7 Aug 2014, 1:08pm
peak oil:
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  • Life After Growth

    Dr Tim Morgan, he of Tullet Prebon’s research department, has a new book out; well it’s new to me although it came out in 2013. Apparently he quit Tullett Prebon to get serious about scaring the shit out of the proletariat.

    Now our Tim isn’t known for his cheery outlook. You only have to take a butcher’s at what he wrote while at Tullett Prebon to see he isn’t chipper about the prognosis for the global economy and the Anglo-Saxon variant of it in particular. You get the drift with a title like “Thinking the unthinkable: might there be no way out for Britain? Project Armageddon – the final report”

    Tim is a bright fellow, and his book Life after Growth is a cogent summary of how he looks at the world. It’s interesting because some of his insights are well worth taking on board in their own right, and have direct application to the personal finance world.

    A Tale of Two Economies

    We often think about finance in the abstract, as if it is a law unto itself, you diversify to minimise risk, the long-run real return from equities is something between 3 and 5% etc etc. Tim Morgan is at pains to remind us that the money economy is a map, it isn’t the territory. There is a real economy underlying it – that is the economy that puts food on people’s plates, moves stuff around, makes iFads and takes away your sewage. As I observed in Today I shall live like a King, this economy is astronomically more productive than it was a century or more ago. On a pretty average day I can live a lifestyle a lot higher with much more capability than Queen Victoria – and that’s without indulging in any consumerism.

    The money economy overlays that – money is a claim on future work. Yours if you owe me money, mine if I owe you money. The abstractions helps us manage our work across time – when you take out a mortgage, you get to use the work of all the builders and the land right away. But the bank owns part of your soul – part of your wages is garnished and you work for the bank for the next twenty or thirty years.

    In a way the money economy is a model of the real economy, but we have set up the model with some implicit assumptions of how the real economy works. We have taken past performance as a guide to the future, exactly the same sort of thing that the FCA mandates nearly all investment details to tell you not to do.

    The assumption Tim Morgan fingers as the big one is that of assumed growth. Growth is how Western democracies have alleviated poverty – because the overall size of the pie is increasing the material wealth gradually increases over time. Much of that growth, Morgan postulates, is because we have had cheap energy for a long time, but gradually the amount of energy available after that used for extraction is falling, and this is strangling the global economy.

    The real economy is running out of energy

    energy returned on energy invested

    energy returned on energy invested

    So why does our Tim reckon growth is over? Largely because of this chart – the cost of getting hold of energy is rising, because not unreasonably oil companies focused on the low-hanging fruit of easy to get at stuff first  – in the early years of the 20th century you only had to drop a nail in Texas to end up with a gusher it seemed.

    Spindletop. Texas, 1901. We haven't seen one of these for a little while

    Spindletop. Texas, 1901. We haven’t seen one of these for a little while

    Where Tim Morgan  does very well is in making some of the fundamentals clear in unusual ways. Take the rise in oil prices – in his afterword he says

    It might interest you to know that, if you are an average earner – in Britain, in this instance, though this is true across the world – your salary would have bought you 1,076 barrels of oil ten years ago, but would only buy you 328 barrels now.

    That is a large change. Morgan hasn’t got any nice words to say about how Western governments encouraged their firms to outsource production to emerging markets either. I have never understood why there is a shift of power from labour to capital. I observed it – as a professional engineer I saw the deterioration in the workplace, I see it in the changing nature of jobs, it’s shown indirectly in the earlier peaking of the career arc for younger people. Tim Morgan outlines why this is so in a succinct way

    The globalisation process is pretty easy to describe (which makes the ignorance of policymakers and their advisors even less excusable). Suppose that an American company manufactured a television at a cost of $350, and sold it for $400, earning a margin of $50. The company then became able, courtesy of globalisation, to manufacture the same television in China for $50, boosting its profit margin dramatically.

    This outsourcing of manufacturing boosted corporate profitability enormously, and created big cash inflows that were placed in the banking system. At the same time, there was a haemorrhaging of skilled jobs from the United States and other Western economies, and countervailing increases in skilled employment in China and other emerging countries. In terms of the West, it is a simplification, but also a truism, that corporate profits expanded whilst wages deteriorated.

    He challenges the Ricardian advantage that underlies a lot of free-market thinking that underpinned globalisation. But essentially, what happened is the the West produced less and consumed more, and the difference was fuelled by debt, which was cheap because of the money coming in to Western banks from the new wealth in the producing nations. These banks had to lend this money out – and a lot of it has been shovelled into inflating property prices in the West, so that twits like Shona Sibary could take the money out again and spend it on middle class consumerism and school fees, not to mention having more children than she can afford at the lifestyle she wants to lead.

    And then it all went titsup in 2007-9. The chart from his book that should scare the shit out of anybody accumulating financial wealth is that the map is not staying in track with the territory.

    the map and the territory are out of whack

    the map and the territory are out of sync

    Now if he is true there’s no point in saving into a pension, because the value of what you will get back will be worth bugger all. Tim sums up the situation in Is Globalisation the Culprit, to be had from his old stamping ground at Tullet Prebon.

    In the West, a small minority prospers, principally the CEOs of companies whose profits have surged, and bankers who gain from the expansion of the lending sector. On the other hand, the majority suffers, both because of declining wages and because of rising indebtedness.

    […]

    The next sequential stage – which probably lies in the very near future – is the realisation that the claimed reversibility of QE is nonsense. For example, do we really believe that the Bank of England can ever reverse £375bn of money creation? And that, logically, is where the tragedy ends – in money-printing, hyperinflation and collapse.

    What can you do?

    Not a lot.There’s not much that is actionable as this sort of thing requires a collective response on a fairly wide scale. It also depends on the time-scale – something that changes over 100 years is easier to adapt to than something that takes place over 10. The obvious responses fall into two opposing camps

    Spend – live for today

    One is to do all the energy-intensive stuff you want to do sooner rather than later, so if you want to see Australia or Macchu Picchu prioritise that. Hell, if money will drop in real value then borrow it like gangbusters. Maybe the consumerism addicts are right after all? The problem with that approach is that creditors may be getting increasingly keen on payback, and become increasingly creative about it, which implies a different tack

    Save – get out of debt

    However, the transition will take time. You don’t want to be carrying too much debt because as it becomes more apparent that debts may not be honoured, creditors will become keener to make sure they get their bit first. You see this endlessly on the debt boards in MoneysavingExpert – it tends to involve guys with thick necks and an intimidating attitude. FWIW this is the approach I have taken 1, though for different reasons.

    There aren’t many actionable takeaways because of the uncertainty

    That’s largely the trouble with that sort of doomsterism – the confidence interval of the predictions is huge, so it’s hard to come up with effective action. After getting out of debt you could do a lot worse than take a look at Mistersquirrel’s list of things you can do, particularly the personal skills from point 1, because these are independent of the financial system and inalienable.

