personal finance shares: expensive wedding HYP RDR paralysis Zopa
by ermine
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The trouble with a HYP strategy now is everyone else is trying it too. Cash is still evil…
A few years ago I decided to follow a HYP strategy. I read this, and in particular I liked
But there’s a way of profiting from holding shares that requires no selling at all, by receiving the (generally) twice-a-year dividend.
So I did it. And am still doing it. It gives me a yearly yield of 5% p.a. on my purchase cost and capital appreciation which more than compensates for inflation, indeed at the moment this is faintly ridiculous. That is due to the disgraceful activities of the Bank of England flushing away the national debt by debasing the currency combined with some hint of animal spirits returning to the business world. So far so good. I have two problems now, both good ones to have in some way.
A HYP is not the approach to take at the moment because everyone else is doing it
This doesn’t hurt what I have already, because the yield I earn is the yield on the price I paid. The problem is everyone else is bidding up the price of the shares so it makes it harder to find value.Some would advocate taking the profits and trading the portfolio but I’m not going to do that because this is not how a HYP is meant to work and I have no skill as a medium term trader
I will sit on my backside and take the divi, indeed I have managed to avoid selling anything this year other than that mandated by iii’s change in funds policy.
A first approach is to look for diversification in areas that are out of favour – I have no oil or mining stocks and could do with some for sectoral diversification. Both of these sectors haven’t been on the roll that everything else seems to have been on this year. I also don’t have the religious objection to tobacco many people have either. I’ve avoided all these sectors because I don’t understand them and when I constructed my HYP they were highly valued. If there were a sector index fund on these areas I’d consider going that way.
However, at the moment I am suffering from a combination of RDR paralysis and the fact that everyone else seems to be destroying the opportunities in what used to be a quiet and tedious investing backwater in a search for yield. So maybe it is time to sod off and fish is some quieter backwaters.
The FSCS compensation issue
The second is that my ISA will cross the FSCS compensation threshold this year even if I leave it alone, and it will cross it sooner if I contribute this year’s 11k allowance. Even worse is that I have about half as much again in an unwrapped TD account, which I used to flush out my sharesave and ESIP holdings. I didn’t want a large unbalanced holding of The Firm’s shares so I took a share certificate for half the holding, which I will sit on and take the dividend thanks very much. The other half I moved to TD, and sold some to crystallise capital gains, which I converted into a Vanguard developed world exUK index fund and a Vanguard EM index fund. I have more than enough UK exposure in my ISA, so the Dev exUK was to balance that out a bit, but the aim of the exercise was mainly to cut down the exposure of having half my shareholdings in The Firm.
A share certificate is a good way round the FSCS issue – I have a direct holding in The Firm and there is no nominee intermediary to worry about. However, you can’t hold an ISA that way so I have to deal with nominee accounts. Having both ISA and regular nominee accounts with TD was a tactical mistake I didn’t appreciate at the time. The FSCS compensation applies to each company, not each account, so I am already way over the top. The obvious thing to do is to move the trading account.
However, at the moment there is loads of confusion in the UK shareholding nominee platform arena due to the change in regulation of funds, called the RDR. I have already taken one hit from the RDR last year. For this year I am going to sit tight, accept the risk of TD Direct going wrong, which I think is low. If there is general stock market mayhem in some ways the FSCS compensation limit of £50k is self-correcting, as a jolly good stock market crash will automatically devalue the holding – a serious market crash can halve the value of a portfolio in a year which would get me below the protected amount. So TD going bust due to a stock market crash isn’t the problem, it is them going bust due to an internal thief or management incompetence. I should add that I have no reason to currently suspect either, I’m not saying that they are a bunch of incompetent fools, I am merely considering the risk
We have seen in 2008-9 that financial institutions that look solid are often built on sand these days…
Cash is evil…
Still a particularly rotten asset class. It makes me sore that my AVC fund is in cash because I will pull it in about year from now. The Bank of England’s destruction of the pound will have rotted the real value of that by about 10% compared to when I left work. Okay, so I avoided paying 40% tax on it, so in the round I am still better off than where I started, but that needs to come out and start working for me.
I also hold cash because at the moment I am living off savings and that is decaying under my feet. This was highlighted recently when a three-year NS&I Index-linked savings certificate rolled over. It started out a £1000 and rolled over at £1,162, ie in three years the value of money has fallen by 16%. I at least have the benefit of being so poor (okay, hold on the strings and violins in the background, guys) that I don’t pay income tax this year and next, so I filled in my form R85 when I switched my Nationwide Flexaccount to a Flexdirect account. They will give me 5% on £2000 if I play stupid games shifting £1000 back and forth between that and my main bank account each month. With R85 I get to see 5%, too
Zopa
I also joined Zopa, though unlike others I consider this bordering on mortgage-backed securities in terms of risk, so I only put into it an amount that I can afford to lose 100%. To see what’s wrong, we only have to look at the current case study.
And borrower Jonathan is no exception – he used his loan to buy a splendid engagement ring for Charlotte, his girlfriend of 8 years
Jonathan, me old bean, you have been with this lady for 8 years, and you’re getting married. I’m really happy for you and wish you a long and happy married life. However, despite it making me look like a hard-bitten unromantic old git, a quick word in your shell-like.
Is it really such an illustrious start to your married life to go into debt for the ring, which is a consumer item, this isn’t an asset that reduces your long-term costs or makes you money?
My father saved to buy my mother a ring. My grandfather did for his wife. Getting married is a very large transition in your life, and doubly so on the financial front if you are planning to have children. You really, really, don’t want to go into debt for any aspect of getting married. If debt is the answer, you can’t afford to get married, or your wedding plans are too extravagant 1. Save up for the expense, because, to be honest, if you do end up having kids, this point is probably about as good as it gets for a little while on the disposable income front. So, Jonathan, if you are borrowing to buy her a ring, particularly after having had 8 years to get ready, then you have just passed a great big red “Wrong Way, Do Not Enter” sign. And you, sir, need to sort your financial shit out and understand the simple principle. If it’s a consumable item, never, ever, borrow money to get it unless it saves you money. A house is a consumable item – the only reason you go into debt for it is because it stops you paying rent 2. Now what is the ongoing cost that Charlotte’s ring is saving you paying out every year? Zilch, thought so. So you need to man up and save for that sort of thing in future. Or do without.
What Zopa needs is an ermine behind a leather-covered desk with a banker’s lamp on it. When people come in to borrow money, the ermine will ask them some pertinent questions about what they are going to buy with it, to the effect of:
It’s notable that this accounts for something that we are very reluctant to acknowledge in the developed world today. That sometimes people have needs that they cannot afford. I have had the experience, and it’s a bastard. But it isn’t necessarily up to Them to fix that for you, sometimes you have to spit on your hands, roll up your sleeves and get to dealing with the issue at hand. Or, heaven forbid, do without some Wants so you can afford your Needs…
The decision process for purchase of consumables would be slightly different if I were working for Zopa, because it would come down to whether I believe this punter is fool enough that I can get the money out of him with my heavies as opposed to the heavies used by the other guys he’s likely to borrow money from. However, though Zopa try and make out all cuddly with their Valentine story and all smoochy smoochy aaah ain’t it luvverly, in the end they are highlighting a fellow who shouldn’t be using Zopa for that purchase. Not because it’s inherently and deeply wrong for him to borrow money to buy his girlfriend a ring, rather than, say, a motorbike, or a holiday, because at least the ring is durable and hopefully gives them joy for years to come. But because he should have been saving for it over the previous 4-8 years, after all it was a reasonably foreseeable expense. Put another way, Jonathan has just chosen to buy £85 worth of ring for £100, because he wasn’t able to foresee this purchase, and he’s paying 5% over 3 years for the pleasure of not looking at the road ahead.
Now if their disposable income is always going to be more than their living costs then so what, I have addressed that option in the decision tree. I have borrowed twice in my life to buy a consumer durable. The first time was the wisest, though it didn’t look that way. When I started work and was living at home I borrowed 20% of my gross income to buy a secondhand preamplifier, on 0% interest free credit. I paid every instalment from income, just before time, and recently I had to fix this preamplifier – it is still in service after 30 years. In the round it was a stupid thing for a 20-year old to do it, but if you are going to do stupid things then you should do them wisely and not pay over the odds for it, 0% is about right
The second was a personal loan to buy a car off a family member as they were changing it, which I discharged in six months, another piece of moderate folly in my twenties, but I ensured I could pay the loan before applying for it, which seems to be a detail a lot of people miss these days.
Maybe the grizzled form of my future Self is in the process of building a time machine to go back and have a word in the ear of the young Ermine, because I stopped borrowing money to buy consumer durables after that, with one ghastly, stupendous and horrific exception, buying a house. By staying put I passed the criteria of the first box, but only in retrospect. I even borrowed my deposit for that on a 0% credit card deal, but at least I didn’t lose money on that, because I paid it down before it fell due.
That’s the long story of why I don’t trust Zopa at all, and will probably limit my exposure to that to my original stake. They lend money to people who shouldn’t be borrowing it for the purpose they’re using it for. I took a butcher’s hook at what my borrowers were borrowing for
- Car
- home improvements
- consolidate debt
- car
- other
- car
- car
- home improvements
- consolidate debt
- wedding expenses (total of £7500! though only £10 from me, thankfully Yikes!!!!)
- Consolidate existing debts
- car
- car
- car
- Car
- consolidate existing debt
- car
- car
- car
- car
- car
- home improvements
- holiday (£5000, jeez!)
- home improvements
- car
- motorbike
- car
- car
- caravan
- home improvements
- car
- car
- consolidate debts
- home improvements
- home improvements
- car
- car
- home improvements
- consolidate
- home improvements
- home improvements
- car
- car
- consolidate debt
- car
- car
- car
- consolidate
- car
- car
Now if you look at this lot it’s a fairly sorry story. Why are so many people over their 20s borrowing to buy cars, FFS? There are people my age at it, you are actually meant to learn something as you go through life. A car is a known running cost – they wear out and break down after you’ve had them for 10 years, so when you buy one you start saving every year 1/10th of the price so you have enough to get the next one. The price of secondhand cars actually drops – I paid about £5000 for my last one, a VW Golf which I had for 13 years. I could get a great s/h car for £5000 nowadays, and £5000 is worth less now than it was 14 years ago. I’d probably look at paying less, because to be honest I just don’t need £5000 worth of car.
