growth angle. For the moment let’s set the LtG angle aside2. After all, I was still in short trousers when the Club of Rome said we were doomed in thirty years, and I am now within spitting distance of The Firm’s normal retirement age, after two decades of extra play.

However, it is clear that since 1980 we in Britain have designed a world of work that is a seriously shit experience for a lot of people after 40 years of TINA. In particular we shifted the UK economy to services, and created an awful lot of crap low-paid bottom end jobs, and a lot of middle-class bullshit jobs. The poor on zero-hours contracts can point to what the problem is with their service jobs. They aren’t reliable, and they aren’t enough to pay the rent, never mind a good life.

Many in the middle-class find their bullshit jobs eat their souls, though they pay OK. One of the problems of bullshit jobs is that they are like Universal Credit for the middle class without the DWP torture, they still lower productivity. Bullshit jobs produce services/goods that nobody wants or needs.

We have maximised money, but not meaning, and muddle along with misery for the many

It’s all very well to clap for our carers, but we will learn what our values are if we collectively stick our hands in our pockets and pay the poor bastards a living wage, and perhaps bring back bursaries so they don’t carry student debt. In general this crisis is highlighting that an awful lot of people who keep the wheels running for us are paid the minimum wage if they are lucky, and don’t have a minimum guaranteed hours if they are unlucky.

And, when we get to stand back a little bit from it all, we discover that an awful lot of better paid middle-class jobs are a bizarre combination of make-work and perverse incentives. F’rinstance, several years ago, we took a look at how some funding organisation was setting up a community project. The first rule of funding is that you have to fund the consultants who happen to be funded by the funders somehow, that advise you on how to use the funding, then how to get next year’s funding, how to fill in the innumerable forms to get the right ticks in the boxes so the funders feel good about the funding.

Personally, I’d pull the plug on the lot, including the National Lottery and all its good causes. There’s a lot to be said for the Hippocratic oath when it comes to fiddling with the lives of the poor. First do no harm. Betting on the horses or greyhounds in the 1960s was more honest than ‘it could be you’ but pretty definitely won’t be. I have some recollection that there was regulation of that but it appeared that the Tote established by Churchill was sold off3 to Betfred in 2008. Ain’t privatisation such a great thing, eh? I’m sure Betfred maximises the amount of money not ripped off from the punters and feeds it back to the sports. Not.

On a more collective level we end up with the deeply borked twisted mess that the DWP has become. They start with a buggered up premise from the get go, which is that work is the way out of poverty. No. It used to be, when the economy had a wide range of jobs for a wide range of talents, and we needed hod-carriers as well doctors. That was forty years ago, guys.

That’s just not true any more, because: globalisation. There are many people in the UK whose skills aren’t up to adding enough value, because it is cheaper to go to somewhere where the cost of living is cheaper and hire that function there – or build a factory to make it there and import the product.

Now there are lovely jobs and lousy jobs, and whaddya know, there are a lot more lousy jobs than lovely jobs. This was spotted 17 years ago, it’s not new. You can’t make a lovely life out of lousy jobs.

That is why they don’t make pumps in London any more – they make money in London, and making pumps is just too low value-add compared with making money.

That isn’t to say we make nothing in Britain any more – the added value of manufacturing has been sort of retained, even as the share of GDP has dropped like a stone

Share of GDP added by the manufacturing sector as percent of GDP
Added value of manufacturing, bn USD, probably slightly declining over time given 30 years of inflation probably make 500bn 2020’s US$ worth less than 300bn US$ in 1990

So what, many might say. After all, my Dad was notably hard of hearing by my age due to working in a glass bottling plant, and he was stone deaf by the time he cashed in his chips.

People may wax lyrical about the mining community spirits but it was still a pretty ghastly tough job. There’s not that much great about a lot of manufacturing jobs, because wrangling Stuff tends to be physical, noisy and hard work. The younger ermine thought I would have to leave the electronics industry due to getting asthma. That first company was probably not COSHH-compliant. The problem turned out to be that we would wash circuit boards in boiling Arklone with the instruction never fall to the floor in that room, because the vapour is heavier than air. I never had trouble with asthma4 since leaving that first job after a year, though soldering was still part of the electronics industry, and fume extraction was not a thing until a few more years. As a design engineer and then research engineer I didn’t do enough soldering for that to be an issue.

Many manufacturing jobs were bad for you, but an awful lot of modern service jobs are shit in a different way. At least many of the problems in manufacturing were soluble with PPE and automation, whereas many service jobs seem to gravitate towards low-end minimum wage zero hour contracts that you can’t live or die on. The micromanagement and metrics of some middle-class jobs lead to chronic stress and the associated strokes/heart attacks.

In Britain Thatcher inaugurated the practice of buying votes by raising house prices. This was achieved by destroying social housing, giving bungs to people who were too poor to buy a house. Credit was expanded massively with banks going into the home lending market. In 1989 a young Ermine as a single man stupidly bought a house on 3.5 times earnings. Apparently you can still do that oop North, but according to the ONS your average English first time buyer earns5 52k, saves one year’s earnings and spunks 237k on the house.

Over a couple of generations, that means a higher level of housing precarity, though house owners feel good about higher nominal values, and they increase inequality by favouring their own children with the loot when they die. Those not so blessed with ancestral wealth also take a hit from BTL landlords hoovering up starter homes, because homeowners are of the view that bricks and mortar = money tree. Present company excepted, that is…

One thing I have always thought would be a good way to eliminate a lot of what’s gone wrong with employment practices is to terminate all agencies and middlemen. If somebody pays you to pay someone else to do something then you are skimming, and should be run out of town. We did it to wholesalers of Stuff, let’s repeat the exercise to wholesalers of people. The Firm used to employ its cleaners directly. They saved money by outsourcing that, goodbye paid holiday and sick pay. Agency is a fancy name for gangmaster. Oddly enough digitalisation has greatly disintermediated buying and selling stuff, but has greatly intermediated employment with agencies and job-search platforms.

What could we do better?

We will have less Stuff. Probably fewer Services. It’s not all bad – you might get to see your kids more. Here are some things I would like to happen. I’m sticking with the UK here, we seem to want the world to get a larger place what with Brexit etc and I am nowhere near clever enough to fix anything wider, but I could probably match the current shower in charge of the UK in basic competence. Ain’tcha glad I’m not in charge. huh?

1) Destroy the low-cost leisure airline industry. Burn it, and encase the memory that it ever happened in glass and concrete, and bury it so deep nobody will ever find it for five thousand years.

Easyjet will resume domestic flights in mid June. There is absolutely no need for domestic flights in the UK ever. Britain is not that big – we aren’t Australia or the United States. I want to see EasyJet, Ryanair, the lot of them destroyed and the ground that low-cost airlines grew in salted and burned. If you have grandchildren, you don’t need low-cost airlines. Because: their world when they are your age.  Let’s quietly ignore the possibility that air travel got Europe into serious shit in March according to the ECDC. The original mistake wasn’t malicious – people weren’t to know then. However, after what happened, if you postulate air bridges – well, it pretty much sums up air travel all round. No externality is important enough to constrain the God Given right to cheap air travel. This is not about people starving like the Berlin Airlift, it’s about the right to fight for towels on a packed beach.

