A look back at three years of a high yield portfolio and a look forward to 2013

MarkyMark’s got it right – January is a long cold month of introspection.  It’s time to look at my stock portfolio and ask myself – is this working for me of where things have gone, where they’re going and all that. The standard mantra for stock market investing is you should buy an index fund and sit on it. That’s probably a good way to save for retirement, but I want an income from it, and I am awkward and different anyway. Doing it in an ISA makes it easy to ask the fundamental question that a stock portfolio ought to be able to answer.

Would I be better off in the bank?

To answer that question I have to ask myself the question

What steady rate of interest would a bank have had to offer me, on the money I put into the ISA and at the times I put it into the ISA, so that the total return + capital value is the same as the total value of stock + cash in the ISA?

Now it’s not necessarily a fair question to ask of a high yield portfolio (HYP) that’s been running for a while[ref]the reason is that a HYP is designed to pay the income, not save for a goal like uni fees or retirement. Its key metrics are do you get the expected income, is the variation on that income acceptable and does the income track inflation in the long run. The total value of the portfolio is not a key metric, if the income is good enough then the HYP is good enough[/ref] – but in some ways it’s a fair question to ask of any stock portfolio. Because I switched  ISA provider I don’t have the details of when I contributed money, but I do have the information of the total amount I put into it in any year in a separate spreadsheet.

It’s also not the question many people ask of their share activities. It’s easy to look at the winners and pat yourself on the back, which quietly ignoring what didn’t go so well.

Success has many fathers yet failure is a bastard.

Using the total gets round that problem, as it automatically integrates every share and every transaction cost, wit one exception. That’s what it would cost to liquidate the portfolio and turn it back into cash. That’s about £12.50*15 which knocks about 0.5% off the total, but I’m planning to live off the income, not sell up, so I’ll ignore that.

I modelled this in Excel, assuming I put the total ISA amount into a bank at the beginning of the relevant year and they paid me interest at the end of the year, which obviously adds to the stake for next year. It’s an overestimate of what actually happens. I try and spread myself across the year, but I am an opportunistic ermine, I’ll hit it harder and earlier if things like the Summer of 2011 happen.

last five years of the ftse all-share
last five years of the ftse all-share

The first thing is to take a step back and look at the big picture. I started in April 2009 so anybody can be a shit-hot stock market investor in a rising market with a 20% uplift from the start 😉 An FTAS index would do nicely, though not as nicely as you would think comparing the April 2009 value and now because I wouldn’t have bought three and a half years’ allowance all in one go.

The capital gain is 7% and the divi gain is 8% of the current value. I calculated capgain by taking the appreciation on total cash put in and subtracting the sum of all dividends paid over all time. Since it’s run as a HYP for about three years one would divide those gains by three years to get p.a. returns and then compensate for the fact the stake was less for most of the time.

The proper way to do this is using XIRR but I was lazy so I set Excel up to run a parallel simulation of a bank account with the periodic ISA cash added, and  scaled by a nominal interest added annually. I then fiddled with the interest value to get the end result to match the total value of the ISA. To do that a bank account compounding at  8% p.a. was the answer, it’s 9% now.

It all doesn’t amount to a hill of beans because of volatility in the capital value

I started writing this post a couple of weeks ago. What’s been clearly apparent in the ridiculous January rally we’ve had this year is that this isn’t the right way to do this job. I’ve just recalcuated this (29/1/13)  and the figures are 9% and 7%, because the capgain has gone up but nobody’s paid me a dividend in the last couple of weeks. Which is good in one way, but a bastard as far as making sense of what’s going on. When I started writing this I thought integrating over three years will smooth the peaks and troughs enough to get a long view. It isn’t. Because the capital value even of a HYP is 20-25 times the income, variations in the capgain dominate the result, and these vary directly with the market. The sheer amount of uncertainty and noise this imposes upon the outcome makes it impossible to draw any meaningful conclusions from the question what rate of interest a bank would have to offer me to match the current outcome. However, the alternative, looking at the stability of the dividend income as a proportion of what I contributed, does provide some support for the reason I started down a HYP path.

The other bugger is that it’s hard to tell what inflation is these days. The Bank of England tells me inflation averaged 5% a year 2009-11 – they don’t go as far as 2012 yet. They do, however, use the infernal CPI measure, and RPI is closer to my experience of inflation over the long run.


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RPI: Index level, All items, monthly, UK from Timetric

 I was pleasantly surprised to observe it wasn’t quite that bad. So do I knock off 4 or 5% for inflation? As such I am a little short of  the design spec of a HYP – to yield about 1/20th of the capital value while increasing the capital by about inflation. Like anything in the messy real world I won’t take away from that that this will go on forever, but at least it is integrated over several years. The lower volatility of income relative to capital is already apparent. The total figure also includes all trading losses and losses associated with some foolishness three years ago with BP and Barclays as I reminded myself why I am a rotten trader and before I stopped that 😉 Some of that foolery cost me performance, but it will slowly fade in significance with time. It is notable that most of the churn has dropped away.

