26 Sep 2013, 12:48pm
frugality housing living intentionally personal finance:
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  • When we are lender of last resort, we take your soul

    Paul Tucker, outgoing deputy Bank of England governor, summed up an essential truth about debt 1

    “When we are a lender of last resort to a bank … we take the institution’s soul. And we say we will give you back your soul when you’re healthy and I get my money back,”

    It’s not just banks. It’s any borrower – they swap a little bit of their financial soul for the use of the money now. It’s why I paid off my mortgage, despite knowing the most rational way to maximise my financial position would be to pay it all down bar £1000 and invest the residual amount. Wherever I hear someone who is financially aware and getting ready to pay that mortgage down, I’ll often try and highlight that alternative for consideration. The analytical case for keeping it is best made here, so I won’t bother trying to state it, but it is compelling, particularly for anyone under 45 IMO.

    For me, my soul was worth the opportunity cost. The dead hand of the lender of last resort is symbolically powerful. The lender plays the part of Mephistopheles to your Faust – they have access to resources you don’t have, and will lend them to you. On one condition – they take a charge over part of your soul 😉 Where Faust screwed up was accepting a charge on his immortal soul, but if you borrow more money than you can realistically pay back from your future income streams, you’re surrendering yourself to a life of debt-slavery.

    Personal finance is not all about the numbers. It is about your values. Mine were honed over the past few years, as the scales fell from my eyes and I realised at work I was doing something I was ok with most days but in a way that really pissed me off, and I was doing it because I was fearful of the claim of that lender of last resort. It was time to give Mephistopheles the order of the boot.

    Buying a house is all about hope and belief in the future when you're young. You ignore the swish of the arrowed tail departing with a piece of your financial soul...

    Buying a house is all about hope and belief in the future when you’re young. You ignore the swish of the arrowed tail departing with a piece of your financial soul… The demon is forgotten for decades, but he’s still there, and He’ll Be Back when there are grey hairs on these two (photo: xaviernau/iStock)

     

    Because I’ve had it for well over a decade, my mortgage wasn’t that much towards the end. It was a nice tracker, and capped to boot, but it had to go, though I did take the time to mull over whether ownership of my soul was worth the opportunity cost. Had I ramped it back up to 100% 2 and bought the FTSE all-share in April 2009 I’d have been about £20,000 better off if I sold up now. I can live with that.

    2007 mortgage statement.

    2007 mortgage statement. BM didn’t get fat off my back that year 🙂

    So my soul is worth about 20k, It’s a good deal, that’s the price of peace of mind. I am a lot more risk-tolerant with money that I have made, but less so with money I have borrowed.  That’s because in the 1990s I saw what happens when you buy assets on leverage and they go down. You get to pay months worth of overpayments into a black hole called negative equity. Although an offset mortgage is designed to offset money you have borrowed against money on deposit, in the end it is still a mortgage – the company has a primary charge on your property.

    Mortgages are a young person’s game IMO

    Although a mortgage is nominally charged against the value of a house, what actually pays it off is the future value of your income stream. The future value of a burned out Ermine’s income stream is lower than of the 30-year old in the 1990s 3. It’s why for most people 4  you should have paid off your mortgage by the time you’re 60, because the value of your future income stream starts to tail off for the simple reason you have fewer earning years left. If I were investing in buying shares of people 5 give me an able 30 year old who is honing their craft over a talented 50-year old any time, because the income may be lower but the value of the human capital transforming into a future income stream is higher – because there’s more future!

    It’s why I have little sympathy for over 50s who are still running interest only and grouse that they will have to sell their homes to discharge the mortgage. Let’s take a look at how they got here –

    Underperforming endowments have left many people aged over 50 with interest-only mortgages facing an average shortfall of £49,000, according to [a special interest group pushing their equity release ‘solution’].

    Er – no. Let’s try this again, shall we?

    An ostrich-like mentality of ignoring warnings of endowment shortfalls in numerous letters sent to them from the mid-1990s onwards, ie a wilful refusal to act for over twenty years has meant these people failed to address their financial situation despite numerous warnings over decades.

    That’s better. I was one of these people who got those letters in the 1990s. I fired off stinking letters to the endowment company. I opened a PEP (ISA in today’s speak). I pressed my claim and got reset to where I would have been with a repayment mortgage. Guess what I did with the settlement money?

    I paid it right away to the mortgage company as a capital repayment, because that’s what it was – compensation to set me back to where my mortgage should have been.

    Many people considered these a windfall and spent in on a nice new car or that holiday they’d always wanted. It was part of their mortgage, so effectively they were saying ‘let’s have a blowout, and hell, let’s add it to the mortgage’.

    When endowment firms tell you ‘we lied, and you won’t be able to pay your mortgage off’ then the first thing to do is DO SOMETHING, FFS… Hell, that average shortfall of £49,000 would probably only have been an extra annual payment of £1000 (because paying down the capital reduces the interest). The Daily Fail tells us that wisdom comes with age, particularly in temporal discounting which is important in personal finance 6 While at least with temporal discounting this probably does apply to me, it seems unevenly spread in the older population 😉

    The trouble with the demon Mephistopheles is that he plays a long game. It’s easy to forget the long shadow of the repo-man over the typical mortgage term of a quarter of a century. The starry-eyed young Ermine that casually signed way five years of annual income with a flourish of his pen is a different creature from the gimlet-eyed mustelid that signed the cheque discharging the final amount that transferred ownership. But Mephistopheles doesn’t forget, you gotta sign that cheque at some time, or deal with the consequences of the Devil owning your financial soul. I saw that shadow in the 1990s, and learned. My personal finance policy is simple

    Owe nobody any money for more than half a year

    I don’t take it all the way to Shakespeare’s advice to Laertes

    Neither a borrower nor a lender be;
    For loan oft loses both itself and friend,
    And borrowing dulls the edge of husbandry.

    This above all: to thine own self be true,
    And it must follow, as the night the day,
    Thou canst not then be false to any man.

