Ground Control to Major Tom–turbulence ahead

What are the five most dangerous words in investing?

It’s all different this time

Actually it was Monevator who spotted the turbulence, and even he had to admit he was winding y’all up with the clickbaity headline. He’s a much better headline writer than I am, anyway. Plus an George Orwell-esque intolerance of waffle, which is why he shot the long-form “the high price-to-sales multiples / low profit stocks” in favour of growth stocks. Now where have we seen high price-to-sales multiples / low profit stocks before? Ah, I remember, the dotcom boom. I made money in the dotcom boom, despite quite shocking levels of churn

Contract notes from back in the dotcom days. I keep these to remind myself. Do. Not. Churn. Just don’t. There’s an argument I spent far too much on churn, reducing retained profit, these were £12.50 a turn dealing fees which was considered cheap at the time – about £20 in today’s money. But i did get ahead.

Where I screwed up was after that. One was not selling anywhere near the top, and the second way is hanging on to enough of this shit till deep into the suckout and selling out into cash. The chart is in that post. About seven kilosods down the tubes, and the Bank of England tells me that this is equivalent to £12,000 in today’s money. Well done me, eh?

Oddly enough I consider that tuition fees in the art of investing at the University of Life. You can spend a lot more that that in getting taught to be a shit-hot day trader, and people invest more than twice that much into going to uni. The edge I had on them was this was money I had earned, rather than borrowed, and the investment was repaid handsomely in carrying me from when I picked up this bat-signal in the teeth of the GFC.

I didn’t believe him one whit, but needing to get out of the workplace ASAP because otherwise the management crap and miserable metrics would have driven me round the bend I figured it was worth a punt. I had reason to be grateful to that signal, and the training in what not to do, so that doing pretty much the opposite looked like it was worth a go, and when I cleared the workforce three years later it, and the training, were vindicated.

Anyway, turns out the Ermine has had a windfall of late, to add to that from last year, of shorting the suckout. It appears I will continue to be a net accumulator for a little longer. I have too much in cash, and my asset allocation has been crouched in a defensive pose. Cash is not good in current inflationary times.

For pretty much any time over the past 10 years the obvious place to invest capacity I don’t need for spending would be the stock market, but it’s not the obvious place for me now. Valuations are sky-high. Some of this is apparent – loads of money has been created, firstly in trying to dodge the longer recession we should have had after the 2007 GFC. And now with the coronavirus pandemic. I’m not a head-banging Austrian school nut-job, but companies going bust is how capitalism flushes out old forms and misallocations of capital, and low interest rates foul up this mechanism, zombie old forms clutter the system up and starve the new of capital. Personally I feel the place for government is to soften the blow and help reallocate people who suffer the result of these forces, rather than driving interest rates down so companies that should go bust don’t, but that’s not a majority view – we didn’t support people made redundant after Thatcher destroyed mining, we haven’t done that in any of the other layers of creative destruction since. These failures alienate more and more people and weaken an established order, in the words of Gramsci

The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.

This process started pretty much at the start of my working life in the early 1980s, as Thatcher and Reagan remodelled the post-war international order into what is now called neoliberalism, this is illustrated at length in Milan Babic’s ‘Let’s talk about the Interregnum’ article. Some of the morbid symptoms appeared PDQ, but not in areas I was particularly exposed to.

Drive through some of the old Welsh mining valleys, and you still see some places where hope went to die 40 years ago. My Dad carried on working to the mid-1980s as a fitter until he was 65 and retired with a final salary pension but soon after that they cleared the place where he worked in the city of London (nowhere near finance) which actually made something, and turned it into a conference centre. His job would have been roadkill if he were a little bit younger.

There is froth and the stench of decadence in the areas of plenty.