Zooming out, you will never electrify air travel. Sure, you might be able to do it technically in a couple of decades, but you have to plug the entire output of Sizewell B power station into a future electric 747 for an hour to achieve one long-haul flight. Even if you don’t give a shit about climate change or know for a fact it’s all a Deep State cabal, just how much nuclear waste to you want those grandchildren to have to deal with to keep up your flying habit? People used to have one annual family holiday to foreign parts. If we could make work less hateful, perhaps we might not need to run away from it so often. As for commuting by air…

Right, capt'n, where do I plug this sucker in? Photo Dave Croker, Geograph
Right, capt’n, where do I plug this sucker in? Photo Dave Croker, Geograph

I really hate the low cost airline industry. It fucks up our skies which is patently obvious now, it generates needless unholy rumble through most of the day and encroaching onto the nights, it ruins your kids’ future worlds,  it facilitates stag party twattishness, it makes places like Barcelona nd Amsterdam crap. It’s just gone too far. If coronavirus can kill it that is all to the good IMO. Less is more. It’s a proxy for the pathologies inherent in late stage capitalism. It just doesn’t know when to bloody well stop. More is not always better.

2) A four day week isn’t a bad idea, along the lines of making work less hateful

3) Do something about crap jobs. Automate the ones that aren’t worth doing, pay the ones that are worth doing a living wage.

4) String up anybody who even thinks “work is the way out of poverty”  – it hasn’t been for 40 years and it never will be. Talent that matches well paid work opportunities and luck are the route out of poverty, and neither are something you have overwhelming influence over. You can play a good hand well, but you can’t do anything with a weak hand, the opportunities just aren’t there. We have specialised too much.

5) Fix Universal Credit. Turn it into a universal basic income, or for all I care universal basic services. Or at least be honest and say we believe some people’s lives are worthless, we aren’t going to get involved, we don’t give a shit, and basically, kill ’em all. If we can pay Endemol to round up Iain Duncan Smith and have him live a month on UC that should be good for a laugh, too.

6) Destroy bullshit jobs. A Universal Income/Services would save the waste of human potential. And the trees. And reduce the pressure on the transport system.

6) Think about how we feel about poverty. If we collectively are chilled about it, there are enough dystopian way pointers on how to deal with it. If we aren’t, then finding some way of learning to live within our means will mean rationing of some things. Probably including air travel,  and probably including other popular lifestyle choices.

7) Reinstate previous generations’ controls on ownership and share of media6. There was an awful lot wrong with the media in the UK before Mrs T gave it to Murdoch, but I would suggest that while the cure eliminated the disease, the pathology metastasized into something worse. There was at least plurality in the previous disease.

Ain’tcha really glad I’m not in charge? Before I take too much heat for the air travel, note many people would have more time in an Ermine world, you can get to your Alpine skiing second, third, fourth holiday by Eurostar. I’m only coming for your second and up air travel holidays. We’ve probably got enough world for the air travel of the 1990s. But not the amount in 2020 BCV.

How about that Limits to Growth stuff?

It is possible that this second global financial crisis of the new Millennium is the result of systemic overreach as described by the Club of Rome. Let’s not beat about the bush here- the prognosis for FIRE is dire in this case. If you aren’t there you’re not getting there, and if you are there you may not stay there, and yes, that’s me too. The problem is an overhang of debt accumulated, this covered up the fact that global production hasn’t kept up with global population, and some of the limiting inputs to production are becoming exhausted. These are claims on future resources that will not be honoured because they just aren’t possible.

That narrative makes a lot of sense, but there are other stories playing out. For starters old men have been saying the world is going titsup ever since Roman times and probably before.

an alternative – Spenglerian decline

Secondly there is a power shift in play – the ascendancy of China and the East in general, which is a longer example of the cycles of the Imperial decline of the West. These were the European empires of Victorian times, of which the best know example was of course the British Empire, but I would also say that the American Empire is also into decline, the Project for a New American Century looks like a Spenglerian dream gone wrong.

Old men dreaming of past Imperial glories, back in the last century. Diddums. Now where have we heard that recently?

Trump and Brexit both express nostalgia for past exceptionalism, but this is not just a pathology of the Anglosphere, it’s writ across the Western world IMO.

Spengler’s – The Decline of the West was written a hundred years ago, and the narrative runs true to form, and it predates the Club of Rome by fifty years. Like Asimov in Foundation, Spengler did not predict a catastrophic fall, but a protracted decline. That’s pretty much what this looks like to me. Maybe the Chinese will fix air travel with small fusion nuclear reactors that won’t spew foul shit everywhere in the event of a crash. Maybe we will have five thousand years of darkness until the new Imperium rises. Hopefully humanity will have learned a thing or two across the interregnum.

We could make a better world, and for all I know this may be the impulse that makes us ask some tough questions about would we want to end up here if we started along the track that got us here. We could start with the question anybody contemplating FIRE asks themselves.

Is our current level and form of consumption the optimal way to live, or is there a better way to optimise our experience?

But I fear we will let the crisis go to waste. The desperate urge to get air travel going again is symbolic of the driving impulse for a snap back to how things were before. There’s all sorts of special interest pleading to get back to the status quo.

A lot of that is understandable – this has been a sudden stop for an awful lot of economic activity. But it isn’t unheard of for us to say ‘we want to see less of this sort of economic activity in future’, usually because it has undesirable outcomes, usually externalities, costs paid for by other people who often don’t get a say or a share of the economic advantages.

It won’t happen. The drive towards a snap back is strong, and the countervailing forces are weak and disorganised. Macchiavelli was right

“there is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Because the innovator has for enemies all those who have done well under the old conditions, and lukewarm defenders in those who may do well under the new. This coolness arises partly from fear of the opponents, who have the laws on their side, and partly from the incredulity of men, who do not readily believe in new things until they have had a long experience of them.”


  1. The dreams include raising children, having jobs that you could plan a life on, being able to buy a house. The reason their dreams were tossed by the wayside is because they don’t have the aptitudes for high finance. That’s the problem with doing one thing overwhelmingly well, you tend to suck at other things. Specialisation is for insects 
  2. If you want to see how Limits to Growth is going now, take a look at the thirty years on update. It ain’t looking good. 
  3. Blair’s government should be charged with the original idea and doing all the groundwork for this, even though the next government actually pulled the trigger. New Labour was no friend of the statistically illiterate working classes, since t’was they who inaugurated the National Lottery to happen. 
  4. Curiously enough the OSHA doesn’t cite getting asthma as a side effect of CFCs, they reckon it causes you heart problems. You can get away with anything in your 20’s, eh 😉 OTOH the datasheet seems to say respiratory problems were possible. 
  5. I can’t work out if earns means individually or collectively, best not have kids in that house if collectively given what young children do for the household income, eh? 
  6. Goldsmith’s College have a longer form report on UK media shares/ownership  

I’ve got a sneaking admiration for Donald Trump

Go big or go home…and The Donald’s going big in opening up America, standing down the coronavirus taskforce in the next few weeks. It’s probably fair to say there’s not an awful lot of love lost ‘twixt the Gray Lady and The Donald. New York is full of, well, t’other side, and it’s just not Donald’s tribe, though it has been his old stamping ground for ages.

