extreme FIRE and how to live well

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

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

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

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

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

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

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

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

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

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

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

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

Don’t be a financial muppet

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

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

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

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

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

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

The seven stages of life

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

No consumer shit tastes as good as financial freedom feels

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

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

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

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

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

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

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

Do what thou wilt, and harm ye none.

Your time gets more valuable as you get older

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

As a well-known vinyl record from my youth said

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Your job gets more brittle as you get older

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

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

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

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

Friday March 6th 2009

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

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

GF no, effectively saying how it is

Me: okay carry on

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

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

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

Me: ok

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

Me: that is not enough

GF: seems taken aback

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

GF: reiterates stuff about raising the bar

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

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

Finished at fifty is a thing

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

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

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

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

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

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

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

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

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

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


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

A Friday the 13th fright

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

A serial liar in the wild

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

The financial aspect

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

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

I predict Brexit won’t be done within five years

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

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


  1. concerning the battle of Al Alamein but against Rommel 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

In the article the crisis of capitalism Milanovic argues that

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Putting the Great back into Britain

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

Jacob Rees-Mogg will do all right out of it

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


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

Crafty Klarna card bites savvy student

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

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

Our Klarna victim

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

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

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

Always pay cash for your thneeds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

If you can’t Pay Now, then Don’t Pay

Klarna. The Pay later people.

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

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

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

Bear markets are a bastard when investing at a fixed time in life

Most of the younger folk reading this will go WTF? Bear markets are the investor’s best friend. You get more for your money. The trouble is, that a human life is not infinite. It is short, and a working human life is shorter still, unless you have a trust fund working for you until your 20s.

Reading this article brought this home to me, getting good results with financial markets is a combination of luck, being in the market a long time1 and never be a forced buyer or seller.

Never be a forced seller

The human financial life cycle – buyer at the start

There is a human financial life cycle2, and that life cycle has two big events in it where you make a big financial decision at a time which is more a function of when you were born than any financial considerations. In the first case, you are a forced buyer. In the second, you are a forced seller.

The first one I got very, very wrong, and that is the time you buy your first house, should you be earning enough to do so. Buy at a bull market high with a mortgage, and it will take you decades to recover from that error. Although it’s true that you don’t have to buy a house at any specific age, the human lifecycle is such that that becomes more of a consideration in your thirties, and it tends to be more of a consideration when breeding. The latter you need to make happen in a space of about 10 to 20 years, and you’re probably too skint or haven’t met the Right One in your early twenties, so this window is more like 10 years in practice. Unlike the financial markets, cycles in the housing market are long and slow, and you take this decision with little experience of market cycles.  And you do it with leverage.

The upside is that you take this decision early in your working life, so there is enough time to recover from errors, though if you get it very wrong it will cramp your style for a long time. Leverage is lovely when the asset you purchase rises in value over time, and it is frightful when it goes down over time. Most of the time housing goes up over time, which is why 90% of Britons regard residential property bought with a mortgage as a money tree3. But if you take a negative equity suckout early in your career you’ll be paying off a long time.

The second decision you take when you are out of ammo, and you become a forced seller, every year. It’s called retirement, and while on average a 4% ‘safe withdrawal rate’ SWR is considered acceptable (it used to be 5% a few years ago) you’re still a forced seller.

And a seller in retirement – an early bear market hurts your SWR

The early retiree, and particularly the extreme early retiree, has a tough balance to strike. What most people want to run their life is a steady income, preferably matching inflation or earnings growth, whichever is the greater4. Sure, in an ideal world you’d want to have as much as possible, but when wrangling the art of the possible, something that looked like their income when working would be nice.

Living off a capital sum and unreliable investment income is really, really hard. It leads to suboptimal outcomes, too. I will be glad when I have a base income that is defined. There’s then a clear answer to ‘how much can I spend in a year’. In the years of living off savings and investment income, the answer to ‘how much can I spend in a year’ was always ‘as little as possible’ and now in hindsight there’s a case to be made that I spent too little over the last eight years. Now that’s easy to say looking at an ISA bloated by ten years of a bull market. It could have been different, and I could have needed the money I didn’t spend had things gone differently. Most of the win I had was in the fact of not working for The Man, the stress of weaving a way through the financial jungle is far less than the stress of working was at the end.