I did calculate what that was equivalent to as a daily compounded rate which is what my cash ISA is  but for 8% it’s not different enough to show.  That’s about the same as The Accumulator’s Slow and Steady portfolio over the last two years. I’m not sure is TA has done the bank account simulation or calculated the XIRR so I’m not dead sure I am comparing like with like. I was going to use index funds to benchmark this until iii kicked me out but TA’s results will do this job for me.

If I were living off this HYP the divis are real and can’t be clawed back, whereas a growth portfolio is still all at risk in the market. I have to actively stick my winning chips back into the casino 😉 That subtle difference is what I like about a HYP. I am still sticking the chips back, because I don’t need the income now.

I don’t aim to sell. Once you have about 20 stocks (I haven’t yet) you can let a stock go down the pan every few years, if that really is the price of inaction. None of mine are anywhere in this position. I found Kirby’s article,  and Monevator‘s original HYP article, and Legg Mason’s article, and my Dad’s experience compelling enough. Curiously, in his latest article, Monevator talks about selling criteria, while acknowledging

I also have no trading strategy because I’ll make it up on the hoof. In my view, once you’ve decided to go to the dark side and buy individual shares rather than passive funds, you must do it your way. I believe active investment is at best an art not a science (at worst it’s an illusion) so no firm rules.

I think he’s looking at the wrong end of the telescope here. The aim of a HYP is not to sell. However, you do get to choose when to buy. Valuation may illuminate that decision. Last year I have had a watchlist of potential HYP share candidates, and got iii to email me if the value of these shares falls below a certain point. They emailed me about BBY which I had selected as a candidate, partly because I have nothing in that sector. Last November BBY has a poor interim update and the share price dropped below the trigger point. I took a look at what was up, but couldn’t actually see how the firm was about to go bust, or generally why people were getting their knickers in that much of a twist. So I had some of that, and it’s done well since. If you’re going to buy and hold for dividends, what you pay in the first place matters. I took some learning from RSA, who at least I am square with now – the loss of capital is counterweighted by the accumulated dividends.

That method is not foolproof. I can be more fool that the system is clever. AGK doesn’t even fit into the HYP metrics so it really should be considered as a rush of blood to the head. I can afford the odd thing like that. Not too many – about one a year is OK.

Targeting firms on my watchlist when they go down, evaluating why and taking a view on whether it is serious or not has helped with adding to existing holdings earlier. It worked on NWBD when I added a lump to the existing holding for less than I paid the first time. To my puzzlement a share I bought for the 10% yield is actually higher on capgain than it’s paid in dividends. This particular sort of share would be expected to depreciate in value over time as it’s fixed interest so I don’t know what’s up with that capital gain. Perhaps it will disappear in the mythical recovery that’s been a year round the corner for the last two years. So what. It’s up to other parts of the HYP to do the heavy lifting then.

Sod determining selling criteria I say. It’s buying criteria you need for a HYP. For instance I observe some of RIT’s cogitations on the valuation of the S&P500 in terms of CAPE10 because I need some global diversification. At the moment the conclusion is the time is not right, hopefully Obama and the GOP will get into a good old hissy fit and have a punch-up about raising the debt ceiling and drag it out long enough to get into the start of the new ISA year. Because I know jack about the US market and it would be dear for me to buy individual shares I am fine with an S&P index fund there, or perhaps a Dividend Aristocrats fund which is more in keeping with a HYP. At the right price, which is about 2/3 of what it is now unless earnings rise. And I’m still after a Grexit, though the way  things are going we will see a Brexit first. Which should be kind of interesting, in a Chinese proverbial way. Possibly useful, too.


Inflation is the endless concern. I have a fair amount tied up in cash, and inflation is busy at work destroying the value of it. QE is working through the system and this leads to inflation, effective £ devaluation and is a positive for the stock market.

I have too much in cash, and need to reduce the exposure to a falling £ which will destroy the real value of some of my networth. In my pension AVCs I may re-enter the market with the L&G global index fund with half the capital, even though I will probably call on this is in less than the five years that people normally say is a minimum for share holdings. I may hedge half my remaining cash holdings in an evenly balanced (at the outset) mix of USD, CHF, CAD, AUD, CNY using IG index. There are running costs associated with that, however, and various other issues.

I also hold cash for the usual emergency fund purposes and an extra lump for a flat roof, because a flat roof lives on borrowed time as soon as it is made. You must never take a risk with an emergency fund, so most of mine is lodged with National Savings and Investments in their ILSCs which offer a tax-free RPI uplift to stop it dying slowly. Plus some in a Cash ISA for liquidity, which unfortunately is probably about 5% less valuable than when I opened it, and in future decades to come the combined two years’ worth of Cash ISA allowance will probably buy me a packet of peanuts and a pint of milk. There’s not much one can do about that sort of thing, and the sensible thing to do would probably be to add it to my S&S ISA. Perhaps in that mythical recovery it will be possible to get a decent return on cash. Unlike some I don’t expect a real return on cash, just going back and finding the same amount of real value as it was when I put it away will do me fine.

You save for liquidity and invest for return. The deal used to be that you get a paltry return but no depreciation for liquidity and a long-term return but short term risk and volatility for investments, but at the moment the cash/liquidity depreciates dangerously. Turn your back on a lump of cash for five years and you’ll lose a quarter of its real worth.

