13 Sep 2016, 9:24pm
economy reflections
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  • The Smartphone as a tool of oppression in the Gig Economy

    Smartphones connect us with the virtual world, but also bind us. 1

    A digital nomad in her natural environment (Bali I think). Smartphones work just fine for people like these

    A digital nomad in her natural environment (Bali I think). Smartphones work just fine for people like these, they never had it so good

    The smartphone epitomises what has changed about the world of work, and a whole bunch of articles this last week have reminded me that it has changed, in my view adversely for many workers. I am beginning to understand why so many people are pissed off at the lower end of the employment spectrum. At the middle and top end, they are having a blast – the smartphone is emancipation of the four hour work week, the contractor, the digital nomad and all that. All these dudes are whooping it up and going “wassup, you never had it so good?”. Tim Ferris’s The 4 Hour Work Week is the bible for this crowd. . Back in the real world, it’s the lumpenproletariat taking the shaft, along with a lot of disrespect through what has become a tool of oppression.

    How low end work used to be in the 1960s to 1980s

    The world of work in the analogue world had a lot of hazard and unpleasantness in it, there was overt racism and discrimination is many areas, and humans did a lot of physical work which was terrible for their health. Some of the improvements in longevity and the narrowing of the expected lifespan between men and women of recent years has been due to running some of these jobs out of town. My Dad worked with glass bottling machinery, he was already losing his hearing by my age and was stone deaf by the time he died. There’s a whole gratuitous rant in this post about for God’s sake don’t trash your hearing with loud sounds and use hearing protection with power tools when you’re over 40 inspired by his experience. Blue collar work was a bastard and took it out of you.

    Arthur Scargil, 19 years a miner and rabble rouser deploying flying pickets against Edward heath. Met his match with Thatcher in 1984

    Arthur Scargill, 19 years a miner and then rabble rouser successfully deploying thugs otherwise known as flying pickets to switch off the lights under Edward Heath’s 1970s administration. Met his match with Thatcher in 1984.

    As I child I used to listen to the revolting turkey Arthur Scargill harp on on the radio about how mining was a tough and dangerous job demands oodles of pay, and yet resisting like hell when Thatcher offered 2 to stop future generations going down t’pit by switching power generation away from coal to natural gas. WTF was going on there? Scargill called a strike to guarantee that uneconomic pits should not be closed, presumably a social service to keep dangerous employment open despite it not making money. Coal mining was typical of a lot of blue collar work in the past – dirty, dangerous but compared to low-end unskilled work now, paid better to compensate for that. This Is Money have an interesting contrast of working conditions between 1952 and 2012. In pretty much all aspects conditions in 1952 were worse. But there was a place in the economy for unskilled labour, and people knew where they stood. On the downside, opportunities were dreadfully limited for women and for the brighter poor.

    Many blue collar jobs had a decent level of community spirit among the workforce, which manifested in the strong union presence. These jobs were stable across years, even a working lifetime, largely because work practices didn’t change much. In some manual jobs skill and experience built up over decades. So although there was a lot wrong with many jobs, there were some things right. In particular the sense of community and the dignity in work. Some employers provided pensions which were defined – my Dad was a fitter but benefited from one of these.

    A key part of  most jobs in those days was that they were clearly defined into working time and non-working time. When the factory whistle blew and the workforce downed tools they were off the clock and work was out of mind. This was because communications were limited – phones were connected to places not people. I personally feel the smearing of work into non-work has been one of the most pernicious things to have changed over the last 20 years. As John Philpott of the Chartered Institute of Personnel and Development said in 2012

    The world of work has fundamentally changed, but it is not a change which is making many of us happy, according to the Chartered Institute of Personnel and Development.

    He blamed the invention of new technology, from laptops to the BlackBerry 3  and the iPhone, which is ‘imposing entirely new pressures on staff.’

    While it has liberated people to work from home or from outside the office, it has resulted in ‘information overload, created pressure for an instant response, enabled more sophisticated monitoring and surveillance of employees, and blurred the boundaries between work and non-work time.’

    It is possible that I have a limiting belief because my idea of the place of work and leisure was formed in the previous generation – Stephanie Buck (H/T Monevator) puts it elegantly:

    Leisure came to define a person’s identity during this time, in many cases superseding career identity. Having a hobby was not only accessible, it was a status symbol. It meant one had time to relax, a privilege previously enjoyed only by the very wealthy.

    This is probably one of the reasons why I just don’t miss working at all. I have been able to surrender a career identity because it had less meaning to me. That is the upside of my antediluvian understanding of work. I was also fortunate enough to have spent most of the time working in a reasonably congenial environment with enough challenge to be interesting. I don’t recognise most of my job in Buck’s later observation

    Instead of viewing work as the inevitable grind and hobbies as core to one’s identity, as in the post-war era, today’s professionals strive to equate career with leisure.

    I started work in 1982, in the transition period between that world and the one we have now, and benefited initially from the improved flexibility but the old community structures of the workplace.

    That was then – better communications is changing the workplace massively

    Communications have improved over the last 20 years – the advent of the Internet and WWW came in tandem with mobile communications where you now call a person rather than a place you expect them to be, and of course you have more modes of communication.

    Strange things have happened as a result. In the early days we expected better comms would mean people to be able to do remote working from anywhere, even on the beach. See digital nomad, above – just imagine all of us doing that. At school I was really told that the future would have lots for leisure time and  we’d be typically working one day a week. How did that turn out for y’all?

    In fact what has happened is that high-paying jobs have concentrated in London 4 which sucks in people and money, creating a lot of misery in the middle range of ability because they are all in competition with each other for finite geographical space and skyrocketing housing costs. It really wasn’t meant to turn out like this, but it seems the network effect, combined with the increasing instability of jobs means workers need to concentrate geographically, both to interact more with each other but also to have a better chance of replacing one job with another when they get the chop without having to move or take huge commutes.

    We didn’t realise it at the time, but the limitations on communications and physical transport of goods and services was a great equaliser. As a thought experiment, say we still made chairs by hand but otherwise had all the information comms and containerisation and Deliveroos we have now. When a horse limited a day’s range to 20 miles, every market town could support, say, a skilled carpenter. In a globalised and high transport world, you’d only need as many carpenters as you need to make the amount of wooden stuff needed. Put them all in one place, call it Heartwood Valley and transport the goods for next to nothing. The quality of the carpentry will probably be a little be higher, and the price probably cheaper, but there will be far fewer carpenters employed worldwide. House prices in Heartwood Valley will probably rise, both because the star carpenters will be making more money but they all have to live where the jobs are.

    So now take finance, management consultants, IT and stick ’em all in London. No wonder grunts can’t afford to live there. This is not a new phenomenon, though the intensity of the effect is increasing. Thirty years ago an Ermine in a modest but above-average paying technical job was driven out of London. Where I was more fortunate than Millennials was that the concentration of jobs in London and hollowing out of the rest of the country hadn’t happened, and that jobs were more stable so the risk of ending up in a one-hoss town was less strategically dangerous than it would be now.

    Zero-hours contracts aren’t new

    I worked on what would now be called a zero-hours contract, in 1979/80-ish ISTR. As a kitchen porter – the idea was you go to an agency early in the morning and they would allocate work on a first come first serve basis. There was no guarantee of any work at all, but you generally got to know the system. No phones or anything. When I inflation adjust my earnings to now I was working for a lot less than the minimum wage, too. That sort of work allocation existed elsewhere too,  dockers used to line up in the morning on the same sort of basis to get casual work unloading ships.

    Smartphones let employers dynamically allocate work to people via apps, that has the opportunity to turn zero hours contracts into oppression. Casual work is casual because anybody can do it – if you can drive you can drive for Uber, for Deliveroo, and pretty much anyone can flip burgers for McDonald’s. The best way to improve your earning power is to get out of this commodity competition for replaceable skills, because if you have undifferentiated skills then competition is always going to drive your pay down to the minimum wage or lower.

    The lower than minimum wage is achieved by zero hours contracts – there are fixed costs associated with being available and ready for work – commuting to the workplace, having a car in the case of Uber, not being able to work for someone else or take your children to school. So you are always are risk of taking a hit if you can’t get your hours up enough. Now in the past the agency sometimes did take a dislike to some people and would always call out others for work before them, but at least that discrimination was visible, and done in person. When an app doles out the work you have no protection against that sort of thing and may even be unaware – as the FT’s “When your boss in an algorithm” describes.

    The problem isn’t so much zero hours contracts as such, or even app scheduling – after all every taxi company used to have dispatchers who would match the drivers to incoming jobs over the radio. The problem is zero hours contracts combined with unskilled work, where the work allocators can simply pitch the workers against each other, micromanaging jobs and people in a never-ending treadmill. When one hamster falls off the wheel, there’s an unlimited supply of  rodents to replace them.

    1404_hamsterwheel

    One hamster is pretty much like another – hamster work is fungible

    In that sort of environment the advantages of flexibility accrue to the employers not the workers. To add insult to injury, the welfare safety nets like unemployment benefit are predicated on the job for life, or at least the job for weeks. They just don’t help you fight that sort of here today gone tomorrow employment pattern. These are not entrepreneur hamsters playing the market for their talents. This is unskilled piecework.

    The so-called joys of self-employment

    The Grauniad asks whether zero-hours contracts really are worse than jobs for life. Sure, for many people with skills that command a premium, contracting and zero-hours contracts can be great. There are the guys that write about how great the opportunities are. Heck, a retired Ermine hasn’t been able to avoid making money totally, and I would be happy with the lack of commitment of zero-hours contracts 5 – if it pissed me off in any way, I’d just walk away. I can afford to do that because I am financially independent. Financial independence is very rare in a first world consumer society – there are many, many people who have far more wealth and income than I but who are not financially independent because of their spending.

    It’s easy to big up the joys of self-employment. Yes, you have the freedom of self-defined work and your time is a little bit more your own. Set against that you have the stress of managing a variable income, you have all the grief of self-assessment and the trials of HMRC, you have to run the business, make the judgement calls on capital spend versus return. You also have to carry a massive cash float to manage contingencies, else you risk getting slaughtered in the first cashflow crisis that comes along.

    Those that make self employment work for them tend to be the more entrepreneurial, and those with skills that can command a premium. I look at Liberate Life’s description of how to live life working without a job and it looks like one of Dante’s Inferno’s circles of Hell to me – I hate selling in all of its forms 6 – all that hustling would be a nightmare for me. I am so glad that I managed to get to the end of my working life before these changes happened. Perhaps there is sample bias – if I were 21 again then this gig economy world would be all that I had known and I would follow such a path, which looks a great way to play that sort of hand.

    But I knew another way, and to my eyes it was a far better compromise for the majority of people, who are of average talent but want to have some stability, have kids and FFS do something other than thinking about work all the time. It served me well, I like to think I had a little more talent for the scientific, engineering and analytical than the average Brit, though I am nowhere near clever enough to work for Google. It isn’t like the compromise kept everybody down, and if you really wanted to run your own business and had talent then you could knock yourself out and go do that too.

