Citywire’s miscellaneous marked up moronic musings on market movements

I use Citywire occasionally, and they spammed me with this breathless noodling. Now don’t get me wrong. I share some of their opinion that economically we are in a hole, and until the last couple of months I would say the stock market was overvalued, particularly in tech. However, this is all storytelling, and one thing I have learned across ten years is that short-term macro storytelling is hard to use. To be honest, you are better off with a Netflix subscription, not so much because the storytelling is better, but because the scenery and the protagonists are more attractive. How do you like your stories?

Netflix
Citywire Pulse

Which storytelling would you rather look at? Netflix seems to roll in cheaper at £192 p.a

SELL IN BEFORE MAY AND GO AWAY!
The market bounce has entered April. Investors should use this rally to sell
before May, as equity markets may be about to re-enter a volatile bear market
for the rest of 2022.

Hmm, what rally is this we speak of? Let me consult the Great God Vanguard and their price of VWRL

Rally? Oh Really?

Well, I suppose it’s a rally of sorts. Equity markets may always ‘enter volatility’. What I would expect to get for £280 a year is at least Equity Markets will enter a volatile bear market after May, and if they are higher in December than they were in May (benchmark SPX or QQQ or whatever) then your money back, hows about that? Or if December is too heady for you because of the Santa bounce, then guarantee it till St Leger Day at least.

Record-high inflation has left central banks cornered, unable to resist hiking
rates and taking liquidity out of the market. This makes the economic downturn
almost certain.

They’ve spent the last ten years resisting hiking rates when perhaps they should have done. Has somebody suddenly taken the old Frankenstein jump leads to Paul Volcker then? Surely the energy crisis is more of a thing than what the Fed may or may not get up to. At least it’s got form.

Yield curves are one of the leading indicators for investment strategists, along with liquidity data and monetary aggregates.

Subscribe to unlock this issue of Pulse.

Plan will auto renew for £280/ year or £28/month until cancelled

Don’t Panic, Mr Mannering[1]. And as a general rule, anything sold via a subscription should be viewed with suspicion. If it auto-renews, then they are out to get you. More widely, I am buying. Bring it on. Monevator dealt with the yield curve earlier, and you’re late to the party, which is not a good look for £280 a year.

I now expect my mum to tell me about the yield curve inverting when I call her this Sunday. In-between her spring gardening plans.

Monevator

The other problem with Citywire’s Pulse is that I expect competence in the spelling, at least. I will look the other way at the curious construct of SELL IN BEFORE MAY AND GO AWAY!, which has a sort of TEFL feel to it, but the video shows that you can’t get the staff down at t’wire

Seriously. Won’t somebody save us from the grocer’s apostrophe?
The intern trawled https://stuckinthemiddle.substack.com/ for inspiration from Twitter’s @mrblonde_macro. I’ve saved you £280 p.a. You’re welcome.

I’d normally ascribe this sort of puffery to something written by AI, but the brutalised English supports a human origin. Anyway, I intend to ignore this breathless ballyhoo and buy over time. After all, if sell in May and go away, come back on St Leger Day is true then isn’t that when you want to be a net buyer in the summer? Also if you have religion about annual timing, then wouldn’t you want to avoid holding ‘owt in October too?

Continue reading “Citywire’s miscellaneous marked up moronic musings on market movements”

Seeking a new ISA platform

Last year I had a bash at getting a second ISA platform to join iWeb. There’s nothing wrong with iWeb, indeed if I could find a broker with iWeb’s service that was unconnected with Halifax/Lloyds I would just do that.

I ended up with Vanguard, but although there’s nothing wrong with Vanguard either, I came to the conclusion that they aren’t the right fit for me. I should have spotted it really in Monevator’s broker table

Investors with larger portfolios — Look first at the flat-fee platform table if you’ve accumulated over £25,000 (ISA)

Yeah, I was already over that with Charles Stanley before I moved it, and I am now way over. This is not good because – fees.

Iweb are good enough to provide the FSCS regulatory info. I am already well over the FSCS limit, and would suffer a serious haircut if push came to shove. The aim of splitting is to get 1+1 protection, This means I have to avoid

  • Halifax Share Dealing,
  • Lloyds Bank Direct Investments,
  • Bank of Scotland Share Dealing,
  • IWeb Share Dealing, (because I already have this)

To get that protection. Taking a look at Monevator’s broker table, that’s the first three options ruled out right away.

Interactive Investor – just say no, once more, with feeling

I’m not that keen on Interactive Investor, because I have had bad experience with them not just once but twice, though I could jump over it. There’s a lot not to like about iii – the odious scumbag Tomas Carruthers who pissed me off last time is still in there having bought it out, and its owned by private equity associated with JC Flowers, according to Wikipedia. No, I’ve drunk from that well before, and private equity is never any good for anybody other than private equity, with it’s inherent lack of transparency and generally scummy behaviour. If you look at all the M&A activity they are to share brokerages what Endurance international Group are to web hosting and Interbrew are to craft beer. On a more positive note, Aberdeen Asset Management seem to be in the process of buying them out. That might remove some of the reservations.