Trump administration officials are telling members and staff of the coronavirus task force that the White House plans to wind down the operation in coming weeks

NYT

It’s not unknown for a POTUS to claim a premature victory. We’ve seen this movie before

How did that work out for ya, Dubya?

but there’s a big difference. I felt that Dubya was a bit out of his depth. He probably believed his own hype. It’s all that inbreeding in the presidential families of America. Trump is an outsider. Sure, his dad was steenking rich, we’re not talking the poor kid from the wrong side of the tracks making it to POTUS version of the American Dream.

I’m of the view that Trump is one of a kind – a masterful dog-whistler. Not everybody is responsive to his particular schtick, and it brings an awful lot of people out in hives. But those to whom he does speak, he speaks directly, and they feel he speaks for them. And sure as hell nobody else has been speaking for them since the American Dream started to go down the toilet pretty much since Reagan took office.

The Mule’s childhood was one of alienation and torment. This motivated him to use his powers to get revenge on the Galaxy

He reminds me of the Mule in Asimov’s Foundation Trilogy, someone who almost directly controls people’s minds by making what he says resonate with their lived experience. After years where nobody sounds like they are listening to you that is magnetic – because all humans want to belong and for their pain to be witnessed. The Ermine has recently fired up the TV and paid the goons of TV licensing. I heard Trump on the TV news, and unlike hearing it through my PC on the Web, I heard him on my hi-fi.

The Donald needs to be re-elected

And while he doesn’t speak to me and I know he’s a lying sack of shit, I could hear the magnetism in the way he used his voice and understand the appeal. But the Donald comes with problems. Presumably he had attachment issues as a child, anyway he has a deep seated need to think that he is favoured, and it is really, really important to him to win the election.

Over in London they think coronavirus probably has a low mortality rate and the economy is suffering. Citing various posts from the intellectual right-wing website Unherd, some make a cogent case that Covid-19 isn’t such a big deal for most people. To their credit, Unherd supported their assertion with interviews with experts of similar views  – Hendrik Streek, and Johan Giesecke, and these make a lot of sense. it’s only when you look at Unherd’s content more widely that the focus of their particular lens shows clearly.

Their lens may be more accurate in some areas. I find a lot of resonance in Unherd’s interpretation that a lot of the problems in recent decades stem from a general anomie where by measuring everything in money we may have stripped our world of meaning and knowing what we stand for. I am not clever enough, nor privy to the information that shows whether the truth about coronavirus is closer to the Johan Giesecke end of the spectrum or Neil Ferguson’s. I am less convinced by Giesecke’s, not because I have a way of evaluating it, but from the people that are pushing it, who seem driven by the economics. But the low mortality rate we are all overreacting because what does it matter if this is infectious as hell if it doesn’t kill that many people is popular in London, and it is internally consistent. These are clever people making the case. Human societies do not put life first above all else everywhere – cars, pollution and many other things are examples of drawing a balance where some deaths are part of the price of achieving a greater good.

Mandy Rice-Davies might proffer that Londoners would say that. Londoners are young so at lower risk, on average. It’s unlikely to be a lot of fun being holed up in London micro-flats in a mini-heatwave.  Some are currently not doing a job that brings in squillions. Feeling more squillions disappearing down the plughole due to the shuttered economy must be stressful.

It’s less bad for a retiree in the sticks, where in a bike ride of several miles I encountered four cars once I got out of the town. I saw this

the white handkerchief is a Little Egret

avoided a serious gang fight

Why this field hasn’t degenerated into a swan war of all against all beats me

and wondered how this knot was done

Knotted Willow

While there’s some rumbling going on among the more swivel-eyed Tory contingent about opening up the economy – step forward Iain Duncan-Smith channeling FDR in the Torygraph

After six weeks of lockdown, we mustn’t lose sight of how vital a functioning economy is to our health and wellbeing. Perhaps we should remember President Roosevelt’s wise words in a time of crisis: “The only thing we have to fear is fear itself.”

Iain “I’m all right Jack” Duncan-Smith, who is of the blessed opinion that poor people have a previous monthly salary paid in arrears that they can draw on before they get Universal Credit, writing in the Torygraph 5 May 2020

the trouble is that they are all chickenhawks. What the world needs to straighten out the difference between these courses of action is someone sure of their convictions and with balls of steel and pure conviction. Enter our man of the moment, Donald Trump.

Here’s a guy who knows what he wants, and knows how he’s going to get it. There are two competing ends of the theory spectrum about coronavirus, and sadly we have insufficient data to make a clear call which is right.

One, the London/Unherd view is that it’s not a biggie, most of us have already had it, closing the economy kills people too y’know. The other is that this is so infectious it will let rip as soon as its given a chance, mortality is not low enough that it won’t kill many. The UK already seems to have the highest European death toll, which points me in the latter direction, but whatever.

What we need is strong leadership, somebody who goes with his gut to cleave the Gordian knot in the face of uncertainty. Now strong leadership tends to have rather undesirable consequences of people marching in shiny jackboots and smashing windows in the night, so what we need is strong leadership somewhere else. And in the US of A they’ve got it. They voted for it once, and they’re gonna vote for it again.

Donald’s really keen on getting re-elected. He’s already flung so much Federal Reserve money at the stock market that it no longer reflects reality, even Warren Buffett can’t see where he’s going, the screen is covered with so much money.

But that’s not enough. Donald needs boots on the ground. He’s not going to let a little thing like a global pandemic get in his his way of being re-elected. Not only is he going to ReOpen America, he’s going to damn well Make America Great Again. And for that he needs Americans back at work. lickety-split.  No, not that interpretation of the phrase, though I guess this is Trump…

Now obviously there’s a chance that people might die if the low mortality  view is less congruent with reality than the higher mortality view. But that’s not important to Donald. Strong leaders decide, others take the consequences. Trump 2020 is what matters, so the great engine of American exceptionalism needs to get fired up. As Warren Buffett said,

never bet against America.

Warren’s ADF indicator may be titsup because of the Fed’s wall of money, but Donald Trump knows exactly where he’s going, what he wants and how he’s going to get it. And he’s going to put the pedal to the metal. Real Men accept collateral damage.

Warren scratches head. Which way is up on this damn thing? Trump leans over, smashes glass, sets the needle. That way is up, buddy.

Cheese-eating surrender monkeys and the rest of the world can stick it, lily-livered quislings that they are. But they can hitch a ride on the Trump.

VUSA is your friend. Or pretty much any S&P500 fund or ETF. Never bet against America, because Donald will MAGA. I’m tempted. I am light America. I loathe everything Trump stands for. But perhaps our Londoners are right, and coronavirus isn’t all that. A punt may at least make me feel better when Donald wins again in November. Like Asimov’s Mule, he doesn’t need to make everybody like him – all he needs to do is keep the people who do like him doing his bidding.