    Maybe I am simply at odds with current thinking. There was an interesting thread on MSE where a fellow retired, and got so bored he went back to work, which made me think what was summed up in this post

    It’s a bit sad to spend such a large part of your life working, retire, and then realise you haven’t actually got a real life to enjoy so go back to work again. It suggests an absence of hinterland

    Whereas now you’re increasingly on call all the time without getting paid for it, at below the mean level of ability you seem to be yanked about on a smartphone string and have to think about work all the time. In particular, the sort of digital Taylorism the FT’s Sarah O’Connor talked about in this podcast and article treats their unskilled workers with a shocking level of disrespect.Not only are these unskilled workers micromanaged via their smartphone apps, but they are stripped of the employment rights that used to protect casual workers from the variability of the workload (by paying them for their time, including downtime during the working days). The work providers talk up the virtues of self-employment and being able to choose how much you work, but decline too many jobs in a row and you’re embargoed for 24 hours, so the choice is pretty clear, do as we say or piss off. Hobson’s choice, not a better work/life balance.

    It tickled me to hear John Gapper’s faint public school accent debating the plight of the precariat with O’Connor’s slightly preppy uptalking and lashings of vocal fry. I don’t think they know the territory, though kudos to Sarah O’Connor for doing some fieldwork at Uber Eats. It’s epitomised when Gapper asks Sarah at 2:24

    “Are they employed? I means what is their actual status? Are they workers…”

    It’s not so much what is said – it’s a reasonable question, but you can hear the arm’s length treatment in Gapper’s tone of voice – these aren’t the sort of people the FT hacks typically consort with. I can almost picture him holding the dirty rag at a distance asking “so what exactly is it that we have here?” 😉

    Elsewhere in the FT, however, it seems that there are still a lot of recalcitrant proto-Ermines among the millennial set that aren’t that enamoured with the go-getting entrepreneurial dynamism of the gig economy. Over to Sarah again

    young workers seek traditional permanent contracts to unlock the necessities of life …

    The traditional permanent job contract is still the key that unlocks a range of life’s necessities. Without one, you will struggle in many countries to secure a loan, a mortgage, a mobile phone contract 7 or even a room to rent.

    like all that boring shit like a roof over your head and not having to think about work for 24 hours every flippin’ day.

    There’s hope. but not soon

    New ways of working have often led to oppression of the weakest party (generally labour) until regulation can catch up with it. There’s nothing inherently wrong with better information and mobile platforms, after all Uber and GPS means relatively unskilled drivers can provide a low cost London taxi service that was previously the domain of cabbies in a guild with The Knowledge. Because these things started in the teeth of the 2007-9 recession and regulation hasn’t caught up, they have spread quickly, because they give an advantage to the work providers and probably the work consumers, at the cost of the work doers. Our definition of employment and self-employment that has been acceptable for many decades isn’t fit for this sort of employment/work. So regulation needs to catch up, there’s probably space in the marketplace for smartphone mediated work matching to give novel services with a better balance between the conflicting interests of capital, labour and the consumers. It’s inherently the way of capital to to misuse it’s power over people, for the reason identified by Baron Acton in 1887

    Power tends to corrupt and absolute power corrupts absolutely.

    Capital is a claim on future human work, the power to get people to do what you want. It needs regulation to gentle it away from being purely a tool of oppression, and it takes time to find that balance. Of course there is always the head-banging Ayn-Randian counter proposal for a no-holds-barred let it all get sorted out in the market. I guess once we’ve killed off the weaklings perhaps the water will find its own level. It’s a bit harsh, but I guess it works. For some strange reason it tends to piss people off seeing that sort of thing happen to their friends and family members, so unless there really is a Galt’s Gulch Uber can retire to they will probably have to come to some less one-sided agreement in time.

    It’s not all about the money

    though at the bottom end it is… Some of it is about dignity and respect. When I boil it down to the essentials, what I came to hate so much about working at The Firm when they laced it up with stupid performance management metrics wasn’t that the pay was crap, it wasn’t. It wasn’t what I did, which was okay and mildly interesting when it was the actual job in my job title, as opposed to feeding the performance management system bullshit. It was the increasingly demeaning and disrespectful nature of the micromanaging performance reviews and endless justification of my existence, the gamification of the workplace. This crap was unnecessary – it was either a deliberate ploy to make people feel so shit about themselves that they would leave, without having to pay redundancy, or it was some sort of management fad. I recently heard from someone still there, at a more senior level than I reached, who was going through this again – he had to justify his existence, say why he was meeting objectives half of which had been imposed without discussion, and I was so glad to be out of there. But at least the pay was enough to reach FI with a bit of grunt.

    When you’re working at the casual end of things, your boss is an app, you have the same sort of arbitrary rules plus various ratings for jobs taken, customer feedback etc you have the same disrespect without the compensation of getting paid the FU money.It’s one of the tedious things about buying online from the gig economy. You get bombarded with requests for feedback to up their metrics. Sorry, but I don’t do feedback any more. I just want to pay the money, get the goods and get out of there.

    Recently I bought a replacement car battery from Halfords because I had been a jerk and ignored the signs the old one was fading. So I jumped the battery with a leisure battery and got lost on my way to the cheaper joint. Knowing I was at risk of not starting the engine again if I stopped it took the hit at Halfords. Then realised I only had spanners in my car toolkit, not a socket long enough to reach the lower battery clamp, and my 30-year old jump leads weren’t man enough to turn over a diesel engine from the new battery. So I was faced with pay the £10 fitting charge or buy a socket set, well,  I was idle and paid up. It was a pleasant enough transaction, but no, I didn’t actually want to get a card soliciting feedback on my experience. It’s bad enough online, and there’s no need to feed these stupid monitoring systems in bricks and mortar shops too.

    No wonder people are pissed off at the bottom end of the gig economy – they are paid sod all and treated like shit. One or the other you can live with, but not both.

     

    Notes:

    1. I don’t speak of it from experience, because the first smartphone I got was after I finished work. And I decommissioned the bugger about a month ago because it was seriously pissing me off. It did most of the things I could do with a computer, but all at half cock, and was poor at answering phone calls.
    2. I know it was an existential fight and all that but the miners lost my sympathy when they turned the lights off while I was at school and I heard arrogant SOBs like Scargill tell how they were going to run things by sending thugs round to stop other people working.
    3. Doesn’t that date the report – this was a year after the hot summer of rage when da yoof ran amok and rioted in London for better trainers, communicating via BlackBerry Messenger. I don’t know if you can get a Blackberry these days
    4. I know, not all of them, but the drift has been huge
    5. that which I do is probably closer to individual contract jobs, I wouldn’t take low end ZHC jobs where you have to be there for them but they don’t have to be there for you, because I am not having people take the piss out of me for money, the second word in my response to such a proposal would be “off”
    6. I chose LL because he is an engineer with IT and electronics which was what I used to do in a former life
    7. I have never attempted to get a mobile phone contract because I am a PAYG aficionado, but presumably as someone without a permie job I would be SOL on that one too
    25 Aug 2016, 9:21pm
    living intentionally
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  • Why aren’t the National Trust and the English Heritage the same thing?

    After all, they sort of do the same kind of thing, act in the same sort of space and need to merge IMO. Before 2009 I had been a member of English Heritage for a while, largely to get into Stonehenge for free 1. It was a good staging post on the way down to the West Country, and usually picked up enough visits to make it worthwhile. It’s been a while since I was part of this, but now I have returned to the land of those with a regular income, I need to go out and put some of that to work.

    I want to see more of Britain, and take my time

    One of the remarkable things about Britain is that a lot of the place is like a history theme park, and that it has all sorts of bizarre things scattered around the landscape. Take this oddball triangular building. It challenges you a bit being inside, we are so accustomed to rectangularity in rooms that it’s quite disorienting.

    Rushton Triangular Lodge

    Rushton Triangular Lodge. It’s not a funny perspective, the groundplan is an equilateral triangle

    The aristocracy of this country was eccentric that way, and fortunately the reforming post-war governments dispossessed enough of these folk of their undeserved wealth gifted them by that varmint William the Conk that we have the opportunity to see some of them.The general principle was since so many people got slaughtered in service to King and Country in the World Wars it was considered a bit rough to have the toff dynasties lording it over the proles like they used to.

    There’s no need to get the violins out for the aristocracy – the landed gentry still own about half the rural land this sceptred isle, because the crafty devils struck a deal with the reforming post-war governments. Of course, Mr Attlee, they said, you wouldn’t like to break up family farms now, would you, after all we have just survived a war and had to dig for victory? So give us an exception on agricultural land for inheritance tax. Which still stands, but of course our landed gentry can’t be arsed to drive their own little Fordson tractors or get their hands dirty. They take public money in the form of subsidies to the tune of about £245 for every British household to reduce the costs of carrying their unearned capital stored in agricultural land, get huge contracting firms to farm the land, and flood it with chemicals, poison our birds while they of course keep the ancestral wealth in their dynasty free of IHT, because it’s agriculture, innit? To add insult to injury for the great unwashed, Gerald Grosvenor, who owned £9bn of ancestral wealth when he carked it recently, moaned that it didn’t make him happy. Well, Gerald, you know what you should have done then, you miserable git. Spread some of the love around, then maybe your kids don’t get to moan the same when they’re 64 😉 Seriously, you couldn’t make it up.

    In the UK there are two heritage organisations, the National Trust and English Heritage (and the Historic Wales and Historic Scotland equivalents to EH). The overlap is notable – for instance EH run Stonehenge and the National Trust own the site, and Avebury it seems the National Trust run the site, even if they did upset Bill Bryson. Cynical me wonders how he managed to shell out £31 before seeing a stone, and whether his role as an English Heritage commissioner had something to do with his discombobulation. I’ve had the same dilemma as Bill whether to take a fleecing from the National Trust or observe from the sidelines but if he really did manage to miss one of these great big things

    One of the massive stones at Avebury, of which there are many

    One of the massive stones at Avebury, of which there are many

    while he was so busy chasing comestibles then I think he needs a visit to the optician. Personally, I don’t expect to pay anything even for parking when I go to Avebury, but I guess I have more experience of the site than Bryson had 😉

    they're all over the place

    stones are all over the place, Bill

    I’m with the NT here–  we don’t need more or bigger signs, because if you’re the sort that misses twenty-foot high sarsen slabs by the side of the Queen’s highway, then you aren’t going to spot the signs to the stones. The territory is map enough in this case. more »

    Notes:

    1. free once I’d gone about three times in a year ISTR
    19 Aug 2016, 7:40pm
    personal finance
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  • Telegraph to wannabe FI/RE new parents – you must be kidding!

    The Telegraph’s Money Makeover is a rich seam of entertainment for a grizzled mustelid observing the triumph of hope over experience in the human condition. It seems to be an endless tribute to wannabe buy-to-letters wanting to retire on a woefully small portfolio, thirty-somethings with a tenuous understanding of just how much money you need to have to retire before midlife and the oddball doctor with a massive salary, none of which ever seemed to stick to the sides. I could generalise many of the tribulations as “if you are asking whether Buy-to-Let will solve all your problems, the fact you are asking the question tells you the answer is no”. As a respite from this folly, this week we have a paragon of financial rectitude who is debt-free by 37, but there’s still no pot of gold at the end of his rainbow.

    Consider this plangent photo of domestic bliss and unachievable dreams, a comely couple and two preschool rugrats with their associated plastic paraphernalia.

    with two young sons, JM wants to retire as soon as possible to spend more time at home.

    with two young sons, JM wants to retire as soon as possible to spend more time at home.

