6 Jan 2014, 1:23pm
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  • What looks interesting in 2014 then?

    It’s still three months to the new ISA year but it’s a good point to take stock. 2013 was one of those years where pretty much whatever you invested in seemed to make money, reversion to the mean indicates 2014 may be a tough year then, and to be honest I still don’t know what the hell we are doing up here. What’s been happening then?

    Developed markets, the US in particular, have done very well. Shame I got no US then 1 – it was too dear when I started looking at it and it’s still too dear. Emerging markets, pretty much anything to do with mining, and gold seemed to be the losers of 2013. Obviously he’s talking his book, but Money Observer’s Thomas Becket socks it to the Henry II in us with

    2013 has undoubtedly been the year to own Developed World equities and avoid everything in the Emerging World.

    which is hard to argue with. Intriguingly he also asserts

    Closer to home, UK mega-caps are cheap and should benefit from a decent year for the global economy; we are currently expecting above trend growth in global GDP next year.

    I own some of these guys as you’d tend to do in a HYP and I’m not so sure I’d describe them as cheap, else I’d go get me some more – in all cases bar one they’re notably dearer than when I bought ‘em. Maybe Psigma has a load of UK mega-caps in the fund too ;)

    Where am I now?

    I pinched the principles of this article on unitising a portfolio and applied it to my own, I’ve stayed 20% ahead of the FTAS over the investing period which would probably have been my index fund of choice. Rather than run a second unit tracking for the FTAS I track this Vanguard FT Allshare accumulation fund which rolls up dividend income into the unit price, and referred it to January 2010 which is the first year I had enough performance data since I started with half a S&S ISA allocation in 2009.

    I don’t think Goldman Sachs will be begging me to come out of retirement to do God’s work for them but it isn’t, so far, the usual slaughtering that seems to be expected of private investors who don’t go by the creed. I was lucky, however, to start in the investing hellhole that was 2009, 2010 and 2011. You probably don’t have to be smart to do okay from there. But you do have to start

    I am about 2/3 of the way to getting the income top-up of 5% of the ISA capital (as measured in terms of cash spent to buy it, not the dreadfully volatile market value) that I want of it by about mid 2015. As it transpires I could probably do okay without the top-up income from the ISA – you only find that out after retiring 2, which is a real bummer for financial planning ;) So I can leave the existing investments right as they are, but maybe look further ahead. After all, if I live as long as my parents I am looking at a 40-year investment horizon from now…

    What does look interesting then?

    Everything that looks crap now, I guess. As everybody looked in the abyss in 2007-9 we projected our hopes and dreams onto emerging markets, and pumped them up as the Western financial model was shown to have feet of clay. We still do have very serious problems, many of which haven’t been fixed, but it survived the heart attack. Although he’s also obviously talking his book, I think Terry Smith’s outlook on the economy is more accurate.

    So we generally think/feel 3 everything is going swimmingly, the only way is up. So now we don’t need those damn emerging markets. The pound is also rising, which makes foreign stuff look overpriced if you bought it before the rise, etc etc.

    The rising pound helps me, as a UK investor and also one with significant cash holdings. The Government has been busy destroying the value of those cash holdings through inflation, but if the pound and interest rates rise then that means I can get more Foreign Stuff for my paltry pounds. Now normally when people talk about Foreign Stuff they thing of imports, like Samsung mobile phones and cheap DVD players, but it also applies to foreign equities, particularly where those currencies are being threatened by Fed tapering.

    For all that, the promise of emerging markets is still good – demographics to die for, many of these new consumers will come of age and start working when an Ermine is old enough to draw a State Pension, should it still exist at that time. 2014 looks like a good time to get to add some of this to my holdings. I only need about 10-20% in total, which will drop the effective return on capital to 4% from the 5% it has been since emerging markets don’t seem to pay dividends to any useful extent. The newsflow continues to be ghastly which is a good sign ;)

    However, Emerging Markets isn’t one monolithic block. Asian emerging markets seem to be different to, say, South American emerging markets, and India, China and Russia are so very different in demography, culture and resources to each other and anything else out there that rudely lumping them in together seems wrong. Demography alone leads me to lean away from Russia and China – people say the demography of the West is rotten but it’s better than both of those.

