23 May 2016, 10:57am
personal finance:
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  • Brexit or not – opportunities and hazards?

    In about a month’s time the UK will have a referendum on leaving the EU. I’m not going to spend much time on the merits or not, because the result will be whatever it is. I will observe, however, that you get to know something about your destination if you look at your fellow passengers on the bus. And the passengers on bus Brexit seems to be folk I don’t want to ride with – people who haven’t realised that the sun set on the British Empire a very long time ago and a few random chancers and headbangers from the Tory party. The one thing I do hope and pray for is once the result is known, whatever it may be, we don’t get to do this again for another 40 years 1. I suspect by then it will be a moot point for different reasons.

    The quality of discourse about which way to vote is terrible, largely because so much is inherently unknowable. Osborne stands up and says house prices may fall by 18% if Leave wins. To which I ask myself exactly WTF this is regarded as a bad thing in the first place? Is it really so terrible that some of our young people might actually get to be able to buy a house and some borrow-to-letters get to know the deep joys of negative equity, and secondly, what is Osborne’s confidence interval on this stat? How certain is he of the assumptions behind this ridiculously precise-to-two-figures assertion – the range is probably between -50% and + 25% and he may as well say God knows. The same charge can be levelled against the other side – deciding to leave is a complex and chaotic process that depends on many variables that are inherently unknowable, open to fate and the whims of other people and countries. I’m not clever enough to have an informed opinion, and that probably goes for most 😉 So this is not about the merits of either course of action, and headbangers of either side aren’t welcome in the comments.

    Financial hazards and opportunities

    The choice is between the status quo and something different, and it’s probably fair to say that financial markets in the short term don’t really like ‘something different’ in general. That’s not specifically to decry the putative upsides the Leave camp are making – if they are right these upsides will show up over the five, ten, twenty year timescales. Certainly if one is convinced by the Leave economic case the course of action is to buy UK equities into the post-June whirlwind and sit tight for a few years – a mix of VUKE and some UK small-cap index fund would cover most bases.

    I’m not personally that convinced. There is also the slow run on the pound which is already 25% down from the financial crisis, as a chart of IMF special drawing rights (a basket of foreign currencies to try and average out individual country forex swings) per UK pound shows

    1605-gbpxdr

    Which has no doubt made my ISA look better than perhaps it really is because there is now a fair amount of foreign stuff in it – indeed it is making my Charles Stanley ISA, which is purely a index fund of Dev world ex UK look better than it really is. And since that is over 50% US and I think the US is shockingly overvalued it’s not what I want to do. But sometimes in investing you have to invest in stuff you don’t believe in. The US isn’t a bad place to have a lump in if I am expecting turmoil in the UK and perhaps also Europe more widely. Obviously there’s the potential turmoil of the follically challenged trickster becoming POTUS in November 2, but let’s tackle the nearest fire first, eh. Oh and let’s not forget the Greek crisis and other tribulations. One of these days that damn Euro is going to go titsup…

    Now a run on the pound could be countered in many ways. Buying foreign stuff, indeed buying forex or spreadbetting it. Buying gold isn’t a bad way to go, although I already have a bit too much gold from late last year. But I’m not after optimizing my long term asset allocation. I am looking for a defensive position until after the referendum.

    There are two outcomes I can see. One is that remain wins. My asset allocation is broadly where I want it to be at this stage, and in five years time the referendum will have been a hiccup in the general trend. The only opportunities in this eventuality is if the uncertainly before the referendum makes prices cheaper. I bought some VUKE a couple of times earlier this year, this holding is currently 7% up. Should the turmoil of Brexit send that below par, or close, I am tempted to buy more of that sort of thing. Although a Brexit win will probably hit those firms, they are big fish and 70% of earnings come from overseas they can probably come good over time.

    The other is of course that Leave wins, in which case gold will have been the right way to go because the pound is likely to come under severe pressure for a while. I’m still okay with the FTSE100/VUKE which I think will come good in the end. So, undecisive bastard that I am, I have chosen to do all three. I have switched the cash in my TD ISA with gold ETFs, I have brought forward my monthly purchases of the L&G Dev xUK index fund for the next three months and if FTSE100 starts to tank in the runup to the referendum I have a full year’s worth of ISA allowance to put into Charles Stanley, although I’m not going to use all of it on this. In the end I can’t protect myself against the downside, but I may as well try and lose a little less in the worst case, and if possible profit from the volatility in the best case.

    The FT has a piece on Brexit finance ramifications and a poll tracker as does the Economist. But in the end William Goldman has the edge on all the pundits  – “Nobody knows anything”. He was talking about movies, but it applies just as much to Brexit and its outcomes or not.

    Notes:

    1. in which case it’s highly unlikely to be my problem either way
    2. I don’t necessarily agree with all of the Spectator’s conclusion, but it’s a fun description and one by Americans rather than a slightly more balanced way of saying the same by us effete Europeans, which seems right in something that is essentially an American choice
    19 May 2016, 5:35pm
    housing
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  • Buy to let is a rich person’s game – shock alert.