Continue reading “Seeking a new ISA platform”

A trip to the Great Wen in the Ides of March

The Ermine made a rare visit to London recently, to see the World of Stonehenge exhibition at the British Museum. The exhibition is striking enough – not so much about the specifics of Stonehenge but about the development of the Neolithic world-view in North-western Europe, insofar as we can determine.

Part of the trouble with Stonehenge is that it is very clearly there, after forty-five centuries, but there is no story associated. That is the enigmatic appeal of prehistory. "Every age gets the Stonehenge it deserves — or desires"1 This exhibition tries to fill in some of the blanks, with analogy, with a general timeline meandering through the exhibition sequence.

The ticketing roster packs ’em in, and while it’s not explicitly prohibited to go back, it’s hard and discouraged. So if you want to admire Seahenge, the wooden circle with upturned tree trunk in the centre, do it as you pass the first time,

Seahenge exhibit, normally at Flag Fen

Because else you will be going against the tide of visitors for a long time. There’s a certain prelapsarian hint to the narrative, peaceful cooperation in the the early days, and remarkable evidence of quite long-distance communication and exchange of ideas as styles. Technology remains simple, there is a certain beauty in the collections of stone axe-heads.

Stone axes
a polissoir - how you sharpen your stone axes
a polissoir – how you sharpen your stone axes
Evidence of remarkable craft skill in gold

Until the advent of iron in metal working, and then this happens

Overall good stuff and worth the £20 a head cost of admission, if a teeny bit rushed 😉

Continue reading “A trip to the Great Wen in the Ides of March”

Dolmens and doldrums

Strange and fractious times on the markets. Not enough of a hammering to be a crash, but perhaps some of the froth is coming off the top. As it happens I have a significant amount of capital I want to invest. Looking at the sturm und drang on UK share forums, looks like there were many folk balls-deep in Tech, but out in the real world it seems a bit of a meh so far. Of which more later.

What’s a fellow to do, eh? Time to take advantage of a bright winter day to look at some ancient stones near Avebury. As soon as we came past the main stone circle we saw that World + Dog was out. It probably wasn’t the wisest thing to go on a Sunday, after all part of the point of being a retiree is that you avoid the times when others are using the great outdoors. You need other people to make a music concert work, or presumably a football match, and arguably being in a restaurant on your own is a little bit lonesome, but the outdoors is generally best enjoyed with you and yours. The Ermine household switched to the wider landscape and visited Devil’s Den, a dolmen I haven’t seen up to now. We had it largely to ourselves, and very fine it was, too.

We parked at Gravel Hill car park and walked down to it. It was a bright day, and you could see the dolmen from above, there is a permissive footpath to the site. You are aware of old money and the Norman pattern of land ownership in the UK as you pass the horseyculture gallops, but looking at the map the National Trust is making inroads into the estate 😉 In theory National cycle path 403 and 45 would take me from Marlborough where there is a campsite to Avebury, but I only have a road bike, and it’s not clear to me whether the NCN cycle tracks need something more hardy.

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Ground Control to Major Tom–turbulence ahead

What are the five most dangerous words in investing?

It’s all different this time

Actually it was Monevator who spotted the turbulence, and even he had to admit he was winding y’all up with the clickbaity headline. He’s a much better headline writer than I am, anyway. Plus an George Orwell-esque intolerance of waffle, which is why he shot the long-form “the high price-to-sales multiples / low profit stocks” in favour of growth stocks. Now where have we seen high price-to-sales multiples / low profit stocks before? Ah, I remember, the dotcom boom. I made money in the dotcom boom, despite quite shocking levels of churn

Contract notes from back in the dotcom days. I keep these to remind myself. Do. Not. Churn. Just don’t. There’s an argument I spent far too much on churn, reducing retained profit, these were £12.50 a turn dealing fees which was considered cheap at the time – about £20 in today’s money. But i did get ahead.

Where I screwed up was after that. One was not selling anywhere near the top, and the second way is hanging on to enough of this shit till deep into the suckout and selling out into cash. The chart is in that post. About seven kilosods down the tubes, and the Bank of England tells me that this is equivalent to £12,000 in today’s money. Well done me, eh?

Oddly enough I consider that tuition fees in the art of investing at the University of Life. You can spend a lot more that that in getting taught to be a shit-hot day trader, and people invest more than twice that much into going to uni. The edge I had on them was this was money I had earned, rather than borrowed, and the investment was repaid handsomely in carrying me from when I picked up this bat-signal in the teeth of the GFC.

I didn’t believe him one whit, but needing to get out of the workplace ASAP because otherwise the management crap and miserable metrics would have driven me round the bend I figured it was worth a punt. I had reason to be grateful to that signal, and the training in what not to do, so that doing pretty much the opposite looked like it was worth a go, and when I cleared the workforce three years later it, and the training, were vindicated.

