Unlike most years, where the Santa rally is a thing, there’s not so much cheer on the stock market at the moment.
In other words, there’s a sale on. The Ermine has an additional problem, in that my money is held in increasingly worthless Lesser British Pounds, which are going lower relative to foreign assets day by day. That’s largely due to the pickle we have got ourselves into. Having narrowly voted to leave the EU for a land of unicorns and unlimited supplies of cake, hard reality seems to have met the dream. Usually when that happens the dream loses the fight.
The narrow majority for Brexit covered up an inconvenient problem in that there are two pro-Brexit constituencies, and their interests don’t really overlap.
These are roughly the groups as I see it – one lot want their unskilled jobs back, or at least not to see them going to young folk from the EU who can live more cheaply than their constituents can for a while1. There’s another lot who are the Tory headbangers of the ERG group, who are sore about the loss of sovereignty. There’s an argument that the sovereignty fight should have been had at the time of Maastricht and they should have signed up with James Goldsmith’s Referendum Party. These guys are usually rich enough to weather any storm of a no-deal, or old enough that they don’t have to find work in the resulting maelstrom, and some of them have fond memories of an imperial past when Britain ruled the waves. Whenever I hear Jacob Rees-Mogg speak, I do feel that the 1950s called, and I wasn’t even born in the 1950s, although I am about ten years older than him!
The top left side want much less immigration, they don’t really care about trade deals with non-EU countries, the top right don’t care about immigration but get off on the idea of trade deals free of the yoke of the EU that limits their coruscating ambition. There’s a small dark side of xenophobia, which isn’t necessarily just people who favour Brexit though it does tend to go along with the Brexit patch
At best only one of these groups with non-overlapping interests can be satisfied. Rationally, the largest group that can be satisfied would be the Remainers, because their desire is simple and achievable, what we had before that Cameron chap cocked it all up trying to hold his party together.
If one of the Brexit group gets what it wants, the other group largely doesn’t. The Remainers at least know they lost the fight. The Brexit contingent that doesn’t get what they want will be doubly pissed off because they thought they won. There is no win on offer here that gets anywhere near 50% of people happy. And yet Brexiters are busy screaming the house down about “The Will of the People Must Be Respected”. Well, yeah, as long as it’s not the will of the remainers and as long as it’s not the will of the other half of the Brexit voters, because for them that other lot’s Brexit is not my Brexit.
I’m all for respecting the will of the people, as long as they tell us which will of the people they think that should be. Will the real Brexit stand up and make itself known to the hapless captain of the good ship Britannia? Even when May brings them something that looks like a Brexit, as in ‘submit Article 50 to leave the EU’ people still yell out like two year-olds that’s not what we wanted, Waaah. So they defenestrate May and it’s Groundhog day again.
There should be an honorary eagle pecking out the liver for David Cameron for putting the question is such a stupid, damn-fool and undeliverable manner. It is like having a referendum on “Do You want Real Live Unicorns on the High Street Every Sunday”. The answer may well be yes, but it’s a tough one to deliver. Because: Unobtanium. In the form of cakeism in the first case and unicorns on the other
All that is as may be, but in the immediate future it drives down the real value of my cash.
What’s a fellow to do faced with a falling currency and a falling stock market?
This is probably one of the lower points for the pound, because uncertainty is high. Independently of this, the markets are falling, partly I would say as a reversion to the mean, partly as a reaction to problems way outside the UK – pathological liars at the helm in the US and aggro elsewhere, combined with a secular trend of the Western Imperium losing its grip on economic clout as power shifts towards Asia.
Of late I have been buying a world index. I have largely met my requirements for the stock market since retiring in 2012 – I survived the intervening years and soon I can draw my pension. I had a lot of luck – I started in a market swoon in 2009, and Osborne’s changes allowed me to spring some of the proceeds of pension investing since 2014. Starting then, investing steadily, and sitting on my backside did it for me. Oh and not spending too much 😉
The Ermine snout begins to twitch when I hear sounds of doom on the markets, it is only a minor doom at this stage. I use VWRL, which is a standard world index tracker, but I have increasingly used IGWD, which is hedged to the Great British Pound. It isn’t exactly a world index tracker – it is a developed world tracker. That’s OK because for historical reasons I am less exposed to the US than I should be.
So a bit of Dev world that is mainly US in reality helps the overall balance a bit. I need to hope that the irresistible force of US business smarts can run faster than te immovable object of Donald “Trade wars are easy to win” Trump’s facile policymaking acting as sheet anchor.
