Playing With FIRE

This post is partly about the eponymous movie, featuring outgoing FIRE exponents like MMM. It will be shown in Birmingham on the 5th of July, well done Cashflow Cop for getting this shown outside the Great Wen. But I couldn’t help thinking about the other meaning, too…

The Ermine is an introvert1, so I fought the FI battle as a loner. For sure, I learned from other people – Monevator for how and sort of why2, Early Retirement Extreme for why though not so much how, I was too old and too wedded to some creature comforts to live the ERE life.

At that time the FIRE blogosphere was ruled by introverts too, unlike now, where I’d say extroverts rule the roost. I’m glad I started when I did, because I could relate to people’s narrative. We were crawling from the twisted wreckage of the credit crunch. The credit crunch had squeezed The Firm I worked for, and what had been a decent job for 20 years started to go bad, fast.

I read this post shortly after what I interpreted as a manager trying to run me out of the company. I was more than a decade away from retirement and needed a fast track out. I had been living the usual life of hedonism, though I didn’t carry consumer debt.

The world looked very different then – as Monevator described people’s emotional state was in the pits, the financial world was ending. I read that, and yes, I was one of the people that thought he was barking mad. Rather that yell abuse, however, I asked myself “what if this nutter is right, there is some logical coherence in what he says”. If he were right, this was a remote chance to stick a rocket on my exit plans. So I bought. That committed money to a remote chance, but that money wasn’t anywhere near enough to buy me out of 10 years of working. Looked at in that way, it was a rational choice, though a long shot.

I chose individual shares and a HYP approach, because I thought I was smarter than perhaps I was. I still have most of those HYP shares. It didn’t matter what you bought then, everything was down the toilet. It mattered that you bought.

Swimming in troubled waters – if I will fall, may I fall slowly, all is lost

I recall coming across the song Désenchantée from a colleague, and even with schoolboy French I got the feeling and it matched my mood playing on my work PC as I put half or the 2008/9 allowance into a Cash ISA and half into an III S&S ISA.

I had been slaughtered in the dot-com bust a decade before. Intellectually I saw the logic of Monevator’s words, but I did not feel that there was any hope, after all, it hadn’t worked out that well last time. I invested that money because I saw I was going to fall, though not when the end would come3. I did not have 10 years of working life left ahead of me. Your late 40s is often a troubled time of life,  you cannot live the afternoon of life by the principles of the morning.

The next month I did the same again, in the new tax year, but I also signed up to the company salary sacrifice AVCs and pushed my pay down to virtually the minimum wage, investing in a 50:50 UK:Global index fund. The other options were cash or 100% UK. I did not do this because I was an optimist, I was of the view that this was most likely a lost cause, but that there was a worthwhile chance.

The modern FIRE landscape is a very different place from that lonely and desperate world

We stand on the ramp of a long bull run from those troubled times. Extroverts are optimistic guys, they need to feel things can only get better. Let’s hear it from MMM on the practical benefits of outrageous optimism. Pete isn’t the sort of fellow to play Désenchantée on loop as he throws overboard the trappings of a comfortable middle class lifestyle into the bottomless stock-market pit for a low chance of a big win. He knows he is going to clean up and face-punch the bad guys. Every last one of them. Self-doubt is for pussies.

His story is better, and it’s been turned into a movie. Well, there’s more to it than that. Apparently it was shown in London earlier this month. I totally agree with Cashflow Cop that it shouldn’t just be the Londoners that should get the benefit. CfC has been instrumental in getting this sorted so it will be shown in Birmingham on the 5th of July. Take a look at Cashflow Cop’s site more generally – he is a UK FIRE aspirant who doesn’t live in London or work in finance. As for the movie,

It’s all rather American, but the principles of financial independence are the same. Go and see it for inspiration, particularly if you are an extrovert.

But leaven the feelgood story with the knowledge that…

Continue reading “Playing With FIRE”

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All you cash belong to Zuck

Say what you like about Mark Zuck, but the fellow doesn’t lack ambition. There’s a bit of the Terminator in him, or one of those mediaeval giants that takes quivers full of arrows but keeps on coming.