But I never considered taking the CETV of my DB pension. Younger readers probably tap their heads and think that crazy. But I have had enough of living from an unstable income. It’s just not how I want to live. The Irrelevant Investor’s article shows the problem. If you set your income at 4% of marked-to-market investment income at the start, then a bear market at the start of your retirement will kill off your capital in 20 years.

You can fix that easily. Stick with the 4% rule and spend 4% of your capital as marked to market at the beginning of the year. Simples

Your income if you suffer an early bear market, predicated on a 40k income at a 4% SWR at the start of retirement. Swiped from The Irrelevant Investor

Our retiree didn’t get anything like 40k that his SWR promised him most of the time, and suffered 2:1 swings in income. “Can we go on holiday next year? God knows…”. Had the bear market happened at the end, then of course he’s been living high on the hog, ending up with a lot of money.

You can theorise all you like, but you have to live a particular sequence of returns trajectory rather than the Monte Carlo average. Sure, you can pool resources with other people to reduce the swings a bit. That’s called buying an annuity. It’s what you had to do until as recently as 2014, but when most people look at how much they have to pay for an annuity they run away in the opposite direction. Heck, even where people already have an annuity in the form of a defined benefit pension (which is annuity in all but name) and someone dangles a CETV in front of them to buy them out of getting that annuity many of them take the money and run.

There aren’t any good answers to this problem. There’s an argument that I have made the other mistake – fearful of the hazard of ever having to go back to work, I ended up with an ISA that is worth five times my gross salary at the high-water mark of my career, about to draw a pension that meets my needs and most of my wants. There is a case to be made that I underspent in the last seven years.

And yet it could have turned out differently. Because I started in the teeth of the financial crash, more than half of that capital came from investment rather than from savings. That investment gain might not have come. The market could have gone lower. That is the conundrum of trying to live off investment returns. There are a number of paths through the maze, as things like firecalc can show you. But you don’t know which track the hand of Fate has allotted you until you look at the path you lived, and there is much variation in the particular sequence of returns you can live through. In the early years I believed I would run out of money within five years, reaching 2017 with no fuel in the tank.

I was lucky. That early bear market never happened, and so I reached the finish line with more than I started with. It now makes sense to draw my main pension a little early, and to shift the profile of the ISA towards income, so that I smooth my income until I get my state pension.

I will give up some total return doing that, but in return I get peace of mind. I learned many things across the interregnum between taking my last pay packet and getting my first pension pay. One of those is that I am not a good judge of sell calls. Although the largest holding I have is VWRL which probably is my largest dividend paid per year, I have shifted recent purchases towards higher yielding investment trusts and of course the original HYP is still working. I should be able to make my income aim out of the ISA with the top up from my PCLS over a couple of years, while still nto having to sell.

Sure, if I wanted to optimise income, I wouldn’t start from here, particularly with all the VWRL which is a lousy dividend payer at 2%. I was led off the HYP path by the siren song of the passive investing shibboleth. But I can get what I want by a shift back towards income with future purchases. Without having to sell anything. I don’t want to shoot for the moon now. I want an easy life, and get an income uplift without making investment decisions.


  1. a long time because the real return of the market is piss poor on average, 3-5% in real terms I would guess. That means you need 100k of capital to get 4-5k of annual income 
  2. This should be prefixed “in the developed Western world” – and perhaps even more qualified “In pre-Brexit Britain”. Other European countries are more rent-friendly or have multigenerational living, and in Britain itself there have been higher levels of homeownership and more stable employment patterns, both of which are changing as a result of globalisation. 
  3. It always puzzles me why people don’t ask themselves what ground that money tree grows in. It is the hopes and dreams of their children trying to buy their houses 20 years down the line, because the parents pay politicians to water their house price money tree with tax breaks and credit pumped into the residential housing market. After perhaps too many drinks I greatly offended some berk at a party once who was mithering on about how it was so unfair that his kids couldn’t buy a house nowadays, after talking about how he’d done so well with property that he was thinking of getting into BTL. You couldn’t make it up… 
  4. Matching inflation keeps your absolute standard of living stable, but humans generally compare themselves with other humans, and if the others are working and earnings increase above inflation then workers will be able to buy the latest iPhone when you can’t, because they will be able to pay more. 

Two Factor Security shouldn’t involve a mobile phone

If I were God for a day the piece of technology I’d uninvent in a heartbeat is the mobile phone, with a special mention for its bastard spawn the smartphone. It’s made rude shits of us all, because the phone trumps the person you’re talking to in meatspace right here right now. It enables zero hours contracts, things like Uber and pretty much anything that allows us to treat human beings more like pieces of machinery. It allows Facebook to track the proles all over the place and sell them shit they don’t need to impress people they don’t like…you  know the pack drill. Pretty much anything that’s good for Facebook1 is bad for the common weal.