This is your captain Warren speaking – it’s going be a long night. Three out of four engines are on fire, the fourth is running rough

I sparked up Warren Buffett’s Berkshire Hathaway livestream, well, the recorded version anyhow. H/T Monevator. Some Ermine tips – start about an hour in, and I had to click n the unmute audio to get to hear anything. It was a funny old feeling. Warren’s sitting more or less on his tod in a massive convention hall with hardly anybody out there. It’s all very 1950’s, there’s no top end in the audio and you can hear the 60-cycle hum and noise in the amplifiers. BRK clearly doesn’t spend money on young media-savvy hipsters to tart up the presentation slides either. This is part of his homey schtick of course, but you’re sitting there watching one of the richest people in the world.

He cut a lonely figure on the podium. And while I wouldn’t go quite as far as to say he sounded scared, the headline sums up what I heard. Sure, you can count on the tailwind of American exceptionalism, but you gotta live that long to get into the upswing. And at 89, in some ways it’s in doubt that he will.

He spent a lot of time describing how if you’d been unlucky enough to buy into the DJIA before the Depression, you would have to be ready to fall back and fall back and fall back to hope that the engines of American exceptionalism would fire again into the low-water mark, and it would be 1951 before you break even. He’s not saying this will happen again, many things are genuinely different now. The intercession is likely to be much shorter, and of course he was quick to state he does not know what the markets will do tomorrow or next year.

But he didn’t give the impression he sees a V shaped recovery. He didn’t even see BRK shares as a good buy now. And he’s dumped airline stocks. I wonder what else?

In some ways I was cheered by Warren Buffett. I dumped a lot of rubbish in the first half of March. In a single hit on mainly one day. I had gotten decadent with the long bull market, and had a significant holding of the FTSE100 in VUKE. ZXSpectrum summarised it well on this Monevator thread

The high street was obsolete anyway, airlines should go bust, the petroleum industry needs massive downsizing. The FTSE is not coming back because it full of crap companies with obsolete business models. The S&P and Nasdaq are not.

I’m also more relaxed about higher unemployment. The UK made a sort of Faustian bargain: low unemployment for high underemployment and low skill base.

[…]

Machine learning and AI is going to make many middle class people unemployed. We might start getting used to it now and stop stigmatizing those who don’t have jobs. A generation or two from now being unemployed might well be the norm.

I was heavily in the FTSE100, and I was buying rubbish because the yield was decent. My main ISA1 is 13% down on what it was in January, so I showed a clean pair of heels in time. I got rid of a lot of other rubbish, because in a decadent bull run shit looks attractive and safe. It wasn’t.

And WB reminded me of that. I had lost my way, and was buying trash. Quality is worth having now. If you are going to buy, buy quality. WB doesn’t forget that, but I did.

Warren’s patriotic American exceptionalism shtick got on my tits. America is captained by a uniquely talented buffoon of the first order, who is a danger to the world and his own subjects. Trump reminds me of The Mule in Isaac Asimov’s Foundation trilogy. Just as Asimov’s psychohistorians foresaw the arc of history but failed to model a mutant intellect, the founding fathers of the United States got an awful lot right. They put checks and balances to try and control the temptations that absolute power brings. But they had no model for Trump’ particular talents resonating against a particular slice of history. There is at least cheer to be had in that like the Mule his particular combinations talents seem sui generis; we will get at least another four years of him, but the magnetic combination will probably die with him. So no, Warren, Americans do a lot right, but not so much as you’re cheering. However, in economics ZX48’s observation support WB’s thesis – compared to the US indices ours are full of crap businesses, and the US appears the only place in town for quality.

But Warren Buffett is a much better investor than me and his point is right. I need to favour quality – companies supplying what people actually want and need. I did well getting rid of the rubbish before it had fallen too far. I am intrigued the WB finds nothing at attractive valuations, because he credits the Federal Reserve with forestalling another credit crunch for companies. He thoroughly approves of the action, compared to the results of inaction, but it has corrupted the signals given by the market because of its indiscriminate behaviour. Noise floods the input, but he prefers that to the deathly silence of no noise and no signal.

And yet if Warren Buffett is saying that the compass spins and knows no North, then perhaps I have not missed the opportunity. My guess is the signals will start to return at the start of November, as we start to enter what is likely to be a long winter low in reserve capacity.

And while it’s all different now are the most dangerous four words in investing. I need to start to challenge some assumptions I have held from 2008. One is I have always been weak on the US – it looked overvalued and as I started to buy a lot of my holdings in the 2008-2014 period. Most of my US holdings are in the half of VWRL, and yes, I was wrong earlier. Don’t bet against America 😉 My market timing scored over sector selection.

In the early stages just after the GFC when I have bought individual shares, I thought more like WB. I still have nearly all those shares, mostly in my HYP. But as an index investor you can’t think like that, because you’re not buying individual shares. And I started chasing meta-parameters like yield, and following stories. The best story is Lars Kroijer, but sadly I picked up that signal late, it was only written in 2015. I still have all my VWRL.

I have been fortunate in being able to shoot the other index crap early enough, but I need to get back to basics. Good quality at the right price – and also perhaps take another line from WB. It is better to buy a great company at an okay price than an OK company at a great price. In index investing that means no FTSE100, not VHYL (which I have never owned) and perhaps I need to suck it up and consider the S&P500, and maybe the CNDX on the NASDAQ100, preferably after Trump has either won or lost and the new administration suckout goes on top of the pandemic recession. In the meantime I will continue to buy little bits of smallcaps which will become more and more bombed out. I am where I want to be with about 2/3 equity exposure now, because I have serious firepower. Buffett gave me the hope that I will have somewhere to aim that in the year(s) to come…

No, Buffett’s message wasn’t quite Bill Ackman’s self-serving Hell is Coming interview, I am glad I sold before he opened his bloody great big gob 😉 But it sure as hell rhymed.

Capt’n Buffett will make it across the water on the one defective engine, but it’s going to be a very long and rough ride to get from here to there. And he seems to believe that there is an outside chance that Dubya’s angle from 10 years ago is a very real possibility, leastways in the time he has left.


  1. My secondary one with Charles Stanley doesn’t revalue in Jan. It isn’t underwater on purchase, but is mainly a DevWrldExUK index fund LGITI, so similarish to VWRL and also about 13% off Jan from its chart 

Musings on misadventure and market madness

I was listening to a young fellow on the radio who delivered himself of the observation that in lockdown the days are long but the weeks are short, and thought to myself there is wisdom in this 24 year old fellow.

It reminded me of Gretchen Rubin’s similar observation, that I watched on my office PC in my last month at work. If only I had seen that in the low-water mark early in 2011, half-way through my dispiriting passage out of the workplace. The half-way point in any long term goal is always tough, for you have committed enough resources to preclude other courses of action. And yet the final destination is not yet in sight. Rubin’s narration is cheesy as hell, as pretty much anything that involves parents talking about children is. But it is fluent. Part of our problem now is that we don’t know how long it will go on for. These days are long, and make for rumination. Such as

Did I err in jumping out of the market?