    Aw, diddums. The Torygraph is spitting bricks about the unprecedented assault on private buy to letters in the Budget. Apparently buying houses to rent out to people too poor to buy them themselves is becoming a rich person’s game. Colour me flabbergasted. You’re buying extra copies of the single most expensive thing most Brits ever buy, just because you can, so you can fleece some of your fellow countrymen for an essential good. Of course BTL is a rich person’s game. The amazing thing is that we permitted, nay subsidised, non-rich but still extremely well-off people to borrow cheap money to give poorer people the shaft for so long, and indeed it’s another rum thing that it was a Labour government that aided this stiffing in the first place and a Tory government that applied the brakes, ever so gently.

    Obviously if you’re rich enough to buy more houses outright, well, go for it. But the one thing that the British housing market doesn’t need is more cheap borrowed money chasing a limited stock of houses, so it’s about time that these leveraged ‘landlords’ got run out of town, particularly at the moment when interest rates are low.

    Now it’s been a very long time since the Ermine rented a place, but my experience of private landlords was that in general they were thieving scum that wanted all the profit for themselves and spent as little as possible on their properties. Now part of that was my own fault – I had bought into the collective mantra the pollutes the British psyche that renting is fundamentally A Bad Thing. I was Monevator’s sister, probably before she was born 😉

    “I am just throwing money away by renting.”

    I combined this with another toxic tendency, one I still struggle with at times, which is if it’s something I don’t feel a passion for, I buy cheap. And often buy twice 😉 Now with renting I avoided the buy twice, but I did buy cheap. Not because I had to – I could have afforded to pay twice as much. But I was tight. Because I am throwing money away by renting, I tried to throw as little money away on that. Not to do something else clever like save for a pension but to spend it on beer and travel and music and shit like that. I was in my 20s FFS. The downside of this of course is that I was drawn to cheapskate landlords, because I was a cheapskate. I’m sure there are good landlords. I never ran into them. I never rented houses, either – only rooms – well and got together with others to rent a house but we each occupied a room. The only decent landlord I had was the work colleague I rented a room from for six months before I stupidly threw money away on buying a house at the top of the market.

    So when the Torygraph wheels out some dude called Craig Scott-Dawkins, ten years younger than I am who  owns five buy-to-let properties in Leamington and Warwick, the Ermine heart of stone chills to his plight

    He said: “I voted Conservative because I thought they were going to take a steady approach. But they’ve knifed us in the back. These changes are making it more difficult for those of us who want to prepare for retirement. 

    Let’s bottom out what is actually happening here. Let’s take a look at Maslow’s Hierarchy of needs, what the human animal focuses on

    1402_Maslow's_Hierarchy_of_Needs.svg

    A house sort of goes in the red bit. Since we’re not snails or tortoises, we need a roof over our heads to keep the rain off, and hairless wonders that we are walls keep the wind off us so we don’t freeze in these cold Northern climes. There’s no fundamental need to own houses, true, and in many other European countries renting is a perfectly good alternative. There is a strong argument to make that renting suits modern employment patterns better, at least until having children, but that’s a different issue. So our poor Craig isn’t rich enough to actually afford to buy the capital base of his evil empire, and he’s bitching about losing his subsidy. Well excuse me Craig, but you aren’t a landlord because guess who owns these damned houses – that’s the bank. You are a lord of jack shit, you are a bank worker making their money work for them. You are also exposing your unfortunate tenants to the risk of you getting taken out by rising interest rates on your overleveraged farrago. How do I know it’s overleveraged? Because you’re a subsidy junkie. If you really had the money you wouldn’t take the hit on the tax changes, because you were charging interest against tax, something that the poor bastards who actually want to buy a house to, y’know, actually live in the darned thing, haven’t been able to do for over 25 years.

    The trouble is that the government in the UK had made regulations about renting so bad for both landlords and renters that it’s a deadly embrace that isn’t much fun for either when it goes wrong. The renters have little security of tenure, but if they dig their heels in the landlords seem to have to jump through some odd legalistic hoops too kick ’em out. It’s something made for people with deep pockets who can play a long game, not the ‘my BTL is my pension’ brigade, who believe in housing as an asset class because they can touch it as opposed to things like shares or bonds. That’s religion, and it shouldn’t be subsidised by the taxpayer, particularly when it puts our young people at such a disadvantage compared to our old gits who have suddenly got pension lump sums to splurge from Osborne’s pension freedoms.

    learning to spend again – consuming more intentionally this time

    With a regular income now, and only so many years to use it in, it is time to review one of the Horsemen of personal finance from the other side, consumption and lifestyle. It’s an opportunity to think about it properly this time and consume intentionally – to spend on what matters to me and furthers my values, rather than the admen’s. This is a big difference to how I spent money up to 2009 – that was the classic slow lifestyle inflation of moving from a student through escalating jobs. That sort of lifestyle inflation is unthinking, and while I generally avoided consumer debt which is the #1 win against the black tide of advertising making consumers spend badly, I didn’t always get value. Some was bought for the promise that it would make things better and easier. Some of it didn’t because of the Diderot effect, and some of it was sheer being suckered.

