The Hunt budget changes Ermine plans slightly

…but not too much.

Jezza tells us we will all pay more tax. Fixing the value of the personal allowance in a 10% inflation environment naturally means you get to pay more income tax year by year, if your income is above 12.5k which mine is. However, the hazard and arguably the opportunity for Ermine action lies in a different area. I regard the current dire straits of the UK economy partly Putin, but the particularly worse performance relative to our peers is a Brexit phenomenon, now Covid is no longer covering it. And I didn’t vote for Brexit, so if this screws the economy, well, Brexitards, you voted for it, you own it. I don’t feel a moral obligation to help dig you out of the shit, and if you voted for Brexit and feel skint, well, don’t say people didn’t tell you it’d cost you.

According Jacob Rees-Mogg it’ll take 50 years to see the economic benefits of Brexit, and I don’t think that many 20-year-olds voted for it, so hopefully most Brexitards were big on sovereignty, because they’ll be long gone before they see the economic sunlit uplands. I don’t have an issue with people who thought it was a price worth paying for sovereignty – freedom always comes at a cost, and presumably you are rich enough to carry the Brexit malus on GDP, which is part of the fiscal hole Jezza wantes to fill.

Income tax changes

I am probably never going to be a higher rate taxpayer. Well, until Jeremy Corbyn comes into power. While over the 12500 level I am far enough off the 50k income mark to feel safe from higher rate tax for a while. I never earned enough to be endangerered by the additional rate, so if that’s you then while I hear your pain, it’s not my problem. I would suggest you research  salary sacrifice if you can, and if you are already over the pension LTA then your are rich enough to afford professional advice, as well as caviar and champagne.

I’m not even that exercised about fiscal drag on the thresholds, because I am old enough to remember that Mrs Thatcher took a much higher tax take out of a much higher proportion, about 2/3 ISTR of the younger Ermine’s pay packets at the start of my working life. The current personal allowance is still quite high, historically. You lot don’t know you were born. OTOH there’s some argument to say that government services worked better back then, you don’t get ‘owt for n’owt.

I struggled to find any useful information on the tax changes as they apply to me, because most of these are in the dividend and CGT arena. Most media don’t talk about that, because the vast majority of their audience presumably don’t have that sort of income/assets. Let’s face it, if you are investing up to 20k a year your shouldn’t have that sort of assets either, as Monevator keeps on telling you. Use your ISA allowances, as you were. I have not picked up any signal about changing the ISA threshold, so aim to fill your boots in the next couple of years, I could see that regime getting tougher with a change in government.

 

whatcha lookin’ at, punk?

Due to the dearth of information about my oddball bias I am going on this Which summary. I didn’t listen to the budget since while it’s within my circle of concern it’s not within my circle of influence, a walk in the countryside snatched between the showers seemed to be a more constructive use of my time. I saw this bad boy perched on some rugby poles. Indeed I spent so much time watching him I pissed him off so much that he turned his back on me.

I pointedly ignore watching mustelids…

before he dive-bombed something in the pitch.

something got it, there

Or I could have spent an hour watching this old buzzard instead

I was taking the line that a walk round a buzzard-filled countryside was doing a teeny bit for keeping my sorry ass out of the way of the NHS, because it seems to be needed for keeping the young’uns noses at the grindstone, and the buzzard on the telly was going to do what he was going to do anyway.

Dividend tax changes and capital gains tax changes.

They’re coming for your rentier earnings, capitalists. The amount of dividend you can earn tax-free drops from £2000 this TYE2023 to £1000 TYE2024 and £500TYE2025. The latter is likely to be irrelevant since I don’t think the Tories will be in power. You won’t have ANY tax-free dividend allowance in two years, at a guess. Note that at this stage you pay a lower rate of tax on dividends over the tax threshold than you do on earned income, 10 8.75% for shares as opposed to 20/32% on earned income. I would not bet on that persisting after two years.

This pretty much wipes out my plan to pay for the increase in power bills through dividends held in my GIA (so outside the ISA). I may pause my Vanguard ISA next year and reactivate my iWeb ISA, I hold the GIA with iWeb (which is terrible from a FCA compensation angle) so  I will see what they can do about Bed and ISA transfers, from memory they only charge you one side of buy/sell transactions. I have time to boot these dividend payers into the ISA, or sell them out.

Capital Gains tax

The allowance here falls in future, first to 6k TYE2024 then 3k TYE2025 Curiously that makes the carry over of some CGT losses I have more valuable; while you can’t carry allowances forward you can carry the losses. CGT is generally a fight you can choose the time of battle. Not always, some corporate actions trigger CGT gains or losses.  Obviously you don’t aim to make a CGT loss, in the event say that I observe a gain is my holdings of Invesco  SGLP gold I will sell them and buy Ishares SGLN (first checking Invesco isn’t owned by Blackrock or the other way round. I would need to qualify the cost of the turn and spread, natch. This would circumvent the 30-day rule – same underlying asset, different ETF share instrument. Like dividend tax, a basic rate taxpeyer pays a lower 10% rate of tax on shares CGT over the threshold. Again, I would not assume that applies after two years.

In the big picture, my GIA will end up full of SGLP and SGLN and I will move income assets into the ISA over the next couple of years. I will move all gold holdings out of my ISA, probably swapping this for more VWRL and index funds. I will probably clear down most of my Vanguard ISA into the Hargreaves Lansdown ISA, to kill off percentage fees (I am at the HL cap on shares, I hold no funds).

So yeah, at the edges I will be one of those paying more tax. But not too much more. Because unlike people who get most of their income by selling their time or skills for money I am on the side of capital, and capital always has more choices than Income. Since I didn’t vote for Brexit, I feel no particular moral obligation to compensate for the 4% loss in GDP. I also think it would be only A Very Good Thing if the OBR’s 10% house price fall forecast comes true. Houses are far too dear in the UK as it is. Rather than pissing around trying to facilitate people to be able to afford to pay more, the best way to make anything more affordable is to reduce the price of it. Flushing out BTL landlords are all the other good folk that try to invest in houses rather than to live in the buggers could also work wonders, though we could do well to remember that many people are just too poor to be able to buy houses.

Note that this is relatively short and ill thought out because its’ only been two hours since the buzzard on the telly has stopped talking. E&OE particularly on that single-sourced piece on the changes in CGT and dividend tax, and the ISA allowance being the same.

Ten years of leisure wrested from The Man

I stopped working for The Man ten years ago, at the end of June. I spent my last working day in the Athlete’s Village in the 2012 Olympics. It was a little bit odd to end my career working off-site, but I had a little bit of annual leave to use up. I did return the The Firm at lunchtime at the end of June for a valedictory round of drinks at a local pub and a send-off, and that was it, three decades of working life came to an end. It was a good way to finish off, on a high as the last manager said. I look at the pictures and they are good, though I see the signs of three years of the stress and the effects of drinking too much to dull the pain.

Not many FI/RE people are still writing after a decade, so here are a few takeaways from the ride. It has been against the background of a long bull run that is only just fading, as the firehose of central bank interventions begins to surrender to the irresistible force of the accumulated pathologies stoked with it.

I did not get bored

Honestly, I still can’t understand why bright young fellows like Monevator still link to cruft like this. Seriously, if work is the best thing you can think of to do with your limited time on Earth, then you need to get out more and get some hinterland in your life. Preferably half a lifetime ago, but now is better than never. I am sure that for 1 or 2% of people their profession is their one true passion. They tend to be outliers, often psychopaths like Elon Musk, or Mark Zuckerberg, and that passion tends to be unbalanced. That leaves over 90% of us who can probably do more congenial things with our time than working, if only we could solve the conundrum of dreadful things happening in our lives if the flow of income from our jobs were to stop. You know, like losing your home or your kids starving, that’s the sort of thing that keeps most of us working past the point that the Do What You Love, Love What You do meme has transmogrified into Suck it Up, Our Way or the Highway. Solving that is what financial independence is about, but too many people end up with Stockholm syndrome with work. The Escape Artist summed up the problem. Don’t just load the gun. Pull the trigger.

The world is plenty interesting enough to reward an inquiring mind and an inquisitive snout. Learning new stuff has never been cheaper or easier, though it pays to remain critical as there is also much more misinformation about. In many areas of factual learning, favour books over online, and I personally almost always favour the written word over video1.

I got less hard-line about working than my younger self, who was running away from a crap situation. But the key takeaway is still the same. Don’t rely on income from work after you have become FI. Save it, spend it on champagne and caviar, but never, ever, set up your life so you depend upon it again. Otherwise you are no longer financially independent. This severely limits what the financially independent can safely do with the proceeds of work.

