16 Oct 2017, 10:47pm
personal finance rant:
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  • So what does all this Brexit baloney really mean then?

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

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

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

    H.L.Mencken, 1915

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

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

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

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

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

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

    Cats will fight

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

    What does a successful Brexit look like?

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

    It should have been more nuanced – for instance

    Should the UK remain a member of the EU or leave

    Remain a member of the EU

    Leave the EU

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

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

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

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

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

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

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

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

    rich Brexiters fuss about sovereignty, the poor about immigration

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

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

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

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

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

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

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

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

    […]

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

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

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

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

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

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

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

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

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

    The personal finance angle – what to do?

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

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

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

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

     

     

     

    Notes:

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

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

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

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

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

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

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

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

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

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

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

    Faster Payments, once sent, cannot be cancelled.

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

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

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

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

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

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

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

    Notes:

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

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

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

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

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

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

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

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

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

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

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

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

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

    Access takes the waiting out of wanting

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

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

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

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

    Notes:

    1. If it were, it’s against Queensberry rules to take the piss, because the whole point of of an advert is to make you buy shit that you don’t need with money you don’t have to impress people you don’t like
    2. this was roughly the number of people on earth as when I was born
    3. MMM would tell me that had I invested the money at a 4.5% real terms ROI then as Monevator’s compound interest calculator tells me I would now be sitting on £25,000. I think the old Ermine would have socked him on the mush back because I had 36 years of enjoyment from that thing
    30 Sep 2017, 1:46am
    housing
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  • Michaelmas – a good time to get out of Britain’s favourite asset class

    The Ermine has lately been that pariah of the bien-pensant crew, a vile second homer. Not particularly because I wanted to oppress the young of some rural district but to give me some more time to move, and widen my options. As such I have been long residential property. When everyone else in the UK looks at residential property they see this

    but when I look at UK housing I see this

    Housing is a particularly evil asset class because you tend to be a forced buyer, initially when you get old enough to need to set up on your own or want to fire out kids. That’s basically a function of when you are born, then add about 30 years. There’s not much scope for riding out the market cycles which are very long with housing compared to the stock market.

    In our case although I was a free agent after retiring Mrs Ermine was very much connected with the location, but it started to get apparent that working in the open was starting to get physically demanding, and various things got in the way of even being able to get a field shelter. So it was time to move on, but the trouble was that just before we came to this conclusion, the good people of Britain decided they wanted the 1950’s back. I know that the protagonists say that dynamic Blighty is being held back by the sheet anchor of trading tariff-free with the EU and wanted to take back control, but the trouble with all that is none of them seem to have a clue. They don’t agree on what they want, and they have no idea of how to go about it. Brexit may mean Brexit but no bugger seems to be able to tell us how they plan to make it happen. Those that do major on bluster rather than substance, BoJo, I’m looking at you, while you’re not busy making our man in Myanmar’s toes curl by reciting Kipling in their temple, FFS. I know you want to recreate the glory of Empire, but not everyone is as fond of it as the Brexit brigade and as foreign secretary it behooves you to keep that in mind. Keep the Kipling for the Conservative Club, eh?

    The UK housing market seems to be in a strange place at the moment, puffed up by low interest rates. I wanted to go upmarket a bit, and there seems to be a strange effect of compressing prices. You seem to have to pay an awful lot to get anything at all, and not as much more to get a lot more house than when I last bought a house. We aren’t getting younger, so I wanted to do this before Brexit, not after, although people going upmarket want a housing crash. But I didn’t know if that compression would unwind, and in the end I don’t have enough time to sit out the cycle.

    So we bought the new place a couple of months ago and completed the sale of the old one recently. It’s good to be clear of it by Michaelmas – one of the old quarter days. The quarter days were traditionally days when debts were settled and when magistrates would visit outlying districts to administer their justice.

    “There is a principle of justice enshrined in this institution: debts and unresolved conflicts must not be allowed to linger on.

    However complex the case, however difficult to settle the debt, a reckoning has to be made and publicly recorded; for it is one of the oldest legal principles of this country that justice delayed is injustice”

    On the way to the Postmodern

    It is pure happenstance that this came good for me by Michaelmas, but I like the olde-worlde symbolism. Some commercial leases still cleave to the old quarter days for rent periods – I noticed some shops closed or moved in the last week or so, presumably when their rent period ended.

    I discovered that the trauma of the first house I bought runs very deep. Whenever I look at a house, in the back of my mind there is a siren going off which asks “yes but what happens if this falls by half in real terms” because that’s what happened to me. And there are parallels with 1989, cynics would say that to an Ermine every year has parallels with ’89 in housing – but:

    Prices were in the late 1980s Lawson boom because of government policy. Well, they’re high now because of government policy – 10 years of interest rates way below the long term average means people can ‘afford’ to pay stupidly high prices. I would hate to be bringing new money into this market – although we have bought ridiculously overpriced property we were selling overpriced property to buy it, and divesting ourselves of land which is a similar asset class.

    Then, in a couple of years, there was a recession in the early 1990s. Perhaps in a foretaste of Brexit we attempted to track the ERM and failed dismally in 1992. I was paying a mortgage rate of just shy of 15%. Unless you’re a rampant Brexit booster we have that recession coming our way, hell, we voted for it. If anybody wants to see what Britain’s free trade agreement with the US will be like, well, let’s see how it goes with Boeing and Bombardier, shall we? The Telegraph is steaming that May took dictation from the EU, but the US is the 900lb gorilla compared with the UK. It will be a case of “here are the terms, you sign here”.