Anyway, turns out the Ermine has had a windfall of late, to add to that from last year, of shorting the suckout. It appears I will continue to be a net accumulator for a little longer. I have too much in cash, and my asset allocation has been crouched in a defensive pose. Cash is not good in current inflationary times.

For pretty much any time over the past 10 years the obvious place to invest capacity I don’t need for spending would be the stock market, but it’s not the obvious place for me now. Valuations are sky-high. Some of this is apparent – loads of money has been created, firstly in trying to dodge the longer recession we should have had after the 2007 GFC. And now with the coronavirus pandemic. I’m not a head-banging Austrian school nut-job, but companies going bust is how capitalism flushes out old forms and misallocations of capital, and low interest rates foul up this mechanism, zombie old forms clutter the system up and starve the new of capital. Personally I feel the place for government is to soften the blow and help reallocate people who suffer the result of these forces, rather than driving interest rates down so companies that should go bust don’t, but that’s not a majority view – we didn’t support people made redundant after Thatcher destroyed mining, we haven’t done that in any of the other layers of creative destruction since. These failures alienate more and more people and weaken an established order, in the words of Gramsci

The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.

This process started pretty much at the start of my working life in the early 1980s, as Thatcher and Reagan remodelled the post-war international order into what is now called neoliberalism, this is illustrated at length in Milan Babic’s ‘Let’s talk about the Interregnum’ article. Some of the morbid symptoms appeared PDQ, but not in areas I was particularly exposed to.

Drive through some of the old Welsh mining valleys, and you still see some places where hope went to die 40 years ago. My Dad carried on working to the mid-1980s as a fitter until he was 65 and retired with a final salary pension but soon after that they cleared the place where he worked in the city of London (nowhere near finance) which actually made something, and turned it into a conference centre. His job would have been roadkill if he were a little bit younger.

There is froth and the stench of decadence in the areas of plenty.

I introduce you to the 20 minute avocado delivery in the Great Wen. Okay, a superyacht is a more egregious example of decadent excess, but most of you can’t afford that. I’d say we can all afford to pay £5+£1.8 for something that would cost half that if we walked to the supermarket, even if it were a Tesco Extra where everything seems to cost half as much again as if you walked a bit more to a regular Tesco. It’s hard to deny the decadence and the froth.

Gorillas grabs close to $1bn Series C funding …values the on-demand grocery delivery biz at $2.1bn

Series C funding is late-stage venture capital funding. Venture capital spends shitloads of money on vapourware. Why do they do that? Heck, so they can do the IPO, get their cash back and sell this shit to you in your passive index funds, rinse, repeat. Because think about it. Hipsters can diddle on their smartphone apps in the London loft spaces to have meal ingredients delivered by e-bike. Where’s the obvious catch? Surely it’s that the self-same hipsters can diddle on their smartphones and have a fully-cooked meal delivered to their loft space, and have been able to pretty much ever since Deliveroo and Just eat. Heck, even when I was working in TV in the Great Wen  in the 1980s we’d ring up (on a dial office phone) for a pizza delivery if it looked like Production would wrap late.

Where have we seen this unprofitable firms worth loadsamoney movie before? 1999. But it’s all different now. Yeah, right. Why are valuations up in the sky? Because money is searching for a return, because there’s more bloody money flying about made to try and dodge the consequences of the global financial crisis and there are fewer places to park it where it does better than slowly die into the night, and it’s getting less and less discriminating about doing due diligence on whether that return has any real hope of existing. We are buying this fluffed up crap in our index funds. This sort of garbage is one of the reasons valuations are going up – there are too many companies

What’s this make-believe rubbish doing in our index funds? Some indexes require profitability for inclusion, but an increase in unicorns are a bad sign of irrational exuberance IMO

that are worth gazillions and yet don’t turn a profit. Still, look on the bright side. Valuations haven’t reached the heady heights of the dot-com boom. Things can only get better, eh?

image

S&P Composite CAPE (from Shiller)

A fellow on Monevator sensibly asked me why, rather than buying puts at the moment, I don’t

Why not just invest what you are comfortable with for the long term and just forget about the drops?

I’m not a young pup saving steadily from income for 30 years, so I don’t believe in the fundamental premise of index investing because I don’t have that many market cycles. I believe valuation (and indirectly, timing) matters in a cyclical market. Those valuations worry me. If they stay up in the air for a couple of years then I will have spent a manageable amount in puts. If they stay up longer, then yes, I will need to suck it up and conclude things really are different this time and stop buying puts 1. The equity purchases I will make between now and a couple of years will be up in the sky along with all the rest of what I have had for years. I just happen to be of the opinion this has to go titsup sooner than later. But if I’m wrong I can eat that too, the increased balance in my ISA will salve my dented pride somewhat 😉

For all that, my largest holding is in VWRL, but I am happy to say that the vast majority of it wasn’t bought at current eyewatering valuations.  But I’m not buying into this market large-scale at current valuations, and yes, I am prepared to pay over the odds to insure against some downside in what I have at the moment, because I perceive the downside hazard is a lot higher than the upside opportunity at the moment. It’s not a general view however, and again, a lot of money is flying about the place. The inflation manifesting itself now is one symptom of that – consumer spending seems to be strong in those households that saved money through the pandemic, and in combination with the lost capacity.