I jumped out of a lot of stuff in the second week of March. To put it into perspective I still have two-thirds of my holdings in my Iweb ISA. All my VWRL, all my HYP from way back. But I did make tactical errors in continuing to buy a little bit in 2019 despite the high valuations, although a lot of what I did buy was bonds and gold. But I bought some more VUKE in 2019. Bad move.

I sold all my VUKE, and other stuff I didn’t love. I have a Google spreadsheet of those sales, and it updates the current market values with the Googlefinance option. Those sales are still well worth having made, but the notional reduced losses have fallen by two thirds, because I did not account for the wall of money that was created and thrown into the system. This is not a crisis of confidence. It is an exogenous shock to the system. So far that has been rugby-tackled to the ground, in the view of the stock market, by a wall of money. Jolly good for the market, and us as asset holders. It’s a little bit shit for everyone else, though, no?

The hazard has changed from losses to inflation IMO

I am badly exposed to inflation in the long term, because half my income is an annuity, albeit with some inflation protection, but only up to 5% p.a. Any time inflation goes above that, I get permanently poorer for the rest of my life in terms of income.

Now to get this into perspective, there’s only a need for the tiniest of violins. There is some awesomely bad shit going down. Deaths are up, running about twice average for the time of year. As for the living, many people have lost 100% of their income, and there are some poor bastards who are sleeping on the mean streets of London because they used to work in restaurants and live in lodgings. Now they have no job, no money and no home. Half of the world’s workers’ jobs are under threat. The UK seems to be making a particular bugger’s muddle of handling coronavirus.

The John Hopkins tracker currently shows the UK has roughly 10% of the world’s Covid-19 deaths, which is a little bit crap for a country with 0.87% of the world’s population. Let’s hope that the good folk in London who are of the opinion that most people in the city have been exposed but were asymptomatic are right, because if this is what success looks like I hate to think what the face of failure is. At the moment if you’re a confirmed case1 you have the same chance of pushing up daisies as playing Russian roulette. Let’s look on the bright side. You’re likely to join Graham Greene on the side of the living. But the odds aren’t terriffic. Enter a hospital in the UK and they put two bullets in the chamber before spinning it. You really don’t want to see Arnie  in your hallucinatory dreams in the ICU, do you? Continue reading “Musings on misadventure and market madness”

buying into madness

I despise the stock market at the moment, because it seems to be insane. There is nothing good about the economic situation or outlook, presumably the ludicrous rises of late are due to the wall of money flung into the system by central banks. I’m much closer to this fellow’s view. This shit is going to come in waves.

However, in bear markets you need to buy into insanity, so I ask myself, what is a solidly bombed out sector that has no prospects, and UK midcaps looks like it. So Tuesday I asked myself how my automated purchase of L&G mid cap index fund was going.

Hmm, not very well by the looks of it

Computer sez NO. Indeed Charles Stanley seems to be having a hard time in the IT department, because although it’s working now, the response to the login button is glacial, I have to suppress the temptation of the Ermine paw to jab-jab-jabber on the JFDI login button which has a response time of about two seconds before ‘owt happens. It gets confuzzled if you rap on that control, as presumably some tiresome load of AJAX crap rattles around in the background and does its thing. First rule of UI design is at least make the bloody icon change colour locally right away. Oh well. Been slow and crabby like that for the last few weeks, I am glad I didn’t leave it to just before the TY end to whack the lump sum back in there.

Anyway, I got in there and saw the queued automated purchase of that L&G mid cap fund as well as my regular L&G index ex-UK fund which has up to now been my entire CS holding. I stopped investing into the CS ISA a few years ago, but keep it because Charles Stanley is a flexible ISA provider, which means I can draw down from the ISA and put it back without losing the ISA allowance. Monevator’s broker comparison table doesn’t even show Charles Stanley because it’s good for nothing with its 0.35% annual percentage fee. But that flexibility is valuable to me, and indeed the money I put in there is last year’s allowance. I detested stock market valuations in 2019 and stuck the borrowings in Premium Bonds, which reduces CS’s 0.35% fee (because the assets under management are lower) and is safe-ish. As long as you return the wedge over the tax year end/start you can borrow it back soon after the start of the TY which is neat.

My CS holdings are about a fifth of my total holdings. Looking at the account, the best I can say is that it hasn’t gone down relative to purchase cost. That’s index investing for ya, gone nowhere over several years… You have to buy into bear markets, or spend decades to consolidate the slow chunter up at a real return of ~4% p.a..

FTSE250 is roadkill-in-waiting

It’s all the wrong stuff. Loads of these firms are going to go to the wall. Young’uns with enterprise and vigour can look at these and stockpick in there, but I CBA with that. The index clears out the dead wood every quarter. I can’t find any value in the markets at the moment, it’s all way up in the sky and I am just waiting for the second wave of growl to overtake us. There is a genuine problem out there, this isn’t just a crisis of confidence, and there’s absolutely no excuse for the recent rallies, the bear market needs to double down IMO.

A quick look at the key data for this midcap fund shows roadkill-in-waiting

What have we got here then? Bellway PLC FFS. Yeah, right. We really are going to be building lots of houses when people aren’t meant to go within six feet of each other and half the country has lost their jobs, which is going to make servicing a mortgage so much easier, natch. I guess GVC holdings might do better in lockdown, although sports betting is going to be tough without sports. Their CSR report gave me a titter. This is a firm that’s trying to part fools from their money. It really shouldn’t be allowed, in the same way as the National Lottery is a tax on poor people for middle class projects, although I am sure they have a great CSR report too. GVC’s greatest CSR achievement would be to switch it all off and do something else, watching the bright red arrowed tail disappear through  the door. It’s a dirty job and all that. Next up is Pennon. At least they do something useful that people will still need in lockdown.

It’s not looking good. So I doubled down and switched all but £50 of the planned index ex-UK fund purchase into that mid-cap.

the lesson from the last bear market was buy what you feel has no hope

Small companies and the Ermine haven’t got good form. I’ve made more money from shorting my holding of Aberforth Smaller Companies than I ever made from holding the buggers. People say the FTSE250 is meant to be the growth engine of the UK economy, but these companies have already had the living shit beaten out of them by the Brexit madness1, though there’s a bigger war on now.

LGAAJO FTSE250 ex ITs. Suitably titsup and every trace is down. It’s be cheaper ‘ere the year is out.

I failed dismally to catch the bottom because monthly investing is like that, but I don’t have to do that. Leave something for the other guy. It’s tough to believe these guys will ever pick themselves up off the floor, and I am definitely of the opinion that this will be had cheaper before the year is out. But it’s a lot more beaten up than the rest of the market, drunk on funny money. In a genuine bear market you don’t have to be clever with what you buy, you just have to buy. This one isn’t a genuine bear market at the moment, because for the moment some indices have shrugged it off – existential economic threat? What existential threat?

The S&P500. This is not a bear market. A response to such a loss of production of -470 points out of 3700 is bleeding ridiculous.