    So we have high valuations, the only way for interest rates to move is up, and we have got a recession on the way. As the IPPR said in forever blowing bubbles

    In short, house price rises are particularly vulnerable to depart from fundamentals and are very hard to correct if they do. Meanwhile market actors are likely to suffer from momentum behaviour and have strong reasons to behave speculatively. So, we move from periodic bouts of fear of ‘missing the boat’, followed by the pain of negative equity and retrenchment.

    OK, so we haven’t heard much about negative equity for three decades. So it’s all different now and that will never happen again. Until it does. But at least I’m out of here. One bite of that damn cherry is enough for a lifetime.

    Buying a house is a lot more scary without a mortgage

    I last bought a house 20 years ago, with a mortgage for most of the capital. You never see most of the money, because a lot of it’s between the solicitors and the mortgage company. When you do it without a mortgage, massive amounts of money go flying in and out of your bank account – for starters the normal payment system seems to max out at £100k, so I had to go to the bank to initiate a CHAPS payment. Then of course there’s the  stress of trying to ensure thieving bastards don’t intercept email transactions, basically don’t let solicitors act on emails account details, face to face is the only way 😉

    You can borrow from your ISA under certain conditions

    I also learned that you can borrow from your ISA, this helped me capitalise some of the second house. To do that it must be a flexible ISA – not all ISAs are but it so happened that my Charles Stanley one was, although my TD Direct ISA wasn’t. I use the CS ISA for index fund investing, basically world according to Kroijer  with an L&G FTSE World ExUK tracker, to lean against the UK bias of my shares, matched with VGLS100. I sold a hefty chunk of this and took it out, as long as I put it back by the end of March I still have my entire 20k allowance for this year. Which is pretty neat. What borrowing from your ISA won’t help you with is if you need to borrow money across the April change in the tax year – in that case you lose the tax shelter.

    All this means my ISA is about 30% in cash now. I’m not in that much of a hurry to restore it to what it was before because the markets are at a high, but I am still regularly buying the two funds back.

    21 Jun 2017, 9:37am
    living intentionally Suffolk:
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  • A FIRE approach to air conditioning

    One of the advantages of being an employee is that The Man usually air-conditions your cubicle. Well, for knowledge workers, anyway, rather than, say, brickies or landscape gardeners. And the heat is on in England at the moment.

    Way back when, in the 2003 heatwave DxGF and I bought a standalone air conditioner and we thrashed that unit, but it used a horrific 3kW to sort of chill one room. It seems to take far more energy to cool something down through a certain temperature difference than it does to heat it up by the same difference, I guess these things are dreadfully inefficient, particularly standalone units that try and pump out the waste heat carried in air as opposed to dual systems with an inside and outside unit with the waste heat carried in a circulating liquid. So you get a 3kW heater in the room to add to the load. Not only that, you have to open the window a crack to get the exhaust hose out.

    We were grateful for that in 2003, but it made an unconscionable noise and power was cheaper in those days. 1

    Dunwich beach

    So it needs some lateral thinking. I need a large body of water, and the North Sea will do. Time to park myself down by the waterside and chill out to the waves –

    and the peaceful sound 2. There was a pleasant breeze off the sea – it was almost too cold.

    I did look around and wonder why the other punters weren’t at work – some were retirees but half seemed to be families. I can’t really moan that the beach was teeming like Benidorm.

    So the ermine air conditioning isn’t really that portable. But it does have some extra features, like the fine ruins of Greyfriars Friary

    Greyfriars, Dunwich

    and it seemed rude not to celebrate the moment with some fine dining

    Local strawberries and cream from the Friday Street farm shop just off the A12

    Londoners travelling up the A12 for a weekend break may want to note the  Friday Street farm shop, which is a few hundred yards detour off the A12 on the London-bound side. The strawberries and cream set me back £3.23 which I thought was a good deal for quality in both items, and they have a good range of foodie delectables. I paid roughly twice that in fuel. There are some that may carp that you can’t spend £10 for gratuitous decadence every day, but I have done my time of ultra-frugality now. No nightingales to be heard in Dunwich forest, where I’ve heard them in previous years, it’s probably too late in the season now

    Dunwich is noted for mostly having disappeared into the sea. In 1250 it was a rich port town of 4000 souls. Since then the sea has gnawed away about 1.5km of the coastline, so most of the old town has fallen into the sea. It is now a village of about 100 people.

    The last surviving gravestone from All Saints church, lost to the sea. This was Jacob Forster who departed this life March 12th 1796, age 38

    The sound of the sea is not far from Jacob Forster’s grave. It’s coming for him after two centuries of undisturbed repose…

    Mr Money Mustache will no doubt consider seeking air conditioning an act of pusillanimous weakness, but the trouble is that no part of Britain is very far from the sea, and in a maritime climate it always really wants to rain. Even on a hot day with blue sky – the inherent desire to rain results in high humidity. So things like swamp coolers work fine at the lower latitudes of LA, but are a waste of space and money here.

    In LA at the same temperature this would be way down towards the 40% mark

    So I am leveraging the fact that I own my own time, and summer is a good time to live like a king, reasonably cheaply. Strawberries and cream by the seaside is pretty good 😉

    Incidental rant: why doesn’t Britain have proper cadastral records?

    I came across this notice walking from the car park to the Friary:

    No cadastral records, no bloody clue

    Every other European country has a definitive land register of who owns what. But not in Britain. Because all the land was seized in 1066,  what the King didn’t keep for the Crown was handed out to the aristocracy, which hoards it and passes it down the generations, much of the land in the UK is not on the Land Registry, so you get situations like this.

