Will the last UK finance blogger please switch off the lights on their way to Twitter

In a recent post Monevator started off decrying the slow fade-to-black of the UK finance blogs, did nobody tell him that

This is the way the world ends
Not with a bang but a whimper.

but more seriously, I wonder if it isn’t in the nature of the beast. The blaze of frenzied writing is to be had in the initial stages as you are working out what is what, and if this FIRE malarkey is possible at all, and what  stage of the process you are at. Then come years of grind, when not much interesting happens at all, particularly is your investment strategy is basically buy a tracker every month for 20 years, then quit on the proceeds.

The end of the world features tumbleweed

Before I join in bemoaning the passing of the old guard we really ought to have a rundown of some great new UK FI blogs I have come across:

There are also some interesting EU FI blogs, achieving FI is different in most of Europe because tax-sheltered accounts seem to be less generous and tax thresholds lower. It reminds me of the situation in the UK when I started work, when although we were all poorer the social safety net seemed to have a bit more humanity1. The Anglosphere has gone more towards a winner-takes-all model, diverging both from mainland Europe and from its former self when jobs were more stable, addressed a wider range of the intellectual ability range and particularly in the UK, housing was less vile. Firehub.eu is a good place to start. I wonder if the Brits will be kicked out in April for their renegade ways 😉

Steady investing and a lack of market drama isn’t good for narrative

I would say that RIT has done well with the steady investing narrative, turning it into a book. But there are only so many ways you can slice the lemon. Maynard Paton has an interesting FIRE journey – note that it also features some fantastic luck. In his case, calling the housing market well, but selling out of stocks before the GFC to realise liquidity to buy the house. Luck on its own is not enough, you must also carpe diem. MP gets to stop work nine years earlier in life than me.

It was much easier to write about investing ten years ago. We had just gone through a humdinger of a crash. Not only did you stick out in a big way saying the stock market was something to run towards, rather than away from as fast as you could, but starting from such a low base meant the market was tolerant of mistakes other than churning. The expected return is inversely proportional to valuation, you could buy pretty much anything left standing in early 2009 and do reasonably OK. Building a high-yield portfolio (HYP) with a useful yield looked like a reasonable possibility then. Nowadays you’d have to indulge in risky behaviour to get a high yield because valuations are higher. Sure, there’s Sturm und Drang in the papers about recent retrenchments, but the FTSE100 is back to two years ago, not 10! Continue reading “Will the last UK finance blogger please switch off the lights on their way to Twitter”

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Unitising my portfolio shows I sucked last year

The trouble with unitising one’s portfolio is there’s nowhere to hide. Unitising lets you track the effects of adding money, which helps avoid the easiest gotcha in fooling yourself on returns. The Beardstown Ladies Investment Club effect. The hard earned cash you lob into the pot makes your portfolio go up, but it’s not profit, or ROI, or anything like that.

Unlike starting with a one off lump sum from which you draw nothing, evaluating performance gets a lot more complicated if you draw a yearly stipend from your stash. It gets a lot more complicated if you’re one of the ordinary mugs who has to actually, y’know, earn the money they are putting into their future freedom fund, paying it in year by year as they go.

The UK version of the Motley Fool used to have the greatest description of how to unitise and worked example called Stockpicking – Are You As Good As You Think? by G.A.Chester which was still visible to freebie members, but all that was lost when they reorganised the website(19 January update – see Neil’s comment for the original text – he had saved this). Sadly G.A. Chester seems to serve up endless spammy clickbait articles these days, what the hell happened to you, man? Stockpicking was an article pure genius, putting across a tough concept in actionable bitesize steps.

Monevator has a description here but for some reason I really struggle to follow that, although I recognise the moving parts when I analyse my spreadsheet written to implement GA Chester’s more ermine-friendly narrative. I tested the spreadsheet against Chester’s example. Pity that gem of wisdom is lost to linkrot.

Unitising is quite a grief-stricken and error-prone process because it involves going through the spreadsheet and entering the current price of holdings I own at the January sampling datum point. After 10 years, particularly with some occasional muppetry I have a few dead lines of stocks I have no holdings in, but it’s easy to miss the odd line where I do have holdings. It fails safe in that if I don’t enter the price of a holding I own, it says the value of that line is 0 which makes the unit price lower, which is an incentive to go back and catch all of ’em on the grounds I can’t be that crap, surely? There’s also a error-checking catch line that tots all the holdings up, it’s kinda nice if it matches Iweb’s view of my world. Obviously fans of Cloud Services like Money Dashboard will have this easier, though you still need to do the annual spreadsheetery to unitise. Money Dashboard claims to be

a secure cloud-based open banking website that enables you to replicate and then track all the spending categories you set up in MSE’s Budget Planner

Colour me a cynical sonofagun but I am of the firm opinion that secure and cloud-based do not belong in the same sentence. See Equifax for a worked example.

The Ermine portfolio unit value is down 5% this January to last January. It’s also changed nature, more gold and I have taken 20k out as cash, though I may stick that back in to Charles Stanley, which is a Flexible ISA, and pull it out again halfway through April. And I may contribute something to Iweb this year, though I can’t make the full 20k.

Now that’s not dreadful. What would I have been doing otherwise – I’d be in VWRL a la Lars Kroijer.

