28 Jan 2016, 9:05pm
living intentionally
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  • it could be you, but it’s incredibly unlikely

    That’s of course the motto of the UK National Lottery, but it is increasingly the mantra of a lot of other ways capitalism is making use of the way we humans can’t get statistically small chances. I was reminded of this when I read a curious article on the Guardian about a chap trying to become a pro video gamer. To be fair to him, at least he got an article out of it and presumably the Guardian paid him, but in addition to the WTF factor, I am amazed that a reasonably intelligent fellow even entertained the idea.

    a modern-day Mark of the Beast

    a modern-day Mark of the Beast

    The rules are different for people with good contacts or those with a net worth of more than about £10million, because you can then buy the government, or at least influence the rules. You can even convince yourself you’re not being evil when you pay corporation tax at 3% rather than 20%. For ordinary grunts ways to make a living come in several classes other than selling your time for money in traditional employment.

    fifty ways to make a living

    you can make a product or service, that is likely to provide an income of sorts if you can find buyers at the right price. That’s because you are changing the world in some way that others find of value, that for some reason they have neither the skill or inclination to do. Such honest toilers include builders, cleaners, doctors, gardeners, some ebay traders, people who work in the shop round the corner.

    Not everything of value is of course tangible – artists create expressions of their view of the world which others of us can use as a framework to hang our hopes, dreams or fuzzy insights on, we pay them. Market makers of various sorts can sometimes add value – in the past wholesalers and distributors parcelled up small purchases into bigger ones. Music, childcare, dance classes are services. I passed Dial-a-Dog Wash a while back. I guess the product is a cleaner and less stinky hound.

    Arbitrage works – skimming a bunch of other people because you have superior resources, knowledge or connectivity. The entire financial industry is a case in point. It doesn’t make anything, but it amplifies dreams. For instance it lets foolhardy house buyers overpay for houses. I managed to buy a house as a single man on a entry-level white collar salary nearly thirty years ago, that’s not really possible now. I’m not quite sure why that is considered success, but we all conspired to make it happen, with the benevolence of organisations able to create money out of thin air. But finance does do good stuff too. It lets us insure against low-likelihood but high impact risks. It puts money in the hands of people with talent but no capital. On the way it fleeces many of us shitless. This kind of way of earning a living on a freelance level depends on contacts and chutzpah, and it is lucrative.

    There is, however, a Dark Star of enterprises, these are ones where we have a zero-sum game with a huge number of punters and an extremely low likelihood of getting fame and fortune.

    Deep Throat was right. Follow the money

    In the early 1970s, the Washington Post reporters trying to break the Watergate story were given a sage piece of advice by their informer, although the principle dates back to Roman times. Follow the moneycui bono in its classical form. It’s still a decent way of qualifying a financial opportunity someone sticks in front of your nose.The ermine has some simple rules about this:

    • If the opportunity comes to me of its own volition, it’s not something I want to pursue. Exeunt doorstep sellers, all advertising flyers, cold callers on the phone. It’s why I run ad-block plus. If I didn’t ask to know, I don’t want to know. End of. I am perfectly capable of getting novelty from the world myself – be curious, and aim to know more when you get to bed than when you got up. Even if in includes that pro video gamer is a thing.
    • If I can’t see what a financial opportunity produces or adds to the world, it’s likely a scam. Even if it isn’t a scam, I am not smart enough or too lazy to be able to tell it apart form a scam. I don’t want to know. You can get rich through things like this if and only if you get out at the right time… Madoff made people rich. Until he made them poor.
    • All sellers are liars and charlatans who promote their interests at my expense. Be careful out there. It isn’t universally true but it’s a good starting guess.
    • Very few things in a market economy are truly free. For example, you pay for coupons, Topcashback and Quidco with dedicating headspace to getting a little bit of the money you overpaid back. There’s an opportunity cost of time and attention. The more you think about shopping, the more you are likely to shop.
    • If somebody wants you to sign on the dotted line now without thinking it over, it’s a very bad deal. If it were a good deal, it would survive the scrutiny of sleeping on it. Walk away.

    In general, follow the money. If this transaction goes ahead, who wins? If you were unaware of this outstanding lime-limited opportunity this morning, then the winner isn’t likely to be you.

    The Seventies discourse on media  was surprisingly prescient about our times – Andy Warhol’s 15 minutes of fame anticipated the vastly improved communications we have, breaking down the layers that graded performers’ access to the audience. On a small scale it costs me virtually nothing to reach you, dear reader, and I hope it costs you virtually nothing to read. Before the turn of the millennium that simply wasn’t possible.