    In any French village you can ask to look at the cadastral records at the Mairie to know who holds a piece of land. Isn’t it about time that we sorted ourselves out and demanded of the aristocracy and anyone else that it bloody well registers every single claim to every piece of land it asserts that it owns, and if no claim is made after 10 years then tough shit, it belongs to us all? After all, if it isn’t registered then Lord Warburton-Smythe can simply make sure everyone looks the other way when his sprog Jimmy Warburton-Smythe-Pollock take over that part of the family estate when he pegs it because no bugger knows about that acreage, because it isn’t on the records. Decent cadastral records would help catch sneaky buggers avoiding inheritance tax and would be a prerequisite to introducing a land value tax. It smacks of dire incompetence not being able to find out who owns what of a scarce and finite resource, and one every other civilised country has solved. But since the lack of transparency serves the aristocracy perfectly well, they won’t let anything be done about out it, the piss taking bastards.

    Notes:

    1. Americans will be tapping their heads, and go just get damn split system aircon, but I wonder how you have any hearing left. When I arrived in LA after a long flight and got to the motel the room aircon unit was on, and I thought I can’t hack this racket, so I turned it off. You don’t do that in LA in July – not getting any sleep was preferable to being fried 😉 Airconditioners I’ve come across in Europe are usually made by Japanese firms like Mitsubishi and are much quieter, but that thing was an all-American GE unit and made a terrible noise. Elsewhere in the city aircon seemed unwholesomely rowdy until you got to a Fortune 500 company offices or a bank. I guess people just get used to the noise.
    2. the intermittent rumbling is sadly the wind, I only had a handheld rig as I wasn’t expecting to do any recording.
    16 Jun 2017, 11:18pm
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  • Over 50s are big spenders on home and lifestyle into retirement and beyond

    Be afraid, people, be very afraid. Saga 1 tells us the over 50s are big spenders. It’s the beyond retirement that I’m intrigued by, have these profligate silver surfers found a way of borrowing from their own cold dead hands? I’m sure the intergenerational foundation would have something to say about that, but Saga?

    I’m sorry, but by the time you’ve gotten over 50. you shouldn’t be in the business of borrowing for frippery, For sure, you shouldn’t be paying down your mortgage if there are better things you can be doing with your money, like socking it into a pension or investing it. But if you want a new kitchen, and need to buy that sucker on the never-never, then you need to take a long hard look at yourself. Now there is a case to say YOLO, but only if you can be sure that you can outrun your debts. The advantage a young person has in going YOLO and living beyond their means is they have human capital in spades – their future self gets to work longer or harder to redeem their overspending. The finished at fifty, not so  much.

    For a fifty-something to play the YOLO game effectively, you need to be able to know the year you die. Now you can determine that, but it’s all going a bit Logan’s Run

    Jenny Agutter in Logan’s Run

    and often involves Dignitas. I’m personally of the opinion that a sentient being ought to be able to choose that option, but terror management theory generally induces most of us off the way of the Cylopes. It really would make retirement planning a damn sight easier, but the option is still an uncommon choice.

    So many new cars, Saga surfers, so few holidays, WTF?

    Saga say these over 50s buy three new cars in the decade 50-60 and yet only seven foreign holidays, which strikes me as odd, what’s with the materialism grizzled citizens of Saga-land? Mind you, Saga are one of the few banks to advance a loan based on income both from a pension and from savings and investments. The trouble is the usurous 7.9% APR. I’ve groused before on how an retiree is a loans pariah, even when the aim of the loan is to use tax allowances, indeed a 7.9% APR would be tolerable to get a 20% uplift. But not if you have to be a homeowner and it’s secured on the house. Although taking up a use it or lose it tax allowance is a reasonable sort of thing to borrow money for, it becomes non-reasonable if you open yourself up to the risk of losing your house or becoming a forced seller.

    Paying nearly 8% for a new kitchen or car before you have saved for it is just foolish in my view. and by the time you are into your sixth decade you really ought to have learned better. Unless you have a good reason to believe your future self will be richer than your present self, just don’t do it.

    The 50s is a very tough decade for the FI crew to get right

    This decade is tough for many reasons. You can’t get hold of your pension savings until your are 55 and rising, so a whole chunk of your savings may be sterilised, the old silo problem again. You are fast running out of human capital – it very much depends on the field you have been working in, but openings at the sort of salary you were on if you can consider early retirement may be rare. Your financial risk exposure to redundancy is high, and you have less time to catch up if it does happen to you. You may be at a peak of child-related spending unless you had your children very early in life. One of the notable features of the early retirees from The Firm before 55 was that they were mostly the child-free, and being out of the university expenses meat grinder was probably a big part of that.

    Retiring before 55 runs against the general way people do retirement, and it’s a more critical decision because just as you cut the power you have the longest glide path to sustain. It’s a hard balance to get right. Looking back, it is clear that I underspent in the early years following retirement in 2012. Compounding the error I earned a few lousy bits of money in a few one-off hit and run jobs and then picked up a steady income from some technical stuff and bookkeeping until last month. I never recognised these amounts as any useful amount of money, because they were typically less than 10% of what I had been earning when I was working, and I didn’t trust them, so they formed no part of my budgeting. But they seemed to make a surprisingly large contribution to the slowing of the fall in my networth, which was aided by the stock market being tremendously kind to me across the years 2009 to now, until I could make it with just my DB pension because I could defer it long enough.

    Much as I was a purist in that the aim of retirement was to bust The Man right out of my life, I discovered that it was freedom from the rules and the bullshit that I wanted, only later did I find it was also the freedom to do other things, which is why it is time to get work right out of my life again as my pension savings come on stream. No SHMD The Returned for me 😉 I am no longer self-employed as of this month, now that I have collected my second and last year of Class II NI contributions purchased at the spiffing price of £150 p.a. When I was on PAYE I was paying over £5k p.a. and the cheeky barstewards made those years count less for being contracted out. It’s not necessarily the last money I will ever earn, but I will favour no-commitment one-off hit and run jobs in future.