    I do lend money, both as a Zopa-ist, and as a stock-market investor 😉 The key is never lending money to any entity or grouping that you can’t afford to lose. I do think the Bard has a point when it comes to consumer debt, though, when he says

    And borrowing dulls the edge of husbandry.

    presumably meaning you don’t take as much care of something you bought on credit as if you saved up your hard-earned beforehand.
    Kate Moss. And no, she wasn't talking about personal finance in 'The Waif that roared"

    Kate Moss. And no, she wasn’t talking about personal finance in ‘The Waif that roared

    It is this casualisation of the value of Stuff that makes the consumer economy go round, fuelled by debt. Mindful of the value of my soul, however, I don’t have to take part in it, because, to paraphrase Kate Moss
    No rush of consumer baubles tastes as good as financial independence feels…
    It’s the low level of needless consumer spending that I found didn’t give me lasting value, and this is particularly injurious to financial independence because it’s unthinking and it adds up. I came to the conclusion that in many ways with decadence it’s better to ‘go large or go home’. If something’s really of value to me, I will, after suitable deliberation, go for it,  if I can imagine looking back and thinking ‘that was a good purchase, given what I knew at the time’ – or even that it was a qualified risk and I accepted the range of possible outcomes. It’s the unthinking drip, drip, drip a little bit here, a little bit there that I have no truck with. I am mindful of the fact that the lender of last resort takes my soul; I would not be financially independent if I owed anyone any money for any length of time.
    Nutty thing to do from a personal finance point of view, paying off your mortgage. But I wouldn’t have it any other way, because I know the value of my financial Soul, not just the price of it 😉

    Notes:

    1. It’s a shame I can’t second-source the original quote. If Philip Aldrick made it up, he’s wasted at the Telegraph
    2. I don’t think this would have been permissible, I could reclaim overpayments but it wasn’t an offset
    3. It’s probably not zero as I suppose a pension is a future income stream, and in some ways more secure than income from employment, you don’t get made redundant from a pension.
    4. I’m talking about wage-slaves working for The Man here, not people whose risk-tolerance is higher than normal, and or people who have unconventional assets like a business or BTL
    5. I know, it’s called slavery, this is a hypothetical thought experiment 😉
    6. Yeah, I know it’s the Daily Mail. It’s peculiarly tough, because young people actually have more future so the cost of getting temporal discounting wrong is higher for them. But it does follow my life experience.
    24 Sep 2013, 8:04pm
    housing personal finance:
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  • your pension should be worth more than your house by the time you retire

    Interesting point made by Jonathan challenging my assertion that for the middle class, buying their house is nearly always their biggest cost. Jonathan took a total lifecycle point of view

    Well, no. For the middle class, our biggest cost is now building the defined-contribution pension fund.

    Although I was thinking of the monthly running cost in saying the house was the largest cost he made me think, and run the arithmetic. In my area a family home is about 5-6x  the middle household disposable income of 24,400, according to the ONS 1. I was seriously gobsmacked by that disposable income – here’s the infographic, I didn’t dream it up.

     incomes of households in the middle of the income distribution (ONS)

    incomes of households in the middle of the income distribution (ONS)

    I looked for a second source 2 but it seems to stack up. I had a much lower estimate for disposable income, from all the hollering you get in the papers about the squeezed middle. I’m still finding this hard to believe. Looks to me the squeezed middle is sitting pretty and it supports my feeling that Britain is far, far richer than the Britain I grew up in (I left home in 1978, a year after the infographic’s start date). We should bear in mind that the middle is defined in the logical American way, rather than the British way, where nearly everybody seems to define themselves as the middle class unless they are members of the landed aristocracy or they’re currently wiping down their hands on their blue overalls at the time they are polled.

    Much of the screaming from the squeezed middle you hear about in the papers would be from what the Americans would call the working class if they were to use such a term. The ONS defines the middle in a different way to most British journalism, though logic is on their side.

    This middle exists, in a Britain where I saw a van today that would come and valet your car onsite, FFS. Another van drives around supplying ironing service to suburban households, while another trails the city dustcarts and pressure washes your wheelie bins for you for a fee. All these goods and services are presumably some of what that 24k median household income goes on, while the rest of us seem to be ramping up our credit cards again. The ‘squeezed middle’ feels squeezed because before 2007 it spent a lot of its disposable income and consumer credit  on consumer goods, a hell of a lot more than it did 30 years ago. Although the 1970s had issues, I don’t think that people were anywhere near as miserable 3 as you’d expect only spending half as much on consumer goods, and consumer goods now are probably far better value in general now 😉

    People will cite housing as the major source of hurt nowadays  but the average house is about 5-6x household annual income. I paid 5x my annual income when I first bought a house. I recall sitting in the Broadcasting House bar in 1988 grouching into my beer about how it wasn’t fair I could never buy a house etc etc, just like Generation Rent do now – and eventually identified my problem and got the hell out of London. Generation Renters might want to observe that buying a house soon after that on such a high income multiple still classifies as the most stupendous personal finance mistake I have ever made, although some social trends 4 may mean income multiples need to be considered for a couple rather than an individual; I was single when I bought that house so there was only one earner by definition. I also needed a 20% deposit. Look also at the 5% fall in direct and indirect taxation between then and now.

    However, Jonathan is absolutely right, if this median couple had accumulated a pension fund of 150k this would pay about 5% annually, roughly £7500, which is a big climbdown on their 24k previous disposable income 5. If they doubled their savings, the savings would pay about half their pre-retirement disposable income ,which was the usual target for a final salary pension scheme.

    However, even if they target pension savings of twice the house price in real terms, the house will still be their largest cost in the 30-50 year old range while they are servicing the mortgage. This is because unlike a pension you want to use a house before you’ve paid for it so you have to pay interest, that usually ends up being about twice the original price in real terms when you tot all the repayments up, and allow for the fact that your later payments are made in money that’s worth less due to inflation (you typically pay about three times the nominal purchase price over 25 years).

    Added to that you buy your house over about 25 years, whereas if you start early you have 40 years to buy a pension. 6

    You need a lot of money to end up like this in retirement rather than rooting about in the bins like Top Cat, so go easy on buying too much house if your pesnion fund ends up less than the price of your house... (photo LdF/iStockPhoto)

    You need a lot of money to end up like this in retirement rather than rooting about in the bins like Top Cat, so go easy on buying too much house if your pension fund ends up less than the price of your house… (photo LdF/iStock)

    It’s a sobering thought, however, that you should have a pension savings target of twice the value of your (paid off!) house. Consumerism does enough of our heads in that some people appear to be surprised to find out that an interest-only mortgage doesn’t actually buy you the house and act all surprised at 50 that you can’t have lots of foreign holidays, school fees and what-have you and get to own your house.