    Last year I bought a little bit of AAS at a discount, and the SP is slowly going down the toilet, so I should get a chance to buy some more at a discount this year – I will buy this in modest bits. There is a Blackrock tracker mentioned here which looks like a good one to match AAS. Finally I have a small stake in AFMF – basically Africa, which seems to be generally considered uninvestable, but from what I hear from someone I know who works in mobile telecoms out there the beating heart of capitalism seems to be stirring with  African people doing things for themselves. For all my life Africa has been considered an economic basket case, so this is a straight punt on reversion to the mean. I don’t need much EM, but 2014 is probably a good year to build this stake up.

    Then there is the gold and mining conundrum. I’ll leave consideration of the merits or not of of gold to RIT, but one difference to him is that this will be a small part of my holdings, and I will hold it outside my ISA, because I can’t live with a non-income producing dead asset like that in my ISA. If it continues to tank this year I will add to that.

    I don’t know what to do about mining, it might have to be filed into the too hard camp for now. I don’t have to swing for everything. I have a particularly pessimistic trigger alert set on BRWM so I will revisit that if it turns out to be a spectacularly bad year.

    Of course, there are the usual stalwarts – the Eurozone crisis still hasn’t gone away, and there are of course all the unknown unknowns. At the moment emerging markets are good enough to pique an Ermine’s interest.

    Notes:

    1. That’s not strictly true as it appears I have a hefty slug of US in a Vanguard FTSE Dev World ex-UK index fund, although that happens to be outside my ISA
    2. The other half of the retire early fight is reducing the crappy middle-class and work-related spending that doesn’t enhance your quality of life – note that you do increase some areas of spending. The trick is to increase spending on wants that you really want, as opposed to shit wants induced by others that don’t deliver a return in terms of quality of life. Reducing the stress and noise in your head makes discriminating between these a lot easier, but that’s a different post
    3. I’m talking homo economicus – as opposed to the strivers, and the group formerly known as the middle class who are still very pissed off, as Ed Miliband correctly highlights in his cost of living crisis, though I don’t agree that nationalising energy resources necessarily means you can control the total price
    6 Jan 2014, 8:40pm
    by BeatTheSeasons


    Dare I mention prime residential property? Not for you personally, that’s for sure! But in terms of what ‘looks interesting’ for 2014, even a modest 5% increase comes out at a 20% capital gain with the power of a 75% mortgage.

    I can think of many factors that mean prices should keep increasing for a while yet. Both supply and demand are working in your favour in many ways, not to mention inflation and wage growth.

    6 Jan 2014, 8:56pm
    by ermine


    @BTS Already in there after Help to Buy was announced, and I considered the sheer ghastly horror of what was likely to ensue. Castle Trust seemed like a punt on the HHPI without all the unpleasantness that goes with wrangling real houses ;) I’m tempted to diversify that with a bit of Grainger in the next ISA year.

    It’s an ill wind, eh?

    6 Jan 2014, 9:08pm
    by BeatTheSeasons


    I don’t think Help-To-Buy has made much if any difference for older properties in prime areas. Low interest rates do more to help with affordability, and 95% mortgages were becoming available anyway.

    The biggest factor I think is supply/demand imbalance. It’s partly been caused by political weakness, but even building on vast tracts of green belt doesn’t give us enough houses in nice established communities with transport links to London.

    Anyway, sorry to hijack your article but I do think it’s relevant for 2014 – Savills are forecasting 25% growth over the next 5 years (that’s a 100% gain if you have a 75% mortgage). Pick the right suburb and you could beat even that.

    6 Jan 2014, 9:29pm
    by ermine


    You’re absolutely right – it is an interesting sector for 2014 I’d missed due to personal prejudice. Although I note that like Thomas and Terry, Savills are also talking their book.