    This massive increase in communication and the reduction in costs makes us all potential performers now, the hierarchy of gatekeepers that qualified which subjects were worthy to be represented has been eliminated. They were only there to guard access to the expensive medium of communication, their function of grading out the dross was a secondary, not a primary function. You probably have more than 100 channels on Sky TV at home. They probably aren’t worth 30 times more of your time than when we had three TV channels in the 1970s. more »

    21 Jan 2016, 9:53am
    personal finance shares
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  • sometimes you just have to hold your nose and do it

    I wrote the first half of this in November last year under the heading “Valuation matters” when I was bored with the stock market, but couldn’t really take it anywhere. Things have improved in the two and a half months since, so I thought I’ll run the post.

    Ermine approach to bear markets

    There are two big problems with bear markets. One is the general noise and hum of people like RBS yelling sell everything. The other problem is that bear markets are usually shorter than bull markets, but steeper. So not only do you have a shorter time to get into the suckers, but it feels bad too.

    past investment performance provides no guide to future performance

    Standard FSA text you read everywhere but probably don’t believe at heart

    I do have a fair lump of money to move out of cash, even while leaving my SIPP as it is. But what to do with a bear market, eh? I will do roughly what worked the last couple of times.

    Valuation matters

    Once upon a time, in the late 1990s, I got more and more interested in the stock market as prices rose, ‘cos I looked at the virtual bottom line and thought that it was real. Whereas now I get more and more lethargic as valuations rise, I cast about and struggle to find anything of interest to buy, and occasionally carp about it. Whereas a decent market crash would interest me again…

    Let’s take a look at the enemy. Total Return values for the FTSE100 are only available back to 2012, but I got my FT All-Share TR from here, apparently derived from the ONS.

    FTAS Total Return, log scale to preserve relative changes. Some big hits and a drop in the rate of increase of TR since the Millennium

    The overall trend is up. And yet this is a game of two halves – whatever happened after the dotcom bust seems to have taken a bite out of the annual rise of the FT all-share total return, and given us bigger and more protracted retrenchments. Perhaps the change in annual rise is because inflation was generally lower in the second half period, but there’s no way of getting away from the fact that the retrenchments in TR are deeper and span longer periods. There’s real money to be lost here for significant periods of time.

    Whether this is the result of structural changes to the economy, or perhaps the massed ranks of index investors beginning to kill the golden goose is something I am not clever enough to say. Perhaps it’s as simple as the increased financialisation of the economy, in the end somebody has to be paying for all those salaries in London. FirevLondon put it well

    Financial services is, er, where the money is. Pay levels here significantly exceed almost all other sectors when you benchmark for responsibility, experience, lifestyle, etc.  The point is that these jobs are not easy to get and are not everybody’s cup of tea.

    Just like people working in sweet shops don’t want for sweets, I guess people working in money don’t want for money. The kink in the chart may be as simple as the fact that these pay levels as well as soaring CEO pay have to be looted from the real economy because financialisation is an extractive rather than productive business, looks like shareholders have been getting a bum deal for the last 16 years as well as being shaken down twice. Or is that three times, including now 😉 Whatever it is due to, there’s a good case to support the thesis that it’s all different now, but the trouble is that it isn’t all better now.

    If we are going to be carrying the deadweight load of all these spivs and CEO salaries on our backs, we really want to be buying in the suckouts, since the cost of the future income stream is cheaper, cos, well, the price of entry is on sale.

    People made a lot about the last bull market being one of the longest on record, which is all fine and dandy, but if the price of longer bull runs is greater humdingers of bear markets that knock you back the odd decade then it still isn’t great news for steady buy and hold. The view post 2000 on the FTAS total return hasn’t been worth the climb compared to the 20 years before it. The slightly lower slope could be explained by lower inflation, but the multi-year suckouts are longer and deeper.

    My aim is to long-term hold, and use the dividend income. So I am buying a future income stream, and I want prices to be low when I buy. They haven’t been low for the last few years, that’s the trouble with bull markets, they hang around too long and outstay their welcome, particularly that last one. I’m glad to see the back of it. All it’s been good for the last couple of years is to shift unwrapped assets into an ISA wrapper, rather than put much new money into the markets.

    Buying into bearishness with index funds

    I have stood next to the open goal of bear markets before, tapping a bit of wedge into it at the same time as buying that Cash ISA, That Cash ISA is still the same one as I bought in March and April 2009, when I also bought the other half as a S&S ISA in April and started hitting AVCs. Cash has lost value in real terms whereas the S&S ISA and the SIPP paid me handsomely.

    There are similarities to 2008 in that the stock market and the pound are tanking. The combination of these gave both my AVC funds and my ISA a good heft. This bear ain’t really got into it’s stride IMO, which is just as well for me. I have about 3k worth of ISA allowance left plus about two grand of cash in there. This year in an aberration of common sense I adopted the nice little quarterly regular drip-feeding approach of a good index investor, largely because I couldn’t really get excited about much, but figured I can’t just sit on cash. So for the last two quarters I’ve been buying gold, and in the first quarter I did some racy stuff like buy into Russia, EMs and oil, all of which have tanked faster than the unwrapped assets I sold. I’m taking the Zombie approach to the busted value of the last enterprise, at least the gold is up a smidgen.