I introduce you to the 20 minute avocado delivery in the Great Wen. Okay, a superyacht is a more egregious example of decadent excess, but most of you can’t afford that. I’d say we can all afford to pay £5+£1.8 for something that would cost half that if we walked to the supermarket, even if it were a Tesco Extra where everything seems to cost half as much again as if you walked a bit more to a regular Tesco. It’s hard to deny the decadence and the froth.

Gorillas grabs close to $1bn Series C funding …values the on-demand grocery delivery biz at $2.1bn

Series C funding is late-stage venture capital funding. Venture capital spends shitloads of money on vapourware. Why do they do that? Heck, so they can do the IPO, get their cash back and sell this shit to you in your passive index funds, rinse, repeat. Because think about it. Hipsters can diddle on their smartphone apps in the London loft spaces to have meal ingredients delivered by e-bike. Where’s the obvious catch? Surely it’s that the self-same hipsters can diddle on their smartphones and have a fully-cooked meal delivered to their loft space, and have been able to pretty much ever since Deliveroo and Just eat. Heck, even when I was working in TV in the Great Wen  in the 1980s we’d ring up (on a dial office phone) for a pizza delivery if it looked like Production would wrap late.

Where have we seen this unprofitable firms worth loadsamoney movie before? 1999. But it’s all different now. Yeah, right. Why are valuations up in the sky? Because money is searching for a return, because there’s more bloody money flying about made to try and dodge the consequences of the global financial crisis and there are fewer places to park it where it does better than slowly die into the night, and it’s getting less and less discriminating about doing due diligence on whether that return has any real hope of existing. We are buying this fluffed up crap in our index funds. This sort of garbage is one of the reasons valuations are going up – there are too many companies

What’s this make-believe rubbish doing in our index funds? Some indexes require profitability for inclusion, but an increase in unicorns are a bad sign of irrational exuberance IMO

that are worth gazillions and yet don’t turn a profit. Still, look on the bright side. Valuations haven’t reached the heady heights of the dot-com boom. Things can only get better, eh?

image

S&P Composite CAPE (from Shiller)

A fellow on Monevator sensibly asked me why, rather than buying puts at the moment, I don’t

Why not just invest what you are comfortable with for the long term and just forget about the drops?

I’m not a young pup saving steadily from income for 30 years, so I don’t believe in the fundamental premise of index investing because I don’t have that many market cycles. I believe valuation (and indirectly, timing) matters in a cyclical market. Those valuations worry me. If they stay up in the air for a couple of years then I will have spent a manageable amount in puts. If they stay up longer, then yes, I will need to suck it up and conclude things really are different this time and stop buying puts 1. The equity purchases I will make between now and a couple of years will be up in the sky along with all the rest of what I have had for years. I just happen to be of the opinion this has to go titsup sooner than later. But if I’m wrong I can eat that too, the increased balance in my ISA will salve my dented pride somewhat 😉

For all that, my largest holding is in VWRL, but I am happy to say that the vast majority of it wasn’t bought at current eyewatering valuations.  But I’m not buying into this market large-scale at current valuations, and yes, I am prepared to pay over the odds to insure against some downside in what I have at the moment, because I perceive the downside hazard is a lot higher than the upside opportunity at the moment. It’s not a general view however, and again, a lot of money is flying about the place. The inflation manifesting itself now is one symptom of that – consumer spending seems to be strong in those households that saved money through the pandemic, and in combination with the lost capacity.

Inflation worries sort of jumped me into working, at a fairly minimal level. I guess I need to be careful to stay below the lower profits limit, since now I have a full state pension entitlement there’s no point. It is surprising how the lower profits limit is twice as much as the upper earnings limit, where permies start to pay NI. I am selling pure mind, so pretty much all my pay is profits, and because of my pension I pay tax on all of it. However, I will charge out my replacement computer against income, because the old one was driving me bonkers with the fans screaming as the CPU overheats due to the thermal paste drying out. And it is time I charged my IET/chartered engineer registration to tax again, even though it is largely vanity 😉

But when I sit down and actually think about it, there is no earthly financial reason why I am working. It’s not a permanent job, so it doesn’t protect my future against inflation. It doesn’t really shift the needle on the dial, my dividend income works harder than I can. But I carry on because it gives me connection with a different community of people, and it turns over the grey matter. I have seen a couple of very serious cautionary tales over the pandemic – one fellow I know, bright but seems to have dived down the rabbit hole and is almost a hermit. And another is drifting that way. These are hidden hits of the pandemic. Pandemics accelerate trends that were already latent, in society at large but also at the micro level it seems.

