BofE’s Ben Broadbent inserts hoof in gob, message gets tossed in can

Poor old Ben Broadbent, second in command to the suave Canadian fellow Mark Carney at the Bank of England. Mark’s a chap who can fall out of a boat without making waves, unlike his deputy.  In the hoopla about Ben’s  perhaps unwise choice of words – did you know climacteric1 was a thing? his message got lost. but it’s pretty straight between the eyes. In an article for the Torygraph in the guise of Edgar Allen Poe’s Raven, the harbinger of doom says

compared the current slowdown in growth and wages to a lull at the end of the 19th century, when the height of the steam era was over but the age of electricity was yet to begin.

Today’s economy could be experiencing a similar trough as it passes the boom of the digital era and awaits the next big breakthrough, possibly with artificial intelligence.

Ben Broadbent to British economy – you’re over the hill, every which way is down from here for at least a generation

Oy vey. And among other things it’s good to know that the ermine is doing his bit2 for this incoming doom:

something similar happened in the late Victorian era. Towards the end of the 19th century, British productivity “slowed pretty much to a halt” after peaking, as it entered what he labelled a “climacteric” period.

The word “climacteric” is, according to Mr Broadbent, a term that economists have borrowed from biology and means “you’ve passed your productive peak”. It has the same Latin roots as “climax” and means “menopausal but it applies to both genders”, he said.

Mr Broadbent added: “I once got an economist to explain the origins of the word ‘climacteric’. As soon as he started talking to all these middle-aged men – about [how] it means you’re past your peak and you’re no longer so potent – they all said: ‘We understand’.”

Hehe. I understand that climacteric bit, after all I am no longer a productive member of society. For those lucky enough to have the choice, it comes from the age-old arc of a human life, poetically summed up by Carl Jung thusly: Continue reading “BofE’s Ben Broadbent inserts hoof in gob, message gets tossed in can”


Retired accountant fails to understand interest only mortgage, loses house

It must have been so simple when he was a nipper. You buy a house with a mortgage, and you got to pay back a shedload of interest and a teensy bit of the capital. 25 long years later and this happens

how a traditional mortgage builds equity

as the dynamic balance between interest and capital repaid shifts in your favour. The downside, of course, is that you have to pay off the capital. You pay roughly twice as much1 for your house if you buy it with a mortgage than with cash, due to paying interest for 25 years. Which is why some bright spark dreamed up the interest-only mortage.

Although we now think of them as ways to enable the BTL brigade to shaft everyone younger than themselves, the IO mortgage was originally dreamed up to make houses more affordable by halving the mortgage payments. Easy peasy. What actually happened for a while was house prices went up2, because every time you make the existing price more affordable the price adjusts so it becomes only-just-about-affordable, because that’s where premium scarce goods reach equilibrium in a market economy. It’s only the punters that can’t afford the prices and fall out of the market that puts a brake on house prices, but UK governments have never acted on this because most voters want high house prices. Governments will change that when the increasing age people buy their first property means there are as many non homeowners as there are homeowners of voting age.

Enter stage left, an accountant, age 77, mithering about his IO mortgage being called in

who didn’t realise you had a pay off an interest-only mortgage in this lifetime, rather than the next. Len, this post is for you. There’s pathos in this story on so many levels, I mean, FFS, this dude worked as an accountant for a living. It’s fair enough for the interest-only mortgage to catch out young whippersnappers like Joe and Josephine in the hands of Mr big Bad Wolf, but grizzled greybeards of 77 who have only just wised up to the fact that they have aught to pay off the capital have no excuse. These guys had the temerity to complain to the Financial Ombudsman and then when they got the finger from the FOS because of the pickle they got themselves into through overspending in retirement, bleat to their local MP. The MP spins this as a tale of dreadful ageism by Santander. No, they’d just like to get their fricking money back before you die. I’ve done this story too many times before, WTF is it with the British and housing?

I know it’s impolite to mention the Grim reaper but it’s a fact that every 24 hours you live you get a day closer to death. I am nearly three decades closer to death than when I took out that mortgage, which is why I paid the bugger down, and that’s even without the benefit of a life of accounting to see the problem rushing up to meet me. The MP puts this spin on it

Lloyd called on Santander to either increase its age limit for mortgage borrowers or abolish it, and said: “Without such a move, Mr and Mrs  Fitzgerald will lose their home. Is that really what the bank wants to see happen? I will also be raising this vital issue in parliament. I am sure there are tens of thousands of other families potentially facing the same, desperate situation in the coming years, which is unacceptable.”