Hargreaves Lansdown tells me VWRL is down 6.87% Jan 18 to Jan 19

I get divi from VWRL, which is about 2%, I guess there’s a .25% platform fee too. So instead of all that tracking, I could have had one lot of VWRL and been about the same.

What about VGLS100? That was about -5.36% in acc units. Much of a muchness and not worth the Sturm und Drang. In general, a little bit shit. Where Eagles Fear to Perch did better than me last year for instance, congratulations that man!

Defence, not offence is the word at the moment

Now I did shift much more defensively, there’s a lot of gold, there are some government bonds in there. I am probably suffering the deadweight drag of the gold not earning an income. Well, that’s my excuse. I shifted more defensively for several reasons. It is not quite determinate when the best time to take my main pension is, there is a balance between the actuarial reduction because I am not 60 and what appears to be high CETVs which incidentally seem to reduce the actuarial reduction, for reasons I don’t understand.

So I have to keep on pinging the pension modeller. I might need some of that cash if the modeller says delay a bit, and money you might need in the next five years has no business being in the stock market. Particularly when said stock markets are at high valuations. I did much of the switching mid last year, but all that gold and the cash is pretty much a passenger now. I am not one of you young finance workers getting a savings rate of 50% into your SIPPs, I might have a negative savings rate this year.

I’m also trying to keep some of this year and last year’s ISA allowance, because I will draw a pension commencement lump sum from my main pension. And there is some hazard of a Corbyn led government in the future. As a retiree I won’t have a particularly spectacular income1 so I will probably be safe from his ministrations, but an ISA allowance of £20000 is way above what the vast majority of the population could even dream of saving. The argument that letting the rich shelter such a large yearly amount from tax does have some cogency, so I want the possibility of getting that PCLS into the ISA within the next year or two. Whether £20,000 will have any useful value in the Brexit Brave New World of buccaneering brio will remain to be seen.


  1. by the standards of my professional self or indeed the general UK PF scene – even the employed Ermine was way down in the ranks of finance whizz-kids well represented on the UK PF scene now. It wil be fine and more than my early retired self, but I don’t expect to be a tall poppy in Corbyn’s sights. Hopefully Corbyn won’t have the Blairite ambitions of siring a baby-boom through pronatal giveaways as we had in a tough period midway through my career, where every other bugger seemed to be getting the breaks. 

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”

Odd Christmas sales and consumerism

Unlike most years, where the Santa rally is a thing, there’s not so much cheer on the stock market at the moment.

In other words, there’s a sale on. The Ermine has an additional problem, in that my money is held in increasingly worthless Lesser British Pounds, which are going lower relative to foreign assets day by day. That’s largely due to the pickle we have got ourselves into. Having narrowly voted to leave the EU for a land of unicorns and unlimited supplies of cake, hard reality seems to have met the dream. Usually when that happens the dream loses the fight.

The narrow majority for Brexit covered up an inconvenient problem in that there are two pro-Brexit constituencies, and their interests don’t really overlap.

These are roughly the groups as I see it – one lot want their unskilled jobs back, or at least not to see them going to young folk from the EU who can live more cheaply than their constituents can for a while1. There’s another lot who are the Tory headbangers of the ERG group, who are sore about the loss of sovereignty. There’s an argument that the sovereignty fight should have been had at the time of Maastricht and they should have signed up with James Goldsmith’s Referendum Party. These guys are usually rich enough to weather any storm of a no-deal, or old enough that they don’t have to find work in the resulting maelstrom, and some of them have fond memories of an imperial past when Britain ruled the waves. Whenever I hear Jacob Rees-Mogg speak, I do feel that the 1950s called, and I wasn’t even born in the 1950s, although I am about ten years older than him!

The top left side want much less immigration, they don’t really care about trade deals with non-EU countries, the top right don’t care about immigration but get off on the idea of trade deals free of the yoke of the EU that limits their coruscating ambition. There’s a small dark side of xenophobia, which isn’t necessarily just people who favour Brexit though it does tend to go along with the Brexit patch

At best only one of these groups with non-overlapping interests can be satisfied. Rationally, the largest group that can be satisfied would be the Remainers, because their desire is simple and achievable, what we had before that Cameron chap cocked it all up trying to hold his party together.

If one of the Brexit group gets what it wants, the other group largely doesn’t. The Remainers at least know they lost the fight. The Brexit contingent that doesn’t get what they want will be doubly pissed off because they thought they won. There is no win on offer here that gets anywhere near 50% of people happy. And yet Brexiters are busy screaming the house down about “The Will of the People Must Be Respected”. Well, yeah, as long as it’s not the will of the remainers and as long as it’s not the will of the other half of the Brexit voters, because for them that other lot’s Brexit is not my Brexit.

I’m all for respecting the will of the people, as long as they tell us which will of the people they think that should be. Will the real Brexit stand up and make itself known to the hapless captain of the good ship Britannia? Even when May brings them something that looks like a Brexit, as in ‘submit Article 50 to leave the EU’ people still yell out like two year-olds that’s not what we wanted, Waaah. So they defenestrate May and it’s Groundhog day again.