VWRL and IGWD generally track acceptably, presumably because at this stage the developed world is still the largest by capitalisation – about 80% of VWRL is dev world, and 54% of global assets by capitalisation is the US. There was a particular disconnect in June 2016, wonder what on earth happened then, eh?
The discontinuity doesn’t bother me so much because I didn’t own IGWD before June 2016. I am Monevator’s canonical Barry Blimp – a fifties something whose portfolio did very nicely in GBP nominal terms out of Brexit. One of the corollaries of being in your fifties is that you are running out of human capital – I don’t have any because I have no significant income from working. So buying hedged foreign assets makes much more sense to me that it would to someone in the first half of their working lives2, given I don’t share Barry’s politics or positive expectation of the sunlit UK future free of the EU yoke.
Wider derisking also made sense – buying gold as a straight hedge against the fall in the currency, and an indirect one against a fall in the overvalued stock market. I cocked up deeply here by buying gold in my ISA because it was bought with some sales from the ISA. I hold far too much cash, which is doubly bad when that cash is GBP, to the extent some of it is in European government bonds. Normally I would never have a reason to buy bonds because my deferred pension is very bond-like. But that’s a GBP denominated fixed income, I need some protection against the GBP downside. My investments have drifted closer to Harry Browne’s Permanent Portfolio, I rotated some out of shares into gold a couple of years ago and aimed new money into bonds and the mix of IGWD and VWRL. I hold the cash part out of the ISA for as long as possible, to retain optionality, this year’s allowance is unallocated.
Harry Browne was very rich, so having 50% of his assets in unproductive gold and cash3 worked for him. I am not sure that’s a recipe for success for someone accumulating assets over a working life to try to retire early, because that deadweight of having half your assets in unproductive investments means you will have to work harder to accumulate, rather than having a larger proportion of your money working for you. But you will experience less volatility probably. Volatility makes many of us panic sell into downturns, so avoiding that may bring a better result in the end.
On the subject of unproductive cash, Hargreaves Lansdown keep yelling at me to sign up to their active savings product in my SIPP that ties up the cash for a year or more. IMO the job of cash in a SIPP is to allow you to buy beaten up stocks should the opportunity arise. That opportunity is more likely within a year than after two years, and I for one am perfectly happy to pay 5% loss to inflation for that flexibility, thanks.
Contrary to Monevator’s article, I didn’t sell existing assets to buy GBP hedged assets so I will always be more than 90% unhedged. I was happy with those assets I had at the time I bought them. If I got an illusory 20% boost from the fall of the pound, then I am perfectly happy to give that up in the unlikely event that Britain’s political class sorts its shit out and the country finds its mojo. I bought a fair amount of IGWD last year, and now I buy about equal amounts of IGWD and VWRL. buying IGWD when there is more bellyaching about the pound being low and VWRL when I want to get the balance right.
Earlier in the year was the time to buy VWRL, now is a better time to favour IGWD the aim is to buy about equal amounts (in GBP terms) of each
All in all I am chuffed that the markets are tanking. It means that I get a little bit more IGWD for my money. One should take advantage of Christmas sales, provided it’s a product that you want…
Don’t hold gold in your ISA
Unless you are very rich you don’t need to hold gold in an ISA, it pays no dividends. You have a yearly 10k capital gains allowance which is probably enough for strategic rebalancing a la Harry Browne’s Permanent Portfolio, and while it’s possible for gold ETFs to have a corporate event that makes you a forced seller in one year it’s unlikely – I haven’t heard of any. Gold itself is unlikely to have a corporate event unless Auric Goldfinger has his way, in which case just pay your sodding capital gains tax 😉 I suppose CERN could find a way of economically transmuting other elements into gold to pay for their toys, which would depress the price of gold, but so far they haven’t cracked the economically part.
Of consumerism and spending it
From my corporate life I recall some pseudy airline magazine4 which had a section called Spending It. I haven’t darkened the threshold of a decent airline since leaving work – presumably on business class carriers you can connect to the internet in flight these days so the airline magazine has no reason to exist and everyone is glued to their smartphones. Anyway, the desiderata in these mags always seemed to along the really bizarre ‘what this product says about you’ sort of line. Don’t get me wrong, a mechanical watch can be a true thing of beauty in some ways, but it’s simply the wrong engineering solution to accurate timekeeping, and has been since the 1970s.
It seems to be the season for FIRE folk to do a Spending It and acknowledge their darker, non-FIRE selves. Monevator has ‘fessed up to a penchant for expensive steampunk coffee-making hardware, costing Holy cow – how much?
