26 Oct 2017, 8:13pm
rant
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  • Why does getting super-rich mean a taste bypass?

    Dear readers, feast your eyes on this, which is a new development in Nine Elms in London called Versace Tower. Now the first thing you need to know is that Nine Elms is south of the river, and anywhere sarf of the river is infra dig for the cognoscenti, it’s just not the place to be seen.

    inside London’s Versace Tower. You need to view this full size to take in the true horror… I confess at first I thought the things on the side were urinals, but did wonder why you’d put a dining table in the bog.

    The only way you can make it worse is to go south-east, which is where an Ermine grew up, basically in the arse end of the city. There’s a historical reason for that, which is that the prevailing winds in Britain come from the south-west, so when people used to throw their crap into the river the prevailing winds carried the stink east and north. London had a problem because the Romans built Londinium north of the river, so all the useful stuff ended up on the north side of the river and transport links south were historically poor. A quick glance a a Tube map of the bits that matter shows you this at a glance. 1

    Not much south of the river, and the east side beyond Bank is relatively new build too. And yes I know this is symbolic rather than cartographic, but the symbolism carries the story of what matters too

    WTF is wrong with the über rich? Ever since I read that Saddam Hussein had gilded taps in his toilet it struck me that a problem with today’s rich is that all too often they have absolutely no taste.

    the only thing not to expect, as Peter York noted in his 2005 book Dictators’ Homes, is good taste.

    Dictator’s Homes

    That’s kinda understandable in a dictator, to the extent that there’s even a book on it, Dictator’s Homes.

     

    Saddams gilded bog

     

    Random item of Gaddafi’s palace

    The landed gentry of Britain developed taste and a sense of proportion, which is why once the great unwashed managed to deprive them of some of their unearned wealth a lot of it was deemed a national treasure, and the National Trust has been able to charge us and foreign tourists to be able to gawp at some of this.

    concentrating inherited wealth led us to stately homes and a tiny part of the population owning nearly everything. But at least they didn’t gold plate everything.

    I start to see some of the reason why the aristocracy of old looked down their noses at the nouveaux riche, the problem with the hyper rich is that they are such tasteless bastards. A taste bypass is perfectly acceptable in a rapper but the rest of us have to live in the same world as the hyper-rich, and it’s time something stopped them despoiling large parts of London with their ghastly mega-basements and uninhabited gilded towers. The problem seems to apply across the board – paint this boat battleship grey and it still lacks the aesthetic appeal of a Navy destroyer, where at least form follows function

    and yet apparently it is a design of Philippe Starck, he of the elegant lemon squeezer. He must’ve been having them on when he did this project.

    Now if taste were the only problem it wouldn’t be too bad, but all too often it goes along with bad character, as exemplified by the despots. When it comes to gold and interior design, less is definitely more. There’s another well-known example of this genre

    Chez Trump

    which begins as soon as you get into the elevator

    America take note. Gilding the living crap out of everything is a look that says something about the perpetrator, and that something isn’t very good, all the way from King Midas through Nicolae Ceaucescu, Gaddafi and Saddam Hussein 😉 Be afraid, very afraid.

    Notes:

    1. It took me longer to get 15 miles from my parents’ place to Cannon Street by train in the 1980s than it took me to get the 70 miles from Ipswich station to Liverpool Street station in the heart London’s financial district, which says something about how southeast London was disfavoured in terms of transport.
    20 Oct 2017, 11:02pm
    economy personal finance:
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  • Investing for Brexit

    The Ermine has two retirement resources. One is my DB pension, which is easily enough to live on at the moment – it is deferred for only a couple more years, because the Ermine is grizzled of fur and will reach normal retirement age for most of that pension accrual, some time after Brexit, sadly. But it’s denominated in pounds, and there’s an inflation cap on it. Neither of these had been a particular concern until June 2016.

    The other is my stock market holdings, which are in two ISAs for platform diversification. I hold equities and ETFs with TD Direct, which by a quirk of fate don’t incur platform fees because TD make its money on the buy and sell commission. The ermine is not a source of rich pickings here, as my aim is to never sell in the case of the HYP or a world index ETF. Sadly TD Direct have been bought by iii, and I fell out with them a while ago for stupidly hiking fees in an attempt to make us all churn our portfolios. That good fees fortune may not stand.

    I also hold funds with Charles Stanley, or rather a single fund, the excitingly named B2Q6HW6, which tracks the FTSE World (ex UK) Index. The original aim of this was to lean against the home bias of my HYP.