    I don’t know what the personal circumstances of all these profligate Saga spenders are. This extract doesn’t convince me they are that well off –

    Lenders have been short sighted by turning down people by looking only at earned income which is one of the reasons we launched Saga Personal Loans, to give more people access to credit they can afford in order to live the way they want to.

    Perhaps Saga haven’t targeted me because I am simply too poor, not because I have cleverly dodged their tracking mechanisms. But if their fifty somethings are borrowing money to do up their houses and buy three new cars in 10 years, then these guys aren’t that rich either, and they certainly aren’t living within their means. I spy trouble ahead for these indebted consumers as their human capital rapidly dwindles. The ermine may look poor to Saga, I’ve never bought a new car in my entire life, never mind three after retiring. But I am rich in a way that these silver borrowers aren’t. When I buy consumer goods on credit cards I pay them down in full each month as the statements fall due. Saga’s big spenders are rich in cars and kitchens, I am rich in self-determination. Each to their own.

     

    Notes:

    1. I am very happy to say Saga haven’t yet detected from my spending patterns and personal data held by advertisers that the Ermine has crossed the 50 turns around the sun mark despite me being closer to 60 than 50, I have never received junk mail from them
    14 Jun 2017, 5:36pm
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  • workers will retire from five million jobs in the next 10 years

    Government figures tell us that over the next five years people will retire from 12.5 million jobs, and there will be only 7 million young people to fill them. Somehow the authors of the report also assume that another two million jobs will be created. Oh yes, and last year our blessed fellow countrymen decided that they didn’t want Johnny Foreigners coming over ‘ere and taking our jobs. The inference seems to be that we need to get our ageing baby boomers out of retirement to go fill these jobs.

    Now a cynical Ermine thinks to self firstly ‘when Hell freezes over’ and secondly – a number of things that are wrong with this scenario. It’s not just investments where past performance is not supposed to be a reliable guide to the future. I’d say there’s this problem with economic prognostications too.

    Let’s take a look at what’s been happening with jobs over the last few decades, shall we?

    Once upon a time, like when an Ermine first rocked up for work in the early 1980s, you could apply for a job, and you’d actually be working for the company on their payroll. That was the case whether you were a graduate engineer or if you were the toilet cleaner. Said firm would also invest in you – they would train you, which was of particular relevance if you had a generalist degree or the company worked in a technical specialism that had unusual quirks. They would also pay into your defined benefit pension – for The Firm at least this even applied to the janitors until the mid 1980s.

    The something called neoliberalism showed up, and communications and IT improved significantly. A whole bunch of blowhards like Peter Drucker came along and pretty much said that pitch everybody against everyone else, let the devil take the hindmost and may the best man win.

    As a result, CEO pay shot up as a multiple of the average employee’s wage, and that was after they hived off the janitors et al to supply services companies and drove wages down to the lowest levels, so the average employee is drawn from a smaller pool of higher qualified staff. That CEO ratio still shot up, not because CEOs add any more value to companies now, indeed looking at stock market returns they’re adding less than before the millennium, but because they are top dog and they can.

    A quick detour through Globalisation, BPO and All That

    Then in the 1990s and early 200s we had wave upon wave of business process outsourcing which sent anything you could send off to lower wage economies, this afflicted the English speaking world more than others because of a ready global pool of decent English speakers. This has very materially improved global pay and reduced global poverty in a big way, as the the right-wing nutjob Tim Worstall correctly opines. And repeats himself thusly. As do the not left-of-centre Adam Smith Institute.

    It isn’t true that everyone benefits from free trade and globalisation. The net effect on all humans is vastly positive, but there are still those that lose. And that’s a political problem, not an economic one. For the people who don’t win are, largely speaking, those below median incomes in the already rich countries.

    Now Tim’s probably rich enough not to give a shit, I figure TW is well over the median income in a rich country. So was (and possibly am) I, but I am far closer to the edge than him, so I am more twitchy. None of these fellows are wrong. All other things being equal, for the sum total of humanity globalisation delivers the goods in the way Bob Geldof and so-called aid just didn’t. It probably wasn’t Sir Bob’s fault – the sort of corruption and baksheesh that aid generates is remarkable, there are many problems in the world that helicoptered money just can’t fix. But even the distorted version of free market capitalism that goes now left all that do-gooding in the dust when it came to alleviating global poverty.

    Globalisation also needed a population explosion because it needs growth.

    There is some argument to be made that it also enabled a shocking population explosion which has made a lot of things like food, water and climate change a lot tougher to nail in future than they were when I was at school, when there were half as many people in the world. I suspect globalisation only works when there is economic growth, and to have economic growth you need growth in the number of consumers, but I am not smart enough to say that is categorically the case. At the moment the score is Oxfam-nil:Globalisation-1

    Communism was also a great idea in theory. Trouble was it went against the grain of human nature. So the trouble with globalisation is that people don’t care evenly about humanity in general. They care about the humanity that is closest to them. Within rich countries we have institutions that sort of temper this instinct, but when the people who are getting the uplift are far away, then the people below median incomes in rich countries who are drifting backwards economically get really, really, pissed off. They let people know, through Brexit and Donald Trump among others. In general they want to put a spanner in the works, because nothing pisses people off more than not getting ahead while seeing other people are.

