Rust never sleeps – 20% inflation in five years

In March 2010 I wanted to gift my future self a regular income, and came up with a great way of doing it. Every month I would buy a three-year NS&I inflation-linked savings certificate of £500, in three year’s time I would have a three-year steady income of £500 a month. Ideally that would have been more, but I was saving in pension AVCs and  filling ISAs at the same time.

I only managed to do that twice before NS&I ILSCs disappeared like summer rain – when they briefly reappeared I hit ’em straight between the eyes with the full £15k. The low-maintenance high-security non-taxable inflation-proofing of NS&I is too valuable to waste. These NS&I savings I consider strategic reserves against the unexpected. Because the value isn’t destroyed by inflation these savings are an in emergency break glass sort of thing to the extent that I will borrow money for short-term requirements rather than break into this, because once they’re gone there’s nothing else available that will preserve liquid cash across the years without stupendous amounts of faff. I don’t expect much of cash, I’d just like to find the same amount of value when I come back for it rather than have it melt into the ground.

Rust never sleeps, they say, but it came as a surprise to me to receive this statement, on a rolled over echo of that first £500

photoshopped to ice the details
photoshopped to ice the personal details

In only five years 20% of the value of that cash has quietly died in the night; it now takes £600 to represent the same value that £500 did in 2010. (Update – Bruce correctly pointed out I missed that ILSCs offered 1% over inflation for the first three years!) It summarises everything that’s wrong with cash – a great medium of exchange but a dreadful store of value. NS&I ILSCs fix the store of value problem, but since debasing the currency is how promises are paid for they aren’t sold any more.



how Britain fell back in love with borrowing

In the Ermine world, people clearing their unsecured debts sounds like A Good Thing in general, after all, when I was growing up there was no unsecured personal debt[ref]this isn’t strictly true, there were ways and means but usually associated with the threat of violence for defaulters. What we know as consumer credit to buy Stuff was regulated hire purchase secured on the goods[/ref] and people survived, the sun rose each day and they seemed to have fewer financial crises… In the Through the Looking Glass world we have now that’s all bunk. Apparently, more unsecured borrowing is a good-news story. Let’s hear it from PriceWaterhouseCoopers

Just as daffodils herald the beginning of Spring, it’s a sure sign that people are feeling better about their economic prospects when they dust off their credit cards. […]

In the five years after 2008 people worked hard to reduce their debts and managed to clear almost a quarter of their unsecured borrowing. But the latest report shows a sudden and sharp return of unsecured lending

[…] In cash terms, that’s more than ever before and a reflection that many people feel more confident about their finances than they have in a while.

Matthew’s Moronic Money Muppetry

On the radio I hear such a stupendously moronic statement from a mouth-breather that makes me  ask WTF is going on here? Did I stick shift somewhere and end up on a different planet rather than a different lane?

The man-child Matthew tells us something at 16:44 that informed me that the fight is futile, the good guys lost and the bad guys won.

Q: Are you spending money you don’t have:

Err, yes, people do these days, things are expensive, you have big outgoings, …Christmas, I put things on credit card… then you get into a cycle of just paying the minimum amount…transfer the balance again…hopefully that won’t run out

I definitely use credit cards to pay for major times like …Christmas… I’ll spread that over the year, won’t be gone by the end of the year…you wanna have a good time, wanna have nice food and things…it’s important for me to keep a good credit score

Q: when was the last time you were credit free?

6 or 7 years ago

Q: is there any end in sight?

when those interest-free offers run out, and I do pay interest on some things; when that all comes on top of me I will eventually get a loan, and then it will stop..until then it works for me.

Fundamentally my lifestyle revolves around exceeding my income and I think that’s a normal thing

There are times that you weep for all the previous life-forms that struggled their way across the geological aeons, the fish that left the sea, and indeed our own human forebears who endured desperate privation to produce the pinnacle of wisdom delivered by Matthew encapsulated in

Fundamentally my lifestyle revolves around exceeding my income and I think that’s a normal thing

Live intentionally, Matthew. Christmas should be about gratitude, not spending to make corporations rich

Go on Matthew
Go on Matthew. In the unthinking stir-fry that occupies that cranium of yours, ever look at things like this and ask yourself if there’s more to life that rolling over your Christmas consumer debt from year to year?