It not just your innermost secrets, your lives, your loves and of course what consumer goods you buy he wants to know. The Zuck is now coming for your money. Be very afraid. It’s called Libra, it’s blockchain, and Mark is doing it because he wants to make more money and know how you spend yours has a deep compassion for the

1.7bn people around the world without a bank account would be able to use it to make instant and nearly free international money transfers from their mobile phones

Earth calling Zuck. You may have a brain the size of a planet but has it ever occurred to you that a good number of these people don’t have a bank account because they don’t have any money? How do you fix that? Well, paying your taxes rather than spiriting the ill-gotten gains into Moneyland would help this altruistic aim more than facilitating people to spend money they don’t have, all watched over by the benevolent gaze of Facebook’s servers.

the great and the good involved with Libra

There are other companies involved, and of course Libra’s website makes much of its credentials as a not-for-profit independent company, along with all the good is will do for these good folk who are unbanked, possibly ‘cuz they don’t have anything to bank. To wit:

Reinvent money. Transform the global economy. So people everywhere can live better lives.

There’s a Youtube puffery vid for ya

There are some questionable statements delivered in that minute and a half:

Technology has improved the world around us

Not sure what Extinction rebellion would say about that. Not if you’re a London sparrow. Or a cyberbullied teen. But sure, it’s improved many things, lets move on:

So why is it simple to send these [on screen example of low-value consumer goods] anywhere, but not money? What if we made money truly global, stable, and secure

Err, that’s because there’s no United States of Earth to protect us from the goddamned strongmen that we already have and seem to be siphoning off resources into offshore tax havens? Who watches the watchers, and how to we kick the blighters out if we create such an overarching single point of failure? The problems here aren’t technical. They are human. The history of the world shows you shouldn’t put a few people in charge of power. Piss off, Zuck and your ubermensch mates. What part of No do you not understand? As for secure, with Facebook on the board that’s just not happening. I’m not even sure it’s possible at all. Every bugger has their price.

Let’s run Libra through the bullshit translator, shall we. Let’s take a look and what’s wrong with money now. Money is two things. One is a medium of interchange. If you have money, you can get people to do things for you, right now – clean my windows, fix my drains, make me and my SO a nice meal in attractive surroundings, build be a superyacht so I can big up my ego.

It’s also a claim on future human work, which is often called a ‘store of value’. For various technical reasons, ever since 1971 and arguably before then, it’s not particularly good at that. To store value these days you are usually advised to use it as a medium of interchange to buy a diversified array of other things like equities and bonds. Storing value as currency doesn’t work that well in normal times. It can work exceptionally poorly in abnormal items – Venezuela now, Argentina not so long ago, Germany in between the wars. It was pretty iffy in Britain in the 1970s 😉

Improvement is possible. Some people critique the issue of there being no anchor – once upon a time currencies were backed by gold. With crypto you could probably achieve a similar limit in the money supply, well, until quantum computing comes along and people get to forge it. But that’s technical, it’s probably solvable. There was a problem with the gold standard in an expanding postwar economy. If your money is fixed and the amount of valuable stuff in the economy it is chasing rises, you are locked into deflation, and the real value of your mortgages and bank loans goes up with time. Of course, having floating currencies lets politicians promise more than they can deliver and let a slow devaluation in the currency tax people invisibly. But given that we don’t want to pay tax I guess it’s got to come from somewhere…

OK, maybe we have gone ex-growth, environmental degradation may mean contraction and convergence. Maybe a fixed  worldwide amount of money could work. But not if it’s run by Facebook.

Iffen it ain’t broke don’t fix it.

Banks use ancient IT systems, but I can’t recall the last time a load of money just disappeared. Challenger banks are making the user interface better. Western consumers don’t need easier payment systems and micropayments. really they don’t. Consumer debt is already bad enough

UK households already owe £60k on average. They don’t need easier spending

One of the easiest wins you can have with spending is simply to insert a wait loop. want to buy something that’s over £50 and isn’t a matter of health and safety? Stick it on a piece of paper with the date, and wait a week. If you still want it a week later, go buy it. It’s amazing how many want-it-now purchases can be canned.