No. It’s a situation that has been developing over decades, and they can’t say they weren’t warned. The Fitzgeralds chose to stick their heads firmly in the sand, and that’s why they are in the shit. It also shows the folly of another innovation in mortgage finance, the short-term fix. These guys remortgaged in 2007 for 8 years. It’s fair enough, when the 8 years are up, you need to ask again if you can stay in that house if you don’t have the money to redeem it.

You have the option to borrow from someone else I guess, but nearing 80 you just aren’t a good prospect, because you have zero human capital left. If you financial capital isn’t enough to keep you in your house, then you don’t get to stay in that house, and you can’t earn any more financial capital. You are stuffed. The moral of the story is pay your bloody mortgage off in your early retirement, or be prepared to move or rent.

This is not a sob story of somebody who was taken out by events beyond their control. This was wilful overspending on a big scale for decades. I could have had many fine holidays with the money I used to pay down my mortgage. The fact this guy plied his trade as an accountant takes the biscuit. Continue reading “Retired accountant fails to understand interest only mortgage, loses house”

getting under the skin of Brexit

A lot of political discourse these days consists to yelling insults to the other side across an unoccupied no man’s land of the vacated centre. The Ermine is/was a Remainer, largely from the economic point of view, but I thought I would use Kindle Unlimited (KU) to try to get a understanding of what the other side thinks. I’ve already used Brexit Central, but the advantage of KU is that political screeds often end up on Kindle Unlimited, so you can sample a lot fast. 1 I wanted to try and get inside the heads of the majority, to let people develop their arguments, rather than take the soundbites. Plus people are more civilised when they think they are talking to the converted.

There’s a lot of dross on KU, some of the Brexit stuff confirmed the Guardian’s stereotype of the Brexiter as old racist white guys who hated immigrants. I wish I could remember the authors or the books in question, they yattered on about “common sense” but were basically latter day Enoch Powells without his rhetorical gift, and disliked all immigrants including white Eastern European ones. This kind of author made themselves known from the first paragraph.

I wasn’t after that, I was trying to get a handle on the case for Brexit. Two KU authors helped me get an idea, one was Daniel Hannan’s Why Vote Leave, with an honourable mention for supporting cast to his jingoistic book How we invented Freedom.  The other was Andrew Mather, who falls definitely into the category of old white guy 😉 One should always be wary of people who cite their membership of MENSA2 in an indirect appeal to authority but one should equally be wary of inferring the general from the particular, people who are wrong in some aspects aren’t therefore wrong in all. Mather’s book was

Brexit: Why We Won: What Remain will never understand about the Leave victory

which seemed to be a good place to start as a Remainer trying to understand the leave result. These aren’t the only decent books from Brexiters, but these were the ones I read rather than skimmed. I came away from the exercise with more respect for the internal consistency of the leave argument for its supporters.

The price I paid for this project is that Amazon now thinks I am  on a diet of the Daily Express, Breitbart, and this is the sort of reading they offer up, I guess one has to suffer for one’s art 😉

Last time there was a bit about trigger warnings, global warming conspiracies and social justice warriors, so I seem to getting less intolerant with distance from this exercise. I didn’t realise that Brexiteers swam in such waters 😉

Amazon is of the view that there is some correlation between Brexiteers and climate change denial, and oddly enough those that rail against speed cameras repressing their inner Mr Toad. It’s a funny old world, and it shows the toxicity of the way filters amplify extremes. In the analogue world you would walk past the billboards for the Tories, then the one for Labour, whereas on the Internet there’s some guy running ahead fo you swapping out the opposition’s ads for ads for cars, lingerie and PPI claims before your sensitive head gets troubled with uncongenial points of view.

Some of the problem of Remain’s argument was that it was bloodless and talked in terms of abstractions,  ‘the British economy’. I quite like this description of how dialectic tends to swing between the poles of abstraction and reflection, which puts the issues more poetically than I could.

