It is August, California has recorded the hottest temperature on Earth at the aptly-named Furnace Creek. I just can’t imagine 54 degrees. I went there in 1993, and overheated my rental Grand Am in the 1500 meter lift up from Zabriskie Point through Daylight Pass, with the heater flat out and all the windows open. In July…
Nevertheless, in Blighty there is the hint of Autumn in the air in the changes of the natural world. Birdsong has changed from the frenzy of the breeding season, perhaps most clearly and commonly with the Robin, which sings a song that sounds in a minor key to me, which we associate with mournfulness, though of course this is pure anthropomorphising. The retired Ermine is more physically active than the working Ermine. Earlier this year in lockdown there was an edict from the government that you were permitted to spend an hour walking. I stayed with some of this, while I don’t do it every day I cover about three miles. Walking is good for reflection and rumination – in the heat of summer I started earlier, and there is some reward to doing it before wrangling anything that needs an Internet connection to happen.
I get to know the small area better, and living in a small town it is easier to get out into the countryside by shanks’ pony. The transition between town and country is sharp, I cross the liminal space in about fifty yards. Earlier in the year I got to know the territory of some of the blackbirds and robins by their individual song. Now these ranges are more fluid, and I hear the lovely sound of flocks of goldfinches who have swelled their ranks in the breeding season, feasting on the seed-heads. Although the swifts have gone some time ago, the swallows are still swooping over the fields with their chattering sound.
Swallows chattering hawking insects over the fields as I come to the main road
The bold song of the chaffinch has been replaced with the double finch-finch sound of their alert call, and the lovely arrow-like white tail feathers flicker in the morning light as they make their swooping flight away from the paths into the trees. I have seen herons courting and the odd egret drifting lazily on the summer breeze.
I have learned that the sound of the wind in the oak is not the same as the wind in the ash or the willow. In some ways it is reminiscent of the almost animistic approach of my primary-school self, where I knew a very small area intimately. I cover more ground, and there is far more natural variation in the natural world of the Levels than there was in the urban landscape of New Cross. When I checked the size of my childhood world on Google Maps the size of my patch was amazingly small.
spotting quality in the competing price signals
We are surrounded by opportunities to buy Stuff, and yet trying to buy quality Stuff seems to be a tougher game now. Ellen Ruppell Shell highlighted that in Cheap, but it’s a lesson that I keep on relearning.
Discriminating quality is inherently tough buying online. The easiest parameter to compare is price. Perhaps one day there will be a way to heft the thing you are buying and turn it over via a 3-D display with haptic feedback, and twiddle the knobs or whatever. However, that’s susceptible to the usual problems of advertising. For example food photography uses tricks1 to make your Big Mac look better that it is in real life, so how do you know that your 3D virtual gizmo isn’t bigged up somewhat, pretending to be better than it is?
Covering more ground walking showed me that I got on the wrong side of this when I replaced my Brasher walking boots that I had bought in the early 1990s. I replaced these with some bought from Trespass a couple of years ago, I think these are closest to mine. Things didn’t get off to a good start after six months when one of the riveted hooks at the top came off, but in fairness to Trespass they replaced them without demur. The sole tread was poor, particularly on mud, as I discovered at RSPB Swell Wood where the action was more skating than walking in parts2. Fair enough, I will pay more attention to the sole when buying my next pair of walking boots in another 15 years I thought.
At three miles a day on and off I will put say 12-15 miles a week on thse boots. The Somerset Levels are called the levels because they are flat, my entire gain in elevation is about 20 metres. It’s hardly rough terrain, either. These are quiet roads where I only expect to meet two or three cars in the three miles, it is a combination of grassy paths and tarmac. Although the boots have been up in the Mendips, the Preseli hills in Wales and also in Scotland, they haven’t gone over that many hills and rough ground regularly.
Apparently Brasher, founded by pacesetter for Roger Bannister and the guy that brought us the London Marathon were bought out by Berghaus, which were bought out by private equity, which is a shame, as my first thought had been to go back to them. It seems their punters are not happy these days. Brasher talk proudly about their heritage on their website, but are surprisingly coy about being owned by Pentland Group who also own Black’s.
I’m surprised at the low expectations of Internet reviewers. I don’t expect a pair of walking boots to last for only a couple of years. I expect them to last a decade! Anyway, I need to fix this. It’ll be good when the kids go back to school, the litter problem hopefully gets better3 and the rest of us might get the country back from our unwilling staycationers pining for Benidorm and Ibiza.