    Unfortunately becoming more skilful and self-reliant is not the way that consumerism takes us – people are becoming less and less self-reliant even at some of the basic skills in life like cooking and basic construction. The increasing specialisation and antipathy to generalists in professional work is also running against that. You only have to look at back-issues of Popular Mechanics or Woodworking to see that previous generations were far more self-reliant. I am probably a fair way ahead of most people – I have built a fair number of odds and sods but I don’t have the solid grounding of my father’s and grandfather’s generations because I learned a lot of this from books, not from seeing people do it. I didn’t even know how to make a packing crate right.

    On the upside, there is much room for improvement. Many of the ways we use energy are terribly wasteful. Transportation, for instance, is bizarre. I once worked in Beckenham and lived further in London than that, and it was amazing that the trains I was using were empty whereas the platforms on the other side were chock-a-bloc with people travelling to the City. Now the Guardian is advocating long commutes as a way to save money – how long is that going to last in a world of rising energy costs and train fares?

    Things like the Internet and mobile networks are increasingly power-hungry. In principle we could have gone the decentralised resilient approach but we went for great big server farms instead. Humanity is a bit like the Americans Churchill groused about – we do like to eliminate the alternatives before doing the right thing. Even in Life After Growth there are surprisingly upbeat indications –

    1408_fig18_eroei_trendsI was very surprised to see two renewables and nuclear power clustered at the knee of the curve around current oil and gas finds, so still very useful. And the appalling return on shale gas shows that for the sugar rush that it is 🙂 It should be noted, however, that renewables and nuclear provide electricity, which is not very useful for small-scale transport or for shipping, so it does imply changes will be afoot in the use of transport. With the cost of energy rising the world will become a larger world again – there aren’t any good alternatives to the convenience and compactness of liquid transport fuels and the concept of an electric passenger aircraft carrying 300 people at 500 mph is laughable at the moment, and indeed the thought of charging that aircraft isn’t a cheery thought at all.

    Right, capt'n, where do I plug this sucker in? Photo Dave Croker, Geograph

    Right, capt’n, where do I plug this sucker in? Photo Dave Croker, Geograph

    A 747 takes 184,000 litres of kerosene (43.15 MJ/kg, so  ~6400GJ, ~ 1.8GWh ) If we take the output of Sizewell B nuclear power station and plug all of it into our electrically powered 747 then it will be charged in about 1.5 hours. I don’t know how many aircraft Heathrow turns round in a day 2 but something tells me this won’t fly.

    The future will have less material wealth in it, for average Westerners

    and probably for others too. But let’s face it, when we look at some of what we do with our material Stuff, we have gone a bit nutty. And it only takes a bit of a push to jump the tracks from the nuttyness. Take this from Tim’s Afterword describing the effects of the changes on the average person

    This person is most of us, and his or her life is already being affected profoundly by the processes described in this book. Over the last decade, his pay has increased, and may even have risen by more than the official amount of inflation, but he does not feel better off. The prices of many things that he has to buy (such as electricity, gas, food and petrol) have gone up by a lot more than his wage packet. It is a fair bet, too, that the various departments of government, no less than utilities, are taking a far bigger bite out of his income than used to be the case.

    If his employer provides a pension scheme, its real value has probably fallen. If he has saved for retirement, the income that he can expect to enjoy is far less than seemed likely until a few years ago. If he expects to rely on a state pension, he wonders whether it will really keep pace with the soaring cost of essentials.

    Despite the squeeze on his disposable income, he is subjected to seemingly continuous commercial pressure to spend. If he has children, it is likely that peer pressure is fuelling ever greater demands for new gadgets. If he is a young person (between, say, 16 and 30), he faces the additional problems of scarce, costly accommodation and a lack of well-paid jobs. Whoever he is, he quite probably has far more debt (including mortgages and credit) than he had ten years ago.

    Although I see where he is coming from, some of it doesn’t ring true. I have fought some of these. I have reduced energy consumption and tried to switch space heating to more local sources. We have reduced food miles, along with a fair number of other people, by growing this ourselves (or rather Mrs Ermine does). I have iced most of the commercial pressure to spend, by decommissioning my TV, using ad-block plus on the Internet and realising that much of this spend simply didn’t contribute usefully to my quality of life.

    Some of the fight lies between your ears.

    Think differently. Most of our gadgets are fantastic value – as long as you don’t churn them every year following stupid peer pressure. Learn to fix some of the damn things – most of the problems lie with connectors and batteries, and there seems to be a huge aftermarket industry supplying spares. Buy fewer but better things.

    Don’t be a sucker for stupid fads that make other people money at your expense – the whole wedding industry seems to be a serious case of that, what with organised stag and hen parties that involve flying somewhere to get pissed. You’re being rooked, guys, WTF is the point of going somewhere fancy and spending shitloads of money if you’re going to be hammered all the time? According to MSE the average cost of a wedding is £18,000 3.

    Only a generation ago ordinary people used to get married on Saturday and be back at work on Monday and the cost of the proceedings were a few rounds down the pub. £18k is 10% of the cost of the average house the average happy couple aspires to. It’s barmy to spend all that on your ‘special day’ and then sweat the next five years moaning you can’t buy a house. What makes a wedding special is the interaction between the people, not the amount of money spent trying to feel like a Kardashian for a day. You aren’t a sleb. Get over it. And picture the saving for five years towards a house before you casually toss it into the maw of wedding consumerism. At least ask yourself the question of which is more valuable to you, and if it’s the wedding then STFU about not being able to get the house. You can’t bloody well Have It All™  – but you can choose the It you will have.

    I’ve picked on the wedding industry because it seems to be a particularly egregious example of “You’re Worth It” consumerism but there’s plenty more out there. I spent too much money on fast and furious holidays because it was a break from the crappiness of the working environment towards the end, until I realised that the more I spend on trying to forget about work the longer I would have to work, and that was the time I put a tin lid on it.

    you can win the fight with consumerism because you own the battleground

    Consumerism offers empty dreams that make other people richer and bind you deeper into wage slavery. It is illogical to indulge in consumerism or sponsor your kids’ consumerism if you moan about work. If you like your work or are neutral towards it, then no problem. But for every pound you spend on an iFad, you have to typically earn twice that much – you have to pay tax on the money, you have the parasitic overhead costs of commuting.

    You aren’t what you buy. And the advantage of the battle with consumerism is that it is entirely within your head. This is a space that you should control. Buying things isn’t bad – but buying things because other people tell you to is. Buying things because you’ve considered the value delivered and come to the conclusion it’s worth the opportunity cost of spending the money elsewhere or later is fair enough. Live intentionally. We don’t need so much damn Stuff to be happy. We live like kings already, and need to cure ourselves of Tiny Details Exaggeration Syndrome. The latest iPhone is nowhere near as much better to what went before as the first iPhone was to what went before it.

    Oh yeah. And don’t buy your Consumer Shit on credit, mkay? As the man said, your debt makes other people rich, That’s not cool and that’s not clever. If we could ice the Great British Consumer’s addiction to credit, we’d be in a much better position to tackle Tim’s Life After Growth. We’d probably then have to tackle the Great British Government’s addiction to debt, but one step at a time, eh?

