The shortest day and the longest night, a time for reflection on the year

Most people do this on the 31 December, but I’m with the Pagan tradition here Today, on the 21st December (for most years but not all) the day is at its shortest, and the night is longest. There was also a lunar eclipse on offer today to make it even more special, but cloud cover meant I didn’t get to see it. As the wheel of the year slows to a standstill, it is a good day for reflection on what has been, and for what is to come.

Finances wise I’m doing okay – my low-cost ISA provider tells me that I’m 15.92% up on the year. I don’t know if they count the dividend income in that since that is still sculling around as cash, but I’d happy with it, indeed I am dead chuffed.

And no, I’m not brilliant, or a future Warren Buffett, a fair share of that has to do with a certain degree of luck in timing. Anybody starting this year and with some of my hopes and fears would do okay. It’s also got to do with determination is saving; Quicken tells me than I saved about half of my gross income this year, which isn’t bad taking into account that Her Majesty’s Government steals about 25% of it to sponsor profligate bankers – well along with running schools and all that actually useful stuff too I’ve also bought into some non-financial assets which probably count for half of the residual what I am left, indeed that part of my wealth-preservation strategy to try and hedge the forthcoming financial shitstorms is done. I’ve been able to live on about 10-15% of my gross income, but on the other hand I didn’t have a holiday this year as you probably did

I can focus on the financial from now, accepting the hazard that I could be totally wiped out in financial assets when the money dies because we are carrying on in a way that I can only see leads to what happened to the Weimar Republic. But I’m not wise enough to know for sure, so I choose to ride this dangerous horse in the awareness of its possible bad character.

I owe this man a beer or two, both for some seriously good tips, and yes, I’m happy to eat the consequences of my own bad choices but there really haven’t been any duff ‘uns to date and there are three elements that Monevator introduced me to which are responsible for about half of the current health of my ISA, the rest is my own hopes and fears.

To you, my dear readers and commenters a decent tip of the hat too, for insights, different points of view, different approaches  and occasionally pointing out I am talking complete bollocks. Your help is much appreciated

Some things remain the same or continue to get worse – the slip-sliding decay of the company I work for from a once inspirational place to work into an outsourcing jobbing shop continues apace. I have at least found a niche in work culminating in 2012, which should take me to a good place to retire

The financial crisis continues to metastasize, hollowing out the shell of the Western World though leaving the apparent shell intact. It turns out the Goldilocks economy was nothing of the sort, and tragically this is being paid for by all sorts of people taken down as collateral damage. Looking at many people under 30, the big difference in their pattern of working compared to mine at 30 is less long-term or full-time employment, lots of short-term contracts for a year or two.

There is a general atmosphere of fear and loathing about employment prospects in much of the working population, as people begin to realise that the modern corporation does not really need that many people working for it to turn a profit, and it will subject those that it does employ in a roiling torrent of fads and inititatives, while busily outsourcing and subcontracting as much as it can to get away from any responsibility owed to customers, employees and shareholders alike, as short-term bonuses destroy strategic direction and company building at Board level.

Maybe there’s a good side in there. Perhaps it is Schumpeter’s  creative destruction at work, though we should remember that his view of this as a positive force builds upon the priciples outlined in the negative view of Karl Marx’s schöpferische Zerstörung describing the way in which capitalist economic development arises out of the destruction of some prior economic order. That prior economic order, holding from the end of the Second World War to the implementation of the Thatcher/Reagan doctrine gave us decent pensions, banks that were stable in Europe, jobs that you could build a life upon and mortgages that were harder to get but possible to pay off, and some other good stuff.

Let’s hope the replacement can enable a lot of the population to lead stable, rewarding lives where they can bring up their families or pursue other dreams, aims and goals in some semblance of financial security. The last government hid some of the rotting core by pumping up the benefits system and employed an awful lot of people in the machinery of government, but the train wreck of the financial crisis scuppered that.

What lies ahead? Well, falling living standards for the majority of Brits, as they face:

• Skyrocketing inflation due to the Bank of England printing money and not giving a fig about the nominal inflation targets.
• Increasing energy costs, due to greater worldwide demand and/or possible peak oil
• Increased interest rates, hammering the personal finances of those who have overmortgaged, with falling house prices trapping them in negative equity
• Wages not keeping up with inflation
• Having to pay down high levels of consumer debt accumulated during the boom times
• Credit crunch mark 2, possibly precipitated by the PIIGS destroying the Euro. There is no bailer-out of last resort now – sovereign governments in the West are bankrupt, so their guns have no ammunition left.

On the upside, if you happen to be debt-free and have money, you may do well in the stock market, or perhaps somewhere else – after all those companies seem to be able to make money without employing people, or if they do employ them then they employ them in low-wage countries. I expect power in the West to shift dramatically from labour to capital, for success there you want to have capital,  you want to not have debts and you want to get you income from capital rather than working for a living. I am by not means rich enough to do well at that, though I am richer than 90% of Brits. That doesn’t make me as rich as you’d think – the wealth distribution is massively skewed at the top

Hower, I will try and reduce my costs, particularly energy costs, I will not acquire debts unless I am building up savings to pay down the debt at the same time as I incur it, and I am aiming to retire and get my income from capital rather than from working. I am trying to reduce my exposure to the downside and fan the feeble flames of what exposure I have to the upside. However, I am not an island, so though I am less exposed to some of the incoming economic headwinds I still expect to take a hit in living standards. If I can make it working for another two years then though my material living standard may fall, getting my own time back will be a massive increase in living standard, for time is something that is priceless – they’re not making any more of it!