We have 8 debt consolidators in there. These guys aren’t going to pay that back – if you’re borrowing money to service debt you are in deep shit and going deeper. I hope the girl who’s borrowing £7500 for her wedding won’t have the shine taken off her marriage by the stress of paying that lot off. The summary is scary, because only the home improvements one would pass the Ermine’s beady eye in the test above, and that is for improvements, not Changing Places fun and games or new carpets because you’re bored with the colour of the old ones. Not if you’re borrowing money to do it, because that is telling you that you are living above your means. I have some sympathy for the people in their 20s – stumping up the money to buy a car to get to work may well need borrowing money. But there are a lot of people whose age indicates they should have got out of that stage…
I feel a lot better about lending the Nationwide cash at 5% than doing the same for Zopa customers. And yet Zopa seems to have a strong following in the UK personal finance community. I have to say that if I were these Zopa customers’ bank managers I’d give most of them short shrift
I’m sorry, but if you are over 50 and borrowing money for a car then you need to start buying less car. Mr Money Mustache gives it to you straight between the eyes in his usual inimitable style. Basically you do not need a pickup truck, and SUV or a people carrier to drive to work or take the kids to school.
Notes:
- it’s come to my attention that there is a whole wedding industry whose raison d’etre is to make sure newlyweds start their married life in as much debt as they can persuade them to go into. On the ads they say getting married is all about the wedding and the honeymoon. For crying our loud these good people state that
Your wedding day should be the most romantic and memorable day of your life
I guess what they’re really saying is it’s all downhill from the end of the honeymoon, eh
When you look at people who have been married a long time they didn’t need some ghastly extravagance to get married. It was about each other, not about their consumer purchases. If anything, going into debt to get married is more threatening to the relationship than not having an expensive wedding in the first place. Get your priorities right – being stressed about owing money is no way to start a life together if you can avoid it. ↩ - not paying rent is not a great thing in itelf if you have to tie up a load of your capital in an illiquid asset like a house. There’s nothing fundamentally wrong with paying rent, if it costs you less than you’ve have to invest in buying a house and all the ancillary parasitic costs of home ownership. ↩
rant: agriculture farming genetic modification GMO Monsanto Owen Paterson
by ermine
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Monsanto GM – Imagine a boot stamping on a human face. Forever
Many people have an issue with genetically modified organisms from a gut feeling and philosophical point of view. I used to take that line, but I don’t any more – the good people of the United States have been willing guinea pigs for the GM experiment over the last 20 years and it’s been in general not hazardous to human health 1
But I am opposed from an economic point of view, and this story of Monsanto suing a farmer in the United States is why. It reminds me of a quote late on in Orwell’s 1984
But always — do not forget this, Winston — always there will be the intoxication of power, constantly increasing and constantly growing subtler. Always, at every moment, there will be the thrill of victory, the sensation of trampling on an enemy who is helpless. If you want a picture of the future, imagine a boot stamping on a human face — forever.
Much of what is wrong in industrial agriculture is the desperately overleveraged capital structure of farming in the West. Farming owes so much money to banks to raise the cash for the complex web of seeds, chemicals, machinery that they can’t take any risks and have to maximise production, purely to pay off the debt incurred.
Now on the face of it, it’s an open-and-shut case. Monsanto patented their seed. Farmer Bowman buys a load of soybean seed from a bunch of guys selling it as feed, and then he goes and plants it as a late crop. Since 90% of soybeans in the US are GM roundup-ready, this is largely second-generation GM. Bowman doesn’t have any alternatives not encumbered by Monsanto’s patents. And so Bowman has Monsanto’s heavies roll up demanding protection money lawyers appear threatening to sue the shit out of him. Which they do.
One of the most convincing proofs that there is no God is that at Monsanto’s headquarters the sign doesn’t get to look like this

what about the 4.5 billion years of R&D before you, Monsanto?
The problem I have with GM is that it means evil shits get to own most of our food supply. These guys put it well, though I don’t personally subscribe to the Monsanto makes Indian farmers commit suicide theory 2. Monsanto should be indicted for its own patent and legalistic evilness
Control over seed is the first link in the food chain because seed is the source of life. When a corporation controls seed, it controls life, especially the life of farmers.
Now if I have a problem with some company, say Sky TV for example, or Rupert Murdoch in general, then guess what? I don’t have to buy their products! Giving up eating, however, isn’t really an option.
However, Monsanto’s express aim in life is to seize the means of production through legalistic shit like patenting the very stuff of life, and then extracting protection money. They do that by creating an unsustainable business model that gives a sugar rush of profits at the beginning, which is the hook to get farmers dependent on a highly leveraged business model. Borrow the money to buy our seed, and you can drench it in Roundup (made by Monsanto, funnily enough), and make enough profit to pay us back. Rinse, repeat, recycle. But don’t you dare plant that seed, else we will sue the living crap out of you.
In itself that was not so bad. What is bad is that as soon as there is any Monsanto GM in, say a cross between Monsanto crop and a neighbouring farmer’s crop, then Monsanto assert their rights over that other farmer’s crop, and say his seeds contain Monsanto patented information, Monsanto therefore forbid him planting his seed or want their payment. That’s the bit I have a problem with. Basically, if Monsanto want to take that line, fair enough. Let society then make a stipulation on Monsanto in return, to prevent the company stamping all over the rights of third-parties to mind their own business. Something like
Okay, Monsanto, you want to assert patent rights over descendant crops that may have been contaminated. Fine. In that case, we attach the following license conditions to you being able to sell your GM seeds to farmers , to the effect of. “All GM crops must be plated under condtions of biosecurity, in negatively pressured double-skinned polytunnels that are sealed against the egress of your damn precious stuff, so it doesn’t pollute the environment or infringe the rights of other people not to use Monsanto products”
Patent law is fine when it comes to human constructs and inventions. You don’t normally leave a television set or an iPad in a room and come back a year later to find they’ve introduced iPad technology into the light switches, the wallpaper shows eulogies of Steve Jobs and doorknobs speak to you like Siri, while the gravel in the drive can tune itself to BBC1. However the whole point of Life is to reproduce and spread genetic material, and it’s been doing that for three and a half billion years. Self replicating structures are inherently incompatible with the exclusive rights of patent law, and it’s high time that humanity in general took the fight to Monsanto and educated the piss-taking bastards that their abuse of the patent system needs to stop. There may be a case for GM technology, but the case for it is to be done in national research facilities or universities 3. Oh and the patent system needs to be updated to include the fact that Life has over three billion years of prior art and therefore no living forms whatsoever may be patented. I assume that Monsanto has already tried to patent the wheel, but didn’t manage to get that one through.
Unfortunately in the UK we are about to lose the GM battle, because:
We had a pro-GM lobbyist Caroline Spelman as an Environment minister before she was sacked.
To be replaced with Owen Paterson, who says people who don’t like GM are humbugs, and if we don’t have GM in Europe WE WILL ALL STARVE. Yeah, right.
Presumably Monsanto and its ilk have bought enough of David Cameron’s guys to get their way. Everybody has their price
Part of the problem is that Monsanto does deliver real value for their customers in the beginning, just as a drug dealer does. All the wins are at the beginning, when you switch a diverse but sort of sustainable agricultural model to a closely controlled monoculture aided by broad spectrum herbicides. Yield goes up, what’s not to like? The problem, just like with narcotics, is that to take the wins, you get locked in. To afford Monsanto’s seed prices every year, because you aren’t allowed to save and replant, you have to borrow. And to service the debt, you need the higher yields, to earn the money to pay the debts, so you then end up in debt-slavery. This is not unique to Monsanto, it is the problem for a lot of modern farms, in that they are extremely capital-intensive, thus so highly leveraged that the financial structure of farming becomes brittle and non-resilient. You coin it in the good times, then use the money to consolidate more and more holdings into huge farms with dearer machinery, becoming more and more leveraged in the process. So when a bad year comes, like last year’s endless summer of rain in the UK, you get financially slaughtered and need to borrow even more money. Which leads to short-termism, which is a bad thing in farming, because you no longer look after the land, using the soil as a growth substrate and fertilising artificially, rather than working with the natural carbon and nitrogen cycles. GM seeds break another natural cycle, though seed saving has long gone from Western agriculture and horticulture.
Even in the 1960s the majoriy of corn and sugar beet were F1 hybrids, ie purchased anew each season. The unique thing Monsanto brings to the mix is they are using the expensive process of GM to get themselves to sole supplier position with a dead hand on competitive alternatives. It is the rent-seeking nature of a monopolist that makes the company so dangerous, when combines with monopoly control of the essentials of life.
Shame about the absence of that fiery hand writing on the wall. It would make terrific TV, and would be a really stylish launch for the Second Coming
Notes:
- It has indirectly been very bad for some Americans’ health, by making it cheap to raise industrial beef on feedlots and by putting high-fructose corn syrup into all sorts of low-grade foods. However, Americans have the choice whether to eat these or not, this is a social and business problem that has been facilitated by GM but not caused by it. ↩
- Even in India I don’t believe cotton is the first link in the food chain, unless they’ve found a way of reprocessing it into something edible ↩
- Companies welcome too – some firms make a profit on open-source material and it would be unwise to prohibit the private sector just because one example became evil. But if you even think of patenting Life then we will bulldoze your buildings, take every red cent in your accounts and debar every member of the Board from running a company ever again. Because you have shown yourself to be greedy bastards who want to control our food supply, and steal the work of over three billion years of painstaking research and development that has claimed countless lives on planet Earth. They didn’t all die for your monopolistic profits. ↩
living intentionally: dandelions
by ermine
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The joy of observing the quotidian…
The philosopher G. I. Gurdjieff was of the opinion that most humans live their lives in a state of hypnotic “waking sleep” 1 ; one of the aims of a life well lived was to snap out of it and wake up. One of the simple joys of being retired is to be a little more aware of the world, to take the time to wonder a little more.
Perhaps work did that hypnotic sleep thing for me, the routine dulled the senses, it’s still a little bit sad to think of the wasted years of consciousness. Now, even in observing the quotidian, I wonder if I just missed stuff in the real world. Some of the greater awareness almost throws back to childhood times
I try and do is get out and wander around the immediate area every day, I’m lucky in having a few quiet streets with a rec and a cemetery nearby, places where I can observe Nature going about it’s everyday business. At the moment the walk is livened by the lovely sound of blackbirds in full song.
Is there always such a profusion of dandelions at this time? Is that just something that happens at this time of year and I never noticed, because I was too busy looking at screens than at the Real World™? How did I miss that for 20 years…
I thought of the fellow above whose ‘lawn’ I pass every day, as I dug my own Löwenzähne out of the grass. The German word for dandelion is ‘Lion’s teeth‘ translated literally, a more poetic term. If they didn’t spread like crazy (see above) they’d be attractive flowers in their own right.
Gurdjieff was right. How did I miss this minor spectacle for 20 years? If this kind of living on automatic pilot only made me miss this sort of thing then it’s not the end of the world. But drifitng through life means we live by other people’s values, standards and agendas. That isn’t a way to lasting inner peace. Thoreau put it well
If a man does not keep pace with his companions, perhaps it is because he hears a different drummer. Let him step to the music which he hears, however measured or far away.
Thoreau, Walden
Some of those values and agendas are buying stuff because it makes other people richer, not because it delivers inherent value for you. It’s a bittersweet tragedy that working, which enables you to earn more money to buy more Stuff, steals away our consciousness at the same time unless we are unusually vigilant and alert to the distant drummer, and so we spend more of what we earn on Stuff that doesn’t always deliver value for us.