Inflation is bad for me in terms of the pension, since it seems likely that it will overtop the cap, and for cash, and it favours the stock market as a poor choice among those available. At 5-6% inflation, if for example, I sit out five years in cash trying to avoid a 30% drawdown in a bear market, I may get to eat a 30% drawdown in the cash instead. Valuations seems particularly high in the case of big fish, this is, of course, most of the market capitalisation in VWRL. I am trying to diversify away from those high valuation stocks in new purchases. In the flash crash of last year I was buying VMID which seemed particularly beaten up, and I have been adding to that holding. It is now trading sideways, and has a poor yield of about 2.5%. Back in the day I wanted to avoid drawing down capital, but as it is in covid times I find it hard enough to spend my regular income.  I have still never drawn income from the ISA, because just as I started to run out of money drawing down my DC SIPP my main pension came on stream. So I can let that hangup go.

There does seem a greater trend towards tax and spend, which implies minimising my taxable income. That means reorganising my ISA, booting the gold ETFs out into the unsheltered GIA by selling it in the ISA and then buying the same amount in the GIA with new cash. The proceeds in the ISA let me buy shares and shelter the dividend income from tax, which wouldn’t be the case if I used the cash to buy the shares in the GIA. But I do get to eat dealing fees and the spread on the gold 😦

There be turbulence and hazard ahead. I do wonder how many people will be talking about FI/RE if the big One comes in the next couple of years. It’s all looked terrifically easy in a stock market that only climbed higher over the ten years since the GFC, with the exception of what turned out to be a deep flash crash due to Covid last year/ Even at the low-water-mark of that, valuations were getting on for twice the value after the GFC.

Something stinks to high heaven about valuations to this mustelid snout, but the rapid increase in inflation is robbing us of the opportunity to sit out on the sidelines. But I am mindful of Gramsci. This is the interregnum, and morbid symptoms appear. One of them seems to be stratospheric valuations. Unicorn shit is on the rise.


  1. Shortly after that no doubt the Big One will hit us all, because life is like that. You don’t have to win every punt if you take an opinion, these are relatively cheap, though throwaway 

30 thoughts on “Ground Control to Major Tom–turbulence ahead”

  1. I can’t help thinking that as a mid 30’s accumulator I’ve chosen the worst possible time to decide to start learning about investing and taking control of my pensions and financial situation. I started before the March Covid blip but everything that has happened since then has just seemed ridiculous to me as a newbie.

    There isn’t anything I really feel confident investing in. My global cap weighted portfolios in both pension and ISA make me very uncomfortable seeing as they are dominated to the tune of some 60 odd percent by expensive American companies, many of which I actively despise and avoid as much as possible in my daily life, bonds are currently a no due to QE and the negative real returns as well as rate risk, cash is also losing to inflation. In my mind it makes complete sense to try and underweight the US, which totally contradicts the passive cap weighted nature of my portfolio which, according to everything i’ve read, is the best place to be for most people…

    I almost wish I’d remaind ignorant! The only thing I’m sure of is that I’m actually investing less but paying off more of my mortgage as I know that at least with that I’m actually gaining something out of it.

    Liked by 1 person

    1. For what it’s worth I can’t disagree strongly enough with

      I’ve chosen the worst possible time to decide to start learning about investing and taking control of my pensions and financial situation.