Paying for something really isn’t that hard these days, assuming you have the money. We don’t need a totally new edifice run by tech giants to fix something that just ain’t broke in that way.

I’m not saying that money can’t be improved. But let’s think long and hard about the requirements capture, the social ramifications and how we kick out abusers of power and grifters before we build a system because money attracts bad sorts like shit attracts flies. Before we have a Global Currency of Earth let’s have a United States of Earth first, eh? Currency unions are historically rife with problems – ask the Greeks how that’s going over a small area with closer economic convergence that Earth.

Libra. Just say no, if only to keep Mark Zuckerberg out of your payment history. He knows far too much about you as it is! One of the most scary bits in the Grauniad article is the kicker at the end.

Facebook claims financial transactions will remain siloed from social media activity and that user ad profiles will not be based on Libra habits

Yeah, right. And I am the King of Spain.

100% mortgage backed by BOMAD? I’ve seen this movie before – it didn’t end well

Rich kids will get to bid up house prices aided and abetted by BOMAD1 and a Lloyds bank 100% mortgage. BOMAD are on the hook for defaulting rich rugrats in the first three years, then Lloyds bank should be OK with the equity said kids2 have built up in those three years. Let’s hope Brexit doesn’t make the housing market go titsup, eh?

No, actually scratch that. I wish exactly that. I have no sympathy for these featherbedded chillun – let them suck up the negative equity, and let BOMAD be rocked for a chunk of the debt as a useful playing-field levelling action. Bring it on.

Perhaps after that’s happened some other poor devils will get to afford a house, should they be fortunate enough to still have a job in post-Brexitland.

BOMAD-backed mortgages are tough luck for kids who don’t have well-heeled  parents, because, natch, the rich kids will bid up house prices. So we can understand the delightful sentiment behind Frank Field’s letter to the Grauniad which proposes extending the largesse of the 100% mortgage to all those who don’t have access to BOMAD. Bless your egalitarian cotton socks Frank me old mucker, but you happen to be older than I am. So how come in your 76 turns around the sun you haven’t noticed yet that if you subsidise people’s mortgages, what happens? House prices go up. The maths is simple.

Punters have £x they can spend on housing, and in general when you are young an inexperienced as to the vicissitudes of financial life you deploy all of that £x, because everybody around you tells you that you can’t lose with housing. You also don’t tend to have much capital behind you and are in the first part of your working life, so your earnings are limited. You’re running on empty once you’ve committed your £x to the rapacious maw that is UK residential property. There are no reserves. If you’re £x is more than someone else’s you soak it up by having more house or living in one of the more tony districts, or reducing the zone on your London Underground ticket if you are rich enough to buy in the Great Wen.

The market is set by some punters finding their £x just ain’t enough to own where they want to live, so they leave the market for the rapacious BTL rental market, reducing demand of housing to buy. So, Frank, you go and subsidise that buyer’s £x by £y allowing these folk to borrow more than they can actually afford, guess what happens? Prices rise by £y, or if you subsidise mortgages by £y, by the increase they can borrow with that extra £y, which is a lot more. Result misery. This is an area that needs tough love because of the law of unintended consequences.

We’ve been here before. MIRAS, Help to buy3, LISAs. Get the government the hell out of the home loans market and keep it out of it, nail their feet to the floor. That includes you, Frank. Sure, BOMAD ain’t fair and the rich will screw everybody else. See also: private schools, moving to catchment areas, the lot. If you have the money you will always shit on other people’s kids to get yours ahead.

Government – stay out of the home loans biz. Get into the house building biz

The government can do something about housing – build the bloody things as social housing, don’t subsidise the buying of houses. Leave that to the market. Fewer that half of British households can afford to buy a house IMO. It’s a tremendously expensive capital asset that sucks up roughly 6-10 years of your gross earned income4, and in earlier generations before 1979 we catered for these people with something called council housing.