    The effect of globalisation on First World Jobs

    It makes lovely jobs lovely, and pretty much the rest of them shit. Q: What’s worse than a zero-hours contract job? A: A ZHC job where you get fined £250 a day if you can’t find a replacement if you’re sick. Or only £150. Welcome to the lousy jobs. I am glad that I had my career while the Iron Curtain was still down – true, we had to watch films like Threads and worry about being nuked in four minutes but at least I wasn’t competing with Vladimir and 1 billion in India, and I was working in an analogue world where the cost of replication was higher than now. That suited me very well, because while I am on the right hand side of the bell curve I am not that far to the right of it, and I am an introvert which is maladapted to the interconnected and always-on world of work now. Collaboration and teamwork – meh. You get ahead by having an edge, and you get an edge by spending time understanding what is going on IMO. Chatter on SMS and social media is for gossip, and meetings aren’t much better 😉

    Back to the original premise – a deficit of 7 million jobs?

    Well they’re not going to be getting old gits like me back out of retirement to go into the bear-pit of zero hours contracts, are they? The second word would the -off. Because all in all, working is increasingly a pretty shit proposal, and it’s particularly crap compared to my experience of working in the past. Fortunately, a whole different bunch of guys is telling us that Humans Need Not Apply and that the robots will be doing all these shit jobs. Hopefully this deficit of people desperate for crap jobs is going to do some good then, and people will automate the crap jobs they can’t get the retired baby boomers to fill. This will finally lift capital productivity in Britain although possibly not per-capita productivity. Pret a Manger say that 1 in 50 of their workers in British. Well, tough luck – Londoners are going to have to pay more of their bonuses for their coffee and snacks or brown-bag it, and some teenagers in London are going to get breaks they couldn’t get before, until the robots come. Or they will set up camp somewhere outside the citadel and bus in the serfs. I am not so sure I find that such a terrible thing.

    There, Mr Government and your hired guns. Fixed that for you. Taking 7 million shit jobs out of the economy is A Very Good Thing in this humble Ermine’s opinion. There’s now’t wrong with encouraging those old gits to punch their cards one last time and clear off, even if there aren’t enough worker drones to fill their shoes. The balance had been swinging from Labour to Capital ever since the 1970s. There are too many crap jobs in the UK, and retirement of the Baby Boomers could be just what the workplace needs at the bottom end.

     

    9 Jun 2017, 7:41am
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  • Sowing the wind in the summertime and the living is easy…

    Nearly a year ago the Will of The People™ amply guided by the Will of the Press Barons™ spake of their dreams of throwing of the foul yoke of Brussels, and the Pound took a dive of about 20%. And people said either it was a price well worth paying for freedom from EUSSR tyranny, and anyway, since we make so much of our own stuff and grow so much of essentials like food, the effect on inflation was going to be a mere few percent, so chill out you goddamned remoaners etc etc. In the frenzy of cheer and Enlightenment values we had the Daily Mail calling the judiciary the enemies of the people, perhaps they should have been true to their hearts and used the term Volksverräter

    Well, fast forward a year, which is often when the harvest from last year’s sowing is due, and what have we got? Presumably loads of hospital building, increased pay for NHS staff in the pipeline and all that good stuff we had plastered on the side of buses? Let’s hear it from Mark Carney then.

    Uncertainty for companies about the outlook may also have made them unwilling to raise wages at a faster pace until they have more clarity about future costs and market access

    Oh well, guess that’s the price of freedom then, guys. You don’t get ‘owt for n’owt. I was reminded of this as a couple of Conservative dudes cruised round a few days ago wanting to know if they could count on my vote. I’ve been looking forward to this for a while, to ask a genuine Tory how David Cameron could have been allowed to fuck things up so beautifully by asking a question to which he didn’t really want to hear the full range of answers. An affable old Tory gent, Geoffrey Van Orden responded that it will be fine and all right on the night. He was the first aristocratic-viewpoint Brexiteer I’ve come across, because the Ermine is of lowly stock and doesn’t normally move in such circles. I know enough ordinary folk who were into the sovereignty side of things, and tended to be a little bit older than me. That’s fair enough, it takes more than one viewpoint to make up a world, and at least these retired folk aren’t subject to the vicissitudes of finding work. Nor have they had the possibility of going abroad to earn money and escape the tyranny of British housing and its vile BTL landlords ripped away from them, so although I don’t agree I can see they hold a valid different opinion. I have also run into a couple of the xenophobic sort of Brexiteers, I try and avoid the lowlife scum end of the spectrum. But since it is largely the wealthy gentry and their mouthpieces of the right-wing press that brought us this joyful freedom, I was interested to see what an example was like in the flesh.

    I noted the public school accent and education, which gave him the edge in verbal dialectics compared to me, although I also observed the entitlement to rule character. He identified me as a Remainer and feigned sympathy for the cause which he clearly doesn’t have. Was clearly chilled about the way Brexit has made political discourse pretty nasty in this country, and is of the view that if a few Poles get roughed up, well, that’s just statistical variation, correlation with Brexit not causation, dear boy. I guess the ends justify the means.

    Geoffrey showed me just how much further away from the heat the rich really are

    The ermine is hopefully on the right side of the impending Brexit economy suckout, but it worries me. Sure, I read things like this article and with this sage reflection:

    The fuse of currency depreciation had been lit, and was quietly making its way towards the tinderbox of rising inflation, higher household debt and increased pressure on spending power.