Teacher, leave them kids alone
But the children dance and sing as if the time were spring
When the seasons change everything they find a joy in what it brings
September leaves are falling through the autumn haze
And the school bells tell everyone there’ll be no more summer days
Warm nights are gone, all the leaves are turning brown
Then the windows close again when the winter comes around
Seasons, Grace Slick
And with that transition to the colder part of the year the hazard of coronavirus rises. Particularly once the school bells tell everyone there’ll be no more summer days…
Despite everybody telling themselves that children don’t spread the virus I find that incredibly hard to believe. They spread pretty much every other sort of viral disease – the winter that I was installing videoconferencing kit in schools was one where I had more than my fair share of colds. I do take the point, of course, that as a societal policy we have to take this hit in the Autumn season, but the ridiculous wish-fulfilment and magical thinking disturbs me. It seems true that children are less likely to take a hit from the virus, which is only a good thing IMO, and for the wellbeing of the children that points in favour of reopening schools.
The spread in the general population is likely to rise massively. Like everything Covid there is a range of opinion, from that it will all be ticketty-boo, move along now, nothing to see here, children don’t spread coronavirus all the way through to that reopening schools is a major public health hazard and the Georgia summer camp and Missouri. It would seem more prudent to accept that this is a serious risk that we have to take rather than singing la-la-la and pretending it wasn’t a problem, which seems to be the current approach. However, competence and skill in action doesn’t seem to be a strength of the UK’s current leadership.
De-facto unelected UK prime minister, Dominic Cummings may well have a brain the size of a planet but he can’t lead from the front and seems incapable to seeing the big picture. He may bitch about elites and EU technocrats with some justification, but he’s just as much of a technocrat himself, in a different way. Clever people can be just as blinkered charging down their preferred rabbitholes as the rest of us. Dom’s got an unhealthy penchant for AI, Big Data and algorithms. That doesn’t always seem to end well when it meets real people in the Real World. Particularly when you pay your mates to do the job on the QT, eh Dom? And what’s this BS about non-disclosure agreements from OfQual? If it’s public money and there is no compelling reason justifying the Official Secrets Act then it should be available, in the open, to everyone for a FOI request and a tenner. This is about kids’ exam grades, hardly a matter of national security.
Being a slave to the algorithm works well, until it doesn’t, and where it doesn’t it goes very bad very fast, be it Facebook fomenting fringey fantasies or Ofqual dropping teenagers’ A level grades three levels. You can be clever as hell and believe in the algorithm, but the latter SNAFU was foretold by a 17 year old girl in the 2019 Orwell Prize winner A Band Apart. Her reason for writing the story matches the issues the Royal Statistical Society flagged up. OK, she missed the rampant corruption that seems to be at the heart of this administration – after all what did BoJo’s chum Dido Harding do to justify running public health in the midst of a pandemic, having artfully buggered up NHS Track and Trace? I guess Dom hires in his own image, the same centralisation fetish was evident there, and as the FT observed
Given Dido Harding’s track record overseeing the set up of England’s sub-par test-and-trace system, many people will be worried to hear that she may be given a pivotal new role in the NHS
Back to them kids again. I’m not a bleeding-heart teacher’s union member of The Blob, I have despised criterion referencing 4 ever since I came across the idea, my A and O levels were norm-referenced and it worked fine, you didn’t get the regular bitching about grade inflation, or the need to invent A* and A** etc. And you didn’t leave university owing shedloads of money, because few enough people went to university that we could support poorer students with full grants5, I was one of them. A levels are used to allocate limited resources, university places – by ability. Norm referencing would let you match these more reliably IMO. But obviously not this year!
The desperate drive to centralise command and control doesn’t speak of someone open to a diversity of opinion. While Dom’s lapdog Boris Johnson’s great attachment to the right of every Englishman to have a pint in the boozer is admirable, perhaps he might consider opening schools a little bit more important and perhaps closing the pubs if things get out of hand. Education before recreation, Dom-Jo.
Winter is coming for the economy
Though not the markets, because as Barry Ritholz reminds us, if you’re an index investor then the big digital fish of the FAANGs and Microsoft have had a good crisis, and they make up most of the market capitalisation.
The most visible and economically significant market sectors are also among the smallest weight by market capitalization. Markets are not especially affected by highly visible but relatively tiny sectors. The 30 most economically damaged sub-sectors could be de-listed before tomorrow’s open, and it would hardly shave more than a few percentage points off the S&P 500 index.
So that’s all right then. It presumably explains the WTAF moment when I look at networth and see that it has gone crisis, what crisis? I was soaked in Q1 but I had a good Q2, so I am about 10% up on the year relative to 1/1/20.
There is a respectable amount of gold there, and the pound and the dollar have been drifting downwards reflecting hefty money printing and fiscal muppetry, which makes anything else look good. Not everything is as it seems, but these markets seem to have the temerity to not only ignore the shit going down, but also to sneak up. The trouble is that the real world is hurting. Perhaps the markets are reflecting that people are withdrawing into digital worlds like Neuromancer or the slightly less dystopian Solarians of Isaac Asimov. I think those 1950s and 60s SF guys got too hung up with the Space Race when they set their stories among the stars. You can save an awful lot of rocket fuel and difficult faster-than-light story devices if you just go with virtual reality, like the holodeck in Star Trek when the production budget was tight.