    Notes:

    1. getting out of debt, that is. I’ve gone easy on the thick neck and intimidating attitude
    2. looking at this, a lot more than 18 long-haul
    3. I struggle to find any sympathy for the stupid bint cited by MSE who was gifted £12k by her dad only to find the bank used £6k of it to pay off her credit card debt. If you are in debt then don’t spend stupid money on your wedding. You are NOT worth it, by definition.
    16 Mar 2012, 10:45am
    peak oil rant
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  • Obama and Dave, what is it about peak oil that you don’t get?

    Apparently Dave and Obama have decided that the price of oil is too high. So guess what? They are going to push down the price of oil. I could have titled this one don’t fight the tape but I’ve already used that for one of Dave’s previous wheezes. What has got into Cameron’s head? Has Samantha bought him a Superman costume or something, first he goes around encouraging people who can’t afford a house to overstretch themselves for a mortgage, and now he’s going to Do Something about the price of oil

    So how can we do that? We could:

    • increase supply – nope, the IEA says we can’t do that much longer
    • reduce demand. Now there’s an idea, but it sits badly with rising global middle class aspirations

    Hey, I know what we can do, says Obama. Let’s fudge option 1 and release a load of the US strategic reserves. That way American drivers don’t get pissed off in the Driving Season.

    Oh good, says Dave. Tell you what, we’ll help you by releasing some of the UK strategic reserves to help you out, along with out Squeezed Middle. Presumably some Civil Service flack hurriedly whispered in Dave’s ear that the UK doesn’t actually have any strategic oil reserves. Thinking on his feet, he changes it to asking UK oil companies to hold less in reserve.

    Great. That’s all sorted then. What part of ‘strategic’ was it that you guys didn’t understand, or should we send in the DEA to find out what you were smoking?

    The high oil price is a signal. That signal is telling you that more people want oil than production can currently match, and the price will rise to shed demand until it matches supply. It’s also perhaps showing that the currencies of both the US and the UK have been debased in recent years.

    Oh and by the way, guys, you haven’t got enough strategic reserve to deal with the probable war on Iran. They may be mad as a bag of spanners over there but the interruption to production will probably exceed the 40 days capacity of the US Strategic reserve. Just look at what happened next door in Iraq a few years ago.

     

    26 Oct 2011, 12:48pm
    peak oil:
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  • The odious energy minister Chris Huhne calling people names again

    Students of irony don’t need to pull me up on the reflexive irony in the title 🙂 The reason it’s okay for me to call Chris names is because this is my blog and my opinon, and Chris isn’t one of the people whose wishes I represent as a politician. So I get away with being an opinionated twat. Whereas he doesn’t, and gets to take flack for it. Apparently all those NIMBYs who don’t like onshore wind farms need to sort themselves out, an in the immortal words of Nicholas Sarkozy to David Cameron, “you have lost the opportunity to STFU”:

    “I want to take aim at the curmudgeons and faultfinders who hold forth on the impossibility of renewables. The climate sceptics and armchair engineers who are selling Britain’s ingenuity short.”

    Now our Chris has got previous, as they’d say in the East End of London, after all even his mates counsel discretion before defending him.

    I’m not actually a million miles away from Chris – we are going to have shocking problems with energy supply. The big boost of North Sea oil that allowed Thatcher to do her privatisations of the power industry has run out. However, I note that even such armchair engineers and curmudgeons such as David “sustainable energy without the hot air” McKay doesn’t have wind as a major part of most of his future UK wind scenarios, and the one that does, Plan G, is probably best described as ‘rabid Green Party scenario’. David McKay described the rationale as “I call this “plan
    G,”  because I guess the Green Party don’t want nuclear or coal, though I
    think not all Greens would like the rest of the plan. Greenpeace, I know,
    love wind, so plan G is dedicated to them too, because it has lots of wind.”

    There doesn’t seem to be significant political support for that approach otherwise it would be the Green Party, not the Liberal Democrats who would be in coalition with somebody and the odious Mr Huhne would be out of a job.

    McKay also raised several serious technical issues to do with the high peak to mean ratio of having a lot of wind, and unlike most of Huhne’s curmudgeons and the usual wing-nuts he cites the issues, sources, and possible solutions. Oh and he knows what he’s talking about, probably more than our Chris does…

    The big PR trouble with wind is that it’s big, it’s tall, it sticks out for miles, and it moves, all of which draw attention, in the “What the heck is THAT doing there” sort of way. It’s got some place in the mix, but what I want the Government to do with it’s power strategy is to have a vision of which, if any, of David McKay’s scenarios it thinks is right for the UK, and make a reasoned case for that on a cost-benefit basis. I don’t currently see that, we seem to have a emotive “we need a load of Wind, now, to be seen to be doing something”.

    Wind is a great way to be seen to be doing something precisely because it’s not shy and retiring on the PR front. I know that being seen to be doing something is often considered almost as good as doing it properly, but when you are up against physics you actually have to do it, faking it doesn’t work 🙁

    It’s possible I’ve missed that analysis, but it doesn’t seem to be promoted much. After all, the UK government isn’t unaware of Peak Oil , with the All-Party Parliamentary Group on Peak Oil and Gas.

    So, Chris, can we have less of the name-calling and adverse briefing, and more about what the wind target is, how much of the total mix it is going to represent, and how it will work with all the other future energy sources your department is promoting as well as wind? Even in scenario G it isn’t a one-horse race. Other stuff has to happen too, indeed the Other Stuff is needed to smooth the peak-to-mean ratio of the wind component.

    18 Oct 2011, 10:10pm
    peak oil rant:
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  • We need Energy price transparency, don’t just tell us to switch, Dave

    Not content to let the odious Chris “need for speed” Huhne to tell the proletariat to switch suppliers, Cameron weighs in on the same theme too.

    The trouble with the UK energy market is that the Big Six do their damnedest to make their pricing conditional, obscure and impenetrable, they’ve also put in perverse misincentives to save energy.

    Forget switching. You want to know the cheapest way to save on the electricity bill? It would be to join forces with your adjacent contiguous neighbours and have two drop service and share the remaining connection. No I haven’t told you how to implement it because though it’s easy enough to do this sort of information is highly dangerous in the wrong hands. And do bear in mind that adjacent houses are often fed from alternate phases, which might give you concern on maintaining earth integrity with PME installs, among all the other things that could go wrong 😉 The energy companies Ts & Cs usually disallow this sort of thing explicitly, by the way.

    The reason this would work is that you are charged a standing charge per connection, either explicitly or obfuscated as a higher cost for the first few hundred units you use. Not only is that ripping you off, it is a major disincentive to reducing energy costs. I get charged a standing charge of over one unit of electricity a day – my usage is about three a day so a quarter of my bill is standing charge.

