I was listening to a young fellow on the radio who delivered himself of the observation that in lockdown the days are long but the weeks are short, and thought to myself there is wisdom in this 24 year old fellow.
It reminded me of Gretchen Rubin’s similar observation, that I watched on my office PC in my last month at work. If only I had seen that in the low-water mark early in 2011, half-way through my dispiriting passage out of the workplace. The half-way point in any long term goal is always tough, for you have committed enough resources to preclude other courses of action. And yet the final destination is not yet in sight. Rubin’s narration is cheesy as hell, as pretty much anything that involves parents talking about children is. But it is fluent. Part of our problem now is that we don’t know how long it will go on for. These days are long, and make for rumination. Such as
Did I err in jumping out of the market?
I jumped out of a lot of stuff in the second week of March. To put it into perspective I still have two-thirds of my holdings in my Iweb ISA. All my VWRL, all my HYP from way back. But I did make tactical errors in continuing to buy a little bit in 2019 despite the high valuations, although a lot of what I did buy was bonds and gold. But I bought some more VUKE in 2019. Bad move.
I sold all my VUKE, and other stuff I didn’t love. I have a Google spreadsheet of those sales, and it updates the current market values with the Googlefinance option. Those sales are still well worth having made, but the notional reduced losses have fallen by two thirds, because I did not account for the wall of money that was created and thrown into the system. This is not a crisis of confidence. It is an exogenous shock to the system. So far that has been rugby-tackled to the ground, in the view of the stock market, by a wall of money. Jolly good for the market, and us as asset holders. It’s a little bit shit for everyone else, though, no?
The hazard has changed from losses to inflation IMO
I am badly exposed to inflation in the long term, because half my income is an annuity, albeit with some inflation protection, but only up to 5% p.a. Any time inflation goes above that, I get permanently poorer for the rest of my life in terms of income.
Now to get this into perspective, there’s only a need for the tiniest of violins. There is some awesomely bad shit going down. Deaths are up, running about twice average for the time of year. As for the living, many people have lost 100% of their income, and there are some poor bastards who are sleeping on the mean streets of London because they used to work in restaurants and live in lodgings. Now they have no job, no money and no home. Half of the world’s workers’ jobs are under threat. The UK seems to be making a particular bugger’s muddle of handling coronavirus.
The John Hopkins tracker currently shows the UK has roughly 10% of the world’s Covid-19 deaths, which is a little bit crap for a country with 0.87% of the world’s population. Let’s hope that the good folk in London who are of the opinion that most people in the city have been exposed but were asymptomatic are right, because if this is what success looks like I hate to think what the face of failure is. At the moment if you’re a confirmed case1 you have the same chance of pushing up daisies as playing Russian roulette. Let’s look on the bright side. You’re likely to join Graham Greene on the side of the living. But the odds aren’t terriffic. Enter a hospital in the UK and they put two bullets in the chamber before spinning it. You really don’t want to see Arnie in your hallucinatory dreams in the ICU, do you?
So I am hoping that I will be one of the lucky ones and inflation will be my problem 😉 If not, well, hopefully I have made a decent start on this recent investment
Life is too short to drink rubbish wine, and I’ve definitely not drinking homebrew wine again… There are a few months’ worth in there. In the end what will be will be.
So I took a look at iWeb, and pulled up their valuation for January. I am 13% down, and I haven’t added or taken anything out, avoiding the Beardstown Ladies Common Sense Guide to Investing error2. So I’ve had a relatively good war, so far. January’s valuation was fully puffed up with irrational exuberance, because coronavirus was only a thing that happened in China at the time.
I’ve no ‘king idea what we are doing up here mate…
I used that quote a while ago. It applies now, in spades. I take a little bit of solace that my ISA asset allocation is a lot less equity-heavy now. It is about 2/3 equities with the remainder in a mix of mainly gold and cash. I don’t do property. Property is evil in my experience. I got out of commercial property a while ago.
I don’t do bonds any more either – I had IBGE as a salve against Brexit stupidity, but I don’t want to hold anything associated with Euros, because I fear that going titsup. Italy, Spain and maybe France have made a bigger SNAFU of coronavirus in terms of numbers but we are behind their curve, I am sure we will cock it up more3.
However, economically we can print our own money, so although I think the UK’s insouciance will cost us more lives per head, there’s going to be an ugly economic reckoning to be had in the Eurozone along the whole one for all/all for one axis. It really does go with sharing a common currency.
People cleverer than I hold US treasuries. They probably have longer investment horizons than I, plus I already have a massive bond holding in terms of the annuity that is my pension.