    Brexit changes the risk balance

    The classic view is a DB pension is steady as she goes, as close to gold as you can get, whereas equities are an exciting but unreliable floozy on the side. Brexit changes that because it is likely to hammer the value of the DB pension in real terms by devaluing the pound. It’s a massive risk to the UK. The rest of the world will probably tootle along just fine. Now it’s entirely possible that the Brexiteers are right and nothing of note will happen, or having flung off the yoke of the EU we will do well. Trouble is, I am very heavily exposed to the UK – the ISA is worth only about half the notional value of the DB pension, so even if it was all in foreign assets I’m more than half exposed to the UK. And what I’ve experienced so far of Brexit is inflation, and we ain’t even left yet. Now on a contrarian basis there’s an argument for buying the UK, but I felt a bit bad writing that last time, and @hosimpson and @Neverland  weren’t sold. No, I can’t really convince myself either. There might be a case to do that if I weren’t in the eye of the storm – a Frenchman could consider a small contrarian punt on the UK, but the trouble is if the  UK goes titsup so does my main pension. I don’t need any increase in UK exposure.

    There are some things I could do with the pension – I could draw it a couple of years early, shovel those years into my ISA. But then I get to pay tax on my SIPP that I haven’t cleared out yet. I could take a pension commencement lump sum, which commutes some of it to cash, and invest that, but the rate isn’t terrific.

    Doing nothing is iffy, I am sitting on half a house worth of cash much of it borrowed from my ISA and a Brexit steamroller coming to pummel the value of that into the ground.

    The Ermine takes a sneak peek behind enemy lines

    Most of what I hear of Brexit boosters comes from the Brextremist wing of the Tory party, for the simple reason that they seem to be doing most of the running these days. I obviously hear the endless barrage of whiny Remoaning, to which I am adding here, but it’s always good to hear other voices. I thought I’d look wider, and in amidst a lot of Googling, I came across these guysI confess that I quite like the cut of their jib on a lot of things, since it appears that I share some of the sovereignty issues 1, though I am nowhere near as worked up about them as they are, and weight the economic hit much greater which explains why I am still a pusillanimous Remoaner.  I also kinda like North’s descripton of blogging as a way to learn 😉

    In the search I came across all sorts fo flotsam and jetsam, I was tickled by this piece by an anti-fangirl of Jacob Rees-Mogg, as a cheerful interlude before we get on to what Peter North thinks Brexit will mean, as led on by the no deal wingnuts. In some ways people who voted Brexit seem almost more pissed off by the mess May and her crew is making than Remainers. At least the latter know they lost the fight.

    The phoenix must burn to emerge

    Bloody hell, and I thought it would be bad, and North is still a fan of the process.

    all JIT export manufacturing will fold inside a year… Across the board we will see prices rising… Britain is about to become a much more expensive pace to live. It will cause a spike in crime…  lot of engineering jobs to be axed since a lot of them are dependent on defence spending. It will kill off a number of parasitic resourcing firms and public sector suppliers. it will wipe out the cosseted lower middle class and remind them that they are just as dispensable as the rest of us. 

    major rationalisation of the NHS and what functions it will perform. It will be more of a skeleton service than ever… a lot of zombie projects will be culled and the things that survive on very slender justifications will fall. We can also expect banks to pull the plug in under-performing businesses. Unemployment will be back to where it was in the 80’s…. Anyone who considers themselves “Just about managing” right now will look upon this time as carefree prosperity. There are going to be a lot of very pissed off people.

    young people actually start doing surprising and reckless things again rather than […] tedious hipsters drinking energy drinks in pop-up cereal bar book shops or whatever it is they do these days. We’ll be back to the days when students had to be frugal and from their resourcefulness manage to produce interesting things and events.

    A few years in and we will then have started to rebuild EU relations […] we are looking at a ten year recession. Nothing ever experienced by those under 50.

    I really recommend you read the whole thing, I like his style, but I think he graduated at the Nietzschean school of dialectic, perhaps with coaching from Tim Gurner regarding da feckless yoof, who seem to have dropped some smashed avocado into his beer at some stage.

    That which does not kill us, makes us stronger.

    Mind you, I need to be careful what I say, I was/am part of the cosseted lower middle class and an engineer to boot, so already up against the wall in his world. He’s saying that the economic fallout from Brexit will blight a third of the amount of life I have left, statistically speaking. The bear case always sounds smarter. 2It’s poles apart from keep calm and carry on, and it’s a more dramatic story. But this narrative of woe comes from a fan of Brexit. Leave alliance has the most cogent takedown of the no-deal it’ll all be OK with WTO rules stance of the wingnuts – it’s not all about the tariffs guys. But in the end it’s for the Brexiteers to sort out what Brexit means, beyond the gnomic tautology of Brexit means Brexit.