Spending FI/RE earnings on  lobster is OK. You can live well without lobster, but perhaps better with.

Breaking that rule is fair enough if you opted for thin-FI/RE and came to the conclusion you don’t want to live that way – financial independence is not worth more than anything else, and if you want to live high on the hog, or live in London, or send your kids to private school, then you are probably not going to be financially independent as early as someone who can eschew some of that and drink prosecco rather than Dom Perignon.

Continue reading “Ten years of leisure wrested from The Man”

Citywire’s miscellaneous marked up moronic musings on market movements

I use Citywire occasionally, and they spammed me with this breathless noodling. Now don’t get me wrong. I share some of their opinion that economically we are in a hole, and until the last couple of months I would say the stock market was overvalued, particularly in tech. However, this is all storytelling, and one thing I have learned across ten years is that short-term macro storytelling is hard to use. To be honest, you are better off with a Netflix subscription, not so much because the storytelling is better, but because the scenery and the protagonists are more attractive. How do you like your stories?

Netflix
Citywire Pulse

Which storytelling would you rather look at? Netflix seems to roll in cheaper at £192 p.a

SELL IN BEFORE MAY AND GO AWAY!
The market bounce has entered April. Investors should use this rally to sell
before May, as equity markets may be about to re-enter a volatile bear market
for the rest of 2022.

Hmm, what rally is this we speak of? Let me consult the Great God Vanguard and their price of VWRL

Rally? Oh Really?

Well, I suppose it’s a rally of sorts. Equity markets may always ‘enter volatility’. What I would expect to get for £280 a year is at least Equity Markets will enter a volatile bear market after May, and if they are higher in December than they were in May (benchmark SPX or QQQ or whatever) then your money back, hows about that? Or if December is too heady for you because of the Santa bounce, then guarantee it till St Leger Day at least.

Record-high inflation has left central banks cornered, unable to resist hiking
rates and taking liquidity out of the market. This makes the economic downturn
almost certain.

They’ve spent the last ten years resisting hiking rates when perhaps they should have done. Has somebody suddenly taken the old Frankenstein jump leads to Paul Volcker then? Surely the energy crisis is more of a thing than what the Fed may or may not get up to. At least it’s got form.

Yield curves are one of the leading indicators for investment strategists, along with liquidity data and monetary aggregates.

Subscribe to unlock this issue of Pulse.

Plan will auto renew for £280/ year or £28/month until cancelled

Don’t Panic, Mr Mannering[1]. And as a general rule, anything sold via a subscription should be viewed with suspicion. If it auto-renews, then they are out to get you. More widely, I am buying. Bring it on. Monevator dealt with the yield curve earlier, and you’re late to the party, which is not a good look for £280 a year.

I now expect my mum to tell me about the yield curve inverting when I call her this Sunday. In-between her spring gardening plans.

Monevator

The other problem with Citywire’s Pulse is that I expect competence in the spelling, at least. I will look the other way at the curious construct of SELL IN BEFORE MAY AND GO AWAY!, which has a sort of TEFL feel to it, but the video shows that you can’t get the staff down at t’wire

Seriously. Won’t somebody save us from the grocer’s apostrophe?
The intern trawled https://stuckinthemiddle.substack.com/ for inspiration from Twitter’s @mrblonde_macro. I’ve saved you £280 p.a. You’re welcome.

I’d normally ascribe this sort of puffery to something written by AI, but the brutalised English supports a human origin. Anyway, I intend to ignore this breathless ballyhoo and buy over time. After all, if sell in May and go away, come back on St Leger Day is true then isn’t that when you want to be a net buyer in the summer? Also if you have religion about annual timing, then wouldn’t you want to avoid holding ‘owt in October too?

Continue reading “Citywire’s miscellaneous marked up moronic musings on market movements”

Seeking a new ISA platform

Last year I had a bash at getting a second ISA platform to join iWeb. There’s nothing wrong with iWeb, indeed if I could find a broker with iWeb’s service that was unconnected with Halifax/Lloyds I would just do that.

I ended up with Vanguard, but although there’s nothing wrong with Vanguard either, I came to the conclusion that they aren’t the right fit for me. I should have spotted it really in Monevator’s broker table

Investors with larger portfolios — Look first at the flat-fee platform table if you’ve accumulated over £25,000 (ISA)

Yeah, I was already over that with Charles Stanley before I moved it, and I am now way over. This is not good because – fees.

Iweb are good enough to provide the FSCS regulatory info. I am already well over the FSCS limit, and would suffer a serious haircut if push came to shove. The aim of splitting is to get 1+1 protection, This means I have to avoid

  • Halifax Share Dealing,
  • Lloyds Bank Direct Investments,
  • Bank of Scotland Share Dealing,
  • IWeb Share Dealing, (because I already have this)

To get that protection. Taking a look at Monevator’s broker table, that’s the first three options ruled out right away.

Interactive Investor – just say no, once more, with feeling

I’m not that keen on Interactive Investor, because I have had bad experience with them not just once but twice, though I could jump over it. There’s a lot not to like about iii – the odious scumbag Tomas Carruthers who pissed me off last time is still in there having bought it out, and its owned by private equity associated with JC Flowers, according to Wikipedia. No, I’ve drunk from that well before, and private equity is never any good for anybody other than private equity, with it’s inherent lack of transparency and generally scummy behaviour. If you look at all the M&A activity they are to share brokerages what Endurance international Group are to web hosting and Interbrew are to craft beer. On a more positive note, Aberdeen Asset Management seem to be in the process of buying them out. That might remove some of the reservations.

Continue reading “Seeking a new ISA platform”

Dolmens and doldrums

Strange and fractious times on the markets. Not enough of a hammering to be a crash, but perhaps some of the froth is coming off the top. As it happens I have a significant amount of capital I want to invest. Looking at the sturm und drang on UK share forums, looks like there were many folk balls-deep in Tech, but out in the real world it seems a bit of a meh so far. Of which more later.

What’s a fellow to do, eh? Time to take advantage of a bright winter day to look at some ancient stones near Avebury. As soon as we came past the main stone circle we saw that World + Dog was out. It probably wasn’t the wisest thing to go on a Sunday, after all part of the point of being a retiree is that you avoid the times when others are using the great outdoors. You need other people to make a music concert work, or presumably a football match, and arguably being in a restaurant on your own is a little bit lonesome, but the outdoors is generally best enjoyed with you and yours. The Ermine household switched to the wider landscape and visited Devil’s Den, a dolmen I haven’t seen up to now. We had it largely to ourselves, and very fine it was, too.

We parked at Gravel Hill car park and walked down to it. It was a bright day, and you could see the dolmen from above, there is a permissive footpath to the site. You are aware of old money and the Norman pattern of land ownership in the UK as you pass the horseyculture gallops, but looking at the map the National Trust is making inroads into the estate 😉 In theory National cycle path 403 and 45 would take me from Marlborough where there is a campsite to Avebury, but I only have a road bike, and it’s not clear to me whether the NCN cycle tracks need something more hardy.

Continue reading “Dolmens and doldrums”

Safe haven by Mark Spitznagel

Try imagining a place where it’s always safe and warm
“Come in,” she said, “I’ll give you shelter from the storm”

2111_safehaven

I bought Safe Haven by hedgie Mark Spitznagel from a recommendation in one of Monevator’s comments. I’d agree with the comment that the book doesn’t leave you with anything actionable, but perhaps as Dion Fortune said of the Cosmic Doctrine, the object is to train the mind, not inform it. This Spitznagel achieves IMO. It isn’t a long book, I read it in a couple of hours in one sitting, albeit punctuated by watching a movie with Mrs Ermine.

Reading has its systole and diastole, which is why cramming is tough, which is why doing something else midway lets you digest it better – Darwin was a fan of walking for this purpose. I only find that useful for when I originate something creative, but the movie improved the digestion of the book’s 240 pages, presumably by letting something in the background reflect.

Spiznagel is pretty full-on, a reasonable storyteller, and uses metaphor and analogy well. The main takeaway is that many of us  evaluate investment prospects by expected value. Despite the standard FSCS warning that past performance is not a guarantee of future results, that’s sort of what happens. The author disses macro investing, and goes on to make the assertion that managing (tail) risk can be cost-effective. In particular, that it can improve your compound annual growth rate (CAGR) without costing you performance

cost‐effective risk mitigation—or raising compound growth rates and thus wealth through lower risk—is really our comprehensive goal as investors.

Spitznagel, spends the rest of his book showing you how you can recognise an asset class that could do that.