So I have a third of the ISA held in gold and cash. Plus I have premium bonds to cover this year and next years’ ISA allowance, so I have liquidity. I should remember that the value of those premium bonds is going down the toilet, and the next two years is probably a bad time to hold cash on that front. OTOH you need to watch gold. Had I bought gold on retirement, back in June 2012, I would have been a sick puppy until recently. Not one to hold for years.
Where do I think this market is going?
Down, down, deeper and down. In real terms. We haven’t got anywhere near the end of the beginning IMO, and an awful lot is unknown. Current market levels look like madness to me. I am buying, because I have seen madness before and been wrong about it. When VWRL gets close to what Iweb tell me I paid for it4 earlier, I buy some, although I don’t really think now is an illustrious time for index investment. Sadly it means I have added to VWRL twice now. I’ve owned it for years, clearly I didn’t call my original buying times well, eh? Or perhaps it is just that I moved in that direction in the second half of a bull market. I am also buying UK smallcaps, because: greed and fearfulness.
But I am not moving fast, up to a grand or two a month, because if Warren Buffet is sitting on his hands because he can’t work out where this is going, then perhaps I should take a lead there. On the other hand WB probably holds his cash in something inflation-proof, though I bet it isn’t gold, given his view on the barbarous relic. The value of my cash is being destroyed, which is why I will consume that first before starting to run down some gold.
I am greatly at variance with the market’s opinion, which seems basically ever upward. It’s back in bull market territory, FFS. Along with Monevator (so far justifiably) berating me for my excess of cock, there be grizzled ghosts of markets past that whisper in my shell-like “don’t fight the tape” and “don’t fight the Fed“. Talking of which, the last article has a staggering graphic of the S&P500.
I confess I am amazed by the size of MSFT relative to the others and thought FBK was bigger. Oh well. You don’t hold the SP500, you say? The Ermine is not an index investor5, but VWRL is my largest holding by far, and I hold a lot of L&G Devworld exUK. I hold a lot of the SP500 for the simple reason the US is over half the world index by capitalisation. And half of that half is MSFT,AAPL, FBK, AMZN, GOOG. These guys are having a good crisis, and social distancing can only add grist to their mill. Along with Trump’s billions. If you are an index investor you are having a good crisis because a quarter of your holdings are having a great time. Concentration is not always a Good Thing of course, the FTSE100 was very oily and finacials and look at how that turned out, eh.
What do I wish for?
An honest bear market. I am old, and at the end of my investing career, and yet still I yearn for one last fling… I also yearn for a reckoning of values, rather than taxpayer’s money being spaffed into inflating asset prices for the second time in a decade. I hope airlines get pummelled and many low-cost airlines especially Ryanair go bust. I’m sorry, but foreign annual holidays are not a yuman right, never mind four or five.
I don’t want to see people mithering on Facebook about how much they care for their children’s futures while posting pictures of their fourth flipping foreign frolic that year. Be the change you want to see and all that. I’m with the UN here. Let’s not bail out companies that actively screw the environment. We may not summon up the balls to discourage them, but FFS to aid and abet them? We really, really, don’t need more mass leisure air travel. Some is good. More is not always better.
For God’s sake save us from the charade of leaving airline middle seats empty. I’m with Ryanair’s O’Leary, for different reasons. You don’t get to social distance on aircraft, because of recirculated air and the sardine can thing. Sure, the WHO tells us recirculation is all tickety boo, what with HEPA filters and shit like that. I’m sure they work dandy and kill viruses stone dead. I am not quite old enough to remember smoking on aircraft, but I sure as hell can smell people’s perfume and BO from more than a seat away6. If you’re going to run aircraft, pack ’em in to reduce fuel per punter. Won’t somebody think of the grandchildren?
If you fear getting Covid-19 on a plane then ask yourself why they stop serving peanuts on a flight where someone has notified a nut allergy. Exactly what is the process whereby peanut dust spreads throughout the cabin but coronaviruses stop ¾ of a seat away? Is the guy in the row in front/behind you a seat’s distance away? Maybe in First Class. What happens when the lady in the window seat needs to go to the bog? Leans over to grab a glass of Chablis? Inquiring minds would like to know how this voodoo works. Perhaps airlines have tamed Maxwell’s Demon?
I don’t have anything in particular against the poor bastards that work for those industries, but I do hope that we take stock, both for the noise pollution, the endless scarring of our skies and the sheer wastefulness. You can now see in the blue of the skies what the cost was. You can smell things more, though that’s probably lower traffic pollution. There is a price to pay for all that gratuitous travelling, and because it built up slowly we never had it thrust in our faces just what that price was.
As a teenager I recorded sparrows and song thrushes7 in my parents’ south east London garden with my cassette recorder, and aircraft noise was not a problem, I could get 15 minutes of tape between one and the next. 40 years later when I extracted my aged mother from that place, there was a jet screaming overhead every minute and a half enough to make you have to yell to be heard. London airport is in West London, not the southeast where she was, although I think City Airport had a particularly bad effect on aircraft noise in Greenwich. City airport didn’t exist in the 1970s.