    Our man has done an awful lot of things right in the search for early retirement. He appears debt-free in the true sense – paid down his mortgage on a Cambridge semi at £300k, which is a very respectable achievement at 37 1. But he’s done two things wrong for his dreams of early retirement, and they’re in the foreground of the picture.

    I’m not saying that having children means you can’t retire early, but JM has a fairly pedestrian job for early retirement ambitions, and kids will seriously hamper his ability to reduce his outgoings, which is the other route to early retirement – being able to sustainably reduce your spend. Which is pretty much what the Torygraph had to say to him. To wit:

    JM is doing well in retirement provision but the challenge for him will be getting enough funds to enable him to retire early and provide for his family.

    followed by the coup-de-grace

    I would sound a note of caution, as one parent to another: children tend to get more expensive as they get older. 

    The other lot aren’t that much more encouraging

    Mr Massey’s primary goal of retiring early to spend more time with his family is unrealistic given his current financial planning route.

    and

    should concentrate the bulk of his pension savings into shares-based investments as, realistically, retirement is at least 18 years away.

    A quick tappety tap on the Ermine abacus tells me that 37+18=55. As for spending more time with the fruit of his loins, in 18 years time they will have just come of age. He’s not gonna do it before then  unless he does something very different.  Having children is going to be a big project for anybody- if we say JM is exceptionally frugal and gets his two for the £230,000 they say it costs to raise one child, then clearly in 20 years time his pension pot will be down that much 2, or at a 4% SWR down about £9000 p.a.. That’s not the sort of thing that early retirement dreams are made of. Of course some people with children  can retire early. But you’ll usually find they were in a different class of earnings to JM – The Escape Artist for instance, worked in the City. He probably earned a little bit more than JM, who doesn’t even pay higher-rate tax, which makes paying a fixed sum into a SIPP much less painful than for basic rate taxpayers.

    There are other minor aspects of JM’s carry-on which could make it less of a stretch. Let us take this oxymoronic statement

    He takes risks where he understands them and has £17,000 in a stocks and shares Isa invested in Greggs, BP, Poundland and Tesco – companies he is “familiar with”.

    Mr Massey is satisfied with his investments so far, although Tesco has delivered some losses.

    He said: “Everyone always goes to Tesco – I thought how could the shares fall? Well, they did.”

    JM, you got frickin’ soaked on Tesco. I’m not particularly having a larf, so did I. I didn’t buy them from a careful consideration of the company, but figured if I paid less than Warren Buffet I would be okay. Turns out this was one of the few occasions when WB didn’t know what he was doing. So I got soaked too. I didn’t understand the risk, and nor did you. The big difference between us, bud, is that Tesco is less than 1% of my portfolio, whereas it’s probably more than a fifth of yours. I also realised within three years of starting along the high yield portfolio route that the global imbalance 3 was probably hazardous to my long-term wealth and started to shore it up all round with diversifying index funds, focusing on ex-UK to specifically fight that bias. So go do yourself a favour and listen to Lars Krojer and sharpen up your act. Once my contributory investing career is over 4 I may choose to listen to Lars, so save myself a hunk of time I could be spending on more interesting things to do.

    So, JM, you had your two precious little bundles of joy because of all the warm feeling, extra meaning and richness that they add to your life. Good things are worth paying for, and life is full of choices. That particular choice means you won’t get to put your feet up at 55. For God’s sake don’t suddenly decide that your special snowflakes need private education, else you’ll be retiring about never on that salary. Now of course you could go out and get a much better paid job working for The Man, but pushing 40 is leaving it a little bit late to do that. Colour me a heartless bastard but “trust and grant manager at a charity” sounds like a) you’re milking it b) there aren’t that many opportunities for progression and most of them will be dead men’s shoes, the charity sector is notorious for crap pay 5 and c) you are just one re-org or restructuring away from redundancy. So better hope nothing goes wrong in the next 18 years, eh?

    There are things you could do to make yourself better off in retirement. But you ain’t getting to retire early. Paying your mortgage off was a grand achievement and hats off to you, but paradoxically it was probably a bad move for retiring early. I cocked this up too. At historically low interest rates, you could have carried that sucker for longer and pumped more of your salary in pensions, getting a 20-32% lift and getting longer for it to appreciate, while paying 3% on the money. The 20% uplift plus the ~4% real return on equities make that a win even if you get to  put your 25% pension commencement lump sum into clearing the mortgage in 20 years. Think of it as tax-free mortgage saving. Of course mortgage rates will go up over two decades but you will also be paying it off slowly so you’ll take less of a hit, and inflation will erode the principal anyway.

    So listen to the drunk telling the traveller how to get to the city with your unrealistic dreams of early retirement.

    If you want to get to there, you don’t start from here.

    I am curious that none of the advisers asked this fellow whether his question was wrong. It often pays in life to try and make sure you ask the right question, because once you have framed that you’ve eliminated some of the options. Surely if he wanted to spend more time with his family, perhaps the question should be ‘ Can I afford to go part-time for 10 years and see my family grow up’ rather than “Can I retire early”. He still won’t get to retire early, but perhaps he gets something else of value. His wife has clearly jumped to this option, and by reducing the £700 a month childcare bill he would reduce the financial hit and get to see more of his children rather than more of the office.

    Notes:

    1. a cynical Ermine wonders exactly how he has managed to pay off £300,000 on a household income of £77k within’ say, 10 years. One assumes the untimely demise of a rich aunt may be a factor
    2. a DINK couple usually spends more on other things, so the difference may be less
    3. that imbalance is less bad for me because many of the FTSE100 firms I have in my HYP make their money partly overseas. Greggs and Poundland seem pretty domestic, looks like JM invests in what he sees on the High Street. From what I see on the High Street I would actively run miles from any firms with a High Street presence, the Internet is eating their lunch. Tesco is in fact my only such firm
    4. I am reasonably convinced by Lars’ argument you can’t long-term sector pick and beat the market, though I am less convinced that if you only have a few years to get into the market that valuation/when you get into it is irrelevant. I happened to be very lucky in starting in 2009, though of course the effects of the GFC on my job was the reason why I started then.
    5. until you get to the executive levels where anything goes
    15 Aug 2016, 12:40pm
    living intentionally reflections:
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  • work as a limiting belief post FI

    We all go through life accumulating experiences, and, inveterate pattern-matchers that we are, all too often we infer the general from the particular of those experiences. In the search to impose order and meaning on our world, we frequently conflate correlation with causation, and build up a mental map of the world at odds with the territory. Some of these beliefs about the world gained from experience are just plain wrong or get overtaken by events after they are formed. To take one

    “You need to work”

    When I left university I had no money and therefore needed to work. I hadn’t come across the option of dropping out and possum living, and it probably wouldn’t have appealed, a young buck must run with its kind 😉 Peer pressure is strong for young adults.

    But in that first year I built a limiting belief, by inferring the general from the particular. I needed to work, at that time and for a significant time afterwards. But not for all time. I needed to earn enough to pay the capital cost of some of the necessities of life. I didn’t think that deeply about buying a house, though I left London because it was clear that I wouldn’t be able to buy a house there and maintain a decent lifestyle. I really should have thought more about buying a house at a market high, but that’s another story. There’s a pattern developing here, an across the board intentional living fail.

    A considerable amount of luck saved me from myself – I was enterprising enough to shift myself from boring jobs until I found one that loaded the grey matter enough to be congenial, I was fortunate enough to end up in a company where I was looked after pension-wise and the pay was decent enough. And then got on with the job of spending too much but not more than I earned on consumer crap, partying, beer and travel.

    And so across the intervening years, the world globalised and loads more people joined the capitalist workforce, and it started to arbitrage towards cheaper countries. I was protected from that from a long time but eventually the erosion came to my door. There’s an argument that the Millennium Bug work of the year 2000 accelerated this erosion of developed world work in the IT world. The Firm opened a BPO joint in Mahindra and a couple of the localised Big Cheeses instrumental in setting it up benefited handsomely from their shareholdings in that.

    I wasn’t passionate about IT although competent, I moved into it and out of electronics engineering because that was what The Firm did. Some people did jump ship at the time, fearful that their electronics skills would atrophy. In the first glimmerings of intentional living I came to the conclusion that I worked to live not lived to work, I was in serious negative equity so I adapted and retrained. I suspected electronics design would go to cheaper countries, and it did – the tide would have gone out on me faster in electronics that it did in IT. 1

    Limiting Beliefs

    Steve Pavlina has a pretty decent summary of limiting beliefs –

    Limiting beliefs can seriously hold us back in life. But most of the time such beliefs are invisible to us. They control some of our thoughts and behaviors behind the scenes, enough to curtail our results in some area of life.

    His article also proposes a method of eliminating these. I don’t have his particular brand of materialist rationalism, so while I am prepared to acknowledge some limiting beliefs, I won’t fight all of them. One of mine is that something snapped in me mentally in the last few years at work, and that once something like that has broken it will never bear that load again. Since I’m rich enough not to have to challenge this by finding another job, I don’t have to go through the pain of challenging it, or indeed find out that it is in fact true. The evidence that countermands that belief is that people overcome much greater mental challenges than having a really shitty experience of working for a year.

    The way this belief limits me is that I will never be able to feel safe enough to deploy any money that I earn in working again to increase my lifestyle, because I will be afraid of losing having the FU nuclear option on work. So while I might well appreciate more baubles and jaunts, no consumer shit tastes as good as financial freedom feels. And I’ve gotten used to owning my own time. So I’ll pass on the extra money and enjoy the extra time.

    Over at SHMD Jim has returned to work. While that wouldn’t be right for me I tip my hat to a fellow who concluded a 0 hours week wasn’t enhancing his quality of life, and took the obvious corrective action – go get a job. I’d actually read Jim’s article before it was cited on Weekend reading and just thought good for you Jim, about time too 😉

    When I read the phrases selected by Monevator from Jim’s post I thought blimey, did I read the same article? Monevator is a much more pithy and concise writer than I am, but the precise extract and reformatting together with the extra narrative in his post I think says something about both the observer and the observed:

    I was struggling a bit with the retirement lifestyle, and finding the change from a full on, full time working week to a zero hour one quite difficult to handle.

    I just couldn’t shake the notion that I was too “young” to put my feet up, that I should be working and that I should be out there earning money.

    I might not have “needed” the latter, but it never quite felt that way.

    SHMD as cited by Monevator

    Jim’s evocative description of the problem shows to me an incongruity between his map of how things should be compared to the territory of how they were. He doesn’t need the money, but he needs things to be different to how they are to feel happy about it. This looks like a limiting belief to me, largely because Jim “shoulds himself” twice in one sentence. Two different takes on this issue, one from Psychology Today and the other from the A0M seem to indicate this limiting belief is from an external locus of control in the affected topic. He is measuring an internal state by a yardstick written by other people. Since humans are a social species some of this is inevitable, and there was an easy and obvious solution. Make the territory more like the map and go back to work.

    Monevator admits his gut belief later on

    But I believe almost everyone will benefit from having an ongoing economic relationship with society while they can – even if only for a day or two a week.

    Sadly, by the time most people reach the point of having options, they seem to feel too burned out by the workplace to explore all the various other ways of making money more freely.