    There are other perversities in the energy market. For no good reason suppliers churn the rates every year, with the aim of shifting their customers onto the expensive standard rate while being able to offer new customers incentives. Combining the two fuels gives them more freedom to hike prices without being too obvious. Sometime they will tell you they have heroically held one fuel price, in which case you can be pretty damn sure the other fuel has been jacked up to compensate. And check the standing charge, or the usage breakpoints, all good places to hide bad news.

    I have used EDF for a year. They wrote me they are going to hike charges, so I entered my usage into uswitch, and lo and behold I could save £80 relative to the new cost with a bunch of suppliers. One of which was EDF, surprise. So I rang them up, lost half an hour of my life to get through to switch to the quoted tariff. Punks. It’s like with insurance, every damn year you have to go to something like confused.com just to get the price back to what it was last year.

    Sharing services across households would work with broadband service, and Sky (using the second box option, though both have to be connected to the same phone line) which are easier to share with your neighbours 😉

    Anyway, back to Mr Need for Speed, who tells use we should switch more. Well, yes, maybe, but perhaps it is the job of Government to regulate so that all providers have to couch their offers in comparable language, and not churn their prices? You have to give an equivalent APR for loans, so how about all firms having to give an equivalent annual cost for electricity and gas for low, average and high usages, as defined by Ofgem?

    While we’re on the subject of transparency, Mr Huhne, it is disingenuous to say

    No government can control volatile world energy prices

    without adding

    But the government has decided to add 7% to your bill in green energy taxes

    Now green energy may well be a good thing, after all Peak Oil may make that 7% a worthwhile investment. However, blaming the price rises on the devaluation of the pound and world energy prices without acknowledging that a fair amount of the hike was the result of deliberate government policy is disingenuous. Our Chris then goes for the cuddle factor to soften the blow, telling us

    We have also increased the electricity bill discounts available for the fuel poor by two-thirds, guaranteeing £120 off their bills to more than 600,000 of our most vulnerable pensioners.

    Well, yes, Chris, but since you were part of making some of these guys fuel poor by adding to their bills, and these discounts don’t come from your back pocket or the Fairness Fairy, I get to take a second shafting as my bills go up proportionally more to pay for the discounts, and for other people’s solar panels and feed in tariffs. Cheers, Chris, have one on me, mate.

    multifuel log burner

    Now energy is going to be a major pain in future, and I’m happy to tell Chris that I am not paying proportionally anywhere near my fair share for his impoverished pensioners, feed in tariffs and damned wind turbines because I have attacked my power usage and I am in the process of reducing my heating bill by using the low-tech alternative of wood, so he can take his renewables tax and stick it where the sun doesn’t shine. Energy costs are going to keep an awful lot of people in wage slavery in the years to come, and reducing costs by gaining control of the means of production is my preferred approach to independence, from rapacious energy suppliers, misguided Liberal Democrats with a disdain for the proletariat and Russian gas disputes.

    I might as well save some of my ire for Dave CamerHuhne, who delivers himself of this priceless quote

    We can’t control volatile world energy prices. But we can still help people get their bills down.

    No you can’t mate. The best they can do is keep the bills about the same. Not only has your buddy Mervyn King devalued the currency with extreme prejudice and intent to do more, which makes imports dearer, but gas and electricity have more than doubled in unit cost in recent times. I have dropped my usage by a third, but I can’t reduce my gas bills of late. All that is happening is mine goes up by less than most people’s. I’ve managed to press my case a lot better with electricity, but there is more you can change there.

    18 Jul 2011, 11:59pm
    economy peak oil
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  • There are a lot of Bears in the camp these days…

    I’m a macro-bear – I think that there are some pretty serious long-term hazards to economic growth, such as peak oil, environmental degradation and the like.

    I’ve all of a sudden been joined by a whole shedload of Johnny-come-lately bears who are focused on the seriously short-term. Yes, we all know the Greeks are bankrupt and that the European politicians are trying to do a stealth bank-bailout of French and German banks. They’ll lose the fight sometime. The US is devaluing and seem to be in an epic internal fight of their own. The second dip of the double dip recession is hammering at the door.

    It all reminds me of Ben Goldacre’s Twitter comment, on Rebekah Brooks

    must feel amazing to work in an industry where when you f*** up, everyone else loses their job

    only here its that everybody else gets to pay when the financial bank-wizards screwed up. There again, everybody was happy to take the liar loans, and we do so like to see really big numbers in house prices which loose lending is very happy to help with.

    However, when it comes to looking at the stock market, it looks to me that companies are in a lot better shape than your average over-indebted Western consumer, and for that matter their over-indebted governments. At least the yield-paying sorts I am looking at are. Their debt levels seem lower and often profitability seems up (or costs are down).

    I’m not sitting on anything that I’m currently unhappy with owning, as long as they keep on paying dividends. Obviously if this is the second dip on the way to down and out due to all that macro crap falling out of the sky then all bets are off, but I don’t feel that’s the case at the moment. This is the crap falling that was dodged the first time round. It’s still there, it still stinks, and it’s still out to get us, but I don’t feel that it’ll destroy steady companies that are making stuff that people need. As opposed to stuff they want, I’m not about to buy Thomas Cook even at a high yield, because it’ll be a long time before Brits are going on foreign holidays to the extent they were in 2007, particularly when interest rates go up on their over-leveraged homes.

    So I have a list of companies that I’m interested in and would like to buy, and I’m keeping an eye on the price. This will probably be a drawn out slide, so I have to buy these companies is small amounts over several months. For instance, I’d like to buy Tesco, and I’d like to pay less that Mr Buffett did (about 380p in June last year), on the grounds that the yield at 3.6% is below my usual 4% minimum target and heck, I don’t have as much money as Buffett 😉

    I have a price alert on them of 380 and will start to look then. I’ll probably split my purchase in lumps spaced a couple of weeks apart as I can’t call where in the downswing I’ll find myself. I figure that I might as well ride with Buffett’s analysis, the financials are right for me, my shares based HYP is missing this sector and people probably aren’t going to give up eating any day soon.

    I’ve got an eye on some others, I could do with another income IT, at a two digit discount, please. Discounts have narrowed a lot of late, what with everyone wanting income it seems, well, it’s time to shake the tree and see if people start selling again.

    Valuations are improving on quite a few shares at the moment. I’m happy with the gains on my sharesave shares, so I am shorting a quarter of those to lock in the current price until I can get hold of them, as a bear market can hang around for a year or so.

    It’s one of those sad things in life, that it’s easier to live with the stock market when you don’t need the money right now, it makes it easier to watch the gut-wrenching 50% loss in value that happened in the last bear market (2007-Mar 09 for the FTSE AS). This one could be a chance for me to fill in some of the missing slices in my asset allocation pie chart.

    I’ll probably take the last bear market as a guide. Some firms such as Tesco took a reasonable hit to the share price but they’ve kept steady dividend growth through from 2005. Others such as ULVR have had a more ropey dividend performance. So I’ll take some hints from what happened last time, as it’s only a couple of years ago, and favour steady as she goes dividend performance where other parameters are comparable.  Oh and I’ll pass on financials, having eaten a £200 loss on BARC (and having missed most of the recent slide I’m happy to say!). There’s still too many unknown unknowns for me there. I’ll stick with the one financial I do have, RSA.