    However, in a decent general bear market, you don’t actually have to be clever at what you buy. What you have to do is be buying. There’s a hell of a lot to be said for indexing into a bear market. You can sort out the asset allocation later when the rubble has stopped bouncing.

    What does a bear market look like, and how do you know one?

    A bear market is a fall back of 20% against recent highs, apparently. How do you know one – I spent too much time a while ago trying to formulate a black box determination of a bear market from the price signal. A bear market is not just about the price. It is also about how people feel. You know a bear market from the number of pundits screaming that everything is doomed – indeed I’d go as far as to say a bear market is much more about how people feel about the market that the price signal the market is giving, it’s the sizzle, not the steak.

    The trouble is that the depth and duration of the retrenchment is unknowable at the start. Is this like 2008/9? Is it like the dotcom bust? The 1930’s? Is it the final denouement of capitalism culminating in a war of all against all, or maybe a modest wobble like 2011?

    This unknowability means I don’t want to be buying all in one go, a good bear market happens across a year or more, the 2011 wobble was a few months ISTR, but the trouble is you can’t know where the bottom is. So I want to be getting in steadily over a few months, perhaps a year. The five grand for the ISA is easy enough to do, buy £1000 of VUKE and do it again over the next few of months. VUKE because it’s the FTSE100 that’s getting much of the stick at the moment. As well as that I have about 8k left in a cash ISA, which I can now deploy into the stock market. Unfortunately, having tried with Charles Stanley, it appears that I can’t actually open a S&S ISA by transferring in a seven-year old cash ISA without opening a new ISA for this year, which I can’t do 1. I could, of course, transfer the cash ISA into my TD Direct ISA which I already contributed to this year, but I don’t want that any bigger, I need another two S&S ISAs to bring the value of my shares ISA down to the FSCS compensation levels. This gets more relevant in times of market turmoil, MF Global is the poster child for what can go wrong here…

    So I guess I am stuffed until April on moving that cash ISA, which probably isn’t so bad. If this is a big one, the bear market will be just getting its boots on by then, I should imagine we will still all be thinking it’s financial Armageddon. In time for the new ISA year 😉  I am pretty sure that buying VUKE now will look like a terrible idea by then. As will buying it in February. And March, May and June. But I can’t know, and that’s why sometimes you have to hold your nose and buy into bear markets anyway. It’s a dirty job, but somebody has to do it. I can’t call the bottom of a bear market. But I don’t have to, all I need is get in while the sale is still on.

    It’s a lot more interesting than steadily socking away a few hundred pounds a month into an index fund in a bull market, even if the interesting is the same sort of interesting as living in interesting times. It’s the drama of bear markets that I like, well, and the fact that valuations get so much better. Despite everybody saying valuation doesn’t matter and you can’t time markets etc I can recognise a hissy fit when I see it. 2009 was good. 2011 had its moments. Perhaps 2016 will be up there as well. Of course, it is entirely possible that that kink in the long run TR of the FTSE100 is indicative of a deeper malaise – after all the suckouts seem to be deeper than they used to be and getting deeper, and despite the great celebrations when the FTSE100 crawled above the peak sixteen years ago it still seems to be walking wounded. I’m happier buying it at 5700 2 than 7000-something, although I am sure it will test 4500 sometime this year. I wonder if this will also be the year the Greeks default just to double down 😉 Let’s hear it from iii’s Rebecca O’Keefe

    With every upturn being followed by deeper falls, investors are increasingly wary as it becomes more and more difficult to determine what might happen next.

    We know the rough outline what’s going to happen next. Shit is going to go down, and keep going down. Until it doesn’t go down any more. The dotcom bust went down for three years straight, most of the other bear markets were two years or less. You shouldn’t have money in markets you will need in the next five years, so it’s likely you’ll be at least a year or two into the bull that follows the bear before the five years is up. Buy, not all in one go, and forget about it for five years. If the suckout lasts longer, well, you got different problems, bud.

    If there is a deeper problem of returns then the value of some numbers on my TD Direct/CS screens which would be visible on the internet if we had any power and broadband while the zombies fight in the streets aren’t going to be a big problem for me, compared to the marauding zombies and preppers like some Cormac McCarthy novel. But if that doesn’t happen then we will still be using oil in ten years time and I’ll wager we’ll be paying more than $30 a barrel for it. People will probably still be buying things made out of stuff that somebody is going to have to dig out of the ground. We probably won’t have given up eating and Facetweeting. I can’t be bothered to try and work out who will be providing this. That is the nice thing about bear markets. They are absolutely made for the mindlessness of index investing, because a synchronised gloom grips people and they flog everything off cheap. You don’t have to be smart about what you’re buying. Just buy something reasonably diversified.