Let’s not over-romanticise that – some council housing was ghastly, I remember playing on some of the elevated walkway council estates as a kid where some friends lived, and they were dire. Council houses were often terrific, though, particularly for families – far more space than the typical four bedroom premium executive detached-in-name-only5 rabbit hutch constructed now.

Typical taste bypass of a modern estate aimed at those with more money than taste, this one in Turkey. Someone’s missing the whole point of a castle, these ones are definitely DINO. A castle should be 10 miles from the nearest one 😉

The government should stay out of the homes loans biz. Totally, other than to regulate charlatans, minimum lending standards, and to deny BTL lending totally IMO. I’ve nothing against private landlords, if they really own their properties. If they are competing for mortgages with homebuyers, well we survived perfectly well without BTL mortgages up to 1994 and nothing about the British housing or rental market has gone in the right direction since then for the poor bastards that have to live in the properties.

If the government wants to do something about housing, then look to the days before Thatcher screwed it all up to buy votes giving away free money to council tenants with Right To Buy. They were council tenants because they weren’t rich enough to buy their homes, and 40% of these houses are now in private BTL hands, shitting on the generations after. Thanks, Thatch.

We could roll this back  – build social housing, which we used to call council housing, and employ the best lawyers in the land to place a perpetual restrictive covenant on council housing so that any politician that even thinks of doing a Thatcher Right to Buy to sell them for votes is threatened with an official summons to be put in the stocks at the Tower of London to be pelted with eggs by everybody that can’t afford to buy a house until they think better of it.

In other news, personal insolvencies reach a seven-year high and household spending is at a 13 year high often fuelled by credit or depleting savings. Just the sort of situation that absolutely calls for 100% mortgages , natch?


  1. That’s Bank of Mum and Dad if you are one of the lowlife oiks that don’t happen to have mater and pater with the odd 10% of your starter house kicking around in loose cash they don’t need for three years. 
  2. In the curmudgeonly Ermine worldview you’re still a kid whatever chronological age you are if you are financially dependent on your parents. Paying your own way in the world was one of the key rites of passage to adulthood in my day. I do appreciate that such non-launched kids like to be called adults nowadays, but this is my narrative, so bite me ;) 
  3. Help to buy was on new houses, FFS. Yer typical first time buyer isn’t rich enough to spaff their money on a new house, you whazzocks. This was straight bung from taxpayers to Dave’s housebuilder chums 
  4. At a purchase multiple of say 5* one salary, and typical mortgage terms at typical multi-decadal British interest rates of ~ 6% means you pay about twice the capital sum over 25 years 
  5. DINO is when there is separation of about two inches from one ‘detached’ house to another. You need a few feet to get away from your neighbour’s bad taste in rap and to keep your squealing grandchildren out of their beauty sleep. 

New year, New You, New hope

A Happy New Year to you – what are we looking forward to in 2019 then?

I was out walking with two friends – the sun was setting – suddenly the sky turned blood red – I paused, feeling exhausted, and leaned on the fence – there was blood and tongues of fire above the blue-black fjord and the city – my friends walked on, and I stood there trembling with angst – and I sensed an endless scream passing through nature.

Oh. Not so much, really. Did you know there were four versions of this picture? I didn’t until now, so I have learned something new today before 10am. Can’t be all bad. There are great parallels between now and the beginning of the global financial crisis. There are some that say there are great parallels between now and the 1930s, but let’s fight that one later on, eh? What do we have in front of us?