    So overall, all these bears jostling by my side need to start selling, but I’m not going to be one of them. I am a different sort of bear. I don’t think any of the firms I own shares in now will be destroyed by the forthcoming storm, and more than half steadily increased or maintained their dividends since 2005.

    If they can keep doing that, I can eat a repeat of the 50% variation in share price some of them experienced in the last bear market. Unlike my previous forays where I chased growth, with the share price volatility making me nervous and jumpy, the stability of the income is a much more peaceful ride. As Monevator said

    the companies chosen have steadily increased their dividends over the past five years, but during the same time their share prices have been all over the place.

    All of the firms in my portfolio took a hit in the last recession, and none have reached their pre-recession heights. However, I had the good fortune to start in April 2009. There’s something to this buying when others are selling lark… I haven’t got the diversification right yet, because I targeted the higher yields first. Looks like the opportunity to fix that at a decent yield may be coming my way soon!

    23 May 2011, 10:50pm
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  • One of the great things about high petrol prices is that it prices other people off the road, apparently it’s Squeezing the Middle

    There seems to be a constituency of consumers out there who are calling themselves the Squeezed Middle. And they’re mightily p*ssed off, so much so they want to vent. I got some choice words for them later on. However, I had a surprisingly pleasant experience yesterday.

    I hauled my carcass into the car to drive to London to visit my parents, guess it’s a 75-mile trip each way. I’m mortgage free and I have no intention of taking out the small mortgage I’d need to buy a rail ticket. I’m going to London tomorrow by train for work and it costs my company £78 of their Great British Pounds to do it. I hope I can add that much value to the meeting compared to a phone conference, but heck, it’s their call as it’s on their coin.

    So I fill up the car flexing the credit card for £62-odd. It’s been a couple of months since I bought petrol, as the trusty bicycle doesn’t touch the stuff. I note that it’s probably the highest about I’ve ever spent on a tank of petrol, and then I set myself on my journey down to The Smoke.

    I launch myself onto the A12 from Ipswich, and I think to myself blimey, where have all the people gone? Is there a football match or a Royal Wedding on? Okay, so it’s a Sunday late morning, but I know what the traffic should be, I’ve done this journey often enough. So I settle in and try and maintain an even speed of about 60 to optimise my fuel consumption of my 12 year old car that has already seen more than 100,000 miles of road, and it’s dead easy. I’m not streetfighting the trucks and I can let all the folks who have more money than me hare along in the outside lane, but even they aren’t streaking past me at about 40-50mph above my speed as they used to.

    This reminds me of how Britain’s roads were when I learned to drive, in 1984, you didn’t have the frenetic and tiresome jockeying for position then that has become the norm on our crowded highways.

    So I say hooray for high petrol prices – it prices all those other buggers off the road that were getting in my way. I arrived at my parents’ place more relaxed than usual, heck, I’d pay more to get the balance shifted even further. Which is kinda just as well, as I’m sure it will go that way, for all sorts of reasons, like peak oil, the increasing debasement of Britain’s currency, the general decline of the Western world relative to the East in competing for natural resources etc.

    According to the New Statesman we are into ‘peak car’ where people really are being priced off the road (hat tip to Alex for the heads up). About time too, the ever increasing volume of traffic on Britain’s roads, particularly the huge number of trucks doing the old truck race blocking both lanes of a two-lane road, was beginning to make inter-city driving in the UK really draining. On-cue the Grauniad delivers us this heart-wrenching tale of the Blanchards, a couple comprising of a chap and a SAHM who are part of the Squeezed Middle.  Let’s take a look at the ways they seek to design oil dependency into their lifestyle.

    So they had to get rid of one car, so the remaining vehicle naturally gets driven by the wage earner to get to work. What, then, is the nature of the complaint? It appears the lady (a SAHM I observe) has to take the 16-month old out of nursery ‘cos she no longer has a car to take him there, and now considers herself imprisoned in her home, to wit:

    It means I can’t get anywhere now, including nursery.

    Well, err, colour me a cynical son of a gun, but lady, you are a SAHM, so what’s with this nursery lark then? One of the upsides of living in a purty li’l village is you get to enjoy the birdsong and the smell of the countryside in its rich variety, one of the downsides is you are miles from anywhere – well, 10 miles from Cambridge. Apparently the bus fare for those 10 miles is now £5.40 return. Count yourself lucky, lady, the bus fare for me to get to work and back is that much and it’s only 6.5 miles each way, which is why I get on my bike.

    These Squeezed Middlers have built themselves an unsustainable lifestyle, though at the moment the solution is easy – SAHM actually has to be a SAHM and SAH to be a M, the clue’s in the acronym. Tesco or Ocado are going to have to deliver… Then we have the coup de grace

    Our children are missing out and the government needs to lower the price of petrol much closer to £1 to help families out.

    It’s the classic please won’t you think of the children? line. Why does the government need to use my taxes to subsidise your lifestyle? I’m not being a child-hating fascist here, when I was a kid my family didn’t even have a car till I was in secondary school! Schools, yes, health, yes, excess driving for SAHMs to live out in the country yet have access to the facilities of the town like the nursery, let’s just hold on a moment. It is possible to survive without a car, y’know. The choice has been one that people took for years before oil – you store or save your needs for about a month if you live in the country, and make a monthly trip into town, or you live in a more modest abode in town with easy access to the facilities around you and shop every day.

    In the coming decades transport will become ever more expensive. We will move ourselves are our supplies about less. We will manage stores better, as the fragile just-in-time supply chins that gorged on cheap oil fracture and fail in service. We will reimplement some of the systems that were used in the past, or more evenly distributed and graduated local, city, regional, county and country stores.  We will probably still have modern communications and data processing, so we will manage our stock far more efficiently than we used to. And country dwellers will make infrequent trips into town. £5.40 return is a killer if you do it every day, but it is not outrageous if you do it once a week. My Mum shopped one a week to the shopping centre for durables and ISTR twice a week if not more often for fresh veg from greengrocers and market stalls.

    We are going to have to think differently about how we live and how we supply ourselves. At least in Europe we still have a physical geography that reflects a time when supplies were distributed before cheap oil. I don’t know how Americans are going to be able to keep the suburbs and exurbs supplied in future, but they are a resourceful bunch so I am sure there’s a way.