Now I know you’re not a fellow who’s given to deep thought on the meaning of life and all that jazz, but Matthew, has it ever occurred to you that the purpose of your life on this sparkling blue planet may not be totally summed up in doing as you’re told and buying shit you can’t afford to make other people rich? Let’s take a look at that Christmas thang, for starters. What is Christmas? Why is it there? Ever thought about that, y’know – why do you want to have a good time, drink yourself stupid on wifebeater and pig out? Let me tell you a story

Continue reading “how Britain fell back in love with borrowing”

Diversifying an HYP with a global index

Most PF savers have a stock market accumulation horizon measured in tens of years. I don’t – I realised I was going to take the expressway out of the world of work because otherwise it would drive me round the bend. I was James, not Pat, in this story of how to be a wage slave and play the game, so I did the celibate monk in a brothel thing, saved up shedloads of money and jumped out of the runaway vehicle of my erstwhile career and let it crash.

I was dealt a kind hand by the stock market. You didn’t have to be smart in 2009 to do well out of the stock market. You had to get in it, despite everything saying Wrong Way; it wasn’t easy.  I started building a HYP in my ISA in the eye of the storm that was simultaneously terminating my career. On a 4% SWR on my HYP investment capital I can make up the damage done to my pension from quitting early and losing a third of my pension contributions[ref]Because of crafty changes made by The Firm to the pension scheme that last third of my working life wasn’t worth a third of the accrual, reducing the amount I had to catch up[/ref]. From 55 which is not so far now I can use a short SIPP to give me a DC pension for five years before drawing my main pension at the NRA for The Firm, so no actuarial reduction for 90% of it.

Nothing comes for free – I had little fun in the last three years of working, and I’ve run down some separate cash for the last two and a half years. Later this year I am probably ready to re-enter the middle class income fray, but hopefully without pissing away my income/wealth on the sort of garbage I used to do when working.  I will spend more, but not at wage slave me levels. There is an interesting perspective from one of the Telegraph’s interviewees about realising a pension that is adequate. I shall never be rich or poor, assuming, of course, that society survives reasonably intact. War and hyperinflation can change that in the blink of an eye, of course…

The Coffee Can portfolio and HYP Rule #1 – do not sell

I started off with a HYP because my experience of stocks have shown me  I am a rotten seller – jumpy and fearful, I will bail too early. With an HYP one of the tenets is you don’t have to do that. Over the years I’ve also learned how to benchmark a portfolio. Unitise the sucker – compared to XIRR and all sorts of other ways unitisation is simple, it’s the basis of how mutual funds work except you are the mutual fund manager and, although I don’t decumulate at the moment, it can track how well you are doing as a manager even through decumulation. The instructions are here. My aim is to beat VGLS100, over my investment period and with what I’ve put in over time, because that’s probably what I’d have bought otherwise. So far I’ve done fine. And I don’t have to sell units to derive the 4% SWR income.

The Ermine is a capricious investor, many would say irrational. I aim to buy in bear markets and when people are rioting in search of decent trainers at a knockdown price (revisionist alternative view that this was a correct response to Not Having Stuff here) and things that people hate. I try and take breaks in times like the last couple of years, just buying my own stuff back tax-wrapped instead of unwrapped. It’s a messy approach. Observing that most of the behavioural biases that clobber my returns are usually on the selling side and taking that out probably helped me.

bunch of contract notes from two years of my dotcom days
Two years of my dotcom days. I have a natural tendency to churn 😉

The Do Not Sell was inspired when I read Robert Kirby’s The Coffee Can Portfolio from 1984[ref] the formal reference is DOI: 10.3905/jpm.1984.408988 though I am not educated enough to know what the hell to do with that. A Google Search will be a profitable source of PDFs if you want to read the whole thing[/ref]. That sings to me because my errors were in churning, and here was a way to stop that. I like the standfirst

You can make more money being passively active than actively passive

Continue reading “Diversifying an HYP with a global index”

Why doesn’t the middle class understand how bad their situation is?