    I’m not a fan of steady index investing across time. But I am a fan of indexing into market swoons, and then sitting on the spoils of war. Later on I will buy some individual shares/ITs once I feel there is an upturn, which of course will only be detected after the event. But on the way in, it needs to be like a slow-motion supermarket sweep contest, repeated regularly and paced out over months.

    It’s never a good feeling to buy into something that’s tanking. And to do it month after month. I know what that felt like in 2009. But compared to the feeling when you look back afterwards, well, that isn’t so bad.

    Pound cost averaging into a bear market isn’t smart and its not clever. But it’ll work, I’m happy to take the punt because I’ve been here before. Which is why I started buying yesterday.

     

    Notes:

    1. I have since asked them, and they have given me explicit dispensation for that
    2. that should probably be 5200 by the time I post this
    14 Jan 2016, 3:49pm
    living intentionally personal finance reflections
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  • I want to learn to spend a little more, with grace, with gratitude and with a new map

    Everyone is on the New Year’s resolutions track, and most PF folk want to save more. I am going to take a different line this year, because I am in a new territory. That needs a new map. It’s been a long time coming, over six months between when I started the process of transferring my DC savings to Hargreaves Lansdown and actually seeing the numbers tick up. It has happened now.

    That'll be a nice Lamborghini, and to hell with the money

    That’ll be a nice Lamborghini, and to hell with the money. Secondhand, in my case, as I am using five years worth of pension, not a lifetime’s worth.

    So the long period of coasting between my last pay packet in June 2012 and the first appearance of a regular income in the new tax year worked. I will enter the new tax year with some working cash to spare, and all the earnings from this year to toss into the SIPP on March 31. It has been a very different perspective, living on the fossil wealth of my erstwhile career to living on an income. That period felt like a limbo – yes I had retired but there were hazards that meant I might have had to work. Now it is very likely that I will never work again, at any rate at the level of most of my working life. Sticklers for accuracy will, of course point out that a pension is also fossil wealth, but living with it expressed as an income is different to living off saved capital. The amount in the SIPP is such that I could rush out and purchase a Lamborghini – I’m quite taken by this red one  – I am not rich enough to buy the quarter-million jobs but I am good to follow through on Steve Webb’s recommendations for the lower end of the secondhand market.

    Passing through the turning point is difficult – there is a big  difference between living off capital and using income

    I was always a salaryman, not an entrepreneur, and so as I left the workforce and the income tap turned off, I lost my main financial navigational instrument, the first law of Wilkins Micawber – spend less than you earn. This has guided me across thirty years of working life, but once the annual income falls to zero, this waypointer spins in a pathless land and knows no North. And at the same time the source of accumulation ceased. That I was able to still accumulate is tribute to an ageing bull run that seems to have finally reached senescence. I am not complaining, as someone who now has too much asset allocation to cash 😉 I am disappointed in RBS’s definition of cataclysmic year. WTF is the use of a fall of 20%? 50% is what I want 🙂 OTOH this fellow has he S&P at 800, 1200 will do me.

    For three years the answer on how much can I spend always came back ‘as little as possible’. I struggled initially because I couldn’t serve two masters, and eventually accepted the slow fall in working capital.

    Decline and fall

    The turning point

    Some of that struggle was simply not acknowledging that I had passed the accumulation phase, had reached the apogee of my earning power and accumulated wealth. It felt wrong because for thirty years previously it would have been wrong. The switch to living off capital may be doubly hard for people in the PF community who have focused on accumulation for many years. I am lucky and perhaps privileged – my main pension is expressed in terms of income not capital and I am burning up a Lamborghini’s worth of DC savings ahead of it to avoid the penalty of drawing it early.

    Everybody else’s New Year’s resolutions are how to save more or earn more. Mine are about learning to spend more 😉

    Over at Quietly Saving Weenie is sensibly looking to push her savings rate up. FFB40 has set himself a plethora of goals broadly aiming to earn 100k this year and presumably save a fair chunk of it. ERG is doing forex trading and matched betting.

    I now have the answer to Micawber. For the next five years I can spend up to £14k a year and not fall behind 1, which roughly matches Mr Z’s Goldilocks spender‘s disposable income. If I drew an income from the ISA I could push that to 18k. That’s the equivalent to earning 20k gross p.a. which is apparently the white collar minimum in London according to FvL. God knows how people do it – I left London 28 years ago earning more than that in real terms because I was pissed off with being skint all the time and living in shared accommodation. I must have been a terrible spendthrift, because nothing indicates to me that London living has got cheaper in real terms over those three decades. But I obeyed Micawber’s rule, so while none of it stuck to the sides I was debt-free.