    As proof of how much of this wasn’t necessary, in the seven years I have not lived a life of abject poverty or the Rowntree Foundation’s inability to take part in society – most of the stuff I had seven years ago is still in service and works well enough, and is not shockingly low-quality compared to modern offerings. One 20-year old piece of consumer spending that did give me great value that failed in service over that time was my Naim power amplifier for my hi-fi, already secondhand when I bought it, which developed a shorted turn in the transformer. I missed that, but anything else that broke I lived happily without. Some of this is because digitalisation means the world is getting a little bit more virtual and less physical, but much of it was simply because I didn’t give a damn, once you have freedom you can be more creative or just go do something else instead.

    It’s hard to get perspective as one gradually inflates lifestyle to match income, but I have had a long break from consumerism – for seven years the answer to how much to spend on Wants was ‘as little as possible so I can save’. So it’s like starting anew, but with the wisdom of hindsight from the previous experience. Not all consumption is bad – the consumer society didn’t get where it is today by never offering value. What I want to win from the hiatus is the discrimination to spend well, to get value on my terms rather than other people’s. So it still means a ruthless avoidance of advertising in its many forms, and I still don’t have time or inclination to watch TV 😉

    One of the I’m going to do with my return to a regular income is to enjoy some of the interests and hobbies I used to do before I made the decision to get out ASAP. Some of these I simply put on hold because they cost money to pursue on needed travel I didn’t want to spend money on, some of them I quite because I didn’t have the energy. All of these fall into interests; they are firmly in the Wants category and not in the Needs. So canning Wants when I Needed to retire early was an entirely rational thing to do.

    Sadly the rational thing to do isn’t always the right thing to do. In hindsight maybe I should have got that amplifier fixed and saved a grand or two less, because I missed decent sound, the sound systems I have with my computer and in the bedroom are okay but nowhere near as clear. I know everybody else uses Spotify and good for y’all but I like being able to listen on speakers and it not all blending to mush. So I should have pushed the boat out here, but the other interests etc, well, the time was better spent on learning and honing my art. When I was working and short of time it was always about the next great thing and gizmo that was going to turn me into a great photographer/recordist/birdwatcher/writer/whatever. In the long lean years I discovered that I was usually the weakest link, and learning to use the stuff I already had and more about my targets, to learn about what I was interested in and just damn well slow down and listen and observe FFS was often the secret sauce I was missing.

    One of the conclusions I have come to is that any sort of pastime I do in future needs to definitely not be primarily stuff-consumptive, it needs to involve some sort of challenge, or creative expression. I don’t necessarily have to have an audience, but I do want to be changed by the experience, have some element of mastery. So that’s no to the beach, anything that ends in -collecting, yes to things that involve some sort of art and craft, or reward for effort. So of course the first thing I go and do to celebrate is purely consumptive, but in experience

    The Swan hotel in Lavenham

    The Swan hotel in Lavenham

    I stayed a couple of days the Swan at Lavenham with Mrs Ermine for a short break. Apparently much used by London types up for a weekend, from Mrs Ermine’s chat with the spa staff. I drank coffee and spent time in the peaceful courtyard reflecting, reading and listening to the birds.

    the courtyard

    the courtyard at the Swan in Lavenham

    The Londoners clearly know a thing or two about demanding high standards for the grub, because it was excellent on both nights in at atmospheric half-timbered hall. I then had got Mrs Ermine a couple of hours of owl flying experience with Lavenham Falconry. She’s mad on owls, and you get to see them close

    Barn owl

    Barn owl

    though personally I’d say getting up this close to this great big lump was too close for my liking.

    Steve the proprietor with Bonnie the owl

    Steve the proprietor with Bonnie the owl. That’s one big owl IMO…

    I ducked every time this one came close 😉

    Inside the Guildhall

    Inside the Guildhall

    Lavenham is a nice part of Suffolk and the Guildhall was worth a gander (does a very decent afternoon tea and cakes too). I was taken by the mummified cat, there to ward of evil spirits coming down the chimney, a common feature of mediaeval Suffolk buildings – there’s one hanging from the ceiling in the tiny bar of the Nutshell in Bury St Edmunds too.

    Rameses

    Ramesses

    The NT have a nice feature that you aren’t hit by the grisly sight from the off, he’s respectfully covered in some cloth, but the temptation to peek is too strong…

    1605_ramcoverP1070556

    The village itself is all wild jaunty angles of the ancient half-timbering in many places.