I give a few people I want to talk to my phone number, and even fewer a mobile number, along with the exhortation do not make the assumption that you can get me on this. One colleague summed it up perfectly when I was at work – he only uses a mobile when he is mobile. Well, yeah. Duh.  Unlike the rest of the human race it seems, I go about my business without carrying a mobile phone with me. I don’t want to be disturbed at anybody’s whim if I am doing something else. I think the AI guys can beat humans by just taking a break for a few years, then the gormless numpties that are us will lose the fight, like Idiocracy on speed.

Asimov missed the target in The Feeling of Power.

The congressman took out his pocket computer, nudged the milled edges twice, looked at its face as it lay there in the palm of his hand, and put it back.

It’s not just maths, it’s orientating ourselves spatially using a map, knowing shit that you ought to know without the Big G, all sorts. But this fight has been lost, the bad guys won. In the fight between Them and Us, Them routed Us comprehensively.

Increasingly seems that banks want, nay demand to have a mobile number, and they just can’t believe I don’t have one. So the blighters continually demand one, and say I can’t use t’internet to buy shit without. Sure I possess one, but since it spends most of its time in one place it’s not the vade mecum that it is for everyone else. I gotta switch the damn thing on, because I’m sick of the FAANGs “following me around with Rays2” otherwise.

2FA – what you have and what you know

I understand the point of 2FA3. Way back in the mists of time, you could present your credit card, and the spotty yoof would take a print from the embossed card and get you to sign it, and then inspect the signature with the one on the back to see if it matched. That was the something you have – the card – and the something you know, which is how to scrawl your moniker in such a way as to match the one on the back. The obvious problem was presumably visual artists could match anyone’s signature, so we went away and invented Chip and PIN, and all was well with the world.

Then some more spotty youths invented t’internet. Bless their idealistic souls, they built it along the models of some prelapsarian Eden where Bad Guys didn’t exist. It’s one of the reasons why email is so broken and you get all those letters from people you know, even those that are dead, saying they’re stuck in some God-forsaken place without money could you just Western Union4 over some cash.

So we all got on our computers to buy our consumer shit that we see people with on Instagram, and they had to invent some other sort of out of band authorisation, involving injecting spurious data from third party sites5 and calling it 3d secure, ‘cos obviously knowing the number on the front and the one on the back is trivially easy for some punk that’s just nicked your card, as long as it’s not something he wants delivered.

That’s not up to snuff for actually using your bank online. Obviously they could ask you to put your PIN in the computer the way you do at an ATM, but all sorts of Bad Guys are in your computer along with the NSA, GCHQ and some random assortment of Russian whatevers. You’re probably OK form the latter sort of Bad Guys but it’s the ones who don’t have enough money that you have to worry about. Sometimes it’s a wonder you can get the lid back on your computer, there are so many bad guys in there. So the banks give you a gizmo you stick your card in that has no ports for a keylogger etc. Yet, anyway. The whole point is you don’t plug it into your computer where all the Bad Guys are hanging out.

I was pretty much OK with that as an option, and I would have been OK to use that on the Web instead of 3D (in)secure. But the banks now want to send out text messages to a mobile phone.

A mobile is highly thievable, insecure and spoofable

Hoodied n’er-do-well on a bike about to half-inch a phone in London, as shown by the Metropolitan Police

Now I don’t spend time thinking about mobile security but it’s pretty obvious that mobes are highly liftable. Plus, it turns out, they are highly spoofable by design, which is a big Security Fail for the banks, because Mr Big Bank sends you a SMS text message to a phone number.

In an epic fail, Mr Big Bank failed to realise that the phone number is not an inalienable parameter of the mobile phone, it is a function of the SIM card. The clue’s in the name – Subscriber Identification Module6.