It’s an ill wind blowing, young FIRE folk…

The problem with seeing many new bloggers starting on their journey to financial freedom in the last couple of years is the thought in the grizzled Ermine’s fur that you really want to start that journey with a stock market that hasn’t been pumped up by funny money. I wish y’all the best of British luck, but I know from bitter experience that taking a suckout a couple of years after starting one’s journey to fabulous riches financial independence via the stock market is tough as hell if you take a spanking a few years in. Here’s how I did it wrong, so you don’t have to 😉 Continue reading “New year, New You, New hope”

What Colour is your Parachute

I read my first copy of Richard Bolles’ seminal job-hunting tome What Color is your Parachute in the late 1990s. The big cheeses at The Firm had decided to move away from research, and out of electronics towards development and software. I was wondering if I should stay with my first love, which was electronics design, or stay with the Firm.1

Parachute is a great resource and a good read. At the heart its message is as old as the Delphic Oracle itself – know thyself. Around that message, however, is a good periphery of tactics and perspective. There is only one problem. Parachute is a weapon of contemplative reflection. You can’t use it under fire, IMO, and when do most people turn their attention to looking for a job?

When they either need a job right now, or are fearful of losing the one they have already.

I’m not looking for a job, despite Monevator exhorting the early retiree to get their sorry ass back to the workplace for a day a week. Although Britain is a post-Christian country, the feeling that the devil makes work for idle hands seems to run deeply through the personal finance community. I’d fingered Calvin for the problem, but it seems the ‘work and suffering is good for you’ meme runs deeper than him

Here in the West we have a lineage of puritanical belief systems that still leave their mark, and all forms of Christianity teach that suffering brings us closer to God.

Niall Ferguson made the case a few years ago that this Protestant work ethic is the reason that the West is cock of the rock, his crystal ball didn’t show that the fire was burning out rapidly. Sic transit gloria mundi.

Read widely – library ebooks don’t have late fees

The Ermine reads widely, particularly as the library lets you borrow ebooks for free, and a little munging with Calibre gets that onto a Kindle which makes it easier to read in the park, or a particularly favourite little beauty spot near me with a swing seat and a glorious view. So when I saw a copy of WCIYP 2018 I thought I might take a look at what’s changed over 20 years

Billed as a practical manual for job-hunters and career-changers, it is an interesting read. It has been nearly thirty years since I last applied for a job in the open market2, and getting on for eight since I applied for an internal job, so much has changed. The first part of the book is about the conventional approach, and why this doesn’t work. This is the method the DWP push the unemployed into – registering with Monster jobs and scattercasting CVs3. I’ve only actually ever once had a CV work, and this was at the very beginning of my career, and even that was responding to a newspaper small ad which invited applications with a CV.

The problem with resumés and CVs is that they only work when employers are finding it tough to fill jobs. Continue reading “What Colour is your Parachute”

BofE’s Ben Broadbent inserts hoof in gob, message gets tossed in can

Poor old Ben Broadbent, second in command to the suave Canadian fellow Mark Carney at the Bank of England. Mark’s a chap who can fall out of a boat without making waves, unlike his deputy.  In the hoopla about Ben’s  perhaps unwise choice of words – did you know climacteric1 was a thing? his message got lost. but it’s pretty straight between the eyes. In an article for the Torygraph in the guise of Edgar Allen Poe’s Raven, the harbinger of doom says

compared the current slowdown in growth and wages to a lull at the end of the 19th century, when the height of the steam era was over but the age of electricity was yet to begin.

Today’s economy could be experiencing a similar trough as it passes the boom of the digital era and awaits the next big breakthrough, possibly with artificial intelligence.

Ben Broadbent to British economy – you’re over the hill, every which way is down from here for at least a generation

Oy vey. And among other things it’s good to know that the ermine is doing his bit2 for this incoming doom:

something similar happened in the late Victorian era. Towards the end of the 19th century, British productivity “slowed pretty much to a halt” after peaking, as it entered what he labelled a “climacteric” period.

The word “climacteric” is, according to Mr Broadbent, a term that economists have borrowed from biology and means “you’ve passed your productive peak”. It has the same Latin roots as “climax” and means “menopausal but it applies to both genders”, he said.

Mr Broadbent added: “I once got an economist to explain the origins of the word ‘climacteric’. As soon as he started talking to all these middle-aged men – about [how] it means you’re past your peak and you’re no longer so potent – they all said: ‘We understand’.”