Notes:
- I’ve somewhat brutalised his philosophy for the sake of pithiness, more at the Gurdjieff society, Wikipedia, ↩
housing: complainypants interest only
by ermine
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that Interest Only Mortgage timebomb again – FCA edition
How did you go bankrupt? Slowly at first, then all of a sudden.
I once heard a father tell his son “There are a lot of stupid people in this world”. And if the FCA really is right that many people don’t realise that an interest only mortgage doesn’t buy the house, then they fall into this class. It’s in the name – interest-only. As opposed to repayment mortgage. Y’know, the one where you repay the amount you borrowed. Duh…
Here we have Robert, a fellow 18 years away from the end of his interest only mortgage. He is surprisingly savvy about his plight, having been aware that in the past you would only be allowed to get out of the door with an interest-only mortgage if you had a parallel savings product for the capital. Often an endowment, but a S&S ISA is a good match too. If you save £10k a year in cash, after 25 years you would have enough to buy the average non-London UK family home. 25 years is long enough for the stock market to give you a decent stab at getting ahead
Framing, dear boy, framing.
Listening to Robert, one of the things that struck me was that for some people, an interest-only mortgage could actually be a very good idea, even if they know they will never pay back the capital. In Britain, a lot of renting is on assured shorthold tenancies, where you can be kicked out of the place every six months, even if you comply with all the conditions of the tenancy. A lot of people want to have children, and for that they need to have a house bigger than the one they will need as empty nesters. A 25 year interest only mortgage is a good match for that situation – it’s long enough to raise a couple of children to maturity, and when the time comes at the end, hell, sell up before the time is due, pocket the nominal profit that 25 years of inflation will give you plus anything house price inflation gives you, then rent or buy your empty nest.
The pros are
- as long as you pay your mortgage, nobody gets to kick you out of your house.
- You can paint the walls, do DIY,
- there won’t be a succession of landlords trying to run off with your deposit, move you on etc.
You will never own the home and never plan to – because it’s too much house for the one you will eventually own or rent. As a way to use other people’s money to pay for the extra space you need to raise children, it’s a good deal, as long as you can dodge the cons. You are renting from the bank, but as long as you know that, it’s fine.
The cons are the three big ifs.
- You need to make sure you always have enough coming in to pay the mortgage, up until the time you sell.
- You need to make sure you have a job for life so you won’t have to move to chase work, or live somewhere like London or pehaps Cambridge where there is lots of work around so you can find alternative work without moving
- You need to stay together with the person who brought the children into the world with, and quite frankly from observation I would not say having children always improves the stability of people’s relationships, but hell, what do I know
The modern world has become a lot more inimical to the chances of success at dodging the cons, and you have to dodge all of them for 18-20 years to make a go of this. I wouldn’t bet on it, if I were starting out now.
One of the toxic legacies Thatcher left us was the notion that owner-occupation was the only proper way to inhabit a house in Britain. It runs deeply through the British psyche, and leads us to overpay for housing. Other countries rent happily, even as families. Generation rent may want step back a little, and reframe its thinking
- You can now work and study in other parts of the EU. You may be able to save yourself a shedload of cash at the further education and the home ownership stage for the cost of learning a foreign language.
- The EU is not your only choice, though you may have to jump through more hoops.
Back to Robert. He is being a complainypants and has surrendered agency. He has 18 years to go. Inflation kills your money, roughly halving its real value every decade. 188k sounds like a lot of money now, but it will have a value of only about 47k in today’s money by the time his mortgage falls due. Now I appreciate that’s still a lot for a gent with £6.86 of savings, but in practice it means he needs to save in real terms about £2600 a year in today’s money, about £200 a month.
That is tractable with frugality. He needs to buy less consumer shit, stop going on foreign holidays, and tighten his belt. In particular, if he starts to pay that off, it will reduce the amount of interest he needs to pay, resulting in a virtuous cycle. The tragedy with a mortgage is that it always looks darkest just before the dawn. I never believed I would be able to pay mine off when I started getting the letters saying my endowment was going to fall short. But unlike Robert, I sucked my gut in and started to hit the bugger by overpaying it. And it got easier. It got a damn sight easier when I won a mis-selling complaint and lobbed the entire amount into the mortgage.
In Hemingway’s The Sun also Rises, one of the key characters, Mike Campbell, is asked,
“How did you go bankrupt?“
His response is
“Gradually … then suddenly.“
Now normally I am of the opinion that Tom Peters is full of shit, the sort of thing that he has advocated for business is one of the reasons I couldn’s stand working any longer for stupid pricks bean counters that knew the price of everything and the value of nothing. However, he is a genius, simply one misusing his talents in the service of the forces of darkness IMO. One of his acolytes posted thusly
This is so very applicable to a recession scenario. Actually, it is applicable to all our lives—you don’t fail suddenly; you fail gradually through a series of small failures everyday. The day you fail is just a culmination of all the small failures you have had.
There is a little known corollary of this observation. It can be reversed too. Let me postulate Ermine’s Law
How did you succeed?
Gradually and imperceptibly at first, then all of a sudden.
Take it from an old git, because unfortunately you don’t tend to have this experience with finance before late in your forties unless you are exceptionally skilful. It’s why the halfway point of any long term goal is such a dreary and dismal hopeless place. The foundations are of success laid gradually, but the success happens all at once. Look at this graph of how a repayment mortgage repays the capital. You’ve put all the work in steadily, but you’ve only bought a third of your house at the halfway point.
which I cited in this post. Look how the capital rushes up towards the end.In practice remember that inflation is halving the real value of the cost of your mortgage every 10 years. so not only is the experience really horrible at the start where money is short, but towards the end you can pump up your contributions. That means the all of a sudden effect is even more marked if you have an interest only mortgage like I did and start making capital repayments as you get later into your working life, when the mortgage becomes a smaller proportion of your disposable income – see my case below. That’s the tragedy with saving steadily – you see bugger all for years and it’s hardest in the beginning, then suddenly it all happens – when you don’t need it because you have more money coming in. That’s why the greybeards have all the money in the world – because they’ve been saving a little bit for all their working lives. Death was invented by economists to save the human race from living in servitude to our Stone Age ancestors, some of whom would have been saving for thousands of years and would own everything
That’s why every young generation feels it unfair that all the old gits have the money. I felt that way too in ’84… You’ll get there – if you don’t spend it all and if you don’t inflate your lifestyle with your income like all the admen on the telly say you should.
As another example, take a look at my mortgage and income history, in relative units. Look at that shocking income multiple of 5:1 at the outset – and I was a bachelor at the time, so it was just my income paying this, and I got to see interest rates of 14% p.a.! Buying a house at that time was such a stupid thing to do – it’s even worse than the price to earnings multiples now prevailing, and interest rates are lower now. Again, look at the trajectory – slowly at first, then all of a sudden.
Robert needs to get a grip. First ask himself it it makes sense to own his house in a couple of decades. If it does, then make the adjustments to his lifestyle to fix that. I see he has a very nice flatscreen TV and nice new leather sofas. I don’t have these. But I own my house. You pays your money and you takes yer choice. Robert needs to do less consumerism and more saving if he wants to own his house. He’s got 18 years to go. He has the choice – adjust his financial flight path and land safely. Or have a fast ride, lots of holidays, cars, TVs and leather sofas, then crash and burn. Interest only is not a timebomb in his case unless he makes it one. The FCA is quite right to be educating interest only mortgage holders that they are on , duh, an interest only product. However, the “I want it all now” mentality and general complainypants attitude means they’ll be wasting their breath. If you take out an interest only mortgage and are surprised that you won’t own the house at the end of the term then you shouldn’t be licensed to drive a £10 note down to the pub, never mind sign on the dotted line of any financial contract.
savvy shopping: chocolate
by ermine
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A fascinating peek into the inner workings of capitalism – manufactured demand in the making
Years ago, my Dad had reason to take the cylinder head off the engine of his car and regrind the valves.He showed me the engine running without the rocker cover, and it was fascinating – the busyness of something we take for granted many a day. I’ve never forgotten that insight into the workings of something so commonplace, yet so hidden from everyday sight.
So it is with the works of capitalism at times. Many companies exist now to create wants in their customers’ minds, which they can then address. One of the secrets to retiring early, indeed to financial freedom of all sorts, is to avoid being sucked in, and here is a beautiful example of the process of need creation in the making. Sheer genius!
A decent piece of chocolate is a very good thing indeed. Thing is, with gustatory pleasures as well as most consumer goods, the relationship between quality and cost aren’t directly connected. They go something like this:
Now the trouble is that the price axis is logarithmic – each step roughly doubles the price of the previous step, whereas quality is linear. This reflects the fact that most improvements are subject to diminishing returns. Most of the win is had early on, though there is a rump of cheap and nasty crap that is not really fit for purpose at the bottom end below a price of 1 unit. Most of the quality improvement is to be had in the steep rise of the curve between 1 and 2, and then it flattens out as the price skyrockets. Now what a company wants to do is create a sense of want and desire in you, so you ignore the fact that the price is skyrocketing but the quality isn’t really much better than lower down the scale.
Fortunately, humans are social animals, and we ascribe value to scarcity, all sorts of fancy trimmings and plumage irrelevant to the item in question, and we are suckers for a good story. Plus we don’t have the time these days to really think about what we are buying, so we make mental shortcuts and analogies with similar patterns elsewhere. As well as these foibles, there are, of course, the age-old things we inherited from the animal kingdon – the value of a peacock’s feathers are not in their great utility, but in showing the female that even carrying all that conspicuous consumption around, the peacock doesn’t get eaten. That same applies to bankers swilling Dom Perignon to excess. It’s not the champagne they are valuing, it is the fact that drinking it to excess shows they are rich enough not to worry about the price
Allow me to introduce you to Exhibit A. The Hotel Chocolat corporation, and more specifically their Single Estate Rabot 1745 collection, welcome to the £7 bar of chocolate. I first came across this in the Torygraph, who basically line-printed the press releases with a moducum of added spin by the looks of it. However, I was tickled. A few years ago I read Jason Vale’s Chocolate Busters which sensitised me to how chocolate is promoted, and I thought of that book when I saw this.
You can picture the scene now. Somewhere in a three star corporate hotel near an airport somewhere, a newly appointed Head Honcho of Hotel Chocolat is organising a hothouse workshop, on how to enhance the brand, and drive profitability. In short, to create some value that can be sold to more willing punters. A bunch of guys in off-the-peg suits show up with those wheeled cases with their laptops in. In the morning, the Head Honcho addresses his droids, and tells them this hothouse will come up with thrity-six Innovative Ideas to Revamp the Brand and Drive profitability. Their bonuses depend upon it…
The trouble with meetings like this is that time is so short, and the leadership usually such arrogant peacocks that there’s no time to actually reflect on whether some of the ideas that come out of the pressure-cooker hothouse are actually any good. We’ve all had those ideas that seemed good at the time, but on reflection of a few days or weeks were actually quite ghastly. However, this one isn’t so bad, perhaps Hotel Chocolat don’t do things that way. Perhaps they have stand-up meetings of no more than 15 minutes, or something like that. The basic idea was
Why don’t we make chocolate more like wine. Let’s give it a massive big backstory and raise the perceived value. There’s only so good chocolate can get for 99% of our potential customer base, but everyone is a sucker for a great story!