    1605_rakish_P1070585

    A couple of weeks later we stayed three days at a dedicated spa, because this is something that Mrs Ermine really enjoys, and we went to Norfolk for a couple of days. Some of this I have to pack in in a short while because it so happens this is a better time of the year for her to be able to get away from the farm for a bit because of the vagaries of the growing season. While I have the time and now the money, she finds it harder to go away for more than a few days, which favours the fast and furious sort of decadence rather than slowly ambling along on a journey of discovery which I will be able to do on my own.

    a requiem for The Firm’s sports and leisure association

    One of the things I will mess around with again is amateur radio, despite the fact that the Internet happened between when I was a youth and now and has pretty much destroyed the whole point. But it’s an excuse to climb some of Britain’s hills 1 and make contacts and gawp at the scenery, a little bit of the experience and being changed by the challenge. Now when I joined The Firm, as a joint full of electronics engineers pushing the boundaries at times there was a very active amateur radio society. I never did much with it then because you need time. So many recreational interests are like that, you need time in the field to get any good.

    POTUS with a Blackberry - in Nov 2014 WTF?

    POTUS with a Blackberry – in Nov 2014 WTF?

    And time is something we don’t have while working, and it got less with the always-on way work drifted after 2000 as mobile phones poisoned the work/life balance after the Crackberry (who remembers that from 2004, eh?). Time is not just the total number of non-work waking hours, it’s also about how many contiguous days of them them you can string together.

    I joined The Firm in the late 1980s as a twenty-something pup. In a research lab you are surrounded by clever people and there is always something more to learn, but The Firm was more than a workplace, it was a community, albeit a somewhat strange community. It was intellectually biased and technical/electronics engineering biased. Let’s face it, at times there were issues of personal hygiene in some places where guys spend too much time thinking, I actually switched job t at one time because I couldn’t stand the hum in the office from one fellow, though he was brilliant at what he did. And the girls in the town did get to know that while the odds were good (engineering facilities tend to be very male-biased) the goods were odd…

    But for all that it was still a community, and a vibrant community in that the social and leisure association had a dizzying array of clubs and societies, on all sorts of things. I used to borrow records then CDs from the music club, I spent lunchtime for a few weeks trying to learn Japanese. With a deep loathing of sports and particularly team sports that started in schooldays and persists to this day I was never going to see the point of half the clubs, but it was good to know they were there.

    In browsing on the Web I saw traces of The Firm’s radio society, but it’s a pale reflection of its former self, last significant news from 2009. I looked at the website of the umbrella leisure and social society and there’s a whiff of tumbleweed around there too, of the 19 clubs all are sports apart from the radio society, photography, angling, sailing and golf. There were three times as many when I was there, and it’s only been four years… Not only that but the link to the radio society goes to a lapsed domain. I still clearly remember the all hands meeting when a head of department said ‘although we are closing many of the labs we aren’t turning this place into a jobbing shop’ and while I subconsciously picked up that he was lying because I remember the oddness of the statement and shiftiness still now.  I failed to consciously pick this up, nor to take the corrective action which would have been easier to do from 2000 that it would have been ten years later. Oh well.

    It’s all a sort of creepy independent verification that this particular outpost of The Firm is a pale reflection of its former self. It’s also a signal of a wider malaise, where form is prized over function, which seems to weaken physical communities. I was talking to a bunch of people at the Aldeburgh Food and Drink Festival. They’ve been going round schools showing kids how to grow stuff to eat and all good things like that, but they were now getting stonewalled as schools cut out everything that doesn’t go into pumping up something called SAT scores. These are primary schools, by the way. And people used to bitch about the eleven plus FFS, but now we measure the little tykes twice in primary school, comparative to each other. Well, I suppose you have the groom the youngsters for the ghastly world of performance management at work, though it seems a little bit tough to do that at primary school. School is a larger part of a child’s world now than it used to be, with parents working and commuting long hours. You’d have thought eliminating the broader education of how they fit into society and where their food comes from for example, in favour of the misery of metrics draining the meaning out of life is a regressive move. But fortunately this is not my problem, though it looks like a rum way to run a school to me. My primary school, in the 1960s urban wasteland of inner London, found a way to take us ankle-biters out to see nature. And still get some of us to pass the eleven plus despite the shocking digression into the sordid realms of General Knowledge.

    I’m reading Nicholas Carr’s The Glass Cage, where automation is leading us, and he seems to make a cogent case that our thought processes are becoming shallower, that the hive-mind or the Big G will fix things for us. I mean hell, Amazon will sell you a gizmo 2 that we used to know as a bug. For the convenience of ordering pizza you livestream everything said in your house to Amazon for their computing hardware to parse and answer your questions. They will of course, so not parse everything else you say to use in evidence against you feed into their algorithms so they can upsell you more consumer shit that you will have to spend more hours of your life earning money to pay for. George Orwell was absolutely wrong, we will buy the telescreens ourselves and demand to be heard, doubleplusfeelgood social media indeed.