The tribulations of a falling currency

Most people first notice a falling currency when they go on holiday, and then they notice it in a delayed way as the price of everything slowly goes up. Just look at the innocence of the sleight of hand applied by Harold Wilson

[iframe http://www.youtube.com/embed/mIQnpoGBS1I?rel=0480 360]

And people believed him for a while, FFS! Of course, the Britain of 1967 actually made stuff, and probably grew some of its own food and mined its own coal, which generated power, was turned into gas and heated homes, so Wilson has a small point. Unlike the Britain of 2013, which does none of the energy things and is depleting the oil bonanza that enabled it to stop doing those. The FT made the case in 2008 that the pound is experiencing a step-change down and it looks like the process is continuing. If you hold your wealth in cash denominated in pounds, it’s been getting worth a lot less over time.

There’s not much most people will or can do about that. Investors holding equities or land, or real stuff, even, though I hate to (cough, splutter) say it, property, will experience less of that effect.

However, there is a nasty insidious effect of it. They will often tend to become poorer investors. The falling pound will make them believe their stock-picking or asset selection is shit hot, and confirm existing biases. I did well with my HYP. So what. It was nothing that special. Everybody had a stonking run in 2012. Were they all brilliantly clever? Or did the rising tide lift all boats, and more to the point, is there an earthquake under the beach lowering it – the value of what they are measuring their success is draining away as the endless rounds of quantitative easing destroys the yardstick they are using as a reference.

Macro issues for 2013

On the macro upside there is less worry about Eurogeddon, which probably means it will happen this year while everybody is looking the other way. I was buying a HSBC European index fund regularly and have been most pissed off to see it gradually rise, as I expected to buy into increasing Eurogeddon. I don’t have the chutzpah to actually buy GREK. A lot of this, of course, is the creeping death of the pound, I’m not that sure CPEI has done anything to justify its 17% rise on purchase price, other than to sit on its backside and watch the £ devalue somewhat, abetted a tad by hedgies thinking less unkindly about the euro than the pound.

The US still owes a shedload of money, and the polarization to the political scene there will probably lead to a suboptimal fight about that. The narrative is better told by Dr Doom himself in the Grauniad, he is predicting (wait for it) Doom in 2013.

On the non-financial front there’s the forthcoming bombing of the Iranians by Israel and associated punch-up and oil spike/new plateau. There are fifty shades of shit going down in Arab nations and various messy bits of unfinished business left behind by the Project for a New American Century who seem to have gone into suspended animation in 2006, presumably to work out why it all seemed to go wrong.

There is globalisation in general, which is making it very hard to work out what a life well lived and how to fund it looks like in the UK, particularly to those starting their working lives. On the upside they have better technology, better communications, better health, and can look forward to a much longer life that those that have gone before. On the downside they are in a jelly-like unstable world that makes it hard to get set right in the beginning, and they must continually adapt to roiling change, and the relative decline of the status of their nations relative to the rest of the world.

It’s not a cloudless horizon, despite the euphoria in the stock market.

A HYP rather than a passive index portfolio.

So many PF blogs consider the non-rational the enemy within. PsyFi has a long list of irrational ways people can give themselves the shaft and there’s a tightened up version on Monevator. I’ve always felt a little bit uncomfortable with that perspective, in a sort of yeah-but way. The trouble is that saving for the future is also irrational – you have to go without now. There is no objective value to be placed on an individual’s future value of money, what’s right for you isn’t right for me. Doing without £1000 in real terms is a damn sight easier for me now than it was when I was 25 or 35.

Petra Ecclestone. nlike you or I, sh doesn't ned to earn the money to put into her investments
Unlike you or I, Petra Ecclestone doesn’t need to earn the money to put into her investments, net worth $300,000,000 apparently

Unless you inherit your wealth like Petra Ecclestone, you have to save it from earnings to get your foot in the door. It’s crystallised life energy you have to save, the result of precious years of your life surrendered to The Man, and you have to save a lot to actually shift the needle on the dial – your target income * 20, to a first approximation. Saving £500 or £1000 here or there ain’t gonna cut it unless you do it regularly for years. You need nearly six figures just to match JSA, and there are enough people out there saying that’s not nearly enough to do anything with. You need £150k to save enough to pay yourself the basic State Pension of £140 p.w.

Over a 40 year working life that is still a big ask – compound interest will help but it probably won’t double your money, and a hard twist of fate means that you will usually be able to save much more in your later working life than when you start out. It was the power of irrational fears that made me save more than the ordinary. So I am going to raise a glass to the unquantifiable world of values, and why you do what you do. Eliminate behavioural biases where you can, but deep at the heart of much of the malaise in the West is the search to paint the world by numbers alone. Oscar Wilde was right when he poked fun at people who know the price of everything and the value of nothing. This is about values. I couldn’t honestly say to someone about to start work that saving for a pension is the rational thing to do.

Many young people take the same approach as the Lotus-Eater, and to be honest, I think that’s probably the most rational thing to do, because of the unknowability of the world in 40 or 50 years’ time, and the absence of a secure store of value over that sort of time period. I would be surprised if this sort of thing didn’t happen somewhere in the West in the intervening time. I knew someone from Germany personally who had lost their life savings – twice, in things like that. It was the ownership of land, and a more stable human network of connections of the sort that we have deliberately eliminated in modern societies in the search of equality that meant she had anything left.