Matthew – Assets £700k, age 42, two children, SAHM, GSOH. Wants to meet lifetime income of 40k in 2015 terms to enjoy the rest of his life

So he’s in the plush City offices of independent financial advisers Ermine, Ermine and Ermine Ltd and there’s a gimlet-eyed white mustelid  sitting behind a big leather desk with oak-panelled walls and one of those green banker’s lamps on it.

Good grief, Matthew. According to the Trinity study a 4% SWR you will get an income of £700,000 /25 = £28,000[ref]The Trinity study was on US stocks and for a 30 year drawdown. Matthew is younger so there are good reasons to suspect he may need more[/ref]. That’s not that far short of £40,000, so ease off on the consumerism by about 25%, send that SAHM out to work – those kids are 13 and 15 FFS, and then you can have your well earned break. Next!

Maybe not…

Let this book tell you a story about the middle classes, Matthew

It never fails to surprise me how much the so called middle classes haven’t realised just how deep the shit is that they’re in. Matthew is thinking along the right lines – he’s not that far away from the dreaded 45 so he doesn’t want to rely on making shitloads of money as he was. But there are some unfriendly trends happening, which he wants to think about. He could do worse that listen to the story this book I’ve been reading tells him.


The first part of the story is told by the physical book and how it came into my possession. It is clearly a fairly new library book – the Ermine is all for library books, because I can educate, inform and entertain myself for free, and not only that, but I don’t have the problem of storing clutter after I’ve read it. And I borrowed this from Suffolk libraries.

I had to pay £1 for that, because Suffolk Libraries have stopped buying books to a large extent because of cuts. They have been resourceful, and struck a deal with neighbouring county Cambridge. The computer systems can search across both book collections, but as a Suffolk resident I have to pay £1 to borrow from the Cambridge holdings. Now I don’t mind, in the end I can afford to pay the odd £1 to read a book,  but it’s a tiny metaphor for where things are going. One of the reasons Suffolk council had no money is they pay shitloads to their chief executives, step forward Andrea Hill paid £200k to outsource everything, including the libraries. Eventually the charge will rise until it meets the price of alternatives like a Kindle book/secondhand copies on Amazon and then the outsourced operation will go bust. I am pleased to observe we now pay only £150,000 for the head honcho of the council Deborah Cadman, and intrigued by the implied nepotism of her husband getting the job she vacated at St Edmundsbury council. Jobs for the boys, eh? I’m sure it was all above board, and I’m still puzzled why it costs more to run Suffolk than that Cameron chap costs to run the country.

In itself the degradation of the library service isn’t the sort of thing that will impact Matthew’s finances, but it is a harbinger of tougher times to come. There is another service that is degrading which most of us get to use sometime. The same outsourceing thinking is applied to the NHS as decribed in “Serco grapples with watershed [Suffolk] NHS contract” [and makes a pig’s ear of it]. I would be very surprised if in 10 years time the NHS were free at the point of use, or so degraded that if you were used to the sort of lifestyle Matthew were used to you wouldn’t want to wait. Some of my excessively large emergency fund is set against that sort of thing – and I am so far in good health for my age, but I wouldn’t want to wait months for a hip operation were that necessary in 10 years time, so I would pay for that sort of thing privately (it’s about £12,000). There are some things you can’t buy your way out of at any reasonable price; in the end you gotta go some time and you may be better off saving the money and letting it go.

I am about a decade older than you, Matthew, so I will die 10 years earlier. You will experience more of this erosion of public services, so you at least need to think about how you are going to buy your way out of it. Not all of your money is going to go on skiing, holidays and paying your children through university. Some of it will go on health insurance. Hopefully Britain will adopt the German or French method of co-payment rather than the ghastly US system which is fantastic for the rich with the best medical care in the world, but keeps frightened wage-slaves pliant to The Man in fear of losing their health insurance. I believe the ‘free at the point of use’ is part of the problem – there should be a small, flat charge for visiting a doctor, similar to the €23 cost for this in France.