Tragically for you and I, dear reader, that asset class isn’t something that you or I could go out and buy, or synthesise from something we can. It might be possibly in the hedgie world. I am somewhat glad that intuitively I found one of the few assets that sort of comes close-ish. The book also has value in showing that you can compute the optimal amount of that asset class.

Yes, there really is a buried treasure for investors, one that solves our monumental problem by showing that the great dilemma of risk—the ostensible tradeoff between higher returns and lower risk—is actually a false choice. […] We need a more holistic approach; we also need a treasure map to know where to dig.

But just because that buried treasure exists doesn’t mean we will ever find it. The greatest value—more than in the treasure itself—will be in what we gain from the hunt.

I was tempted to issue a refund request, having gotten to the end and being told that the ideal was a chimera, for civilians at least, and since less than 24 hours had elapsed between buying it I would have got away with it.  Amazon track how much of a Kindle book you have read, though I don’t have a habit to returning Kindle books so I’d probably be OK.

But after sleeping on it I came to the conclusion that I did learn something, but in a Dion Fortune like way. My mind was trained, not informed. Most non-fiction reading is to inform the mind. So I got my £15 worth, but it wasn’t the £15-worth I expected.

Spitznagel insights – training the mind, not informing it

Take the Saint Petersburg dice game, a single roll of the dice offers

00007

Wotcha going to pay to play this game? The expected value is ($1+$2+$6+$22+$200+$100000)/6=166,705

but I am guessing most people wouldn’t pay that much, intuitively. It seems obvious that with five chances of being largely wiped out you wouldn’t pay the expected value. Bernoulli’s computation shows if you compute the geometric mean of what you end up with, you can estimate what a reasonable proportion of your total wealth you would pay for this wager. If you had £100,000 then paying about £37k or less to take part gives you a better than even chance of ending up better off. It quantifies the fact that you can take more risk if you have more capital that you don’t immediately need.

Reading the methodology gives an analytical solution to the gut feel approach, and is intriguing. However, the training not informing shows, because most risks you take give a return proportional to amount you put in. However, Spitz has only got started at this point, and he uses a sequence of returns that includes a catastrophic loss (to 0%) to show that where you have a sequence of returns that build on each other then risk mitigation can be worth while,

The arithmetic cost of its risk mitigation is more than offset by its geometric effect—such that its net portfolio effect is positive.

Most of us invest in a single lifetime of a specific sequence of returns. I still remember hearing my German great-grandmother describing sequence of returns risk – they lost their (financial) life savings twice. Fortunately most Anglosphere stock drawdowns aren’t that extreme, but Spitznagels view on central bank meddling suggests that this is not an immutable law of nature, particularly in a declining Imperium.

The Spitznagel edge

Spitznagel despises modern portfolio theory, which is the rough assumption that you buy a mix of less volatile but lower-returning assets like bonds and more volatile but higher returning assets like equities. Inherently in that mix is the takeaway that you will give up some return, and Spitz has no time for such milquetoast ambition.

However, to this mustelid reader he spends a lot of his book in search of something that you could replace bonds with, bonds being the most common MPT risk mitigator of choice1.

As one example, say at the beginning of the ISA year I could save that £20k in an ISA, less an amount that I could go to an insurance firm and say here is £x. If this time next year the market falls more than y%, pay me some lump sum proportional to x (but note NOT proportional to the fall, this is a cliff-edge function and therefore non-linear).

He spends a fair amount of time showing how you would compute the right amount to spend on this insurance, and in his examples it’s not very much. I haven’t given enough thought to whether you can do this with options and CFDs, but I don’t know of anywhere you can go to buy this sort of thing.

You can spreadbet against losses, but in general it is always cheaper to simply buy less of the asset and sit on cash. I have spreadbetted against my ISA in times of market turmoil, but that’s not the same as doing this steady state, which is an exercise in futility.

However, to return to the training the mind aspects, one of his key statements is

We experience profits and losses and all accounting ledgers arithmetically; we experience life arithmetically—one thing after another. This is linear thinking versus geometric thinking. It’s a big difference and essential to our understanding of risk and the disastrous impact of losses on wealth. But it is highly counterintuitive. Here you face an inconvenient, uncomfortable but crucial truth:

Your raw, linear returns are a lie; your true returns are crooked.

Bernoulli’s call to map returns through the logarithmic function was thus a normative one, not a positive one. In basing decisions on the geometric average of expected wealth or returns, not on the arithmetic average, Bernoulli was showing us how we should view risk—not how we necessarily do view risk. And this is precisely where economists got it so wrong.

I find this reasonably compelling. It’s not totally new to me but this exposition is good. I have no idea of if economists got this wrong, but we generally experience a particular sequence of risk. In both the housing market and in the dotcom bust I experienced that the crawl back from a double-digit loss is long and slow, and best made up by Saving More than trying to make it back in that market. If you lose 50% you have to make a 100% profit on what you have left to get back to where you were before.

Some of this you can lean against by not being 100% invested in equities – you reduce your arithmetic return natch, as you are less exposed to the equity market. But you improve your geometric return, because you live to fight another day. Spitz gives you the lowdown in the bit on the Kelly ratio, but again, what makes that less actionable for most is that having seen the value of your equity holdings go titsup in the markets you need to get right back on the horse and throw some of your cash into that now undervalued market. Easy to say, not so easy to do. That’s why people have bonds, and I have gold.  I don’t do bonds, because I estimate 25 times my net DB pension as a bondholding, and unless I get a fair bit older I can’t manage the right mix.

Theory would therefore point me in the direction of 100% equities. But I have had a pretty decent run, I don’t need to shoot for the lights, and sometimes comfort is more valuable than performance. So while Spitznagel wouldn’t approve, I take a lower expected return, because I can.

The big killer is there is no safe haven for little people

Spitznagel has turned the handle on all the things people typically regard as safe havens and qualified them against his specific criteria of cost-effective safe havens (ie they get your CAGR above the 95% confidence interval  of the S&P over a representative set of trial periods)

00068

And the results are in. Little people, you are hosed. As it happens an Ermine does use gold (and there is a useful piece of the Spitz in how you qualify how much gold you should hold, about 20% is right for me)  But before you all rush out to buy SGLP, most of the trial periods where gold lifted itself into Spitznagel success territory happened to be in the 1970s, after Nixon repudiated the convertibility of the dollar into gold at a fixed rate. So gold may not be all that after all.

“Gold is pretty darn good. You just have to understand there’s been a lot of noise around it.” – underlining gold’s value as a safe haven, while noting that it performs best when inflation expectations are high, and historically it’s been inconsistent in mitigating portfolio risk.

Obviously if you can buy insurance on Spitznagel’s terms then you are off to the races. But those terms are tough –

Any punter can devise a trade that does well in a crash. The key is how do you do in a crash relative to the rest of time.

Yeah, quite. From his Yahoo Finance interview via Business Insider interview

“The Federal Reserve is manipulating the most important information parameter in the economy, and that’s the interest rates.”

“I have this expectation of destruction in the financial markets. That doesn’t necessarily mean that someone should just hide away, because that may not be the best strategy either.”

Where’s Clint when you need him, eh? Do you feel lucky, punk?

Spitznagel’s Universa Investments hedge fund returned 4,144% in the first quarter of 2020

An Ermine felt pleased to get out of the first quarter of 2020 with the black tip to my tail intact after selling some crap and shorting some of my ISA. DNFS – bollocks to that. Going for a 40-bagger, now  that’s ambition.

More Spitznagel

Spitznagel’s company Universa

Spitznagel on the FT (Oct 20 this year)

“It would be very hard for bonds going forward to provide cost effectiveness. Bonds really represent the canonical case of the mean-variance approach of lowering the volatility in a portfolio, but being poorer because of it.”

Finally

No book is ever gonna tell you what to do successfully as an investor.

Well, this one sure ain’t. There’s a lot of good stuff in there, and I am sure I have brutalised the principles from a mixture of a lack of comprehension, not being as smart as Spitzy-boy and the exigencies of making it into a post. Nevertheless, it will probably reward re-reading, though I am almost 100% sure that it won’t give me anything actionable. Training the mind, not informing it…


  1. TIPS is the archetypal risk-free asset class – risk-free, that is, if you believe the CPI inflation index used by the Fed, which is a different matter. 

Fintech Fantasyland – Raisin and Coinbase

In more innocent times once upon a time, I walked into a branch of Barclays opposite where I worked, showed them my staff pass card and 20 pounds to get the ball rolling, and walked out with a shiny new Barclays bank account. No passports, name rank and serial number proof, no pack drill, just me and them. They knew The Firm, they knew what a staff card looked like, and that was good enough. They knew their customer, in an analogue way.