    Something else I learned is that while I take information in from the Web, I don’t gain deep understanding, compared to learning the same thing from books. Indeed, I’d also challenge the assumption that learning ability inherently decays with age. I was trying the understand the craft of designing aerials, and I spent way too much time on the Web, getting conflicting opinions. Then I pulled out a textbook that I had bought as a teenager. I had passed the radio test as a way to try and expand my application to Imperial College, though we didn’t have personal statements in the late 1970s there was some sort of CV and it helped to add bits to it. I had never understood that chapter, because I didn’t have the ability to imagine the electric and magnetic fields travelling through space. It was much easier to grasp this time, though I am 35 years older. By rights the younger me should have had no trouble, but it was the older me that made the grade, and turned some of the learning into action. Of course perhaps that is because I am a Physics degree and thirty years worth of experience later. But it is an interesting insight into knowledge learned from the Web can easily be, to pinch the words of Lord Kelvin “of a meagre and unsatisfactory kind”.

    That’s not to knock the big G, after all in a fast moving world often you don’t have time to go deep, you simply need some sort of heuristic rough guess right now. But it was an interesting insight in how all too often the Web tells me how but not why. Somehow that doesn’t seem to be improving my understanding of the world, though it an get a specific thing done. I am not sure that the answer to this conundrum is to spend more money on Freedom to ice this chatter, as opposed to learning to switch it off more, but that is much easier for a retiree I guess than if you’re working, so maybe Freedom is onto something!

    It’s one of the odd things about the cornucopia of information and stuff that we have around us – to use it well we must still know ourselves better, to know what do we want, how to gauge value and how to qualify the opportunity cost of doing one option of buying something, because every road travelled is a bifurcation with the road that was not taken. I once navigated that path by the need to avoid running out of money each month. I now want to navigate it more intentionally. It was necessary for me to escape the rat race that was freedom from. Living and consuming intentionally is part of the freedom to, not the freedom from. It’s inherently more pathless. I will no doubt spend money on crap in the future, what I want to avoid is doing it more than once, through deliberation, reflection and knowing myself. The only increase in spending I’ve done so far is these trips out with Mrs Ermine, because I have time enough to work out what I want where it doesn’t involve other people. I will change things slowly, only a few things at a time, because living intentionally can’t be rushed.

     

    Notes:

    1. most things radio work better with more height, which is the relevance of hills
    2. Amazon Echo is not yet available in the UK at the time of writing

    Journey’s End

    Another day, another tax year, and an Ermine finishes a long, slow glide path running off my cash savings, the ancient sunlight of the fossil wealth accumulated over my 30-year working life. I now return to the regular pay of the salaryman I was but now without selling my time or skills for money – using Osborne’s pension freedoms to front run my works pension that I will draw in five year’s time at its normal retirement age.

    In that respect the financial problem is solved for me at the moment. Of course it’s always possible to imagine scenarios of desperate governments taxing everything, war, pestilence and social disorder. But the end of the world has occupied people past midlife since Roman times. So I will park worrying about the things I can’t change and do the Money Mustache Shuffle. I built up a six-figure ISA since 2009/10, but in the end it was Osborne’s pension freedoms that saved my ass. That ISA will, of course, give me options and some tax-free income, which is nice. But I never learned properly how to live off capital without converting it into some sort of income statement, so that I had an answer to the Micawber question. In that respect I am Poor Dad out of Rich Dad, Poor Dad. I learned Rich Dad’s vocabulary, but never learned to speak the language fluently; I cannot determine if I am overspending or underspending until I can measure it against an income. I found it possible to improve as an investor, largely through learning to sit on my hands on the selling side, and learning to acknowledge that luck does not equal skill.

    The evidence is probably that I was underspending, you don’t fearfully husband an ISA stash across three years and then go WTF do I do with this now at the end if you have the cojones of Rich Dad. The job of that ISA now lies both near and far. Far as in 10 years out or so, where my pension may start to be overtaken by real inflation (as opposed to the official measure RPI) and/or a rise in general earnings relative to inflation, although this is hard to imagine at the moment. Near because I may use the dividend income thrown off to augment running down my SIPP at the personal allowance less any earnings, I really must get out of this working malarkey, since I’m not working for the government any more, which limits my pension + income to the personal allowance. The reason I’m not dropping working isn’t the money, it is that I don’t want to drop people I care about in the shit. 30 years of paying tax is enough, that’s a mug’s game when you have wealth, eh, Dave? At least I earned mine 1 rather than getting it from Daddykins…

    Like RIT I made mistakes along the journey, but like him fortunate enough that none of them was terminal. Unlike RIT, most of the heavy lifting for me was not Saving Hard 2, but Investing Luckily. I was standing next to an open goal of the stock market in March 2009 and that Monevator fellow gave me a kick up the backside that seemed to make sense. Maybe I had a guardian angel who got him to write then and me to look at the right time, when the student is ready the teacher will appear.