The rich have always lived longer, on average, than the poor. It’s not stupendously surprising, but Matthew would be unwise to ignore the straws in the wind. Like me, but more so[ref]because he is younger and will see more of the end-game[/ref], he is on the way down, not up in this fight against the 1%. And that’s just the story told by the library charge, the contents of the book will make you blanch, Matthew.

Let us purview the rest of your situation. Ah, children, it’s the way the modern world really gets to the middle classes. On the upside, there are only two, which is good. You need to be rich or poor to afford more these days, let’s hear it for poster child Shona and the trouble her four got her into. The time will soon come when the middle classes will only be able to afford one child if they want to keep it in the lifestyle they believe they are entitled to. Let us assume that that nice man Mr Miliband gets in, so your eldest goes to university with £6000 p.a. fees, and let us assume a student needs £4000 p.a. for accommodation and beer these days, making a nice round figure of £30,000 for a standard three year course. You need to find twice that because you have two children, which in my book is a knock of £60k, 10% of your capital assets

The question, of course, has to be is this a useful allocation of capital? After all, invest it and it’s an instant boost of £1200 a year for her for life, sort of inflation protected. It would be a useful deposit on a house, outside London. You have to set this against the tax-like version of student loans  – see MSE’s discourse on this which derisks the financial case if they take the loans. Bearing in mind that there are the twin massive forces of automation and globalisation tearing middle-class jobs out of the economy, there’s a strong case to be made that university is an unaffordable luxury – basically your children will be less able to build wealth by earning money across their lifetime particularly if they want the lifestyle you had, and inherited wealth is possibly much more important. So if if you want to make sure your children have a decent future then:

  • Don’t have too many, because it splits your estate
  • Have them late, because then they will get the inheritance earlier in their lives, (you will die when they are younger) That also helps damage the career of the primary caregiver less.
  • Teach them the values of grit and determination
  • Don’t autopilot on university. A degree was much more valuable in the 1960s and 1970s when <11% of people went, as opposed to 50%. Looking at some of the illogical thinking, rotten grammar and mush written by university-trained intern journalists now compared to the school-leaver journos of yesteryear the Flynn effect is obviously too slow to have made four times as many people academic in the last couple of generations. We’ve simply lowered the bar, which is a git because now employers can’t tell the bright from the dim bulbs and everybody has to pay because there are five times as many students as there were when the taxpayer supported them through university. I personally would like to see the taxpayer support students through university again, but I’d like to see a much lower percentage go, no more than 15% with full grants for tuition. If you can’t pass the exams, well, I guess there’s nothing wrong in paying for a vanity degree…

Anyway, on to other things

Rule 1 on page 1 of the book of personal finance is know thyself. Without self-knowledge you are doomed

Hmm, so you realise you are “quite risk‑averse”, do you, Matthew? Absolutely nothing wrong in that, and indeed holding nearly half a million in cash would seem to support the assertion. I thought I was mad holding more cash than property, but I tip my hat to your good self. And yet on the other hand

“waiting for a stock markets crash – after which I would dive in”

Matthew, me old mate, do you have any idea of just how hard that is to do? I did it in 2009, and I had to fight the primitive lizard-brain every inch of the way. Do you know what it feels like to lob cash into a diving market and see yourself lose 25% of it in the next few weeks, and do you know how you have to practically seize one hand with the other to stop selling back out because every part of everything is telling you wrong way, step back, run for the hills, Gateway to Hell and total oblivion this way?

That is just not something risk-averse people do. Know thyself. Risk averse people need to be sated with the general long-term lift of the market over many years, which is sort of 5% real though there’s good reason to think it may be a bit lower. Passive, index investing is what you need. Spend the time you save on otherwise obsessing about money with your kids, Matthew, the days are long but the years are short. You’ve already missed five-sixths of your eldest daughter’s childhood and two-thirds of the youngest…

Mr and Mrs Ramsden also want to invest some of the capital in a business venture together. He’s thought about setting up an auction house but Mrs Ramsden plans a tea room.