And so the new marketing was born.
The Story
Hotel Chocolat: – I’d have guessed established in the 1990s, and that was a good guess. Companies House tells me that it was incorporated in 1993. Good move on changing the name in 2003 to Hotel Chocolat from Chocexpress Ltd, which made me titter, that sounds so low-rent compared to the image Hotel Chocolat is trying to project now
I was actually warmed up to be sceptical by the marketing strapline “British cocoa grower and chocolatier”. It’s very nouveau-riche and pretentious – Cocoa doesn’t grow in Britain and we have confectioners, not chocolatiers. That dissonance matters, particularly if you are trying to create a patina of established competence with
Rabot 1745: rare and vintage
The implication is that there is an esteemed heritage going back to days of Empire. It’s bollocks, of course, but adds a haze of antiquity, without ever claiming anything really goes back that far
The label: a classic piece of spin and flummery. That’s the beauty of taste, it can’t be measured. I could say it tastes like angel tears and pulverised unicorn horn with a soupcon of plum and be just as right
A charmer with a smouldering intensity. Quickly floods the mouth with super-mellow but deep cocoa, roast nuts, vintage leather and cream.
Short story: The battle of the cocoa bean is ongoing in Ecuador. The less flavoursome but easier-to-grow CCN-51 variety has been taking over from the delicious and indigenous Arriba Nacional, the one used here.
Harvest: 2012 Roasting time: 35 min @135 C. Refining & Conching: 65hrs.
(label backstory, from the website)
Ecuador was once the world’s powerhouse of cocoa back in the late 1800s, but a disease wiped out many estates in 1919. This estate, known as Hacienda Iara, was re-planted with the fine Arriba Nacional cocoa from the more protected interior of Ecuador and is run on organic principles. An easier to grow, but less flavoursome cocoa variety known as CCN-51 has recently been taking over the country’s crop, but a fight back has started to maintain the true ‘Nacional’ cocoa taste, characterised by an intense cocoa flavour with a subtle jasmine/floral note and relatively low acidity.
I wasn’t able to substantiate this with research on the web. The whole CCN-51 and Nacional seems to be a shimmering chimera, and depends on who you are reading
But I do accept this isn’t my area of expertise.
The Price: £7 for 70g, that’s 10p a gram. Tesco sells Galaxy for 1.2p a gram and a good match for this would seem to be something like Green and Black’s Organic Dark at 2p a gram. We’re clearly straddling that knee point of the graph.
Let’s take a look at what’s happened here. I’d hazard a guess that the value price chart looks something like this
Basically a huge amont of perceived value has been created by the guys in the suits creating a story that people will buy. It’s because of things like this that many of us find that our Wants grow to about 110% of the size of our take-home pay. We’re suckers for a great story, and we get caught up in it and buy into it.
Don’t get me wrong, I am sure Hotel Chocolat’s Hacienda Iara Organic Dark is probably a very decent chocolate. But chocolate just isn’t worth the extra 8p/g a throw to me, compared ot the Green & Black’s version at 2p/g, which is about as far as I need to go with chocolate. Life is too short to go around paying more for the Story than for the Stuff. I try to just pay for the steak, not the sizzle, because there’s a limit to how much steak you can have before you just don’t want any more. Not so for the sizzle
living intentionally simple living: retirement
by ermine
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Retirement isn’t like a long weekend, or a long vacation
Something I’ve discovered is that many people who have been working for some time find it hard to imagine what life is without work, and occasionally fear the void. I’m not talking about someone who has found their vocation and genuinely enjoyed most of it. I observe that most often in the self-employed at the entrepreneurial end of things, be that in DW at The Oak Tree Farm, or the driven creative entrepreneur, or hell, even Diamond Geezer Bob ex of Barclays
. That’s fine – but some of the rest of us wage slaves occasionally look at our lives, look at the bits that aren’t work (weekends, vacations) and subtract work to think ‘is that all there is’? with a little shiver down the spine at an imagine life of long weekends and extended vacations. For some, it seems to lack meaning and purpose.
It isn’t how it will be, but it’s an understandable mistake. When you have retired, life is not like one long weekend, or even a long vacation. Yes, the weekends are less different to the working week, obviously, but therein lies the clue. For people working 5 days a week, the two-day weekend is a brief respite, a chance to recharge the batteries, to take a break. You don’t need to do that when you have control of your own time, so your weekends are different! it still staggers me how I became almost zombified as energy drained, whole swathes of weeks merged into grey blocks of time compared to the kaleidoscope of variety. Don’t get me wrong, there was much more busyness then, but the ancient Greeks identified the problem with their concepts of Kairos and Chronos. You must live time, not just watch the hands sweep over the face of the clock. That means paying attention and doing things with respect.
Retirees still have to take some regard of the weekends, of course, because meeting up with others who are working is usually easier. Just as steam gives way to sail you need to respect other people’s time pressures. Nevertheless, life retired isn’t one long weekend, because there’s no need to decompress from the stress of work or to pack all the stuff into the two days that you couldn’t do in the other five days. It’s hard to say exactly how that is different, but it is – it is much more relaxed and more fun. Your weekends are no longer the bassline to the strident demands of work, they are part of a greater harmony.
It’s not one long vacation, either. Unless you’re very rich
Even if you are, ask yourself whether an endless vacation isn’t perhaps the grown-up version of the kid who only wants to eat ice cream all the time. A life well lived has dynamic contrast, moving between different poles. A lot of your vacations while working are expensive because you are packing in a lot of stuff to make it as different from work as you can. You are usually time-constrained, too. I can’t really put this much better than GOP from this comment:
One change since I retired relates to travel. I used to go on far-flung holidays ranging from Bolivia to Bhutan which I thoroughly enjoyed but which also satisfied a need to get as far away from work as possible in every sense. Since retiring, although I can still afford to do it and my partner would be happy to let me, the need has somehow gone and I’m content with more local travel which, preferably, does not involve flying.
Now I am somewhat constrained at the moment in that I have no income, so I’m not going to spend large amounts on travel right now, but that won’t last forever. I still feel similarly to GOP – I travelled reasonably well with work when I was a single man and had a penchant for trying to take longer but travelling overland. Most of the time I love my fellow humans but that doesn’t extend to seeing them milling around in airports, or pretty much anywhere where a whole load of people have to line up all in one place. MMM may have put his finger on the problem with a Peak life is lived Off-Peak.
One of the key Principles of Mustachianism is that any and all lineups, queues, and other sardine-like collections of humans must be viewed with the squinty eyes of skepticism. Because if so many people simultaneously decide to do something that they are forced to stand or drive in a queue to do it, there’s a good chance it is something that is not worth doing.
He’s got a point. Don’t travel at the same times as the rest of humanity if you can. Sometimes that means don’t travel at all
Often it’s as simple as travelling midweek, sometimes it means travelling at night. Similarly if you have to queue to buy something, it’s probably a carefully orchestrated shortage (think anything made by Apple, Christmas toys where the supply, marketing and demand are carefully managed to engineer a shortage and pester power that keeps sales up well after Christmas).
Your life will change post-retirement. When you’re working more than half your time is owned by someone else, and in a hard twist that means you often have to pay other people to do things for you because you don’t have the time, be that Starbucks to get you coffee, some deli in London because you didn’t make sandwiches or calling in a plumber because you don’t have the time to fix the problem yourself or understand and learn what needs doing.
The other thing, for which I have to thank GOP for introducing me to, is Herbert Marcuse, and his critique of capitalism, which is even more true now than when he wrote it :
“The people recognize themselves in their commodities; they find their soul in their automobile, hi-fi set, split-level home, kitchen equipment,” meaning that under capitalism (in consumer society) humans become extensions of the commodities that they buy, thus making commodities extensions of people’s minds and bodies.
You are not what you buy or use. Your soul is to be found in the space between your ears, in the web of life with other sentient beings, in your love of life, and of others. It has no barcode; there is none other like it. Never lose sight of that in the mesmerising maelstrom of marketing messages. Thoreau had some point when he said
“A man is rich in proportion to the number of things which he can afford to let alone.”
For a more direct dissection Jacob ERE gives it to us straight between the eyes with both barrels.
In general, if you ask the average consumer what enjoying life is all about, it distills to the following trifecta: buying tickets, going to restaurants, and shopping.
That’s it. Those three things are all there is to enjoying life. The uninformed opinion is that if you don’t have these these three things in your life, your life sucks. I know, because that’s what I used to think. And it’s also what consumers keep bringing up.
Gulp. The Ermine has been known to darken the door of a restaurant occasionally
It is a little over three years since I started this blog. The first real transmission was this one. It’s hard to picture your life retired when working – I found even the financial issues hard to envisage and they are among the more tractable and quantifiable changes. Nobody bangs the drum for things after the change – because nobody has the experience of being retired before they are retired
Looking at that post, it was quite prescient. Illich had a point when he said choose a life of action. I spend more on tools and things to investigate stuff and make things happen. I don’t spend money on DVDs and video games. I’m fiddling about with finding out how to post a graph of the temperature of some chickens, and a polytunnel on Cosm. Because it’s a challenge. The secret to retirement is to be curious. Become like a child, always ask the question why.
I took a rotten shot of some flowers I passed because I’ve seen them before, and I figure it’s time I knew enough about my world to know what they are called. It’s one of the things that the gift of time gives you – you don’t have to live life on autopilot any more. Take joy in the quotidian as well as the unusual. I hear the song of the blackbirds slowly becoming more accomplished as time goes on. I learned about how to use json for data interchange.
It was easier for me to not fear the void, because my work experience had deteriorated, and I was seriously stressed, not by what I was doing but by the stupidity of the system. In life you should generally try to run towards the light rather than away from the darkness. But sometimes it simplifies things. For someone who doesn’t have serious issues at work, there is much to be said for taking some time. I can’t recommend highly enough scaling down your expenditure to match what you expect to retire on, and do that for a year at least. The decision to retire, and if so to retire early, is one that is important, though not urgent. You have to make time to consider it. I was seriously motivated to retire early, but it still took me three years to get to the right point for me. The delay wasn’t for the want of trying to convince myself I could do it earlier. And you have to be prepared to take some leap of faith, because you have no clear idea of what it will be like. Sometimes in life it is good enough to do the best you can with what you have to hand
It won’t be an endless weekend, or even an extra long vacation. Like sculpting anything, crafting a good life free of ‘work’ is a matter of having a general idea in your mind’s eye, and then taking the first steps. It won’t turn out exactly like the mental picture, and that’s fine. It won’t solve all your problems either, because remember that every place you go, still yourself you see in the mirror, and it is still your shadow that the lamp throws on the wall. Issues that lie within will retire with you. You may have more time to ruminate on how to work on them, but you won’t leave them behind as you hand in your mobile phone, computer and access card. Possibly for the first time you will be in charge of most of your time. Carpe diem – and may it serve you well.