    Re supply/demand eventually people are going to have to learn to live in shared housing, I lived in houses shared with three, four other guys in my twenties, and I really do think many twentysomethings are way out there if they believe they can buy a house on their own in that first decade. We could also do with shaking off the bizarre British fetish of the single family house and get less snooty about flats. Mind you, our landlords could also do with sorting out – I’d like to see companies owning the housing stock and more professionalism in the whole area for the sake of Britain’s tenants, rather than the serried ranks of BTL-ers who then employ middlemen to do the grunt work, but that’s a whole different story and somebody else’s problem to sort out ;)

    There’s also a fundamental disconnect re ‘ nice established communities with transport links to London’ – years ago I lived in south east London with my parents for a while when I was working near Broadcasting House in Oxford Street. Though it was only 15 miles as the crow flies it took me an hour and a half commute each way, and losing three hours out of every day means you don’t become time to be part of the community. it’s really odd how the vast improvement in communications has been used…to make us all commute longer distances to work. Beats the hell out of me why.

    7 Jan 2014, 10:33am
    by BeatTheSeasons


    Good point about communities, I’ve certainly experienced that. On the other hand, in such places the price of land is so high that new residential developments are almost exclusively flats rather than family houses so that developers can maximise their profit.

    So the proportion of flats to houses is rising faster than the snootiness is falling! This means where I live you can still buy a modern 2 bed 2 bathroom flat for the £250,000 it would have set you back in 2006/7. Whereas centrally located houses have increased in value by around 50% in that time.

    You’ve made the point about professional versus amateur buy-to-let before, but do you really want to see such vast wealth concentrated in the hands of the few? I suppose they could be listed companies, but somehow I think private landlords are a lesser evil than some kind of private equity backed giant property conglomerate based in a tax haven….

    7 Jan 2014, 1:05pm
    by ermine


    It’s probably a fair point about private equity. Housing is a dreadful mess in the UK, and though I take Jonathan’s point that the effect Thatcher’s council house sales may have been over-egged, the rot seemed to start from there. Correlation isn’t causation, but up to the 1980s we had a serviceable social housing sector that housed a range of incomes from the low to middle, which also gave a wider voter base interested in the subject. Now social housing is largely the domain of the poor, the private rental market is an unholy combination of people thinking ‘my house is my pension’ and some professionals. It’s particularly the accidental landlords who have moved, or gone up the chain and left admin in the hands of agents that seem the slovenly people who make life painful for some renters I know. Things have got better since the 1980s – in one rented house I had to isolate an electric shower tapped off the lighting circuit when the insulation melted and blew the lighting fuses periodically, and lit a bedsit gas oven by tossing matches into it as recommended by the landlord because the whoosh would otherwise take your eyebrows off. That sort of thing has improved, but I’ve seen houses with central heating without a timer because the landlord was too cheap to fit one and plumbing bodgery of all sorts.

    I don’t know what the answer is, a company running BTL would be one we could buy shares in, if we believed in the asset class or were a young person wanting to buy the housing asset class, helping savings at least track the market. Whereas now you can only benefit from housing if you can raise a mortgage, and avoid being foreclosed over your working life.

    Even things like Castle Trust aren’t right for a young person’s deposit with the three year minimum investment period – what they need is a housing ETF, preferably in the area they are buying. We used to have things like that – they were called a building society ;)

    7 Jan 2014, 3:34pm
    by BeatTheSeasons


    I hope this isn’t what we can expect from a professional buy-to-let empire.

    The Wilsons, who own 1,000 properties in Kent, have just decided to evict all their tenants who are on benefits in case they get behind on their rent.

    http://www.theguardian.com/money/2014/jan/07/buy-to-let-landlord-defends-no-housing-benefits

    Mr Wilson is quoted as saying:

    I feel sorry for battered wives who have come to us because we are very much consigning them to go back to their husbands to be beaten up again

    BTW – I’m not sure what’s going on with JII, but it seems the discount has ballooned with little change in the NAV or the share price. I assume this is to do with the subscription shares expiring.

    (No idea whether it is a real effect and therefore subject to mean reversion or not, but might be worth a closer look.)