There should be an honorary eagle pecking out the liver for David Cameron for putting the question is such a stupid, damn-fool and undeliverable manner. It is like having a referendum on “Do You want Real Live Unicorns on the High Street Every Sunday”. The answer may well be yes, but it’s a tough one to deliver. Because: Unobtanium. In the form of cakeism in the first case and unicorns on the other

All that is as may be, but in the immediate future it drives down the real value of my cash. Continue reading “Odd Christmas sales and consumerism”

Anti-FIRE – the YOLO train-wreck edition

It’ll soon be the season of goodwill, which also seems to bring about exceptional financial muppetry for some reason. A few years ago it was Shona Sibary and her excessive brood that was financial folly du jour, along with TV producer Charlotte and a few also-rans. Along with running articles on how you can get to retire early, we’ve had a few on people who don’t seem to be planning on retiring ever.

I was tickled by this young 30-year old singleton living with her parents. Now I have some sympathy for her original plight of living in London on 40k a year. If you don’t want to share your living costs with other people, be they a partner or some sort of shared housing/flatshare arrangement, I can believe 40k isn’t enough to live in London. What’s a girl to do in such a quandary? Clearing off back home to live with Mum and Dad seems like an eminently sensible thing to do. Hats off to her for effective action in the face of adversity.

£40k p.a and living in her childhood bedroom, but still with a negative savings rate. WTAF?

I also have to admire that she doesn’t have a credit card because she’s too worried about ending up in debt. Wise move, that. But where I am totally nonplussed is that of her £2200 pcm take home,

By the time I’ve paid rent, done some food shopping (I want to pay my way as much as I can), settled my phone bill and insured, taxed and put petrol in my car, there’s not a great deal left.

I mean FFS? Let’s leave aside the breathless insouciance of not getting that: hitting Bank of M&D for a few hundred sods a month for foreseeable expenses like eating and car maintenance is not paying your own way by any of the usual definitions of the term.

An ermine spent some £400 on road tax and insurance and £1k on servicing and fuel last year. My phone bill is some £50 a month, so that’s about £2k p.a. Let’s say that’s £200 a month. Leaves our heroine with £2k a month. Say she spends £1000 a month on drinking with her workmates and clothes, and surely the reduced rent to Mum and Dad plus food can’t eat up the remaining £1k. I’d say our young lady has a serious drugs habit she’s not letting on about if it’s really true that none of the £2200 a month actually sticks to the sides. There’s precious little detail about what she actually does spend it on, this is Grazia, after all, which seems to have little detail about anything. It did, however, introduce me to the latest wheeze to part the financially naive from their hard-earned:

Klarna – a buy-now pay later app

As I was considering a corduroy pink boiler suit in the Topshop Black Friday pre-sales, under the Add to Basket button, a rectangular box winked at me: “Pretend it’s pay day! Pay ⅓ now and the rest later”. That’s Klarna.

I confess I’ve read the entire article, and looked at the Klarna website, and it looks like a credit account that’s restricted in stores you can use it to pay. It absolutely beats the hell out of me why on earth you would want to do that, but if a subset of Millennials really are so gormless that they find ease of use of payment so important to them that they will take these restrictions lying down, then they deserved everything that’s coming to them, quite frankly. A jolly good shafting, by the looks of it.

Financial Friction is your Friend

There’s a strong hint that Klarna’s bad for your wealth right in the rubric here

Klarna is the millennial store card, designed for a generation who want things as easily as possible, or in Klarna’s words “a frictionless buying experience”

You want friction in the buying experience. It throws sand in the wheels of your advertising-addled monkey-brain. One of the wins I had in racking back my spending was the simple addition of controlled friction. If it cost more that £100, I wrote it down on a piece of paper with a date. Allow a week to pass. If it still looks like a good idea a week later, go get it. It’s really quite amazing how many things don’t look like such a good idea a week later. Hours of your life died to earn that money. Honour the sacrifice by taking the time out to think. Obviously if it’s a piece of safety equipment or it’s going to save life right now then go right ahead, but most purchases really aren’t that urgent. A little bit of sand in the wheels of the Iwantitnow reflex doesn’t hurt. Nowadays I can get away with 24 hours, but the week cooling-off period is a good one to break the I-want-it-now habit at the start.

Klarna is good for them. It’s not good for you. Much of Grazie’s article is spent talking about how great it is to be able to ‘buy’ a gazillion sizes, try out the ones that fit and return the others, without having to front the money. In the old days you could do that in the store, it was called a changing room. But fair enough, I geddit, things change, Millennials live busy lives and don’t do face to face, life is lived best through the screen of a smartphone. What I can’t get is what does Klarna do here that my trusty credit card can’t.

If I buy five pairs of high heels just after I pay the card off, I get well over a month before I even need to think about paying back my flexible friend. That’s probably long enough to find out which four pairs will give me bunions and return the buggers for a refund 1

a hard credit search each time you want to slice it

But the worst thing about Klarna is that say I am Grazie’s Sian, and while Klarna lets me return 9 out of my 10 items without raising the capital up front, I still decide that I need to slice it because my 40k salary is insufficient to buy myself all the things and experiences I wish to have in my young life. Each and every time Sian hits the old ‘slice it’ button, that’s a new hard credit search. Since she’s in the habit of spending more than she earns, that’s a new hard credit search every month, if not every purchase.

In comparison, if a grizzled Ermine decides to slice it, that’s called ‘not paying off the credit card in full every month’. No new credit search, just business as usual. It’s a stupid way of living for all the usual reasons, but were I saving for my house deposit then when I get to ask for a mortgage the bank isn’t going to go ‘Holy cow, 12 hard credit searches in the last year, no way am I lending this punter a single lousy penny, never mind a couple hundred grand’.