    Oh, and before I take some stick for being some hyper-rich Toad of Toad Hall, I spent a total of £319 on petrol last year, so I am not Mr Toad, and it is why I can afford it if petrol doubles in price, indeed I could cope if it went up 10x, though I would probably cut my mileage even more and bike in the rain. I’m not rich as Croesus either, my household income puts the household into the nominal Squeezed Middle, though having no mortgage probably puts me at the upper end of it in terms of disposable income. I haven’t designed a long commute into my lifestyle, that was a choice I made decades ago. My London commute was 15 miles and 1.5 hours each way, and I resolved that one of the things I was going to fix was making sure I didn’t have that experience again. I was lucky in having that bad experience, but in general we are increasingly going to have to design our lives to involve less driving. Moaning that the government should subsidise fuel to allow SAHMs to drive their kids to nursery isn’t the right answer…

    In the meantime, I look forward to increasingly empty roads. I hadn’t noticed this drop in traffic going to work because my bike ride doesn’t go via too many main roads, and indeed it seemed to be the inter-city part of the journey that had less traffic, I can’t say I noticed any big reduction in town or in London.

    20 Apr 2011, 8:04am
    peak oil simple living Suffolk:
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  • Listening to the barley bird – one of the pros of cycling to work in a beautiful county

    One of the downsides of being a crabby old git on here is I don’t tip my hat often enough to some of the finer sides of life. A year ago I posted about the advantages of cycling to work with the emphasis on it saving money. However, there are other pluses to cycling to work, my route goes next to fields and then across a small patch of heathland, where I was treated to this lovely sound

    [audio:http://simple-living-in-suffolk.co.uk/wp-content/uploads/2011/04/20110419_101131_nightingale_240hpf.mp3|titles=Suffolk nightingale]

    It’s the sound of the barley bird. You have to have a heart of stone if you can’t tale a few minutes to listen to a nightingale that has crossed the lonely thousands of miles from Africa. He sits deep in a bush or some scrub and calls out his signal, which he hopes is heard by a lady nightingale who follows his long journey a couple of weeks later. That’s just not the sort of thing that you hear from your car over the traffic over the Today programme. Called the barley bird in old Suffolk because nightingales arrived as the barley was sprouting, according to the wonderful nature writer Richard Mabey

    2011 petrol prices

    Bike odometer

    As for the financial advantages, well, that still holds – I pass the same petrol station and it looks like things have gone up somewhat – petrol was £1.20 a litre then. So I get to save about two pounds a day. Okay, so it isn’t earth shattering, however it adds up. In the time I’ve had this bike computer I have put about 3000 miles on it. I’m a utility cyclist not a recreational one, so most of these miles I’d have driven otherwise.

    And every so often I get to hear a nightingale. What’s not to like 🙂

     

     

     

     

    31 Mar 2011, 6:42pm
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  • A New Financial Year looming, plus the Sound of Thunder in the Distance

    April 6 is the new financial year in the UK for some curious reason, as it seems the fiscal year ends on the more rational March 31. I’ve maxed my ISA for now, so the change of year means I get to have another bash at building tax-free assets that won’t be counted as income in future. It’s also a chance to have a general reshuffle. Every so often I have to get to lift the drains up and hose out the accumulated fat and grease of the finances to see if it accords with my values and beliefs. That’s not the same as getting the right answer, because my crystal ball is as cloudy as anyone else’s. but at least it will be my own mistakes 😉

    I don’t bugger about with formal rebalancing of my ISA, because I’m just not that kind of guy, and also because I am still in full ISA purchase mode what I do this year could shift my asset allocation by about 40%. So I rebalance by going to buy what I don’t already have a lot of. Which probably means mining, pharma, some REITs and some financials, but I have to research this.

    What I need is a jolly good stock market crash this year, so I can buy cheaper. There are distant sounds of thunder – some of the eurozone rumblings and of course all that oil war adventure is probably good for some of this. Some part of me suspects that this distant sound of thunder is the beginning of the end, as Peak Oil starts to overcome industrial civilisation as we have currently set it up. Although I wasn’t economically active in 1973 I was sentient, and we’ve been here before, so I may get my jolly good stock market crash this year, possibly on the popular revolution in Saudi Arabia. The challenge, of course, will be whether it (the stock market, rather than Saudi…) gets up off its knees afterwards as it did then. An awful lot of companies’ business cases would look a lot different with oil at $250 a barrel, and not many of them would look better.

    I wasn’t used to how National Savings Index linked certificates worked last year. In particular I didn’t realise that these were desert blooms, only available for a short time after the Spring rains. My plan was to buy £500 of these each month to give me a steady index-linked income boost in three year’s time (now two years). That doesn’t fit with the seasonal availability, so I only got £2000 into that before they were summarily canned. Which sort of put the kibosh on that bright idea 🙁

    However, NS&I may still serve me well. I have an emergency fund of about £7500 in a two year’s back to back Nat West Cash ISA, which, all credit to them,  has actually continued to provide a3%-ish interest rate. Now on reflection, there is a lot to be said for shifting this to NS&I certificates, because you can

    • get the money out at short notice, although at an interest penalty
    • but it’s a little bit of bother, so you have to think about it
    • and thr RPI indexing means an emergency fund of £10k today will be able to fix the same amount of emergency in five years hence
    • oh yes, and did I say it’s tax-free, so what the heck is the point of sterilising some of my ISA allowance looking after cash?

    Which beats the cash ISA option, which dies a little bit by about 2% a year. There’s also an opportunity here – I believe I can transfer the Cash ISA into my shares ISA ands still load up with this year’s ISA allowance, ie I could get £17700 into my shares ISA earning an income for me rather than £10200 into it this year. Of course the downside of that is I have to save the £7500 to go into NS&I in the next month, plus save up £10200 over this next year plus increase my pre-tax savings in AVCs to keep that greedy tyke Osborne out of my pay packet.

    That’s a very serious big ask and I may not make it, though my outgoings and non-financial investment costs have dropped. But it’s a potential opportunity.

    As to the asset allocation, for myISA I have shifted it to this

    March 11 ISA asset allocation

    which, compared with December has changed to more accurately reflect my views on what an ISA should do for me. Which is buy me an income that isn’t considered an income for tax purposes. I’ve dropped all holdings of precious metals in my ISA because I have come to the conclusion that an ISA is not the place for precious metals. This isn’t because I have decided holding precious metals isn’t for me, I simply need to get my policy on that right, so at the moment I am exposed to currency debasement big time, apart from my non-financial investments.

    Overall financial asset allocation

    Overall my total share allocation including pension AVCs and stuff outside my ISA is more balanced. The obvious holes as mining stocks, AsiaPac and the US, all of which confuse me.

    The US is home to an enterepreneurial bunch of go-getting people who aren’t known for taking no as an answer, and I am sure this will work to their advantage in future. However, they have some deep systemic problems arising from being a reserve currency, which has permitted some extreme excesses which are denied everyone else. I’d prefer not to be caught in the crossfire of unwinding those debts. The US is also hellishly exposed to Peak Oil, in a way which is so much more extreme than anywhere else.I can imagine a Europe without liquid transport fuels. I struggle to imagine a US without gasoline, with perhaps the exception of New York and some of the East Coast. And the low taxation of oil makes the US economy far more sensitive to increasing crude oil costs.