      The rule is simple, learn sooner rather than later, you you have done well. Zoom out. Postulate that I were right in what I fear (and I have feared the last four out of about 1/2 crashes 😉 Say a stock market drawdown of 50% sometime in the next two years.

      Firstly, you are about the same age-ish as I was in the dotcom rise. I ballsed that up in spades, but it didn’t turn out too badly, eh? You are very unlikely to screw up in such an egregious way – buying VWRL every couple of months at high valuations is nothing like the madness of buying some Rage software, Pace Micro, videologic, selling some, buying the next great big thing, a few times a month. Some of what I bought in the dotcom boom went 100% titsup (hello Rage Software, and Ionica, I am sure there was something else). VWRL or any global index is just not going to do that, or if it does then we have much bigger problems on our hands.

      > In my mind it makes complete sense to try and underweight the US, which totally contradicts the passive cap weighted nature of my portfolio which

      Yeah, I know how you feel. If it makes you feel any better, I felt like that coming out of the GFC. I probably gave up some return doing it, though mostly I won out because I had to use a global index in my SIPP/AVCs started at that time. And if you start buying in a crash, sector balance is trumped by valuations, it almost doesn’t matter what you buy when valuations are pummelled. Like you I have been overexposed in my view to the US market and its blasted unicorns

      > I’m actually investing less but paying off more of my mortgage as I know that at least with that I’m actually gaining something out of it.

      There’s now’t wrong with that. And again, I discharged my mortgage before the GFC, which was perhaps a little bonkers but I didn’t know it was going to make me what to retire early. So even if it isn’t offset, you are improving your general situation, if it is an offset mortgage you are building up firepower and reducing interest.

      You’re doing fine. Remember you have time on your side. Your risk profile is very different. I have earned all the money I will ever have, to a a reasonable approximation. I have financial capital, and am exposed to the downside much more. You have human capital, at a guess you will earn more in future than you have so far, because earnings tend to rise over time and you gain ability and experience. You need the crash I fear 😉

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      1. > The rule is simple, learn sooner rather than later, you you have done well

        Perhaps I came across wrong there. I agree, it is a good thing that I’m finally taking an interest and learning. It pains me, knowing what little I know now, to realise just how much growth I’ve missed out on by staying in my default workplace pension fund for the past 5 years! At least I’m now trying to putting it right.

        > Like you I have been overexposed in my view to the US market and its blasted unicorns:

        I read an interesting back and forth on the US Bogleheads forum the other day, with someone stating that around 20% of the money in the markets need to remain actively managed in order for price discovery and supposed market efficiency to remain functional. I think this makes sense and so have set aside 20% of my ISA to be invested in actives. I’m on the Vanguard platform currently so that’ll likely be the Global Equity fund or maybe the new sustainable equity funds. I see this possibly as diluting a little the large exposure to US mega cap tech which passive currently exposes me to without necessarily underweighting the US as a whole. A kind of unhappy medium and the best I can do without adding all sorts of geographical funds to my core tracker to increase Asia, Japan and Europe.

        I just don’t understand how you guys who’ve been investing for years managed to do so without going mad. The job I have now is by far the highest earning I’ve ever had, I’m talking over double any of my previous salaries.
        It’s a lot of money for me. So now that I have the potential of an early retirement in my sights the rational part of my brain is just screaming at me, asking what the hell I’m doing risking all this money in these ridiculous markets. And this is after only a couple of years. I’ll be a jibbering mess by the time I hit 50!

        Perhaps once things eventually tank and if the money printers ever stop, setting up an asset allocation I’m truly happy with will be easier. Until then, as well as the motgage overpayment maybe I should start a little cash position in my pension so I’m pumping less in?

        Liked by 1 person

  2. Re your puts – IIRC the same “fellow on Monevator” estimated these to be costing you around 6%PA.
    On the face of it this sounds high – but what would you expect the payoff to be?