Hehe. I understand that climacteric bit, after all I am no longer a productive member of society. For those lucky enough to have the choice, it comes from the age-old arc of a human life, poetically summed up by Carl Jung thusly: Continue reading “BofE’s Ben Broadbent inserts hoof in gob, message gets tossed in can”

Retired accountant fails to understand interest only mortgage, loses house

It must have been so simple when he was a nipper. You buy a house with a mortgage, and you got to pay back a shedload of interest and a teensy bit of the capital. 25 long years later and this happens

how a traditional mortgage builds equity

as the dynamic balance between interest and capital repaid shifts in your favour. The downside, of course, is that you have to pay off the capital. You pay roughly twice as much1 for your house if you buy it with a mortgage than with cash, due to paying interest for 25 years. Which is why some bright spark dreamed up the interest-only mortage.

Although we now think of them as ways to enable the BTL brigade to shaft everyone younger than themselves, the IO mortgage was originally dreamed up to make houses more affordable by halving the mortgage payments. Easy peasy. What actually happened for a while was house prices went up2, because every time you make the existing price more affordable the price adjusts so it becomes only-just-about-affordable, because that’s where premium scarce goods reach equilibrium in a market economy. It’s only the punters that can’t afford the prices and fall out of the market that puts a brake on house prices, but UK governments have never acted on this because most voters want high house prices. Governments will change that when the increasing age people buy their first property means there are as many non homeowners as there are homeowners of voting age.

Enter stage left, an accountant, age 77, mithering about his IO mortgage being called in

who didn’t realise you had a pay off an interest-only mortgage in this lifetime, rather than the next. Len, this post is for you. There’s pathos in this story on so many levels, I mean, FFS, this dude worked as an accountant for a living. It’s fair enough for the interest-only mortgage to catch out young whippersnappers like Joe and Josephine in the hands of Mr big Bad Wolf, but grizzled greybeards of 77 who have only just wised up to the fact that they have aught to pay off the capital have no excuse. These guys had the temerity to complain to the Financial Ombudsman and then when they got the finger from the FOS because of the pickle they got themselves into through overspending in retirement, bleat to their local MP. The MP spins this as a tale of dreadful ageism by Santander. No, they’d just like to get their fricking money back before you die. I’ve done this story too many times before, WTF is it with the British and housing?

I know it’s impolite to mention the Grim reaper but it’s a fact that every 24 hours you live you get a day closer to death. I am nearly three decades closer to death than when I took out that mortgage, which is why I paid the bugger down, and that’s even without the benefit of a life of accounting to see the problem rushing up to meet me. The MP puts this spin on it

Lloyd called on Santander to either increase its age limit for mortgage borrowers or abolish it, and said: “Without such a move, Mr and Mrs  Fitzgerald will lose their home. Is that really what the bank wants to see happen? I will also be raising this vital issue in parliament. I am sure there are tens of thousands of other families potentially facing the same, desperate situation in the coming years, which is unacceptable.”

No. It’s a situation that has been developing over decades, and they can’t say they weren’t warned. The Fitzgeralds chose to stick their heads firmly in the sand, and that’s why they are in the shit. It also shows the folly of another innovation in mortgage finance, the short-term fix. These guys remortgaged in 2007 for 8 years. It’s fair enough, when the 8 years are up, you need to ask again if you can stay in that house if you don’t have the money to redeem it.

You have the option to borrow from someone else I guess, but nearing 80 you just aren’t a good prospect, because you have zero human capital left. If you financial capital isn’t enough to keep you in your house, then you don’t get to stay in that house, and you can’t earn any more financial capital. You are stuffed. The moral of the story is pay your bloody mortgage off in your early retirement, or be prepared to move or rent.

This is not a sob story of somebody who was taken out by events beyond their control. This was wilful overspending on a big scale for decades. I could have had many fine holidays with the money I used to pay down my mortgage. The fact this guy plied his trade as an accountant takes the biscuit. Continue reading “Retired accountant fails to understand interest only mortgage, loses house”