Capitalism just does that in combination with the frailty of human societies. Every few generations it has a massive hissy fit and destroys shedloads of worth, value and promises of future gains. Just because it can. This isn’t Schmupeterian destruction, it’s just capitalism amplifying the madness of crowds. It seems to need to do this every so often, because it is not unconditionally stable, and there is no generally accepted external reference point that will hold its head while all around are losing theirs.

and so the cycle will turn again, and start anew
and so the cycle will turn again, and start anew

Eighty long years have rolled by since the 1930s, and people built firewalls and distant early warning lines against it happening again. Only seventy of those needed to pass before Bill Clinton had so much cock that he saw fit to repeal the Glass-Steagall protections that held some of the demons at bay. Let us assume that we find a way to stabilise and set in train protections against what happened in 2007/8/9. I will confidently predict that even if all the other macro hazards to humanity are avoided, when the young people entering finance in their twenties over the next few years have reached their eighties and nineties, those protections will have been weakened, because they get in the way of Progress. And so the cycle will turn, and start anew 😉

I use a HYP for my shares, rather than index-tracking. Why do I do that? Poor old Monevator is scratching his head on there wondering what’s up with people

I am not saying they are right to find index funds distasteful. I am saying I have met many people who do, and I have failed to convince them otherwise.

Index funds have their place – even in a HYP I will use them for markets and areas I know little about or can’t access economically. Here are some reasons and gut feelings it doesn’t convince me across the board. Some of them aren’t logical, and I am perfectly prepared to pay the price of that.

  • First and foremost, the whole living off the income thing. Most people are building a retirement fund over decades, and the yearly value doesn’t matter other than to their sleep patterns. I have about 8 years, and probably less, to start living off the income. I’m not rich enough to accept the returns on passive index funds and I have had bad experiences of income volatility from things like IUKD that aren’t passive at all though they look it. If you want income early in your investing life, you fly this damn thing on manual or you do without the income.

The first point is a reason, and a compelling one against using index funds, IMO, because of my atypical situation of a short horizon that can live with market risk, because I have defined benefit pension savings elsewhere. The others are prejudices 😉

  • It didn’t work for me in the early 2000s. Obviously there’s sample bias there, after all the 20%  gains I made in my AVC fund using L&G’s Global index are a counterfactual. But the alternative was cash in a devaluing background of government money printing QE. ’nuff said. Most of the gain there was due to the government devaluing Sterling 20% by printing money. In many ways saving money from the depths of a global financial near death experience while the government is doing its damnedest to destroy the real value of money and the real value of its debts is the canonical sort of thing index investing is designed for. The Telegraph is full of old buffers who don’t get this. You don’t fight governments, you try and roll with the punches they throw. They are the 900lb gorilla and you aren’t, unless your Warren Buffett or the Rothschilds and even they aren’t big enough to fight the Fed. It all involves risk and nothing is for sure in this world, though cash melting through your fingers in the next few years is as close to a dead cert as you can get. If I have any cash when we experience the next crash I will do the same. You don’t need to think about investing from that sort of base, you just need to do it. Pretty much anything will do, and in the fog of war at least the index is unlikely to go bust.
  • One day, Vanguard will have its rogue trader or internal thief. Money is power, and power corrupts. Why did Al Capone rob banks? Because that’s where the money was! I may buy some Vanguard Lifestrategy as part of my portfolio because it will form only part of the whole, but a whole 100% Vanguard index portfolio with nothing else? Do you feel lucky, punk? Other firms do index funds too, sometimes you hafta pay a little more TER for the insurance of provider diversity 😉
  • The backstory. What exactly do you get when you buy an index fund? I own a small slice of DLG, BBY, GSK, NG., RSA etc. I know what these guys do. I can see their boots on the ground. Some build houses, some write car insurance, others make pills. What does the FTSE100 index do? Six years ago it was banking. In 1999 it was tech. It was oil recently. I can’t relate to that. The index fails the Henry Kissinger ‘Who do you call’ test.
  • I like dividends. They slowly buy me out of mistakes. They give me an income without having to sell units. Although intellectually I can understand profit comes from capital gains and divis, selling units feels like selling down capital. In a multifund ISA, selling units forces me to make decisions about which holdings to sell. I hate that. I need more dividend yield than that on most indexes.
  • Track record. It’s worked well, particularly for people who were catatonic and sat on their hands!
  • Index investing is passively active by definition – it is rebalanced quarterly by the index. A true HYP becomes unbalanced (unless added to each year). I am beginning to wonder if that is such a bad thing as it’s made out to be, since the unbalance comes from success – if it all comes from failure you’re gonna be dead anyway. Say an HYP designed in 1980 held the minnow MSFT. Should it have kept selling the swelling behemoth?
  • A HYP that has cash added to yearly can try and balance sectors with the added money. That’s probably good diversification (indirectly pushes you to buy low). It’s also a perfect fit for an S&S ISA. Kirby’s 1984 article leads me to suspect actively selling parts of a steady state HYP to rebalance isn’t necessarily good diversification. This isn’t going to be a problem for me for a few years yet. Next year’s annual allowance is 20% of the total, which is plenty of rebalancing. Although that percentage falls, the divis start to help out with rebalancing until you start drawing from the portfolio.
  • A multi-decade HYP will integrate several business cycles, and see a lot of inflation. It’ll see different sectors skyrocket and pan. So what? Watching the world go by is what old money does while pursuing its other interests, all the time collecting the rent.