    I have not been spending anything like 18k p.a. across the last few years. I don’t aim to take it with me into a next life, so I need to become a curious combination of Mr Zombie’s Jones’ and frugalistas. I need to keep his chart on the level, not go for the networth increase and accumulation that has been the watchword until now, otherwise I will be rich in the graveyard but poor in life. That is a big change in perspective.

    We went to Orford to celebrate the milestone where Mrs Ermine bought me lunch at the Pump St Bakery  and I finally managed to crack open the wallet and blow £20 on some fine products from Pinney’s smokehouse, after observing this fine piece of cold war brutalism across the river in the January breeze.

    Orfordness radio station, erstwhile site of the failed Cobra Mist Cold War over the horizon radar

    Orfordness radio station, mothballed in 2012, erstwhile site of the failed Cobra Mist Cold War over the horizon radar.

    The village seemed totally quiet, I guess this second weekend of the new year isn’t a time most people are on the razz. Unlike Steve Webb’s exhortation, I’m not going to go mad, but it is a significant change to my situation. I need to reflect upon the upside of spending, without being suckered into the stupid consumerism that promises but doesn’t deliver. I spent so much effort over the years to shoot needless spending, and I find I don’t know what to do here.

    Then last night we went out to the Fox at Newbourne to celebrate some more, and in returning we passed the Firm and I recalled the first time I had come there twenty-seven years ago, also in the night, and it felt as if the circle had turned now fully, when I change from being a retiree to being a pensioner 😉 The pub has positive memories from the Firm – many project topping out celebrations as well as a fair few summer lunchtimes dreaming up project ideas or setting the world to rights in the distant early years before the dotcom bust. It was a different world of work then, much more creative and less micromanaged routine paint by numbers…

    I froze all my SIPP savings in cash as of March 2012 because I believed I was leaving then and would have needed to liquidate that AVC fund as a pension commencement lump sum. It happened to be a local high for  the FTSE100 around the 5900 mark. I occasionally cursed myself in the intervening period for not leaving it invested, but I lived by the old rule of thumb – don’t have capital you expect to call on in less than five years in the markets. If the period is longer it’s worth taking the volatility of the markets because inflation will also be eating at the value. And as it turned out the FTSE100 is within spitting distance of March 2012. Had I kept it in the 50:50 FTSE/global fund I would be notably better off now. But what the hell. At the moment the stock market can’t hurt 2 my SIPP or main pension, and I’m okay with giving up the upside. I will take market risk all in the ISA and soem unwrapped equity holdings.

    I am now an oddity in the PF universe

    because I have crossed to the other side of the accumulation/decumulation divide. Most writers are in the accumulation phase. Indeed the only other exception I can think in the PF blogs I read is Jim. As such my aims and risk profile have changed in a big way. There are many standard FI/RE things on my old map that I will not need to do –

    no need for pension saving (beyond the £3600 to get £720 p.a free money for a few years). Having earnings has buggered this tax opportunity up somewhat anyway.

    While on zero income I carried an emergency fund of several tens of thousands in cash across the three years, because I needed to be my own lender of last resort in an emergency. Nobody lends money to someone without an income 3, but I have an income now. I was lucky – no emergency happened. Some of this erstwhile cash reserve needs to get invested and start working for me now that I have an income and could borrow against the future income stream again, in the same rationale as Jacob ERE. Of course I will still need an emergency fund of sorts, but much less. I will retain my NS&I ILSCs and shift the rest into a new S&S ISA. I don’t need the three-years expenses cash buffer to smooth investment income, because I won’t be living off investment income.

    I am nominally working in this tax year, it will be my 35th and final year of National Insurance to pay. I will electively pay that NI, to become fully paid up.  I asked for a State Pension forecast which is about £7100 p.a. It’s not quite clear to me where I got this good fortune, as I have been contracted out for 20 years, and the last time I asked for a statement in 2009 the amount was £5700 p.a. I am not sure I can rely on the existence of a State pension – it’s still another 12 years before I’d get it which is 12 years for some government to decide to means test it. If I were to get that then I personally would have an income of the typical UK household. That is more than enough for me.

    I have an ISA originally designed to compensate for the actuarial reduction to my pension from drawing it early, which is no longer required because I won’t draw early. A source of tax-free income is always nice, and I will continue to build this up, though the market crash will no doubt make this smaller in the near future. In the long run (10 to 20 years) it will compensate for the erosion of my pension relative to workers due to earnings inflation outstripping RPI, and gives me some buffer against modest strings of bad times. If peak oil happens, zombie apocalypse or other shocks to the system I am still stuffed of course. Otherwise I am like this Telegraph pensioner, I will never be rich, but I will never be poor. Thirty years is a long time – for perspective thirty years ago I was still working in London… Things will change.