People in business are not characteristically risk-averse. Else they wouldn’t do it, given the ghastly odds of 50% failure in the first two years, more so in the restaurant biz. Cripes…

There’s hope. A word in your shell-like – cut spending

Unlike some of the other wannabee early retirees, with a bit of  cutting his cloth to match his resources Matthew could do well. He needs to lose that £40k figure – he’s just not that rich. Half of it, however, he do do without breaking a sweat. If he really has had the experience of

20 years of constantly working hundreds of miles away from his family

he is probably used to a high-spending lifestyle while away, all on expenses and making up for the rotten nature of that sort of thing. For a few years I worked on a project that involved international travel about once a month, and that was about right, particularly as I was single at the time so I could use the travel opportunities. But even then, all the married colleagues with kids were frazzled and hated it and were always rushing back. If you are doing much more of that you spend loads of money because, fundamentally, you are bored in the downtime – one hotel room looks pretty much like another, you’re too frazzled from long days to do much tourism  and you are looking forward to the weekend. That’s why such jobs pay well, because they’re a little bit shit in the lifestyle department.

There’s probably room to spend less but live more. I think he can do it. But it’s not a financial makeover he needs. It’s a lifestyle makeover – a what am I doing, what really matters to me, what are the risks and opportunities ahead drains-up. It’s not surprising he wants to downshift after that. He could also do with harmonising these life goals with his wife – after all in five years his children will be adults. If he and his wife want that £40k then maybe they could consider working at a low level, though the way this is going a 20 year gap it’s not going to look good on his wife’s CV.

As for those IFAs –

Okay, they agree with the general principles of the Ermine IFA partnership of cynical mustelids. I found the second IFA to be much more on the mark with the fundamental  issues. Matthew’s primary problem is not that he hasn’t got enough money, it is that he doesn’t know himself, so he doesn’t know what he wants. He knows what he doesn’t want, but ‘anything but this’ is a dangerous way to map your path. You’ll struggle in getting from London to Scotland just knowing you need to get out of London. You might end up in Bognor Regis or the Slough Trading estate.

Word in your shell-like Matthew, one of the aims of life is to know yourself  else you’ll always be a stranger in a pathless land. Some of what he thinks about himself is inconsistent and incompatible. These are not financial conundrums, and some aren’t even solvable by money. There is serious tension between

  • risk averse : buying in a bear market and/or starting a business
  • seeing more of his kids: starting a business
  • featherbedding his kids: retiring early

Either way, the odds are that his children won’t have the lifestyle he or in particular his wife had. Broke is a long-form story of how that got to be that way. The short form is that the 1% are eating their lunch, they have the firepower and the deep pockets. The halcyon days of the middle classes were when there was limited mobility of capital and labour, and automation hadn’t greatly dented the need for people in running companies and administering things. University for those kids is a chimera  – the vet may need it, and at least the job isn’t outsourceable which is very wise even if she needs 4 years at university but the “I dunno” is case unproven. The world is changing, and it’s not favouring their future in a First World country. Now if they were Indian, or possibly African, the hope of middle class parents might be more likely to be fulfilled.

It’s an interesting book, Broke. There be trouble up ahead for people with certain kinds of aspirations… Matthew could do worse than read it.

One fair question to ask is how much of that wedge is inherited, since the BTL he finds such a PITA to run was his Gran’s flat. I’ve charitably made the assumption he’s earned/saved it. If it is inherited, you need very specific and careful skills. The middle class is going to need to learm the characteristics of old money, and if this is ancestral wealth then it’s not his to spend – it is fossil wealth that should be husbanded across the years to benefit his dynastic line, if he wants his children to remain in the middle class. Old money never eats it’s seedcorn.

“never spend your principal[ref]The child-free can be more relaxed on this[/ref]”

That’s why it’s old money 😉 You can spend the income it throws off, but the aristocracy holds its capital in trust for its children. Preferably in assets like agricultural land[ref]obviously they don’t get their hands dirty farming their estates, they get contract farmers to do that[/ref], where old money has negotiated tax-free status for its ancestral wealth.