Nobody will lend me any money, because I have virtually zero income. The last time a hard credit search for ‘would you lend this mustelid any money’ was run on me was when I took out my credit cards, which was when I was still employed – it’s getting on for over ten years now. I took a look for credit searches on me. They are all for insurance and ID qualification, plus one for Starling bank. Who then go on to lie about my balance, saying it’s £0. It’s £2500 FFS, because they pay me a gnat’s cock of interest on the current account as well as being the solution to not getting receipts for contactless payments. They also don’t charge me stupid amount for using the card abroad 2.

Over There and Overindebted

Everything’s bigger in the States – houses, hot dogs, cars, and debt. And Financial Folly in the pseudonymous Kate and Tom. The problem is simple. Too many snowflake kids, too many airs about the kids, too much house.

Our first house was perfectly fine, but I was pregnant with our third child, and we had three bedrooms in that house and wanted a fourth.

They could probably afford the kids – just save the $15k pa each that goes on private schooling and give it to them as a bounty on reaching 21. See Rule 5 later on

But we have a good deal — we’ll pay $15,000 for the three of them. But, of course, it’s all going back on credit. There’s a company that offers educational loans for private school.

I love the way he claims to be good for $90k a year, and get works as a bartender at night. I mean, how does that bartending job even get to shift the needle on the dial? Then there’s this sort of addled thinking:

Tom: To be fair, we do try to save money where we can. We had a lease on a minivan that was costing us $405 a month that we just downsized to a $208 car.
Kate: We always lease cars. Honestly, we can’t afford repairs. If our car broke down, we wouldn’t have the $3,000 to fix it. We need to have that high car payment because, frankly, we are not good enough with money to have savings.

Dudes, it’s simple. If you need to lease a car, you can’t afford to drive one. End of. Sure, if you could afford to buy one, but choose to lease, well, perhaps you get the new car smell more often. I pay too much for some things, because I can’t be arsed to squeeze the lemon on everything. I can afford to do that because I don’t borrow money for these things.

These guys aren’t stupid and they’re earning a decent screw. They’re playing a strong hand incredibly badly.

More and more I start to wonder if the road to financial success is far less about what you do do. It’s a tough one – in nearly all other endeavours you progress by getting better at what you do do. With money, an individual surrounded by clever people manipulating the atavistic monkey-brain with advertising, social media FOMO and people who want your money finds themselves in an unfair fight. It’s what you don’t do that matters:

Rule 1: Don’t spend more than you earn

Rule 2: if you really must break Rule 1, then not on wasting assets. Sadly wasting assets often includes education nowadays

Rule 3: Don’t lock in commitments you can’t afford

Rule 4: Never own anything that eats while you sleep

Rule 5: invest in your children. Teach them the skills to be self-sufficient adults

The writers of The Millionaire Next Door bring out rule 5 of unassuming millionaires: Their adult children are economically self-sufficient.

None of that is about investing. You gotta plug enough of the holes in the bucket to stop running out of month before you run out of money.


  1. I guess as a quadruped an ermine will need two pairs of heels to strut its stuff, but Visa and Mastercard can handle that 
  2. Not that that’s going to be a thing until we find out which way is up with all the Brexit bollocks coming along. 

FIRE in the news, liar, liar, pants on FIRE

Escapism seems to be the norm, people have got back from their hols and the rude awakening of life back at the office makes for good newspaper copy. It seems the Torygraph is working on this sort of thing, and let’s hear it from the Grauniad –

…the secret to never having to work again – but does it work for everyone?

Ah bless ’em. There are people who get to live in London and retire early. They aren’t the Guardian media types, though, who asked themselves this question and failed to detect yes in the echo from the walls of the city skyscraper canyons.

The ermine already established part of the dirty little secret to retiring early. You need to earn more than average for a decent amount of time, or massively more than average for a shorter time. The Times qualifies that as having £600k in the bank and a fully owned house, H/T Monevator for breaking down the paywall.They also say that Barney from Surrey managed this as a modestly paid accountant after 20 years. WTAF, guys, compound interest is irrelevant over a period of 20 years so there’s an implication this modestly paid accountant was on a screw of ~£800k * 2 / 20, assuming he had a savings rate averaging 50% and his Surrey place cost him about £200k1. That’s about £80k net pa, which is way over the average UK income. Now it’s possible he got lucky on the stock market, let’s face it the stock market probably worked the equivalent of three years of an ermine at the office, but there’s another little dark truth here. We are several years in to a bull run that is long in the tooth by historical standards.

Oh yes, and half our blessed fellow countrymen decided to devalue the pound in a rush of blood to the head a couple of years ago, which made the numbers bigger by roughly the same as the loss in currency value. It ain’t real guys, the tide’s gonna run out at some time, and much shorter than the 40+ years a fellow retiring in his forties and drawing down needs it to last… Let’s hope Barney has some other plans, eh?