    7 Jan 2014, 4:39pm
    by ermine


    The obvious question is would any individual BTL-er do differently – I suspect not, if he wants to turn a return on investment. You can get a return on capital. Or you can house people for lower than the cost of capital, but you can’t have both, which is one of the reasons we have taxes…

    I watched the TV clip and I think he is making a fair point that this is the result of Government policy – in the end it is the Government that is acting on all our behalf and makes the rules. It isn’t up to Mr Wilson to provide the welfare state. There may be a case for a social levy on landlords, including individual BTL landlords then, since they’re all profiting from the higher prices that cause this misery. Do too much of that, however, and we’ll find there aren’t any houses for rent…

    He is only saying what happens when you withdraw part of the welfare state. The solution lies in persuading MPs to try and sell to the electorate that taxes must rise, perhaps to the levels I saw when starting work – I paid ~38% tax + NI on a whopping over 2/3 or my crappy starting income in 1982. Otherwise the conclusion has to be, sadly, that we don’t collectively care enough. The money to pay for people who can’t pay for their own housing has to come from somewhere. Although I don’t have much feeling for landlords, if they run at a loss they eventually fold. If we regulate too many of the losses onto landlords, then we will find a dearth of rental property. I’m not a Big State kinda guy, but there was a lot less hurt associated with housing when council housing was a much larger part of the mix. Thatcher’s giveaway still hacks me off, I find the whole premise of Right to Buy a disgrace, and I’m shocked it still exists – pumped up to a 60% discount! If you want to buy a house, go onto the open market and pay the market rate – I’m opposed to RTB and think council/social housing should be legally registered with a restrictive covenant that no tenant may benefit from the sale of the house they live in.

    7 Jan 2014, 5:00pm
    by ermine


    @Greg crikey, 16% discount, and a rising £/falling INR. They must be haemorrhaging cash… Spoiled for choice, what with the interesting times on AAS ;)

    I see AAS has taken another battering. 6% discount now. I’d have a piece of that if I had money to spare.

    Interestingly, CGT is also well below its normal premium at under 5%. (I assume due to the recent poor performance, probably due to the fall in index linked gilts.) I’d love to have a position in CGT and would probably be buying using a limit order (big B-A spread) if I actually had money needing a home.

    As for housing, we need millions more good ones in addition to anything else anyone can come up with. As for the Tories, I swear they have a brainstorming session each morning over what policies might get them more votes at the next election, write one down on an envelope, then announce it at lunchtime.

    With taxes, don’t forget the 9% (over £15k) extra went-to-university tax young people pay!

    Greg,

    The went-to-university tax has changed slightly and the different types of income contingent loans now work out as roughly:

    Started course before 1 September 2012 (Plan 1): 9% of everything over £15,795 (increasine in line with inflation)
    Started course after 1 September 2012 (Plan 2): 9% of everything over £21,000 (not sure if this will increase with inflation).

    I’m plan 1 and the interest rate isn’t currently too onerous (the lower of RPI, or 1% above the average? rate of a nominated group of banks), currently a very reasonable 1.5%.

    Plan 2, on the other hand, looks horrendous. RPI + 3% while you’re studying (currently 6.3%), or RPI later on (would be 3.3% at present).

    This plus the fact that tuition fees appear to have effectively tripled (at least in Scotland), means that if I was a young person nowadays I would not be willing to go to university if I made the choice again.

    Even assuming fees-only (no loan taken for cost of living), new graduates are looking at a c. £33k loan growing at RPI on graduation day.

    Considering how hard it can be to beat RPI with savings and investments, no ta!

    Meh, 2013 was the reversion to the mean year for my diversified portfolio. Not a big loss but ‘testing’ when looking a stocks in isolation. I’m still sitting in cash for this years ISA which in hindsight was the smartest move I made.

    All this talk of esoteric buying opportunities makes me want to get involved… but I know I’ve no clue what I’m doing so your siren song is wasted on me :)

    Reflecting on my income streams I realise that the house I rent out (through an agent ;))has so far been the steadiest and least stressful even though it just returns me about 5%.

    I do feel a little conflicted about it (it does go to ‘young professional couples’).

    On the one hand it’s great for me because there’s no wear and tear or rent ‘oversights’. On the other hand the zealot in me wants to give them a stern talking to. “Do you *need* a 3 bedroom house with satellite TV in every room ? Do you *need* two new cars parked on the front ?”