I spent a lot of time thinking about the money aspects of retirement. I overshot somewhat – I don’t spend now as much as I’d get if I drew my pension early right now. Getting the money straight is a prerequisite, and I would urge anybody thinking of retiring early to inform themselves about the financial aspects of retirement as much as they could. But money isn’t the whole story.
Finance is necessary to crafting a decent retirement. But it isn’t sufficient. Your setting is just as important – who you will spend your time with, where you are, who is in your life, what your connections with the wider community is. Early retirees have some extra challenges in this area (most of their current social circle will probably be still at work) but they have other advantages unique to them too. They are younger, and probably more adaptable too. In the end I only retired eight years early, so I am not that unusual, compared to, say, Retirement Investing Today or Mr Money Mustache. There is a big difference in retiring in your early forties compared to early fifties. While the principles are the same – basically spend less than you earn, the scale is very different.
living intentionally rant: Apple FLAC geeky hearing iPod music ripping CDs technical
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Why is everything Apple so easy and so hard at the same time?
Note this post is a random musing of an ermine poking an inquisitive snout into a wrinkle of the world that interested him. Nothing made by Apple can ever be described as frugal, there’s no personal finance angle and it’s definitely not simple living
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The Ermine has avoided everything to do with Apple in life so far. I didn’t own any Apple hardware, don’t own AAPL stock, never understood the fandom. It all started badly when I began work at The Firm – everyone in the office used the little squiffy mac classic/plus computers to write reports, and there was an Apple Laserwriter laser printer.
Much was made of the intuitive nature of the Mac, compared to the arcane command line of the PC. I didn’t find it intuitive at all. F’rinstance how d’you turn one of these off? The obvious way to shut the bugger down is – wait for it- drag the floppy disk into the trash icon. Obvious, innit? Stupid human for thinking this means “Computer – erase all my shit, NOW.”
Unfortunately at that time you couldn’t do anything useful with a Mac as an engineer, y’know, like run circuit simulation software or the like. I had a great big 286 PC that could do this. I was able, via the Appletalk network and a shockingly expensive PC Appletalk card, to copy the output of a SPICE circuit simulation file to the office LaserWriter. I shouldn’t be too hard on Apple about the cost, this was in the late 1980s, where Novell Netware ran a piece of software on their servers for the sole purpose of counting up the number of connected network cards and kicking people off if there were more simultanous users than there were network connection licenses. Cheeky blighters. TCP/IP and the Internet came along just in time to save us from this sort of rent-seeking usury, Apple at least just collected their rent from the high cost of the network cards. However, Apple never allowed me to me print that document, because if I wasn’t in the Apple ecosystem I was Unworthy to touch their printer. I was able to get the file onto the printer, but without some sort of fork file to attach the file to something to make it do something I was stuffed.
Every so often one of these macs would have a hissy fit and the EHT would start to flash over. We’d take it into the lab and pull it apart. We were electronics engineers, don’t try this at home. You could usually get it going again by pulling off the anode cap 1 and getting some isopropyl alcohol and cleaning round it. It was then that I was exposed to my first experience of fanboidom. Everyone crowded round to observe the most vainglorious piece of narcissistic codswallop I have seen in any piece of gear. Apple thought they were so Really Great they inscribed the signatures of the design team in the plastic moulding of the inside of the case, and everyone cooed about how marvellous this was. It was all I could do not to chunder in the wastepaper bin.
I ended up with a deep dislike for everything Apple ever since
When I buy a piece of equipment I own the damn thing, not the manufacturer, and this seems to be a simple fact that the Apple corporation doesn’t get. What else does a printer expect to do when it receives a PostScript file other than print it, FFS? HP got this, but Apple specifically made their printers slightly nonstandard so they would only work with Apple kit. When you buy a piece of Apple hardware, you get to check in your balls with Apple. You do it their way, or you feel the squeeze…
So how do people use smartphone screens then?
Fast forward 25 years, I have no smartphone. It was a struggle for me to imagine how people use any sort of website on a poxy little two inch wide screen, and in portrait mode. And I needed to understand this, else I would be authoring stuff that would really hack my users off, and in the end the user is always right, even if they’re mad as a bag of spanners. So the Ermine was in the market for an iPod touch, which does most of the things a smartphone does, but using wifi, so without tying me into a phone contract and feel the squeeze of a different corporation on my parts – the Ownership of my bank account via a mobile phone contract for the next three years.
Now I have to say that the experience of unboxing the device, sparking it up and connecting to my wifi network was the best ever user experience of connecting a piece of computer kit I’ve ever had. The various programs look nice and run well. Since this is the Apple universe you get to call programs Apps, and they tend to be single-function. I was quickly able to run up the browser and learn what I needed to learn about the website design – and that my use of a folding CSS structure did indeed sort of track iPod and presumably smartphone screens. Thank you Skeleton CSS for doing the grunt work and saving my ass while I was authoring blind
And I discovered I was getting old
I had lost my last pair of glasses so I was slumming it with the pair from before, on an old prescription from 10 years ago. But the iPod scales websites down if they are too wide for the screen. As you get older the short focus of your eyes drifts out. Mine was different in each eye, and I could not read the roughly 4pt text with both eyes unless I held the device so it was too far away to read. So I either read it with one eye and get a splitting headache, or do without. Getting this machine has cost me about £400 so far – £160 for the iPod and the rest because I have to accept I need varifocals and reading glasses. In the optician at least I was able to read the smallest grade of text so I will be able to read the iPod rendered website and develop with it. I can’t blame this on Apple
This is the bees knees for the job I bought it for. I can see how stuff looks like on a smartphone like screen, I now know why I get headaches using the computer and what to do to fix this, and the iPod fires up in a couple of seconds so it’s easy to see the weather, email and stuff like that. The share price screen even works well, though I was reminded of the original vainglorious streak when I see the first example stock is AAPL. The iPod doesn’t owe me anything now – I was able to finish the job and the project has already earned me more revenue than the capital cost of the iPod. And I understand how teenagers can use the web on a small screen, because the screen has a finer dot-per-inch resolution that a regular computer screen. Although the total number of picture elements is still larger on a laptop or desktop, the iPod screen picture elements are closer together, so the loss of quality isn’t as much as I had expected from the smaller physical screen size. But you do have to be under 35, or equally short-sighted in both eyes if older, to be able to see the screen well enough to use that resolution without visual aids, and you’d look kinda daft on the bus looking at your smartphone with a magnifying glass!
How to you use this thing for music then?
Then I thought I’d try and put music on it. This, apparently, is the primary purpose of an iPod after all, though I didn’t buy it for that reason. Now I have it, I may as well use it
First, some background. I’ve loved music over the years, and it is one of the pleasure I used to have in life. I never used portable music players in a big way – with a car commute of 20 minutes each way there’s no need. I don’t have the death-wish of cycling plugging up my ears and losing situational awareness. Call me chicken-hearted, but I like to know if a great big truck is coming up behind me, even in rural Suffolk.
a detour into hearing
As a result the ermine is still capable of hearing up to about 12kHz though I have to be careful to use hearing protection with power tools. The mammalian ear is strangely and poorly designed in that there is a mechanical amplifier inside. The ossicles couple the high impedance of the air to the low impedance of the fluid-filled works inside the snail-shaped cochlea, using three bones to the eardrum. Then you get to the outer hair cells, which act as chemically powered-mechanical amplifiers, they do not send signals to the brain. This cochlear amplifer is the damnedest way of getting amplification and very susceptible to damage from loud sounds, but this preamplifer gives the ear remarkable sensitivity if working right. Then you get to the inner hair cells, which occupy a tapered shape, resonating at the input end for high frequencies and further in for low frequencies, acting as a coarse spectrum analyser. As you get older you lose some of the ability to adjust tension in the eardrum and the ossicles which reduces the damaging effects of loud sounds, so you need to be more careful to avoid exposure to excessively loud sounds from 40 onwards. ‘Cos otherwise you start to trash the hairy preamplifier, and you get to know about that eventually, because it has a stupendous amount of amplification- about 50dB or 100,000 times power gain. Lose or seriously damage that and you are deaf as a post. Young’uns should note that you’re not immune to the damage, it just takes a little more loudness to do it. From what I hear on the Tube and on the street, some of you are doing fine wrecking that sucker. Please, for God’s sake read this and take the test. If you are below 40 and it indicates any problem whatsoever then you may want to re-evaluate your relationship to music. I am well over 40 and do fine on the test, and there are a lot more miles on the clock in my case.
Music isn’t particularly a threat to my hearing as when I listen there is a convenient device called a volume control, and I don’t go to that many live concerts. I stopped using portable audio devices on planes (then called a Walkman not an iPod
) after I got off a LHR to LAX flight and fired up the walkman in the hotel room, to be greeted by a hellaciously loud volume I’d never normally listen at. A jet plane is a stupendously loud environment already, running at 80-85dBA 2, there’s no real headroom to make any music heard safely above the engine roar unless you are using noise cancelling headphones. 80dBA is considered the danger level so you don’t want to add too much more noise to your ears inside a plane.
Using tools and transportation which is probably my main noise risk. I use hearing protection even for things like hammering, now, and definitely for any use of power tools. I may look like a jerk, but so what. There’s not much more I can say to the young, but it saddens me when I walk on one side of the street and can hear what track someone is playing on the other side of the street from their earbuds. There is no cure for deafness, and if you are young now and start to lose your hearing before my age you are likely to spend half your life in a silent world cut off from the rest of humanity’s preferred way to communication. My Dad once worked in a glass bottling factory and was very hard of hearing towards the end of his life. It was no fun at all for him.
back to music
I grew up with actually sitting down to listen to music. Yeah, I know it sounds kinda funny now, like a family gathering round the wireless to listen to the news on the Home service. Part of this was determined by the media of the day – record players were never portable in any useful way, and I’d have never played mine on anything crappy. Each time you play a record, a little piece of it dies, and the capital cost of the record collection was by far the greatest investment in audio entertainment, even for a hi-fi nut, so I didn’t take risks.