    Protestant work ethic detector goes off. You don’t have to work to have an ongoing economic relationship with society. I allocate capital, society pays me for the pleasure of using it 😉 Heck, on the other side of the coin the consumers of Britain racking up unsustainable credit card debt have an ongoing economic relationship with society, even if they are on the dole, or reality TV show aristocrats.

    Reality TV show aristocrats

    Reality TV show aristocrats in an ongoing economic relationship with society

    I am thinking of buying a Naim 272 to replace my 30-year old preamplifier, tuner and audio streaming box, surely I still have an ongoing economic relationship with Salisbury then? I don’t even have to worsen Britain’s consumer debt mountain because I have the money.

    Now I am a case of the burned out husk Monevator refers to, although I have to say that the proposed alternative of endless hucksterism of selling your wares as a freelancer/contractor gives me even more the heebie-jeebies than the thought of going back to work for The Man. But I’ve already confessed to the potential limiting belief in my case, so far be it from me to criticise either of these two good people for tolerating theirs 😉 We can all afford to pay the cost of our limiting beliefs – I will be poorer by the opportunity cost of the money I could have earned, they will be poorer by the opportunity cost of the time spent working after financial independence. Conversely, they will be richer in money, I will be richer in Time, and each to their own. Neither course is right or wrong, it can only be right or wrong in combination with the individual’s predilections and temperaments, which may change over time.

    What’s that burnout process all about then?

    Like Monevator, the younger me didn’t understand the burnout mechanism. I saw burnout in enough other people at The Firm, but had been fortunate enough to occupy specialisms slightly removed from the ritual slaughter and yearly cull of too many project managers as the number of projects to manage dropped. I was offered enough PRINCE2 training but I’d rather drink my own urine than be a PM. I have respect for the job and the difficult balances to be made, but I don’t want to be it, and particularly for the Firm. I didn’t realise then that  the The Firm employed the same techniques as some Japanese companies on some of these guys – because there were technical reasons why compulsory redundancies were expensive for them, so they needed to mind-f*k people. They created a Redeployment Unit, which was ostensibly to re-educate some of their dead wood old fossils superfluous headcount. It had a terrible success rate – more than 50% of people eventually left on voluntary redundancy terms, because they couldn’t stand the endless Jobcentre style filling in CVs. You had to fill in so many a week, just because. It drove a fair number of people round the bend. In many cases they had been pulled from overworked teams to match headcount targets, it seemed to be a particular irony to then go for a coffee with their ex-team-mates and hear that deliverables were slipping because there weren’t enough boots on the ground. Which conveniently meant they could pull the project, outsource it to India and send the rest of the team to the RU, while marking down their performance management results. Conveniently you were barred from taking voluntary redundancy if your performance management score was needs improvement, so they saved money by sending people round the twist. Nice.

    Performance management clobbered me because for the first 20 years at The Firm, appraisal was roughly about how well you did the job. I was okay with that. For an engineer their work usually speaks for itself. However, performance management was a way of introducing arbitrary extra elements, FFS like giving 5 minute seminars at all hands meetings whose tedium was increased by 5 minute presentations on random stuff to tick the box, and it was a bewildering mishmash of capricious targets. Basically you had the choice of meeting the targets or doing the job.

    I pre-empted this with the last vestiges of energy I had in reserve in 2009, and fired off speculative applications because there was an opportunity to use some of my legacy electronics engineering skills for the London 2012 Olympics. I was fortunate enough to win that lottery and sweat out three years doing something interesting, time-bound and rewarding. I got a decent sendoff and the guy in charge of delivering the Olympics said I was leaving on a high, and in terms of what I did, yes. But I formed another belief about working then. Which is that working in the modern world of professional jobs is all consuming, over-controlled pissing match that hurts, and I want no more of it in my life.

    It took time before freedom from became freedom to, and I realised the value of the prize I had unwittingly taken with me on the way back from the pub at that final leaving do. Eight precious years of my life that I will never live again, and in decent wealth and health, and indeed I still have a few to go before I reach 60 where I’d join the original track of my retirement from work. What’s the point of burning them up working? As Arnold Zack said to Paul Tsongas

    Nobody on his deathbed ever said, “I wish I had spent more time at the office.”

    Tsongas retired on (physical) medical grounds and cashed in his chips at 55.

    It is the privilege of youth to think you will live for ever in perfect health – in general this squares with your experience of life so far, but as they say past performance is no guarantee of future success. I got a long way into middle age on that assumption, and I am still to be to the best of my knowledge in good physical health. But when something existential that you took for granted fails in service, then the knowledge that can happen changes you. I like to think I got some wins out of the negative experience – I deepened, and took the opportunity to jump the tracks of the assumptions I had never challenged since first starting work. I took the glittering prize of my time back with me, but I only unwrapped it and saw its gleam after the first phase of decompression had passed after two years. I had to switch off so much of myself to get through the last three years of working that I had to train myself to see beauty and appreciate music again. It is all the more amazing because I know the emptiness of the burned out years. I have more gratitude for it. It is sweeter for having known the loss, and to discover in the depths of winter, I finally learned that within me there lay an invincible summer. 2.

    I hazard that Monevator hasn’t had that experience in the work area of life and I hope he never has, and Jim took corrective action much earlier in his journey out of work, or had greater resilience. Indeed, the younger Ermine knew the feeling of Monevator’s surprise at people’s passivity in the face of an adverse work environment –

    Sadly, by the time most people reach the point of having options, they seem to feel too burned out by the workplace to explore all the various other ways of making money more freely.

    It’s always a puzzle, why the hell don’t people sort their shit out and improve their situation? The reason it so often happens is that while mental stress may manifest in an obvious breakdown, the seeds are sown and grow in tiny incremental stages beforehand. It is in these days, months and years beforehand that the fightback must commence.The breakdown is the result of feedback mechanisms that are trying to compensate for the stress finally being overwhelmed. While they work OK these feedback mechanisms minimise the visibility of the problem by trying to maintain the norm. So by the time people realise something is wrong they have passed the point of no return, they do not have the energy to start the fight. I was fortunate in having good people around, and doubly so in having a rare legacy skill that was needed for the last three years it took me to buy my way out. There is much more luck than judgement in that narrative. Some judgement, yes – in the switched off nature where I had lost most of the function of the emotional centre I still had the intellectual centre working at half cock. I was able to see with unclouded vision that buying into a shattered market of 2009 might be a good idea 3, and the nonfunctioning emotional elements did not jam that with the ‘run for the hills’ response. But it’s probably the luck that won it. I learned from that experience, charging into the markets in 2011 during the Summer of Rage and again earlier this year. Last year I was into EMs, which was probably jumping the gun, though the addled brains of my fellow countrymen destroying the currency have helped buy me out of that trigger-happiness and even these dogs are starting to perform.

    Work meant more for me when I was younger, it was part of how I saw myself, and it took the long process of individuation to de-identify myself against external values and own my values.  There is a lot of existential value associated with work for many people – take Ruth Graham’s rebuttal of the deathbed quote. It’s also not terribly surprising that people who suffer burnout break the link between meaning and purpose and work. After all, if I felt like Jim about work I would have to go back into the fray, risking the burnout again. It is easier to change myself than the toxic world of performance management and meaningless metrics.

    Jim doesn’t have that link broken. There are hardly that many terrible consequences of working when you don’t need to. But it isn’t totally cost-free. Those are years you won’t get to live again. Work is a way for finding challenge and interest. But it’s not the only way.

    How to go nuclear on your career

    This is a bigger change that gradually inching down, or switching to a different type of work. If you have any lingering doubts, then don’t do it. Go for the slowly reducing your hours if you can, or alternative employment. After all, that’s the point of being financially independent. You can choose not to work, but you don’t have to. If you are reducing your hours, things are simpler, you probably want to stay in the same location.

    But if you are aiming to finish work, or do something else, then you have more options. Moving is one of them – of course if you have a partner/children and particularly if they are not retiring at the same time then this is out, unless moving closer to their work. For many people FI roughly coincides with their children coming of age, which I hear is also a big life change for the parents. It’s a good time to re-evaluate what you want out of life.

    Anybody living in London should seriously consider their options on reaching FI. It’s a young person’s city and no place for old men IMO – and you may as well leverage the closeness to massive pool of employment premium on the value of your house or reduce the rent you’re paying. It’s an opportunity to reduce costs, unless you value the lifestyle more than the cost.

    For many people work is a huge part of the amount of day-to-day intellectual stimulation they get, they are too busy in their non-work time making all the trappings of a middle class life happen and wrangling kids. Pull the plug on work in that sort of lifestream and there’s going to be a great big instant hole.

    If you are going to quit then you have to step up to the bigger change. You have greater opportunities too, simply because you now have all your time to allocate to living your unique life. In no particular order I toss these out as things worth considering, they work for me. I’m not saying they have to work for you

    Look to your social circle post-retirement

    Early retirees, very early retirees, men, those who move on retirement all have a particular issue with this and ideally want to start addressing it before they leave work. To stereotype shockingly in the interests of brevity

    Early retirees (30s-40s) and men often have a lot of their social circle connected with work. Retire early and half your social circle is still working and will be for the next 20 years. You want to at least think about backfilling this, and you’re probably going to have to make most of the effort.

    Those who move on retirement may face having to start anew in a different place. If you have an idea of where you are moving to, there’s a case to be made for cultivating social connections there ahead of time.

    Retiring is also an opportunity to leave behind people who have become toxic in some way, it’s not all bad 😉

    Toss your TV.

    Slightly tongue in cheek, but it is a particular form of a general principle. Create, learn and be intellectually active rather than a passive consumer. TV is great escapism to switch off from work. You don’t need that any more. And too much of TV is vapid attention-grabbing pabulum whose main purpose is to be a carrier wave to ram consumerist messages into your head.

    Learn something new every day

    You probably had to do this at work. If you are retired, then you have the freedom to cover new ground. Learn about new things just because. It doesn’t have to be useful. I am thinking of making a bull-roarer today. It is the diversity of what you learn that makes you a more rounded person, and exposes you to more viewpoints. Read at least two papers from the opposite sides of the political spectrum. Try and open your mind to points of view that you don’t agree with. Are they at least internally consistent? Are your views? Are your views perhaps wrong?

    Read books as well as the Web

    The Web is a fantastic resource for learning something new every day. But it is shallow, it is bad for your attention span, it is often unreferenced and unauthoritative, and there is always the vile commercial imperative in a lot of writing, which favours the attention-grabbing and the short form. I found too much web reading damaged my ability to take in information from books, I had to slightly relearn that

    When I say books, I mean books that have at least some print format that is not self-published. If a publisher had to take a risk on the book it is more likely to have merit. The massive swathes of ebooks written by money-grabbing incompetents are a way of trying to ‘monetise content’ and from my experience that content isn’t worth my time. There isn’t a book in everybody, leastways not a book worth anybody’s time. I wish there were a way of screening out the output of ebook content mills on Amazon. Using your public library to borrow real books is one way round that.