Hopefully I will look back in five years’ time and be cheered that I got FTSE250 on the cheap. I will probably look back in one years time and curse myself for being a dumbass for jumping the gun and paying 40% over the odds. That’s why I am going to spread myself out buying every month. Buying in bear markets is hard because of that, although at the moment much of the bear market seems to have been cancelled in the main due to irrational exuberance. It’ll be back IMO. In spades… But at least the FTSE250 is still in bear territory. This used to be nearly 60p and is to be had for 41p. In a theoretical and intellectual way there’s a yield of 2.8% to be had there, but that was at the end of February. I don’t see midcaps paying a dividend for a good couple of years yet.

I can’t bring myself to buy into the overvalued general index. It was overvalued by CAPE before and it’s definitely overvalued for todays’ world of a synchronised shutdown of a quarter of the world’s economy. I have no understanding of the madness and hope it will go away soon and valuations will come to good value. But I am not buying at these valuations, if necessary I will return to the original path of running down cash over several years.

I’m not selling gold yet. There be inflation in the medium distance. I am all for printing money in the face of an existential threat, but more money and fewer goods and services = money being worth less. I am still in the market for investment trusts at a discount, however. This is largely why I favoured the FTSE250 ex-ITs, because I am heavy in ITs in the main ISA elsewhere. You have to buy into bear markets, and do it while they are still there. I am sure the boosters  will say this is a V shaped recovery and I’ve missed my chance. Good luck to you, I say – I figure the bears will be back, and if not, well, I’ll run down cash as I was planning back in the halcyon days of late last year.

The market is mad at the moment. There again, many things are mad at the moment. The value of money is looking strange at the moment too. About the only useful thing I did with it this year was get in touch with CAF to reactivate my CAF card, now I am a taxpayer again2.

Thursday clap for carers

It’s all very well clapping for our carers, but if these poor devils are going to take those sorts of chances for us the least I can do is try and buy them some gear, since the public-school eejits in charge of the country seem to be so flat-footed we can’t do that in a timely manner.

Similarly there is a lot of suffering due to the disappearance of many people’s incomes down the U bend and others may help with that. I’m not going to make much difference sadly, I am not  JP Morgan, and charity isn’t always the most efficient way of achieving a goal. But some is better than none, and I am fortunate is still having an income.


  1. The EU hasn’t covered itself in glory in the bigger war – it had to make a formal apology to the Italians for leaving them in the shit while pestilence ravaged their country. “too many were not there on time when Italy needed a helping hand at the very beginning.”   FFS guys, where is your humanity? I used to hold IBGE as a bond holding but switched to gold. There be trouble coming down this pike IMO until the hawks get real on coronabonds. I suspect they won’t… 
  2. The great thing about using a CAF card is you get the 20% basic rate tax back into the account. Normally to get that you have to give your name and address to the charity for them to claim it on your behalf, and then you get hounded shitless for the next 10 years. With CAF you can give anonymously which fixes that problem 😉 CAF do take a rake for it but it’s a lot less than the tax back and it’s a price worth paying for peace IMO. 

Hedging is not just about money

One of the likely issues we will have later this year due to coronavirus is a shortage of fresh produce. This is absolutely not the same as OMG WE ARE ALL GOING TO STARVE! For starters, a fair proportion of the population doesn’t eat fresh produce at all. In general, young males living in cities don’t, and the very existence of my older self is living proof that it doesn’t kill you. Indeed, the very existence of urban food deserts shows that you can live perfectly OK without fresh produce, though perhaps you shouldn’t do it for more than 10 years once you have reached 30, for your general health. so once again, I am saying things may not taste as good as normal by the Autumn. We are not going to starve by Autumn. There are just some lines you won’t find in the produce aisle that you usually do.

We should tip our hats to the fact that society has managed to keep the wheels running despite the lockdown in terms of the essentials. The Chinese managed it, the Italians have managed it, we are managing it, I hear you can even buy bogroll again 😉 This is not an existential challenge. But we are going to face shortages of fresh produce in the Autumn, and we import a lot from Spain, which is not having a great time of things. The price is likely to go up and the quality will be down.

But you can do something about it, particularly as you may have more time on your hands. Now (in the UK) is a good time to start. Last month would have been better, but you start where you find yourself.

Now I am the first to admit that this isn’t really my area of expertise. I am writing it because I am closer to an ordinary punter, but I have observed Mrs Ermine, for whom this has been a passion from childhood.

Hit the tasty and the exotic first, particularly if you don’t have a garden

We will be fine on staples I should imagine. There will be shortages of some basics, because we import more than half our food, and we featherbed our aristocracy to ruin our soil1 or play silly buggers on our hills. Tim Lang summarises the issues of how we got here, a combination of our early industrialisation and imperial past, we grow about half our food.

but if you turn some of those issues on their head, we will probably be OK, because we can probably pay more on the global market than poorer people. T’ain’t pretty, but it’s the way of the world. But you can fight back and make Autumn taste a little bit better, if that matters to you. If it doesn’t, then I am sure Nando’s and your local kebab shop can keep the show on the road. About a quarter of London’s food by value is eaten outside the home- there have been reports written before the current crisis promoting the kitchenless city. NYC has already got there in part 2.

Probably the easiest win for the space-challenged are herbs – a little goes a long way, they are usually cut and come again, they don’t need huge amounts of water, you can use a window box. But they do generally want sun. They make things taste a lot better, and fresh always beats dried. You can grow these from seed, but for a window box get ’em from a supermarket, given garden centres aren’t open. Compost is a problem, some supermarkets carry it. It’s not essential, my younger self never realised you were meant to use compost. I used earth from the garden. Sure, things work better if you have compost, but use what you have to hand. The young Ermine was perhaps unwittingly channelling Masanobu Fukuoka’s natural way of farming ahead of time. There’s too much dogma in gardening. The will to life of most things is strong. If you want to optimise yields and germination rates, sure you have to work harder. But seed is cheap, in most cases JFDI and see what happens.

If you have a small space, then eschew staples. There’s no point in trying to grow a field of wheat in your back garden. Similarly a bag of Maris Piper or King Edward spuds is cheap. Don’t bother. If you are going to grow potatoes, grow fancy ones with a distinctive taste –  something like Pink Firs. You can also grow potatoes in compost in containers on a patio.

We didn’t cover ourselves with glory with tomatoes, they went out too early too fast, but will still happen

Look at what’s expensive, and favour that. Favour the vertical over the low and spreading. We3 favour tomatoes, peppers, cucumbers, though we also do beans and lettuce. Grow from seed, it’s cheap and lets you succession sow so you don’t end up with more than you can use at any one time

Stagger your planting, because you stagger your eating in the usual way of things

Continue reading “Hedging is not just about money”

Developing a buying policy for the bear market

Wealth warning. I only have a couple of years net accumulation ahead of me. You are most probably younger and have decades of accumulation. Do not extrapolate your situation from mine.