Nowadays the process is grief-stricken and involves webcams picturing your driver’s license(sic) and all sorts of aggravation. I figured I should start to get a teeny bit better return on my cash than 0% as the amount started to creep up to Harry Browne regions, so I was tempted by Hargreaves Lansdown’s Active Savings, on the principle that I already had an account with them, so I wouldn’t have to go through all that customer ID crap. I stopped as soon as I read signing up for active savings means they will always send an SMS to log in, even for my SIPP. I am sick of this stupidity. It’s the easiest job in the world to slam your phone number to some ne’erdowell, particularly if you live in rented accommodation with a shared mail access. But it’s not that hard to do for everyone else.

We had/have a perfectly serviceable alternative – your bank card and one of those reader things to generate a one-time password. But no, it the general fetish to have everything on your damn smartphone, SMS messaging is a less secure alternative they are pushing. Because every bugger has a smartphone surgically implanted, FFS.

The advantage of Active Savings is that you have a single interface to the account, and they then let you save with a number of other organisations without signing up with those separately. Which is good, because the process of signing up for a bank account in the UK is absolutely horrible now with all the ID checks, I’m sick of it.

So I looked for an alternative, and Raisin seems to do the same thing. Given that I have a SIPP with HL, running with a separate FSCS institution seems a good idea anyway, and though I have to suck up the SMS bullshit at least I only have one sign up process to do.

The time to worry about bail-ins is before they happen

If you look at Raisin’s FSCS protection page, once you have signed up for savings account through Raisin, you get the FSCS (or Euro equivalent) protection of the destination institution. One of the biggest drags about savings is having to sign up with many institutions, the implication here is that you could break up your holdings below the 85k FSCS amount all through Raisin, provided you were careful where the destinations were.

There is some argument that holding more than the FSCS limit in cash is mad, unless you are really, really old. However, at current valuations I can see myself doing that for some time. Inflation is not the only hazard I see, and looking at what happened in Cyprus the FSCS limit is roughly where you become a tall poppy and a source of emergency bank funding of last resort.

So far so good, but though Raisin is associated with Starling Bank and I used Starling as a feeder account, it seems to be taking its time to happen – transferred about 10am and only got there 11pm. In general I expect better from Starling, my experience to date has been of quiet, understated competence, and blistering speed at posting details of transactions. Pay for something using the card, and by the time you have picked up the phone and opened the app that transaction is there to be seen in your account right away.  I don’t bother to ask for paper tickets for those card transactions because there’s no point.

For other Starling customers wondering what the hell their sort code is, Starling tell you there is only one: 60-83-71 at the time of writing.

I found Raisin confusing in operation. Some of this of course is that the nominee method of banking is new to me. For example I applied for a 32 days Investec notice account, paying 0.8% APR. Time to order some tiny fireworks, eh? So I get an email saying the Ts and Cs for the Investec savings account you viewed, and I think fine and dandy, to be treated to a pdf with 16 pages of solid cruft about Meteor Asset Management, with nary a peep about Investec. If you look at How Raisin Works you will see that Meteor Asset Management is the pool account front running Raisin’s customers, sort of analogous to a nominee account1, which is how you don’t get to streetfight the onerous Know Your customer crap for each and every share line in your ISA.

I happen to have read the how it works page before getting this 16 page Investec Ts and Cs not mentioning a word about…Investec. I was more tolerant of this rum carry-on because I had already qualified Starling as a competent operation, but that sort of inconsistency is going to scare the horses in customers of a more nervous disposition. Continue reading “Fintech Fantasyland – Raisin and Coinbase”

The Coming Gilded Age and Vanguard’s mustelid indigestion

Diversification is  a decent principle with bank accounts and the like, particularly given the tendency of financial organisations to freeze people’s accounts without due process due to the money laundering regulations. Then there’s the Madoff risk of the unknown unknowns cratering a business. So much to worry about.

1+1 redundancy is a good principle in many things-when I did a parachute jump there was a main and standby. Whether I’d have had the presence of mind to pull the standby1 before becoming a grease spot is another thing, but main and standby is A Good Thing.

To that end I have a second ISA with Charles Stanley as well as the main one with iWeb. The aim here is damage limitation, and you get most of the win with the first standby system you introduce. In theory I could get better security against providers going titsup by balkanising my ISA to try and stay under the FSCS compensation limit. Life is too short for that. Main and standby – and stop there.

My main ISA with iWeb is pretty spit-and-sawdust. Their win is not charging me annual fees, provided I hold no funds (shares and ETFs are fine) and don’t trade. I am OK to pay them transaction fees, the aim here is not to churn. They have no monthly investing facility, and you can’t borrow from the ISA – it isn’t a Flexible ISA.

Flexibility is valuable to people with no income

The financially independent are despised by the banking system, who won’t lend them money because without a salary income they can’t qualify the risk. So it’s handy to be able to borrow from your ISA, though you should never aim to use it. I hung onto my Charles Stanley account for its flexibility, but what with one thing and another it tended to grow, and CS jacked up their fees a while back. This begins to irk me. According to the Great God Monevator, CS rocks in at 0.35% where Vanguard are 0.15%. The difference in that makes it slightly worth while to shift as the account gets larger. As an old git I don’t need to flay costs as if they were the tattooed agents of darkness is the same way as TA, because I am a decumulator, and there aren’t as many decades to accumulate as for a 20-something. On the other hand I carry a lot of gold in the iWeb ISA and have shifted my risk balance lower, so maybe I do need to up the ante on the equity part. I was pointed toward the behemoth Vanguard as a lower-cost supplier with a flexible facility via a comment on Monevator. Although flexible access tends not to be a bargain basement offering, Vanguard do indeed offer it. To wit

The Vanguard ISA is a “flexible” ISA, meaning that money you withdraw may generally be paid back in during the same tax year without counting towards your annual allowance

Don’t transfer your old ISA as your first act. Because: AML theatre/freezes

Continue reading “The Coming Gilded Age and Vanguard’s mustelid indigestion”

Coiled spring and missing Claw

Andy Haldane, Bank of England chief economist at the time, said that the economy was like a coiled spring, ready to leap into action after the Covid crisis. He’s now off to head up the RSA after 32 years.

An Ermine is left scratching his head and wondering what the backstory is here. Did Haldane always have a hankering for the arts, and his mastery of the metaphor made him wonder if the grey garb of the professional economist was beginning to chafe? Did he pitch for a promotion and get blanked? There’s also the admiration for a fellow up to working for more than three decades, clearly the FI/RE mantra speaks less to him that say one of the mustelid species, or Monevator’s TA.

Coiled Spring

When they reopen, pubs and restaurants could see a boom because of the Joni Mitchell effect: you don’t know what you’ve got till it’s gone.

Investor’s Chronicle

Fish and chips

It’s a fair cop, guv. Kicked off early last week with a full English Breakfast at one place which was mighty fine, and we repeated the exercise today, apparently they are overbooked for Sunday lunch so we needed to clear off by 11:20, which was fine, it doesn’t take an hour to eat breakfast! They’ve had to ring round to drum up staff, with the added incentive of free drinks at the end of the shift. However, it helps that the weather is reminiscent of that in lockdown 1 last year, a light breeze and sunshine. Their problem is that it’s all up to the vagaries of the weather – people aren’t going to want to sit outside in the rain, more typical of April weather in the UK.

Missing Claw

A couple of days after the first breakfast we sought out lobster on the beach, now that it’s open season on them.

We were out of luck, perhaps the cafe doesn’t want to carry the capital risk to having too much of a wasting asset. I can see their point, so we slummed it with fish and chips instead.

Fish and chips

However, we did see evidence of lobster being eaten by one of the other patrons. After such hedonism a wander up to the top of the hill and look out over the surprisingly blue sea. It is still a surprise to me. I am used to the coastline of East Anglia bordering on the North Sea, where the sea is shallow and easily churned up so it always looks like dirty dishwater.

Dorset coast

In some parts of the Dorset coast it’s clear enough you can see your feet in the water, though I leave that sort of thing to Mrs Ermine. I’d always thought blue seas are a Mediterranean sort of thing.

Eating out is a slightly odd experience. Many people find it difficult being around others now, I am not sure I noticed a change. Perhaps I never melded with the mosh-pit in the first place. However, here’s a sound I haven’t heard for an awful long time, humanity in its garrulous exuberance.