I only earned a bit more than the British average wage compared to many others in the PF scene, but I did it for thirty years. Let’s get that into perspective, however, I earned getting on for twice the average national income for more than half my working life. Many PF writers earn a lot more than I did, but they are in industries where burnout is rife. So it’s pretty darned obvious  that it’s not going to work for everyone, d’oh. And we really shouldn’t be bullshitting people, if you are earning the average wage, and get up to the average level of spendyness and the average number of kids, there’s not a snowball’s chance in hell you are going to retire early. End of. Sorry about that. You might get it so you don’t have to wait to 67, but 40? Fuhgeddaboudit.

Let’s look at a poster child  – MMM. That was deconstructed by Flannel Guy a while back. It’s still an impressive achievement – most people who have a household income of $100,000 for ten years don’t end up retiring early, they rack their lifestyle up to spend that and then gaze longingly at the people earning $500,000 and wishing they were them. Yacht envy is a thing2, y’know.

So you gotta earn more, but that’s not enough. Not only do you have to do an MMM and know when to stop, you need to have a stroke of luck, or at least avoid some types of bad luck. The prime example is for God’s sake don’t have kids and get divorced before they all come of age. So the answer to the rhetorical question

but does it work for everyone?

Is even more a great big fat no. Not a prayer, Guardianistas. If you want to live an average life, do the things everyone else does, well, you ain’t gonna retire early, because that’s not an average thing to do.

There probably aren’t that many people who live in London and get to retire early in London. For two reasons. Just about everything about London, with the exception of transport and art galleries/museums, is dearer than pretty much everywhere else. So you need more to retire there, unless you bought your house 40 years ago on a teacher’s salary. Plus you’ll have more going out the kitty day-to-day, though perhaps that is compensated by the fact you can earn more in London. The operative word there is earn, which implies w-o-r-k.

The other reason is that of sample bias – if you are the sort that flourishes in London and earns shitloads of money you are probably driven, and would find doing without the finer things in life a massive privation and you’d feel out of kilter with your peer group. You’re more Wolf of Wall Street than the Good Life. Jeroboams of champers and fine dining don’t grow on trees. If you want to stop working and enjoy that, then you either need to have earned stratospheric amounts of money, in which case hitting the off switch early may be tough though necessary, or you need inherited money. Take Petra Ecclestone, for instance. A great way to retire early is to get Daddykins to earn the money 😉

Petra Ecclestone – one way to FIRE. They still can’t mend the holes in their clothers, or in her case get shoes that fit [irony off]. It’s a tough life at the top, eh?
Wikipedia says about herPetra Ecclestone (born 19 December 1988) is a British-born heiress, model, fashion designer and socialite.” I’m guessing here, but probably the modelling and fashion designer income wasn’t quite enough for a 29-year old to buy the $90M Chelsea place and the 57,000 sq ft LA place. Thanks, Dad, is probably the order of the day, here…

The Times did a feature on FIRE where apparently 900 good people from London piled into a pub to hear about how they could retire early. Several things vaguely disturb me about this –

  1. London
  2. In a pub – you’ll find it easier to be an introvert if you want to retire early, because to be different you have to do different 😉
  3. but the #1 thing that worried me was if they were paying to hear how to retire early, because they’ve started off on the wrong track. Retiring early is usually about spending less, and spending to find out how to spend less has a delicious irony of its own. If it was a general shindig to chinwag and you got to cover room hire, fair enough, but if it’s like one of those make-money-fast trading seminars then it’s wrong foot forward, people.

Update 30/9/2018 – it was a Facebook meetup and the only cost was the price of your beer, see Luke’s comment below. I am getting too much of a cynical S.O.B. I’ve been punted too many payable London events but I should roll back my guns in this case. There’s everything good about the extrovert wing of the FIRE clan getting together and drinking beer. I’m all for it. Mea culpa

The Times headline is modest earners find formula to retire in their 40s, which should be banned under advertising standards regulations. If these are modest earners in London they are stuffed. Has anybody told these poor saps that we are ten years into a massive bull run fluffed up by funny money? You don’t have to be clever to have made money on the stock market in the last 10 years. Weegee’s quip on how to get a great picture applies – f/8 and be there. The f/8’s irrelevant, it’s the be there. Where you gotta be clever is holding on to that wedge over the next 10 years – and if you’re retiring at 40 then you need to accumulate and hold on to that for the next 40 years.

How do you make a small fortune on the stock market? Start with a big one, or start when it looks like it’s going to hell in a handcart. That time is not now, dear modest earning office workers, so if you want to start your FIRE journey on your modest earnings, then don’t start with the stock market, start with racking back your spendy ways. Some of your spendy life choices have probably already been made, but don’t add to ’em.

So no, the ermine is not going to add to this pipe-dream. If you’re on a modest income in London looking at a bull run that’s one of the longest in recorded history and you are looking back at what would have happened if you had invested along with Monevator in March 2009 then stop right there, breathe in deeply and remind yourself that it was all a dream.

I’m not saying you can’t retire a little bit earlier than normal, if you invest sensibly and consistently, and control your spending, and you have reasonable luck. But look at the sort of privations RIT had to put up with to retire in his 40s – and he was an above average earner, again. But if you are looking at the stock market to do the heavy lifting, then forget it. If you are beginning to aim at retire in your forties, assuming you have started work, you are between 20 and 30. You can’t retire on a modest salary from a standing start in 10 years without having given it any thought beforehand. Really you can’t.