However, in other respects I pretty much run like Monevator‘s approach. Sit tight. Do as little as possible. Yes, I’ve had to deal with corporate actions like NG’s rights issue shenanigans. Paradoxically I had to sell some index funds when iii threatened to start charging transaction fees on those, other than that I’ve sold n’owt since going HYP, with the exception of a slug of Direct Line’s IPO. There I had to pitch for more than I wanted because of the risk of getting knocked back, selling the excess at a modest gain.  As it is I still have too much insurance and no oil firms or mining. The latter seem to be having a little of a hard time at the moment which is good for me if it carries on to April (my ISA is maxed out at the moment). I reinvest dividends, and shall continue to do so until I have no free cash left to live on or I start drawing my pension. In the latter case I will continue to reinvest dividends, because I maximise the tax shelter and I expect governments to get extremely rapacious in tax terms if and when there is such a thing as a recovery. They got a big hole to fill. The more tax-free incoem I can build up the better I can hold the line against these depradations.

I’m happy with the return and the balance between dividends and capital gain. The steady improvement in the dividend income over the three years is good, it’s now enough to make a significant and tax-free addition to my future pension. I’m still less than a third of the way through my journey building this portfolio. As I get into the second half in a few years’ time I will probably shift to a index approach for that, because  diversification works, and there’s no reason not to apply it to investment philosophy 😉 I just didn’t want to start with an investment philosophy that bores me and has failed me once before.


Scandinavian invasion – Waxwings

This morning I heard a welcome noise, a fine trilling in the air. It can mean only one thing, Scandinavian invaders on the loose. Stand by your ornamental garden berries!


These guys had come all the way from Scandinavia over here, in search of berries. And they parked themselves on a telephone pole at the end of my road. so I could go get a camera for a second look at these handsome creatures with their jaunty crests. They aren’t particularly shy, and tend to group in garrulous flocks, trilling away to each other.



what they're really after is berries
what they’re really after is berries

They post some of the ranks on the telephone pole as lookout, busily digesting the spoils of war.

waxwings massing
waxwings massing keeping a lookout

Sitting around also helps them digest 🙂

They crap a lot too
They crap a lot too

It’s kinda rude to ignore something as lovely as these guys, and what’s nice about them is they are drawn to urban areas, because fo the ornamental berry crop. They aren’t particularly shy and have a penchant for supermarket car parks which have a lot of that as low ground cover. first time I’ve had them in my road!

The cost of playing the Lottery has gone up – it’s still a guaranteed shafting so why the fuss?

a modern-day Mark of the Beast
a modern-day Mark of the Beast

Funny the things people get worked up about. The nation’s favourite purveyor of empty dreams, the National Lottery, is apparently raising the cost of entry from £1 to £2, and some people are getting really worked up about it.

MPs and campaigners said the increase was a ‘tax on the poor’ and ‘sheer greed’ and research revealed pensioners and those on low incomes would be hit hardest.

er, what’s the problem guys? The greed issue is a moot point, what about the ‘sheer greed’ of the punters? You’re buying an empty dream here, so if the price has gone up, buy less of it. It’s still an empty dream, because half of sod all is still sod all. It’s so unlikely that you’re going to win that there is an easy solution. Halve the number of times you buy a ticket 🙂 You’re still vanishingly likely to win, indeed most buyers have more chance of pegging it in the next hour than winning the jackpot! You’re effectively buying a call option on your life, yikes!

You could make a far better choice in where to buy your empty dreams from. Apparently lottery players spend an average of about £6 a week. Take the £300 a year, by a FTSE all-share index tracker and get on with the rest of your life like Drew from Objective Wealth has.

You’ll get a far greater proportion of your money back in winnings, possibly even make a profit on the deal. Why? Because though there is an element of chance due to risk, you are also buying a teeny share in a productive economy. You are actually buying an asset, not the empty promise of a sliver of a chance of massive riches. Some of those companies will use your ex-Lottery money to make a profit, and they are legally bound to share some of the spoils of war with you. Which is a damn sight more than Camelot. When people are asked by their financial advisers how they feel about risk, most employees say they hate it, avoid if possible. So why the hell are they taking a bigger risk of losing all their Lottery money than of surviving the next hour? Barmy.

Half the paid out prize money (this is not half the money takein in, remember!) goes to the Jackpot, which is what everybody thinks of when they buy the ticket. A few people get the dream, though in an evil twist of fate it then often really buggers up their lives , at the expense of millions of other people’s empty dreams.