As I was waiting for the bill I was trying to work out exactly what it was that disturbed me about the King Charles spaniel at another table. Obviously that a dog was in an eatery, but after a while I sussed it. This craven mutt had no lower canines. Not a gap where the original ones had been, just no pointy eyeteeth in the lower jaw, all incisors. No damn self-respect.

The markets are not the economy

Despite the Joni Mitchell effect, the coiled spring may not have much substance behind it in the medium term. Unless you’re in your twenties you shouldn’t really eat something and chips more than once a week, so you’re not going to eat a year’s worth of missed meals out in three months. As that Investor’s Chronicle article observed, much is in suspended animation at the moment, and jobs will be lost as the rubble hits the ground.  On the flipside, capitalism turned out a lot more resilient in the face of the challenge than we expected this time last year. As evidenced in the markets. After settling down the frenzy of the first part of last year, I’ve been buying FTSE250 since mid last year, because sometimes you have to stake a claim on what you don’t believe in.

That has done well, but I suspect that some of the hurt is being felt more in the unlisted small firms, the tiddlers. Oddly enough I was looking out for this on the drive down to the south coast, and I didn’t really see much that was shuttered, more was shouting that it was open than usual1. Most of the pubs looked okay, it’s not like the drive through Dorset was like driving through the Welsh valleys, where the mark of Thatcher still blights the land three generations on. The worst part was coming back through Yeovil, but that’s a town that always looks like hope came to die. Enough boarded up shops, but I couldn’t remember if these were places that had been boarded up two years ago. Yeovil is that sort of place…

It’s hard to see where the markets are now. However, after the last post where the sentiment seemed to be that I am not representing the bond value of my DB pension adequately using the HMRC scale factor of ~20, perhaps I am overly defensive at the mo. It did lead me to ask the question of whether I really should hold getting on for twice my erstwhile salary as cash. I am not at the widows and orphans end of the risk profile scale. This mustelid fears inflation. It doesn’t have to be in equities, but it shouldn’t be so much in cash…

Hard to know what to use this year’s ISA allowance for, though. Perhaps a little more gold, and then there’s the Lars doctrine, nobody ever got fired for buying VWRL. Indeed, Lars’ latest has an indirect bollocking for those in cash because they fear the stock markets

If you feel the minimal-risk asset’s interest rate does not give you enough return in your simple two-product portfolio – and you’re willing to take more risk – I’d say maybe take that risk in the equity markets. At least that keeps things simple.

The non-equity part of the portfolio is bonds, which in my case is the DB pension. If I am undervaluing the bond component by using the HMRC multiplier of 20, then perhaps I can shift some into equities. Shame they are up in the sky… I missed this point about the State Pension shifting the needle on the dial in the more bonds department.

Since it appears that Vanguard’s ISA is a flexible ISA, I can ground my Charles Stanley and move it to Vanguard. What I will do is first open Vanguard with this year’s ISA allowance, and buy VWRL or the fund equivalent on the same day as selling out the similar fund in Charles Stanley. Which will reduce market risk. I haven’t yet worked out if Vanguard’s ISA will only hold Vanguard’s products. I normally transfer ISAs in specie which gets round that problem.

Perhaps the markets are expecting a massive post-pandemic boom. Personally I wouldn’t be surprised to see another lockdown as Autumn turns to Winter – yes vaccination is giving us breathing space, but the enemy is adapting too. Maybe capitalism has the resilience to adapt and profit from the new normal, though it seems to be doing so by throwing an increasing part of the workforce under the bus. That tends to have undesirable side-effects. There are cheerleaders for the concept of the Roaring Twenties, let’s hope that Kondratieff was wrong, because that didn’t end well on the last turn of the arc 100 years ago. Now is the winter of the fifth Kondratieff wave, let us hope that winter holds a spring…


  1. There’s sample bias here, since if you’re the Abbotsbury Swannery you have 20 billboards advertising for the masses to bring their ickle children for a perfect family day out, whereas if your eatery is closed you can get away with a single ‘closed’ sign on the door. However, I was looking out for the latter 

coiled spring – or cautionary tale – a strange year

Mrs Ermine and I recently celebrated a year of lockdown with a bottle of wine. A strange year, but there’s something to celebrate, which is that we are still here. I will drink to that.

This is one that a lot of the the rich world got wrong, ballsed up in spades, with the UK in the top ten with a death rate of 1 in 530. There aren’t any really big-picture commonalities that can be drawn, though the intelligencer’s high-level takeaway isn’t bad. We have become soft in the West from having it easy for a long time, so we didn’t really believe shit was happening to us. That’s bad when you are up against an exponential.

We have continued to just think that something bad isn’t happening to us, and that there’s an out somewhere — that, of course we’re going to solve this next month. It’s always been one month away. And as long as the solution is always one month away, the urgency isn’t there. And I do believe that this is a symptom of a bunch of nations and societies that really haven’t had to deal with adversity on our shores in a really long time. We are uncomfortable with making the hard decisions that have to be made.

Europe including the UK, the US, and for some reason South America made a pig’s ear of responding to Covid. You have to scroll down a long way down to South Africa to get out of Europe and America on the JHU table ranked in deaths/100k.

Yes, we have a route out in the vaccination programme, a win for science. It’s also a win for the one thing that Boris’s crew did get right – dropping a lot of money, and in not trusting Trump/Merck  in the Oxford vaccine production.

Anyway, we are still here, and we cleaned most of the green slime off the  camper van in the hope of being able to use it sometime next month. Even if only to go and eat lobster – except that it seems to be closed season so we will have to make do with fish and chips by the beach.

Fish and chips by the beach
Fish and chips by the beach

The NT opened only a third of the car park, so while we got there early the car park was already rammed. I asked them if they were going to open the other two, but apparently not. Helpfully they said it would be open for Easter, it was to do with the grass being ready. I had assumed they were doing it to limit numbers on the beach. Anyway, this is the south coast. There are beaches enough, indeed the next one westwards had a council car park where you could park all day for £2 as opposed to £6 for a day. The view was still superb, the fish and chips tasted better after so long and people were spread out.

Stock market gives Covid the middle finger

The Ermine sticks a snout at my ISAs, and it appeared they have still been creeping up. Didn’t really look like what I expected this time last year. It is now much more defensively biased and there is a fair amount of gold, on which I have taken a soaking in £ values. But the other stuff seems to have outstripped the loss of lustre. The change in the gold price leans away from the obvious possibility that our great British Pounds have become rather less Great, they are relatively spiffing of late. Maybe World + Dog thinks Brexit is the greatest thing to happen since sliced bread? Or they think Covid is on the run? Goldwyn had it to a T Nobody knows anything. I don’t think it’ll be over by Christmas, but I’m a nobody…

I can’t say that’s what I expected, but given I have a rammed Premium Bonds allocation and NS&I ILSCs and next year’s ISA contribution in cash I have far too much GBP exposure, so being wrong in that way is not a hardship. I’d rather be wrong than poor. I still worry what is coming our way though, and with the markets up in the sky what the hell do you buy to diversify that? Gold is one place. There have been other oddities. What’s up with BlackRock world mining? Have we all decided to start digging shit up from the ground then?

BRWM. Eh? It’s mining, FFS

Years ago, there was a quote from a City wallah to the effect of I’ve no ‘king idea what we’re doing up here mate. No, me neither, bud. In fact, generally the only rational response is to stand there with your gob open and go WTAF?

I am getting older, and perhaps not allowing for that.

I recently had to do one of those finametrica attitude to risk things, as a CYA exercise I guess. Less extreme results this time than last time. Perhaps that is as things should be, after all, a tenth of my three-score years and ten has rolled by since the original result. The ISA is now much higher than it was, buoyed by a rising stock market and swelled by the transfer of my old AVC/SIPP during my lean years of earning very little. To a first approximation I have achieved my financial goals, and I am reminded of Warren Buffett’s observation of the likely lads of Long Term Capital Management. “Too much cock, boys

to make money they didn’t have and didn’t need, they risked what they did have and did need. That is foolish. That is just plain foolish. It doesn’t make any difference what your IQ is. If you risk something that is important to you for something that is unimportant to you it just does not make any sense.

The Belle Curve has it put in a different way

My job as a wealth manager is to help clients hold on to their wealth and to preserve and grow it to keep pace with inflation. My number one priority is to ensure that money is there to meet their goals, when they are ready to spend it.

I don’t need to hit it out of the park. Just as well at current valuations, eh? Perhaps I have more in common with Warren’s last outing. He sounded pretty much out of ideas. I am not the desperate Ermine of 2009, needing to chart a route out of work as soon as possible. I need to look closer at preservation, and that is a different mindset.