Take it from me – at 49 I wanted to retire early, from a standing start. By then I owned my own house almost (bar £1000) mortgage free, had a decent built up pension and I was earning a decent salary. Plus I was starting in a stock market swoon otherwise known as the global financial crash. Try as I might to munge the figures to give me a shorter timescale, I had to work another three years saving as much as I possibly could, living on less than the national minimum wage after all the saving. That really wasn’t any fun at all. 3

30 year-olds on a modest salary in London probably haven’t paid off their mortgages and you’ll have 20 years less pension savings than I had. You’re unlikely to cross the finish line in 10 years, and you have to stretch it for 15 years longer. And whatever you read about the magic of compound interest, forget it. Over a 30 or 40 year working life, compound interest sort of doubles the real value of your pension savings, as long as you leave them  alone to grow. Over 10 years, not so much. If you don’t believe me, listen to RIT. There is no snowball in FIRE.

There’s a general rule about investment. By the time you read it in the papers, it’s too late. Beware Greeks bearing gifts. It’s going to be a tough ask for somebody starting now to replicate RIT’s work of retiring by 40. Oddly enough your greatest hope of doing that is for the greatest humdinger of a stock market crash to occur ASAP, provided you get to hold your job. But remember Weegee. You gotta get in there and stay there, and stay the course.

Passive investing aficionados will no doubt tell me that’s market timing, to which I would say yep. You want to retire in only 10 years, you need a bit of market timing on your side to get yourself a place most have to work for more than 30 years to get to. RIT reached the finish line using passive investing. But he sure started at a reasonably good time, too, like me. Methinks he earned more than that average British wage for much of that time, too. RIT also highlights some very serious social costs that will be more of a load on younger people – to wit:

The vast majority of my friends and certainly my indirect family are still from my pre-2007 days.  This means that over time a big shift between our once reasonably common values and beliefs has occurred.  […]

At the same time I have found it very difficult to find “new” friends with common interests to my new self (it really is amazing once you have shunned consumerism to see how much it dominates people’s lives).  They really do seem to be few and far between.[…]

my day to day contacts and colleagues have changed and because their standard of living matches the salary they receive today I am now starting (if I’m not there already) to be seen as very obviously different.

The social contact is more important when you are younger. I didn’t experience these issues because I didn’t really rise through the ranks as I was saving to escape, I did that from the high-water-mark of my career. So while I experienced a much more dramatic adverse change to my lifestyle than RIT, I didn’t have so much of a drift away of common interests.

Beware newspapers bringing you promises of freedom from The Man through the stock market. It’s doable, but as a marathon if you start now. The starting pistol for the sprint probably fired over five years ago.

The stock market gets all the attention because of the promise of free money if it goes right. The other things – getting out of debt and reducing your spendyness are the Mr Boring of the FIRE world but they are reliable. They will deliver dividends just as they always did. FIRE wannabees should start with those first – get out of debt and spend less.

Don’t believe all you read in the papers…


  1. I know, you don’t get to buy a garage in Surrey for £200k. Let’s assume Barney got lucky at some stage in the housing market. It’s what the asset cost Barney when he bought it that matters, not what it is worth now. 
  2. I wrote that before googling the supporting reference because a lifetime of studying the human condition taught me yacht envy would be a thing ;) 
  3. The fellow who introduced me to using pension contributions to save the loading of 40% tax, who opined that you have to be mad to be working here after 50? He’s still working there as far as I know. Absolutely nothing wrong with his theory. It was selling the lifestyle to his wife and kids that was too hard. Let’s face it, there’s nothing in it for his kids but privation, they don’t have to earn the money for their nice middle class lifestyle. I can see their point ;) 

Battening down the hatches and exploring the opportunities of Brexit

Regardless of your views on Brexit’s ultimate desirability or not, it’s likely to bring choppy waters to the UK in the near future. You’ve heard quite enough of Remainers saying that, but the view is shared by some Brexiters. Take a random look at LeaveHQ’s contentAfter all, Britain is about to set up a new startup called UK PLC in the world, and we have good people like Liam Fox and Boris Johnson at the helm, what on earth could go wrong…?  In my youth the British elite seemed to be able to screen for competence and eliminate buffoons like BoJo and fops like Fox, but clearly this process has broken down. There’s nothing wrong with saying that Brexit is a tough job with notable risks, let’s spit on our hands and get to work to maximise the utility and minimise the costs. But that’s not what’s being done. The ruling party is a house divided, and so it doesn’t know what Brexit means. Other than Brexit, and I think we all got that over a year ago.

What we do know is that Brexit will be a point of change, the nature and type of change is uncertain, but in the short term will not be increased trade, the date is reasonably set though subject to late-stage fudging. There will be threats and opportunities to be had. It’s worth considering these ahead of time. I’ve already done an investing for Brexit post, but the inflation of the stock market since then makes the stock market more dangerous.

The boy scouts bit

It’s reasonable to expect shit to go down on the transition. There are some obvious things to do – stockpile water, bogroll, tins, dry carbs and motor fuel (outside the house and in approved fuel cans, people!). The Ermine is fortunate enough not to consume medication, but if you need this then having some advance supply would be wise, and do all this before Christmas, because the history of the world shows that if you are going to panic, then panic early or not at all.

