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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