Preservation is about asset class diversification. You give up return for security

The trouble with FI/RE is your younger self sets a course at the start of the journey. You have time on your side to ride the markets, and you need win, because over a working life you’d rather the mythical magic of compound interest double your savings in real terms over 40 years, and it builds a certain mindset. If you happened to be a feckless Ermine who started all this stuff far too late in life then you need a lot more punch, and the win that feckless blighter had was starting in the hole of the GFC, which coincidentally was also what made my job a bit shit hence the breakout requirement.

Trouble is, your younger self sets the direction, and what was right in the morning in the afternoon becomes a lie, not just in the psychological sense. I was playing that hungry younger self, this time last year, looking for opportunities in the noise and hum. I took them, more actively than most, and shorting the market in March/April to boot, and I have been fortunate, the numbers are decently bigger now than the end of December 2019. Obviously I am chuffed that it worked, but there’s a bigger Warren Buffett-style question I should be asking myself

“Self, what are you doing on the bleeding edge of the coalface shorting, when you are grizzled of fur? OK, so you have win, but you have to ask yourself whether you should have been on the playing field at all?”

Let’s hear it again from The Belle Curve. Now obviously I don’t employ a wealth management firm, so I am not sure I classify as being able to stay rich, I have never worked in finance or the upper echelons of IT, but I am reasonably well off, and I am with Joseph Heller. But Blair has some words of wisdom. She doesn’t help people climb the mountain. What she does is help them stay near the peak, and that appears to be a very different ballgame.

Few things compare to the high of making millions off a concentrated bet; whether that bet is on a single stock, building a business, or working for a successful start-up. I imagine the brain responds to this high in the same way it does to addiction. The temptation to chase the next high is all-encompassing. I talk to investors all the time who can’t stop chasing that high.

Hmm. Am I that guy? I recall reading TA’s Do Not Sell post into the teeth of the March selloff last year and thinking to myself “F*ck that for a game of tin soldiers, there’s win to be had”. Not only did I sell a load of crap, I shorted some of it, along with some of what I retained which was taking on water. Sure, I made errors along the way, like selling BRWM, only to rebuy it, fortunately still bent somewhat out of shape. But in the round it paid off handsomely, as I cleared a couple of numerical thresholds which are more a product of having ten fingers than actual significance, but nevertheless good for the fur.

I have now well over twice as much in my ISA as the capital assets I left work with1.  Inflation makes that less riveting than it sounds, but it’s still worth having. I saved a capital amount starting three years before I stopped working that is over half the capital amount backing 23 years of DB pension savings. You aren’t meant so save for retirement that way, but all’s well that ends well etc. However, it’s got to stay well, and here perhaps I have something to learn.

I have to look in the mirror and wonder if this grizzled mustelid is doing the walk of shame as far as Warren’s LTCM comment. I didn’t need that boost last year. Maybe I should have listened to TA, much as it went against the grain. Self, be like Joe Heller, not the hedge fund manager in Kurt Vonnegut’s poem. I’d imagine by now it’s worked well enough for TA, if you did nothing than you are probably better off than before Covid in a balanced equity portfolio. Update: TA is 20% up on the deal. Chapeau that man. I am up a fair bit more, but I sweated buckets for it and in retrospect took a shitload of risk for it. Shorting anything always comes with a ‘here be dragons’ warning. TA just wiped his brow, went away with all this noise and hum  and sat on his backside watching Netflix.

Sadly I know some ex colleagues who are well pissed off with the markets, I put my foot in it with one of them because I figured pretty much everyone with market exposure has come out well of the last year. Not necessarily. If you did something in the crossfire, it depends what, and how long you took to get back on the horse after you fell off if that happened.

I was balls-deep in equities before March last year. Some of that is because I have a DB pension, which is a very bond-like asset, and it is enough that if I scale the annual income by 16 to roughly get the capital value behind it,  I will never tip the balance to the classic 60/40% equity:bond ratio because I didn’t save up enough in my working life.

However, if it leads to intemperate behaviour, then maybe I need less of that. I now have a large slug of gold, and because the shorting happened outside the ISA I have a fair amount of cash. I have as much premium bonds as I can have, still the old NS&I ILSCs and some random savings accounts earning sod all.

Much of that is because I took some money off the table selling rubbish and moved it into gold, and my cash was lifted by short-selling some of the ISA which indirectly moves money out of the ISA. Since then the markets have lifted the ISA in the same way as for TA , turning it into a sort of double win. TA will probably leave me in the dust over the Roaring Twenties with buy and hold. The Big One is gonna come, and TA is a young fellow, he can probably ride the suckout and hold on for the uplift. Me, not so much. Roaring Twenties be damned, as the Germans say

Gott läßt sich keinen Baum in den Himmel wachsen

the Lord sees to it that the trees do not grow into the sky.

I am closer to the Permanent Portfolio than I was before last year. All in all it was interesting reading the purity of purpose in my seven-year younger self – investing is all about return, about getting ahead. It was then, for me.

I could be more aggressive with the security of the DB pension floor to my income, but I am still a relatively young retiree and the value in my ISA holdings is in defending me against longer term hazards like inflation, so I should perhaps be more respectful of its value to me, and take less risk. It’s instructive to look back nearly 10 years at my younger self when I wrote about the PP last

Nine years ago I was using an older version of excel and there was less balance

Back then, I was in the final straight to retire. Fixed interest is the rescaled annual amount of my DB pension at 60 after tax (because I don’t giveashit about what I don’t see, it isn’t useful value to me). It was over half my networth. It has more or less stayed the same in real terms, but I have forced that beggar back to 30% of my asset allocation. Which is OK for a deadbeat who is considered ‘economically inactive’ by Her Majesty’s government. Yes I have earned lousy amounts here and there, but never amounting to more than 10% of my erstwhile salary, and most years less. The magenta part of the Pac-Man swelled, not only to match the cyan pie, but also to fund my life over nine years, spaff more on a house and fund the other 33% in gold and cash. At current valuations, it’s not inconceivable that it falls to half, but the problem is in calling when 😉

It is easier to derisk after having taken a win from one last Covid crash hurrah than if it had all gone titsup. While I am less exposed to the markets now, all that cash exposes me to inflation and currency risk. An obvious move would be to take half of it and buy gold over a period. I would still have less than Harry in cash and gold, but the balance would be better. Harry Browne was a 1970s USA guy. I am also not in the USA, and 50 years have rolled by. The West is not cock of the rock and insulated from China and Russia, it was still in the ascendant in his time (the UK was further along the Imperial downslide than the US is now).

There’s some hazard in having gold as the only non-fiat currency store of value – surely there are others, but I can’t think of any that I trust. I did give a short consideration to Monevator’s ‘should you own bitcoin in your portfolio‘ and thought – intellectually the answer is probably yes, but bollocks to all that. I should probably own a BTL or two but, well, bollocks to all that as well. I’d rather do bitcoin than go there.

the Vanguard Borg

I should take a leaf from AlCam’s book and switch out of Charles Stanley to Vanguard’s ISA for my standby ISA account. I shouldn’t increase iWeb any more – they are attractive because there are zero fees if you don’t hold OEICs and you don’t trade, which suits my general activity pattern well. CS charges 0.35% as a platform fee, which begins to irk me as the account increases in size. Vanguard charges 0.15%. There’s nothing racy in there. I hold a L&G world exUK fund in there and a L&G FTSE250 ex ITs fund. I favoured L&G over Vanguard to diversify away from Vanguard – I have a lot of VWRL and had way too much VUKE. I can accept the risk of Vanguard going titsup now because the great lump of VUKE is gone. Vanguard offer a serviceable replacement for the L&G Dev World exUK fund and a FTSE250 fund albeit without the ex-investment trusts tilt.

Main and standby is good enough ISA protection for me. Finimus has the go-to post on why you can’t rely on platforms  client-money segregation rules. In engineering having 1+1 redundancy is usually the main win. You can do more to spread the risk, but complexity gets out of hand and you end up with a maintenance liability.

Your broker going down is a tail risk, very unlikely but the results could be devastating. From a gut feel Vanguard going down is less likely to me than CS going down. I will make sure in future that I don’t buy more Vanguard ETFs in iWeb, though I won’t liquidate VWRL. I am sure somebody else does an ETF like VWRL, though the substitute is not obvious on Monevator’s list. I don’t want a fund because iWeb charge platform fees on funds. Scratch that – having just checked to see if I can substantiate this, which was true when I opened my account, I can’t back it up from iWeb’s charges list. In which case the obvious course of action in iWeb is to go buy Ishares HSBC FTSE All-World Index C GB00BMJJJF91 and be done with it. Vanguard slightly frightens me – so many people believe in it and it is huge. The win for a bad actor taking it down is enormous.