    The big tragedy of personal finance and FI/RE is that for most people it is a marathon, not a sprint, it is an accretion of a small amount, but steadily. All the projections you see, like the ones in MMM’s the shockingly simple maths behind early retirement

    show this marathon running steadily, either in their underlying assumptions or in the narrative. Now some people seem to swing that – take a look at RIT’s path to FI and while you can’t draw it with a ruler it’s not far off. Beats the hell out of me how he did that. I could never have saved £100,000 a year because I never earned that much, perhaps a higher savings rate makes spending disappear into the noise. I saved bugger all at the start – indeed by screwing up buying a house I anti-saved with negative equity for 1o years after 1989. Real lives have much more drama in them than the steady as she goes narrative. You can probably still do it with the marathon approach, but it won’t be a linear process and anybody in their twenties or thirties predicating FI on a stable savings rate for the next 20 years may rub up against some challenges to that assumption in the vicissitudes of Real Life™. Obvious challenges are Children, Divorce, Redundancy. And these are the external hits, although I guess children can be sort of planned, not so much the others.

    My biggest error was assuming I was a steady-state system. I wasn’t. You, dear reader, aren’t either. It is easy to make that assumption because once you enter your 30s you have passed the Turning Outward then the next transition you can see is your children coming of age or retirement. However, you may find along the journey what you want out of life and work may change. In particular you may favour more Life and less Work. Not necessarily the nuclear option on Work, but you might want to ease back. I am surprised at how few of the projections of FI/RE account for the life stages. Some written by DINKYs  don’t seem to account for the total devastation that having children wreaks on a DINKY couple’s finances. I don’t know that from personal experience but I saw enough of it at work, you have the double whammy of the extra costs of baby, and the suckout of losing one partner’s earnings, together with the concomitant damage that does permanently to their earning prospects if it’s a professional career. On the upside I guess the Government does sponsor the lifestyle a bit through the benefits system.

    A colleague at The Firm sometime in the mid 2000s was talking in the tea room about the opportunities presented by saving via salary sacrifice into pension AVCs, I guess I was 46 at the time. I was turned off the concept of pensions because they had just shifted the earliest age you could draw a pension from 50 to 55 and it all seemed way off then. However, one of his phrases did strike me “with these opportunities, you’re daft if you’re still working here after 45”. Obviously that’s going to stick in the craw, I was at the grand old age of 46.

    Funnily enough this fellow is still working at The Firm, so he clearly missed the boat too. There was nothing wrong in his reasoning, but one of the assumptions behind it is that you can take the axe to your consumer spending. The fly in the ointment for him was that his wife and kids quite liked the middle class lifestyle. You can’t spend more and save more at the same time without upping the Work monster, so I guess this fellow lacked the cojones to walk the talk, and turned into a walking wallet. The best laid plans of mice and men, eh? I could drive my pay down to a whisker of the national minimum wage using salary sacrifice because I had paid down my mortgage. OTOH presumably he and his wife and kids have some 5 bedroom executive house in a bijou village whereas I live in a crappy 3-bed semi in the better-off districts of Ipswich 3. But the walking wallet has to go to work whereas I get to listen to the birds and ruminate, you pays your money and you takes your choice 😉

    The non-financial error

    I failed to identify that I needed to stop working because work held no meaning for me any more, and I didn’t need the money if I stopped spending it on vacuous crap and empty experiences to compensate me for flushing my life away eight hours every day. The answer for me wasn’t to buy even more crap. It was to stop flushing my life away. I admit a sneaking admiration for several young people (well, in their thirties) I know who electively choose to work part-time because they value their free time. This was not my path – part-timers were despised at The Firm for being, well, part-timers, but it seems tolerated more nowadays despite being very hard to manage from the company’s point of view. Since I didn’t do that, effectively I saved all those days off these young ‘uns take during their working lives and get to take that all off at the end of my working life. Their pattern seems to be three days on two off (then weekends which I also had) so I guess I got the short end of the stick. If a normal working life is 35 years then a 2/7 taken off would imply a 25 year long full-time working life. Epic fail on my part. On the upside I have a lot more Stuff and capital assets, there ought to be something to show for all those hours indentured to The Man.

    It was easy for me to psychologically project much generic crap on The Firm. Modern performance management is a dreadful and stupid way to herd cats, all stick, no carrot and all tied up in barefaced lies for no good reason. You know the pack drill. And so the first three quarters of this blog is about how that sucks. Yeah, it did. Deeply. But in the end it wasn’t the fundamental reason I left, though I believed it was at the time. I had only one really bad half-year, and that was when the project I was on was canned due to a reverse takeover, and anyone who didn’t have enough billable hours was shot with a performance improvement plan. The poor sod instructed by HR a year or so after to try and patch the twisted wreckage up when The Firm needed my skills for the London 2012 Olympics work even said that they were rotating the piss-awful reviews round, because they had to reduce the marks profile.