    In the time we have left, is there a brace position?

    Foreign assets, basically. That FTSE World (ex UK) Index. There’s not enough time and I don’t have smarts enough to do anything better. It’s the world according to Lars  Kroijer but I get to atone for my seven years of nonchalance in not anticipating that my fellow countrymen would suddenly perform an act of economic hara-kiri with the ex-UK slant.

    I did have a look to see if I could buy that in a L&G ISA to get rid of Charles Stanley’s platform fee but sadly the L&G ISA index funds list doesn’t include the L&G fund I want. Go figure.

    It won’t be enough to compensate, but it may slow the fall a little bit. I will probably have to pay health insurance to make up for the fact the NHS will be eviscerated and life will be a bit more shit in many ways, but we will have taken back control. The same sort of control of the pilot taking a hammer to the autopilot and getting in a flat spin, but goddamn it, it’s his own flat spin till the crunch comes.

    OTOH it may well go all swimmingly, bluebirds will be tweeting and there will be the fine sound of leather against willow on a thousand village greens in the joyful sunlit summers that will come when the foul yoke of the EU superstate is thrown off.

    Fair enough – so what’s the worst that will happen out of my attempt to brace for Brexit if it all goes swimmingly? I will end up with a ISA that is more or less balanced according to the advice of Monevator’s tame ex-hedge fund manager, albeit oddly with the old HYP core. I guess there are worse things that could happen.

    Plus I increase my risk of devaluation due to a stock market crash, since valuations are high, but then I am almost guaranteed another value of cash sort of crash with Brexit, so I’m stuck between a rock and a hard place. A market crash usually comes good in a few years, whereas Brexit looks like it will hammer the pound for a decade – and that’s according to parts of the Brexit camp, they have so little faith in the competence of Her Majesty’s Government to know their arse from their elbow. I need to pay back my ISA from the cash from the house sale, pay this year’s 20k in and get me some Brexit ballsup insurance in the form of foreign assets while the pound is still worth more than a bucket of spit.

    There aren’t any good answers here. Unlike Rees-Mogg and his band of happy Brextremists I am not rich enough to come out of Brexit unscathed. I will go down with it, it’s a question of how much. I need some light relief. Let’s hear some Moggmentum from Madeleina Kay, JRM No 1 fan – not.

    Notes:

    1. I haven’t searched all the Leave Alliance, but I note they don’t really say much about immigration
    2. It seems to be a more general case in more than investing
    16 Oct 2017, 10:47pm
    personal finance rant:
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  • So what does all this Brexit baloney really mean then?

    Be careful what you wish for. You may just get it.

    King Midas, and the characters in The Monkey’s Paw

    Democracy is the theory that the common people know what they want, and deserve to get it good and hard.

    H.L.Mencken, 1915

    I have much sympathy with the view of Guy Verhofstedt that Brexit is the result of a catfight in the Conservative party that got out of hand. The more I see of how the Tory party prosecutes the aim of leaving the EU, the more Verhofstedt’s observation rings true.

    Very little of what I have seen since June 2016 has convinced me that I erred in voting remain. However, it is clear from the result of the referendum that there is considerable animus in the UK to what the EU does or how it does it. Added to that seems to be a terrific amount of projection of other issues the EU is not particularly responsible for, from the winds of globalisation and automation to the fact that Britain was a much more significant player on the world stage 40 or 50 years ago, and those of late middle age feel the ways of the world slipping away from them, and hearken to glories past.

    The tragedy of the referendum is that it was couched in the nihilistic terms of this or not-this. The problem is one of direction. A remain result would have been a clear result for a particular solution – the status quo in that case. A no result is a vote for ‘anywhere but here’. If I get in my car and set the sat-nav for London it can take me there. But I haven’t yet found the ‘get me the hell anywhere but here’ button.

    The Tory party is ripping itself apart like a bunch of rats in a sack, because it is not of one view on anywhere but here. We have the swivel-eyed nut jobs, step forward John Redwood, Bill Cash, Daniel Hannan 1, Jacob Rees-Mogg and others. Now to their credit they do deeply believe in Brexit, from a point of basically despising John Donne’s dictum that no man is an island – basically it’s everyone for themselves and let the devil take the hindmost. You can take that point of view as long as you are much richer than average, because you can buy your services and security on the open market. It’s Ayn Rand’s Objectivism, and Britain is Going Galt, 2 along with everyone in it.

    These Brextremists positively crave a no-deal Brexit, because any deal gives the EU a say in something, and that pisses them off. No price is too high to pay for purity, and anything that doesn’t give them what they want is always the other side’s fault. There is a mirror-image of this in the EU with the focus on the terms of process, but in the end the UK is the dumper rather than the dumpee, so we get the advantage of calling the what and when, but fewer rights in calling the how.