Vanguard are a better and cheaper bet that Charles Stanley, with similar advantages of the flexible ISA offering and regular investing. So rather than putting cash into CS next month, I will open with Vanguard. I can defray part of the market risk by selling the L&G funds in CS and buying the equivalent ETFs in Vanguard on the same day. There’s a lot more than one year’s ISA contribution in CS but at least that takes out some of the risk. I can then do an ISA cash transfer at my leisure.

Covid makes spending and working very different

It’s reduced my spending overall. There was a flurry of spending at the beginning, to hedge some of the worst eventualities which didn’t come to pass. They also hedge Brexit to some extent, which is very clearly making the price of some things rise – oddly electronic gizmos from Amazon seem to have risen, and food is rising. We bought a lot of wine, but still have most of it in stock 😉  But overall outgoings are very clearly down.

Monevator has occasionally given me stick about a rabidly anti-work stance, basically the whole point of getting to FI was to get the monkey of The Man off my goddamned back. Work is overvalued in our society. It’s way overrated as a source of meaning in life, to be honest if you’re going to look for meaning from a belief in God or a meaning in work, I’d take the former any day. At least it gives you hope in adversity2. Whereas a belief in the meaning of the grind of the 9 to 5 is empty IMO – a form of terror management theory writ large. Even a Grand Fromage is typically forgotten about two weeks after they take the nameplate off the door.

The Protestant Work Ethic is a mashup of meaning and money. Niall Ferguson made a cogent case that it was what until recently made the West cock of the rock economically3. Not absolutely sure how you make sense of the more recent decline and the rise of the East, I am a little bit more with Oswald Spengler there, that there is a cyclical nature to empires. Let’s hope it’s not Jared Diamond and catabolic collapse eh? The problems Obama called out  eight years ago don’t seem to have got any better. MAGA doesn’t seem to have improved the State of the Union that much.

We once had a positive view of a world with less work

In the twisted wreckage after the Great Depression, Keynes dreamed of a better way – Economic Possibilities for our Grandchildren

I feel sure that with a little more experience we shall use the new-found bounty of nature quite differently from the way in which the rich use it today, and will map out for ourselves a plan of life quite otherwise than theirs. For many ages to come the old Adam will be so strong in us that everybody will need to do some work if he is to be contented. We shall do more things for ourselves than is usual with the rich today, only too glad to have small duties and tasks and routines. But beyond this, we shall endeavour to spread the bread thin on the butter-to make what work there is still to be done to be as widely shared as possible. Three-hour shifts or a fifteen-hour week may put off the problem for a great while. For three hours a day is quite enough to satisfy the old Adam in most of us!

The old boy did well in the what will happen. Compared to the 1930s his narrative of economic and material plenty has largely come true. But he achieved an epic fail in the why of work. It’s hard to know where we lost the plot, but if the peak human breeding age is about 30-35, then there’s no escaping that fact that those grandchildren have definitely come of age and entered the workforce, and they stick their head up above the parapet and go WTF? Where are my fifteen hour weeks, then?

One can argue that for a narrow section of the workforce, that has arrived, paradoxically amplified by the coronavirus pandemic. There be many workers who change the state of information. They don’t turn metal on a lathe or unload ships or build stuff. If what you do falls into that category, then working from home wins. I would say that if you’re doing that for an employer and you find it successful, then watch your back. If you can do it at home, then it’s susceptible to geographic arbitrage, and it can probably be done in a country with a much cheaper cost of living, to your detriment. Be careful what you wish for, and all that. I expect to see a big hollowing out of lower-end white collar jobs in the years to come. Pandemics accelerate change, because they squeeze the focus onto the essential to the detriment of the cosmetic. We didn’t hear so much about the Kardashians last year 😉 McKinsey say this is also acting on businesses, again amplifying the difference between the best and the rest.

Keynes was right about work in one way IMO

I gave thirty years and arguably the best years of my life to the god of Work. Unlike many others, I didn’t have a great attachment to it.

I never had a problem with keeping myself occupied since giving it up, but one thing I have missed in the pandemic is creative activity with others. I would do this in the area associated with recreation before, but in one of the clubs we decided to cease operations until a secure way  of meeting is possible and it’s not, at the moment.

I am an introvert, I see in others quite serious distress at relative isolation, because the community of people I know are generally fortunate enough to be able to work remotely. Which may have its ups, but it seems to also have its downs. True home/remote workers probably compensated for the remoteness in the leisure or other non-work areas of life, like I did, though as a retiree you have more time to do that.

I recently physically built an instance of the design I made to qualify it worked, with somebody else. Physically assembling it was basically technician work for both of us, but there was an element of  the case for working with your hands in it. We didn’t even really have the right tools4, so needed to improvise with a bench vice and a bunch of cardboard boxes, but there was something satisfying in assembling this component, making the connectors, and sparking it up and having all components report back as present and correct. I had been spending too much time in the virtual world spinning the parts on a screen to make them fit and optimise things at home, and it was good to do something real with real stuff and real people for a change. It was a good win for half a day.

There’s probably more of this work than I want to spend time on it, so I needed to think and prioritise, chase the higher value-add. Keynes was right. One day a week to one and a half is about right – although the pattern is different. Some of this work is CAD, and I am on the maker side of the maker/manager divide.5 It doesn’t fall neatly into days, or even half days, Sometimes I have to have at it, then take a walk. Strange things happen in the downtime, and things which were intractable before become obvious after.

You’d get sacked in a heartbeat doing that in a company. Where the hell is that Ermine? What do we pay him for if he’s not there? However, as a maker, the productivity of the time in such an unscheduled way goes way up.

On the other hand, working one day a week doesn’t earn enough to build a life – I’d be in the precariat renting a single room if I had 30 years of that behind me. I can do that now because I don’t need the money, other than to feel valued and to buy commitment 6. I can work Keynes’ pattern, but in an economy designed for a 24/7 requirement. Because: FI. There’s no other way for most people.

I am also doing a recreational creative project with somebody else. This is an entirely virtual operation. It was a chance to get my head round how to use Git, bitbucket and Cloudcannon to redevelop a website while making the technology usable to somebody who has had no background in software engineering. There will never be a revenue stream from this, but it is developing something bouncing ideas off other people, and that is something valuable, even to somebody identified as a lone wolf on leaving primary school. I am introvert, but not an island.

I am also privileged I can avail myself of these incidental upsides precisely because I don’t need to make them pay my costs of living. In What’s Wrong with the Way we Work. the New Yorker indicates that the cult of finding meaning at work started in the 1970s

“management must develop a better understanding of the more elusive, less tangible factors that add up to ‘job satisfaction.’ ”

Hmm, respect, enough pay to live well on, and not too much time lost to it seems a good place to start, eh? How did we let twats like Steve Jobs tell us rubbish like this

You’re not going to believe Usain Bolt telling you it’s easy to win the 100m Olympics, so why believe the DWYL-LWYD lie from Steve Jobs? No doubt it worked for him, but you shouldn’t infer the general from the particular. Not without at least some statistical analysis.

Work can offer you some of that peripheral claptrap, but only after it gets to pay your rent and put food on your and your family’s plate. The trends weren’t heading in the right direction before the pandemic, never mind after it.

Keynes was cheerful sort. Current visionaries, not so much.

Work is the fundamental problem. We have designed systems where you need to work to satisfy Maslow’s hierarchy of needs

In theory we have a welfare state that addresses the bottom of the pyramid, but you have to ask yourself why if you go around the streets of London or Oxford or many other towns and cites you see people who have clearly fallen between the cracks. There’s no law saying this has to be so – Asimov’s Solarians and Keynes’s grandchildren were imagined in worlds where you didn’t have to work to meet these bottom needs. But it was why the twenty-something Ermine signed up for working five days a week – to be able to get out from under my parents’ roof and get food on my plate. I could have occupied myself better elsewhere, there’s plenty enough to interest a curious mustelid. However, not being able to make the rent concentrates the mind.