In the 1990s a return flight to Europe was about £200 (probably ~£450 now) and to the States was about double that. That’s about right IMO, as a pleb you can do it if you really want to but not more than once a year.
We need far fewer flights, and at higher prices. While we’re at it, airlines need to at least pay VAT, rather than get stringless bailouts. Some travel does broaden the mind. AirBnB racking up rents for Amsterdammers and people in Barcelona? Perhaps not such an unalloyed good.
Once again, some is good, more is not always better. Unfettered capitalism just doesn’t do balance, particularly if it can shift the costs onto some other sod who isn’t involved in the transaction. That’ll be the sleep of those in the noise shadow, and people suffering the pollution, and locals unable to afford to live in their home towns from AirBnB. And all of us suffering ever increasing jet noise and scarred skies.
In the 1940s it was decided that air travel be exempted from fuel taxation with tax breaks because
WHEREAS the future development of international civil aviation can greatly help to create and preserve friendship and understanding among the nations and peoples of the world, yet its abuse can become a threat to the general security; and
WHEREAS it is desirable to avoid friction and to promote that co-operation between nations and peoples upon which the peace of the world depends;
and industry lobbyists have pushed hard to keep those exemptions for 80 years, so that nation may speak peace unto nation, such as British stag parties pissing on Latvian war memorials. Those 1940s stirring words are a little bit like the Second Amendment, sounded like a terrific idea and addressing a need at the time, but really hard to get rid of when the Law of Unintended Consequences turns it into a malign influence as the decades roll by.
This is the second time in a decade that public money is hurled at companies without asking for ‘owt back. For the last 40 years we have been told that privatisation and marketisation is the One True Way and TINA. Is it really so unreasonable to demand that companies save something for a rainy day rather than paying massive CEO salaries and getting out the begging bowl when their risk assessments screw up? And if they can’t get that right, they should honestly go bust and taxpayers take them over, pointing them in a less antisocial direction before launching into the wide world again? What is this private enterprise you speak of, that all of a sudden becomes public in times of trouble? Should there not be even the tiniest quid pro quo when the cocky prodigal son runs back to the Bank of Mum and Dad for a sub?
Not even all salaries capped at that of the Prime Minister? What, Mr CEO, you say you have a legal right to payment for failure? Fine. That was with the old company, which appears insolvent. Would Sir like to reconsider his options, particularly the worthless stock ones? It’s a common ploy to make people redundant and apply for their jobs again at lower pay. Sauce for the goose and all that?
What else do I wish for? A thinning out of bullshit jobs. How come so many people can work at home without missing a beat? Perhaps it’s the Information Economy and they are all adding terrific value. We are all about to get a lot poorer for a while. Do we really need/want/afford all this intangible frippery? Alternatively, if we really do want/need all this intangible stuff and people can make it at home, then why, in normal times, are we putting them in cars and trains five days a week, and concentrating them like salarymen in massive conurbations like London?
A chance to reorient priorities. All that money being poured into inflating the stock market could have been used to create a universal basic income. Many of us are too talentless to be gainfully employed in a modern economy which has less and less use for also-ran skill levels. Fine, you have to go live somewhere other than the middle of a big city, but you could have a decent life without having to prostrate yourself in front of the DHSS Universal Credit goons, who are performance managed on how many claims they refuse/sanction/deny because they can. If we are going to have a crisis where loads of government money is going to be flung about, why not actually use it to push things in a direction that, y’know, actually makes voters’ lives better?
It won’t happen. I bet that in a couple of years it will be back to the same old. But hey. I can dream. Of a world with fewer aircraft, less tourism, no foreign stag parties, groceries that taste of something, less rushing around. Economic possibilities for our Grandchildren, a telegram8 from an economic crisis of similar magnitude in 1930 to us. We are the children of those grandchildren 90 years down the line. More balance in all things. It’ll never catch on.
In the meantime, yes, I missed the market opportunity
I’m getting a strong gut feeling that the low’s been visited for the next year or two at least, until the next financially-driven recession, that I missed it, and that continuing to hang on to a “hey, where’s my next-leg-down” mentality could be damaging
Too much cock, mate, to precis TI 😉 It’s a fair cop, guv, at least in terms of what we know so far. I have hope for redemption in terms of the unknown unknowns. But it’s a long shot.