    Liked by 1 person

    1. I don’t recognise that pricing. I would agree, if you’re paying 6% to hedge a fall, sell the lot into cash, put it in NS&I and eat the inflation tax 😉

      In my experiment I paid £25 for two points against the SPX falling to 4000 (that was about 15% off at the time I bought this). That’s nominally buying £8000 worth of the SPX, in the unlikely event of it falling to USD3999 I get £2. if it falls to 3500 I get £1000. But obviously the put is highly unlikely to be in the money. At this stage the put also has some resale value, but that trends to zero on maturity, so let us ignore that.

      While that’s not enough to hedge my ISA in a useful manner, one wants to trial these things gradually, because puts and options are counterintuitive. But I compute 25/8000 = 0.3%, so if I did that 6 times a year, dividing say my stake in VWRL by £8000 and buying that many points I would be eating 1.8% p.a.

      I’m certainly open to being informed where the logic sucks, because how many points of any index you buy always screws with your head. But in general, if I buy one point of any index, I am buying roughly the integer value of that index in pounds, so I have to scale the nominal amount of my holding in pounds by the index value. So if I have £100,000 of SPX I should buy 100,000/4000 = 25 points, which will cost me 25*12.5 = £312 every two months, or £1800 p.a.

      Perhaps the 6% is if you buy puts that are at the current cost of the index. Indeed, for the various things described in this post I feel VWRL is overvalued at the moment. But if I buy £40,000 of it over the next year and a half, and protect that 15% off at a cost of £750 p.a. than I can be open to riding the rise and feeling OK if it goes titsup. Taking an opinion usually costs, and I don’t see the cost as outrageous. But I am open to being shown where I cocked up the maths.

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      1. I’m not sufficiently familiar with puts to add anything meaningful re the maths.
        Perhaps, @Naeclue (aka “fellow on Monevator”) could enlighten us.

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      2. Having slept on it, the only modification I would make is that I should divide by the current value of the index (4700 at the time of writing), rather than the strike value of 4000 in my example. The gap is analogous to the excess on a regular insurance policy. So if I buy 20k in my ISA on Monday and £20k on the 7 April then I can protect that at roughly four points each time, which is about £100 every two months after April (for all 8 points). Indeed I need to investigate how much dividends I can afford to get in my GIA without paying tax* because at that paltry income rate I can probably buy a lot more VWRL and slowly bed and ISA it.

        If I sit on that 40k amount as cash for a year losing 5% of its value to inflation I lose £2000 p.a. in real value to the inflation tax. Looked at that way, paying £1200 to make my fearful self shift my lazy butt and buy VWRL now rather than later is in fact a win in the right direction 😉 Not only that, I get to take a pop at the rise to a PE of 45 because it’s all different now and unicorns and AI and Elon Musk will save the world as we all retreat into our smartphones like Isaac Asimov’s Solarians, and after paying an insurance excess of 15% £6000 in (uncrystallised) losses, I can laugh in the face of a bear market. I am also slowly ratcheted up in the strike value of the put every two months as the market goes up into the stratosphere.

        Put that way, the government is paying me to insure that by the inflation tax I don’t pay if I shift myself sooner rather than later. And I get a yield of 1.42% less .22% OCF = 1.2%, which, while measly is in fact more than I can realise in interest on the cash without sterilising it for some ridiculous time

        There are the usual riders in that I am assuming that the counterparty (IG index) doesn’t go bust, and also that they don’t fiddle too much with their option pricing as they perceive the risk escalating.

        * That appears to be £2000 so I could buy about £140k of VWRL in a GIA, and indeed this is arguably a useful way to win more income from capital, even if I spend all the divi insuring myself against it all going titsup.