I would hope Brexit would be a transient supply chain disturbance issue, but let’s face it, the government seems to be ill-prepared for some of the obvious interruptions to local trade. If you want to get more into this then UK Preppers are your friend. I’m not sure I want to live in their world for more than a couple of weeks…

Personal Finance – threats and opportunities

One of the great things about Brexit is that it is a planned and a local shitstorm. You don’t normally get advance warning about financial challenges, and nor do you usually get a massive store of assets that are definitely not involved with the crisis. Brexit isn’t going to threaten the world economy. The Brexiter Peter North was offering us a ten-year recession.

Britain is about to become a much more expensive pace to live. It will cause a spike in crime. […] Basically it will wipe out the cosseted lower middle class and remind them that they are just as dispensable as the rest of us.

The Ermine has already dealt with some of the threats, before the vote, by shifting into global assets and gold. There are other aspects of derisking:

I owe nobody any money, other than the credit card which is paid off each month. This is a big win in times of trouble, and I am probably not exposed to the jobs market1

I have ramped down my allocation to equity markets over the last year, not to do with Brexit, but to do with overvaluation. Tragically that increases my exposure to Brexit induced devaluation.

I was going to draw my DB pension early, but I can’t think of anything I really want to invest in at the moment, so I run down cash, indirectly buying more annuity. Everyone else lucky enough to have a DB pension seems to be asking how much the CETV is. I wish I knew what asset class promising a good future income stream they were going to invest it in!2

I made several mistakes shortly after the vote, and several wins around it too, but overall I experienced a very significant numerical win from Brexit in my equity holdings. One of the problems now is that stocks are on very high valuations worldwide, buying equities anew is not so attractive. Monevator made a good move with the Brexit dividend, buying his flat with it, so he is less exposed to the overvalued stock market to the tune of one London flat3

the threats are more important to me than the gains

If Brexit is an economic success and I adopted a brace for impact position, then I look a bit stupid, but I get to live in a country that is doing well, though I’ve lost money on my ISA I have gained it in the future income stream of my pension. That’s a win as far as I am concerned, apart from the hurt to my pride in being wrong. I’ve had a lifetime of practice in being wrong, it’s no big deal. You Brexiters can have a jolly good laugh at my expense. I’m big enough to take the ribbing for my lack of faith in Bulldog Blighty.

If Brexit leads to a 10 year recession, that’s at least a third of my life blighted by that from now on, and my globalised ISA becomes a larger proportion of my future assets/income stream. Just to add spice to the mix, the stock market is at very high valuations. I hold two years worth of cash expenses because that’s how long I have to reach the age to draw my pension without penalty.

I hold most of last year’s ISA contribution in cash in my ISA, and may do the same with this year, because there may be opportunities in Brexit to buy UK assets cheaply in the turmoil. This is hard to execute because you never catch the low-water mark, so you buy stuff, then see it plunge 20% and have to be prepared to take the chance of buying similar assets and holding the trash you already have. While all the time you have this horrible screaming noise in your ears from the media telling you all is lost. What I need is for Monevator to do this again, at a suitable point, to stiffen the spine in April 2019. Let’s look on the bright side, it’ll be a new ISA year…

I already hold a lot of gold in ETF form. Rather foolishly I hold it in my ISA. In general you should hold gold outside an ISA, since it pays no dividend. Should the price appreciate to approach the capital gains limit, then sell the ETF and buy another gold etf. I hold SGLP, I could sell that and buy say PHGP at the same time, crystallise the capital gain but stay exposed to the same asset class. As long as there’s not a flash hike in the gold price in the 10 minutes between transactions I am OK. However, given it is in the ISA, the gold gives me some more working capital, if I have the balls to sell it and buy pounded-down UK stock indices.

Repositioning myself for Brexit

Cash and gold represent about 12% and 9% of my ISA. A lot of the shares part is sky-high, and fortunately a lot was bought before this time two years ago. The cash, however, is bad news, it’s GBP.

What can I do with it to get it out of the country?

  1. Buy foreign currency
  2. Spreadbet foreign currency
  3. buy global government bonds
  4. buy gold
  5. buy world equities
  6. buy world equities hedged to GBP

5 and 6 aren’t attractive, because I feel equities are overvalued now. I already hold a lot of VWRL and IGWD anyway. 4 isn’t that attractive either, because I hold a lot of gold ETFs from the first round of this Brexit aggravation in 2016.

1 and 2 are difficult for me because I want to do this in my ISA, the cash is already in the ISA. I could take it out and try and put it back in, unfortunately the Brexit date 29th March 2019 is very awkwardly close to the turn of the tax year (5th April), it’s possible that the financial system will seize up. It did after the original Brexit vote so it is likely to do so again4. They’re a possibility for next year’s ISA contribution, I guess.

For this year’s ISA, one obvious thing to do is to buy bonds. They are supposed to be the yin of the equity yang. Not so much corporate bonds, which seem to vary with equities these days. I’m already jumpy that the stock market is overvalued, so it’s government bonds I want. I know absolutely nothing about bonds, never been interested because my defined benefit pension has always been more fixed income than I would ever need for a notional 60:40 equities:bonds balanced portfolio for someone of my age and risk tolerance. There was an interesting thread on Monevator about bonds, but I am not sure I understand it well enough. The pointers seems to be to use currency hedged bond funds, which make great sense except for a guy who is explicitly looking for safety against the pound going down the toilet, I don’t want to hedge to the GBP. I read youngFIGuy’s piece on how he invests but it’s for the long term, and I am trynig to forestall a particular short term adversity. Here’s Lars Kroijer on Monevator taling about government bonds. He says:

If your base currency has government bonds of the highest credit quality (£, $, €) then those should be your choice as the minimal risk asset.