    Because of the peculiar emotional magnetism of housing to Britons’ national characters many people end up with far too much house relative to their pension savings. It isn’t easy to sell your house off brick by brick, and there seem to be issues with equity release schemes, but that’s where you’re going to end up if you have loads of house equity but sod all pension income/free cash flow. So beware, all those who say my house is my pension. Who are you going to sell it to, and how? In my experience of ex-colleagues surprisingly few people really do downsize when the kids fly the nest (assuming that they do, of course). They get used to a house and it seems to encapsulate all sorts of warm fuzzy happy memories. It just doesn’t seem to happen that often, even in cases where it would help financially strapped empty nesters. The child-free have an easier time in this regard as their housing requirements don’t have to increase to accommodate kids and then contract again afterwards.

    I came across this backwards – I looked at what I wanted to achieve as my desired early retirement pension income. I discovered I ended up with big numbers. I had to target ISA and AVC savings so unlike many Britons the sunk cost of my house is quite a bit less than half of my net worth 7. However, it’s notable that most of my ex-colleagues had much better and more expensive houses – their relative asset allocation was usually much more housing-heavy than mine. I get the feeling that for most Britons their house is their largest asset by the time they retire.

    This fondness and faith in property leads Britons to go into BTL and indeed purchase property abroad. Although buy-to-let is a business, it does also increase exposure to residential property as an asset class. I don’t know enough about BTL to know if BTL mortgages come with recourse, ie the mortgage company can come chasing you for other assets other than the house the loan is secured on. If it did I could see a world of hurt under some circumstances (rising interest rates being the most likely).

    However, if these middle class households really do have 24k disposable income per annum, then they have no excuse for failing to save or a pension. Let’s face it, stick half that into index-linked savings certificates that track inflation but don’t pay a real return, and 20 years later you have more pension savings than the average UK house price.

    It’s not as horrendously big an ask as it first sounds, because you actually save for a pension before you use it, unlike that house. In practice it will cost about the same or perhaps less in total lifecycle cost, because you don’t pay interest on it, and you benefit from up to 40 years compound investment return on the savings. You also don’t get any tax breaks on buying the house.

    But you do have to start, and like for any large savings goal the earlier the better…

    Notes:

    1. Middle income Households 1977-2011 Note this includes Londoners, so in my area the median income is probably significantly lower
    2. f’rinstance check this Grauniad article on the subject – a couple with two kids would be in the middle with a post-tax income of 31k, I wouldn’t find 31k that out of keeping with the ONS 24k disposable income (ie after rent)
    3. Britain’s happiness in decline – BBC – from 2006, I shudder to think what it looks like now!
    4. I started work before the arrival of women into the workforce that started in the 1970s was complete, so I was competing with a mix of single earner households and two-earner households
    5. The State Pension would be about £7500 for each of them, so this isn’t necessarily a terrible position, it depends how old they want to be when they retire – added in that brings them up to over half their pre-retirement disposable income
    6. this is slightly misleading as in practice you may do much more of the heavy lifting in the later years, when you may be a 40% taxpayer, you probably earn more and you may have paid off your mortgage, meaning you can save more out of pre-tax income. The magic of compound interest roughly doubles the value of your early payments over 40 years – my savings profile much more than doubled as I got older, so my later contributions are more significant than my early ones.
    7. I also don’t count the house as part of my net worth, more as part of my income in the rent I don’t have to pay
    14 Sep 2013, 12:30pm
    personal finance reflections:
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  • being in the rat-race made me spend badly

    Okay, this doesn’t apply to everyone – maybe you are King Rat and have this taped. But it made me, unwittingly, spend badly on stupid things 1. I was lucky – I was raised to not spend more than I earned, and I was lucky enough to start work in a more paternalistic age so the whole pension thing was set on the right track for me. I therefore simply ended up stuck in the rat race earning money to spend badly, which stopped me saving enough to get out of the rat race. As opposed to owing shedloads of money and all the hurt that goes with that.

    I was set on this train of thought by Monevator’s How to Make Easy Money post. Which, fair enough, is about making easy money. A common theme in personal finance is that you improve your financial situation by making more money. Monevator’s gently steering you into the direction of honest money-making in the Ayn Randian version of delivering value to your fellow-humans rather than the get-rich quick of P.T. Barnum. Making more money didn’t work for me to accumulate financial assets until I wanted a way out. Reducing spending did the job fine. 2 I have less income now, below the full-time national minimum wage 3. But I have control of my time, and I have a much better quality of life as a result. Something about not being in charge of my own time encouraged me to spend unwisely.

    Working makes many people spend unwisely, of course, in two ways. One is that there is a steady income, so your decisions are made in an endlessly static present. Presumably this explains why interest only mortgage owner-occupiers find themselves surprised to be 50 without a stake in their home. I have some sympathy for the young who may go IO because they have no experience of the toxicity of UK housing, but by the time you’ve got to 50 there’s no excuse…

    The other factor is that they spend as distraction from the experience of working. I watched some colleagues come back from their summer holidays and immediately book their next year’s summer holiday, “to have something to look forward to”. That was probably the sort of spending that limited my savings, until the external shock of the credit crunch and some nutty management behaviour then focused my mind to stop doing that and get my head round the saving lark.

    Trends in the world of work are running away from me, promoting an extroverted ideal

    In reading Quiet: The power of introverts in a world that can’t stop talking I discovered another possible reason why the way of working was becoming tiresome. I had previously put it all down to changes in The Firm, but I see there were wider changes in the world of work that were unfavourable to me. The workplace is increasingly being designed for extroverted and collaborative working – qualities organisations now prize in people is ‘team player’. I do my best work on my own. It’s not that I can’t collaborate, but I find the jabber of all the interaction counter-productive. However, the world of work is being cast in the image of extroversion – the massive increase in the number of meetings, the open plan offices, the hot-desking, and oh, the endless interruptions and meetings and all-hands events.

    Take communications – the  move to people having always-on mobile phones. It still to this day strikes me as bizarre that people go around their business willingly packing a device that interrupts their train of thought on a sporadic basis. If I ran a software coding joint I’d seriously consider asking people to check their mobiles in at the door 😉 Of all the engineering jobs I’ve ever done, software coding is one where if you have an interruption to a critical point, you lose hours if not half a day to pick up the thread again. A mobile phone is a weapon of productivity destruction in that sort of task.