So there’s no security to be had by texting your mobile number, because Bad Guys can get your number reallocated to them. As happened to gobshite Jack Monroe. While she may sometimes talk rot in along with a fair amount of sense presented in an edgy manner, she doesn’t deserve to have Bad Guys run off with some of her hard-earned. There’s also an object lesson here, which is if you must put your birth date on Facebook then for God’s skae make it a day, month and year which are not the same as the ones you give to your bank, huh? HM the Queen can have a real birthday and an official birthday. If it’s good enough for Her Majesty, it’s good enough for her subjects. OK so she has managed a fail by blathering her real birthday on the website, but she has the advantage over you and I that she has staff to sort out her money, so it’s not like she has to ring up the Bank of England and some droid in another continent asks her for her birthday to let her know how many billions she has in the Bank light now. Don’t plaster your birthday over social media, peeps, and if you must, make sure it’s wrong. Sure, it’s an example of security by obscurity but don’t make it unnecessarily  easy for the bad guys, eh? At least make your Social Media Self a couple of years older or younger if you’ve already let the cat out of the bag.

Mr Big Bank., let’s have less of this garbage about enhancing security and making life twice as hard as it needs to be. You had a perfectly serviceable method with the card reader gizmo to get an out of band validation of the customer’s pin, which you spurned in favour of the mobile phone. There is absolutely nothing secure about a mobile phone, and the smartphone is known only for being a totally uncontrolled piece of computing hardware which has a totally uncontrolled set of software applications and an equally uncontrolled software patch status.

The one thing we know about the smartphone is that is does pretty much anything it does incompetently, it’s nickable as hell and there’s no process of nailing the phone number to the phone, even if that were desirable. So, banksters, quit the fetishisation of the smartphone as a way to add security. Use either the card readers you have already, or suck it up. As for the rubes that grizzled on the radio about not being able to use their bank details stored on their mobile phones due to yesterday’s Three outage, well, whaddya expect? A bank card just is. If you want to save yourself the burden of carry less than 1g of plastic by sticking it on your phone where you need a working network connection as well as the damn phone, well, you’ve just discovered that the extra requirement inherently reduces reliability. Live and learn, eh?


  1. OK, let’s not pick on the Zuck. Anything that’s good for the FAANGs isn’t good for the common weal. 
  2. Terry Pratchett, Soul Music, Foul Ole Ron 
  3. Two Factor Authentication
  4. The rule is simple. If it involves Western Union it’s a scam at best and criminal at worst. Presumably there is a correct use for Western Union but I’ve never run across it. Why the heck they don’t re-christen it Bank of Con-Artists and Thieving Scumbags is a mystery to me. 
  5. how injecting cross-site scripting Javascript into a web page makes the system more secure beats the hell out of me because in pretty much every other application on the Web that’s a big No No. 
  6. Else it would be called the PIM, huh? There is a phone identifier snazzily called the IMEI that is meant to identify the phone. No idea how spoofable that is. There’s still the problem that phones are small and valuable, thus attractive to thieving barstewards. 

DB pension options – an object lesson in the power of inflation

The Ermine is advancing of years. It comes to us all, hopefully. I am not yet of the age when I would have quit The Firm after thirty years of service and gone to the pub to celebrate my forthcoming freedom. But it’s not that far off.

Seven years after retiring, I have now burned through half my DC pension AVC savings and invested the other half into the ISA. In cash-flow terms the Ermine is almost skint, and I am on the final approach to taking my main pension, a little early. So I asked them for the information pack.

Every pension is different, and with mine there is the usual  option to take some as a tax-free lump-sum. After that there are two options. One is to take a pension that is index-linked up to a cap, and the other option is to take a higher pension that is part non-increasing, and part index-linked up to the same cap.

Why on earth would you do that? Well, the logic is that you get a higher start, since they are paying you to take your claim of index linking off their hands. The higher start makes some sense – one is in best health at the start of retirement than at the end when you’re eyeing up a pine box. They also made something of the fact that the State Pension will turn up later, which should fight some of the later attrition.

Inflation can easily kill the higher start

It looked reasonable at first sight. There’s a common argument that people spend more in the early years of retirement, and less as they get older. Unless they are unlucky enough to end up in a care home, but fewer than 20% of us end up in a care home1. The difference between the higher start and regular isn’t huge, however, it is about three grand p.a. after tax. But it doesn’t take much inflation to erode that, it falls behind in my early seventies and typical inflation rates of ~3%. Some people take the argument that it is the cumulative shortfall that matters,and it is true that this falls below zero later on, a few years past the age that my Dad died. But I am in much better health than either of my parents were at my age. So I might be leery of assuming I cark it at the same age, though of course I could be flattened by a bus tomorrow. Risk is tough to qualify, eh? Continue reading “DB pension options – an object lesson in the power of inflation”