Congratulations to Patrick Pichette of Google, 52 (ret)

The CFO of Google has achieved something that few high earners seem to do. In amongst all the Sturm und Drang of earning shitloads of money as CFO of Google, he heard the faintest sounds of the distant drum at 52, having climbed Kili. In itself that’s not particularly remarkable. What was remarkable, however, is that he took action. He switched the engine into neutral, and planned his glide path out.

say cheese, guys
say cheese, guys

Now the cynical Ermine observes a massive helping of cheese in this pic. Hopefully that photo is a mock-up – it would really, really piss me off to pay all that money and go to all that trouble to find such a ghastly contraption bringing unauthentic consumerism with a Capital C to a natural place. Las Vegas is fine where it is 😉 But if it’s really there, well, it takes all sorts, eh.

Be that as it may, and even if it’s a publicity stunt to promote the ailing Google Plus system, he’s outlined the fundamental problem. You’ve only got so much time in your life, and it’s running out 24 hours every day.

His valedictory post has all the usual things the rich retiree wants to do – travel the world, blah blah blah blah. It’s great- each to their own. It reminds me of the things I thought I would do lots of once I had control of my own money and time. And indeed I may still do. All these things are projected outwards, but retiring well is also an inner journey. I am reminded of the words of the Swiss psychologist Carl Jung

It seems to me that the basic facts of the psyche undergo a very marked alteration in the course of life, so much so that we could almost speak of a psychology of life’s morning and a psychology of its afternoon. As a rule, the life of a young person is characterized by  a general expansion and a striving towards concrete ends; and his neurosis seems mainly to rest on his hesitation or shrinking back from this necessity. But the life of an older person is characterized by a contraction of forces, by the affirmation of what has been achieved, and by the curtailment of further growth. His neurosis comes mainly from his clinging to a youthful attitude which is now out of season….

Carl Jung, 1929 CW 16, para 75

Translated into our times, in youth the ego is expands in strength and influence. Although the West has few rites of passage, the ego follows a well-signposted path, projecting and gradually gaining force and influence – job, career, relationships/marriage/kids. All this is promoted and is in the symbols all around us.

We don’t have many symbols for success after the turning point – look at the ads around you, they are to hang on to youth, to beauty, most commercial symbols of ageing are negative. The ads assume we want to look like we are between 25 and 29.

I lived some of Carl Jung’s neuroses in my 20s  – the young Ermine lived in a rented room in London, putting salt around the room to keep out the black slugs. I was in a decent job, 25, but I couldn’t buy a house and seemed stuck in all aspects of life other than work. I did finally sort my shit out and make changes. It wasn’t just me – the mid twenties seemed a really tough time for several of my peers too. Maybe it’s a London thing, or Imperial graduates. Maybe it’s birds of a feather sample bias. I have experienced worse lows in life since, but none as protracted. Bollocks to all the ads, I never, ever, want to be mentally again in the place I was in my mid to late 20s. For all the lows and the fortunately modest losses I have so far had since, the highs deepen and colour in with experience. That runs against the narrative of the Western Myth, and it is important to be prepared to surrender some of what was valuable in youth in order to deepen and grow. So far I have found Carl Jung’s map to be more true that that held up to me by the consumer society around me.

I did not dodge the midlife crisis[ref]I don’t really understand Jung’s chronology he termed the years from c. age 56 to c. 83 the “afternoon of life,” using the analogy of the passage of the sun through the sky from morning to night. This kind of sits ill with the typical allotment of three-score years and ten.[/ref] – arguably the forces that pinged me out of The Firm were stronger because my inner values began to diverge more an more from the values of my younger life. In particular I found it harder and harder to suck it up to The Man’s stupid metrics and bullshit ways – little empires of small desperate people doing what their immediate higher-ups said despite it being often wrong (in engineering terms) or simply against common-sense, nature and experience. The misery of mendacious measurement and metrics enforcing mediocrity and digital Taylorism continues unabated, but at least it isn’t my problem any more. There are some who simply carried on turning the handle, and good luck to ’em. I wanted to determine how I spend my days. And while I probably have the edge on Patrick on some of the inner changes, he has lived more intentionally, choosing to throw the switches of his life in a controlled manner, unlike my uncontrolled derailment from the Work strand of life. So hat tip to Patrick – a great exposition in how to retire well.