    We have the self-serving egotists – hello Boris Johnson, Gove et al, trimming their sails to whichever wind will blow them personal aggrandisement. The concept of living in a country run by BoJo is I suppose a little bit less bad than living in one run by Donald Trump, but the fundamental problem is the same – narcissist at the switch. BoJo is brighter than Trump, but has more of a tin ear, whereas I have a sneaking admiration for Trump’s ability to signal to his vote base via a barrage of what looks to others like random brain-farts.

    Cats will fight

    Then we have a whole bunch of non-extreme people that think a well-negotiated Brexit would work well for Britain, who seem to be AWOL on both sides, scared of the intensity of feeling of the nut-jobs. If we could kick out the swivel-eyed nut-jobs, then perhaps  the rest of Tory party could make a fist of it, but at the moment my greatest hope is that they rip themselves apart in the next few months. Cats will fight, and the buggers have been fighting about this for 40 years, it’s time that the fight goes all the way to death or dishonour for the sake of the rest of us. The endless yowling needs to stop, and Top Cat needs to stand on top of his dustbin lid.

    What does a successful Brexit look like?

    The trouble with the referendum is the nihilism of the No response leading to a lack of direction.

    It should have been more nuanced – for instance

    Should the UK remain a member of the EU or leave

    Remain a member of the EU

    Leave the EU

    If you voted Leave the EU, what are your primary concerns?

    The primacy of Parliament to determine life in Britain
    The effects of freedom of movement on the social fabric
    The effects of freedom of movement on wages
    The effects of freedom of movement on services

    It would have been useful to gauge which of the aspects of the EU concerned people the most.The obvious pushback is that it sets a leading question and favours the Leave side, and the government didn’t really want the No answer, but Cameron stupidly made it a manifesto promise hoping a Coalition would spike it.  Very little work was done on what a successful Brexit looked like. However, I saw the vile creepy grins 3 and the spring in the step of my fellow voters who were all of a certain age (I voted in the afternoon, like all retirees) and I was pretty sure they weren’t voting remain 😉

    Qualifying the issues people had would have informed what to prioritise afterwards. For instance, May and the wingnuts are making a hullabaloo about the ECJ, which probably doesn’t exercise people bothered about immigration, while the wingnuts frequently don’t even bother to mention immigration. I love Hannan’s disingenuity in asserting

    In the event, of course, things worked out differently. Britain appears to have grown more strongly in the six months following the vote than in the six months before it, and finished 2016 as the world’s most successful major economy. Unemployment, far from rising, has fallen consistently since the vote. British stocks are the best performing in Europe..

    Hannan, me old mucker, you may be a wingnut, but you’re not shit for brains. The result you wanted has devalued the pound by a lot. Obviously things measured in pounds will look bigger, in the same way as it takes you twice as many six-inch rulers to measure your carpet as 12-inch rulers.

    the pound has got about 10% smaller in IMF SDRs since the referendum

    A lot of those stock market gains you’re seeing aren’t real. The way unemployment is measured is deeply borked. I will be considered employed this year because I was working as self employed between April and May. We torture the genuinely unemployed with pettifogging rules and regulations; it’s not surprising that people claim to be employed but make no money and get tax credits. Look at the increasing number of rough sleepers and the use of food banks, which are also caused by the increasingly worthless pound among other things.

    rich Brexiters fuss about sovereignty, the poor about immigration

    It is of course possible as a remainer I have missed some aspect of the Leave debate, but of what I have heard, rich Brexiters tend to lie on the sovereignty axis, often not really giving a toss about freedom of movement, whereas poorer Brexiters have concerns about immigration, the effects of freedom of movement and the effect on their wages. The rich make sweeping assertions about Ricardian advantage and Schumpterian creative destruction, but when Tony Blair opened the UK to people from Eastern Europe the resulting influx had a negative impact on wages the lower end of the market. There is a very strong argument that the influx was good for the UK economy as a whole, which probably made people that took the sharp end of the stick feel even worse, seeing rich Londoners living it up on fine dining while they went to food banks.

    A ‘sleb leaving the Chiltern Firehouse. Observing the increase in London fine dining probably throws a hard light on the tribulations of the minimum wage slave on a zero hours contract

    If you’ve taken the shaft on minimum wage, voting Leave is not necessarily irrational even if it impoverishes the country.  It will be immigration that lights your fire. It is tragic that the effects of globalisation and automation are hurting these people too, and it is compounded by the wilful destruction of the welfare safety net in the last few years. The EU ended up shot for an awful lot of decisions that should have been laid at the door of UK politicians or the tides of capitalism and Schumpeterian destruction, as well as secular trends which aren’t going the way of unskilled labour. There’s some case for adapting the welfare system to ameliorate this shift from labour to capital, but it’s not really the theme of the current administration.