Cassette tapes were noisy, unclear and all round ghastly, and I was unlucky enough to be oversensitive to speed instability. I was eventually reasonably happy with CDs, and more recently have moved to a Slimserver (now Logitech) media server and streaming players, playing losslessly compressed data from the CDs (ie the player gets exactly the same digital data as was on the CD). All of these work entirely within my four walls. I don’t do Cloud anything, for the simple reason that I hate third-party dependency for anything I put effort into. Cloud is fine for something you don’t need, or only need for a few weeks, and you don’t put any effort into. My music collection has been with me for thirty years and I’d like to hang on to it…
Getting CDs into a digital music library is something that costs a lot of effort, leastways if you start off with a few hundred CDs. Transferring my CDs was a project that took me two years using multiple PCs and CD drives, sometimes running EAC on two drives at once, ripping the CDs to lossless FLAC and Cue files, which the SlimDevices/Logitech kit can play. It’s a long, tedious and soulless job ripping CDs. You only ever want to do that once, though I had to do it one-and-a-half times because I discovered why you should not split CD albums into tracks as soon as I ran into my first live album, and reinforced again when I ran into my first classical album. It’s a bastard when you get a gap between the first and second movements of a symphony that wasn’t there on the CD, or the applause hiccups between tracks on a live CD.
And then work went bad and other things went wrong. In a twist of fate something that had given me joy for decades came to hold no meaning for me, and there is a gap of about three years when I bought no CDs and listened to hardly anything at all, and even that with jaded perception. Although I love the idea encapsulated in Miranda Sawyer’s lovely Observer article about the power of music to score our lives, and lift spirits in adversity I didn’t find the same. Until the spell was broken earlier this year, and the music came back to life.
Now in trying to sort this out I discover much has changed in the three year intercession. Some people actually pay for digital downloads. When it comes to information I don’t pay for what I can’t touch, and in many cases the CD is actually cheaper these days if you take it secondhand, but yes, you do need to wait for it in the post. It seems there is some unholy digital download battle between Apple/iTunes AAC and the rest, led by Amazon MP3, with cloud streaming systems like Spotify throwing in a wildcard. I don’t want any of that shit. I grew up with a standalone audio system depending on only power and what’s within my four walls. Sometimes I am going to run a party in a field with no phone service or mains electricity. No Cloud service, no tunes.
I managed to use the iPod without trouble for everything but music. When it comes to music, there seems to be a world of hurt in store for me, because I am not a new-born come to Apple to sort my life out. I have a perfectly good existing digital music collection, held in a free open source losslessly compressed form specifically because I don’t want any company to be able to control my usage or suddenly render my collection useless. It seems the way you are meant to get music onto an iPod, iTunes, wants to control me 100%. It wants to say how and when I can listen to my own music, and how and where I can move it. I’m not having that at all. I didn’t rent this iPod, I bought the damn thing, and I want to use my existing music collection without handing over the keys, so iTunes is right out. I’m happy to accept compression on a portable, but not the lock-in, and as for saying what I can or can’t do with my own data, sod that for a laugh. I say what I can do in my own four walls, not Apple.
How to get music onto an iPod without installing iTunes
I did finally crack how to do this, without installing the infernal iTunes. I have a desktop computer with a load of electronics software, kept on XP which I have to use for ripping CDs because EAC doesn’t work on Windows 7. The last time I installed iTunes on this XP machine it installed half the contents of Steve Jobs’ control-freakery ecosystem without having the decency to ask if that really was what I meant to do. Not just iTunes but bonjour which confused the hell out of my existing streaming system, Quicktime, Apple updating service, the lot. Not an exercise I wanted to repeat.
Because I still think in terms of albums and not tracks, I use foobar2000 to split the CD image files into tracks and convert to MP3 for the iPod, which, though proprietary is at least a widely supported standard. Somehow foobar2000 was smart enough to tell the MP3 files that they are part of an album and tell them the track number, and the iPod is bright enough to take note of this and present me the music in terms of albums again. I used CopyTrans to do the job of shifting the MP3s to the iPod. Foobar2000 can also embed the cover art, which helps brighten up the selection process on the iPod somewhat. Both programs are free though only one is open source.
CopyTrans had to download iTunes and use some part of the guts of it, but other than that I have snatched control of my own hardware back from Apple, without making the Beast angry by jailbreaking it. It kinda scared the hell out of me when I pressed play without headphones to hear a truly nasty tinny rendition of the track sodcasted to me from the internal speakers. It’s funny to think that forty years of technological innovation has brought us a poorer portable loudspeaker reproduction quality that the first transistor radio I ever owned, because at the portable level it’s all about the size of the enclosure that baffles the out-of-phase back output of the speaker. This was nasty, tinny, distorted and unclear. It was fine when I jacked in my headphones. I’m still not sure I have the clarity/resolution of playing back on my hi-fi, but it’s entirely fit for purpose as a portable
Apple products are great and easy to use as long as you are prepared to stay in the walled garden. Do as the nice man says and use the Apple ecosystem in the way prescribed, which in my case presumably would mean paying for several hundred CDs from the Apple store again or losing another two years of my life to ripping them into a compressed format that is locked to one PC and one iPod. And it will all work a treat, in general attractively, smoothly and without serious problems apart from the hurt to your wallet. That’s the easy part of the Apple universe.
If I’d wanted a portable music player as such, I should probably have got anything other than Apple, where you can simply dump the MP3s onto the player as a mounted mass storage device, and the player sorts it all out. However, I needed to understand the smartdevice and Apple world and this the iPod has done for me. I do like some of the one-task programs, the share prices, the weather app and, to be honest, the music player itself with the cover art. So I can accept the hoops I have to jump through to make this device work with my existing digital music library. However, it’s another example of how Apple makes life hard for free-thinking customers. I’m not particularly tempted to buy an iPad after this experience if and when my existing laptop cashes in its chips. That’s the hard part of Apple.
I was left with a greater admiration for Apples’ craftiness and the quality of their customer experience. And a greater dislike for the company at the same time for trying to turn an Ermine into a consumer zombie. A lot of the developments in computing, information technology and telecoms at the moment are trending towards making us good little consumers who don’t have any control or creative output. You can’t write code or write books or articles on a tablet computer 3, an iPod or a Kindle, but they’re great for consuming the work of others. We are all consumers now, it seems, and soon the act of creating content, which was democratized by the general-purpose personal computer in the 1980s, will be professionalised and locked down again, by the simple act of not allowing the user to install non-approved programs
Notes:
- really don’t do this at home. You have to short the CRT to ground after removing the cap, but dielectric absorption means the some of the charge on the CRT comes back while you’re not looking, ready to give the unwary a shock
↩ - Passenger noise environments of enclosed transportation systems, US Office of noise abatement and control ↩
- not fundamentally impossible, but without a real keyboard your productivity sucks ↩
personal finance
by ermine
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The ISA conundrum, and a Cyprus memento mori…
The Ermine ISA has had three and a half years in it. I still have the cash ISA with the other half year in it
So overall that’s about 36k lobbed in the pot. Now the FSCS protection on nominee providers is 50k. 1, so I’m good for another year with TD, eh?
Not so fast. The whole point of an S&S ISA is that it is meant to appreciate in value, basically if I contribute this year’s money to the ISA I will go over the 50k limit. Plus obviously I’d like the ISA to keep on growing, if you please, so there wants to be some headroom in there.
Now if you add any money at all to an ISA in this tax year, you have to stick with that ISA provider for this year, so it pays to think about this before I do anything with this year’s ISA allowance. I like to spread my contributions across the year, though I will up the rate if things like 2011′s summer of rage happen, or the Euro goes titsup, or Mad Kim goes willy-waving with his nukes. Obviously assuming there’s enough of the world left standing
Something else we’ve learned from a divided Mediterranean island, is that anybody who has any money in an account over the government guarantees is considered a rich bastard who needs to help with the national debt. The more cynical who sleep on a bed of gold and line their walls with tinfoil will correctly opine that because governments have a monopoly on the use of force they get to do as they damn well please in times of real trouble. which is true, but let’s hope those sort of times don’t arrive, because how much is in your ISA is probably not one of the most pressing concerns at that juncture.
Nevertheless, when there is some simulacrum of democracy running, it seems that you’re still going to take a hit if you are a minor Rich Bastard. Truly rich bastards have of course spread their vast wealth far and wide. I don’t think the Rothschilds are that troubled if their ISAs go down the pan, and Warren Buffet’s Roth IRA is probably not the largest part of his holdings either. However, it does matter to me, and from recent events in Cyprus, it pays to avoid being considered a Rich Bastard. I would have thought that thirty years of paying taxes would be considered a decent enough attempt on the National Debt, but it seems not.
I can’t recall any UK ISA providers going bust, but the US firm MF Global shows that brokers can go bad. It’s the same old same old – power corrupts, and money is crystallised power, so get too much of it in one place and the effect of it on frail human integrity can pass critical mass. We are still blinking in the daze from the result of the last chain-reaction of too much money controlled by too few hands. And I’d say that the financial system is still deeply damaged and there are still big debts on private and Government books. Being an identifiable financial milch cow is unwise, so I need to find another ISA provider. Not because I believe TD Direct are a bunch of crooks and the Toronto-Dominion bank is about to go titsup. But just in case they have their internal thief, their Nick Leeson, Jerome Keraviel or Kweku Adoboli.
It’s not that easy to select an ISA provider these days, because the effect of the FSA shakeup of the fees structure, the RDR, means that something that looks good now may turn out not so good a year down the line. There’s no point in me doing the analysis when there’s this comparison chart at Monevator that summarises the issues. But it still lacks the crystal ball to see what the fee structure will change to in future as RDR settles down. It is often fearsomely expensive to shift a S&S ISA – you either have to sell all the holdings and shift as cash, or shift each line of stock, for which there can be a hefty transfer charge. I was lucky enough to avoid that when I transferred my iii ISA to TD Direct because iii were trying to avoid any more negative publicity from their fees hike, they intially wanted their £15 per line of stock. I had 13 lines of stock at the time, so that would have been £200 to show a clean pair of heels. You just don’t want to do that too often, it would knock about 10% off my dividend income for the year.
I’d like to carry on with running a HYP – indeed I’d probably buy more of what I have already, and break out a bit into sectors I don’t have yet, particularly oil, mining. However, I may take some time out for this year, allocate my ISA allowance and ride RDR out with a 100% Vanguard Lifestrategy fund with Hargreaves Lansdown, on the grounds they’re big, and one fund can’t be too expensive to shift out if necessary. Plus there’s the issue that I’m not sure I was getting a better return for focusing effort on making money from money, rather than allocating the same amount of effort to alternative passive incomes. As long as it doesn’t start to look anything like work, that is
I’m still glad I did it, and the principles of making money from money still hold. I just don’t need the streetfighting with rapacious transfer fees at the moment if I need to move because of RDR. Hopefully TD won’t go bad like iii, and my existing HYP can continue to grow there and work for me. This is the first year that I’ve managed to sell nothing at all, apart from two find I had in iii when they threatened to start charging for buying and selling funds. Much of the secret to stock market investment seems to be to choose well, and then sit on your ass and leave it be.
It appears that provided you aren’t contributing to the ISA in the current year, you can shift out a lump from an ISA provider or just one line of stock for instance, which may be the solution for if/when my TD HYP grows beyond the FSA protection limit. If I don’t add to it this year I should be good for a couple of years yet there.