    Walk/bike everywhere

    I’m a walking guy on this front, but that’s because Ipswich is a relatively compact market town. most places I want to go are within two miles. Over distances like that walking wins over cycling by not having to park your legs outside your destination and worrying some scrote is going to pinch them. I’m of the opinion no retiree needs to use a gym 4. The trouble with walking when you are working it it wipes out a huge amount of your small amount of free time, after all if I want to walk somewhere two miles away and come back it’s going to wipe out an hour and a bit of my day. That’s tough if I only have four hours free time. But it’s no beef for a retiree. It’s good for you, and thinking while walking is somehow a different and more lateral experience too.

    Obviously there’s space for the car as well, if you are going to haul stuff. But don’t go nuts on it. I walk a mile and a bit to recycle glass, carrying it in a rucksack. You can easily carry 10kg in a backpack, more in panniers on a bike.

    Create experiences, don’t buy them

    Climb hills, learn about Nature, invent, carve, repair, originate before consumption. Many ‘attractions’ are simply commercial enterprises designed to separate parents from their money because they don’t have enough energy or imagination to distract/entertain their kids themselves. I personally avoid places like this like the plague. But there are similar joints for adults, and, I am sad to say, particularly targeted at men who have a weakness for extreme this and that. There are general trends to commercialise, professionalise and monetise recreation. What did kids do before Go Ape? They climbed the trees and built their own tree-houses from scrap wood. BTDT

    Do hedonism, but vary it. Prize diversity and  quality over quantity

    There’s nothing wrong with going to a decent restaurant every so often, but it should cost you more than £100 for two (Londoners probably need to think £300). Do better, but less often. There are vast swathes of middling and low end joints which aren’t worth your custom, go big or go home, but go infrequently. And spin it out with other sorts of hedonism.

    Travel alone sometimes

    You see far more of a place when you travel alone. Conversely the experience of travelling with your partner is a more congenial experience and gives you shared stories. Make space for both.

    Be insanely curious

    Poke about in the cornucopia of variety that is our world. Take things to bits, turn them over and wonder why. Lift stones and see what’s underneath 5. Play

    Do one thing at a time, and do it well

    There’s a trend towards multitasking – looking at your phone while listening to an audiobook etc. Humans haven’t suddenly become great multitaskers over the last 20 years. If it’s worth doing it’s worth doing well.

    Leave the smartphone at home

    This is a personal bugbear of mine. I decommissioned my smartphone when I realised it was simply pissing me off for no good reason, and swapped it for a dual-SIM plastic Nokia 150. Why? Dual SIM gives a better chance of getting a signal in the countryside if they are on different PAYG bearer networks, plus I can route outgoing calls and SMS via the cheapest option. I couldn’t stand the touch keyboard, and prefer predictive text SMS. The RF performance of a basic phone is so much better than a smartphone, people can actually hear me and I get to hear them (if they aren’t using a smartphone outside an urban area). Every photograph I’ve taken with a mobile phone is a little bit shit and makes me wish I hadn’t taken it or had used a real camera. I don’t regularly do Facebook, twitter and all that cobblers. A smartphone is a really crappy satnav, because again the RF performance of the GPS is poor in urban areas, which is of course where you really need detailed navigation and good responsiveness. They are great in the open, on motorways and A roads, the sort of places where it’s easy to navigate using map and road signs 😉 I bought a Garmin satnav after realising that I was going to more places I hadn’t been before even in Suffolk and was spending too much time and fuel overshooting, then turning round to back up. It performs properly in urban areas, uses DAB to update traffic reports rather than spying on me by using the mobile network. A smartphone does a load of things, all of them poorly, and I got sick of that in the end.

    Reduce unnecessary interruption in your life

    Most of these come from electronic devices and social media. You can probably still swim with the hive-mind by connecting every three hours and then disconnecting, and the old saw about connecting to email once or twice a day is also worth noting. Even if you are a social media maven, well, connect every hour or half-hour if you must, and then give your full attention to whatever you are doing. If you can’t be bothered to give it your attention, then perhaps just cut it out of your life altogether. You don’t have this choice at work, because obviously you are being paid to do what others want.

    Pursue novelty. For its own damn sake

    But try to avoid paying for it 😉 In general any new experience or thing should challenge you, teach you something  or make you grow some tiny bit. Too many manufactured experiences are designed to get you to buy something or take part in the sequel, hence try to avoid paying for it. I admit that three years of frugality mean I take this a little bit too far. I should become more prepared to pay for and honour quality and distinctiveness.

    Choose diversity in what you do

    You may think you want to lie on the beach or play computer games all the time. Too much of any one thing isn’t good for you. Mix it up. You have the opportunity now your time is your own. Seize it. If you’re sitting in the same place for as long as you were at work you’re probably doing something wrong even if it is on the beach or at a computer game.

    Does retiring early kill you faster?

    Towards the end of his piece Monevator opined,

    Incidentally, I also think retiring early is bad for your health.

    This is a hard subject to get any accurate research on. For starters, people who retired early in the 1970s and 1980s tended to be be educated white collar workers, which is a shocking sample bias. These guys are going to be richer than the general population, and, surprise surprise, richer people live longer anyway. Pretty much everyone reading this will probably have a longer life expectancy than average all other things being equal, let’s face it the poor don’t read about personal finance and early retirement because it’s not relevant to their lives. There are just too many confounding factors and statistical wrinkles to establish facts with a decent confidence interval. We diverge more and more from each other as we get older – at graduation you had more in common with your peers than you’ll have with them at the reunion year when you all start drawing your State pension. There are more subtle forms of sample bias. Some people retire early for health reasons, arguably I am one of them, although for mental rather than physical health. If you retire early for physical health reasons then you’re loading the dice towards shortened longevity, I don’t know what the stats on that are like for mental health. For physical health reasons it’s probably still the right thing to do – for you, and for the same reason as retiring early was the right thing for Paul Tsongas. You gotta play the hand you are dealt.

    There’s an ESRC report that concluded 6

    “Early retirement is generally good for people’s health and wellbeing unless it has been forced on them,” the study said.

    “Those forced into early retirement generally have poorer mental health than those who take routine retirement, who in turn have poorer mental health than those who have taken voluntary early retirement.”

    A moot point for me then. Arguably it was forced upon me, although I did not retire using any formal ill-health procedure, and indeed took an active part in the decision to retire early but using voluntary early retirement mechanisms. In that case Monevator’s prognosis is right and  I will die younger than my parents. OTOH I can hardly say the ESRC’s narrative on mental health squares with my experience of life post retirement 😉

    There’s sport for both of us in Sing Lee’s interesting piece using the pension funds from several big American white-collar employers’ pension funds. I confess that I agree with Lee in that technical creativity is probably at it’s peak in the 10 years around 30. Although he took a lot of shit for it Mark Zuckerberg was probably right that young people are just smarter. If people stopped berating him for his political incorrectness and listened to what he said, he proffers a mechanism which makes a lot of sense to me

    “Young people just have simpler lives. We may not own a car. We may not have family.” In the absence of those distractions, he says, you can focus on big ideologies. He added, “I only own a mattress.” Later: “Simplicity in life allows you to focus on what’s important.”

    Looking at the other end of the working life arc Sing Lee’s 2002 talk of over-funding of pension funds sounds delightfully naive now – he didn’t realise that the developed world was going ex-growth after the dotcom bust. However, when he charted the years of retirement versus age at retirement, I think his narrative is pretty much along with the narrative what I did, although I didn’t have the strategic vision and just ended in a tactical firefight.

    The pace of innovations and technology advances is getting faster and faster and is forcing everybody to compete fiercely at the Internet speed on the information super-highways 7. The highly productive and highly efficient workplace in USA is a pressure-cooker and a high-speed battleground for highly creative and dynamic young people to compete and to flourish.

    However, when you get older, you should plan your career path and financial matter so that you can retire comfortably at the age of 55 or earlier to enjoy your long, happy and leisure retirement life into your golden age of 80s and beyond. In retirement, you can still enjoy some fun work of great interest to you and of great values to the society and the community, but at a part-time leisure pace on your own term.

    On the other hand, if you are not able to get out of the pressure-cooker or the high-speed battleground at the age of 55 and “have” to keep on working very hard until the age of 65 or older before your retirement, then you probably will die within 18 months of retirement. By working very hard in the pressure cooker for 10 more years beyond the age of 55, you give up at least 20 years of your life span on average 8

    But anecdotally I see where Monevator’s coming from. I’ve seen people retire and then pretty much switch off. My Dad did this. He retired, at 65, from his job as a fitter, and while he didn’t zone out totally he watched far too many crappy TV game shows. On the upside he was also stuck to Teletext and share prices 9, he read company accounts and went to AGMs, as well as gardening and the occasional travel. In support of Monevator’s angle, as a non-early retiree, he got to 86 before leaving this mortal coil, which is still 16 years of extra time over his allotted three-score-years and ten.

    Retiring early does hit people who get a lot of meaning and self-esteem from work. It’s not inconceivable that if they lose meaning from life they may live shorter lives, and certainly have a lower quality of life. The obvious answer is ‘don’t retire early’.

    Notes:

    1. I still indulge the passion for electronics in making instrumentation, it’s of course different from the purely analogue world I cut my teeth on as a teenager but still fascinating. But there’s no point in trying to make money from it, too niche, too much regulation and too many Chinese copycats ready to eat my lunch. OTOH I would probably still be an employable bench tech/engineer, because there is still some niche instrumentation being made in the UK. But why the hell would I want to drive to Cambridge every day?
    2. pinched from Albert Camus, Return to Tipasa
    3. I am not a passive investor, because to build my portfolio I had an extremely short timeframe of only a few years. My contributory investing career is almost done now. To me valuation matters for new money, and 2009 was a good year to apply that. I may become more passive after I have finished contributing, though I will leave my HYP in place for the zero carrying cost and the income.
    4. If you get an endorphin rush, have masochistic tendencies or simply like the stale smell of sweat and pheromones, then damn well go for it – there’s nothing wrong with gyms if you can afford the money. I just don’t think they are essential.
    5. Old World only – don’t do this in Australia, where if it moves it wants to kill you
    6. I had the devil’s own job trying to locate this. It is called “Health And Well-Being In Old Age: It’s Still Money That Counts” by the ESRC in 2009 The press can get it from Science Daily
    7. how delightfully anachronistic, I haven’t heard reference to Al Gore’s information super-highway for years, it’s so AOL Connie
    8. Sing Lee does stand somewhat charged with inferring the general from the particular. For starters his stats about longevity are typically from people who retired 30 years ago, so the pressure cooker pace of change wasn’t so bad. Some of the jobs will have been more physically wearing 30 years ago which may have taken a physical toll. There’s no good answer to the delay in longevity statistics, we will find out what early retirement really does for my age cohort in a few decades.
    9. this was pre-internet
    19 Jul 2016, 3:11pm
    housing personal finance:
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  • Residential property investment success with Castle Trust

    Every Briton loves residential property, because ever since 1993, every man and his dog has been able to clean up with buying UK residential property. What’s not to like – no capital gains tax, banks lend you shedloads of money to buy an asset you otherwise couldn’t afford and no marked to market margin calls. Hell, they’ll even lend you money to buy other people’s houses, which is why we have middle class parents with buy to lets wringing their hands that their precious offspring can’t get a foot on the housing ladder and rent into their 30s.

    Three years ago Cameron decided to add fuel to this fire buy lending more money to people that couldn’t afford to buy houses, called help to buy. This pissed me off so much that I decided it was time to get in on the action. I didn’t want to buy a house for other people,  because I distrust the British property market more than Bernie Madoff because of what it did to me early in my working life, when I stupidly bought a house on five times my annual pay, albeit with a 20% deposit.