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  3. Your title reminded me of a line from that Aliens film – “Rough Air ahead, we’re in for some chop”. Things didn’t go well after that, I like this short YouTube clip which sums up the gist of it: https://youtu.be/FgbyIETniY4

    Ah DotCom bust, I made my first investing mistakes there. Funnily enough it started with a paper share certificate I had in VideoLogic from exercising staff share benefits around 1994. What do you do? You take it to a stockbroker, open an account, lodge the cert with them and start buying more tech stocks because you work in tech and think that is what you know. Lessons learned 🤣

    To be fair, I actually did OK working in tech through the DotCom boom / bust – it made up for the investing mistakes. I made my money through employment and getting lucky with share / stock benefits working for a .COM that survived and not through any clever investing on my part! The staff stock options were underwater as the share price tanked due to the tech meltdown and the CEO/CFO cooking the books and being found out. But they eventually repriced our staff options from something like $15 to $3 and it recovered to around $30 I think. So after a long waiting game I exercised those things, sold out of it, paid tax and took a chunk off the mortgage. How lucky is that.

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      1. I used Sharesave (or SAYE) a few times and would summarise my experiences as falling into these categories:
        a) big wins – sold out and paid off a big chunk of the mortgage;
        b) meh – sold out and gains probably paid for a few good nights out;
        c) bouncy, but overall did very well to maturity – however, I hung on to these and they were subsequently slaughtered by C-19 and are still a long way under-water.

        I will be forever grateful for my experiences at a) but have often wondered how I would have behaved had they occurred in a different order and had I not, to some extent, been forced to sell my a) shares.
        I also seemed to unlearn the teaching from a) and b) about selling.
        My reasoning, – which even now seems reasonable – was I had no immediate use for that money.

        Liked by 1 person

      2. My experience was the same, I was doing it throughout more or less 20 years at The Firm, though the Railtrack story kept me on the straight and narrow that if I did exercise the options, to get rid of ASAP in the second half of my career. The only exception was after I had left, because those were well in the money and I didn’t seem to have the capability to transfer those into an ISA because I was allowed to contribute for a few months after I took redundancy ISTR, but as a non-employee couldn’t use the direct transfer to ISA option. So I sold those in lumps to avoid getting hit for CGT. But on the upside, I wasn’t going to lose my job if The Firm went titsup

        Shorting is such a terrific match for the Sharesave scenario – the holding times are typically 3 or five years and you’d only start shorting once the options were well in the money so the duration of the short is lower, so the high cost of carry isn’t too bad

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  4. If you believe in the UK economic miracle, you could invest in companies that have a ‘sure thing’ connection with the ruling elite, like making vaccines that have to all go now, PPE provision contract distributors who know people who matter, sprawling conglomerates that grow fat off govt. outsourcing?

    Just get an invite to an Xmas party that matters from someone in the inside lane at Crony & Nepotism Inc. 🙂

    Liked by 1 person

    1. haha, what Christmas parties. I hear they were cancelled, you know 😉 It’s the non parties you need to get an invite to.

      Sadly it looks like Soane Britain who are the wallpaper suppliers of preference are probably not a listed company. Odd what with CarrieBozza ejecting spawn like it’s going out of fashion, you wouldn’t normally spend more than you need to to have your furniture covered in random bodily fluids but there we go

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      1. Whoa, easy now Sir, you can’t just accuse suchlike of creating progeny willy-nilly, there is a precedent of being shy with official confirmation, which is understandable given the considerable expense. Perhaps an elegant solution would be to have the army of eager party donors sponsor a sprog, like with pandas at the zoo? I don’t doubt for a minute they would do it purely out of admiration and appreciation for his unquantifiable services to the country, any peerages changing hands in the future being totally unrelated. (just ignore the cynical conspiracy theorists claiming otherwise, because you’ll always get the jealous millions of losers in this national lottery of life)

        Liked by 1 person

    1. > let the bleeding continue, death by 1000 cuts it is.

      It’s way way too early for defenestration, he is performing the role of useful idiot for now, drawing fire from all points but presenting a random target. I mean seriously, what specific character flaw do you do BoJo for, there are so many?