    The average household is now spending an additional £21 a quarter on groceries compared with last year. That may not seem a huge amount, but with inflation on the up that could mean an extra £119 over the course of this year. Airfares, package holidays and energy bills are all rising while wages remain the same.

    and think to myself well, if £120 a year is going to push you over the edge then you’re hosed anyway. You way as well stick your head between your knees and kiss your ass goodbye right now. And FFS, airfares, package holidays – you need to pay your energy bills but cut out the holidays if you find the wolves howling ever closer to the door. To be honest the prescription is always the same, cut the wants before the needs, live within your means, and avoid picking up commitments that you can’t afford to run.

    But it’s still a worry for me, I am many multiples of that £120 a year from the breadline but they’ll all add up. Whereas the likes of the old buffer Geoffrey swan blithely through that sort of worry, because they are so far away from being washed away by the incoming tide that they spout about grand plans, which broadly sum up to a Trump-esque “Make Britain Great Again”. I never did understand why they had so many wartime films on the telly in the 1970s but it seems that the sentiment burns on in many Brexiteers’ hearts, particularly if they are of a certain age.

    Geoffrey talked lovingly about his fine work with the Indian trade delegation when I reminded him that I am old enough to recall the National Front marching through Lewisham in the 1970s and that sort of intolerance of t’other seems to be on the rise again. Apart from a minor technicality of him doing this as a MEP which will be worth a bucket of spit after Brexit, it really isn’t the days of the Raj any more, and I think some of these old boys are going to have to be pushing up daisies before Britain finally starts to deal with the world as it is in 2017 rather than as it was in the 1950s. Having shitloads of money just seems to insulate you from some of these realities.

    I had a really great choice in this election of nothing I like at all. One the one hand is the Maybot going Brexit means Brexit and on t’other side we have somebody who was probably a closet Brexiteer anyway. I had the choice between something I never asked to happen and a genial but ineffective old buffer that reminds me of other aspects of socialism in the 1970s like that creep Arthur Scargill and his band of merry thugs flying pickets exercising their God-given right to stop other people working because they had the power of force.

    A plague on both your houses

    But we seemed to have had a general election with no overall winner, which was probably the best result for my views, although what I voted for was lost, so thank you the rest of the British public. It seems the despicable rightwing press was largely ignored in their seething spewage. The Tories buggered this up in the first place by having a Brexit referendum at all, and now seem to have lost a lot of their pre-Brexit majority. Good for Theresa May returning to the electorate after such a big change in the background 😉

    Theresa May’s WTF? expression

    But what I feared more than a Tory landslide was a Corbyn majority. Corbyn has done well and hopefully will do his job in diluting the Empire-dreaming hard Brexiters. It’s not a good result, but it’s probably the least worst. You sowed the wind, Tory PM Cameron, with you damned manifesto promise of an EU referendum. Now the hard Brexit nut-jobs have reaped the whirlwind by being just too full of cock. Maybe we’ll have to try and talk in a civilised way about Brexit, rather than revel in the arrogance of ‘no deal is better than a bad deal’

    Oh and though I had no part in it since I couldn’t bring myself to vote Corbyn, I am pleased that

    Labour’s gains included the symbolic toppling in Ipswich of Ben Gummer, the author of the Conservative manifesto.

    It’s an ill wind that blows nobody any good 😉

    10 May 2017, 6:24pm
    living intentionally:
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  • How work is stealing leisure from us

    I’ve never come across the concept of serious leisure before, but a bit of Internet ratholing brought me to the Serious Leisure Concept, which takes a look at how people spend their spare time, should they be lucky enough to have such a thing in their lives. The site is heavy on sociological speak, but they break down leisure time occupations into

    Casual Leisure

    the sort of instant gratification, hedonistic and gormless thing that gives leisure a bad name – watching reality TV etc. It’s a bit wider than that

    [Casual Leisure] is fundamentally hedonic […] Among its types are: play (including dabbling), relaxation (e.g., sitting, napping, strolling), passive entertainment (e.g., TV, books, recorded music), active entertainment (e.g., games of chance, party games), sociable conversation, and sensory stimulation (e.g., sex, eating, drinking). Casual volunteering is also a type of casual leisure as is “pleasurable aerobic activity,” or casual leisure requiring effort sufficient to cause marked increase in respiration and heart rate (Stebbins, 2004a). Casual leisure is considerably less substantial, and offers no career of the sort just described for serious leisure. In broad, colloquial language casual leisure, hedonic as it is, could serve as the scientific term for doing what comes naturally. Yet, despite the seemingly trivial nature of most casual leisure, I argue elsewhere that it is nonetheless important in personal and social life. (my emphasis)

    Well, yeah. You need the yin to balance the yang in life, and going without shooting the breeze and eating is taking austerity too far.

    Southwold from the coffee shop with a distant view of Sizewell. Casual leisure happening.

    I think we all get this side of things. The other two categories were interesting additions to the taxonomy:

    Serious Leisure

    is the systematic pursuit of an amateur, hobbyist, or volunteer core activity that is highly substantial, interesting, and fulfilling and where, in the typical case, participants find a career in acquiring and expressing a combination of its special skills, knowledge, and experience

    They then break down amateur, hobbyist and volunteer down further, but the essence of this type of thing is that it isn’t an immediate and known win like getting a coffee, you must put something of yourself into it to get something out of it. I found this sort of thing more rewarding after retiring, for the simple reason that you have more time to hone the art. I screwed up a little in being shorter of money in the first few years of retiring than I am now – don’t pay off your mortgage early if you want to flatten your income profile 😉 But I would go as far as to say getting into serious leisure will improve your experience of retirement no end. I’m not comfortable with their use of the term career, but perhaps that’s because I have BTDT, unlike Jim I have absolutely no desire to climb another greasy pole. Like him, I did not leave the rat-race as an elective  move towards the positive goal of FI, although perhaps I had the advantage of having a three-year run-out period.  That nobbled any fond nostalgia for the hell on earth that the modern management practices have turned the professional workplace into for my INTJ type. Either way, I hope they don’t mean career in a work sense, but it is of course true that there is an arc of progression from noob to wizard-guru as you hone the art and craft of your serious leisure pursuit.