    It’s really hard to describe how much that buggers you up financially. Put it like this, my shareholding net worth is considerably more than my housing net worth. The latter I built up painstakingly from that early start across 20 years (until I discharged my mortgage). The shares I started in 2009 – okay so I was at the peak of my earning power and particularly keen to amassing capital, but nevertheless, accumulating housing wealth was a slow horrible grind for me, I was underwater for ten years.

    Since Cameron was giving out free money I decided that I may as well put my hand out for some of it, So I went with a Castle Trust Housa. I only went with £1000, because I was about to pass through a few years of lean times living off capital and investment returns, so most of my spare capital went into stock market investment. As a term lump investment with no income this was exactly what I didn’t need, but I did it for the principle. I didn’t incur any dealing costs or liquidation costs. and they have now sent me this letter

    housaOccasionally, in the three years since taking this out I’ve suggested it as something to consider for people saving for a house deposit bemoaning that the deposit gets overtaken by rising house prices. It makes sense to invest the deposit in something tracking the asset class, and while the Halifax house price index will never track the prices of the house you want to buy in a particular part of the country (particularly if it’s London), I was drawn to the Housa precisely because it was an index product.

    It was very illiquid – there was no secondary market for Housas, so if you needed the money within the three years (or five years) then you were simply SOL. There was obviously provider risk, Castle Trust used the Housa money to advance mortgages, a delightfully simple principle reminding me of the halcyon days before everything became financialised, you know, where real people clubbed together to help other real people raise the cash to buy a house. We used to call them building societies before they lost their soul to abandoned credit controls under Thatcherism, financial deregulation and greedy carpetbaggers.

    I wasn’t depriving some poor first-time buyer from buying a house 1 by front-running them and renting it back to them as a buy to let. So all in all an easy win. The 30% win is neither here nor there on this amount – perhaps I should have borrowed money to up my stake, but it is the first time I have managed an unequivocal profit on UK residential housing, unlike 99% of my fellow countrymen.

    It’s a shame this low-cost way of investing in the house price index has gone

    Castle Trust clearly want to get rid of this index product – they will only pay it out, not roll it over, and what they are offering now is nowhere near as attractive or even useful as a house price hedge. They are now offering basically fixed-rate corporate bonds on their mortgage business. The Housa was also secured on their business and I recall it made me uncomfortable at the time, but I was happy to take the haircut if the house price index fell, which would automatically ease the pressure on the company if people started defaulting. What made the Housa attractive was it had no carrying costs, purely the risk from the index and the provider risk, and since it was secured on the asset class underlying the index I felt okay about that. I won’t touch their alternatives.

    The problems for house buyers deposits are still that a sequence of Housa bonds or equivalent doesn’t really match how you want to use a deposit – you save over the years and then want to commit the entire deposit to the house purchase, at some unknown date.  You’d have to stop saving into housas three years before you buy, the flexibility is dire compared to a liquid alternative you can dripfeed into –

    Spread Betting

    You used to be able to spreadbet the Halifax house price index with IG Index, but the carrying cost of spreadbets is surprisingly high at 2.5%, pretty much the same long or short. You get the advantage of liquidity, unlike the Housa, but you pay that cost and a spread. On the other hand leverage is easy with spreadbetting. I don’t know if I were a young person trying to track deposit whether I would be tempted by leverage. The old head on my shoulders now looks at that and just seems despondency, desperate costs and massive tail risks, but on the other hand it would offer someone the chance to gear up if they feared prices escalating away from them.

    Part of the trouble with house prices is the cycles are slow, so all these annual costs can rack up and kill you because the underlying volatility and gains are too low. They look huge because a house is such a large purchase, Moneyweek had an interesting article on why spreadbetting sucks on house prices. It brings home just how much of a shame it is that Castle-Trust’s carry-cost-free alternative has gone.

    A young person will be more dynamic and risk-taking than me, and they have the advantage of having nothing to their name, so if their spreadbet goes titsup they have the option of walking away from their debts by declaring bankruptcy. I’m not advocating the idea, but faced with years of saving and falling behind, I can see an attraction is taking the risk if they are prepared to go through six tough years if prices fall. I considered walking away from massive negative equity in 1990 and going to work in Europe 2

    Low interest rates are no kindness to new house buyers

    It is a shame that we have no financial products that can help the young save in a deposit that at least tracks house prices. The very low interest rates now have decoupled savings from house prices with the pernicious rise of people talking about affordability – ie how much can you borrow at current interest rates assuming this will hold for the next 25 years. You amass equity very slowly at high income multiples, so you are exposed to the risk of negative equity for much longer in your working life than previous generations, and low inflation doesn’t help erode the real value of the principal. True, they had to suck up higher interest rates than now 3 but that has a silver lining – it incentivises overpaying, because that delivers a real win even on small amounts. The maths that make affordability good at low interest rates and high income multiples also make paying down the capital harder (because it’s a bigger proportion of your pay) and less worthwhile, you’re effectively renting the money from a bank, and much closer to the renting situation generally, even if you think of it as ‘owning’ the house.

    Even if we did have suitable financial products it’s no competition with buying a house on a mortgage, and you can’t live in your house price index bet either, though at least you don’t pay capital gains on it, should you have any.

    UK housing is a harsh mistress in a downturn

    …but she’s put on a lovely face for nigh on 25 years, tracking and soaking up the massive expansion of credit. So I’m inordinately chuffed with my £300 won from this most toxic of markets for me. True, Brexit seems to have done me several orders of magnitude more good in the numbers attached to the shareholdings I bought, which is just as well as I want some compensation for the damage my buccaneering countrymen have done to my financial future. And I am staying well out of the UK residential housing market in future – even if Castle Trust had offered me a roll-over I’d have walked away.

    Winter is coming to Britain. People are going to lose their jobs, and a good part of the reason for Brexit is that globalisation is making the lower part of the jobs market more and more crap, to the extent that middle-income families are getting 30% of their income from welfare. These are not people that will be able to afford to spend more and more of their non-income on housing, particularly if inflation and interest rates rise. If there’s one market I want out of, it’s UK residential housing, and now I’m out I’ll stay out until it has its Minsky moment.

    Notes:

    1. Castle Trust do lend to landlords too, so I could have been shafting the young by proxy
    2. I appreciate the poignance of that now, but heck, I was a Bremainer, so it wasn’t me that hurt this option for twentysomethings
    3. I paid 6.5% for most of my time and 15% just after buying the house (from a start of 7.5% in 1989)
    12 Jul 2016, 9:49am
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  • Down the rabbit hole

    This is gonzo politics and puzzlement. What goes for normal service will be resumed when the dizziness goes away. I’ve tried to be equally offensive to all sides here, because none of them comes out with great glory.

    I’m wondering if someone’s put LSD in the water supply. It’s less than a month since some of us including me discovered the limits of our filter bubbles. It’s like waking up covered in engineer’s blue with a cow looking at you strangely and surrounded by Swiss guys in lederhosen and thinking “Eh? I only started out last night with three bottles of cider in Croydon”. There’s only one thing to do – invoke the spirit of Yeats

    Turning and turning in the widening gyre
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,

    Vada a Bordo …Cazzo!

    Where’s Gregorio Falco when you need him? Been less than a month since the referendum and we’ve discovered that Cameron is made of the same stern stuff as Francesco Schettino. Having run the ship aground trying to appease the headbangers in his party that lacked the spine to join UKIP he starts calling for Mummy and abandons his post as the ship is taking on water. We then see a string of effective knifings and backstabbings which end up with the last woman standing allocated the role of top dog, while loathsome Leadsom who asserted having children uniquely qualified her for the top job exits stage left at the eleventh hour, pursued by a bear, the press pack and her own folly of denying the evidence of a tape recorder. Beware the hermeneutic rule about the bullshit before the but, dear lady, you parse such sentences by crossing it all out from the beginning until the t of but…

    Yes. I am sure Theresa will be really sad she doesn’t have children so I don’t want this to be ‘Andrea has children, Theresa hasn’t’ because I think that would be really horrible but genuinely I feel that being a mum means you have a very real stake in the future of our country, a tangible stake. She possibly has nieces, nephews, lots of people, but I have children who are going to have children who will directly be a part of what happens next.”

    1607_mummy2560

    Children – not prohibitive but not necessary and not sufficient to be PM, Andrea

    Reproduction has been done since time immemorial with unskilled labour, and anyway, that’s not why we’d hire you to run the country, though I admire the swift decision to exit the kitchen due to an excess of heat. Next time feel the bloody door for heat before you open it, huh?

    Back to the seminal question of the rabbit hole. Not only did I discover something about my fellow countrymen that I’d rather not have known, but okay, at least that’s opinions and like other parts of the anatomy we’ve all got one. It’s the succession of ghastly putative leaders in quick succession that did my head in:

    the effete narcissist BoJo, motto “think only of yourself” and let the devil take the hindmost

    cut down like a tree by the creepy wierdo Gove, who is apparently clever though he despises expertise in its many forms, frying pan, meet fire,

    Leadsom’s self-immolation would have been entertaining if it hadn’t been for the real possibility of her trying to steer the ship off the rocks, presumably into a watery grave because she mistakes enthusiasm for ability. After all, Angela Merkel is child-free and appears to be a competent head of state, though perhaps not a competent head of the EU finance department… more »

    1 Jul 2016, 12:18pm
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  • Those stock market rises you’re seeing ain’t real, guys

    I am surprised at the nonchalance in the UK personal finance scene about the fall in the pound as a result of the Brexit vote. I am not making a long-term prognosis about whether or not Brexit is a good thing, but what is incontrovertible is that it has led to a sudden drop in the pound relative to other currencies. To avoid the vicissitudes of other countries’ fortunes I am using IMF Special Drawing Rights to compare the pound with. Let’s have a definition

    The value of the SDR is currently based on a basket of four major currencies: the U.S. dollar, euro, the Japanese yen, and pound sterling. The basket will be expanded to include the Chinese renminbi (RMB) as the fifth currency, effective October 1, 2016.

    Since the SDRs include the pound, a fall in the pound slightly devalues the SDRs, so the picture looks slightly better than it really is for a drop in the pound 😉 If you don’t trust those cheese-eating varmints at the IMF you can see the same effect in the good ole United States Dollar down below.

    A fall in the pound relative to other currencies makes us poorer than the rest of the world. We have to exchange more pounds for foreign goods – these foreign goods include most of the food we eat and the fuel we heat our homes with and put in our cars, it’s not academic. Because of lags in the distribution of goods this shows up as higher prices over time, typically over a year. I was a Remain voter so my view is that this change is a strategic impairment of the pound. This is my opinion – it is perfectly possible that the pound will rise over the coming year as the myriad delights of Brexit make themselves manifest in a cornucopia of joy. In that case my thesis is entirely wrong, and it will all come good. If you believe, nay, if you know that to be the case then save yourself the trouble and stop reading this pusillanimous piffle right now.

    Let’s have a fact check – has Brexit made the pound fall?