Some part of me wonders what actual value these high-market cap behemoths Apple, Facebook and Amazon are actually adding to the world? Sure, we’re buying into them like gangbusters, but so what? Amazon at least shifts stuff about, and Google sort of enlightens us in exchange for following us around the place like shit on your shoe, and Apple are purveyors of overpriced but user-friendly IT to the rich.
Facebook seems to be an overall malignant force on the interwebs, one that humanity would be greatly better off without, particularly in times of crisis. Think of pretty much anything going wrong in the world at the moment, and Facebook is there making money out of making a bad thing worse. It has an uncanny talent to amplify our darkness more than our light, feeding off bile and hate for profit. Perhaps Dom’s AI singularity is already here, and it really, really hates us. Maybe we wrote our id into the algorithms, they are expressing it like the monster of Forbidden Planet, drawing power and resources to give expression to our shadow selves and their repressed craving for dominion and power. Perhaps Mark Zuckerberg’s parents didn’t love him and he holds that primal injury against humanity like a virtual Unabomber. Whatever the problem is, he shows no interest in fixing it.
But the virtual world isn’t real, and in the same way as we can’t all cut each other’s hair, we can’t all withdraw into virtual worlds; we still need to eat, keep the water supply running and discharge our sewage. If all the money in the world is going into flipping bits, then where is the limit? The Germans have a saying that
die Bäume wachsen nicht in den Himmel
a winter of discontent
A lot of people are going to lose a lot of jobs in the next few months and a lot of businesses are going to go down, and landlords will evict a lot of tenants. Fair enough, they aren’t represented on the markets, but they are represented on the streets of our towns and cities. So I’m still not convinced that this isn’t going to go titsup in a big way. Which I guess is why my asset allocation looks a lot more like Harry Browne than it has for a very long time. Which is slightly disturbing, Harry Browne is somewhere to the right of Ayn Rand, but his four orthogonal asset classes bring some comfort, they are a terrible way to try and make your fortune, because of the dead-weight carriage of gold and cash, but probably not so bad to try and hold it through a storm. I do not need to hit it out of the park, just stick with what I have is a good start.
I was active this year, shorting some of the rubbish I had bought chasing income. It worked out, though Uncle Donald has made me look better by devaluing the US$ in real terms, heck even against the GBP in the last 6 months! I have been shifting and diversifying that into VWRL and some gold a while ago, to add to my earlier attempts to hedge the coming Great British Fiasco of Brexit. I’m sure there’s a theoretical success that might be had there, but competence is not a hallmark of this crew.
I had a butcher’s at gov.uk’s what do you need to do for Brexit and even as a retiree only going to the EU for leisure travel it’s all about getting a new passport because it has to be < 10 years old, about getting an International Driving Permit, having no health cover because EHIC is gone6, needing a GB sticker without pesky stars around it, border checks taking longer. This is what success looks like? Personally I will wait for a few months and let some other band of intrepid Brits find out what you really need to do to travel abroad without getting into the shit. In the meantime, God help you if you want to do business over there. Best wait for that US trade deal, you know, the one that says When we say jump, you say how high?
So I’ll probably dial down on the cash and up on the gold/equities with the Permanent Portfolio. With a steady DB cash income stream I can live with that. I really don’t ever want to be shorting anything again. That’s a big boys’ game, and I really shouldn’t have been holding that much overpriced rubbish in the first place.
An interesting encounter with a cautionary tale of early retirement
I had an interesting conversation with someone who worked at The Firm and left when I did. We both had the same sort of trouble with the system, and followed a similar path. He had more saved up to start with than I did, but for technical reasons he had to draw his pension about five years early.
I slowly accreted networth across the intercession between leaving work and now. I did earn small amounts of money in that gap, but nothing that would justify the difference now, he has run down a lot of his capital. He’s spent a little bit more, too, I would say. But then I’ve moved upmarket housing-wise, s it’s hardly that I lacked frivolous decadence either.
He had shifted very heavily into chasing income, he had a lot of oil and lacked diversification IMO. He has suffered in this year’s crash. Not to the extent of having to sell into a down market, but his income has taken a hit. He has to cut his cloth now.
I am not cleverer than he is, but one of the differences was I remained in the personal finance arena with this blog, and it is likely that some of you, dear readers, knocked off some of the rough edges or leaned against nascent excesses in the comments. You will never turn me into a passive believer, but I grew to believe less and less in any edge I may have – much of my success was being desperate enough to go balls-deep into a stock market crash assisted by 40% tax savings. I have pretty much discounted any personal skill with sector allocation, though I would say timing and valuation have still served me OK, both this year and originally. Sadly one cannot influence those, and it is hard to discount Lady Luck. Thank you, readers, for the moderating influences 😉 And learning – because I was surprised how far my colleague had drifted out of the PF scene.