    Then I remember fixing the shed roof for 5 hrs in the middle of winter, without even being offered a cup of tea let alone a chance to thaw out and recall they are free to make their own choices. As am I.

    In the interests of balance I’d like to add that in my experience as a tenant, landlords and managing agents are toads.

    10 Jan 2014, 12:42pm
    by BeatTheSeasons


    My gut feeling is that we surely have higher overall taxes than when a young ermine paid 38% in 1982.

    I am thinking of the effect of all the NIC increases, VAT now being 20%, council tax increases in the 1990s, and years of escalators on duties for fuel, alcohol and cigarettes.

    But according to the Adam Smith Institute, Tax Freedom Day was at its latest in 1981 (20th June) but has hovered around the last week of May for the last decade, so taxes are indeed still relatively low by historical standards.

    Of course that doesn’t mean increasing them is a good thing!

    @L same here – starting again now I wouldn’t go to university, leastways in Britain (young folk now may want to investigate some of the European options where fees are much lower – the ROI of learning a foreign language seems high, and many courses are taught in English anyway!). OTOH only 11% of school leavers went to university when I did, and it was harder to pass the exams. I flamed out of the Oxbridge entrance spectacularly on general knowledge with a gamma – which I assume is borderline imbecile level, whereas I did okay on the science papers ;)

    @Nathanb commiserations! Perhaps 2014 will be my reversion to the mean with the increased EM ;) Satellite TV in every room, eh, you did live high on the hog – or do you have to fit an IRS to rent a house to professionals these days? In which case, they pays their money, they takes their choice I guess!

    @BTS I’m simplistic rascal enough to consider NI+tax as ‘tax’. So your BRT fellow runs 20% + 12% = 32% tax and your HRT payer runs 40% + 2% = 42%. I didn’t sweat the lowered boost of driving my salary into the BRT range with pension contribs, because a saving of 32% from salary sacrifice still wasn’t to be sneezed at.

    What is hugely different now from then is the personal allowances are a lot higher as a proportion of useful income nowadays. When I was kitchen portering in the summer holidays university, for a whopping £1.40 an hour in 1980, I was paying a notable amount of NI. When I started at the BBC on an average sort of wage I was paying tax and NI on 2/3 of my salary. As a grizzled old git fearful of being sprung from The Firm thirty years later I was able to force my salary down to about twice the BRT tax allowance and live better on it – the personal allowance is much better now.

    Re indirect taxes Purchase tax was 33% on the sort of things craved by an ermine as a child, plus the cheeky practice of people quoting the price in guineas, which at 21/- was a price bump of 5% relative to the same amount in pounds!

    So I’m glad the ASI backs the feeling up that we paid much higher taxes in the past as a percentage of average income. If you look at the EU comparison of this the UK is still relatively low on that. From a tax POV moving to Malta of Cyprus is attractive, but then low-tax small island economies can have their problems ;)

    “I own some of these guys as you’d tend to do in a HYP and I’m not so sure I’d describe them as cheap, else I’d go get me some more – in all cases bar one they’re notably dearer than when I bought ‘em.”

    Tsk, tsk Ermine, you’ve been too good a student of the Ways of Investing to write that. ;)

    The price you paid is irrelevant. What matters is the value you get. You’re investing for income, and dividends have been hiked considerably over the past 3-4 years. I can’t be certain, but I’d imagine the yields on most of your HYP constituents aren’t far off what you paid for them — but in any event that’s a better metric for whether they’re dear or not. ;)

    In terms of cheap mega caps, you could create a pretty tasty mini-HYP with AZN, BLT, HSBC, TSCO, and RDSB with a yield of around 5% (I haven’t checked BLT’s yield, which will likely pull it down, but anyway, thereabouts).

    Not bad I think five years into a bull market where interest rates are so low it’s like they haven’t been invented yet.

    Re: Emerging market income, I think I’ve mentioned JEMI to you before? (JP Morgan Emerging Market Income). I wouldn’t put more than 1-2% of my own money in (i.e. I haven’t) as the trust is pretty new and the strategy of targeting EM income is too, but it’s paying about 4%.