Inflation worries sort of jumped me into working, at a fairly minimal level. I guess I need to be careful to stay below the lower profits limit, since now I have a full state pension entitlement there’s no point. It is surprising how the lower profits limit is twice as much as the upper earnings limit, where permies start to pay NI. I am selling pure mind, so pretty much all my pay is profits, and because of my pension I pay tax on all of it. However, I will charge out my replacement computer against income, because the old one was driving me bonkers with the fans screaming as the CPU overheats due to the thermal paste drying out. And it is time I charged my IET/chartered engineer registration to tax again, even though it is largely vanity 😉

But when I sit down and actually think about it, there is no earthly financial reason why I am working. It’s not a permanent job, so it doesn’t protect my future against inflation. It doesn’t really shift the needle on the dial, my dividend income works harder than I can. But I carry on because it gives me connection with a different community of people, and it turns over the grey matter. I have seen a couple of very serious cautionary tales over the pandemic – one fellow I know, bright but seems to have dived down the rabbit hole and is almost a hermit. And another is drifting that way. These are hidden hits of the pandemic. Pandemics accelerate trends that were already latent, in society at large but also at the micro level it seems.

Inflation is bad for me in terms of the pension, since it seems likely that it will overtop the cap, and for cash, and it favours the stock market as a poor choice among those available. At 5-6% inflation, if for example, I sit out five years in cash trying to avoid a 30% drawdown in a bear market, I may get to eat a 30% drawdown in the cash instead. Valuations seems particularly high in the case of big fish, this is, of course, most of the market capitalisation in VWRL. I am trying to diversify away from those high valuation stocks in new purchases. In the flash crash of last year I was buying VMID which seemed particularly beaten up, and I have been adding to that holding. It is now trading sideways, and has a poor yield of about 2.5%. Back in the day I wanted to avoid drawing down capital, but as it is in covid times I find it hard enough to spend my regular income.  I have still never drawn income from the ISA, because just as I started to run out of money drawing down my DC SIPP my main pension came on stream. So I can let that hangup go.

There does seem a greater trend towards tax and spend, which implies minimising my taxable income. That means reorganising my ISA, booting the gold ETFs out into the unsheltered GIA by selling it in the ISA and then buying the same amount in the GIA with new cash. The proceeds in the ISA let me buy shares and shelter the dividend income from tax, which wouldn’t be the case if I used the cash to buy the shares in the GIA. But I do get to eat dealing fees and the spread on the gold 😦

There be turbulence and hazard ahead. I do wonder how many people will be talking about FI/RE if the big One comes in the next couple of years. It’s all looked terrifically easy in a stock market that only climbed higher over the ten years since the GFC, with the exception of what turned out to be a deep flash crash due to Covid last year/ Even at the low-water-mark of that, valuations were getting on for twice the value after the GFC.

Something stinks to high heaven about valuations to this mustelid snout, but the rapid increase in inflation is robbing us of the opportunity to sit out on the sidelines. But I am mindful of Gramsci. This is the interregnum, and morbid symptoms appear. One of them seems to be stratospheric valuations. Unicorn shit is on the rise.


  1. Shortly after that no doubt the Big One will hit us all, because life is like that. You don’t have to win every punt if you take an opinion, these are relatively cheap, though throwaway 

Safe haven by Mark Spitznagel

Try imagining a place where it’s always safe and warm
“Come in,” she said, “I’ll give you shelter from the storm”

2111_safehaven

I bought Safe Haven by hedgie Mark Spitznagel from a recommendation in one of Monevator’s comments. I’d agree with the comment that the book doesn’t leave you with anything actionable, but perhaps as Dion Fortune said of the Cosmic Doctrine, the object is to train the mind, not inform it. This Spitznagel achieves IMO. It isn’t a long book, I read it in a couple of hours in one sitting, albeit punctuated by watching a movie with Mrs Ermine.

Reading has its systole and diastole, which is why cramming is tough, which is why doing something else midway lets you digest it better – Darwin was a fan of walking for this purpose. I only find that useful for when I originate something creative, but the movie improved the digestion of the book’s 240 pages, presumably by letting something in the background reflect.

Spiznagel is pretty full-on, a reasonable storyteller, and uses metaphor and analogy well. The main takeaway is that many of us  evaluate investment prospects by expected value. Despite the standard FSCS warning that past performance is not a guarantee of future results, that’s sort of what happens. The author disses macro investing, and goes on to make the assertion that managing (tail) risk can be cost-effective. In particular, that it can improve your compound annual growth rate (CAGR) without costing you performance

cost‐effective risk mitigation—or raising compound growth rates and thus wealth through lower risk—is really our comprehensive goal as investors.