    Free movement of persons seems to be the main sticking point. Freedom of goods is OK – not that many people seem to have an an issue about driving German cars or eating Italian ham. Curiously enough nobody seems to have a beef with the free movement of capital, even if they don’t have any, though that also makes working a bit more crap than it used to as the capital chases the lowest labour costs offshore. Freedom to establish and provide services across the EU doesn’t exercise passions either – people rich and poor are happy to bank with Santander.

    The Ermine, sadly, is in the same camp as the swivel-eyed nut jobs in one aspect. I think the EEC jumped the shark with the treaty of Maastricht and the inception of the Euro. The change of name from European Economic Community to European Union showed the nature of the rot. I view the economic benefits of the EU as the reason for being in it, the political union as misbegotten, I’m not so keen on a United States of Europe, although it doesn’t exercise me with devastated dreams of Imperial derring-do of yesteryear, I’m not old enough to recall the pink of the British Empire maps.

    The British Empire in 1915, when the sun didn’t set on it.

    I don’t give a toss about freedom of movement, so that places me on the rich people side of the issues – with sovereignty. But I’m not rich enough to afford that sort of navel-gazing – in the end rubbing along with people in the world is about compromise. Britain secured specific opt-outs from the ever closer union and the Euro, which means what we had was better from a sovereignty point of view than what we would have if we left and rejoin once the old colonels dreaming of Empire days of glory die off and the interests of younger voters and the economic argument shifts the balance, as Verhofstadt carried on to say

    “I am also sure that, one day or another, there will be a young man or woman who will try again, who will lead Britain into the European family once again. A young generation that will see Brexit for what it really is – a catfight in the Conservative party that got out of hand, a loss of time, a waste of energy, stupidity.”

    […]

    Let’s not forget, Britain entered the union as the ‘sick man of Europe’ and thanks to the single market came out of the other side Europe made Britain also punch above its weight in terms of geopolitics, as in the heydays of the British empire.

    And we from our side must pay tribute to Britain’s immense contributions – a staunch, unmatched defender of free markets and civil liberties. Thank you for that. As a liberal, I tell you, I will miss that.”

    I am not rich enough to prize sovereignty above economics. I expect to be hit less than the poor by the economic fallout of Brexit, but I expect to be a lot poorer, and we will be the sick man of Europe once again. Looking at the swivel-eyed crew with their indifference to the economic costs, I am nowhere near as rich as they are, I would probably need to have much more than twice the wealth I have to share their insouciance about the economic fallout. I have no human capital left, so unlike the young who might be able to make it up by moving and working abroad – after all people worked in other European countries before 1973 – I will have to make my stand in the UK, stuck on a small island with these guys

    I will probably face the need for health insurance as the NHS is destroyed because we can’t afford it, I expect social unrest because we won’t be able to afford even the eroded welfare state that we have now. It’s not an attractive thought to grow old in. And in the event that Britain does leave and rejoin, we will have less sovereignty than we had before we left, though I can hope that the Euro explodes due to its internal inconsistencies before any of those events come to pass, which may trim some of the dream of ever closer union. Europe doesn’t even share a common language FFS, never mind a common culture, there is more history in any one European country than there is in the entire United States (born 1776) which is why the United States of America is a viable union of states in a way the United States of Europe isn’t.

    I do get some of this Brexit bollocks, from a sovereignty point of view, but nowhere near enough of it to think it’s a grand idea and vote for it. The EU had a lot wrong with it, but an awful lot more right, inherited from the old EEC, which was partly shaped by the UK, particularly the Single Market that the wingnuts are so keen to get away from. I find no conviction in the notion of a buccaneering Britain striking trade deals left, right and centre. The one with the United States will be ‘Here are our terms, you sign here for our GMO crops, chorinated chicken and antibiotic and hormone-pumped beef’. It’s been 60 years since Britain surrendered its Empire, the 1950s ain’t ever coming back, and Verhofstadt was wrong. Britain did perhaps punch above its weight in terms of geopolitics as part of the EEC, but not as it did  in the heydays of the British empire. Declinism is a disease of late middle age, and we are in peak Boomer time. I am one, but hey guys, we didn’t have to actually help the downswing come.

    Sic transit gloria mundi, guys. For a Matt-Ridley-esque counter strike, let’s hear it from the Spectator

    Brexit was a vote of confidence in our ability to shape our future as an independent democratic nation — a choice that few of our European neighbours feel they still have. We should not allow declinist panics to confuse the outcome.