Err, no, Lars. With all due respect, not £. The last UK government took the piss having the referendum to alleviate a cat-fight in the Tory party. Not only did that shit on my future to feed tossers like Jacob Rees-Mogg, but the entire prosecution of the process of leaving the EU has been dominated by internecine fighting and precious little effective progress. I’d rather live in the UK than say Uganda, but I don’t view the £ as having the highest stability at all. So the last thing I want is UK government bonds for this particular job. That’s a no to YoungFiGuy’s VGOV, although that is fine for his purposes. Given that premise that UK government bonds may be risk-free in one way, but track the fail I am trying to hedge, Lars carries on

If your base currency does not offer minimal risk alternatives, you have the choice of lower-rated domestic bonds where you take a credit risk, or higher-rated foreign ones where you take a currency risk. Keep in mind that any domestic default would probably happen at the same time as other problems in your portfolio, and your domestic currency would probably devalue. That would render foreign currency denominated bonds worth more in local currency terms.

Exactly. in his next paragraph, it’s basically short-term foreign bonds i want. But looking at, say this US bond, I see shocking volatility.  And given it’s only a year, I am chuffed to discover currency ETFs – a class of thing I didn’t even know existed. Let’s take a look at SGBB

The ETFS Bearish GBP vs G10 Currency Basket (SGBB) is designed to provide investors with a short exposure to the British Pound relative to a basket of G10 currencies by tracking the Diversified GBP Short Basket Index (GBP) (TR) (the “Index”).
That’s about right, what did it do over the referendum?
Pretty much what you’d expect. It’s a bit dear, at 0.5% p.a, and of course I eat buy and sell costs plus the spread at iWeb. So I put it into iWeb to see how much it would cost and what the spread was, and couldn’t find it. I asked them on web chat if they offered it and it seemed to be frowned upon:
Thank you for waiting, it looks like the company may be a derivative and if that is the case we won’t be able to offer it. We will need to do some further checks for the company which can take up to 2 working days.

Blimey. Well that’s pissed on that idea then. I didn’t think ETFS securities was such a bunch of dodgy geezers, but it seems they are viewed with suspicion5. Hargreaves Lansdown do this one but disturbingly they say the ongoing charge is 1.24%. I suppose I could do it in my SIPP with them. I pay £24 on the turn, couldn’t work out if I get to pay the 0.5% Stamp duty on this.

Surely the market has priced Brexit in

and will do a great big meh on the day? I’m not sure the market has priced the stupendous incompetence that could be displayed, the danger of a no deal Brexit seems to be mounting. Some of the trend to no deal comes from the bad faith of the likes of Rees-Mogg and the shadowy European Research Group, the quality of whose thought is to be seen here. These are cakeists6, and I’m not personally convinced that Britain has such a compelling offer. Leo Varadkar has a point when he said

“We are two years telling people that it can’t be cherry-picking, it can’t be cake and eat it, so it [the white paper] needs to understand we are a union of 27 member states, 500 million people.

We have laws and rules and principles and they can’t be changed for any one country, even a country like Britain. Any relationship in the future between the EU and UK isn’t going to be one of absolute equals.”

The ERG hasn’t got that yet, to wit:

Which is why we are writing to reassure you of our continued, strong backing for the clear vision of an internationally-engaged, free-trading, global Britain which you laid out at Lancaster House.

That’s the internationally-engaged Britain that has just told the 450 million strong nearest trading partners to f*ck right off.  I’m not convinced a no deal Brexit is priced in by the market at all. I’m prepared to lose money if we do better than that and there’s a stonking rise in the £.

Obviously it may all be a grand game of chicken, but I’d say that the EU can do without the UK better than t’other way round, and it’s pretty obvious that there will be less UK trade with the EU when we are outside the EU than before. That’s fine, may be a price well worth paying to cut ourselves adrift from these moribund losers as some would see it. We don’t have to be members of the EU to trade with it, other countries seem to manage. But there does have to be some sort of agreement. At the moment it’s we want to have our cake and eat it, or we’ll walk away. Looks like walk away it is, then. That’s not in the price at all, IMO.

 


  1. probably is because at the moment my deferred DB pension is easily enough to live on, so my ISA holdings and residual SIPP give some buffer. But it is possible to imagine inflation and taxes rising so I struggle, in which case I am stuffed. I am not going to do engineering again after five years out of the field, I am not entrepreneurial by nature and I am too old. 
  2. OK, I know the answer. The asset class is BTL residential property, FTW! 
  3. He’s of course now exposed to a differently overvalued asset class, London property, but given it’s his first purchase and he wants to live in London, the utility value is high, and if it’s the Brexit dividend then it’s free money anyway… 
  4. that could mean that for all this fine talk I will be unable to take advantage of any Brexit opportunities, squeezed out by all the shares selling going on in the market jamming retail websites. 
  5. iWeb has since rung me up to confirm, this is considered a derivative and therefore not available to retail investors on their platform. It is news to be that not all listed shares are considered tradable. Need to sit down and think about this, because perhaps this red flag is there for a reason and ETFS really are dodgy geezers. 
  6. they want to have their cake and eat it