    1607_xdrytd

    how many IMF SDRs (ticker XDR) for a pound

    I think that’s a yes, so far. Probably about 10% this year. It’s not the only time, we all got a hell of a lot poorer following the financial crisis. Stands to reason, we make jack shit 1 and sell financial services, and the GFC was, well, a global financial crisis. And that’s what most of the services are, I guess.

    We don't really make anything any more. Source is linked to image (fig 8)

    We don’t really make anything any more. Data source is linked to image (fig 8)

    So we took it straight between the eyes

    the 10 year story

    the 10 year story

    Does it matter?

    Well, Britain imports most of its food and fuel, while we focus on being clever whizzes at financial services, Ricardian advantage to the fore, eh. So you get to pay more for that food and fuel compared to people in other countries. However, there have been deflationary effects on these – the oil price has dropped since the GFC for instance. So let’s narrow this to does it matter to investors?

    Well, yeah. Let’s take a look at the price of VWRL in pounds. Hmm, that’s not so bad, it actually went up after Brexit. I managed to buy some in the confusion, so I am feeling chipper, look at me, ain’t I clever?

    VWRL in the GBP I have got

    VWRL in the GBP I have got

    Now if I were an American and had done that after the initial drop, I would be feeling different. Not bad, but no turbo boosters from the falling pound.

    VWRL in the USD I haven't got

    VWRL in the USD I haven’t got

    So the fall in the pound has made foreign assets dearer for me compared to if I were not buying with pounds. While that makes me think whoopee-do when I look at my ISA screen and I think hey, I am a fantastic investor. Not only did I stay the course through Brexit and even buy, I am up on the deal because all the numbers are going up, it also means something else.

    I have lost my compass

    I have lost my main navigational instrument, and my ISA allowance has just fallen by 10% in real terms compared to the rest of the world. So have my tax allowances, and for those rich enough to worry about such things, so has your Lifetime allowance.

    Now one of the cogent arguments against this mattering is

    Some commentators seem to think that there’s both a perfect level for sterling and that they know what it is. I didn’t hear wailing when sterling fell from over $1.70 in 2014 to under $1.50 in 2015. If it ends up at c$1.40 after the current turmoil, so what? No need to sacrifice our first born to Cthulhu just yet.

    Well, I was wailing earlier in the year 😉 There is something up with me, I am much more nervous about the pound than most other people. It scared me in 2009 as I was shovelling money into foreign assets in my AVCs while Mervyn King was printing money and devaluing the pound. So let’s take a butcher’s hook at the GBP against USD (unfortunately I couldn’t find one for IMF SDRs going out that far)

    GBP against USD

    GBP against USD

    This is not a continuous story of success, or even random noise against a mean, and it’s a headwind against UK investment – even against the Euro we are 20% down over the same period. If I’d held exactly the same portfolio as an American investor over those 12 years, I would pat myself on the back because my numbers on my screen would have risen 40% up on his. And I would be lying to myself. The truth lies somewhere in between, and we normally just don’t see that.

    So I’m not saying I know what the perfect level of sterling is. Devaluation of the currency is how governments charge us for the taxes we aren’t prepared to pay for the services we demand, though this last hit can’t be blamed on the government. So while I don’t know what the level should be, I do know that it’s headed in the wrong direction, has been for years, and I’m getting poorer relative to the rest of the world if I hold cash in GBP. We will notice that in higher inflation in the years to come, particularly if the oil price continues to rise in USD. Of course Donald Trump may help us with that in November, though I suspect we may have other problems then.

    It is true that long term adjustments to exchange rates are A Good Thing. It allowed the Greeks to pay themselves more and more and feel good about that while the Drachma depreciated so tourists could still afford to go there and their rice filled vine leaves were cheaper in British supermarkets in Pounds. And then they joined the Euro. Basically floating exchange rates allow you to be lazy bastards collectively relative to the rest of the world and get away with it. If somebody asks you to take a pay cut of 10% there’s hell to pay and rioting on the streets. If you get the same pay and you currency drops by 10% then there’s the same fiscal result but no rioting. Stopping that happening is the original sin behind the Euro, but that’s a fight for a different day. I am still of the opinion that the Euro will blow one day, and we may be glad of our Brexiteering spirit as blood and guts rain down in the aftermath.

    Those stock market rises you’re seeing ain’t real, guys

    And being less productive is what we have all just voted for, but I am surprised at the simplicity of UK investors so being chuffed at their portfolios going up. Now of course that’s a win on having sat on the cash, or worse still, having sold and then rebuying, but do the thought experiment. Say you bought your portfolio with pounds the night of the Referendum. For some reason it bounces, so you issue the same purchase order now. And it’s dearer, so you get to pay more money for the same portfolio. That is Not a Good Thing. When that happens to the price of food, petrol, Starbucks lattes, wine and German cars that won’t be a good thing either.

    Which is why I wince when people celebrate on the rise in the stock market. It’s not real. Indeed, my portfolio is the highest it’s even been. My pension will be worth less, the cash I hold is worth less, yes I am richer in the ISA but poorer is so many other areas. Oh and I am stuck on an island with these guys.

    1607_stuck

    Deep joy. I’m putting a hold on the champagne.

    Notes:

    1. we actually manufacture more in real terms value than we did in the heyday of manufacturing in the 1970s, but do it with far fewer people
    27 Jun 2016, 10:16pm
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  • Brexit damage limitation

    We have decided to quit the EU. It was a democratic decision with a gap of over a million between the sides, so it’s pretty clearly what the majority wanted. Unlike many Remainers and a large part of the London/finance set that make up the PF blog community, I have sympathy for the part of the Leave community who say their wages and jobs pushed down by the free movement of people after the A8 accession of countries that were much poorer than the UK. I believe their choice is not in their long and medium term interests nor in mine, but I can see where they came from.

    The little Englanders and harkers back to Empire I have little time for. Let’s hear it from Boris Johnson on this

    We used to run the biggest empire the world has ever seen, and with a much smaller domestic population and a relatively tiny Civil Service. Are we really unable to do trade deals?

    We used to run the biggest empire in the world because we industrialised first and had the edge on being able to clobber other places into submission. Things have changed in 100 years peeps. The modern predilection for everyone’s a winner would have no truck with the entrance exams for the Empire Civil Service.

    I want to preserve my capital against the own goal that is Brexit. I may have sympathy with many of the people who voted Leave, but I don’t want to sponsor their decision any more than I have to.

    You wouldn’t start from here (after the Brexit result)

    as the classic joke says. Fortunately I am not coming from a standing start. I started a while ago. In 2009 my HYP was largely FTSE100 based, I’m fortunate in not having great exposure to banks because I can’t value them and only a small exposure to property/housebuilders because UK property scares the bejesus out of me. But I didn’t like the geographical bias and started to shore it up with an outer circle of index funds in emerging markets, Dev world exUK and more recently VWRL world equity trackers. I was aiming for focusing less on finance and more on Life, because I was dealt a good hand by Osborne in being able to use my DC pension savings to front-run my main pension.

    My main problem is that I hold sterling assets. And the big problem is that sterling will become increasingly worthless as trade and foreign investment falls. We’ve already taken a massive hit in the financial crash. I am particularly exposed to this as people still working may see their wages rise with future inflation, where as my networth is the accumulation of previous earnings. On the other hand I have advantages – redundancy is not a threat to me and I don’t owe anyone any money.

    XDRs are a basket of currencies, against the £

    XDRs are IMF Special drawing rights,  a basket of foreign currencies, against the £. I use XDRs because individual currency pairs just show relative changes, XDRs are the luminiferous aether of forex which gets us away from all this relativism…

    Okay so a lot of it (more than half) are foreign assets denominated in sterling, so the fall in the pound will merely give me a false impression I am a great investor by raising the numbers on the screen  rather than make me fundamentally poorer in these assets, but in the end my pension is in Sterling which is most of my effective networth. Unlike some I don’t consider my house in my networth so I am neutral on that and I don’t own any rental property, so if house prices fall I don’t feel that is a bad thing.

    price of gold in pounds

    price of an ounce of gold in pounds

    Oh and I bought a lot of gold last year, because the ermine is a skittish creature and the 2015 valuations of the UK stock market and the US stock market, together with the infinitesimal chance of Brexit 1 scared me, and people thought gold was trash, witness the GBP/XAU chart. OK so I sold some of it before the referendum to half-split the profits which was a bad move in hindsight, but I still took a profit, and I will hang on to the ballast of the rest for a while. Unfortunately I also hold a lot of cash because I have only recently crystallised my SIPP. My dear fellow countrymen have made me 25% poorer in real terms last week, this will come through in the price of imported goods like food and fuel and pretty much anything I do if I stick a paw outside this sceptred isle.

    1606_wilson

    Harold Wilson was quite right in my schooldays when he said the pound in your pocket will stay the same. It’s what you can get with that pound which changes, so I really need to do something about that cash. I have already started with some of it into VWRL, and will drip feed some of the rest as I extract it below the tax threshold into VWRL. I will accept the risk of a market crash in five years time when I will have run the SIPP flat; I will start coming out of the market in four years time and if I take a hit on the SIPP I will start to take income from the proceeds of the ISA. And if it all turns into tears in falling rain, well, that’s just the way things pan out.

    I owe Monevator a few beers – my original HYP was heavily UK based with big fish from the FTSE100. But his diversification articles were compelling, and I shored the UK core up with Devworld Ex UK and emerging market index funds. In the HYP I was fortunate enough not to have a predilection for banks (how do you value a bank?) or house-builders, though my REITs look like sick puppies 2. For some perverse reason my ISA ended up on the week 3 though it took a hit early Friday. But I have bought more gold and more VWRL. The obvious choice is in many ways Lifestrategy100 but the GBP version is too UK biased, hence a favouring to VWRL. World equities are tanking too, but the pound is tanking faster.

    I’m interested in ideas though, what if anything do readers think as a way of losing less capital through the troubled times to come? Or is it as simple as sometimes you have to stick your head between your knees and kiss your ass goodbye… This one is big, and it’s bad.

    Notes:

    1. as perceived at the time, but you should always bet a bit against your prejudices
    2. It’s not like these bad guys are underwater yet, but it’s getting that way
    3. denominated in the increasingly worthless pounds
    24 Jun 2016, 11:12am
    personal finance:
    by

    42 comments

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  • Dude – where are my shares? Brexit across-the-board ISA fail

    An ermine wakes to a new world and it appears I was on the losing side. The good thing is that at least the outcome of the Brexit referendum is clear; a four point lead isn’t handsome but it’s not a knife-edge. So I thought I’d open a bleary eye and perhaps buy some shares with my increasingly worthless pounds. At least I am not afraid of redundancy in the shitstorm to come, and it’s an ill wind and all that. So I whip out my TD ISA, and consider buying, to discover that my six-figure ISA has been looted – evaporated into thin air, pffft – just like that. The robbers only left a little smattering of cash, I ought to be able to buy a bag of peanuts with it on the world markets in a couple of months 😉

    TD ISA FAIL

    TD ISA FAIL

    Bummer. So I yomp over to my Hargeaves Lansdown SIPP, and observe some shocking spreads, see if I can buy. I don’t actually want to buy in a crystallised SIPP cos of tax, but hey, any port in a storm?

    HL - computer says NO

    HL – computer says NO. I’m not actually sure I wanted to buy VMID at that price but it was the first code I could remember and I’ve never bought in HL before.