Mrs Ermine, having lived for years with the stovetop gonzo version of this upgraded to something that cost <£100. I am too much of an animal to appreciate the finer essences of strong coffee, what her machine produces seems pretty close to battery acid in my view, but each to their own. Seems to be a rum deal that Monevator has to learn how to use the darn thing, personally if I’d dropped several ton on a coffee machine I would have expected learning to use it would be down to choosing the beans and pressing a button. Why keep a dog if you have to bark yourself?
Perhaps it’s the impending Christmas, I will join Monevator in acquiring Stuff. Having moved, I am regretting a few of the things I threw out thinking I will never use again, and I do rather miss the collection of random bits of wood, ally angle and acrylic sheet built up over 20 years of making odds and sods. We burned a lot of the bits of wood in the preceding winter, but it’s damned expensive to buy bits of PSE pine again in the new place.
One thing I have come to the conclusion is I am not going to be an avid DIYer as far as the house is concerned. People here are a little bit poorer here than they were in Suffolk, and services seem to be cheaper. Sure, I’ll change tap washers and unblock simple drains, sort basic electrics etc, but for instance the bathroom here wants changing, and somebody else can do that for me.
Of pastimes, hinterland and the odd pleasure of Stuff
From my schooldays I remember the old boys5 in the neighbourhood had hobbies and were much more practical than people are now6. They were, of course, helped by the fact that technology was simpler then, cars were understandable and few and far between. People’s Dads made furniture then, using hand tools. I am still in awe of these, in as much as things lined up and didn’t look wonky. Many of the adults worked in factories, but they had hinterland – interests outside work and the immediate home and kids. They made stuff, created things from parts. There were a lot of model making and train sets being made. Of course, it could be the sample bias of childhood summers always being warmer. I remember the noteworthy, the guy who made ships in bottles, others made model aircraft from pieces of wood (not from kits) and quite a few painted. I probably don’t recall the guys who slumped in front of the telly and didn’t go out.
Amazon and Ebay have made it easier to buy in specialised items. As a kid I had to get on the bus to go to Peckham to get my electronic bits and bobs from Garland’s Electronics, either already mounted on ex-military panels sold by weight to be scavenged or as new. If they didn’t stock it that was it. Hence it was always worth taking the complete parts list and asking if they had all the oddball bits first. Now somewhere on the Internet supplies that sort of thing, no need to go out the house.
tinkering with radio
A young Ermine was looking at going to university in the late 1970s. I was trying to add some colour to my young and therefore inexperienced life, and big up my application to potentially Oxbridge and Imperial College to do science. I think nowadays that sort of thing is called your personal statement, and when I look at personal statements this has obviously become a Big Thing. The cynic in me refuses to believe any 18-year old speaks thusly:
The creativity inherent in crafting and applying mathematical concepts is what inspires me to study it[…] It’s remarkable that infinity is concurrently present, both inside and outside Euclidean geometry, in the singularities of black holes and in the relationship between the area and radius of circles.
Does the secret of a rip in the fabric of space-time lie in the simple curve around a circle? Pi’s relevance to Euler’s identity or the Schwarzschild radius suggests its central role in defining how our universe works. The connection between such simple geometrical ratios and the sophisticated universe is where the beauty of mathematics and physics lies.
Perhaps I was just a slow developer, and I did fail Eng Lit, but I would suggest some ghostwriting happened here 😉 I confess I had to Google Euler’s identity, though after I saw it I recall I was taught it at some point. I was comfortable with the Schwartzschild radius, because – well black holes kind of stick in your mind even after three decades7.
At the time I needed a science-related interest because ‘picking old TV sets out of skips and trying to make something of the parts‘ probably would have admissions tutors looking down their noses at impoverished city urchins dumpster diving8. Truth be told I struggled to make anything useful out of these bits – I had learned from books and too many of those sets had valves in them, I could repair things with valves but not design.
Amateur radio was the obvious electronics based hobby to put down, and had an exam which provided tangible proof of what we’d now call an interest in STEM. Nowadays we have STEM clubs and whatnot, but pretty much all my learning was from material designed for adults, because the world then wasn’t set up to pander to children – if you were interested enough you’d find a way9.
I bought a couple of books and sat the Radio Amateur’s Exam in 1978, I knew enough about electronics to pass, and learned the licence terms well enough from revising on the train up to Central London to get a distinction in both technical and regulatory papers. While it added colour to my university applications, I was too poor to buy any gear and not smart enough to make use of those scavenged TV chassis parts10.
I never really did much with radio – when I joined The Firm there were a few of the guys into it, indeed a Head of Group that I still have fond memories of as a great boss is still a leading light in one of the RSGB groups. I played around on VHF and packet, I now had the money. But not the time, and I had bought a house at the bottom of a hill. There is only one thing that you need with radio aerials, and that is height, and playing a very long second fiddle, physical extent. All the rest is window-dressing, so I was SOL in a terraced house low down on a postage stamp sized piece of land.