The [British] economy is an abstraction, and for the last thirty years or so it has gone along with the assumption that neoliberal assumptions of free trade, globalisation and lower taxation are all good, and indeed ‘the economy’ has expanded greatly as a result. The Britain I graduated into, less than a decade after the last EEC referendum, was far poorer in general than the Britain of 2016, but not everyone was poorer than now in every way. As JMG described, the issue with abstraction is

it becomes impossible to miss the fact that the supposed universality of the world-theories of abstraction has been obtained by excluding countless things that don’t fit. Some of those excluded things are bits of data that contradict the grand theories, but some are much vaster: whole realms of human experience are dismissed as irrelevant because they don’t fit the theoretical model or the methods of inquiry that a given age of abstraction happens to prefer.

Let me take one example of human experience – youth unemployment. I graduated into Mrs Thatcher’s first recession, and found my first job a month after unemployment reached its high-water mark, worse for that age group than at any time since. I was unemployed for six months. The experience left enough of a mark that I never took that chance again,  finishing work from one company on Friday and starting at the next on Monday, until I went to work for the very last time 30 years later. Continue reading “getting under the skin of Brexit”

Escaping the avaricious paws of Interactive Investor – again

I opened my S&S ISA in March 2009, with Interactive Investor (III). I was used to their system, had used it for shares research in my dotcom boom and bust days, and their charges were OK. What I want in a ISA platform is pretty simple. No ongoing fees, and specifically no percentage fees. I am happy to pay for buying and selling shares, not to hold them.

Before the Retail Distribution Review (RDR) this was common. Platforms made their money on kickbacks from funds. I had been educated to this problem so I didn’t have any funds. Simples. The RDR was supposed to help the common people, but I took the shaft. I was perfectly happy to have my platform costs subsidised by all those fund holders. III introduced a £80 p.a. fee, apparently for our own good. From their guff at the time

We believe that customers should be engaged with their investments and actively manage their portfolios. To support this, we are introducing a quarterly fee of £20. If you already trade twice or more a quarter then this fee will make no difference to what you pay – it is effectively an advance payment of those first two trades for the quarter. If you are trading less than that then you will still have the right to your two trades in each quarter without any additional payment and hopefully feel encouraged to more actively manage your investments.

I’d go to IG Index if I wanted to trade, guys. That’s not me, so I jumped to TD Direct. Not without pain, indeed iii’s attempt to make money out of their 2012 switchers showed that they are moneygrabbing scum, which is something I had forgotten over the intervening five years.

Moving a S&S ISA is tedious and slow

It took ages to move that ISA, I moved it in stock format. Don’t know why we suddenly resurrect Latin and call this in specie, but that’s the convention. You have to watch it because some platforms charge a transfer out per line of stock. OTOH you get to pay the transaction charges twice if you convert to cash and rebuy. Some people say there’s the extra hazard of being out of the market, and I suppose since bull markets are longer than bear markets that’s probably the case for a randomly chosen time period.

I had five years with TD, where they generally did what I wanted them to do, and didn’t give me any trouble, other than starting to charge for holding funds. So I got rid of funds I’d acquired with TD and switched to using ETFs. That gets easier as the ISA becomes a bigger beast. I don’t really buy less than £2k of anything now, £12.50 out of that is 0.63%, on a par with stamp duty. So I take a 1% hit upfront. On the £500 transactions when I started out in 20091 that 12.50 was an ugly 2.5%, which is why everybody used funds in those days. Paying the 3% in kickbacks and fees, no doubt 😉

Having laid the beast of III to rest, the zombie comes after TD Direct and buys it up. Other TD Direct customers were more savvy than me and jumped early, I left it until III tell me they are bringing their ugly “annual fees but not if you trade lots” fee structure to TD Direct, and get caught in the crush for the exit. I initiated a transfer to iWeb end of October 2017. Every month after I chased them in their private message system and nothing happened. Continue reading “Escaping the avaricious paws of Interactive Investor – again”

Millennials can chill about not having massive savings

… because they’re young. Young people generally don’t have savings, and it beats me where the idea came from that they should have. H/T to Monevator, who introduced me to the idea that people in FT land are feeling troubled that only one in six millennials have £100,000 in savings. My personal reaction to that was WTF, what do these guys know that I didn’t?

I was in my late 40s before I ever saw an account with six figures to my name. Apparently you need a deposit of £100k to buy a house in London. Housing has always been expensive in London. I was born in London, went to university there, and spend the first decade of my working life there. I had job-switched a few times and the Bank of England inflation calculator tells me I was earning reasonably well for a twenty-something. I was single and child-free.