    I think matey boy is barking, but I admire his chutzpah, and ability to sell a great story. I suspect it isn’t just me that doesn’t have any idea what this Brexit bollocks means. The only people that do have an idea are the wingnuts. It’s the usual problem

    The best lack all conviction, while the worst   
    Are full of passionate intensity.
    The wingnuts seem to be in the ascendant. Their no deal Brexit probably won’t be about immigration, bucanneering free market Britain will need all the lost cost hands it can get, and if that keeps the oiks in their place, well, all to the good if you’re Jacob Rees-Mogg and his ilk.

    The personal finance angle – what to do?

    Most of the last few years I have been allocating new spend towards foreign assets, with a bias ex-UK. As I accumulated stocks, I became lazier as I realised I wouldn’t have to eat an actuarial reduction on my pension, so I shifted towards the world according to Lars Kroijer. I didn’t sell my HYP but I bought a lot of a FTSE World ExUK index, to offset the fact my HYP was heavily UK biased. If you expect the UK to go titsup due to Brexit, it’s a good move.

    Against that one should set the fact that fund managers deeply hate the UK at the moment (H/T Monevator)

    When I see something stinking up the place like UK equities I want to go buy it – there’s now’t wrong with schizophrenic investment and so I am tempted to Buy Britain at the moment. Maybe a push on small/mid cap with about a quarter FTSE100, after all I should lean against my own prejudices every so often and I am too biased towards UK big fish. Brexit might turn out absolutely great, I find it hard to believe, but it’s possible. I may allocate half of this year’s £20k ISA allocation to Lars and half to the UK. If Brexit is a bastard the UK lot will go down the toilet, if it is a terrific success then it will save my ass for this year’s contributions. And vice versa for the L&G Lars option, which coincidentally is heavily weighted towards the US (because the US is the largest component of world equities by valuation) so I still remain contrarian. The US is also notably hated by the professional fund managers. I really can’t think why 😉

    I need to stoke my SIPP with £7200 this year and next. It will follow the rest of my small SIPP which is currently in a gold ETF, this is money I will call on in the next year or two and I don’t trust the £ across March 2019. I will be most  happy to eat the hit if Brexit is a roaring success and the pound soars 😉

     

     

     

    Notes:

    1. A measure of the hypocrisy of the scumbag Hannan and that of Nigel Farage is that they were MEPs sucking at the teat/gravy train of their supposed arch enemy FFS, Hannan since 1999
    2. Attempts to replicate Galt’s Gulch didn’t go very well “Ayn Rand’s Capitalist Paradise Is Now a Greedy Land-Grabbing Shitstorm” for the same reason communism didn’t work – human nature. Better luck with Seasteading, eh, chaps?
    3. I wish I had taken my camera with me, I saw an animation in people quite unlike any election before or since, and the turnout was huge
    5 Oct 2017, 5:30pm
    housing personal finance
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    21 comments

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  • Cheques checked the recipient’s name – BACS & CHAPS use untested numbers

    It’s a funny old world. Way back in 1979 when I got my first bank account I got issued with a thing called a cheque book. You could write out the recipient and how much you wanted to pay them and that was all you needed to do. In those days the cheques were open, so some thieving git could swipe it or steam open the letters, and pay the cheque to themselves or ask for it to be paid in cash over the counter. Fewer people had bank accounts then – when I started my first job I was paid by open cheque that I had to go to the bank over the road and exchange for cash.

    To forestall the hazard of dodgy geezers steaming the mail open they changed the system so you got to draw a couple of lines across the cheque and write A/C Payee, and they changed the law such that this happened

    Not if it is crossed ‘A/C Payee Only’ or ‘A/C Payee’. The Cheques Act 1992 and Section 81 of the Bills of Exchange Act 1882 give statutory power to the ‘A/C Payee’ and ‘A/C Payee Only’ crossing, when it is used. The legislation means that a cheque which bears the ‘A/C Payee’ or ‘A/C Payee Only’ crossing can only be paid into an account in the name of the receiver of the cheque exactly as it appears on the cheque.

    A cheque crossed A/C payee. Presumably the computer’s trained to ignore the * sign.

    Now in practice you could usually get away with paying in cheques in a different name if they were small, or if it was just the first name that was different. I presume if the payer kicked up a fuss then the bank would have clawed the money back, and if recipient had skipped to Rio then they’d have to refund the money. All in all a perfectly serviceable system, though because of all this possibility of fouling up you could only count on having the money after about five working days of paying the cheque in. When I bought my last house in the dog years of the 1990s, I had to make up the mahoosive amount of money I had lost on the previous one and pay even more because I was going upmarket from the two-up-two-down bachelor pad I had foolishly bought in 1989. To do that I went to my solicitor and paid them a cheque. There was never any issue of the secretary deciding she wanted a knees-up in Lanzarote with all her pals funded by running off with the cheque because she’d have had to change her name by deed poll to the solicitors and open a bank account in that name.