Oh and thanks to the good citizens of Cyprus and indeed the nameless EU bureaucrat who let the cat out of the bag. Hold more than the EU protected limit in any one account at your peril…
Notes:
- Note that the protection on investment accounts is against the nominee getting frisky and running off with the cash or going bankrupt, it isn’t on the companies you invest in going bust
, ↩
frugality living intentionally shares: early retirement
by ermine
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So how did this early retirement lark work out in the end
It’s coming up to about nine months since I retired about eight years early from work – that’s eight years than the normal retirement age for The Firm. Truth be told, I retired for negative reasons rather than positive, but I’m not going to go on about those particularly. Because people just don’t bang the drum for the positive things that happen when you are retired. Like everybody else, I assumed it was all about the money. That’s everybody’s greatest fear. What you don’t hear about is the multiplicity of little things that all add up to a far better experience of life.
I caution that to make these work for you, you must eliminate debt, and that means all debt. Yes, your mortgage too 1, and that means doing without a lot of consumables while working, and probably having a reasonable amount of luck at times. You don’t borrow money from a bank, you borrow it from your future self, and if your future self will have less income than your current self, it makes no sense to be in debt.
So what does life retired look like? It’s all about owning your own time. It was given you as your birthright but was taken away from you early in life. Somebody said to me that time is the ultimate consumer good. He has a point, though I had to live it to know it, and also to have enough time to crawl from the wreckage of my curtailed career.
Owning your own time is delightful – you have the choice of what to do and when to do it. Before retiring it pays to prepare your human setting too, who will you know and spend time with, and that’s worth giving some thought to that before you retire. It’s particularly important for early retirees because a lot of their existing friends and acquaintances will still be working, some people I knew who retired even earlier than I did felt lonely, particularly those that retired in their mid forties, and I learned from their experiences – these were typically single guys, it took me longer than for them. Give thought to how you will maintain and develop your human connections, because as you get older it is Who is in your life that matters, not so much What is in your life.
The upside – my skin looks better and younger, the bags under the eyes fade, I slowly lose some of the weight that accumulated over my years behind a desk and in the lab. I walk more and bike more. I hear the birdsong, if there’s a good blackbird I will sit and listen to him for a while. I sit down for meals at a table rather than scoffing overpriced sarnies at my desk, I have more time to spend with the people I care about, I can read books, I can build things, learn how do use woodworking tools better, enjoy the company of people more, listen to people better, learn more, play more.
I watch less TV than I did while working. I tolerate no ads – I use ad-block plus on the Internet and less TV cans that at source, on the occasions I do watch TV I use a PVR and fast forward over the ads. If I have a requirement that may need buying something I use google – I buy things on my own terms, not because somebody is creating a desire in my head for shit I don’t need. I don’t buy anything on impulse, I wait at least a couple of days to see if the want is really a want. But if it is, and it fits my values, I buy it. If an offer has gone and I need to pay 10% more, so be it, that’s the price of living on my own terms and agenda. I don’t piss about with low-rent stuff like quidco and cashback, I have three credit cards but if I use them I pay them off in full. I’ll never get another credit card because I have no wage income, just investment income so I presumably look like a deadbeat living under railway arches on a credit check. Do I care? No – if the existing cards kick me off then I’ll pay by debit card or by cash, because I Don’t. Borrow. Money. ever since discharging my mortgage.
I can’t recommend early retirement enough. But you do need to be prepared to make the ‘sacrifice’ of living on less. I surrendered eight years of income when I retired, if you add all that up it’s a lot of money. I was happy to pay the opportunity cost, because that’s also eight years of life I’ll never live again. For me that was the right call – indeed perhaps I should have looked ahead and done it earlier.
Early retirement means I have less Stuff in my life. But I have more joy. Early retirees needs to speak up for it, because where are the ads on TV for Earn Less and Buy Less but Live More? We in Britain are so much richer now than we were thirty years ago, when I started my working life, I heard an estimation on the radio we have about twice as much disposable income as people had then. Stuff rather than Time seems to have got the thick end of our extra income. I am in my early fifties – the London I grew up in used coal fires and many houses had no central heating, some still had outside toilets. Cold and damp and the associated aches and pains were prevalent in the adults, so when I hear the Joseph Roundtree Foundation talk in terms of needing Sky TV to take an active part in society I wonder if perspective hasn’t been lost. We really have so much now. Ivan Illich called it out well in Tools for Conviviality in 1972. We are so much richer now than we were then, but are we any wealthier, I wonder? You are wealthy when more money wouldn’t massively change where you live, and how you live…
For each of us the sands are running through the hourglass, one day at a time. Making the call on as to where you place the balance between More Stuff and More Life is one of those things that is Important but not Urgent, so it always goes to the back of the to-do list. It’s worth dusting that question off and taking the time out to work through the options. You can measure more Stuff, and you can measure More Money. You can’t measure More Life. And I’ll stick my neck out and say Tom Peters was absolutely full of shit when he said you get what you measure. It works a peach in business, maybe. But in Life, it causes you to prioritise the measurable, the ‘how big is my…’ insert KPI here. And yet, when people look back on their life at the end of it, it is often the immeasurables – seeing their children grow up, and who they spent time with – or didn’t’ spend enough time with. The days are long, but the years are short. Though it’s schmaltzy in a uniquely American way, Gretchen Rubin nailed it. Don’t forget to live in the moment, because those moments are precious and they are running out.
My eventual projected annual expenditure is about a fifth of what I was being paid at The Firm, and I have a better quality of life – because I determine what a day looks like. There are other things that are odd about being retired. I have deliberately and intentionally avoided the whole work issue. I toyed with claiming JSA but figured a) I’m not looking for work and b) the stress of wanting to lamp some pipsqueak in the Jobcentre wasn’t worth the £1500 that six month’s contributions based JSA is worth, particularly as I’d have to pay tax on it.
Managing personal finances after work is enormously different to when you are working. While working, my income was single valued and knowable. Now, it comes from multiple volatile and erratic streams. I have the ISA income, which I reinvest. A similar sized lump of non-ISA shareholdings, that I have to capital gains spring and shift to the ISA over the years. And then cash holdings. These are horrendously different from what they were when I was working. What you must not do, when you retire early is to look at these accounts, and go Wow, I am rich. It is the lottery winner’s curse – most people have been used to a regular income and virtually zero savings all their working lives. So suddenly when it’s all savings and no income they see Big Numbers in their bank accounts and think they are rich, and lose their heads.
They’re not rich. Capital is worth about 5% as income, so divide all those numbers mentally by 20, high-roller. So unless you have half a million in the bank, then you aren’t even going to be living on the UK average wage. I don’t have anywhere near that much in the bank, BTW, though I don’t have the parasitic housing costs most people have because I paid down my mortgage. And if you do have half a million pounds in the bank then you need to remember what happened to the good people of Cyprus recently, and make sure you don’t have it all in one place, because you will probably be called upon to help with the national debt at some stage.
When I left work, I started to see those big numbers, and it is hard to explain just how scary and unreal they seem. I froze, and tried to keep the headline networth figure from falling. I’ve never worried about networth before, indeed there is no figure for house networth in my accounts, whereas this evanescent figure seems to be all that my fellow-Brits seem to concern themselves with. Maintaining networth was not the design aim of the plan, but there is a visceral aspect to money. All of a sudden I see strange numbers, and the power is cut, there is not steady income. The analytical solution I had designed over the preceding years was correct, but I found it hard to live it at first, to surrender a little bit of networth each month, in a long glide path for about three years. Even at the planned rate of descent, I would have half the nominal value of the capital, though more would be in ISAs by then.
I consider myself a reasonably hardened investor. I flew into the 2009 storm, in both AVCs and ISA savings. I’ve seen individual stocks plunge by over half, and recover, first on a total return basis and then on a nominal basis. But I quailed when faced with living a plan I had designed and was going slightly better than planned, because it was so alien to my experience of handling money. Don’t underestimate that effect of losing an income, even if you amass large amounts of capital compared to your mortgage-paying wage-slave life. Perhaps I was overly irrational etc, but I believe that it is not possible to be successful and totally rational about money. It is crystallised human work, a claim on other people’s effort. I must be involved to animate the plan and couple intention with action. And it still took me months to overcome the resistance to doing what I had planned myself
I recently discovered I have been working without knowing about it, fortunately in time to stop getting paid before the tax year ends
In times gone by I was interested in sound recording, and made a few field recordings which I added to a microstock agency. I’m not talented enough as a photographer or a recordist to make headway in that sort of this as Ermine photography. But microstock works for me – I don’t have to deal with people or rights and all that, the agency sorts that for me. The downside, of course, is you expect to make the price of a couple of pints of beer on it, or maybe a decent meal out.
I haven’t bothered to track any of this for a while. It appears that these firms are making me significant money, and I also have a few website estates that bring in a fair amount of Adsense revenue (this isn’t one of them
). I have told all these guys to hold payment till mid April to forestall creeping over the personal allowance this year. It is, however, very sobering to find that this stuff, which I had forgotten about, is actually making me about the same amount of income as my ISA, which has received by far the greatest part of my attention. My field recording equipment lies on a shelf covered in dust now, because the river of creativity dried for a few years as I focused all energy on getting out of The Firm.
I had a strange experience a few weeks ago, I travelled to London to listen to a concert by a singer whose records once kept the thin thread of the young ermine’s fire alive through a long night until the break of dawn during a difficult time at university. The past is a foreign country – thirty years ago there were no mobile phones, indeed without phones at all in the typical sort of crummy bedsits I rented them. If you passed midnight then you had to reach the break of day before assistance could be raised if you couldn’t haul your ass up the stairs and into the cold city night with no Tube service.
As I heard the song once again it resonated across the years and changed something. In reminding me of that turning point it invoked another and the dead hand that jammed the creative centre unblocked, and the spark flickered into life once again.
For several years I fell back and fell back, trying to save enough money to derisk the financial issues. I had saved enough money – I still have no pension income, and my run rate is a little bit lower than originally designed. But I also focused a lot of effort on trying to understand the financial conundrum of how to make money out of money. That was reasonable, because towards the end of working for the Firm, the flame of creativity flickered and failed. The accumulated financial capital was all the resources I could count on, because my human capital had fallen to zero – without the creative spark I could not drive things forward. I would look at code and it would all swim before my eyes and have no relation to other bits, my photographs were technically okay but pedestrian. I would hear things that once meant something to me and they did not lift my spirits. It was too easy for projects to end up as half a page of scribbled lines or half a circuit board and nothing else. I’m not going to sell my time to another employer – I am too old to be employed at a level that would meet what I would charge for my time. That means I would have to create value, and doing that without a creative spark just doesn’t happen.