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    2. I scanned through The Conciousness of Sheep link. Probably the title should have given away its (to me) libertarian feel. Apparently Covid was overblown panic, mask and infection control is unpopular and hence unnecessary, the virus has stabilised and will just kill some elderly and weak people – but it’s worth it as a cost of returning society to normal. At least that’s how I read it.

      Liked by 1 person

      1. You may quip, but I’d argue that is exactly the route we are now taking. I would say BoJo is so weakened and is being used to draw fire rather than do anything – I would say the majority of 80 would melt away by the Covid Repudiation Group which seems to be the UK wing of the Great Barrington Declaration. BoJo’s more at risk from friendly fire than Macmillan’s ‘events, dear boy’

        Let’s hope that Covid is following the track of other virus developments in a less lethal but more infectious direction, although given its short latency and delayed visibility that’s not a given evolutionary route…

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  5. Wow – read this again – I don’t have the stomach for this put stuff you’re doing, I’d probably mess things up! I’ve just watched this recent video by Ramin of PensionCraft he does some good analysis – “Where to Invest 2022” – https://youtu.be/Tep3f30M3ss. Might have to watch it again. Some developed world ex-US funds seem to be one idea, not sure if there is a Vanguard All World Ex-US ETF available on UK platforms.

    I can’t see myself putting too much in VWRL when I do some more pension transfers. The funds they will come from are Aegon’s idea of global which probably have a significant US allocation, although more UK than a global tracker. For good or bad I have a big slug of stuff in VHYL to lower my US allocation as I didn’t want too much FAANG going on. I probably lost a lot of growth doing that, but I really don’t need a lot of portfolio growth at this stage.

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  6. @ Ermine, i think that in these indisputably strange times, investing is a nightmare, what with the spike in uncertainty and general volatility. Given that, an easy to understand, thought-provoking analysis of trends and their underlying causes is helpful, as would be expected from an actuary:

    https://ourfiniteworld.com/

    So, investing in a period of decline for the foreseeable future is going to be very different to what has been known to work until now, because it seems the investment climate is irreversibly changing too. (Ignore the biblical references, being US-centric you can get that in their articles which makes them sound unbalanced, but the facts do make sense)

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  7. I missed the big gains in the US/tech/FANG stocks in the last 18 months, and in the last 12 years, but I’m hoping to miss the future losses too. The UK and the Asia Pacific markets still look cheap, or good value, and I’m mostly invested there. Of course a fall in the US market could drag the other markets down with them. I’m also keeping my portfolio income high and hoping that those dividend paying investment trusts want to (and are able to) remain as dividend heroes.

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    1. Because Mrs Ermine needs to sort her shit out and use that ISA to start building an income. She favoured a SIPP so far but is in danger of getting the drawdown date pushed out from 55, though I am not convinced it will happen to her age bracket. But I can see the logic 😉

      Now how you actually do that in today’s market is a tough wicket to bat on, though UK valuations aren’t that high, in a relative way…

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  8. Just read this and have some comments. While cash looses to inflation, holding stocks can go down as well as loose to inflation.

    I like your put option idea but right now puts are much more expensive than call options. Rather than buying equities and puts, you can hold cash and buy call options. Right now, in the US SPY (an ETF representing 1/10 the SPX) is currently about 450. Jan 2023 400 puts are 21 (4.6%) while 500 calls are 11 (2.4%) both options are 11% out of the money

    Liked by 1 person

    1. > Rather than buying equities and puts, you can hold cash and buy call options.

      I like that, though I need to think about it a bit longer to get the concept really nailed down 😉

      As it happens, valuations have improved somewhat since I wrote this, which is no bad thing IMO though it needs to go further

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      1. > Any use to you?

        Possibly to show me this is not a battle I want to pick on a regular basis. I am OK with occasionally shorting and with using options to cover the possibility of a short going badly wrong, but this looks like a lot of work. I don’t need that sort of continuous fight!

        Like

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