    I think I want to do more of this. And perhaps less idle surfing, though I do love coming across new ideas and poking a curious ermine snout into the vagaries of this world. I recently got back into video editing and shooting, partly for a short job with some travel coming up, and I was amazed at the improved performance and the way editing and compositing, even 3D compositing is done routinely. I whiled away most of today learning what has happened in this field since I used Premiere around 2007. Is that serious leisure or idle mucking about? Dunno.

    Project-based leisure

    is a short-term, moderately complicated, either one-shot or occasional, though infrequent, creative undertaking carried out in free time. Such leisure involves considerable planning, effort, and sometimes skill or knowledge, but for all that is not of the serious variety nor intended to develop into such. Nor is it casual leisure. The adjective “occasional” describes widely spaced undertakings for such regular occasions as arts festivals, sports events, religious holidays, individual birthdays, or national holidays while “creative” stresses that the undertaking results in something new or different, showing imagination, skill, or knowledge. Although most projects would appear to be continuously pursued until completed, it is conceivable that some might be interrupted for several weeks, months, even years

    I was unable to work out if I do any of this. I do pursue some projects over time, but I can’t see how “continuously pursued until completed fits in”.  That starts to get to sound suspiciously like work 😉 One needs a good few leisure projects, and cut between them. That sort of dissipation wouldn’t be tolerated at work!

    There are some real-life examples on this page – this one was from participant Meghan

    how one person sees their leisure activity in this taxonomy

    I was surprised that so many listed travel in their project-based leisure, I’d have put it in casual. But they did the course so they know better, or maybe their travel isn’t like mine. We also have serious sample bias here because all the respondents are undergraduates, they have yet to join the treadmill of the rat-race and they probably don’t have children.

    I got on to the serious leisure site after reading about the demise of the weekend, which is much more the typical narrative that you hear, basically it’s ‘Leisure – what’s that? We work all the hours given us and on the weekend we drive the kids here there and everywhere in between doing the laundry etc etc”. I recognise two of the themes from her piece. The first theme was the much greater freedom I had as a child that seems to be the case for children now, and also the opportunities to fill my own time without structured events. Having children was something people did and fitted into their lives when Katrina Onstad and I were children 1, it seems to be much more all-encompassing now.

    The other theme was the way people don’t seem to have hobbies any more.

    Hobbies are declining, but a hobby is exactly the kind of activity that adds value to the weekend. Stamp collectors and basement inventors may not be cool, but they know the benefits of becoming fully immersed in an activity and losing track of time – that rejuvenating “flow” state

    The students were anomalous in that they did have hobbies. When I was growing up in what by modern standards would be a poor area, many of the adult working neighbours had hobbies, they were often creative but low-cost. Many of the guys actually made furniture 2 using hand tools, others made models, and some of the women made clothes 3, presumably both clothes and furniture were much dearer in real terms than they are now. I’d say there’s more consumption and casual leisure now compared to the other types that there used to be.

    We’ve imbued work with the job of giving us meaning, and it seems to rob us of our leisure time in so many ways

    I recognised another pathology mentioned in Katrina Onstad’s weekend article –

    A friend used to make beautiful earrings occasionally. Almost ritualistically, she would buy the beads, and carefully craft the small, coloured jewels in a quiet workspace. Then came Etsy. Now she makes beautiful earrings and sells them, ships them and manages this business along with a full-time job and a family. What was leisure became labour. The side hustle is a weekend thief, but in a time of stagnant incomes, many must choose income over time.

    I’ve seen that too. I made some ultrasonic microphones because I wanted to differentiate bat sounds and ended up selling some of these because people wanted to do the same. It was okay, but I was working at the time, so it was a weekend time thief. More recently I had been doing the accounts for a small operation and recently finished that – the time commitment was low, but the relief on finishing up is worth far more than the income. It’s unpleasant enough doing my own tax return, life is too short to see more of the taxman’s tiresome demands on behalf of others.

    Somewhere in the back of my mind there must be an old tape still playing out from childhood or early adulthood that income = security, and worse than that, only income from selling my time = security. Perhaps when I finally draw my works pension in a couple of years I will chill from that. Intellectually I can see that I will run out my SIPP in a couple of years, this year it paid me with whisker of the HRT threshold, but I don’t really regard that sort of saved money as an income. There is learning to be had here. I’m not averse to doing the odd hit-and-run job, the microphones were that sort of thing, but I need to avoid regular commitments – the sort of thing Katrina’s Etsy friend ended up with. There is a lot of recommendation to turn a hobby into your job, and yet some good reasons not to.

    Much of the point of hobbies and leisure interests is that this isn’t work. The fun with the microphone was developing it and looking for bats with it and hearing the differences, it was solving the problems. After making one or two, the novelty palls, and I’m not good at repetitive things, it’s the fun of the chase of design I liked more. I guess the lady with the earrings may have the same thing – making a new one is the buzz, mailing them out and dealing with returns, not so much perhaps.