However, when I discover that two lots of legacy activities are now passively earning me more return than my multi-year and reasonably well performing ISA is then it begs the question on whether I have the focus right for the me now as opposed to the me 12 months ago. Money is not the only way to buy passive income, and the tragedy is you can only buy about £500 worth p.a. of tax-free income in an ISA every year. And obviously it costs you 10 grand a go, though this is ideally not a sunk cost. I can probably beat that income without breaking a sweat with a bit of improvement ot the website and some recordings. I could blow the dust of my Sound Devices 702 field recorder and Sennheiser microphones and get out in the field are record interesting sounds. I think people use the sounds in video games, I haven’t played video games since the 1980s but I got a book out of the library to see how people master audio for games when I discovered this.
I don’t miss work. One little bit. I don’t miss the Calvinist sense of purpose or all that sort of garbage. I have no time for the ‘find the work you love’ brigade. I’m with the Mexican fisherman. That isn’t to say that I spend my days lying in bed – the world has plenty of wrinkles enough to keep an inquisitive Ermine’s mind entertained.
There is the lovely story of the flight of the sparrow through the mead hall by the Venerable Bede’s Ecclesiastical History of the English People
the present life of man upon earth, O King, seems to me in comparison with that time which is unknown to us like the swift flight of a sparrow through mead-hall where you sit at supper in winter, with your Ealdormen and thanes, while the fire blazes in the midst and the hall is warmed, but the wintry storms of rain or snow are raging abroad.
The sparrow, flying in at one door and immediately out at another, whilst he is within, is safe from the wintry tempest, but after a short space of fair weather, he immediately vanishes out of your sight, passing from winter to winter again. So this life of man appears for a little while, but of what is to follow or what went before we know nothing at all. If, therefore, this new doctrine tells us something more certain, it seems justly to be followed in our kingdom.
Work is somehow like an inverse of that – the young sparrow starts in childhood from the warmth of the mead hall, then enters the life of work, where he battles the wintry storms of other people having control of his time and purpose, until perhaps later on he re-enters the warmth of the mead hall, in control of his own resources and destiny, perhaps for the first time.
I didn’t particularly dislike work for the vast majority of my working life. But work isn’t what life is about. It’s a means to an end. It’s far too easy to lose sight of that, on the long journey through the wintry tunnel of work, and it’s too easy to build must-haves into life to compensate for the long winter. But the tragedy is that these must-haves – the extra house square-footage, the chichi holidays and city breaks, they all add up. And so you can find that your winter holds no spring, and the sparrow must fly onwards till he falls out of the sky.
Work. It’s overrated compared to Life IMO… Each to their own, but I hear a lot of grumbling about work. And for sure, I’ve done my fair share of grumbling too, but at least in the end I took the fight to the enemy. It’s not all all about the money. It’s also about the time. You can save money, sort of. You can spend less of it. But you can’t save time – try spending less than seven days over the next week. That’s why you need to think about living in the moment. The Moving Finger writes; and, having writ, moves on…
Notes:
- an exception can be made for this if you are saving tax-free in a pension with the aim of using the 25% pension commencement lump sum to pay off the mortgage in full on retirement. In my view this isn’t the clear-cut win for early retirees who will defer their pension for 5 years or more, but IFAs seem to recommend it for many people. ↩
housing: Help to Buy
by ermine
12 comments
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Help to Buy = Moral Hazard. What on earth could go wrong?
On Monevator, there’s a good and spirited discussion has taken Help To Buy apart in detail. So this is just a rant, since despite imploring Cameron not to fight the tape last year, he’s actually taken a bastardised concept that at least had some merit – favouring the first time buyer, and compounding the mess.
The housing market in the UK is deeply and fundamentally f*cked up. There really is no other way to describe it. It is a world of hurt for an awful lot of people, and there is no excuse for the Government criminally acting on behalf of a small proportion of the population that seems to hold sway over policy.
Let’s look at some of the facts. Only half of owner-occupied houses in the UK are owned with a mortgage 1. Assuming that tenure applies to adult occupiers, there are about a third of occupiers who rent in some way and another third who own outright. These latter two groups are taking the shaft from a high house price policy.
The renters are taking the shaft because a significant proportion wants to buy, and the ones who own outright are taking some of the shaft indirectly because they are old gits whose savings will be destroyed by the inflation being unleashed by the money printing used to drive interest rates down, so that damned fools can be persuaded to overpay for houses.
And now the Government now wants to assist those fools in paying even more for houses. And I am hopping mad. Because I don’t want to go through the next depression when the music stops and our money is worth jack shit. At the very least it is rude or the Government to push the stick forward into the next housing-related financial crisis before we’ve done with the current one!
I hold too much cash as it is. I am starting to consider taking some of the Governments blasted money and mortgaging my own house. But then what do I do with the cash? What on earth holds value in this stupid world of make-believe? Where do you put it? In Euros thieving barstewards want to have at 10% of it, or more if they please, I don’t believe the US debt will do foreigners any favours when the chips are down. It is like we are living in end times, everything shimmers and nothing represents real value or a true claim on future human work.
60% of people living in houses don’t benefit from high house prices. We don’t need a crash, but we don’t need tosspots trying to inflate prices, leave ‘em be and let the invisible hand do its stuff. Oh and if you are thinking goody goody the government has made it easier for me to own my own home, then perhaps you should read this cautionary tale. I walked away from half the price of my first house and all of my 20% deposit, more in real terms, ten years after the Lawson boom of 1989. House prices do not always go up. And the longer they have been inflating, the bigger the bust.
The tale won’t do any good. I didn’t believe people in 1989 when I stupidly overpaid for a house. You won’t believe me. But what really, really, pisses me off is having to pay for your stupidity in the years to come when we have the strings and violins playing for jerks like this, who will then claim benefits for their unsustainable lifestyle. I had to pay for my mistake myself, one sodding pound at a time.
Oh and one other thing. Pay your damn capital down, either via a bog-standard repayment mortgage, or via parallel investment systems like a S&S ISA or wizard wheezes like Monevator’s better way to buy a house, though in the latter case have the damn self-discipline to make it work – no splurging on having too many kids or foreign holidays.
Look ahead of you. The power balance in Britain is shifting away from labour to capital. Do you really want to commit so much of your future earnings to buying an illiquid asset at a spectacularly high price? There are better things to do with the fruits of your labour than to sink it into ten thousand bricks and a postage-stamp plot. It’s not impossible to imagine a Spain like property scenario here. As the Germans say, the good Lord sees to it that the trees do not grow into the sky. If house prices get inflated then the value of the money will be destroyed. The rest of us, that’s the 66% who either want to hold on to wealth to live on in our old age or build it to be able to pay our rent passively, will have to invest – in stuff, anything that pays some return and is reasonably nailed down in reality for when the results of this arrant stupidity come home to roost. There aren’t enough real assets in the world to compensate for the make-believe of house price inflation.
The tragedy is that if you need Help to Buy, you can’t afford a house. Look at the graphic in Monevator’s post. You are trying to buy a £200k house, so you save 10K and the Government loans you 40k interest free. You go whoopee-do because you can now pay 40k more than you could before. So you go to the estate agent and offer 20% over the odds, because you now can, and because your brains fall out when you are British and buying your first house. Just like mine did. You have just increased your capacity to overpay by 400%, so you will lever up by 20%.
As it says on the tin
The Government will lend you up to up to 20% of the value of your property through an equity loan, which can be repaid at any time or on the sale of your property.
Where’s the small print, then? You are going to buy this when money is tight, kids may be on the way, oh and we seem to be stuck in a never-ending depression where everybody ends up working part-time. In three years the scheme will end, and all of a sudden people won’t be able to overpay for your house when you have another babe on the way and need to step up. What’s going to happen to house prices then, eh? If you’re lucky interest rates will still be on the floor, though if there really is a recovery then they won’t be, which will reduce what people can pay for a house. You’re going to have a barrel of laughs if you have to move for work, and discover that people don’t want to pay you as much as you paid. All of a sudden you find you’ve geared up your losses, from 10k to 40k. Of course, the Germans might be wrong and house prices will go up, and up, and up like Jack in the Beanstalk. You have to ask yousrelf, though, where will your buyer get the money from? If they don’t inherit it, they have to pay their mortgage from net income, and the IFS indicates taxes will have to rise in the UK to reduce the deficit (that’s right, the deficit. The debt is a lost cause). If taxes rise they will find that harder to do.
If prices don’t rise, you will find out what I did – it’s damn difficult to repay a mortgage if the asset you bought with that loan sells for less than the loan, because unlike in America, mortgages come with recourse in the UK – they chase you for the money you owe. How do you repay that? You take your salary, and throw some of it into a black hole for which you get nothing in return. I’ve been there, done that, and believe me, it was no fun.
Help to Buy would have totally shafted me. Instead of paying down about 50% of the addle-headed price I overpaid for my first house, I’d have ended up paying down about 65% of it. Wow. What a fantastic deal!
And you know what the worst thing about this is? If you are unlucky enough to be in your early thirties and looking to buy a house, you’re going to have no choice but take the Government up on this deal. Because every other stupid twit is going to, so even if you know this is a mad thing, you’ll either have to pay over the odds using the Government’s money or stick your life on hold for a few years as far as buying a house is concerned. That’s easy if you’re young, free and single, but not so good if you have a pressing need for more space now.
So I have one question to ask Dave.
Why are 60% of adults paying taxes to shaft themselves in favour of the 30%, who will find out they also took the shaft when the scheme ends?
What the hell is up with that? If the Government wants to spend money on housing, build council houses. And employ a Keeper Of the Commons, so that when a politician like Thatcher comes along and wants to sell commonly paid for assets to buy herself some votes, the Keeper of the Commons pulls out a silver revolver and holds it to their head with a wizened skull in their left hand as a memento mori. And asks them if they really, really, want to do that. If the answer is yes, then pull the trigger and invoke an immediate General Election. Reloading the revolver before the next cynical vote-buyer has a chance to get elected. There needs to be real and serious penalites for politicians buying votes now with the common good of the future. Thatcher did the British housing market a world of hurt by flogging off the housing assets that had been built with the common effort of the post-war generation so people would vote for her again.
It really is high time the British government butted out of the housing market. Every time they touch it, something about it gets worse for more people than benefit. Is that really the job of government in a democracy, to favour a minority at the expense of a majority? There are better ways to improve housing in Britain. There’s no God-given reason why so many people should aspire to owner occupation. We do in Britain because decades of Government policy, starting with Thatcher, have either destroyed perfectly decent alternatives (council housing) or made them so horrible, like renting from amateur BTL landlords who bodge repairs – my London landlord fitted the electric shower to the lighting circuit, for chrissake. Renting in general on shorthold tenacies with no long-term security of tenure is no fun. At least if you rent from the bank, as any of you with interest-only mortgage are doing ,then at least you get a few years security of tenure
If the Government can’t make it better, then at least they ought to observe the Hippocratic oath, and do no harm.
Too many people borrow too much money in this country to overpay for crap to live above their means. Higher house prices are part of the problem, not part of the solution.
Notes:
- before anybody boils my head for the fact that 31% is not half, note that all owner occupiers are 66%, and the non-mortgaged guys are 31%, a shade under half ↩