    Obviously DYOR etc, as I know you will! :)

    (Sorry, re: yields I don’t mean “what you paid for them”, I mean “not too far off the yields you got when you bought them”).

    @Monevator It’s a fair cop – the yields (on current pricing) on my HYP haven’t changed that much, which puzzles me somewhat. I guess it’s those ‘green shoots‘ eh ;) And I have three out of your list, and have/are toying with the other two, if only for sectoral diversification. Mining is pretty beaten up now, though I’m also tempted by BRWM but the discount is disappearing pronto.

    EM looks nuts now, but I’ve shored enough of the near term income up, so I need to start looking at the 5/10 year mark. Difficult waters to fish in. In one account I’ve just followed TA with his BlackRock Emerging Markets Equity Tracker Fund D to get a stake in the geographical sector

    Shared housing!! That would be communism. I find it very, very strange that we have investors suggesting that people get used to the idea of living in shared housing when they are so far into the capitalist fold, that actually blog about it.

    But, maybe its not so strange as it it fits quite nicely with the exploitive practices of capitalism and greed.
    A case of ‘I’m all right but, screw you’.

    Do you live in shared housing and / or would you like to?

    @demeter I may be a greedy capitalist in your eyes but yes, I have extensive experience of living in shared housing for almost two thirds of my adult life including now.

    It’s a very capitalist thing to do to reduce costs by sweating an asset and getting its utilisation up.

    As a young person I lived in shared housing, firstly in shared houses with other students, then when I started working in a house share with four other guys. After that I shared a house with two others, and then moved into a house that had been divided into bedsits. Later I rented a room from a colleague.

    Sharing accommodation with others is a great way of reducing costs. A lot of the hurt in Britain’s housing provision is that more people are living on their own compared to earlier years – that’s expensive, particularly in the UK with our preference for houses rather than flats. I did that for seven years but only after I had been working for about 8 years. I couldn’t afford it before.

    12 Jan 2014, 4:27pm
    by Grumpy Old Paul


    @Ermine, @BeatTheSeasons

    VAT was increased from 8% in 1978/9 to 15% in 1979/80.

    I believe that VAT applies to about 55% of consumer expenditure.

    I compiled some statistics a while back that indicated that the peak percentage tax (NI+BRT+VAT) peaked at around 47% of earnings in 1982/3 and is now around 42% of earnings. This was a very crude calculation based on basic rate tax payers who spent all of their income!

    From 1978/9 to 1982/3 BRT was reduced from 33% to 30% but NI increased from 6.5% to 9%. There was remarkably little comment in the media about this sleight of hand.

    The shift in the burden of direct tax from BRT to NI has benefited pensioners who are exempt from NI and savers since NI is not levied on interest and dividends.

    The shift from direct taxation to VAT has benefited those who don’t spend much on VAT-liable products and services.

    The rise in personal allowances has been somewhat offset by the increases in VAT over recent years.

    These changes to taxation, the elimination of MIRAS and the “went-to-university tax” together mean that there has been a massive switch in taxation from pensioners to the working young. However, I suppose that in years past fewer pensioners paid much tax because of lower levels of pension provision.

    There seems to be a common belief that a concern with social justice and the well-being of people beyond one’s own immediate family is somehow incompatible with having an investment portfolio. My response is to draw people’s attention to the attitudes, politics and behaviour of people like Warren Buffett and Bill and Melissa Gates.

    13 Jan 2014, 11:55am
    by BeatTheSeasons


    @ demeter

    Living alone or in a nuclear family is about the most unnatural set up possible. Humans have lived in communities of around 30-100+ people for thousands of years, and traditional societies still do.

    No longer doing this is one of the main reasons that housing is so expensive. It also makes bringing up children incredibly hard work because it all has to be done in separate little units.

    So we create alternatives in our lives like dynamic friendship groups, a social aspect to groups of work colleagues, children’s nurseries, old people’s homes, etc.

    I think people are now against the idea of shared housing because everyone is so anti-social. Now, I wonder why that could be…?