    Sherry Turkle’s TED talk “Connected but Alone” touches on this in business, as part of her more general talk about how many humans, it appears, use mobile technology to make themselves feel connected to the hive-mind because they are scared to death of being alone with their own thoughts. I don’t understand how one can feel that way, which perhaps is why I and quite happy without a mobile phone always to hand. Unless I am going somewhere and expect to want to arrange things at the last minute with someone, in which case they are a great tool for addressing that requirement 😉

    The current flavour of the month in software design is the highly collaborative Agile development, with its Scrum meetings – every flippin’ day, and the grand Scrum of Scrums, what the hell is it with people nowadays that they confuse talking about things with action? This is what it’s like in a typical scrum meeting, with a tip of the hat to Wikipedia’s explanation:

    During the meeting, each team member answers three questions:

    • What have you done since yesterday? less than I’d like because meetings took up so much time
    • What are you planning to do today? catch up with the stuff I missed yesterday and am missing right now
    • Any impediments/stumbling blocks? TOO MANY BLOODY MEETINGS stop flapping your lips people and git back to work for God’s sake. Talking about it ain’t gonna get it fixed…

    Paradoxically the little and often rinse-repeat-recycle approach of Agile can work very well when I am on my own – I developed a microcontroller product on my own, but using that methodology with a customer and we both managed to feel our way towards what the customer actually wanted to do with their device. Things I thought really mattered to them they didn’t give a toss but technically trivial mods to the user interface made a big difference ot how they liked it. However, in a development team Agile consumes time and nervous energy, but presumably everybody else gets a big rush from feeling connected.

    I don’t get people that run instant messaging and Facebook all the time either. And email – open it in the morning, do your stuff and then close the darn thing, so that the “you got mail” message doesn’t break the train of thought. Twitter and IM have no place in the creative workplace either, IMO. Everybody else, it seems, thought differently.

    So the world of work was moving away from matching my temperament. It seems a bit sad that business is embracing methodology that disenfranchises / plays to the weakness of a third of the workforce 4, and cuts itself off from analysis and considered action, but that’s the way things are shifting. I guess optimising the workplace to  the majority makes some sense. However, it makes the workplace more stressful for the remaining third. Indeed there’s some evidence that introverts respond particularly badly to observation – annual appraisements I found fine, but justifying my existence quarterly with modern performance management did me in, though looking back at the results they weren’t that different. It was the process I couldn’t stand.

    What’s with that improving finances making less money then?

    It’s not because I make less money that my spending has improved. I designed my target spend rate to be about twice elective spend in the last three years at work. To start off with I didn’t spend that much because I was still shellshocked from the transition. It takes a very long time – months and maybe years, not weeks, to get your head round living from the return on capital as an ordinary grunt who has always lived off income. Then I started to find that exiting the rat-race is changing me. I have become more opportunistic and flexible. While working not only did recreation have to fit in time-wise with work, but I craved control over things, and to make things happen exactly how and exactly when you want them is costly. I go with the flow more now.

    I take more time to try and think laterally now, can I achieve what I want to do with something I already have? Do I actually really want this – I try and imagine what it would be like to have whatever the item or experience is and look back. More than half the time the answer is no, this is a desire that is being induced by advertising. It’s often something I can do with what I already have. That has two rewards. One is saving money and not consuming more resources, but often the greater reward is in turning over the grey matter and thinking laterally.

    Sadly that’s only rewarding because I have the choice. While I was saving hard and working I felt I had to do more with less, which is enervating and leads to frustration. Choosing to do more with less is rewarding, because there is always the implicit backstop – if I really want to do this and buying something is the answer, then I can do it. My tastes are not so extravagant that I can’t afford them 😉 However, if I take the extra time to make sure they are my tastes, I get to save money too, relative to the original projections when I was working.

    An example – I don’t need a better trail camera. I need to fix the one I have and then use my brain to establish what success looks like. Consumerism is rarely the answer

    Let me take an example. A stoat killed some chickens a while back. Now the offer was made to trap it, but I don’t really want to charge around killing my totem animal. I have a high regard for Mustela erminea, and they do a good job in the hedgerows killing mice and rats. Plus we are not very far from sandy heathland, and a gamekeeper advised us that there will be a massive pool of stoats there. I quite like the idea of a massive reserve of stoats…

    To deplete a population of stoats you have to kill at least 2% of the population, monthly 5 I’m just not prepared to be part of that.

    Personal biases aside, one should think carefully before fiddling with a natural balance of predator and prey, after all the stoats are thinning out the rabbits and stoats don’t eat veg but rabbits do. We go and upgrade the chicken wire around the remaining chickens (a stoat can get into a 1.5cm hole or more), kick ourselves for keeping these a bit too close to the hedgerows – stoats don’t like crossing open ground 6. And I am after a picture of the stoat when he tries again, now we have targeted the electric fence to stoat height.

    I have a trail camera. I believe their main use is for Americans to attach to trees so they can get an idea of where deer run in the night so they can go shoot them, because deer are creatures of habit. In the UK we call these nature cams because it’s not so encouraged to go around blowing away critters, and also because UK hunting and shooting traditions tends to be more focused on tracking skills than hardware IMO 😉

    someone who's meant to be there. I don't  totally approve of the method of tackling the gate, which is why it hangs a bit, but I can understand the temptation ;)

    someone who’s meant to be there. I don’t totally approve of the method of tackling the gate, which is why it hangs a bit, but I can understand the temptation 😉

    I use mine as a security camera to look for humans – similar size to a deer. I mainly get cats 😉 Fundamentally, however, these things are very hit and miss. The Chinese chunder these things out from Shenzhen in the hundreds of thousands, so you have the usual problem with Chinese electronics – they just don’t last, often for design flaws.

    I get my trailcam out. Battery life had been falling and the clock wouldn’t keep time between the frequent changes of battery, so I opened it up and observed that the Chinese firm had soldered in a watch battery, which was going to last all of about two years. Then corrode and spew gunk all over the circuit board, making it leaky hence the crap battery life and clock problem.