    That ISA may begin to compound. I am not a great believer in compound interest in helping you get to financial independence. But once you reach FI, and in particular if you don’t need the income from a lump of capital, it starts to snowball. In its short life of about six years of contributions and no withdrawals, the accumulated dividend income has put in about a year’s worth of ISA allowance into the pot on top of my contributions, which is being reinvested. The ISA needs splitting and part transferring to other platforms, because it is now way over the FSCS guarantee 4.

    I don’t really know where I’m going with the ISA because the original aims has been overtaken by events and Osborne’s changes. But I will have a lot of cash looking for a home from that large emergency fund and the PCLS, and Fortune seems to be smiling on me by beating up the stock market for me in advance for 2016. I bought a lot of gold ETFs in stages in 2015 to try and get more defensive in the face of a frothy market, and up to RIT’s 5% asset allocation. This is the first and only of my 2015 purchases to turn a profit now. The less said about HRUB, oil, mining and emerging markets the better for now, though I confess to a temptation to double down on some of those. Every dog has its day 😉 OTOH if the market continues to take even more stick then that is a time to build the HYP too – you can’t build a HYP cheaply  in the heady heft of a bull market.

    What can go wrong

    There is always lots that can go wrong. Let’s face it, in the 1960s of my early life we had Kennedy and Khrushchev glowering across the Cuban Missile crisis and B52 bombers on 24/7 watch over the North Pole with nuclear bombs. Somehow, despite frequent accidents we survived. The 1970s had the oil crises and the Winter of Discontent as the unions manipulated the government like puppets on a string, and 26% annual inflation in 1979. The 1980s had two harsh recessions, a lot more Cold War sabre rattling, Thatcher’s goons in running battles with Arthur Scargill’s goons. The 1990s had the implosion of Russia and all the hazards that entailed, the slaughtering of UK housing as a can’t fail asset class and the Asian financial crisis which was the birth pangs of capitalism trying to adapt to a tripling of the world workforce as the Iron Curtain and other barriers to trade began to fall. The 2000s had the dotcom bust and some of that increasing world workforce weakening the power of labour versus capital in the West; we are still trying to work out where all the rubble is ongoing to fall. The 2010s seem to be about more geopolitical risk, and ugly confluence of mediaeval religious tenets with 21st century technology, along with a lot of chickens freed by the neocons coming home to roost. On the subject of religion, in one generation the West lost all the moral and intellectual principles that were lauded by Niall Ferguson for making it such an effective economic machine with its shared values from the Enlightenment – we are all consumers now. Those shared values had their problems too – they ossified the class system and justified a lot of actions we would now disapprove of, but they were a common myth of perhaps a different nature from our current one of continuous growth. We seem to be still working on a replacement story for how/why to be better at being human, which is probably not purely a materialistic enterprise. That’s a drag given our economic creed knows the price of everything and the value of nothing.

    So far we have survived. There will be change across the next thirty years, some of it welcome, some of it unwelcome. I think I have made a reasonable fist of hedging what I can. I do not have enough to hedge wars of all against all, zombie apocalypse or even the sort of aggravation Moneyweek has been trying to scare its readers shitless about to sell more magazines.

    There are far too many people in the world for us all to live the American Dream of the 1950s never mind like the Wolf of Wall Street, although I hazard that we could all live like kings of old materially.  But I have come to see the wisdom of accepting the uncertainty without dwelling on it – coffee for the things I can do something about, red wine for those that I can’t change. The bearish argument always sounds smarter. But as a way of living life to the full it sucks – it raises your blood pressure and makes you miserable. So I am going to park that. Yes, I may one day regret not having a bug out bag and guns and ammo. But hopefully I will also have missed living ten or twenty years thinking about the bug out bag and the ammo. Humans need to be careful gazing long into the abyss, because else the bastard will blink and look back into you.

    What I know will go wrong

    There are some things we do know. Brexit or not will scare the horses, and it’s an intricate mess from which it’s hard to see which way is up. Taxes will rise, because they have to, we’ve lived beyond our means for a long time and are still at it. For all the bellyaching income taxes are in fact at low levels in living history, which is part of the problem. The young Ermine at the start of his career paid a much bigger proportion of his pay in tax and national insurance 5 than the old Ermine in the last three years of his career. The solution to paying high taxes is be no tall poppy – live a reasonably economical life, because then you have the push-back of lots of people on your side. If you are going to live more than  a third up Fire V London’s scale you are going to pay a shitload of tax until you get into the upper reaches (whereupon you will pay clever people to avoid tax for you in creative and highly inventive ways). Likewise if you want to live in London and decide your children are special flowers who need private education, then this decision creates a fierce money burning furnace that you need to continually feed. You will find it difficult to minimise taxation and need to focus on increasing income to feed the fire. You takes your lifestyle choices and you pays your money.