But a word in your shell-like Patrick, from someone else who retired at 52. Remember the question posited by Erich Fromm in To Have or To Be. What you do may matter less than what you become. Much heartache and angst waits for those who listen to the messages from their inner world with the coarse equipment that listened well to the messages from the outer world. We don’t help ourselves with that second half of life by trying to hold on to outdated forms. I liked this article on the adventure inward  – this passage speaks to me

In youth the ego is expanding in strength and influence. Typically, it follows the well-posted paths of society, perhaps gathering accolades along the way. But at midlife the ego is challenged to become a servant of the larger personality and soul. This is why men often encounter a feminine guide–and women, a masculine guide–in their dreams towards midlife. These figures are manifestations, or symbols, of the soul[ref]The translation of soul from German into English is hard. It has religious connotations in English which I don’t believe are in the German original[/ref]. They invite and would guide us to an understanding of our deeper nature and a more personal spirituality. Thus, we could say that in youth the ego is educated mostly by family and society, at midlife and beyond, by the soul.

One of the characteristics of the last two and a bit years is that I see that I made far too many simplifications in my model of the world and how it worked, they had served me okay in work and career. But they blinded me to faint signals from within, and also faint signals from the future too. I come to know much more how much I don’t know, and learning from others becomes easier to do but more daunting as I see the further mountains to climb in the search for wisdom.

To take one example – writing this blog has helped me, both in the obvious way that articulating something makes it clearer and throws light on inconsistencies, but also I have learned from many of readers in the comments – sometimes I have been plain wrong, but all too often there are nuances I may have missed, things I’ve been unaware of and it is always good to refine my mental models closer to the territory.

In this time I have perhaps focused on the inner journey. Maybe the time will come that I balance this outwards, though I’ll probably pass on Kilimanjaro, a quick google search still gives me the feeling of pumped up consumerism

If you’ve ever wanted to do something truly amazing, something that’s as far removed from a lazy beach holiday as possible, then Mount Kilimanjaro is calling you! Join the great explorers and mountaineers in scaling Africa’s highest peak, hiking through lush rainforests, alpine deserts and glaciers that have been there forever. With our Kilimanjaro treks, you can take on a challenge and do something awesome in Africa.

STA travel

It seems a fave for mid-life crises – a fifty-something I know did it to make himself feel better after a divorce. Good luck to y’all, whatever floats your boat.

For some reason I’ve focused on the inner journey in the first couple of years, but life has an ebb and flow. Maybe the time for travel and looking outwards is soon to come, to integrate some of the changed perspectives, to play across the strands of life. Patrick’s message is cheering, because it runs against the Calvinist Work is Good for you meme. Work is a means to an end, but it’s also good to know what enough looks like – when to consider a switch from having more to being more. Happy retirement!

The cash conundrum

Cash is a terrible ‘investment’. As far as I’m concerned it isn’t one -though there appears to be one period over which it outperformed the FTSE100 TR. If you were dumb enough to sit on a shedload of cash and invest it all in one go in December 1999 then you’d have been better keeping it as cash for 15 years. Well, yeah, but who saves for a pension in cash over half their working lifetime, chucks it all on red and then goes home? If you are such a soul, you deserved all you get. Most of us save for a pension as we earn, albeit at varying rates through our working lives. In general, if you suddenly have a whacking great lump like that you haven’t earned it, so tough luck if you came into an inheritance in late 1999 and blew it all into the dotcom bust. Easy come, easy go…

£100, waiting to be turned into booze, Harry Wraggs and Sky TV vouchers
£100 will remain £100 but won’t be worth £100 as time goes by

In theory private investors can give up part of their lives to moving cash about between the latest best-buy accounts for years. You’ll be working hard for a lousy return, but at least no volatility.