A couple of weeks after I sold was the time to buy. The window of opportunity was between March 18th to the 25th. The corresponding points in the GFC were October 2008 to August 2009. That’s OK. Screwing up is part of life. I am much happier with my 2/3 rather than 100% equity allocation, and if I am 13% down in capitalisation on January I didn’t bugger it up too much. I now have enough liquidity to pay myself a top-up to my pension from the cash across the next few years, should those years be part of my experience of life rather than facing Arnie’s Magnum in a delirious haze in an ICU. I’m not going to be collecting dividends from the ISA for a couple of years I guess, because companies really should be tightening their belts rather than paying hangers-on, and I am totally easy with that.
Plus I have enough firepower to take advantage should the market succumb to gravity in the next three or four years. So certainly I erred in what I expected to happen. But I gained peace of mind. And ammunition.
So my active heart of darkness, revisionist thing that it is, changed the narrative to call the failure of prediction a success. If it’s good enough for POTUS and our dear government to call abject failures successes, then I can call a 13% loss from January to now and enough cash-like stuff to get a good uplift in income till SP a success. As far as buying into the bear market goes, nope. Epic fail. I blinked and missed it.
Dammit, I still hope for that honest bear market in stocks yet to come. Sadly, I think the bear market will be in the value of money. And there will be more human suffering than necessary because governments seem to be prioritising corporate welfare over human welfare. Shareholders are rich. 30% of economic activity has been lost. They should lose money when everything goes titsup. The correct response to 30% of the economy shuttered for six months and some unspecified period of iffy hammer and dance is not to whistle a jolly dancing tune and keep calm and carry on after a flash crash as if nothing happened. And young, starry-eyed FIRE folk should have opportunities for a leg-up, should they be lucky enough to still have jobs and the required intestinal fortitude. And heck, grizzled old gits too. Bear markets are what the risk premium is all about.
There’s nothing wrong in principle in the deep pockets of public money being used to fight an unprecedented shock. But that money should first help the public, and where it helps future profits there should be serious strings attached to get some public good attached to those private profits. Recessions are times of change an opportunity to reshape the way things are done, and this one will be a big one. At the moment we seem to be throwing public money into propping up the same old same old. Shareholders are not the people most in need IMO.
For those of us who are fortunate enough to be basically OK in this strange time, it is a time to learn something new about ourselves. There’s a lovely poignancy to the conclusion to this article by Helen Sullivan:
The question, when all of this is over, is what those of us who weren’t knocked around by it – who didn’t lose our jobs or have loved ones die, who weren’t essential staff – will do about being the luckiest people in the world.
As the pandemic appeared in country after country, the healthy were urged to worry not about how the virus might harm us if we caught it – but how, if we then passed it on, it might harm others. It’s a pretty good philosophy when it comes to other choices we make – politics, consumption, climate change – too.
I’m not absolutely sure that is the current direction of travel. But it would build a better world. I shouldn’t be such a cynical bastard. Be the change, etc…
- Optimistic folk would say that is because because most cases are asymptomatic or don’t get near a hospital, so they are not confirmed cases. To bring the odds down to the same as flu it seems that 16 people take the hit but don’t get tested. ↩
- Roughly summarised, your investment return does not include the money you put in. It is all too easy to focus on ROI but for most of us return of investment matters too. ↩
- It’s difficult to know whether to laugh or to cry that it was Dominic Cummings who brought lockdown forward by a week. He’s bright, getting a First in Ancient & Modern History at Oxford, but not a scientific expert. And yet there will be people alive today who wouldn’t be if he hadn’t made that call which the Boss was still harping on about an Englishman’s right to go down the pub. Dom probably knows more about the urgency in fighting an exponential rise than his boss. Sometimes you can get the right answer in the wrong way, let’s not carp at His Evil Geniusness on this particular occasion. ↩
- iWeb add together the cost of all the purchases and divide by the number of units held to derive an average price. When that’s below the current price they show in green (gain) and above they show red (loss) ↩
- I was definitely not an index investor when I started with the HYP, but since booting out the trash earlier this year it’s starting to get a moot point. I don’t have the passion or energy for stockpicking a HYP like I had in 2009. Once upon a time bear markets were allowed to happen. But if my future investing career is going to be in a world where corporations too big to fail collect government largesse every ten years, then VWRL isn’t such a bad way of getting one’s snout in the trough. Seems a rum version of capitalism, though. ↩
- The sense of smell is molecules of people’s sweat getting into your hooter and reacting with the olfactory bulb. That’s the communication of airborne real physical stuff between them and you… ↩
- a forty-something younger teenager in that house will have similarly quiet skies at the mo, but sadly most of London’s sparrows have fallen off their perch and the song thrushes were giving up the fight already as I was leaving home. Something not right is happening in the Great Wen if the cockney sparrers lose heart and the last chirp rings out. ↩
- JMK me old fruit, I’m sorry to tell you that the jury’s in. It really didn’t turn out that that way. TINA ate your lunch in the 1980s. ↩