    Fast-forward 20 years and we don’t check the name any more

    Twenty years of technical progress passes, and I get to receive the proceeds of my old house. It all comes down to a six-digit number and an eight digit number. Sure, the payment system would like a name to put in the payee field, but it doesn’t matter if you put Mustela erminea, Beyonce or Beelzebub in there. The routeing system doesn’t give a damn. So criminals hack emails and change the details, because the humans look at the name and think it’s all okay but the transfer goes to a different account, which is then emptied and the bad guys scarper with the money. And you get to read newspaper articles like this, this and this

    Given all the usual delays involved in selling a house, there’s something to be said for the security of the good old crossed cheque. We were smart enough in the 1980s to realise that making the name matter was key to fixing this, but that wisdom has got lost in the search for expediency. Is it really too much to ask that 21st century money transfers meet the standards of the 20th century paper methods?

    This pathology also applies to the faster payments system – it doesn’t matter if you make the payment to your cat rather than the payee, it’s all about the six digit sort code and the eight digit account number. They could make these combinations testable by the same system used to catch mistyping of credit card numbers, but this isn’t done either. Update – this Ermine rant is not in fact correct – see David’s comment below. Despite this, some people still seem to be able to screw up in this way – presumably they err is more than one number.

    So you can easily mistype or transpose the numbers, sending your payment to the water company to Bill in Basildon, and you don’t get to know that until you start getting dunning letters from the water board. Bill doesn’t have to give you the money back – after all he’s done nothing wrong. He never claimed to be the water board, all he saw was a kind gift from an unknown benefactor come out of the blue, and he’s probably spent it now. As Faster Payments say on their website, it’s tough luck

    Faster Payments, once sent, cannot be cancelled.

    Whilst the vast majority of payments are made without issue, in rare cases problems can arise if the wrong information (e.g. sort code and account number), is entered – resulting in a payment being made to the wrong account.
    It’s vital to double check the sort code and account number before sending a payment: payments are processed only using these numbers and getting them wrong is like sending a letter with the wrong address and post code.

    The last statement is bullshit – if you send a letter using the wrong address and postcode there’s a much better chance of it getting to the right place because there’s some redundancy and there’s also local knowledge with the postman. And the name would help clarify matters, as it did with crossed cheques.

    Double checking doesn’t help with some conceptual errors, like transposing some digit pairs, for the same reason that it’s tough to proof-read your own writing. To err is human – we could do with helping people out a bit. This is why credit card numbers use the Luhn algorithm, to catch simple cock-ups like transposition and single digit errors.

    The six payment systems in the UK. More info from the BACS PDF

    How about BACS – this is the payments system 1 you use when you put money in, or take it out of NS&I. My solicitor was proposing to use that for the house money because it would save me the £30 transfer fee. I decided I was easy with paying £30 to know I’d got it on Friday afternoon rather than some unspecified time probably Wednesday the next week. If something goes wrong, time is absolutely of the essence to flag up that the crims have made off with the loot to at least try and freeze the receiving account before they empty it over the weekend 2.

    I was unable to determine if BACS checks the name, though the warnings from NS&I to get the right sort code and account number imply not. BACS gives you an automatic delay of three working days, as I found to my cost when I transferred money into NS&I using a debit card, and then got to ring them up to find out what black hole half a house worth of money had disappeared to. At least that made the three working delay between transferring out and receiving it a bit more understandable, though it still raised the blood pressure.

    We have implemented a system without number error checksums, casually tossed away the A/C payee name checking of the cheque era, and sped up the ability of the criminals to scarper with the money by an order of magnitude. This is not progress.

    Notes:

    1. BACS has a rather neat PDF describing the six inland money transfer systems in use in the UK
    2. This is why in an ideal world you should complete on any day other than Friday, particularly a Friday before a bank holiday weekend. Of course, everybody wants to move on Friday so they don’t have to take time off work, which suits the bad guys just fine
    2 Oct 2017, 5:07pm
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  • Toxic car finance could work out the best way to pay for a new car

    I pinched the headline straight from the Torygraph, and I have searched the page to see if it is an advertorial. 1. But no, this financial foolery is being prosyletised in the name of money/consumer affairs. The article goes into great length to find a financial edge case where you buy a brand new Mercedes E-Class saloon with an on-the-road value of £35,205 and if it all goes right then you pay £19,255 in depreciation if you pay cash and £18,404.24 using a PCP. Thus saving being ripped off less by a whopping £851 using PCP.