    I am sure Americans may be resourceful enough to sort it, but they really do have to get off their butts and engage, simply repeating that “the American Way of Life is Not Negotiable” is not what I would consider a rational response. I am not sure that the military option is such a great answer either. There seems to be some doubt about whether it increased oil production in Iraq  some say yes, but it is not a universally held view. So at the moment I don’t do America, other than as part of my FTSE100 holdings.

    Mining, yes, shame that is riding high at the moment 🙁 A missed opportunity from last year.

    AsiaPac – with the current state of the pound that all looks jolly expensive. I don’t do China, because I don’t understand it, and the demographics suck. I could combine mining with an Aussie tracker ETF, since mining seems to be a lot of what Australia is about.

    I am tempted by India, which has strong demographics and a go-getting entrepreneurial class, though some very serious strategic problems. It is hard to gauge performance where the currency has such a shocking inflation rate of around 10%. db-xtrackers do a GPB denominated ETF but this is a synthetic tracker using derivatives and swaps, which introduces a lot of hidden extra counterparty risks.

    Fortunately there’s no great hurry, apart from targeting that NS&I investment in April, and I have a war chest saved which can sort that for me, I will hit NS&I up to aim to hold a total RPI-indexed emergency fund of about 10k, so I can think about how to tackle the ISA over time.

    9 Mar 2011, 6:01pm
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  • Warren Buffet is wrong, there Are limits to Human Ingenuity

    It’s not often that I’ll find the brass nuts to call out the Sage of Omaha for talking through his hat, but this is one of them. In the usual fabulous letter to his shareholders including one heartwarming extract from Grandpa Buffett extolling the virtues of old-fashioned thrift. Nothing wrong with any of that. It’s here where I part company with the Sage of Omaha  a little bit:

    Money will always flow toward opportunity, and there is an abundance of that in America. Commentators today often talk of “great uncertainty.” But think back, for example, to December 6, 1941, October 18, 1987 and September 10, 2001. No matter how serene today may be, tomorrow is always uncertain.

    Don’t let that reality spook you. Throughout my lifetime, politicians and pundits have constantly moaned about terrifying problems facing America. Yet our citizens now live an astonishing six times better than when I was born.

    The prophets of doom have overlooked the all-important factor that is certain: Human potential is far from exhausted, and the American system for unleashing that potential – a system that has worked wonders for over two centuries despite frequent interruptions for recessions and even a Civil War – remains alive and effective.

    We are not natively smarter than we were when our country was founded nor do we work harder. But look around you and see a world beyond the dreams of any colonial citizen. Now, as in 1776, 1861, 1932 and 1941, America’s best days lie ahead.

    The problem with this is that it is entirely ingenuity-centric. Human ingenuity and graft were undoubtedly a lot of why America’s best days lay ahead in 1776, though let’s face it they could hardly have lain behind 😉

    And yet for all of the remaining three dates, human ingenuity had its little helpers, the gift of ancient sunlight that gave it a leg-up. For sure, that ingenuity was necessary to make use of it, but it is insufficient on its own to do all of the stuff we take for granted. London lies some four hundred miles from Edinburgh. In 1776 it would have taken the best part of a month to do it using renewable energy (horse power). Now I can decide to leave at noon and be in Edinburgh by sundown. Human ingenuity created the means, but it doesn’t power it.

    Warren is right in that America will probably not run out of human ingenuity. But it might run out of resources that human ingenuity needs to deliver its current lifestyle. Whether or not America manages to use its human ingenuity to find a different, perhaps better lifestyle is going to depend on it getting rid of human ingenuity’s evil twin, America’s human sense of entitlement.

    Just like Scarlett O’Hara was at her best when she clawed as the soil of Tara and declared that she would make something from nothing, so it seems so often that human ingenuity achieves its best when it does not have the drag of a sense of entitlement pulling people back. Entitlement makes us avoid seeing the world as it is by imposing the world as we”d like it to be onto it.

    America’s best days may well be behind it. This won’t be because the wellspring of ingenuity will fail in America. If it happens it will be because Americans’ sense of entitlement to the benefits of cheap energy will blind them to alternative solutions that would need less energy.

    Warren may be right in the end and Americans step up to the plate. But for once it won’t be their ingenuity that gets them through. It’ll be ditching their sense of entitlement.

    Buffet was talking about Americans, so I’d followed the theme. But it applies to all of us who currently have our lives made easier and more plentiful by cheap oil. We all need to lose the sense of entitlement, and learn to give energy the respect it deserves. Though I can easily bike to work and back, I am not a good enough cyclist to sustain the power to run this laptop computer I am writing this on for the amount of time it took me to write this post. But I have enough ingenuity to imagine an alternative which would be be just as rewarding. Sometimes it is good to drink a few beers with friends and hold forth on a subject. Humans did that well for centuries before the oil age.

    Our challenge in the coming decades will not be finding enough ingenuity. It will be getting rid of our sense of entitlement…

    6 Mar 2011, 5:42pm
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  • Findependence Day, just as Peak Oil’s advance guard comes knocking

    Early in my current job, sometime in the early 1990s, there was a all personnel management course mandated called “the Winning Edge”, I think it was from these guys, indeed the geezer in the video looks like the chap who led the course, the intervening 20 years has not been too hard on him.

    Now most management courses are utter codswallop.  Of course we could all get more stuff done if we concentrated more/cared more/worked longer/smarter/harder and pretty much every management course I’ve been on has been a variant of one or more of those themes, together with the latest management school fad. You know, the usual suspects, total quality management, anything from Peter Drucker, management by objectives, management by fear(oops, sorry, I meant to say modern performance management), management by incentives, management by walking around. The one course I’ve never seen is the one titled “What’s the difference between Leadership and Management, Why it Matters and How You can Tell One from the Other” but that’s a rant for another day.

    This course was subtly different. At the time the Firm was trying to get rid of a whole bunch of people by some pretty awesome financial incentives, particularly for the old fossils that were about as old as I am now 😉 These guys tended to be lifers with some twenty or thirty years at the Firm, and a fairly set view of what they were going to do – ie carry on to 60 and retire. The aim was to jolly them along a bit and get them to take up the financial incentives and reduce the wage bill.

    So the Winning Edge was a little different, asking what limiting beliefs people had and what they really want.  I sat in the room of a fine hotel in Aldeburgh, looking dreamily out of the window at the seagulls wheeling about in the late winter sunshine. You know how it is when you ought to be paying attention but you’re thinking of that pretty girl who served you lunch. Fortunately somewhere in the back of your mind there’s a little guy with a tape recorder recording what you should be listening to, and every so often he picks up something odd and knocks on the glass window in your brain between the main thread of consciousness and everything else. He says “Oi, you might want to hear this” , backs the tape up a bit and replays it.

    So he does that and my mind wanders back from the girl, and the seagulls, and how it is that there’s so much dust in the air that you can see the sunbeams, and the little guy rolls tape.

    And I realise that in the last few seconds that Mr Big Cheese Departmental Manager has been standing up in this Aldeburgh hotel and telling the whole department that what he would really like to have is Financial Independence.