Spitznagel, spends the rest of his book showing you how you can recognise an asset class that could do that.

Tragically for you and I, dear reader, that asset class isn’t something that you or I could go out and buy, or synthesise from something we can. It might be possibly in the hedgie world. I am somewhat glad that intuitively I found one of the few assets that sort of comes close-ish. The book also has value in showing that you can compute the optimal amount of that asset class.

Yes, there really is a buried treasure for investors, one that solves our monumental problem by showing that the great dilemma of risk—the ostensible tradeoff between higher returns and lower risk—is actually a false choice. […] We need a more holistic approach; we also need a treasure map to know where to dig.

But just because that buried treasure exists doesn’t mean we will ever find it. The greatest value—more than in the treasure itself—will be in what we gain from the hunt.

I was tempted to issue a refund request, having gotten to the end and being told that the ideal was a chimera, for civilians at least, and since less than 24 hours had elapsed between buying it I would have got away with it.  Amazon track how much of a Kindle book you have read, though I don’t have a habit to returning Kindle books so I’d probably be OK.

But after sleeping on it I came to the conclusion that I did learn something, but in a Dion Fortune like way. My mind was trained, not informed. Most non-fiction reading is to inform the mind. So I got my £15 worth, but it wasn’t the £15-worth I expected.

Spitznagel insights – training the mind, not informing it

Take the Saint Petersburg dice game, a single roll of the dice offers

00007

Wotcha going to pay to play this game? The expected value is ($1+$2+$6+$22+$200+$100000)/6=166,705

but I am guessing most people wouldn’t pay that much, intuitively. It seems obvious that with five chances of being largely wiped out you wouldn’t pay the expected value. Bernoulli’s computation shows if you compute the geometric mean of what you end up with, you can estimate what a reasonable proportion of your total wealth you would pay for this wager. If you had £100,000 then paying about £37k or less to take part gives you a better than even chance of ending up better off. It quantifies the fact that you can take more risk if you have more capital that you don’t immediately need.

Reading the methodology gives an analytical solution to the gut feel approach, and is intriguing. However, the training not informing shows, because most risks you take give a return proportional to amount you put in. However, Spitz has only got started at this point, and he uses a sequence of returns that includes a catastrophic loss (to 0%) to show that where you have a sequence of returns that build on each other then risk mitigation can be worth while,

The arithmetic cost of its risk mitigation is more than offset by its geometric effect—such that its net portfolio effect is positive.

Most of us invest in a single lifetime of a specific sequence of returns. I still remember hearing my German great-grandmother describing sequence of returns risk – they lost their (financial) life savings twice. Fortunately most Anglosphere stock drawdowns aren’t that extreme, but Spitznagels view on central bank meddling suggests that this is not an immutable law of nature, particularly in a declining Imperium.

The Spitznagel edge

Spitznagel despises modern portfolio theory, which is the rough assumption that you buy a mix of less volatile but lower-returning assets like bonds and more volatile but higher returning assets like equities. Inherently in that mix is the takeaway that you will give up some return, and Spitz has no time for such milquetoast ambition.

However, to this mustelid reader he spends a lot of his book in search of something that you could replace bonds with, bonds being the most common MPT risk mitigator of choice1.

As one example, say at the beginning of the ISA year I could save that £20k in an ISA, less an amount that I could go to an insurance firm and say here is £x. If this time next year the market falls more than y%, pay me some lump sum proportional to x (but note NOT proportional to the fall, this is a cliff-edge function and therefore non-linear).

He spends a fair amount of time showing how you would compute the right amount to spend on this insurance, and in his examples it’s not very much. I haven’t given enough thought to whether you can do this with options and CFDs, but I don’t know of anywhere you can go to buy this sort of thing.

You can spreadbet against losses, but in general it is always cheaper to simply buy less of the asset and sit on cash. I have spreadbetted against my ISA in times of market turmoil, but that’s not the same as doing this steady state, which is an exercise in futility.

However, to return to the training the mind aspects, one of his key statements is

We experience profits and losses and all accounting ledgers arithmetically; we experience life arithmetically—one thing after another. This is linear thinking versus geometric thinking. It’s a big difference and essential to our understanding of risk and the disastrous impact of losses on wealth. But it is highly counterintuitive. Here you face an inconvenient, uncomfortable but crucial truth:

Your raw, linear returns are a lie; your true returns are crooked.

Bernoulli’s call to map returns through the logarithmic function was thus a normative one, not a positive one. In basing decisions on the geometric average of expected wealth or returns, not on the arithmetic average, Bernoulli was showing us how we should view risk—not how we necessarily do view risk. And this is precisely where economists got it so wrong.