If you really want out of the rat-race you can buy your way out of it, just not that way. Here, here, here and here is how. It’s all about agency, taking responsibility for your life and making a start. Nowadays is the best time to prepare for buying your way out of the rat-race, because for all the moaning and griping about how hard things are now, recession, blah blah, the real fact is you are living in a rich country where many essentials of life are so much cheaper relative to earnings that it’s easier now. The reason so many of us are in debt is because we have followed the exhortations of advertisers to spend God knows how much of the increased disposable income on Wants and trifles. So stop buying consumer crap and sort out your life, rather than buying empty dreams and becoming a complainypants. Sorting your life out starts with cutting out the Lottery tickets.

What exactly are you buying with a Lottery  ticket?

You are buying an empty dream, a chance to daydream a little bit of your life away and pretend you aren’t a drone in an office having to put up with tosspots telling you what to do. At the same time a little part of you is telling yourself that you are a LOSER because there isn’t any other way of getting what you want, and the best chance you have is a 14-million to one chance.

STOP doing that to yourself. It’s rude – you are the sum total of fantastic capabilities and you need to stick an axe through that negative self-view right now. It almost doesn’t matter what sort of a hole you are in life right now, if you are spending any mental clock-cycles on the infinitesimal chance a National Lottery rope is going to come down to pull you out then you are not using your capabilities to look around you, see what you have to hand and get with building yourself a ladder out of the hole, cutting steps in the sides or just sitting back and reading a book. You’re betting on a lower probability than your own death in the next 60 minutes.

My detestation of the National Lottery isn’t particularly because it’s a rip-off, although it is. It is because it robs punters of agency by giving a lightning conductor for the abandonment of hope – either by looking for the good in their position or effecting change. I know someone who, when he was down to his last six pence[ref]that’s about 50p in today’s money[/ref] without a job in the 1950s[ref]I was a child when I heard the story. Even if it’s apocryphal, the symbolism is powerful IMO[/ref] took more positive action than buying a lottery ticket. He took that six pence and threw it off London Bridge into the Thames, because then he knew he was starting from zero.

Now he had nothing, and this strengthened his resolve, and he went and found a job[ref]Casual work was much easier to come by in the 1950s than now, so this isn’t as mad as it sounds[/ref]. That is agency, knowing when something is holding your back. Had he spend his last sixpence on the Lottery, or the horses, the symbolism would have been very different. He would have been telling himself that he couldn’t make it without an infinitesimally likely stroke of luck.

Good Causes you say?

About a quarter of the money taken goes to good causes/reduces the tax burden on the rest of us. Want to keep up your work for good causes? Take a quarter of your £300 and give it directly to charities of your choice, ideally by Gift Aid so they get 20% on top from the taxman. You can’t Gift Aid a lottery ticket 😉 That way your preferred charities get more money from what you’d have spent on lottery tickets!

It won’t be you

It really won’t. You have a 14 million to one chance of getting the winning numbers, and have to share that with any other winners. Imagine you started at 18 and bought a ticket every single day until you drew your pension at 65. You would have purchased over 17,000 tickets, and you would have improved your chances of winning to about 1 chance in 800. That’s still pretty piss poor, and most people seem to run weekly, so your lifetime chances of a jackpot win as one in over 5000. Do something better with your life, for heaven’s sake. Purchase one ticket, once, which moves the dial from zero to a chance of one in 14 million. That way you get the buzz of the empty dream, but it costs you only £2. Then let it go. That first ticket is the one that makes most of the difference to your chances.

It could be you, but it’s very unlikely[ref]nearly 14 million to one against – just fuhgeddaboutit[/ref] to be you.

So why do it?

The wheel of the year turns, and a pause for reflection

The Ermine household took itself to the West country at the beginning of the year, for a time of rest, and reflection on the year passed and the year to come. The culturally preferred way of doing that in the UK is to get hammered on the last day of the old year and welcome in the new with a humdinger of a headache and hazy recollections of indiscretions. Nothing wrong in that in itself, but it gets tougher on the constitution as you get older 😉 So happy new year to y’all if you’re still here!

It so happened that Mrs Ermine wanted to go the the Oxford Real Farming conference. That’s an alternative to the conventional Oxford Farming Conference, where Owen Paterson told the assembled mass of agri-business that he was going to pay for PR to convince the recalcitrant refuseniks of  the Great British Public that GM food is good for them. Really it is. I’ve offed the GM rant to later as it isn’t the main topic here.

So we stayed at a lovely campsite near Oxford for a couple of days. Oxford looked pretty much like it did three-and-a-half decades ago when I went up there for an interview, only the tourists have changed,

old-worlde building graced by asian lady
old-worlde building graced by pretty Asian girl wrapped up against the British weather. Time moves slowly in Oxford; Photoshop her out, fade to grainy black and white and it could be the same as my 1978 photo

Wandering around the city you can practically smell the old money oozing from the stones

old money keeping this gilded gate nice. It would be shabby if paid for by an Austerity Britain council
old money keeping this gilded gate nice. It would be shabby if paid for by an Austerity Britain council

Then it was time to move on, to Glastonbury in Somerset, for a period of reflection on the year past and the years to come. The weather was kind to us – we were prepared to eat the cost of a lost booking if the weather had turned all snowy,  since  our FWD camper van is back-heavy and handles poorly in the snow. We had a lovely few days in a magical environment, though I fear a 1970s revival seems on its way by some of the garb on show.

on the tor, I'm sure there's a 1970's revival in there somewhere
on the tor, I’m sure there’s a 1970’s revival in there somewhere

We stayed at a self-catering cottage near the town, and ate well from the slightly off the beaten track greengrocer and the fine town butcher, both near the market cross.

alrternative shopfitting for this greencrocer, but their stuff was good
alternative shopfitting for this greencrocer, but their stuff was good

Although it’s ringed by the usual rash of out of town shopping and supermarkets, the people in the town have enough non-clone-town concerns to support a decent number of shops, and not the usual rash of casinos (not one I recall) and charity shops that infest the hollowed-out High streets of many market towns.