    We’ll see later on in the day, eh? Update at 10am – TD have given me my shares back. I am amazed at the fightback – I have lost a whopping 3% which is neither here nor there for the market mayhem promised. I mean, for God’s sake, does nobody remember January? The VUKE I bought then is still 5% up, FFS. This could, of course, be because the pound is going down the toilet so fast that the weight of the foreign assets I hold are lifting the numerical picture. This is then an optical illusion – my fellow countrymen have probably made me 25% poorer in real terms. Thanks guys.

    Now that I can trade I bought some VWRL. There’s a race going on here – the little matter of Brexit seems to have frightened the global horses more than I had expected, which makes it cheaper. As you can see it in USD

    VWRL in the USD I haven't got

    VWRL in the USD I haven’t got

    So I bought some in the GBP I have

    VWRL in the GBP I have got

    VWRL in the GBP I have got

    where you can see the pound falling faster than the assets. But to be honest I can’t actually see Brexit being such a huge deal for the rest of the world in the grand scheme of things, and if it’s good enough for Lars Kroijer it’s good enough for me. Yes, I paid more than I would have done yesterday, but then I thought Remain would win. Though I hold a lot of gold just in case 😉

    About the other passengers on the Brexit bus, there’s more of them that I thought…

    UKIP poster for leave says something to me, and I am not sure I like it

    UKIP poster for leave says something to me, and I am not sure it’s a good sign…

    The worst thing about the result is the thought of cocks like Farage and Boris running the country. Still, the will of the people has spoken, a primal scream against globalisation and austerity as well as a FU to the EU. Let’s hope the good people of the British hinterland who voted leave feel a bit more chipper about their jobs and public finances in a year’s time, eh. There were many good arguments to be made on both sides. One of the greatest wins of Leave would be the proletariat not having to support the landed gentry through farming subsides any more, but sadly that was promised away. It seems a curious own goal – the CAP is about 40% of EU spend and ceasing this redistribution of wealth from the poor to the rich would seem an obvious win 😉

    I didn’t like the people on the Leave bus, and it turns out the represent the slight majority of my fellow countrymen. I will investigate if I can get German citizenship by jus sanguinis – sadly it is through the maternal line so although it will help me I am not automatically entitled as it would be had my Dad been German. I was able to easily pass the citizenship test from my general knowledge of the principles of a democracy and a decent guessing of the German character, but my German is not good enough at the moment. I am in no hurry to cease being British, but I would like to see if I can get dual nationality and become a citizen of the EU. Some of the ugliness of the Leave side, in particular the potent racism and xenophobia, makes me a little bit scared about the Britain I will grow old in. I would like to have the option of somewhere to run to 1 should some of the heart of darkness I have seen recently begin to rise – neither of my parents was British by birth. When my mother came to Britain in the late 1950s, she had some trepidation, because of course only a decade before Britain and Germany had been at all-out war. She found 1950s Britain was a kind and tolerant country, and while there was the odd piece of hostility it was far outweighed by the gracious and kind welcome she encountered. I hope this is still part of our national character, because it was not overly apparent in the referendum campaign on either side. In general while there have been remarkable increases in tolerance and acceptance of differing lifestyles in the 60 years since she came, tribalism and incivility seem on the rise in a lot of areas.

    But perhaps I am seeing through a glass darkly; I didn’t get what I voted for. Britain is still a rich country with stupendous natural beauty and I believe a basically decent people. Perhaps they showed more wisdom – after all, I viewed this referendum as running against the tide of history, I would be surprised if in 20 years the EU were the monolithic mass it is now. I would be very surprised if the Euro were still used by as many countries as it is now, indeed if it still existed at all. I am not omniscient – there is heart of darkness enough in Europe, perhaps I will grow to be fond of the English Channel again from the vantage point of Das Inselreich.

     

     

    Notes:

    1. It’s always good to have options, I’m not giving a view on what will happen.
    20 Jun 2016, 3:00pm
    reflections
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  • Imperial College sends me an indirect message from Oswald Spengler

    Half a lifetime ago I went to Imperial College to study Physics. I then took some of this knowledge and used it in the world of work, I got to use stuff like Laplace transforms etc in filter design, and generally applied a bit of it. However, perhaps the biggest win was learning how to learn. Imperial reflected to me just how much the world has changed in a shade under 40 years, with an offer of free drinks too!

    Imperial in the City: Networking event for alumni working in finance
    29 June • 18:30 – 21:30 • Corney and Barrow, Canary Wharf E14 4EB

    This networking event is a great chance to connect with other Imperial alumni working in finance. Your first two drinks will be complimentary, courtesy of Imperial College London, if you register in advance of the event. Please also bring your business card for the chance to win a bottle of champagne in our prize draw. Spread the word among fellow alumni in the finance industry.

    Peter Thiel, Donald Trump 2016 supporter and personal grudge holder extraordinary 1, summed up the reasons why the West’s economies are faltering and returning less on investment. Now while Thiel is a pretty odious character IMO, he is a brilliant guy and a sharp thinker. There’s no law that says character has to go with smarts.  I share his view on why the West has lost its mojo.

    We used to think the future was going to be better that today, and we used to have a damn good idea of how to go about it. We were often wrong, but we rolled up our sleeves and wrangled the world to make it more like how we wanted. It brought us decent sanitation, heated homes, longer lifespans. It also brought us reality TV, fast food and corporations too big to fail, but there has to be collateral damage in any enterprise. Thiel called this definite optimism – you’re optimistic and you know how to go get it. The young Ermine went to school in that world, all that jazz about people on the moon, much of the advances following the world wars made science and technology an interesting place to be, and I went to Imperial College to go learn Physics. Then I took some of this into the world of industry to go and make a few things happen, some of which were actually new.

    Something changed, I would say in the 1980s though it had nothing particularly to do with Thatcher. Somehow we lost our nerve, , and also some of our vision for the future. It’s understandable in Britain – ever since the 1920s Britain’s influence in the world fell away, particularly after the Second World War, and the US wanted the top dog slot anyway. But I didn’t expect it, and the problem affected the US too. I suspect the seeds were sown in the 1973 oil crisis.

    We became indefinite optimists – we thought the world was going to be a better place but we didn’t know the hell how. The answer to that is to corral financial resources – and let’s face it, everyone aiming for financial independence is an indefinite optimist. If you know what would work to make the world a better place you’d do it or buy it. But if you don’t, then in Thiel’s taxonomy you become an indefinite optimist – you accumulate general purpose capital because you then keep maximum optionality in taking advantage of whatever things will make the future a better place than today. You become a good passive investor, because you’re damned if you know what will work, but that something will if you diversify enough, because you are indefinitely optimistic about the future.

    Finance is indefinite optimism

    Indefinite optimism, writ large – in some ways finance is indefinite optimism encapsulated.There’s nothing wrong in working in finance – but thirty years ago Imperial’s graduates tended to go into industry.

    Money is a claim on future human work, and you have to be optimistic that there will be future humans and they will be prepared to put in the work for your symbolic tokens when you get round to cashing them in at an exchange rate that is acceptable to you. And good luck to y’all in your networking event.

    Someone got there before Peter Thiel, however, the German historical philosopher Oswald Spengler, whose magnum opus The Decline of the West paints the picture. All cultures experience

    “its childhood, youth, manhood, and old age”. “Each culture has its own new possibilities of self-expression, which arise, ripen, decay and never return”

    Spengler contrasted the earlier vital stages of a culture (Kultur) and the later stages when all that remains is a Zivilisation of people preoccupied with preserving the memories of past glories. Part of the essential myth of the West in continuous growth, it is a bedrock assumption and in contrast to some of the cyclical principles of Eastern thought – cyclical reincarnation had no place in the religious ideas of the West for instance.

    Declinism is, of course, an eternal draw to those in the second half of life – they project the micro onto the macro. And yet I see similarities in Spengler’s narrative, and in the Economist’s thoughtful Bagehot overview of the tribal debate otherwise known as the EU referendum, which hopefully we will be shot of in a week’s time. Perhaps it is all part of the bigger picture – the Gramsci quote cited by Bagehot

    “The crisis consists precisely in the fact that the old is dying and the new cannot be born; in this interregnum a great variety of morbid symptoms appear.”

    was quoted three years ago in the New York Times riffing on the same sort of thing. We are living through remarkable change on many fronts, and many aspects of the old order, assumptions that held throughout my childhood and most of my working life, are changing .The balance between labour and capital has shifted dramatically in Western societies. The assumptions of capitalism are also weakening in the presence of very large corporations who can dominate important sectors globally. Facebook and social media has largely reduced the open Internet and Web of the 1995 to 2005-ish to a lowly transmission mechanism. The British press is owned by press barons with a very similar outlook to each other so a monopoly of sorts – once we had regulations to control how much of the fourth estate was in one individual’s hands but of course deregulation meant the end of such dirigiste thinking. The nation-state itself is too small to tackle some of the global issues of our times. None of these problems are insoluble, but Gramsci’s observation is apposite, because the old is dying faster than the new is being born. This is inherent in the passage of history, because otherwise the old will try and strangle the new at birth, but it does mean there will be an transitional period. Transitional periods tend to be interesting times, and not always in a good way.

    I will grow old in the gathering interregnum, you dear reader, may have some chance of seeing the distant shoreline of the New. We do not know how long it will last, or if the sleep of reason will end before the morbid symptoms overtake the light. I made the mistake of following a link after the dreadful killing of a politician which led to Twitter. I don’t know what social media does to our brains, but the boorish lack of civility doesn’t give me hope. Intelligent discourse and civilised disagreement is necessary to feel our way to a new order. It’s been in terribly short supply over the last few weeks, in the vacuum the monsters seem to be multiplying.

    Goya's darwing from 1799

    Goya’s The Sleep of Reason Produces Monsters

    We could use some definite optimism, but maybe Spengler and Gramsci are right – the West has had a good run but it is time to pass the baton on to other civilisations, perhaps yet to be born. We have some attempts in the direction of definite optimism.

    1969

    1969 Apollo mission 47 years ago

    Perhaps the cynical me has not thought as a child for too long and I do admire the motivation behind Tim Peake’s work, but I recall what watching the Apollo moon landing in July 1969 was like. I was at primary school and less than half the households had a TV, but the school rigged a black and white TV in the assembly hall to watch this at lunchtime. There was none of the vox pop of schoolkids asking cheesy questions – we kids were amazed at adults doing really amazing stuff that captured the imagination. There was a much greater distance between the adult world and children’s world then, and I’m not so sure it was all a bad thing, it gave something clear to aspire to. I learned electronics as a child from books written for adults, not the facile handholding and visual props of the kid-oriented maker space 2 now.

    2016

    2016 Tim Peake addressing some schoolkids

    I haven’t yet worked out if in the intervening 47 years we have gone in the direction of bread and circuses or advancement, but good luck to them all on getting more people into science. Definite optimism or bust I say…

    Notes:

    1. Gawker shouldn’t have outed him, but that’s pressing his case with extreme prejudice and outside the rule of law
    2. only some of the maker space is child-targeted, but descriptions are much more process-orientated  rather than teaching the principles of operation and designing from them. It’s a ‘here’s this picture, now go lay out these exact parts in this exact way’ rather than ‘here’s the schematic, go make this happen somehow’
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