I was able to help him by suggesting a) he gets a new state pension forecast and b) he considers buying extra years before he reaches retirement age, with Class III contributions, which work out to an index-linked annuity at a return of about 25%. That’s a steal compared to the open market equivalent, which would be about a tenth that rate. Like me he had his 30 years NI contributions by 2016, but like me he was contracted out, so you can make up the contracted-out reduction by buying extra years. I bought four more years using self-employed Class II contributions, which aren’t so much a steal as an outright gift – for £150 you buy an extra index-linked income of £208 a year post-tax, for life. He will go Class III because he CBA to go the self-employed route. He may have to buy more years, but you can’t knock a 25% annuity rate.
And it was also a reminder that there but for the grace of God go I. Good fortune and some lucky breaks meant that I grew my ISA beyond the real terms amount he started with, but I wonder how much of that was skill, how much sequence of returns, and how much simple frugality. I was much poorer in disposable income in the period just after leaving work than he was, and conserved the capital.
He will be OK IMO, insulated by a DB pension, but it is chastening to see someone starting from a stronger capital base and with modest pension income from the get-go rather than running on empty for 8 years take such a hit in the Covid era. Even in the worst point of the year towards the end of March I hadn’t taken anywhere near that sort of a hit. The difference was diversification, both sector-wise and asset-class wise in terms of cash and gold. If there’s one lesson from this it is diversify, both sector and country. In my case the HYP is adequately diversified and the index holdings are diversified by VWRL and some of the investment trusts. No sector and no holding is more than 30% of assets. The price of trying to win a sustainable income from capital in retirement seems to be eternal vigilance, and keeping up to speed with the ever-changing personal finance landscape.
- I was once going to do some food photography, and got a book from the library about it. As well as the use of controlled lighting, there are many problems such as the time taken to set up and the heat makes things wilt, so you can hit anything that needs to be wet or fried with gloss varnish, which is clearly not how you’re going to eat it! ↩
- the TripAdvisor review isn’t kidding when they say ‘Messy but good‘, although it did deliver nuthatches as promised. ↩
- the kids are probably all right, it’s the chavvy parents that drive off leaving all that crap behind that are the problem ↩
Teachers and educationalists really, really hate norm-referencing where you allocate a fixed proportion of students to each grade. Not all of them, but most. So they dreamed up criterion referencing, which is testing to a particular standard. That makes sense for things like the driving test, but it is both terribly hard to set questions for, particularly in the humanities, and doesn’t help allocating limited resources properly. Educationalists hate norm-referencing so existentially that this dude from Cambridge spends seven pages of intelligent obfuscation declaring norm-referencing never really happened, can’t really have happened, and even if it did it wouldn’t explain why pass rates were stable in the Sixties and Seventies before skyrocketing from the 1980s.
That’s all very well, but I give him an epic fail in his conclusion “If we are to interpret the overall, national pass rate trend line at face value, then not only did student attainment rise substantially over the past three decades (during the 1980s, 1990s and 2000s), it rose from a baseline of no substantial change over the preceding two decades (during the 1960s and 1970s). The only alternative explanation is that, despite the A level awarding process not having changed radically during the 1980s, more subtle changes were taking place, and these somehow affected the way in which grades were being awarded.This is certainly an intriguing possibility; but one beyond the scope of the present article.” which can roughly be summarised as ‘buggered if I know’. The Ermine red pen of Doom would scrawl “did not answer the question” on his entry, with a consolation prize of “top marks for restating the problem“. After all, something changed towards the end of the 1980s and if it looks like grade inflation, acts like grade inflation and moves like grade inflation then whatever really didn’t change about marking has had a hell of an effect and continues to do so. Current school leavers haven’t suddenly become many times cleverer than I was when I left school with four A levels some 40 years ago. Could. Do. Better ↩
- In my day 11% of school leavers went to university. Nowadays 50% do. I support the idea of reintroducing full grants, but let us be aware of what the costs of that would be. Only one out of five children who currently go to university would be able to do so, and somebody needs to find the spine to fix the borked A level grading system and tell an awful lot of kids they’re not up to the mark. We might go up to two out of five because the modern economy is probably more demanding that it was 40 years ago, but that’s a lot of people and their parents who will be spitting bricks. On the upside you won’t need a degree to serve coffee, and we won’t be normalising four-figure debt in the minds of our young people at the start of their working lives. ↩
- I am old enough to remember that before 1973 you had to fill in a form E111 which helped you get medical treatment in Common Market countries, so we have managed to go backwards there, well done us. ↩