I find this reasonably compelling. It’s not totally new to me but this exposition is good. I have no idea of if economists got this wrong, but we generally experience a particular sequence of risk. In both the housing market and in the dotcom bust I experienced that the crawl back from a double-digit loss is long and slow, and best made up by Saving More than trying to make it back in that market. If you lose 50% you have to make a 100% profit on what you have left to get back to where you were before.

Some of this you can lean against by not being 100% invested in equities – you reduce your arithmetic return natch, as you are less exposed to the equity market. But you improve your geometric return, because you live to fight another day. Spitz gives you the lowdown in the bit on the Kelly ratio, but again, what makes that less actionable for most is that having seen the value of your equity holdings go titsup in the markets you need to get right back on the horse and throw some of your cash into that now undervalued market. Easy to say, not so easy to do. That’s why people have bonds, and I have gold.  I don’t do bonds, because I estimate 25 times my net DB pension as a bondholding, and unless I get a fair bit older I can’t manage the right mix.

Theory would therefore point me in the direction of 100% equities. But I have had a pretty decent run, I don’t need to shoot for the lights, and sometimes comfort is more valuable than performance. So while Spitznagel wouldn’t approve, I take a lower expected return, because I can.

The big killer is there is no safe haven for little people

Spitznagel has turned the handle on all the things people typically regard as safe havens and qualified them against his specific criteria of cost-effective safe havens (ie they get your CAGR above the 95% confidence interval  of the S&P over a representative set of trial periods)

00068

And the results are in. Little people, you are hosed. As it happens an Ermine does use gold (and there is a useful piece of the Spitz in how you qualify how much gold you should hold, about 20% is right for me)  But before you all rush out to buy SGLP, most of the trial periods where gold lifted itself into Spitznagel success territory happened to be in the 1970s, after Nixon repudiated the convertibility of the dollar into gold at a fixed rate. So gold may not be all that after all.

“Gold is pretty darn good. You just have to understand there’s been a lot of noise around it.” – underlining gold’s value as a safe haven, while noting that it performs best when inflation expectations are high, and historically it’s been inconsistent in mitigating portfolio risk.

Obviously if you can buy insurance on Spitznagel’s terms then you are off to the races. But those terms are tough –

Any punter can devise a trade that does well in a crash. The key is how do you do in a crash relative to the rest of time.

Yeah, quite. From his Yahoo Finance interview via Business Insider interview

“The Federal Reserve is manipulating the most important information parameter in the economy, and that’s the interest rates.”

“I have this expectation of destruction in the financial markets. That doesn’t necessarily mean that someone should just hide away, because that may not be the best strategy either.”

Where’s Clint when you need him, eh? Do you feel lucky, punk?

Spitznagel’s Universa Investments hedge fund returned 4,144% in the first quarter of 2020

An Ermine felt pleased to get out of the first quarter of 2020 with the black tip to my tail intact after selling some crap and shorting some of my ISA. DNFS – bollocks to that. Going for a 40-bagger, now  that’s ambition.

More Spitznagel

Spitznagel’s company Universa

Spitznagel on the FT (Oct 20 this year)

“It would be very hard for bonds going forward to provide cost effectiveness. Bonds really represent the canonical case of the mean-variance approach of lowering the volatility in a portfolio, but being poorer because of it.”

Finally

No book is ever gonna tell you what to do successfully as an investor.

Well, this one sure ain’t. There’s a lot of good stuff in there, and I am sure I have brutalised the principles from a mixture of a lack of comprehension, not being as smart as Spitzy-boy and the exigencies of making it into a post. Nevertheless, it will probably reward re-reading, though I am almost 100% sure that it won’t give me anything actionable. Training the mind, not informing it…


  1. TIPS is the archetypal risk-free asset class – risk-free, that is, if you believe the CPI inflation index used by the Fed, which is a different matter. 

Ermine abroad – first the smartphone came for the workers, and now it’s come for me

I extended a mustelid paw across the sea to visit the prehistoric standing stones of Carnac in France. I figured it would be a low-key attempt to test foreign travel post/during Covid. It’s not the first time I have been there, but there are one hell of a lot of sites in a very small area. The stones were good –

Geant de Manio

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Carved stone inside tumulus at Locmariaquer

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roof inside tumulus at Locmariaquer

Kermario stones at night

and it was an opportunity to remember what the point of this early retirement lark is. So I had a good time, also visiting Mont Saint-Michel on the way back.

Mont Saint-Michel

France seemed to work well in my view

Firstly a shout out for the fine Starling Bank corporation, where you really can use your debit card like you would in Blighty, you get the Mastercard interbank rate and no minimum amount, fees, loading or whatever. And they will send you a notification of the transaction and cost in pounds, pretty much before you get to put the card back in your wallet. Foreign travel money done right. What’s not to like, apart from that every other bugger nickel-and-dimes you for this that and the other.