    Built-in obsolescence, Shenzhen-style

    Built-in obsolescence, Shenzhen-style

    I unsoldered this bastard, cleaned the board with alcohol and swapped the battery for the  memory supercapacitor they should have used in the first place. It’s twice the price but lasts for decades, recharged from the camera battery. No future leakage and the clock holds time again. So I go looking for stoat

    Stoat in lower RHS. Some people find it hard to see him so I've highlighted it in red

    Stoat in lower RHS. Some people find it hard to see him so I’ve highlighted it in red

    And find one. This shows what’s wrong with trail cameras – you get the whole soot-and-whitewash effect because it’s basically a point and shoot camera being used at close range. As demonstrated millions of times every day on Instagram and Facebook, an on-camera flash used at close range really sucks because the light falls off very rapidly with the square of the distance. Then of course you’re trying to take a photo in the night – pretty much all products that claim to let you see in the night over-promise and under-deliver. Mammalian night vision is pretty good, so even trying to match it is a big ask. Like all other photography, you can spend loads and loads on tiny camera improvements, whereas what you really want to do is get the light right. If I want to improve the results from a trail camera I should take the money I’d spend on a slightly better one and use it to buy some infrared LEDs and construct myself a slave flash to fill in the shadows.

    Nevertheless, for a few hours I thought to myself

    ‘hey – I know what. This camera is shite, I can rush out and BUY something better’

    Whoa. I now have the time to research, and understand. I’m using something designed to get big animals at a longer range. A stoat is only a foot long. I can’t buy anything better. I could make something better. I could put an IR beam round the chicken house and trigger a camera or use a Raspberry Pi and camera module to do this. Getting a better picture of a stoat needs creativity and activity on my part. It is not just a matter of going out and buying something, despite what the ads tell you.

    The other problem is that I probably don’t need a better picture of the stoat. I need IR video of him, so I can understand his modus operandi, how he thinks. A stoat is a worthy adversary, wily and persistent. However, this camera is telling me something, which is that his visits are becoming less frequent 7. Presumably the improved stoat-worthiness of the chicken pen denies gratification and a hefty zap to the snout from the electric fence offends…

    The right solution is often not buying something. It’s often about doing something different.

    Retirement transforms you. Otherwise you wither and die…

    It is more time that gives me the opportunity to spend less. That’s counterintuitive if you extrapolate from elective spending while working. I spend £x with two days leisure time a week, so obviously it’s going to be more with seven days of leisure time a week. Not so fast…This may well be the case for those who need lots of external stimulation, and perhaps it is the general experience. But it hasn’t been mine.

    Everybody thinks about less money in retirement, and more time doesn’t get so much as a how do you do. More time enables me to work for me. I can think about what I want to achieve, research it, and consider if spending more money will give me enhancement of quality of life. Sometimes it will. I will probably shift up a notch in the quality of wine I drink, because the experience is improved notably as you get away from the low end. I don’t need to go mad and only drink wine that’s more than a tenner, but I want to go upmarket a bit. I probably want to spend about two and a half grand on a Hameg oscilloscope. I still want that drill press. But I didn’t need a new trail camera to know what my stoat is up to. I needed to take time to think better 😉

    For me most of the joy to be had in the world is in being creative, to find my own answers to problems, and poking my nose into interesting corners of the world to make stuff happen. That means where I spend money I want to be spending on tools and not solutions, invest in improving my skills and understanding. It means thinking more and spending less on obvious ready-made solutions. Very often the journey is more interesting than the destination. It means embracing serendipity, it means being actively curious. I can remember a time when this was the default mode…forty years ago 😉 It’s far more powerful and involving with adult resources. Keynes was right with Economic Possibilities for Our Grandchildren, but I needed to buy myself out of wage-slavery first. It’s like somebody has gone into the world and turned up the interestingness level to 11 from about 3. The world didn’t change. But I did…

    One of the amazing things now is that you can get a half-way working knowledge of a lot of the issues on something with a quick search of the Web. The last time I had this much time to be able to recreate was probably at primary school, though first year at university runs a close tie. Compared to then the big change is the ease of finding information wrought by the Web. Yes, an awful lot of it is garbage, but once you’ve told Google you never want to see results from ehow, from springerlink 8 and a few other trash sites then the ease of getting oriented in anything still fills me with wonder.

    This is actually getting even better now – for instance Greg has just reported the Feynman lectures are online. I still have my copy of one of the Feynman lecture books from university – they were fearsomely expensive then, but his engaging writing was worth spending the money even though it was a non-core item on the booklist. There are many online courses available for free at places like coursera. It seems a peculiarly harsh twist of fate that now, just as the cost of really turning up to university is becoming an unaffordable luxury for the young, the people who really need it to get a job, it is becoming almost free for anybody who doesn’t actually need a ticket at the end of it 🙁

    Some people retire and focus on what they lost – their income, their sense of meaning, their place in the world, and they atrophy. I was perhaps lucky, not only in being introverted, but I was also a wreck when I left. The only way was up. I didn’t anticipate a second childhood with the benefits of adulthood, but I sure as hell am not going to pass up the opportunity to repossess some of the wonder at the workings of the world. To do that well I must be in the world but not of it – as an interface to life consumerism sucks. It makes you focus on the minutiae of product differentiation rather than the big picture – you are taught to care about the difference between Nike and Adidas or Pepsi and  Coca-Cola and all the other things you are meant to care about which don’t amount to a hill of beans once you have Enough. I used to go through too many gadgets because I was too harried to really learn to work with the ones I had.

    I am the adaptable and superior being compared to a consumer product, so why on earth I expected to sort everything out with a new product still makes me shake my head a little bit in retrospect. Raptitude nailed the issues with I don’t Need Stuff any more, only Things. I don’t have his Zen-like decluttering urge, and indeed I do collect some useless junk, because I want to scavenge it for bits and materials. But there’s something to be said for his angle on

    If I take it into my home, I should provide a place where it’s properly, officially away, or I shouldn’t pretend I have any business owning it.

    even if I need a better junk box for the Things I can scavenge to make stuff out of 😉

    It takes time to learn how to use a new consumer item, be it an iPad, a musical instrument or a video camera. It take time to evaluate your requirements against all the things that could meet them. It takes time to get yourself to interesting places that aren’t the ones everybody else is gawking at. And it’s this time that the rat-race robs us of. There are whole industries designed to manufacture novelty that people can chase after en masse – step forward fashion, a lot of what Hollywood makes, Sky Sports, i-anything. An awful lot of it is designed to be disposable, providing the hit of novelty on its way to landfill. I want a lot less of that. It appalls me how badly a lot of things are made – I’ve slowed the increase in landfill from my own consumption by fixing some things – this camera, a CD player, a car battery charger, coffee grinder, a Kenwood chef, but some things are just hopelessly shoddily made and aren’t even worth attempting to repair.