    If you need to borrow for a consumer good, you can’t afford it

    The rule was codifed by that Wilkins Micawber chap, and it’s good. It’s one of the deep tragedies about personal finance that if you are desperate enough to need to borrow the money, you usually can’t afford to buy what you want, with two exceptions, housing and education.

    How to decide if borrowing money to buy it is a good idea

    The most toxic thing about borrowing to buy a new car is that half the value of the car falls off it in three years, which is why buying new cars is a mug’s game. If you want to do that sort of conspicuous consumption of an expensive wasting asset you should be rich enough to pay cash, and face up to burning half of it in one go, rather than trying to stretch it out. If you need to ‘save’ £851 putzing about with PCP then you’re not rich enough to do it in the first place. As the lede says

    More and more drivers want to be driving the newest cars available

    Well, yeah, I’d like world peace and there to be half as many humans on it as there are now 2  so as we get to keep that peace, but what you wants is not what you gets, eh? They talk a good talk about PCP giving you a saving on £851, about 3% on the price. To be honest, if you are going to spunk 18 grand of capital depreciation to drive a car for three years, you’re not the type of person who is going to squeeze the lemon for that £851. If the PCP looks attractive to you it is telling you one thing only.

    You are not rich enough to piss away that much money on running a new car for three years.

    The reason you’re not rich enough is that Bad Shit can happen to you, you get to lose your job or get sick or any of the vicissitudes that can affect a fellow who spends more than you earn. All of a sudden some of the break clauses in the PCP contract come to bite you on the ass if you stop paying. Whereas if you really are rich enough to pay cash up front, paradoxically you can actually use the PCP to save yourself the 3%. If Bad Shit happens you just carry on paying the instalments from your vast wealth until the balloon payment is due and then you do whatever’s the best at the time. In that case knock yourself out and put the money to work.

    I understand the principle of what the Torygraph is saying, because I’ve done it. Many moons ago, in 1981, a young ermine bought a secondhand Audio Research preamplifier on an interest-free loan for half of his annual net salary, saved up over a while. In personal finance terms that was an extremely dumb thing to do, Mr Money Mustache would have reached back in time and punched me in the face, 3but I wanted it there and then, and there were fewer consumer gewgaws for youthful excess in those days than now. What made it less dumb was that I was rich enough to afford it, because I had saved up first. I paid the finance company on time each month until the principal was redeemed.

    A grizzled ermine sold that preamplifier on Ebay earlier this year for about half the nominal price, so it gave me good value for thirty-six years. So I do understand the principle – you can save money using finance, because I had the cash saved up when I bought it. I parked it with the Nationwide Building society and in those distant times you could earn interest on your saved money. It actually cost me less to take the interest free loan than if I’d bought it cash.

    Sad fact is, most people borrow money for consumer purchases because they haven’t got the money at the time of purchase. It is a rare consumer indeed who buys on credit to stooze the cash they saved up for the item beforehand. It was right up there in the credit card ads on the 1970s

    Access takes the waiting out of wanting

    If that’s you, you are about to borrow from your future self.

    To use PCP properly, have the cash to buy the car outright when you sign for the car loan

    And then you need to park that cash somewhere safe. Ideally earn interest on it 😉 Alternatively, you need to have at least the depreciation in cash, and have insurance against the sorts of events than would write the car off while you’re still potentially on the hook for the balloon payment, should the car get trashed. If you’re doing anything else, then you are driving more new car than you can afford. If you’re lucky, you’ll make it to the balloon payment without Bad Shit happening in your life. That’s the sting in the the tail. Driving more car than you can afford is a risk nobody needs to take. PCP conceals the downside in all the messy stuff in the small print that nobody thinks will happen to them.

    Micawber was right. Save up for you car first, even if you do use PCP 😉 In the edge case of people who are rich enough to be able to pay cash, toxic car finance is probably the best way to pay for a new car. For everybody else, PCP is just…toxic. Imagine listening to Britney on loop for three years 😉 That’s how toxic…

    Notes:

    1. If it were, it’s against Queensberry rules to take the piss, because the whole point of of an advert is to make you buy shit that you don’t need with money you don’t have to impress people you don’t like
    2. this was roughly the number of people on earth as when I was born
    3. MMM would tell me that had I invested the money at a 4.5% real terms ROI then as Monevator’s compound interest calculator tells me I would now be sitting on £25,000. I think the old Ermine would have socked him on the mush back because I had 36 years of enjoyment from that thing
     
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