    But something snapped within. Although others weren’t happy with being targeted I was unduly susceptible at that time and place. Once the mainspring is broken the dream can never be repaired because it has become a nightmare. I will never work for an organisation with a modern performance management system, and I focused all effort on making sure that I will never be in that weak position again. That meant three very lean years and seven lean years in all to to eliminate The Man from my life. The cloud had a sweet silver lining though – I paid my dues of angst about retirement upfront while I was working. I don’t miss the meaning and life structure The Man gives many people, it was weak in me from the off and got incinerated in 2009. But it took me three and a half years of running before I slowed enough to stop, look back and realise the footsteps I heard chasing me were the echoes of my own.

    a human being is never what he is but the self he seeks
    Octavio Paz

    I had to switch off so much of myself to fit in with work, and in the end the unused parts of my psyche needed the freedom. Initially the freedom from, and then the freedom to.

    I get the upside now. Kate Bush was right all those years ago.

    All the colours look brighter now. Everything they say seems to sound new

    I hear the robins and their territories spread across the land, a patchwork with the other birds interleaved. I hear the shifting dynamic tension between the calling males and the 3d spatial pattern of the territories, it is a thing of beauty to observe, as the others interleave their song. I pay attention more, and see and hear and smell things better. You aren’t supposed to gain any sensory acuity as you grow older, but by unrepressing parts of myself the grey matter does a better job of interpreting what is there. I was lucky enough to grow up when personal audio devices were uncommon, but most of the win is being present in the moment. You can do that actively most of the time, not just in bursts with the much-vaunted mindfulness. All you need is time…

    I did some tech stuff for the RSPB a little while back, and for the bizarre way they fund projects (this was not paid work as I was interested in the results) they wanted a guesstimate for the time spent. I was dumbstruck – I had no idea. The whole point of being retired is you don’t have time sheets and project codes and shit like that. I get up, think what moves me to do right there and then get on and do it, after some undefined time I go do something else or waste time on the Web 4 or go for a walk. Although Philip Greenspun made a decent case that the average person has zero drive and it is the strictures of school and employment that get them focused enough to make anything useful happen, I haven’t found that my days disappear into

    Suppose that the guy cashes in his investments and does retire. What do we find? He is waking up at 9:30 am, surfing the Web, sorting out the cable TV bill, watching DVDs, talking about going to the gym, eating Doritos, and maybe accomplishing one of his stated goals.

    I told the project leader to make it up. I’ll back up whatever he says. Nobody is going to sack me for it 🙂

    Along with not going to the gym, not eating Doritos etc I have done a fair amount of introspection, and came to the conclusion that Work and I grew apart. Retirement seems to be different for me than many others because of this. I’ve really struggled to get this across, and I think I now understand why. Work used to matter more to me, the status of earning decently more than my parents, and, okay, I may as well accept my heart of darkness, most other Brits, the sense of changing things. The sonofabitch work turned me into in my late 30s and 40s used to get a rush from saying jump and have people do stuff just because I said so 5. It’s hardly as if this was a big part of my life but after a certain level you have to lead teams and projects even though I cleaved closely to the technical axis. So I never got the rush that the big swinging dicks of finance  have. But a small dose of the poison coursed through my veins, and I became a worse person because of it.

    A Cock of the Rock. Basically wants everybody to do as he says

    A Cock of the Rock. Basically he wants everybody to do as he says. Primates are even worse, which is why you can never have too big a yacht

    If this is one of the reasons lesser BSDs carry on working until they are 80 fair enough, well, as long as they don’t ruin too many people’s lives playing Cock of the Rock. I started to outgrow this phase with the start of the Turning Inward at 45. Work, particularly the management structures, seem to increasingly demand and express the psychopathology of the extrovert writ large as you go up the greasy pole, so in the end I had to switch off so much of my nature to do that and it wasn’t sustainable.

    Since retiring the armour of bitterness and unkindness accreted over many years of competing and expectations of dog-eat-dog behaviour slowly begins to ease and fall away. I was not born for Work, and while I discharged myself acceptably I have now transcended Work 6. Rabindranath Tagore speaks of a similar transition, he’s more articulate than me

    “I travelled the old road every day, I took my fruits to the market, my cattle to the meadows, I ferried my boat across the stream and all the ways were well known to me.

    One morning my basket was heavy with wares. Men were busy in the fields, the pastures crowded with cattle; the breast of earth heaved with the mirth of ripening rice. Suddenly there was a tremor in the air, and the sky seemed to kiss me on my forehead. My mind started up like the morning out of mist.

    I forgot to follow the track. I stepped a few paces from the path, and my familiar world appeared strange to me, like a flower I had only known in bud. My everyday wisdom was ashamed. I went astray in the fairyland of things. It was the best luck of my life that I lost my path that morning, and found my eternal childhood.”

    Hermann Hesse and others have been similar places, indeed art and literature seem to be more in touch with the meaning of the changes of life than the dry narrative we have of  A Successful Career.