In the forty years that have rolled past taking the RAE exam much of what was apparently magical about amateur radio has been taken over by the Internet – now if you want to speak to someone in Japan you pick up your mobile, or use Skype. If you want the two-way radio one-to many experience you use Zello, I am surprised this isn’t used more in some areas where you have a team of people working on a common project and want everybody to have situational awareness – some of the work on the farm was like that, for instance setting a watch on the public footpath when felling trees. Sure, it needs the mobile phone network and data, but most everyone has the hardware already, and you don’t need a licence. Signal quality is fantastic – indeed better than a mobile phone used as a mobile phone, because the GSM codec is a foul 13kbps. Not that it particularly matters, I guess, since nobody uses a mobile phone to make a phone call nowadays, though I do wonder if someone ever joined up the dots with the crap sound quality11.
Perhaps I am living out some of my teenage self, but I came to the conclusion that there was still some of the magic for me in the unassisted connection, subject to the capricious ravages of the ionosphere, which is on a sulk at the sunspot minimum now. A commenter on The Register nerd site summed it up well
It was all about making a tenuous connection, against the odds, probably transiently, with some like-minded stranger far, far away.
Sure, the internet can do the job better. But it needs all that ancillary guff.
Diderot and his Principle on the Multiplication of Stuff
The trouble with Stuff is the Diderot effect. To mess with this I need an antenna tuner. So I start with a piece of wood as a baseboard, and it ends up wonky. I am finally sick of trying to hand-saw anything to get it straight, square and to the right size. I can have any two but not all three.
My dad was a fitter12, and he most definitely did not want his son to be working with his hands, so he never showed me how to use hand tools right. He didn’t really approve of metalwork and woodwork at school. I turned a piece of metal at school and Dad didn’t share with me the secret of not getting it to look like an Edison wax cylinder – rack down the speed of the lead screw or run it on manual. Slowly… But I can’t knock his aims – after all his job definitely wouldn’t have seen me to retirement age. His heart was in the right place, bless him.
I learned these manual skills, therefore, as an adult13. These things are better learned earlier in life, a bit like riding a bike. You need patience, skill and experience to use hand tools well. For a lot of my working life this wasn’t so much a problem, I could use the power tools in the lab or workshop. It’s been a pain since then, but most of the things I made from wood were outside. You can usually live with half an inch off here or there in the garden, it adds a rustic homespun charm, and the wood is going to warp like hell in a few months anyway.
Trying to make equipment boxes, though, is a different matter, half an inch of drift is right out. I was finally sick of it and bought a chop saw. I can now get edges straight, and square, and mostly to the right size.
So I now have a baseboard for the tuner that doesn’t offend the eye. I am also set up to mass-produce nest-boxes to the BTO design, should I feel the need. Then I have another problem, which is how to get the holes in the right place. I still have a steady enough hand to drill holes to a 0.1″ accuracy in a circuit board if the drill is very sharp, but that’s because the centres are already defined. Getting things in the right place on an even surface is more hit and miss. I need a defined relation between the drill and the workpiece.
I was vaguely tempted to get a dremel drill press, I don’t need a massive workshop gizmo. But one thing my Dad did teach me is ‘don’t buy rubbish tools, son, buy quality or do without” There’s an awful lot of reviews saying the run-out on a Dremel is too much for accuracy. I want to be able to make a line of holes on a panel for LEDs and for it not to look immediately wonky.
So I bought one of these. Saving money on that tuner is costing me a fortune 😉 But on the other hand it’s time to stop misusing handheld power drills. I am now £50 down on just going out and buying the tuner, and had to build it myself. But I now have the means to make more things now. I am only making instrumentation and front panels, and the modelling scale is right for me. Of course, the temptation to buy a Chinese workshop pillar drill from Screwfix for half the price was there, but the ghost of my Dad had a word in my shell-like and stopped me.