Yup. Think we get the message of what's important to some folk round these parts ;)
Yup. Think we get the message of what’s important to some folk round these parts 😉
Recession? What recession? We don't do that round here
Recession? What recession? We don’t do that round here
I love city streets in the rain, okay so it's cheesy and Thomas Kincade but so what
I love city streets in the rain, okay so it’s cheesy and Thomas Kinkade but so what, it’s kind of magical. And no chain stores, no clone – town Britain

You can’t really talk about Glastonbury without a reference to the eponymous Tor so here it is. It’s still a right grunt to get up it, though it is easier now than it has been for me in the past.

Glastonbury Tor
Glastonbury Tor

One of the joys of this holiday is we rented a really characterful stone cottage in nearby Butleigh that dated from the 1500s, though we had the advantages of modern plumbing and electric heating. There was a wood stove in an enormous inglenook, but this was more for the atmosphere than a useful source of heat as it was leaky as hell and tiny. It made me appreciate the quality of my own wood stove, but hell, it added character and we had electric heating to do the real work 😉

wood stove

So where’s the personal finance angle? Well, it was also a good time to look back at six months since leaving work, what happened, what is likely to happen, where I want to go.

what happened since leaving work

  • I lost some weight. That is not a bad thing. I haven’t consciously tackled this, it seems that the stress while working had negative physical effects.
  • I drink less coffee – often just in the morning. Hell, I can even code without it, despite it being the software writer’s legal drug of choice.
  • I drink a little bit less booze. Okay a lot less compared with the immediate end of my working life. That stress thing again I guess 😉

One of the things that became clear, is that I started my journey unprepared, particularly psychologically. I had expected to get to 60, retire normally and get on with life. In 2009 I discovered I needed to do that 8-11 years short. In times of need the Ermine will fight, and so I chose to fly into the storm, accept the rotten work environment but save madly.

Unwisely I assumed that the primary risks were financial, that I would be kicked out. In retrospect this was not the case. I had already accumulated significant capital, unlike everybody else in Britain is seems I paid down my mortgage rather than going on holidays and buying cars with the increased house prices. And indeed lived significantly below my means, accumulating capital in terms of housing and some shareholdings, as well as the usual rainy day fund. I measured this against income, but in fact it makes more sense to measure it against outgoings, which made it bigger in effect.

The financial risks were overblown. I could probably  have made it bailing in 2010, because I had projected my outgoings to be the same as while at work. A life retired is one where you can take joy in things that are free and low cost, those which take an investment of time, or improving skills, becoming self-critical and honing one’s art rather than searching for the technological quick fix or having to pay over the odds to pack everything into the weekend.

One of the gifts that not working has done for me is that I can aim to do things with respect, or not do them at all. When I was working I had to do all sorts of things ‘just because’. I couldn’t respect anything to do with the stupid performance management system. WTF is the point of a performance management system – my performance showed in what I did. The back of house guys in the Olympics could see what was going on in real time, because of the efforts of me in high-level design and the subcontractors in mid and low-level and getting boots on the ground. I didn’t need some stupid prick ticking boxes or not. And indeed all due respect to my last and final line manager who got the balance on this right, it was the previous one who was the box-ticking prick. But I had to do PM, ‘just because’ some management consultant twits on an MBA said that was the way to do things. Where the hell were these guys when the West was built, funny how they only showed up as it is being lost!

There are very few things I have to do just because somebody says so now. So when I do something, I try and take time, to address the job in hand, reflect a few moments, and then engage properly, indeed to live intentionally. Whether it’s roasting a chicken, cutting a piece of wood or designing a piece of kit. While working I sleepwalked like an automaton through stuff that needed to be sleepwalked through, but also through things that needed to be done with respect.

I missed two risks. No man is an island, entire of itself. In flying into the storm of organisational values that had become so disconnected from mine, the Ermine’s brilliant white pelt was tainted as I had to run with some of the stupidity and pretend to agree with what I believed to be arrant rubbish. I paid for being so at odds with the values New Lean and Mean Firm. Overtly, by nearly being ejected for struggling after parting the ways with DxGF. And covertly, because in retrospect pretending to be something I wasn’t for so long seriously damaged my physical and mental health.