There’s a lot of argy-bargy ‘twixt buccaneering Brexit Britain and our nearest neighbours, whether it be Brexit in general, fish in particular, or submarine contracts though Albion seems to be thought of as a bit-player in that specific perfidy.

I am not used to carrying ID in public, one of the nice things about this country is that what’s not specifically prohibited is considered allowed, so unless you are carrying tools for breaking and entering or hurling a ton of metal around menacing bystanders, there’s not a general sus law of people asking ‘papers please’, though you may feel differently about that if you are young and black…

Whereas in many countries and France more specifically it is illegal to be out in public without ID. I’m of the general view that when in Rome etc, so I go along with it if they feel strongly that way. Similarly I wouldn’t go to Dubai and get pissed up, because they are uptight about things like that.

One of the things about the French is they are really big on masks indoors. I admit I find that really unpleasant, because it makes me paranoid, because it’s a big statement that all other humans are out to get you. Yes, I know it’s irrational, it’s how it feels to me. But that’s the way it is.

They don’t generally let you into restaurants (and public buildings like museums of prehistoric artefacts or the Locmariaquer sites) without a Covid vaccination pass as well. You will generally get into shops with a mask but no pass, so you won’t starve, but if you are an anti-vaxxer your life will be hard in France in a way it wouldn’t be here. In France this is done via a smartphone app called TousAntiCovid. Quite remarkably, I had found on expat forums that TousAntiCovid (TAC) will accept the NHS Covid Pass QR codes, which seems either a quaint throwback to earlier times of the Entente Cordiale or a tacit acceptance of the value of the British spending. Given the current state of Anglo-French relations which I would describe as frosty it surprised me. Note that this is not the same as the NHS letter you could request. This isn’t infallible – sometimes it helps to delete the app and generate a new NHS QR code and enter it in, and the fact that TousAntiCovid accepts your NHS codes isn’t necessarily a confirmation that it will go through the app restaurants and museums check it with. Fortunately the first place we went, the Carnac Archaeoscope, wasn’t a stickler for the check actually working, it just had to be there, but some places were less forgiving, so you need to sort it out. And this is where the rest of this post will descend into a rant.

Once upon a time you could travel with just a passport and a ticket

Nowadays, you need to maintain a serious IT operation on the road to jump through all the hoops. I can see a role for that endangered species, the travel agent or some sort of concierge service. Continue reading “Ermine abroad – first the smartphone came for the workers, and now it’s come for me”

Ill fares the land

Ill fares the land to hastening ills a prey
When wealth accumulates and men decay.

The Tory party conference is in full swing and celebratory high-fives, with Lord Frost chuntering that the long bad dream of EU membership is over. Now unlike some of you whippersnappers, I recall what the sick man of Europe looked like in 1973, though as an ankle-biter I wasn’t that economically aware. Ermine Command sent an expeditionary force to the fair city of Oxford. Through the crackling wisps of t’internet came this signal

Tesco

Our nonplussed forward team commander wondered if they’d picked up the time machine by mistake “I’m in a time slip and it’s Thatcher’s Britain all over again” – at least they’re all set for CDs if they can find a way to put them in their phones.

Continue reading “Ill fares the land”

Taking the Great out of Britain – welcome to your new Brexit vehicle insignia

You probably won’t be able to get any fuel to be able to do this, but if you decide to drive abroad in a British registered vehicle then you need to display your country of origin.

Back in the day, before we had joined the EUSSR Common Market I watched my Dad fit a GB sticker to the rust-bucket otherwise known as an Austin A40, to cross on the ferry and drive through Belgium and Holland to visit my grandparents in Germany. Your GB car sticker predates EU membership. Even oo7 had one.

James Bond’s sticker is no longer valid as of tomorrow. No, really. Bite me. Her Majesty’s benighted and incompetent ship of fools masquerading as a government has decreed it so. No. honestly. I’m really not shitting you.

If you want it alongside your number plate to cover up that pesky blue EU roundel, then you will have to display this full Brexit regalia

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Now since my vehicle is old enough that the hated EUSSR insignia is stuck on to be legal at that time and looks sort of like this

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so I have the option to peel that off, and get myself a nice, vanilla UK sticker a bit like the one my Dad used fifty years ago, except that he used a GB sticker like James Bond.

2109-uk

I’ll go that way rather than the number plate version because people waving union jacks around declaring their Britishness in the EU comes across a little bit, er, gammon.

Where the hell is James Bond when you need him? We used to know how to be British with some semblance of class, even if the Continentals had already sussed out hat you couldn’t trust perfidious Albion before 1973.  Come to think of it, where the bloody hell is King Arthur in Albion’s hour of need? It’s all very well to lob Excalibur into the Lake off Pons Perilis but you’re asleep at the switch, mate.

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the last sleep of King Arthur in Avalon

Would you mind awakening and waving the old sword at the fourth-division crew in charge of the Kingdom of Logres who seem hell-bent on cocking up anything that can be cocked up, and then a fair few things besides.