    There’s a more subtle problem. The business world tends to kill creativity in its search for continuous improvement and optimisation, it strips out the places to play. Although it isn’t creativity in the artistic sense, the design part of problem-solving is a form of creativity, if it isn’t up against the clock IMO. As a young research engineer/scientist I covered many more areas than I did as time went on. Part of that was The Firm shifted quite heavily away from research to development and then into IT, specialising and compartmentalising the workforce as it did so. But I think there is a wider trend towards specialisation – the mantra of concentrate on your core competencies and outsource everything else. In the more vertically integrated scientific and technical companies I worked in 30 years ago I got to learn electronics, I got trained to use a lathe, milling and shaping machines and oxyacetylene welding not because this was what I was going to be doing but because they didn’t want their researchers to run the workshop staff ragged with requirements that couldn’t be made. Companies now would probably outsource all that sort of stuff unless their primary function was mechanical engineering.

    That may be more efficient, but it’s much less interesting. Pursuing a hobby doesn’t demand hyper-efficiency, because it is just as much about the journey as it is about the destination. There’s reward to be had in the tides of a hobby, in the ebb and flow of the creative process. These meanderings may not be efficient, but they are part of the fun.

    Notes:

    1. I would hazard a guess she was a child less long ago than I, perhaps Canadian kids kept their freedom to roam longer than Brits
    2. Look at this Popular Mechanics from the 1970s for how common making furniture this was – I wouldn’t have a hope in hell of making something accurately enough out of wood to be fit for being in the house
    3. this was the 1960s and 1970s, remember
    26 Apr 2017, 8:27pm
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  • HMRC decide the Ermine’s gone to work for Goldman Sachs, taxes accordingly

    Flexible drawdown is great but it’s easy to get suckered for huge amounts of tax. Although I originally planned to draw my DC pension under the tax threshold over five years, paying zero tax, there is of course a problem with the best laid plans of mice and men, which is that things change. My original computation was imagining running down the cash saved into the SIPP, and I had invested it conservatively, with a fair lump in gold, some in VWRL and some in cash. Then Brexit happened and lifted the nominal value of the stocks and the gold, by destroying 20% of the real value of the pound. So I get to pay tax anyway where otherwise I might not have.

    In more change I am looking to buy a house, raising the cost of the new one before selling the old, and because I am a poverty-stricken bum under the railway arches according to the finance system’s favourite metric, income, nobody will lend me anything. I need to raise that in cash. So I paid more tax, drawing just short of the HRT threshold in a lump sum and then nothing for the rest of the year. It’ll only buy me half a used Lamborghini, perhaps a cut’n’shut.

     

    The ermine’s new place of work in HMRCs eyes – as teaboy, runner or floor sweeper. People at GS seem very coy about their pay, claiming it averages 64k for an analyst. In which case perhaps the Ermine gets a corner office, on nearly 10x that. I’ve even doing okay on FireVLondon’s pay ranges. Shame it’s an HMRC cockup and not real, eh?

    HMRC, on the other hand, seeing £43k come out have decided I am now working for GS as a teaboy and earning half a million pounds, arrived at by multiplying 43 by 12. Yeah, I wish, guys. What I told Hargreaves Lansdown is to can all monthly payments this year and pay out 43k, whereupon HMRC help themselves to 40% of it. Cheeky barstewards.

    I had been warmed up to this by the Telegraph (H/T Monevator). Although that article says this only applies if your pension provider has an emergency code 1 this isn’t true in this case. I went through that bunfight year before last as they still had me working for The Firm in 2015, despite the fact I hadn’t earned from there since 2012. But I never did anything with the P45 because I had no new employer to give it to. In fairness to them they did get it sorted out within a month and refunded the excess tax.

    So it’s time to do that all over again, via this link. Even if you fill in the form online it’s worth reading the print off and post form first, because the explanation of the form fields is much better on that. In particular I suspect I screwed up because I declared 43k as total amount of income I expect to get. Which is correct, but probably should have been zero, because the next box asks

    Details of pension flexibility payments paid as lump sums

    and I guess mine might be construed as a lump sum, although it’s not against the law to be paid one’s income annually in advance. But in the end 43k is the total amount of income I expect to get from that source.

    They also ask if you are contributing to the pension, and getting savings income and self employment income. In theory if you get all this right they will repay the overpaid tax. Which is over 10k – they helped themselves to £17,734 which is slightly over 40% of the total. Whereas they should have taken (43,000 – 11500)*20%=6300.

    Still, on the upside, once I have gone through this I will be able to run this SIPP down tax-free. I only have another 5400 in it. I will add £3600 this year and another 3600 next year, take my £1800 PCLS on the new money, leaving me with 10800 to run out tax-free in 2017/18. Unless, of course, the stock market takes a hissy fit which will probably jack up the price of the gold. If, of course, Brexit is the stupendous success that Barry Blimp tells us it will be I will take a bath on that gold and my ISA, guess that’s the price of being a saboteur and Volksverräter.

    There’s a lot to be said for being paid annually early in the tax year from a SIPP

    On reflection, although last year I drew from the SIPP on a monthly basis, that’s probably not the smartest way to do it, if you know how much you’ll be drawing that year. Drawing it all at the beginning of the tax year lets me get the money to work for me earlier – Hargreaves Lansdown don’t pay a particularly exciting interest rate on cash in a SIPP, so I may as well pull a large lump sum as soon as I can and get it working for me rather than funding Peter Hargreaves Brexit ambitions. I went monthly because of the warm fuzzy feeling of it being a simulacrum of my old employment income, but what the hell, I coasted for three years on investment income and savings and didn’t overspend.

    I should have behaved like a grown up and made this work for me being paid up front, even if I had to fill in a P55 form every April. Ain’t hindsight a marvellous thing? After this one it will never apply to me again, because I have too little left in the SIPP. Unless they pull the same stunt when I take £10k next year, and assume I will be earning £120k.

     

    Notes:

    1. ie they assume you earn at least the personal allowance elsewhere and tax you at 20% on everything
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