What was the best housing situation I could afford back then? A single rented room in a HMO in Ealing where I had to put salt round the periphery to prevent black slugs invading the place. This was an upgrade on the various rooms in shared houses I’d lived in before. I was in my late 20s, and no, I didn’t really have any savings either, other than about £5k, because I had believed that I needed to pay the fees of my MSc course myself, but it turned out that the Manpower Services Commission gave me a grant. It still didn’t help me buy a house in London.

So I moved out of London. The problem of not having a deposit was still there, but when I moved to Ipswich I was earning better and the prospects for salary increases were better for me. So I borrowed about £10k from a MBNA credit card on interest-free credit for a year to put down as a deposit for a house, perpetrating the single greatest piece of financial folly in my entire life – buying a house at a market high. I used my better salary to pay down that interest-free card over the year – I really did pay 0% on it. But I didn’t have savings of £15k from the start. Those were more innocent times, when mortgage companies looked at only your salary and didn’t ask about CC debts, because such debt was not as commonplace as now.

That £15k deposit was the equivalent of £40k now. Earlier generations of Ermine weren’t any better at saving than Millennials. There is an argument that young people start off more skint now than they used to. There is a compensation for those working in cities that they observe much faster career progression in their early 30s than previous generations

so it’s difficult to tease this appart – I would say that average and middling talented young folk had an easier time in my generation that Millennials, but high-flyers have much better opportunities now, part of a general winner-takes-all trend.

The Hemingway law of motion – Slowly at first, then all of a sudden

In Hemingway’s The Sun Also Rises, there is this passage summarising  economic change

“How did you go bankrupt?” Bill asked.
“Two ways,” Mike said. “Gradually and then suddenly.”

Continue reading “Millennials can chill about not having massive savings”

The Global Auction – why learning isn’t earning any more in the West

There have been some interesting studies of work of late, and I took a read of some of these because the general picture I am getting is that the world of work has been steadily getting more and more horrible since I quit the workforce in 2012. A gem of a book that explains a lot of what is happening to work and what happened to my job is this book, which I discovered while web-ratholing via George Monbiot’s recent column. I was always going to be a sucker for his lede

It’s untenable to let salaried work define us.

although perhaps not so much for his line on volunteering 😉

The book is called The Global Auction: the broken promises of education, jobs and incomes, and as I started reading it I immediately thought of a couple I am vaguely acquainted with who have two children. They’re not rich enough to support their desired lifestyle and send both children to public school, so they send just one. This puzzled me as it seems an obvious way to fund an army of therapists in the troubled adult future of the child who is deemed unworthy, but I suspect that it’s a terrible misallocation of capital even in the case of the Most Favoured Child. It’s not particularly that the Most Favoured one is particularly clever or the Most Unfavoured particularly dimwitted. They’re both probably slightly to the right of the bell curve, for all I know they may well be sharper than I am, but the problem is in the conventional assumptions of their parents, that learning is earning.

The prognosis in the book for Most Favoured Child1 is horrific –

We believe that everyone has a right to know that the opportunity bargain based on better education, better jobs, and better incomes can no longer deliver the American Dream.

Continue reading “The Global Auction – why learning isn’t earning any more in the West”

London is a different country – they do things differently there

Mrs Ermine went to the Great Wen to wrangle some business there, and returned to the provinces with culture shock. London is at the leading edge of many changes in the way we do things, and the general principle of these changes is to take something simple and complicate the hell out of it.

That’s part of the way capitalism works, of course – there’s money to be made in the gap between action and comprehension. Never more, it seems, than in the simple act of getting a drink of water hydrated. The Coca-Cola corporation has been in this biz for donkey’s years, selling us sugar water, plus endless variants on sugar water without the sugar. Hell, they even tried to sell Londoners filtered tap water, which they filtered in some high-tech way that added bromate into to the Eau de Sidcup that Thames Water had competently filtered for them.

There’s a massive hoopla about plastic waste on now, and Mrs Ermine observed this piece of equipment in Hammersmith bus station

The Mayor of London’s water dispensing gear, along with the sign showing you it dispenses water over the floor

Continue reading “London is a different country – they do things differently there”