I should have bought this 20 years ago, when it was still worth building regular stuff. Now it is only worth building things that are too oddball for the general market, particularly customised to my needs, and some types of instrumentation. A diligent Google search before starting a design is always worthwhile – the modern equivalent of Westheimer’s observation that
“A couple of months in the laboratory can frequently save a couple of hours in the library”
In classic consumer sucka mode, I am going to slap the drill, and pretty much everything else I buy for the next few months on my credit card and not pay it all off. That’s because Barclaycard have offered me a 0% interest on purchases to late 2019. Now most people, when they hear an offer like that think oh great, no need to pay for a year. Not so fast. You always have to pay about 5% off every month, just to retain the offer. So if you buy your new fitted kitchen in Month 1 then to a first approximation you expect to have paid The Man a shade under half the capital by the end of the first year, to keep your interest-free status, and that’s assuming you don’t buy any more consumer shit on your card after the kitchen. I am surprised Barclaycard made this offer, since they haven’t made money out of an Ermine on any other such scams. It works well for me, as it runs over the time when I will draw my pension, and take a pension commencement lump sum of some sort. By deferring paying for purchases for a year I get to stick more of my savings in my ISA this year, and backfill the spending from the PCLS next year. Thanks Barclaycard.
- There is a second order problem in that people who move countries are usually more motivated or more desperate than those who don’t. They are prepared to accept poorer conditions. Removing these from the workforce won’t necessarily mean these jobs get filled, but that is a fight for another day. It is not unreasonable for parents that didn’t have to compete with free movement of people to ask tough questions about what went wrong when they see their children struggle with it. There are not always good answers to those questions, however. The response ‘your end of the boat has to go down for the common good of humanity‘ tends to offend. ↩
- Someone in their mid-twenties buying regularly will be soaked on the existing value of their assets if Brexit is a success and the pound strengthens. But they will be buying foreign assets for years with a stronger currency, so it will come out in the wash. If Brexit is not a success and the pound weakens, it will drive inflation up. They can hope to be paid more of the increasingly worthless pounds to compensate, so although they will pay nominally more for their foreign assets it will hopefully be from a nominally bigger pay packet. Time is on your side if you have a longer accumulation time to integrate the shitshow of Brexit. ↩
- To be fair, in Harry Browne’s day you could probably turn enough of a return on cash not to have the real value slowly go down the plughole. You just don’t have that luxury now. ↩
- it appears my memory is playing me up – Spending It is a section in Money Week and there is a close run thing with How To Spend It in the Financial Times – subheads ‘unforgettable experiences’ – ‘Things to Love’ – Mr Money Mustache needs to scramble a SWAT team to take out the printing presses before this seditious material sucks people in. ↩
- I was an ankle-biter, old boys to me then were pretty much men out of their 20s ;) ↩
- we shouldn’t romanticise their greater practical skillz too much. Some of it was out of necessity – blue-collar workers couldn’t afford the luxury of hiring tradespeople in those days, and furniture was a hell of a lot dearer then, though it lasted longer. ↩
- You really don’t want to go anywhere near those 600lb gorillas- no taking short cuts across the Milky Way, sci-fi authors. ↩
- Most of these skips were when builders working for the Council were renovating houses presumably after people died. The 1970s were salad days for people throwing out full sized black and white TV sets because colour TVs were becoming affordable. These things packed a bit of a bite because they weren’t isolated from the mains and the anode cap was good for a few kV. A healthy teen can take the odd mains shock in their stride ;) ↩
- I have some sympathy with the POV, both for the obvious reason I found a way to learn from material written for adults to learn, but also for the reason described in this I don’t teach my kids to code and neither should you article. STEM stuff written for kids is cringeworthily patronising IMO, because it emphasises the how rather than the why. That’s great for getting kids going quickly, but it skates over the principles. One should infer the particular from the general, not the other way round. ↩
- I could slap the teenage Ermine around the chops with a wet fish, those old TV sets had great coil formers and big easily won capacitors. Many of the valves were good for the HF bands, given a TV typically has an intermediate frequency of ~39Mhz. But the school library didn’t have books with this sort of information, nor did the public library, and Google wasn’t a thing then. Radio gear was shockingly expensive then, I read prices in old mags from the 1970s and 80s and in some cases the equivalent now is cheaper in numerical terms and far better in performance. ↩
- I do get the irony of grouching about the GSM codec in a post talking about amateur radio – SSB sounds universally shit, but somehow you can still make some sense of how someone is feeling, in a way that GSM seems to just strip off. And anyway, the ham radio signal has crossed hundreds or possibly thousands of miles twixt ground and the ionosphere unassisted and unamplifed in its journey. The inherent coolness of that from an engineering point of view makes up for the rough-as-guts signal quality. ↩
- Non-Brits may understand the term machinist, though the job is fast passing out of use. Companies don’t repair plant using generalist skills now, with people turning and making spare parts by hand. Even in original production I guess this sort of thing is done by CNC machines, rather than guys with micrometers and a pencil behind their ear, and knowing the gear ratios to turn screw threads on a lathe. ↩
- I was taught some workshop skills as a graduate entry engineer to BBC Studios. Companies used to train people in the basics of their business in those days. ↩