    Strange that you complain that shared housing is communist and then accuse the ermine of being a rich capitalist!

    One you might consider is ALAI with >5% yield. Of course, South America may have further to fall, but I’m thinking of diving in on this one.

    @L You misunderstand – you’re still thinking of it as a _loan_. (I hate it being called that; it makes it seem like they did you a favour, rather than decide you owe £30k.)

    I’m not sure on the projected numbers, but I suspect many, perhaps most people will never be able to pay it off. Therefore it simply acts as an extra tax, one with the remarkable property that it stops for the richest few!

    I’m massively pro-university, even if all it did was get people to become more rounded individuals it would be worth it. Not going for economic reasons would be a massive shame. (Note that I’m not as young as one might imagine so didn’t suffer from ludicrous fees, though I still have a large amount of student loan remaining due to my career choices.)

    —rant begins at this point—

    If I was nominated despot of the UK, one of the things I’d do would be to transform our economy to being one with a backbone of highly skilled jobs, leaving the low-skilled, unhealthy jobs to places which can out-compete on wages. Note that highly skilled does not mean only for intellectuals, but includes things that require craftsmanship etc. There would still be lower skilled jobs, but without the pressure of so many people applying for them, they would have reasonable conditions. (Obviously what would actually happen would be that I’d make a mess of things and get assassinated but never mind…)

    Tax wise, I begrudge paying higher taxes at the time when I’m poorest to subsidise the 2 million over 65s that live in millionaire households, nearly as much as I begrudge paying extortionate rent (or possible purchase prices) to live in low quality accommodation.

    I mean, look at this crap – £430k for leasehold in half a council house in an ok area:
    http://www.zoopla.co.uk/property/2-carrol-close/london/nw5-1tf/17232140
    Imagine trying to save for that and seeing it go up by more than your gross salary.

    Compared to housing costs, discretionary spending is trivial. I could use LED TVs to tile the above house throughout (£750 per square metre using the cheapest 24″ one from ebuyer x 50 m sq) and still have made profit over the year from the price increase.

    Having to listen to people who have “worked all their life” lecture me about how they saved so hard for 6 months straight out of school before they bought their house is infuriating.

    I also can’t stand MMM’s approach either. “Oh, look how stupid everyone is. Asshats! You could easily earn $150k a year by doing a bit of woodwork every so often, buy 100 acres of land for $10 and build a mansion on it in 3 days using the wood from trees you cut down from your land. Awesome! Then to show how unimportant money is to you, keep track of every cent you spend all the time and repeatedly point out how everyone else is frittering it all away! Mega-awesome!”

    —end of rant—

    On the other hand, I find the regular, diverse musings here of the resident flâneur simply superb.

    15 Jan 2014, 3:07pm
    by Grumpy Old Paul


    @Greg,
    You’d probably agree with http://www.theguardian.com/commentisfree/2013/dec/22/someone-needs-fight-selfish-old .

    Most of the comments on that article take the form of ad hominem attacks rather than address the points he makes. Until young people start voting in large numbers and a political party starts pitching for their votes, the current regime of intergenerational inequity will prevail.

    I write this as an old git who was lucky enough to enjoy the cultural explosion of the 1960s. I remember the 1950s too with my main recollection being childhood boredom!

    An excellent rant!

    15 Jan 2014, 5:20pm
    by BeatTheSeasons


    Compulsory voting would do the trick. They already have it in Australia – I wonder how much tax is paid by the young vs the old over there.

    I try not to read “have your say” comments as they are depressing. I hope it is simply an example of the Dunning-Kruger effect in that it is simply the most stupid who are cocksure.

    I think Mr Huhne is right, but I’m most amazed there is any debate at all. I think it is wilful blindness…

    I site I like, fullfact.org has a rather miserable plot:

    http://fullfact.org/factchecks/how_long_average_family_take_save_deposit_house-29213

    As for compulsory voting, I’m not so sure. The populace at large really is very ignorant. I remember when I was voting in the AV referendum having argued the pros and cons with my colleagues for hours, the woman in front of me literally didn’t know what the vote was for. Ridiculous.