    Britain is far richer that it used to be, so why are we so stressed and unhappiness seems to abound? We are surrounded by stupendous availability of knowledge for free, and opportunities previous generations could only dream of. I suspect it is because the pace of change has been raised, and though in theory we are rich enough to take more time to handle the change well and take advantage of the far wider range of opportunities presented to us by that increased level of change, as a society we didn’t go that way.

    We chose to keep the working hours the same, and take the extra money. Indeed, families with children did even worse – they decided that they would increase the number of hours that the family unit worked outside the home in return for more money.

    The rat-race has got a lot to answer for. We didn’t need to design it the way we have, but globalisation will probably mean it’s stuck where it is.

    Notes:

    1. I don’t mean ‘made’ as in The Man held a gun to my head and said ‘spend your money on shit so you hafta keep working for me’
    2. making more money works for other people – take RIT, ERE or Mr Money Mustache for example
    3. I’m not saying you can have a great time earning just NMW. Because I can’t turn a return on cash I live on it and reinvest ISA income.
    4. Quiet: The power of introverts in a world that can’t stop talking, Susan Cain, Penguin 2012 p.3. She’s talking about Americans, the ratio on introversion to extroversion may be higher than 1:2 in other countries, particularly Asian ones (ibid, p.29)
    5. Barlow, N. D., and Mandy Claire Barron. Modelling the dynamics and control of stoats in New Zealand forests. Department of Conservation, 2005. For some reason the people of New Zealand, admirable in many ways, have a really bad attitude to the humble stoat. Let’s face it, Homo sapiens is an introduced species that has caused far more hurt to NZ wildlife than Mustela erminea, they could do with chilling a bit IMO 😉
    6. King, C.M. 1989. The natural history of weasels and stoats. Christopher Helm, London, U.K.   And the personal knowledge of a gamekeeper
    7. S/He seems to have given up now, I haven’t got a picture for the last week now
    8. because Springerlink want to charge you shitloads of money to read academic journals – I’d rather not know it exists, rather than knowing I could buy it for $100, not because the papers are garbage
    9 Sep 2013, 3:14pm
    rant:
    by

    11 comments

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  • James Dyson moans he can’t get enough engineers He is part of the problem

    James Dyson is grousing about a shortage of engineers and wants more government pork to help with that. A word in your shell-like, James. You are part of the problem, not part of the solution.

    Now firstly, engineering and engineers have a problem generally. They are engineers because they have an interest in how stuff works, and so they aren’t always the most articulate or the easiest to rub along with. In the early days of British engineering, this was not such a problem because you could solve a lot of engineering problems on your own with drive and application, so Britain has an illustrious history of talented Victorian and earlier engineers. Thomas Telford, Isambard Brunel, Robert Stephenson, Michael Faraday, Oliver Lodge, James Watt, Frank Whittle, Alan Turing, Ernest Rutherford, Alan Blumlein, William Crookes – and that list is just off the top of my head, with no help from Google apart for checking the first names 🙂

    Tragically, engineers aren’t easy to work with for many people. They tend towards cantankerous crabbiness, they favour purity and precision over practical compromise and ‘good enough’. In its heyday, The Firm where I used to work concentrated these sorts in its research facility. Let’s just say that some of my colleagues in those early years were serious geeks, and often they were unbalanced characters. Some of them watched far too much Star Trek and spent too much time indoors. I believe much human progress is made by people who have something wrong with them, the guy who invented the wheel was probably a nutcase in some way. The broad swatch of humanity, the ones who do what the society norm of the time is, aren’t usually the ones who make the inventions to improve the common weal. Originators are usually the outliers – they make most of the change in human society, because they see things differently. It’s not just engineering either – pretty much across the field of human endeavour, it is the single-minded, the passionate, the eccentric who make the running.

    Interviewing engineers is always difficult. In the past companies had engineers interviewing engineers, which at least meant there was some common language, and the interviewers knew what the challenges were in making whatever the company made, and could qualify the skills interviewees claimed to have. I was lucky enough, in the three successful job interviews I have had in my life as an external candidate, to be interviewed by real people from the departments I was applying to.

    That’s all considered effete and non-PC these days, because the downside of having real people who know about what they are doing interview people is you get a lack of consistency. People favour their own characteristics, and tend to hire in their own image. Now it’s more important to get your equality and diversity tickboxes ticked than to have an effective process of interviewing people by the people they will work with, so many firms contract out the process to recruitment agencies. These take away the diversity tickbox bother and seem to run a computer process that greps the unfortunate candidates’ CVs for keywords of the particular job at hand.

    There are two problems with that – one is every firm is looking for people who have exactly the mix of technologies they want, to be able to hit the road running. They have stepped back from the process of developing their engineers. When I started work, although I was going to work with the electronics and systems of broadcast engineering, in the induction process I learned not only about the specialisms, but how a programme was made, what the issues were for the camera ops and lighting people. I also learned how to do oxy-acetylene welding and how of anneal and harden steels and why these processes existed and how to use a lathe and shaping machine, building on what I had learned at school. These were not because I was going to be doing this day to day – I have never welded or turned anything professionally, but so that I could see the wider setting of what I was going to be doing, and so that as a graduate engineer I had an awareness of the issues facing the people who would be using the gear I was working on or who I would be asking to provide services to me to make things mechanical.

    These companies, both the BBC and The Firm later on, invested in people before the trite bullshit of Investing In People™ 1 had been invented by management consultants. These firms, at the time, were driven by values, and they knew that they had to invest in skills to apply to the unusual requirements of their fields of work. Some of them had training facilities, all of which have now been contracted out or disbanded. It takes time, and occasionally you lose out is someone moves on to another company, though occasionally you gain if someone moves to your firm.

