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I started the journey to early retirement towards the end of February 2009, a low-water mark where I realised that something needed to change if I was to preserve some quality of life. The work environment and what I wanted to do in life had diverged, and rather than retiring in 11 years as it was then, I wanted to draw that short.
At the same time it seemed all around me the world was falling apart, we were a year into what was clearly a different type of recession to the three I had experienced in thirty years of working 1.
It was both the best time and the worst time to try and do that. Worst mentally, not only had the assumption I had made that I would finish working at the normal retirement age become untenable, I was too old to have a good chance of finding a job at similar pay without at least a long commute to Cambridge and even that was unlikely. Oh and the world around me was falling apart.
Stuck in a storm in a pathless land, I looked for some route out. I read this post from Monevator, which I had only started reading a few months before
Anyone waiting for a clear buy signal will likely wait forever.
Buy low because one day you’ll buy high
and it led to this post, which had a strange resonance. One of the things I learn as I get older is how much more there is to learn. Some things have a ring of truth in and of themselve – in general the route to success in this world is via things that are hard. This is something that we are losing in the West, but we once knew it very well. It was once summarised very well in a recording I heard often as a child.
In September 1962 JFK made an inspirational speech that included this
We choose to go to the moon in this decade and do the other things, not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills, because that challenge is one that we are willing to accept, one we are unwilling to postpone, and one which we intend to win
I took it at face value in those innocent times, though the succeeding decades did inform me that the Americans had had the living shit scared out of them by Sputnik – they may have had the A-bomb but they had no presence in space etc. Although the adult version is more accurate, sometimes the childlike version has a greater holistic truth.
Things that matter in life are often hard. It stiffens the spine to do things because they are hard, and always choosing the things that are easy weakens the will. The delightful innocence and purity of the American psyche can deliver these truths well – Stephen Covey’s the Seven Habits of Effective People can sound hokey to my British ears, but I wouldn’t disagree with his list:
- Be Proactive - Take responsibility for your choices and the consequences that follow.
- Begin with the End in Mind – know where you’re going an how to get there
- Put First Things First – do the important stuff first, not the easiest
- Think Win-Win – I don’t really get this because it’s probably the weakest area for me. An ermine wins as the rabbit loses IMO, but Covey’s probably right, he’s more effective than me
- Seek First to Understand, Then to be Understood – listen first, before opening your gob.
- Synergize – Combine the strengths of people through positive teamwork, so as to achieve goals no one person could have done alone. I pinched that straight from Wikipedia because I don’t get that habit either. An Ermine is an island, it largely stands or falls in its own light or darkness.
- Sharpen the Saw – Balance and renew your resources, energy, and health to create a sustainable, long-term, effective lifestyle. This was my greatest failure before 2009 – I grew lazy in a velvet-line rut of enough easy money in what looked like a job that had been a great place to work. I did not heed the warning lights on the control panel of life light up red one by one over time because I did not want to know.
So what’s all that got to do with Monevator? Well, his writing has some of the characteristics that an ermine sniffs out as showing integrity and wisdom. After it’s easy to be a blowhard on the web that know everything, from Nouriel Robini calling Doom repeatedly to the Krugmans of the world who want to bankrupt my retirement with 100% inflation. It takes courage and grit to say that you know that you don’t know. And to have the courage to search for the faint lights of knowledge in the noise and hum of speculation and opinion. Habits 1 and 2 covered There’s even a Seven Habits of Successful Private Investors post to give that Covey chap a run for his money.
Monevator epitomises the F Scott Fitgerald doctrine with Passive Investing
In The Crack-Up, F Scott Fitzgerald delivered himself of the great line
the test of a first-rate intelligence is the ability to hold two opposed ideas in the mind at the same time, and still retain the ability to function.
Monevator’s head knows that passive investing is probably the safest route to investing for the vast majority of his readers. I suspect his heart hopes this isn’t true for himself He’s prepared to take the chances and eat the consequences should this be the case. Knowing that you don’t know, living with it and still being able to run with it is rare in a 24/7 world that often prizes clarity of the message above the accuracy.
I actually used index funds that for the largest application of the spine-stiffening post, it dominates my ISA holdings. Though I saved cash in ISAs for two half-years around April ’09, I also hit my pension AVCs hard with a global index fund. Using salary sacrifice I drove my pay down to almost national minimum wage (you aren’t allowed to sal sac below that).
Although hindsight shows that the real star of the show was the Bank of England, as shown in this 5 year GBP/USD chart
that devalued the currency by 40%, I gained the uplift that caused indirectly
I’m out of that now, because my pension AVCs are nearly the maximum 25% pension commencement lump sum in cash terms. But I have that distant lamp to thank for giving me sight of a way to through the storm.
A track record of some great finds
In the review, I took a look at some of the holdings I have that I discovered via Monevator. The track record ain’t bad. I don’t use his blog a a tip sheet, but if there’s a resonance in the rationale for me I will consider a stock, if it fits in with my prejudices and values. I’ve taken a look at these, and they all show a handsome profit -
MRCH – bought a little while after reading this. TR of > 50% (ie if I sold now I would receive 150% of the cost)
LLPC – had an eye on those but only bought after they started to pay – TR about 27%
ASL – after reading this, TR > 30%. I’d have liked to have bought more, but I had endstopped my ISA by then
BBY – bought on a fall because I needed the sector and I was monitoring it because it was in the Monevator HYP I also hold TSCO which I notice is in there, but that’s more because of Warren Buffet – I just waited until I could pay less than him.
Now the market is riding high at the moment, so it wouldn’t pay to read too much into the capital value. Only four out of my18 holdings are down on a share price basis, and only one on a TR basis, but none of these are in this list. So a hat tip to one of Britian’s finest sources of market insight for me, and a salute to the success is has brought me. And no, I won’t blame you if it all goes titsup this year with Grexit/Brexit/US debt ceiling histrionics/Israel-Iranian war or any of the other stuff that Dr Doom is promising us for 2013.
These six holdings are a testimony to the quality of the analysis, which is much valued as a source of inspiration. Mistakes and errors I happily accept as my own. Stephen Covey got it in one right at the top of his list. Be proactive – agency is what matters.
- Thatcher’s first in ’82 when I started looking for work, her second in the early Nineties and the one we are still in ↩