Cash is not an investment. It is a mediocre store of value but a great medium of exchange

At the moment, interest rates are low. There is a lot of grousing about this, which I don’t have a huge amount of fellow-feeling for. I have never regarded cash as an investment. It’s a proxy for a claim on work in the future, and medium of exchange. It is crystallised power. It is symbolism, it is not procreative in itself. It still surprises me when people think they can get a real return on cash.

The stories your parents told you about saving cash and it growing were largely a lie. They were right that if you add £1 a week you end up with £52 after a year, it grows as you add to it, rather than in and of itself. You still have to work for that. If you want it to grow in value by itself, well, that, indeed, is why you invest. Indeed, the story of the talents I was taught at school is a much more accurate portrayal. If you want your wealth to grow you have to put it to work in doing something. Merely digging it into the ground, sticking it under the mattress or putting it into a bank account isn’t good enough. You can put it to work in the stock market, you can put it to work in a BTL house portfolio, you can put it to work in building a business or buying productive capacity, be that training of yourself or machinery and plant to make better widgets. All of these need skill and judgement calls, and involve some element of risk because what you think should happen doesn’t always happen. There be dragons.

If you want relative security of cash, it ain’t gonna grow – you will largely be running down your capital in retirement. There’s nothing wrong in that. It is what I am doing at the moment. It is what an annuity does. Everybody panics when they think of not getting an income. They want the security that the number at the bottom doesn’t change without their say-so. Clearly they’ve never read Lady Windermere’s Fan, in which Oscar Wilde summarises the problems of conflating price and value,

a man who knows the price of everything and the value of nothing

In doing that they miss that the value of that number slowly degrades with time, but that’s a different story.

Continue reading “The cash conundrum”

Working for The Man post 45 is a risky business

The Man is an unreliable dance parter, the hazard is in relying on working for The Man into middle age. The LA times has a mini series on the shrinking middle class. Unlike the British middle class whinathons and SAHM child benefistas and grizzling journalists that I’ve taken the piss out of earlier these guys are closer to the manufacturing industry end of things, and they seem less culpable than our lot with school fee ambitions for their progeny. All these guys seem to want is a house, two cars and a dog –  one of them sums up the feeling

The promise that your kids would have a better life than you, with the house, the two cars, the dog and everything else, it’s gone.

In fairness to the promise it  didn’t go away, it moved eastwards with globalisation. They were probably chuffed with how cheap DVD players and iPhones are these days… But it’s tough to feel good about that when it’s your end of the boat that’s sinking. Two things are common to all their stories:

They relied on an employer in some form or another. The other is just like me, they failed to lift their eyes to the distant horizons, though they had fewer savings than I had.

I don’t know the stats for the US, but in the UK most of us work for an employer. Fewer than 10% of us were self-employed when I started work in the early 1980s, rising to 15% in 2014.

The Man seems to like ’em  25-35…

You could could be lucky, get all the way to retirement working for him in one form or another. But The Man prefers younger models usually – they’re cheaper, probably more pliable, and in some industries like tech there’s the Zuckerberg doctrine of which more later. For occupations that need some skills he doesn’t like ’em too young, because he can’t see track record, but I’d say late twenties to mid thirties seems to be his favoured the age bracket, old rich favouring the young is not just a dating problem.

There’s more change in technologies and ways of working now. Pretty much everything a young web designer starting now knows will be hopelessly obsolete in thirty years’ time, and this trend devalues and depreciates skills quicker than before. On the flipside things often improve faster now and we will probably be able to do more with less in those thirty years, whatever the equivalent of the Internet will be then. For consumers and users this isn’t all bad at all. There is a corollary of this.

Your peak earnings are probably coming earlier in your career than for previous generations

This is a terribly difficult one to tease out of the statistics. The ONS published this report that seemed to indicate this is true –


Continue reading “Working for The Man post 45 is a risky business”