    There may, however, be trouble in raising taxation. I can imagine the integration of NI and income tax, which would hit me with a tax hike on pension income. Reducing tax exemptions are another way. Pundits are screaming blue murder about tax relief above the basic rate on pension contributions. In the UK 15% of people pay over half the income tax take. Monevator is talking about going Galt with dark mutterings about  “supporting other people’s lifestyle choices, rather than the essentials of State and a worthwhile safety net”. This was a large part of my hitting pension savings hard too.

    On the other hand I find it hard to view people spending less time at the office as a bad thing. They really should spend more time with their children and see them grow up – my working class parents saw more of me growing up in the employment environment of 40 years ago than typical middle class parents both working to pay for their consumption do now. The latter of course have far more and better Stuff and numerous fast and furious fancy foreign holidays, but time isn’t a renewable resource. The days are long but the years are short. If the robots really are going to come for our jobs then more free time is an upside, not something going wrong 😉 The trouble is a lot of people won’t have that choice, the power structure is such that extra productivity will likely increase the return on capital rather than increasing overall human happiness. The solutions Asimov’s Solarians took to arranging their society so the humans had a high standard of living in a work-free world always cause palpitations in right-thinking people, so I don’t know how that will pan out.

    ambitions in things other than finance too

    There seems to be a big thing about goals and metrics in the PF community. Personally I think goals and metrics suck the joy out of life and work, so I don’t do that. But a total amorphous mess isn’t effective either, so I have some ambitions. January is a terrible time of year to try and start anything – we really should be starting our year somewhere between February and May so you get a bit of a leg-up in cheer and hope from Nature. Although if we are all going to sit behind screens in a virtual world like those Solarians perhaps that will become irrelevant in the years to come. We will become Spacers all watched over by machines of loving grace with “All other contact accomplished by sophisticated telepresence viewing systems”  – with the smartphone as the fore-runner of the technology.

    So rather than goals I am going to go for ambitions, and I will change my mind frequently and give some of them up ere the month is out in the time-honoured tradition 🙂

    No thanks. Unlike the rest of the country, I am lighter and richer in January ;)

    No thanks. Unlike the rest of the country, I am lighter and richer in January 2016  than in December 2015 😉

    I don’t need tosh like this – the joy of owning my own time is that life is more chilled, and as a result I eat better and less. It also helps that a lot of what I eat comes from the ground, not from the industrial food system, for that I have Mrs Ermine and the Oak Tree farm to thank.

    Chris with the squash harvest. There are no Clubcard points on this lot...

    Chris with the squash harvest. There are no Clubcard points on this lot…

    Unlike it appears the rest of the UK, I managed to lose weight in December, and have been for some time since retiring. It is within the realms of possibility that I may one day see the same weight as when I was 21, before I draw my main pension. This is an aspect of health that I persistently and continuously screwed up while working – retire and I discover the forces of natural equilibrium slowly shift to the right target. I have still never seen the inside of a stinky gym and I’m not going to. But I have the time to walk and bike to places within the town, I don’t usually drive unless I am going to leave the city limits or shift heavy stuff. It should be noted that average people like me 6 are way, way too lazy to lose weight through exercise. You can’t outrun a bad diet.

    I want to do some hillwalking, to see prehistoric stones, to travel more slowly, to cycle in interesting places 7 in the UK.

    Living frugally simplifies some decisions. I want to still live well and intentionally even if this simplification is lifted.

    I’m not drinking homebrew again.

    I want to learn morse code.

    One thing I want to do in 2016 is to bust some of the media junk out of my life and to read less crap. Before the millennium people wrote books because they had a story to tell, and publishers were valuable gatekeepers because they had to take a financial risk to publish. Increasingly it seems people write ebooks because it’s seen as a way of making money, rather than telling a story, they trade websites because they want to buy the clicks and SEO without adding value. Movie companies trot out sequels and prequels because they’re safe. All in all the media and information space is trending towards arbitrage and extractive rentierism, and the quality of material online and the signal to noise ratio of search results is falling. I spent perhaps too much of the last three years, looking at the world through screens. It was cheap and I learned a lot, but I noticed an increase in clickbait and content farming and a material decline in quality.

    I want to originate, and to co-operate with creative people. I want to tell stories because I think they are worth telling, and to create and shape things because I think they are interesting. And I am privileged enough to be rich enough that I don’t need to try and make a buck, I want to pursue the intellectual freedom to craft and leave my work to speak for itself.

    man-with-savingsI want to leave the world of grubbing for money behind, it is coarsening a lot of discourse as it becomes always-on. In the gig economy work spreads like velveeta into all waking hours. I occasionally talk to people and see the hungriness in their eyes as they are trying to compute whether I am a networking opportunity. I can save them the trouble. I am an introvert, a retiree and of independent means. My networking value to the gig economy is bugger all, I’m not swimming in the same ocean.