    I have some sympathies with MPs – let’s say they wanted to do the “right thing” of project A based on sensible demographic studies etc. They then have the job of convincing the public that it is the right thing to do, but the public’s knowledge of the stats is so poor the MPs have to sneak through project A by misrepresenting everything.

    Obviously getting people to actually be correctly informed about their surroundings would help. No idea how to do that though.

    As I’ve said before, I think we should have a powerful higher house of experts and thinkers whose job it is to point out long-term impacts and obvious deception etc. in commons legislature that comes to them.

    @Greg that was a top rant, I really enjoyed it ;) And thank you for introducing me to the DK effect – the converse of Socrates knowing he knows nothing. Of course I could be demonstrating Dunning-Kruger myself on here ;)

    I would still ike to spike Thatcher’s evil legacy of Right to Buy. They are building council houses in Ipswich again now. Which is good, but depressingly the end of the news report has “The council had said tenants would have the chance to buy the houses “after a certain number of years” at the end. I’m all for the council building houses, but not for tenants being given a free bung of 70% of the value so they can flog it off to a BTL landlord. When they’re ready to move on, the house should be reallocated to another generation of council tenants if it’s being built with public money IMO.

    I’m also not sure about compulsory voting, unless the compulsion also includes becoming informed ;)

    @SG Thanks for that – getting a handle on Em is challenging. I think this page from Greg’s fullfact people make the general case for getting EM exposure in changing of the guard!

    20 Jan 2014, 10:23am
    by Grumpy Old Paul


    @Ermine,@Greg

    Certainly agree with Ermnine’s views on council houses and good to see that Ipswich has started building.

    Looks as if George Osborne has realised that the state is subsidising employers paying low wages via the benefits system and that is presumably why he is in favour of raising the minimum wage above inflation. Perhaps he’ll also realise that the state is subsidising BTL landlords via housing benefit,tax relief on mortgage interest and, to some extent, CGT evasion and address that too.

    Amused by Greg’s reference to the D-K effect which I have observed over the decades. In my working life, after I had amassed what a friend of mine used to call an ‘F-U’ fund, I used to refer to certain senior managers as ‘arrogant f-wits’. Too many people in positions of authority exhibit the D-K effect!

    I’m not actually sure whether I believe the statistics about the number of pensioners living in millionaire households. I heard Radio 4’s ‘More or Less’ on the topic and I’m aware that what is being referred to is millionaire households rather than individual millionaires and that pension pots (including DB pensions) are included. However, the source of the statistics is the ‘Intergenerational Foundation’ which is not exactly neutral.

    I’d favour much larger State Pensions provided the additional expenditure was balanced by:

    a) Merging BRT and NI with no special exemptions for pensioners
    b) Axing WFA and free TV licences
    c) Making wealthy pensioners pay for their care home stay. People in Care Homes derive no benefit from the houses which they own and I see no reason why they should not pay for their care if they can afford it.
    d) Increase inheritance tax and reverse the ridiculously generous changes introduced by Labour in their last term.
    e) A top rate of tax (BRT merged with NI) of around 60%.
    f) CGT rates and taxes on savings aligned with income tax rates.

    Rest assured, there is little chance of any of the above measures being introduced! There’s more chance of ISA contribution limits being frozen, allowed to wither on the vine and then axed completely as happened with MIRAS. Monevator’s servers would run the risk of being overwhelmed by comments judging by the number received in response to H-l’s charge increases.

    Interesting thoughts. I think 2014 will be a sideways year in general for the markets. As the QE tap is turned off, markets will struggle to keep the upward momentum in the west. Real money seems to still be flowing out of the Emerging Markets still which looks (to me) like it has further to fall.

    I’m finding it hard to find any compulsive macro stories to believe in so I’m concentrating more on finding individual companies to invest in as opposed to the funds/etfs that have served me well over the last 2 years.

    Have a great year!

    […] sooner does Under the Money Tree comment to the effect of steady on – not so fast on my interest in Emerging Markets then he’s proved right and the Argies are in trouble […]

    […] them eat cake’ approach of denying that shit is happening because you can now afford to pave your rented flat with cheap TVs seems […]

     

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