Steve Jobs was telling us all to get into the green and blue bits up top, all the other stuff will take care of itself.But he had the self-same blind spot that many people who don’t have to fuss with the lower parts of the pyramid have. He spent his time up in the world of ideas, and that’s where a lot of the successful folk in our economy end up. The people who have the money are focused on the top end, and just like Al Capone, if you want some, then go where the money is. Hence all the poncey services to help the ultra-rich feel great about themselves, with their yachts and stuff. But that goes a long way down the line. Why is Facebook minting it? Ask yourself – does any human being really need Facebook’s services, in the way you need water, or shelter? I don’t use Facebook in any big way, indeed I don’t use social media in a big way  – it was fun to learn about but after a while I came to the conclusion life was better without that stuff 😉

I’ve survived so far, in a way that I wouldn’t without water, or trying to use a cardboard box as shelter rather than a house. Facebook addresses the upper two tiers of the pyramid. Go where the money is. If you want to make money, compete at the top, and if your business has the capacity and smarts, then you see this as being all there is. That fellow made a cogent case for it, though he lost the plot at the end

Consumers in the Purpose Economy have too many options in every marketplace and want you to give them a reason to buy your product. Simply, they want you to help them find meaning in their lives. We are entering a world where meaning is the most valuable currency. What a time to be alive.

Same category error as Steve Jobs, mate. Meaning isn’t the most valuable currency for everyone. If you see people sleeping in boxes and cars, they couldn’t giveashit about meaning, because they’re down at the red end of Maslow’s pyramid.

In this article by Bloomberg about trends, two out of the three trends are putting more people down at the red end. Talented folk ask why does Joe Public love sweatshops?

I used to fulminate at the radio in the 1970s that that sonoabitch Arthur Scargill was governing the country, with his damn flying pickets stopping other people working and turning my lights off. Which he did, and I am still of the opinion that that sort of thing needed to be crushed. I have absolutely no problem with people withdrawing their labour, but getting in the face of other people working in industries that used the product (power generation) and threatening them with GBH to stop working isn’t  good. Nor is dropping concrete blocks on taxi drivers when you’re trying to reduce strikebreaking. And yes, for the record, the violence wasn’t only on the miners’ side, though it did seem like they had the lion’s share.

It always puzzled the young Ermine why there was such resistance to closing pits when the selfsame Scargill went on the radio to talk about how bloody dangerous the job was. He was right. Britain industrialised earliest and this was powered by coal, but it’s hard to disagree that the history of mining disasters in the UK is horrific. Wikipedia has 60 UK coal mining disasters listed. Coal mining fits the sweatshop moniker to a T.

All these white collar folks go tsk tsk, work is the route out of poverty, education, training, yada, yada. Really? You and I with our soft uncallused hand can say it’s easy, but it isn’t, and the rising water’s coming for us now anyway. There’s an argument my job went bad because of globalisation, though a humdinger of a financial crash didn’t help any.  What do the good folk at Bloomberg have to say?

The unskilled worker is the next pandemic.

Let me just step back. First of all, I think that it’s pretty clear if you have high degrees of unemployment, there are basic economic impacts that are not good for the nation. It puts an incredible strain on the economy. It usually only gets addressed through higher taxes on a smaller and smaller tax base. It increases the gaps between the haves and have-nots, which historically has caused more social unrest if it goes on for a period of time. We saw high levels of unemployment like in the Depression create hopelessness and despair in individuals, in families, and their communities.

I think [unemployment] happens as quickly as automation displaces people from work without concurrently retraining them and retooling them for other types of work.

Ah, that old error again. concurrently retraining them and retooling them for other types of work. That’s OK if the other work is at a similar level and hopefully needs at least some of the same skills. I’m sure there are some ex-miners that went into high finance, but if you drive through the Welsh valleys 35 years after Thatcher won that fight and Scargill lost, there are still pockets where regeneration didn’t happen. Hope went to die and got buried.

When I was a child playing on the bombsites and slum clearances where they eventually built Goldsmith’s College halls of residence I had to watch out, there were builders all over the place who would give kids hell. 40 years on and at the end of my working life and the canteen at the Athlete’s village of 3000 flats  of the London Olympics only needed a maximum capacity of 200 for a much larger build. The market for unskilled7 work has been falling for decades.

Less risk. More spending

is what I want to do with my post-covid world, if and when I get there. I can’t really do much about the more spending at the moment, but I can change the risk. Changing a mindset isn’t easy, however, but if and when the next crash comes along, I need to think to self

What would Warren do?

and this last time, to be honest, Warren sat in an empty exhibition hall looking scared, telling us all that in the long run it’ll come good, while thinking to himself ‘but I don’t have a long run!’

Warren’s the blue team, he’s had a slightly tough pandemic relative to the S&P500

I’m not writing the old boy off yet. WB is better at this game than I. But I don’t want to try play the next curveball.

I’ve had a lot of luck in the stock market. Singlehandedly it stamped on the absolutely dreadful luck I had in the housing market, and then some. Whenever I listen to people talk about property is my pension or even smart folks over the Pond talking thusly

Real estate is actually my favorite asset class to build wealth because it is easy to understand, is tangible, provides utility, and has a solid income stream.

and an Ermine thinks to himself WTAF? Property was the greatest source of hurt in my entire personal finance life, and it grabbed me by the nuts at an early age and wouldn’t bloody well let go until 20 years later. I’d rather gnaw a leg off than rely on that. I don’t consider property as an asset at all. When we moved down here we went for a detached house, because I don’t want to hear the neighbours’ grandchildren squealing or Coronation Street on t’telly as they get mutton jeff. Mrs Ermine wanted more garden. I want to hear my own stuff, and if Mrs Ermine is away, then I want to play music at 1am without feeling bad about its impact on other people’s beauty sleep. So I spent more, but I considered the extra as frivolous lifestyle inflation, not an investment in property.

Whereas everybody else leans in, rubs their hands together and thinks ‘money tree’ when they spend money on bricks and mortar.

But I should also listen to the whispers in the wind. I have heard a few times now from people of a certain age that they got slaughtered in the stock market last year and are very pissed off. The advantage the younger Ermine had against being hammered by property was youth, in particular the ability to keep working. These greybeards don’t have that advantage.

There’s a lesson in here. Safety first for a grizzled pelage, though where you get safety in the current financial arena frothed up by money created out of nothing is a difficult question. It is why I have shifted it in the direction of gold, and RICA, RCP and VWRL, and I may sell out of some of the individual shares from the old HYP. It looks more like a greybeard’s asset allocation – and indeed the eponymous writer on Monevator took a lot of shit from young pups who said “investment trusts – pah – just buy a single world tracker and be done with it”.

They don’t know his hopes and fears, which is right, you shouldn’t put an old head on young shoulders. Conversely, you should take the young head off the old shoulders when you are grizzled of fur the return of capital matters more than the return on capital. Most people end up dialling down risk when the markets are in a hole and they have just lost their shirts. Spinning the dial towards risk-off when the markets are up in the sky is not a terrible time to do it…unless you need the return, of course.

TA will probably lean back in his chair bingewatching Netflix and double his money in the next year as the coiled spring doctrine of the UK economy does its stuff. I probably won’t be swinging for that ball, other than what’s already in equities. That’s OK. I don’t need it.

Now if Monevator posts another dark transmission like this one, from deep in the trenches of The Big One, then I don’t know. An old sailor still hears the call of the sea. Perhaps I should dabble in my residual SIPP with a few grand, after all, there are big wins to be had in the teeth of a storm, and it’s ringfenced from my main investments.


  1. financial assets ignoring property, though that has been inflated a bit too. I don’t care what Monevator says, property is not an financial asset in my world, though I can see the argument for an income stream as it stops you paying rent. Do I contradict myself? Very well, then I contradict myself, (I am large, I contain multitudes) 
  2. I’m not taking a position here ;) 
  3. there’s a school of thought that accumulated assets from Imperial plundering may also have had something to do with being king of the castle, though our Niall would probably say the the PWE made all this imperialism a lot more effective and directed. 
  4. fitting 250 screws by hand without a power screwdriver or even a Yankee screwdriver, or even damn it – a ratchet one gets old very quickly… 
  5. Farnam Street has a more accessible translation of that article for people who aren’t makers, particularly those who are managers and unaware of the divide. 
  6. Succinctly summarised by Monevator as “including, I say again, the feeling that getting some cash for doing something generates in a capitalist society, like it or not.” I may have outrun the getting meaning from work in a spiritual sense side of things, but the fellow has some point. I am just not going to work minimum wage, because I am a peacock like that. I pitched for a pay rise, not because I need the money or can spend it, but to feel valued enough to put in the time. How absolutely barking mad is that? Walt Whitman again. 
  7. By no means all building work is unskilled, but particularly historically, a lot of it was more brawn than brains. I didn’t see any hod carriers on the Olympics site, but it seems the job still exists. They were the guys my primary school self had to watch for, because they were often up on the scaffolding with the time to look for miscreants on the way back.