    I will engage if something interests me, but people find it hard to understand that it is difficult to incentivize an Ermine with money, despite it being the universal currency of making people do what you want. There are surprisingly few people of independent means in the modern world, despite that fact that Britain is a far richer country than we used to be. The ever-hungry money furnace of consumerism is making most of us poorer faster than human ingenuity and the accumulated capital and knowledge of generations is making us richer.

    I want to preserve the sweetness of this freedom from the rat race, expressed well in this 1960s ad. For thirty years I was motivated by earning more, before I was challenged by events to ask myself why. The learning and the wisdom gained in the crucible was hard won, to change the ‘just because it’s what everybody else does’ to ‘I need enough, and enough more than enough to match my risk perception and view of the world, and then stop and get off this hamster wheel’. Work is overrated – even a frugal Ermine could live like a king of old.

    On the flipside, I don’t do some of the things retirees do to fill their days. I don’t volunteer, because if you want a commitment from me you have to pay, to express some appreciation for the commitment. Otherwise you may get assistance from me, but on my own terms and with no strings. That’s just me, it’s not a criticism of other people living by different values.

    I can pursue some interests I mothballed because they were expensive, travel, birdwatching, recording and photography 8. I may buy the oscilloscope I considered a while ago.  In general it’s yes to experiences and tools and to things I use to make and do things with other people, no to the beach and no to ‘this XYZ (mobile phone, gizmo, whatever) will transform your life’ – it never does.

    I want focus. I want to do one thing at a time and pursue flow. I want to listen to music again as I did years ago – in the dark and on my hifi once it’s been repaired. I want to get off the modern trend towards doing three-and-a-half things badly rather than one thing well at any given time. I have trialled some of this with books – when I read books I read exclusively. And if the book bores me enough that I feel I want to do something else then after about five minutes I stop reading and decide this is not for me. I don’t listen to music or audiobooks when I am on my bike. I listen to the birds and try and be aware of the traffic around me, not immerse myself in a e-bubble. Consumerism being what it is, it is trying to turn this into the modern self-help religion of mindfulness. Two generations ago, parents and schoolteachers knew all about mindfulness with the two simple words – “pay attention” 🙂

    I want to keep regular use of smartphones out of my life. They have their uses, but they should not become a vade mecum, despite everybody else feeling that way. If Steve Hilton can run a tech startup without a phone a retired Ermine can resist becoming a gormless zombie illuminated by the blue glow of the latest iPhandroid whatever. It is very very hard to originate anything on a smartphone, but it is a fabulous tool for passive consumption and tethering to the Hive Mind. If I want to take pictures I’ll use a camera. If I am recording I will use an audio recorder. I don’t want to tote a device that does sixty-seven things all at half cock. Jennifer Lawrence was absolutely right. You can’t live your whole life behind your phone, bro

    That’ll do for ambitions for now. Across the lean years I learned how to bridge the gap with not enough, and now I want to learn to live well with enough, and live intentionally, and with grace and kindness. I am a different me from the mindless consumer, and I will handle the change slowly and carefully, because the world has become even more talented at invoking mindless consumerism, and presumably some of my inherent flaws are still latent. The challenge now is to spend wisely under my control, rather than being constrained by resources.

    So yes, I want to spend more this year than last. But I want to claim the gift of the seven lean years, and spend it to enhance the quality of my life and that of those I care about, rather than to fill my house with consumer trash and my time with empty manufactured experiences. And I’d like to learn to do it with gratitude. Because for all the challenges and the doomsday razamatazz on the news, I live in a special time and place, where humanity has solved a lot of tough problems and it’s working on more. I want to tip my hat to the giants on whose shoulders we all stand, and not waste that gift in the time I have left.

    Notes:

    1. this is conveniently and by design roughly the maximum rate I can draw keeping below the tax threshold, plus 25% from the PCLS
    2. obviously an unending economic crash would take me out like everyone else
    3. this is not strictly true, there are all sorts of bottom-feeding lowlife scum that lend money to people who don’t have incomes. I’m just not prepared to swim in that foetid pool
    4. note this is £50,000 on S&S ISAs not the higher £75,000 level for cash deposits. This is protection against your platform going bust, not against you making bad investment decisions
    5. the single person’s personal allowance was appallingly low in 1982, less than a quarter of a modest pay level, then tax on the rest at 30% plus NI at 9% means the youthful Ermine paying 39% was closer to a modern HRT taxpayer at 42% marginal than a BRT taxpayer at  32%, and paid that high tax on much more of his modest salary than the old Ermine, although that was distorted by pension contributions of the latter
    6. I deeply detest all sports and have done ever since school, and yet it is quite remarkable that a sport-loathing Ermine is in fact a lot less inactive than much of the adult population of the UK. Just nowhere near active enough to shift the needle on the dial regarding weight
    7. taking the bike most of the way there in my camper van 😉
    8. I actually turned a profit on the latter two over the last three years. But I was using fossil wealth in terms of gear bought while working, and was limited in opportunity by limitations in finance
     
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