Brexit. Taking the Great out of Britain. You really couldn’t make it up. What are we going to change it to when Scotland goes its own way?

Nostalgia nuts can take comfort that there’s a plentiful supply of GB stickers for sale on Ebay, indeed there are special Remoaner editions with full blue stars. But if you want one to do its proper job, you need a UK one. Beats me what Ukraine is going to do. Greedy bastards that we are, it looks like we bagged ISO country code GB and UK, although the UK is exceptionally reserved so the ISO is with James Bond on the primacy of GB. With 111 years of tradition, the backing of 007 and the ISO I’m not sure why we trust the judgement of Grant ‘there is no shortage of fuel‘ Shapps, but that’s the ship of fools for you. This is the same fellow who tells us that

Shapps said there were no supply problems at the six refineries

Hmm, apart from the second largest one in Britain about to go bust, eh Grant? Chin up and get a grip old boy.

Fintech Fantasyland – Raisin and Coinbase

In more innocent times once upon a time, I walked into a branch of Barclays opposite where I worked, showed them my staff pass card and 20 pounds to get the ball rolling, and walked out with a shiny new Barclays bank account. No passports, name rank and serial number proof, no pack drill, just me and them. They knew The Firm, they knew what a staff card looked like, and that was good enough. They knew their customer, in an analogue way.

Nowadays the process is grief-stricken and involves webcams picturing your driver’s license(sic) and all sorts of aggravation. I figured I should start to get a teeny bit better return on my cash than 0% as the amount started to creep up to Harry Browne regions, so I was tempted by Hargreaves Lansdown’s Active Savings, on the principle that I already had an account with them, so I wouldn’t have to go through all that customer ID crap. I stopped as soon as I read signing up for active savings means they will always send an SMS to log in, even for my SIPP. I am sick of this stupidity. It’s the easiest job in the world to slam your phone number to some ne’erdowell, particularly if you live in rented accommodation with a shared mail access. But it’s not that hard to do for everyone else.

We had/have a perfectly serviceable alternative – your bank card and one of those reader things to generate a one-time password. But no, it the general fetish to have everything on your damn smartphone, SMS messaging is a less secure alternative they are pushing. Because every bugger has a smartphone surgically implanted, FFS.

The advantage of Active Savings is that you have a single interface to the account, and they then let you save with a number of other organisations without signing up with those separately. Which is good, because the process of signing up for a bank account in the UK is absolutely horrible now with all the ID checks, I’m sick of it.

So I looked for an alternative, and Raisin seems to do the same thing. Given that I have a SIPP with HL, running with a separate FSCS institution seems a good idea anyway, and though I have to suck up the SMS bullshit at least I only have one sign up process to do.

The time to worry about bail-ins is before they happen

If you look at Raisin’s FSCS protection page, once you have signed up for savings account through Raisin, you get the FSCS (or Euro equivalent) protection of the destination institution. One of the biggest drags about savings is having to sign up with many institutions, the implication here is that you could break up your holdings below the 85k FSCS amount all through Raisin, provided you were careful where the destinations were.

There is some argument that holding more than the FSCS limit in cash is mad, unless you are really, really old. However, at current valuations I can see myself doing that for some time. Inflation is not the only hazard I see, and looking at what happened in Cyprus the FSCS limit is roughly where you become a tall poppy and a source of emergency bank funding of last resort.

So far so good, but though Raisin is associated with Starling Bank and I used Starling as a feeder account, it seems to be taking its time to happen – transferred about 10am and only got there 11pm. In general I expect better from Starling, my experience to date has been of quiet, understated competence, and blistering speed at posting details of transactions. Pay for something using the card, and by the time you have picked up the phone and opened the app that transaction is there to be seen in your account right away.  I don’t bother to ask for paper tickets for those card transactions because there’s no point.

For other Starling customers wondering what the hell their sort code is, Starling tell you there is only one: 60-83-71 at the time of writing.

I found Raisin confusing in operation. Some of this of course is that the nominee method of banking is new to me. For example I applied for a 32 days Investec notice account, paying 0.8% APR. Time to order some tiny fireworks, eh? So I get an email saying the Ts and Cs for the Investec savings account you viewed, and I think fine and dandy, to be treated to a pdf with 16 pages of solid cruft about Meteor Asset Management, with nary a peep about Investec. If you look at How Raisin Works you will see that Meteor Asset Management is the pool account front running Raisin’s customers, sort of analogous to a nominee account1, which is how you don’t get to streetfight the onerous Know Your customer crap for each and every share line in your ISA.

I happen to have read the how it works page before getting this 16 page Investec Ts and Cs not mentioning a word about…Investec. I was more tolerant of this rum carry-on because I had already qualified Starling as a competent operation, but that sort of inconsistency is going to scare the horses in customers of a more nervous disposition. Continue reading “Fintech Fantasyland – Raisin and Coinbase”