In 2007 I came to Glastonbury with a couple of pals. And failed to climb the Tor, I got too out of breath and abandoned the attempt. Which is piss poor, the path rises 80m in about 400m linear distance. Now I can’t say that I raced up it this time but I was okay, stopped a few times to gather strength but the recovery was a couple of minutes, not tens of minutes then fail as it was five years ago. And not too many people overetook me 😉 . I am sure that Mr Money Mustache would consider that a really low grade performance but I’m not him, I’m probably twenty years older. And I don’t have the physical fitness fetish. Decent for my age is what I want. His original weight target is what I’d like, it’s roughly what I weighed at 21, and at least  it isn’t so bad I’d have to lose half my body weight to get there. I have absolutely no comprehension of why he wants to become heavier. Good luck to him, I’m sure he’ll get there by the end of the year!

I want to be able to cycle up the grade from Tuddenham on an ordinary road bike at more than walking speed without feeling like shit for fifty yards afterwards. I’d like to be able to cycle from Ipswich to Minsmere and back again. Pumping iron and being able to lift cars single handed – nah. Life’s too short for that, even if doing that makes it a little bit longer. Each to their own.

So much for physical health, but not living my values cost me mental health too, it robbed me of hope and fire to illuminate my world, to choose life and direction. When I left, I gained by the removal of much of what was wrong. It looked good, and for some time I did not miss the hole – the absence of agency and direction that should have been there but wasn’t. I followed the originally designed financial plan, but the greatest fear was running out of money. So, like an unconscious pilot slumped at the controls, the plane to run on autopilot, and it did well ,the original flight plan was sound. I tried to wrestle against my net worth falling, but that was a fight I can’t win. By various synchronicities events conspired to make it look as if I could win, but it won’t be possible in the medium term. It doesn’t need to be, I don’t need to satisfy Micawber’s rule over the next few years, and my original plan did not demand that. It had two requirements – that I should not run out of cash, and that I allocate my ISA allowance each and every year for several years to come.

Hope is a fragile thing. DW played for time, and guided the inspirationless ermine across the gap until the spark of the internal flame could strike and hold again. There are times in life when one must be prepared to fall back and fall back until somewhere, like Albert Camus in Return to Tipasa, in the midst of winter you learn of the invincible summer that lies within.  Somewhere in Glastonbury this happened. It is time to ease back into the pilot’s seat and survey the controls. Not necessarily time to do anything yet, but to look and see if anything has changed that the flight plan needs to take into account.

GM rant

My personal objection to GM food isn’t that it’s bad for you. I mean, some variants will no doubt turn out to be bad for you and/or the environment in general. But there’s plenty of regular millennia old stuff out there that’s bad for you. Try making wine out of ivy or eating foxglove, or most fungi. Plants are aggressive bastards, out to kill you with strong poisons[ref]if you have ever tried eating red kidney beans without boiling the suckers for ten minutes you get to know this up close and personal. I saw the results in a student flat when one guy sampled a couple of red kidney beans on the stove. The results were dramatic, he didn’t make it to the bog before chundering violently[/ref] in the fight for Darwinian supremacy. Vegetables have feelings too and don’t actually want to be eaten by great hairy apes. Fortunately a whole host of humanity has gone before to ID or learn how to cook the nasty stuff. We didn’t need GM to make a mess of the environment – DDT, the non-decaying plastics waste choking the oceans, there’s more than enough mess made perfectly conventionally. Continue reading “The wheel of the year turns, and a pause for reflection”

Why you shouldn’t break the ice on the birdbath with a hammer


It’s a bit parky round these parts, so I reloaded the spadgers’ nuts, which is more fun in the interludes between the snow rather than in the anticipated blizzards to come. I figured I’d break the ice on the birdbath, with a hammer.

The trouble is it was one of those plastic resin jobs, which is hollow inside. and despite being 2pm in the afternoon sun, the ice had frozen solid.

Damn. Any fule kno plastic gets brittle in the cold...
Damn. Any fule kno plastic gets brittle in the cold…

So I’m down one bird bath and the sparrows are SOL on water. It’s the second time I’ve knackered it de-icing it, the first time was breaking the ice with a spade a couple of years ago. It’s a curious hollow plastic construction. I fixed it the last time using Milliput, which is a sort of epoxy resin putty. The same trick could sort this break out too.

The right way to do this is with hot water from a kettle, but I was trying to avoid losing a load of heat to the latent heat of fusion of the lump of ice. I shouldn’t have been so tight, the bird bath holds probably about 5 litres, so I’d take a hit of 5 x 334 kJ or about 0.5kWh, about 10p these days. It would be several kettles’ worth of boiling water though to thaw it. Whereas now I’m down either £2 for some Milliput, or I may junk this and get a replacement.I’ve been coveting a cement/concrete one at a local hardware store for a while at £22.

The sides of this birdbath are a bit steep for the spadgers and I have to put a piece of wood in as a ramp in the breeding season to give baby birds a fighting chance of getting out. The trouble is many modern ones are resin again so I really need to learn to to stop using blunt instruments on the ice.  I could repair this with Milliput and then fill some of the bottom with concrete to make it shallower, but the £22 one starts to look like a better deal. Plus this is only as high as a cat standing on its back legs, which is poor design in a birdbath IMO.

So if you have one of these apparently solid birdbaths are are tempted to de-ice it with a blunt instrument, perhaps ahead of the Big Garden Birdwatch next weekend then learn from me

don’t do that 😉