There’s a bear market on. Trouble with bear markets is that it’s tough to say where you are in it. Personally, I’m of the view this one ain’t got its boots on. Not only was the stock market pretty overvalued after a ten year bull run, but there’s also a genuine and unprecedented economic hit. In the UK if you aren’t deemed an essential biz, you ain’t trading. That’s a yes to the supermarkets and a no to Sports Direct, BA flights from London Gatwick and London City Airport, and tough trading if you are a cruise line. That’s a lot of economic activity switched off. It would be quite remarkable if this isn’t reflected in the stock market. Yes, it may look forward a year or so, but it’s not going to be like a three-month shutdown never happened. On the other hand, I am mindful of Anthony Bolton – don’t get more bearish as markets go down.

However, I’ve done my selling a  few weeks ago1. Not gonna do any more of that, although of course my ISA is worth a bit less now than it was last year. Not 25% less, I’ve happy to say, which seems to be about the measure of the drop so far, but it’s taken a hit. I would not be surprised to see a market fall to 50% of January’s valuations, and at this stage there’s a lot of company financial results we just don’t know. If you’re Tesco you’ve probably done OK. Carnival Cruise lines, not so much.

Even some of what I hung on to, I shorted. I wasn’t going to sell ASL again, BTDT with Brexit. l But I have shorted the buggers for a couple of weeks. This is UK smaller companies, there is no end to the pain. Other than a fatter IG account. I shorted half of EDIN as well as selling half my stake.

drawdown or buying income

I hated the stock market last year, because I wanted to buy an income to top up my pension. It’s easy enough to live on and some fine living, but I have somewhere between two months and thirty years of more fine living to do.

Cash is king in a market crash and last year I had decided to drawdown a lump of cash over a few years to top up my income, roughly until when I get my State pension. I was going to add that to the income from my ISA, but that’s lower that it should be because of all the index stuff I have in it. My largest holding is VWRL, which pays2: a yield of  – drum roll – 1.98%

So I stuck that cash in Premium Bonds. You can’t  get any useful amount of interest on cash these days, and with premium bonds you don’t have to worry about the provider going bust3. The great thing about cash is that it’s defined, although in the case of the Great British Pound it’s not that well defined, because the pound has been going down the toilet since the Brexit stupidity, and is going down even more in this crash. That means inflation in the years to come.

Anyway, since I determined that drawdown policy last year it’s got overtaken by events somewhat. Exit bull market stage left, pursued by the mother of all bears.

What do I know?

I’ll start with what I think I know, bearing in mind Rummy’s theory of epistemology.

The markets are about 25% off earlier levels. If you look at VWRL

5 years of VWRL in Pounds Be aware that the Great British Pound is not an honest broker due to its tendency to go south relative to anything else of value. The hit is likely worse in real terms. We just aren’t aware of it yet.

the drop is there or thereabouts. The CAPE in the US is about 29 24 now, and VWRL is 50% US. There are/were arguments to tilt away from high CAPE markets, but a market can tolerate a high CAPE longer than you have patience. The market was therefore overvalued. It’s still pretty damn high

the Shiller CAPE ratio for the S&P500 which is about half the global index. For some reason the long-term average of 17-ish doesn’t show up for me here. Go get the original source for that

so there’s a decent argument to be made that the S&P is still overvalued. I’m using VWRL as a proxy for the market in general and it is my largest holding. You can see from the FT’s Markets at a glance that the chart of the FT All-world index is very close to the SP500. To a first approximation the S&P is the all-world, because it makes such a high chunk of the index.

Takeaway – at the moment the markets are better value than they were at the start of the year, but not outstanding value. Some aren’t as bad – there’s been so much bad news coming out of the UK since 2016 that the FTSE100 is good value at about 11, scaling UKVI’s computation for earlier this year. I’ve used his earnings value, but we can be pretty sure it’s not that good as earnings will be low this year. However, the CAPE averages over 10 years, so I won’t be more than 10% off.

I know that when I add money for next year and what I borrowed from my Charles Stanley ISA earlier this year I have about as much cash-like stuff in the ISA as shares – cash-like includes gold and bonds. I was holding about 25% in that before this crisis, but what I’ve sold and what I will add has topped it up. I am in a relatively good position now to make use of a bear market. Largely due to (cough) active decisions made a few weeks ago. That of course, is only any good if I get back into the market with those proceeds, and it’s only any real good if I launch some of the new ammunition into a market that is lower than it was in early March.

Time is of the essence to get into the market, on a scale of months and not years.

“Stocks go down much faster than they go up, but they go up much more than they go down.”

That one’s easy. A simple alert about 5% off the prices I sold at as an alarm saying

git yo’ ass back into the market, punk

will do. Yes, I risk being whipsawed into a bear market rally, but so far in needs at least a 10% rally4 before those alarms go off. Not unheard of, but not that likely IMO.

Bear markets are much shorter than bull markets. The falls are steeper. It doesn’t pay to hang around, getting back in.

Change in S&P 500 during bull and bear markets since 1970 Source

I need to be back in within a year, and I need to start now, even though I will track down some of the twisted wreckage, and rejoice that I held off over the last year’s overvaluations. There will be more losses, but I figure if I buy in through the rest of this year I will get a 30% discount compared to last year. Unless this bear market is like that late 1980s one.

What don’t I know

Everything else, but more particularly what sort of a hit the coronavirus shutdown will have on companies’ future earning streams. Although they have fallen, markets are saying this is no biggie, things will be back to normal in a couple of years. This is not the 1930s. Yet…

Combined with what I do know, I’m loath to conclude this a V shaped flash crash, even though when you look at VWRL

It could be a V-shaped hit, but seems to be still giving way

a v-shaped recovery is still possible. However, the lack of thrilling valuations and the almost full-spectrum shutdown make that less rather than more likely to my mind. Monevator is right when he says

Lower prices improve expected returns. All those markets everyone fretted were too expensive look a lot cheaper now. For example, Vanguard says the expected return from US shares over the next decade has improved by more than 50%, from 4.4% to 6.8% a year:

but CAPE indicates those US shares are less expensive, rather than cheap. Sure, the expected return is a lot better and there is a simple argument to steadily buy into the S&P every month from now on if your accumulation period is longer than 10 years. But the time to hang out this bunting is not yet IMO.

The fog of war is intense

There’s a limit to what you can draw from charts, because each and every stock market transient is an individual. In an earlier life before the millennium I was into technical analysis, and all that palaver. Let’s just say it didn’t end well. The Escape Artist says it all. When you see lots of courses telling you how great something like trading is, the question you gotta ask yourself is: if this is so damn good then why the hell are these guys pissing around telling other people how to do it rather than locking themselves into a darkened room and knocking it out of the park on their own behalf

But you have to become a wizened old mustelid before that is obvious, though I am happy to say that my younger self retained enough cynicism to eschew overpriced courses and stick with books. So I don’t bugger about with heads and shoulders, Fibonacci whatsits and so on. Some people may be able to make that work for them, I’m not one of them. The art of becoming a better investor seems to be one of elimination – learn what you can’t do, and stop doing it.

But we do know something about bear markets. This one started on the 19th February. The average S&P bear market lasts about a year, and recovery takes about two years.

That means if I am going to do something and get back in I want to have done most of it in six months and be back on my long-term asset allocation to equities by February next year, given I am adding new money to the market.