    That’s what made me sit up and listen. Here was a bloke in his late forties, on a wedge somewhere north of 35 grand at the time. The Bank of England tells me that is £57,000 in today’s money. I was a lowly pup on less than half that at the time, and I was staggered. How on earth can this guy not feel financially independent when he’s on twice as much money, what the heck is up with that?

    I was happy in my job at the time and so I didn’t understand a) what financial independence was and b) why you would want to have it. The difference between debt and deficit was not clear to me.

    Fast forward almost a couple of decades to April 2009 and I have the pleasure of hearing a sociopathic manager not give a damn about some traumatic elements that had happened to me in the last year, admittedly outside work, harping on that I was in an area where my skills didn’t fit.

    There was a different area at work where there were customers and work for those skills, but due to ‘headcount limitations’ he needed bodies. So he said I had to retrain for some Cisco crap which I could see plain as the light of day was going to be outsourced to India in the next couple of years, and I thought to myself  “I am pig-sick of listening to jumped-up twits like you wittering on about your damned objectives.  I don’t like the cut of your jib, mate, and I can see where this is going. What’s good for you, buddy, ain’t looking so good for me, and it bores me senseless, too.”

    I mean, it’s not hard, guys. This is network plumbing. Network configuration is easily remoteable, shifting data from one place to another is what networking equipment does for a living. And there are shedloads of guys in Bangalore that are reasonably bright, reasonably young and are prepared to work for a third of what I am prepared to work for. As a shareholder I happened to know that the Firm had just taken a big stake in an Indian BPO/IT company. So why exactly should I retrain to jump into this bear trap? Obviously I know enough networking to get stuff going as basic professional competence, but memorising tedious Cisco-speak to get a CCIE only to be hoofed in a couple of years (ie now) wasn’t where I saw success lying.

    In that interaction I understood what the meaning of financial independence was, and like Proust’s madeleines I recalled Mr Winning Edge and the Big Cheese stating he wanted financial independence. Because I didn’t have financial independence I needed to work to keep a roof over my head. I had to act all nice to Mr Sociopathic Line Manager and smile as he was giving me the BS that this was all good for my career development (ie his objectives), as opposed to what I would do to a double glazing salesman trying to sell me BS – ie tell him to go forth and multiply.

    I’ve just been back to Mr Winning Edge’s website and he is still harping on about the same things

    1. Do you feel that events and other people around you control your life?
    2. Do you struggle to find the motivation and passion you think you should have?
    3. Do you find yourself a victim of your own emotional states?
    4. Do you have a clear image of where your life is going and what you want from it?
    5. Do you feel fulfilled in your career and do you feel you are achieving everything you can?

    Now a lot of this is in danger of being Calvinist cobblers, inasmuch as the aim of life is to have a good time and have fun, not get trapped in Max Weber’s Iron Cage of work. I was okay with all of those five as the young pup, but as I listened nearly 20 years later to the twerp explaining to me that I had the wrong skills some of those answers didn’t look good, a bit more like

    1. Yes, I have to listen to sociopathic managers like you drivel on trying to maximize your performance at the cost of shafting me
    2. Yes, see 1 above
    3. Perhaps yes, there isn’t so much I would like to see now as your smug face missing a few teeth…
    4. Yup, as far away from here as is practicable.
    5. No, it’s tedious when I am being told to throw away what I know so I can be outsourced. I wasn’t born yesterday, mate.

    Not a good situation. At least I’ve managed to get this twerp out of my life, more by luck than judgement. When you have an experience like that, you have two choices. You can either surrender and suck it up, or you can examine what you need to do to kill the beast.

    So I rolled up my sleeves, immediately took out a Cash ISA in March 09 for about three and a half grand, and canned all discretionary consumer spending. In April 09 I topped up that cash ISA to seven and a bit grand, and figured after three months of saving I was done with emergency fund requirements, it was time to start buying financial independence. For various reasons the earliest it makes sense for me to draw my pension is 2015, which is also about the latest it makes sense as otherwise the Government will start stealing more and more of it as tax (pensions are taxed as income in the UK). Although I’d had share ISAs before, the traumatic experience led to all that being liquidated, fortunately before the credit crunch, so it was time to start again.

    At the same time it was time to stop the Government stealing so much of my income in tax so pumping up my pension AVCs gets rid of my 40% tax liability and then some. All enabled by locking down spending. Freedom from tossers telling you what to do comes at a price. I haven’t had a holiday away since 2008 and started to attack my energy consumption and any other steady costs – that means cold turkey on consumerism, charitable spending, the lot. I have become slightly less hard-line as time went by and reinstated a couple of the latter items after examining my values, but generally the hatches are battened down.

    Financial independence is a funny old thing, and it appears to have crept up on me, silently, without giving me a chance to break out the champagne. I use Quicken 98 to manage my finances, and observed recently that if I divide my total cash savings by four I have more than my yearly essential running costs.

    My shares ISA don’t help that much, because I can only buy an income of about £500 a year. That’s  assuming a yield of 5% on about £10200 invested a year, and I only have a year and a half because 2009 has half the ISA allocation to cash, and 2011’s year hasn’t started yet.

    Now it is a meagre form of financial independence – because I would have to run with everything locked down until 2015. That means living like ERE, which, although I agree with his sentiment

    Success is having everything you need and doing everything you want. It is not doing everything you need to have everything you want.

    I find it just too spartan for my tastes. I am also older than Jacob and a damn sight less fit, and aware that although I can easily chop firewood now that won’t last 30,40 years into the future. So the financial independence I have now is of a paltry and meagre kind, though I will be significantly better off from 2015. So there are good reasons to carry on working, while accepting I may fall into the one more year before comfort fallacy:

    1. I have at least one possible reasonably expensive project I want to start when retired for which I’d like to save my part of the money ahead
    2. The advance guard of Peak Oil seems to be rapping at the door. An awful lot of things will get a lot dearer, and there will be enormous changes to the economy if indeed it survives intact. My financial investments may be rendered down to toilet paper so relying on those may be unwise until the smoke clears a bit…

    The original plan was to win freedom in three years time, so I have a year to go, and some other conditions that make it better in a year and a half (Sept 2012 not April 2012). There is something gratifying in passing this milestone a little bit early, as a result of being able to reduce essential spending by more than I had estimated.

    Oh and before anybody tries to bite me for being a lazy b*d and being a load on society, note that anybody with capital of more than £16,000 is automatically debarred from claiming any Government benefits until they reach 66 (currently in my case). In saving and discharging my mortgage I took the decision (knowingly ahead, FWIW) to cut myself off from the support of the government for my income. So I’m not living off your taxes, bud 🙂

    Chevreau's Findependence DayAs for the term Findependence, I pinched it from John Chevreau’s Findependence Day. I’ve never read it, but the summary as he was hawking the book inspired me as I made the call whether to suck it up or take the fight to the enemy in 2009. You can read the first chapter here. It’s not that applicable to be as I’d need to lose a few birthdays to start from where his characters start, but I’ve never had some of their problems either 🙂

     

     

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