    Dyson seems to have forgotten you have to plant and nurture before you harvest...applies ot his people and their talents too

    Dyson seems to have forgotten you have to plant and nurture before you harvest… applies to his people and their talents as much as these squashes

    Dyson is a showman, but he’s also part of the problem. If he wants more British engineers he needs to invest in them – support them financially through university in return for the right grades and subjects, offer them sandwich year terms at Dyson so they can learn a both the technology and the ethos of his company. In short, take them from A level, not bitch about there not being enough of the right kind of postgrads. Let’s face it, if we want veg to grow at The Oak Tree, we plant the seeds months in advance  and water the damn things, we don’t get to harvest time and start moaning that all we have is a plot of thistles and where the bloody hell are all the fully grown vegetables we’d like to harvest that day. Somewhere British industry seems to have forgotten these fundamentals – presumably if they have the Investors In People tick boxes ticked it’ll be all right on the night.

    There was a recent programme, Make Me a German, where a UK journalist went to work for Faber-Castell in Nürnberg. Germany still appears to have an industrial training system that UK companies seem to have given up, as evidenced by the 20-year old who was training for Faber-Castell. Perhaps this explains why Germany still has a reputation for engineering across a broad spectrum. Particularly where it interacts with mechanical stuff, engineering still has a lot of craft in it.

    Oh and James Dyson, as a personal grouse, why the hell is all the gear you make so damn noisy? As I get older it gets harder to pull apart the bones in the inner ear to protect the hairy preamplifier from damage. Okay my Dyson vacuum cleaner is over 10 years old but makes a dreadful and screechy racket; it always did from new. If I go into a public bog with an Dyson Airblade hand dryer I live with just shaking off the water that subject myself to the noise. Did nobody test the Airblade in a tiled room as it would be used before you produced a device chucking out so much nasty high-frequency noise? Although I have never experienced it I would hate to think what a Dyson fan sounds like for £300 – with fans big and slow-moving trumps small and fast-moving, think ceiling fan as opposed to a computer fan. People have to live with your products too, it’s not all about the efficiency!

     

     

    Notes:

    1. Just read the turgid corporate duckspeak and BS, anyone with an ounce of common sense can see that people who write “Investors in People specialises in transforming business performance through people. Our mission is to help you achieve the results you want by focusing all our work on your business objectives, and acting as a critical friend so that you maintain continuous improvement. At the heart of Investors in People is the Standard, a framework of best practice that’s outcome focused: it outlines what you need to achieve but never prescribes how, making it truly flexible regardless of your size or sector. ” are passionless droids who believe that process is a substitute for action. Give me the messy randomness of people trying to do the best they can over outcome focused frameworks of best practice any day. Process shields the incompetent from being pilloried for their cock-ups – culminating in the ‘lessons will be learned (but nobody will lose their job)’ when some organisation screws up royally. If the Ermine were God for a Day I’d dictate that all process documents self-immolate 🙂
    3 Sep 2013, 8:14pm
    personal finance reflections
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  • Buy to the sound of gunfire, sell on the sound of trumpets

    Sold some of The Firm last week, as it was a little of the way off ex-div but still riding high. Earlier this year I had decided everything was too high to invest any real money in my ISA, so a Capital-Gains bed and ISA operation was in order.

    Looks like this year may not be such an uneventful one after all, and this Autumn may have opportunities in it, Syria fighting, thankfully in my optionion currently without UK involvement. It’s never good to get into a fight when you can’t picture what success looks like. As for tosspots like Toby Young rabble rousing with “We are all crisp-eating surrender monkeys now” get off you bloody high horse, mate. If you really want to go out and sort douchebags in the world why weren’t you sabre-ratting to get rid of Li’l Kim of North Korea, and Mugabe has some bad history too. Neverland and Lupulco have done a better job that I of deconstructing the shabby nature of Western involvement in Syria 😉

    Then I took a few days out to poke around the Cotswolds and see some new stuff. Another one of those freebie holidays that comes with having control of my own time – I get to drive, Mrs Ermine gets to find out mob-grazing cows 1 and I get to look at some attractive English countryside. I know George Monbiot really hates the English countryside, with some good reasons, but I happen to really love bits of it – indeed one of the things I found on retiring is appreciating the natural beauty 2 of the country I live in a lot more 😉

    Stow-in-the-Wold

    Stow-in-the-Wold

     

    The Rollright Stones

    The Rollright Stones

    It was a time for enjoying some peace and early Autumn sunshine. I also felt the chill winds of inflation – I went for a gander at a National Trust Roman villa and was somewhat shocked to be charged £8.80 to get in. I certainly wasn’t in the mood to pay the extra charge to giftaid it (what’s that about, isn’t the point of Gift Aid that the taxman lobs in the extra?) which I forestalled by asking for a standard adult ticket. The staff had been trained well because nearly all the other visitors got soaked for the extra giftaid story which was well sold to the punters. I was amazed that so many families thought little of spending £24 – the middle may be squeezed but clearly not that squeezed if they are that easily talked into an extra 10%. It’s one of the things about simple living – I think more about my spending, and whether I am getting value for the transaction. I could easily afford the extra, but I figured the utility I was getting for my £8.80 was already borderline. I can’t really fill in the giftaid ticket with integrity, as a non-taxpayer though I doubt HMRC tests them 😉

    Roman central heating - a hypocaust

    Roman central heating – a hypocaust. Runs on wood and slaves

    I personally had the suspicion the adult ticket was loaded to sponsor the child tickets, since the site was heavily loaded towards child-friendly activities. I was in two minds as to whether to simply park up and observe from the fence with binoculars, as you can get most of the benefit from that, but in the end I stumped up, and it was worth seeing the hypocausts and mosaics up closer.

    Nice work on the mosaics - in reasonably good nick after 1500 years

    Nice work on the mosaics – in reasonably good nick after 1500 years

    It’s been over three years since I have done an attraction like this, the last was Stonehenge for £5.70 ISTR. It shows how inflation has really hit things that involve people to provide it – your iPhones and television sets have gone up a little but they’re much better, whereas the falling pound has presumably jacked up the cost of staffing, servicing and maintaining this sort of thing.