This is where I cocked up in the dotcom bust. Not necessarily in capitulating around 2002, but not getting back in. Well, until 2009, and that with all-new money 😉

Getting out in time is the easy part of the fight. Getting back in is the hard part.

Because you have to buy stuff that you know is going to go down in the near future. I will instruct Charles Stanley to start buying into the dev world ex UK index that I already carry in there and also to buy into a fund tracking the UK FTSE250. (ex investment companies, if I want to buy investment trusts I will do that myself) Many of these companies are going to go to the wall in the coming months and the FTSE 250 pays ‘owt as a dividend. This is going to get much worse before it gets better. I will do these two 50:50, and divide the cash I have in Charles Stanley into six parts for six months. And let them get on with it, CS has a regular investment scheme.

Update. Having now done this, for some reason that L&G fund of the FTSE250 ex investment trusts was an absolute bitch to find on CS. I’d come to believe it wasn’t available on there platform and had resigned myself to buying the HSBC FTSE 250 fund including investment trusts. But by listing fund managers:Legal and General I eventually found it. L&G is slightly less expensive at 0.22% as opposed to HSBC’s 0.5%, but let’s not sweat the small stuff. There be a great big bear steamroller coming behind these pennies, when I buy will matter a lot more than 0.3% difference in annual fees for a good few years yet.

I am therefore going to buy into the world ex UK, so well over half the S&P500. And UK tiddlers, that have taken no end of hurt due to the arrant stupidity of Brexit. Absolutely everything is wrong about the FTSE250 – pain in the past, pain in the future. I see no hope for these guys.

Which is why I am buying the buggers. Experience has shown me that I am not always right. Elephants don’t gallop, and this is a punt I can afford. I expect to hate myself for it in five years time… But if I do, the big fish of the S&P500 and a few other countries will make me feel better.

That will put back half of the value that I jumped out of the market. Not into the same assets – I shot everything that I didn’t love, and this will be into diversified index boring crap.

With the rest of my cash, and then some gold, I will try and make myself buy back into the market, with investment trusts at a discount. The premium/discount mechanism with investment trusts amplifies price movements, to your advantage as a seller in bull markets or a buyer in bear markets, and to your disadvantage as a seller in bear markets and buyer in bull markets. It also makes shorting these bad guys more interesting in a bear market 😉

Why investment trusts? I ain’t got 30 years of accumulation, where the slightly higher costs add up relative to passive funds. I want income rather than selling units, because I can never work out what and how much to sell, and it feels bad running down my capital at this stage. Income is going to be in desperately short supply over the next year. And it’s already clear that I don’t believe in passive investing, so I don’t have the angst associated with them. Oh and did I mention the discounts? As Monevator said

Discounts can be great for income investors, since the money you spend on your shares buys you more of the trust’s underlying income generating assets. For example, suppose a trust trading at £1 per share – the same as its NAV of 100p – owns a portfolio of blue chips that generates a 3% yield. If the share price falls to 90p to create a 10% discount to an unchanged NAV, then new buyers will enjoy a higher 3.33% yield from the trust. (i.e. 100/90*3).

There’s one small fly in the ointment. I have to make myself do it, in the face of a market that I expect to be screaming at me Wrong Way, Do Not Enter. I have to see the value of what I bought go down for months if not years. This could be a big one, like the runout of the dot-com crash, which was a grinding two-year slip-sliding away of market value. And I must not sell into that. I have seen this movie before, and I know that is tough. After I have managed to get the same amount of money into the market on manual as the Charles Stanley autopilot, I will have vindicated jumping out of the market earlier last month. If I managed to sell some gold and get further into the market, I have the potential to get ahead of myself, and vindicate my view over the last couple of years that the market was overvalued. But it ain’t gonna be easy, and I will only know I have won the fight in a couple of years when the market has recovered to the levels I sold out at.

a zoom out

And let us tip a hat to the dark times that have brought us to this sorry pass.  I would have cheered a bear market that resulted from a crisis of confidence that valuations are just too goddamned high, but not this one because of what caused it.

I may never get to look back from the sunlit uplands or never-ending recession that ensues. There is a slightly elevated risk that I will never see next summer, reminds me of this single5 from my schooldays in 1974, another long bear market during the oil crisis of the 1970s. For God’s sake don’t press play if you are feeling gloomy. They had to strike it from hospital radio playlists back then.

There are hopeful articles saying that the crisis will make people think a bit more about how they are living, and what really matters to them. It is possible, but we thought that at the fall of the Berlin Wall and ended up with thirty years of neoliberalism. This piece of the Wall that I picked up near the Brandenburg Gate when I went to Berlin the year afterward has proven more durable than those dreams

A piece of the Berlin Wall, picked out of the rubble by my younger and more idealistic self

We thought the world would change after 9/11, and it did. I’m not so sure for the better. There are big Spenglerian cycles as the West is surrendering its hegemony and the world becomes more multipolar and the power shifts to the East. But humans are adaptable blighters, and perhaps I am coloured by perspective. Even my cynical mustelid heart of darkness was cheered by people clapping for the NHS.

Of course my head tells me that there is now no effective medical assistance in the UK as it goes into the high-water mark of the pandemic. It’s not a criticism of the NHS and it’s not a criticism of political action or a lack of it. You can’t outrun an exponential, and throwing twice as much twice as fast buys you a lot less than you think.

But the recording is the result of a better use of social media than the ice bucket challenge. And perhaps when we look back on this we may believe less in rapacious managerialism for the NHS and perhaps not charge our trainee nurses student fees, living the values of our grandparents. Perhaps.

François Guizot, apparently

But the world belongs to the extraverted and the optimists. You need to be an optimist to invest into a bear market. I am not, but I can act that way. I think…


  1. It appears I jumped just before the formal announcement of a bear market. I could have done better, but I could have done worse. 
  2. That should perhaps be paid a yield of 1.98%. I would guess dividend distributions will be a lot lower in the year to come 
  3. Yeah, you can only put 50k into PBZ and theoretically you get £85k FSCS protection on deposits. But after hearing how long it took a family member to get his wedge out of Icesave I’m not having any truck with that sort of thing. Icesave was not FSCS guaranteed, but the interest rates on offer nowadays doesn’t justify the risk IMO. There is, of course, the other risk which has just risen which is the Cyprus bail-in style. You can’t outrun ’em all. 
  4. It’s probably more than that. A quick eyeball of the percentages in a spreadsheet of what I sold give a typical 15% drop. To get from 85% to 100% is in fact an 18% lift on the current value. That will probably happen over the next two years, but it’s hard to see it happening in the next two months. 
  5. I listened to this a lot in 1974, I had constructed a FM tuner out of modules, in those days impoverished kids with an engineering bent built HiFi because it wasn’t made in China for peanuts and cost loads. The damn thing hissed like a bag of cats because I hadn’t realised you needed signal strength for FM stereo and a T ribbon aerial wasn’t going to make it, even in sarf London. There was a lot of this track, though it’s really quite disturbing to see what poured into a young mustelid’s lugholes from the charts in ’74