    The hypocaust also really brings into relief the improvement in standard of living. One and a half thousand years separate us from the Fall of Rome. They could do central heating without fossil fuels, but apparently it needed slaves to shovel wood into the firebox. Presumably they vented the far end to achieve enough draw, or maybe they had slaves to use bellows. You, dear reader, and I, have the same technology but in far more compact form with fossil fuels, gas in my case, and some electricity to run the central heating pump to circulate the heat-carrying medium. Water in the UK, commonly air in the US. While we may moan about the price it really is a remarkable tribute to 1500 years of progress. Even where I electively choose to use the same power source as the Romans did, my usage is far less labour intensive because we have better stove design and far better thermal insulation. And obviously I only have to heat a semi rather than a villa, natch. That’s the trouble with having more house than you need – the cost of domestic servants is so high these days as well as energy 😉 Sometimes it pays to take time out to think and appreciate what we have.Makes me think of the two horses I’d have to run alternately loaded in my basement that I’d need to power the fridge freezer at a shade under 2kWh/day, something I give little thought to. Not having to find the money to pay slaves to service the heating system, not to mention to go out and fell the forests is also a tribute to modernity and fossil fuels 😉 If/when the oil does run out and no alternatives are mustered, feudalism and slavery will be back IMO…

    The original topic of this post has somewhat been overtaken by events as I come back to see that the Syrian fight interrupted, exeunt opportunities for buying on the sound of gunfire. For now. Well, what the hell, at least I am only vastly over-exposed to The Firm (it’s now down to a third of of my total shareholdings) as opposed to owning a massive stock of my ex-employer with a piddly three-and-a-half year ISA on the side. For some reason The Firm has been going gangbusters of late – even after transferring some of it into my ISA and letting it go ex-div it’s handsomely up on when it went in, never mind when I purchased the shares as an lowly employee five years ago from pre-tax money via ESIP and post-tax via Sharesave. To be honest something gives me the willies about the current level – it’s a mixture of I’ve no ‘king idea what we are doing up here mate… and the fact that The Firm is doing well but not enough to justify its valuation compared to its peers.

    Run towards fire…

    One of the sad things about stock market investment seems to be that you need to have enough to be able to tolerate the counter-intuitive aspects of it. It’s all very well to think you can tolerate a 50% fall in networth in the anticipation of riding up the other side, but it’s a different thing to actually do it under fire in a market crash. Buy on the sound of gunfire is attributed to Nathan Rothschild  in the 19th century You need to be prepared to buy things that people hate, and indeed buy when people hate it. Obviously all the press is about what’s doing well, since curiously enough in the finance pages good news sells, even though the rest of the paper is about the car crashes and wars. The trouble is the good news isn’t useful in finance, apart from perhaps a guide what not to buy. Odd conundrum that, we could probably do with more cynicism in the finance pages and more good news on the front pages, but that’s what the invisible hand of the market seems to be saying we really want of our journalism. Well, along with sex ‘n slebs and the whole bread and circuses thing.

    I am trying to avoid selling, though I make an exception for The Firm purely to get my portfolio less one-sided – it’ll take me ten years of buying to get to balance the shareholdings I left The Firm with. I was lucky enough to be able to buy into Sharesave during its annus horribilis, and you just don’t say no to that sort of one-way bet 3.

    So it’s what to buy – at the moment there are three areas that the world seems to hate: Europe, emerging markets, and it sort of hates gold. So naturally an ermine has been buying Europe and I’m toying with a move into emerging markets. There’s something to be said for the barbarous relic too, but I’ll leave that to those more clever than I am. The case for index trackers is slowly being firmed up for me, but I am an inveterate active investor, if I’m going to be passive I’m going to be actively passive, and that means buying passive funds in areas I don’t have expertise in and in areas the world hates.

    And then sitting on them. Unfortunately moving away from HYP shares will lower my yield – which is why I will still also add to the HYP shares I started off with, because the 5% yield is good. I’ve nearly reached the point where I have enough yield to top up my future pension to what I want it to be, so I want to do something else with the excess – start building capital. One of the advantages of living simply is I get to see what enough looks like. The rest is towards building a bulwark against the depredations of Mark Carney and to give me future options to do things I don’t know that I want to do yet, the unknown unknowns of Rumsfeldian epistemology 4.

    It’s generally a bad thing to compartmentalize savings  5– think of all the people earning 1% interest on savings, or even worse investing in the stock market while owing at 20% interest on their credit cards. I already have a problem with large cash holdings that are being destroyed by Carney’s slow-motion bank-robbery because without an income I need the worst-case likely outlay as liquid cash. However, I need to open an account with a new ISA provider next year to get a renewed tranche of FSCS protection (this is only £50,000 per ISA provider) so that is probably a good time to look at building an index portfolio. Buying what’s out of favour or hated rather than the equal shares to equal pots – -in the end an index investor is still active both in what he chooses to buy and when he chooses to buy.

    Running towards fire has served me well in the past. Sharesave, starting in 2009, the London riots, REITs, income shares in 2009-2012. Every other bugger’s jumped on the income bandwagon now, I’d prefer if they’d kindly gerroff and stop crashing the private party I was having with income ITs on a discount. This part of the year is often good for a punch-up in the markets. There’s the whole Syria trouble, there’s wider Middle East stuff. There is trouble in Europe with Angela Merkel coming up for re-election. Perhaps I called the sound of gunfire early, but I can probably find some sector on fire to get into… The world isn’t likely to run too short of trouble any time real soon.

     

    Notes:

    1. I’m scared of cows, so when I hear mob-grazing I think of seeing them over in a field and then like in the films there’s low music gathering speed, as head dip, snort, and then there’s an awful thundering of hooves as the herd charges as one mob and stampedes towards you. Apparently mob grazing isn’t that sort of mob
    2. George M would probably say the unnatural beauty
    3. Sharesave is an “share option with benefits” – you buy options at the outset but unlike the commitment of real CFD options at the end you can back out and say “no thanks let’s call this whole thing off, I’ll have my money back” if the share price has gone down. If it’s available at your workplace- just do it!
    4. Rumsfeld left out the most dangerous element, the unknown knowns. These are the hidden precepts and subconscious biases that distort our vision of the world. The unknown unknowns, the known knowns and the known unknowns did not cause the groupthink failure otherwise known as the Project for a New American Century, but the assumption that the rest of the world was like them and dreamed the same American Dreams was perhaps unwise in retrospect
    5. strictly speaking in this case I am compartmentalizing a combinations of savings and investments, which is slightly less barmy because they are different asset classes with different risk and liquidity horizons
     
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