    I drew from Carl Jung in the last narrative, but in chasing some of the other references I came across several citations from to Gail Sheehy’s Passages, which is a good read. It is a more accurate read for my life than probably for Generation Y, who will probably be better off with the revised edition New Passages, though the original reads much less New-Agey.  Some of the stages of life are due to the natural life cycle of the human animal, and its physical development, but a lot of the transitions are across the stages society and world of work set, and these have changed dramatically since 1969 when she wrote the first book. The blurb of the revised edition explains some things that have changed –

    Seven years ago she set out to write a sequel, but instead she discovered a historic revolution in the adult life cycle. . .
    People are taking longer to grow up and much longer to die. A fifty-year-old woman–who remains free of cancer and heart disease– can expect to see her ninety-second birthday. Men, too, can expect a dramatically lengthened life span. The old demarcations and descriptions of adulthood–beginning at twenty-one and ending at sixty-five–are hopelessly out of date. In New Passages, Gail Sheehy discovers and maps out a completely new frontier–a Second Adulthood in middle life.
    “Stop and recalculate,” Sheehy writes. “Imagine the day you turn forty-five as the infancy of another life.” Instead of declining, men and women who embrace a Second Adulthood are progressing through entirely new passages into lives of deeper meaning, renewed playfulness, and creativity–beyond both male and female menopause.

    I’m not sure I am ready for the concept of a male menopause, presumably this is decadent metrosexual London/New York sort of thing 😉 Her narrative is very different from the Jungian descriptions I am more used to, but they are derived from observations of hundreds of people 7, though of course edited by their conscious selves in telling them to the author. The conclusions have great similarities despite the varying methodology, Jung gives more of a hypothesis why, Sheehy’s work is more observational Big Data before its time sort of thing.

    Sheehy’s book is a tough read at times if you’re over 45, any life worth living has error in it, and she distills some of the errors of people refusing to grow, it’s a harsh spotlight of some of mine. The increasing competitiveness of working life over my career due to globalisation and improved communications did not foster that sort of thing, I favoured the outer world over the inner, playing against my introverted type and failing to grow.

    The surrender of those career goals on the Turning Inwards and the overflowing of the Shadow and the unlived elements that are incompatible with careerism are also recorded in other narratives -I am not such a special snowflake after all 😉 Sheehy covers a decent range of adult passages, I see friends and colleagues in some of the others. Of course the details vary and some are dated, but the big pictures match. As Joseph Campbell’s Hero with a Thousand Faces described, the stupendous variation of individual life stories is woven from a surprisingly small number of different archetypal threads.

    But I feel have probably won most of the fight to turn that particular decade of life experience into wisdom, to clear out the baggage, and to disembark from the old vehicle and be ready look to the new beginning. That is the point of journey’s end for the Work phase, to change mode and start travelling the journey of Life in a new way at a new stage. Hopefully be a long and happy retirement full of people and things many of which I have no inkling of now. Of course there are no guarantees, a hundred and one ways it might all go titsup, but I will do the MMM thing on that.

    The financial errors

    Some readers may one day need to float ISA savings ahead of their pension savings simply because of the arbitrary age as of which you can draw a pension. It is very hard to do that right, because your money is in silos, and you can easily flatten one silo and find yourself short, even if others are flush. My solution to that was being prepared to borrow money but it is very, very tough  for the debt-free to make that mental adjustment, it caused me to underspend since retiring in 2012. It’s probably also hard for me to borrow money other than on a credit card offer by now because my credit scoring probably stinks, not from a litany of missed payments but from an absence of ‘normal’ credit 8. MBNA let me money a few days ago because it was just before the end of the tax year, I need to put all my earnings into a SIPP, fill up the last few thousand in my ISA and front-load £2880 into the SIPP just after the tax year, so I can maximise my tax-free SIPP PCLS. Since I was at  journey’s end I didn’t have enough money in my bank account to do all that, and I couldn’t sell unwrapped holdings because else I’d fall into capital gains tax. So I borrowed the money in the old tax year and just now I have sold some unwrapped shares without tripping the CGT limit  to pay them back when I get my T+2 settlement. Thank you, MBNA for your kind loan of 5.6% APR and no fee – for about two weeks I figure  that will be less than £100. There’s nothing wrong with debt if you invest it in productive assets which return more than the interest. I don’t need to do that any more, now I have access to the SIPP silo.

    It’s not easy qualifying a withdrawal rate

    Nominally the safe withdrawal rate is 4%. It’s easy to know that, but I was just not able to bring myself to do spend at that rate. I am fortunate that most of my pension is expressed as an income – effectively an annuity. It’s that Rich Dad Poor Dad thing. I have no mental model of personal finance that works with Capital, rather than income when it comes to spending. I never built that mental model in 30 years of being paid a monthly salary, so while I did okay on the investing front I was horrendously conservative in my use of that saved cash – in 2012 I thought it would last one or two years. For each of those three years I saved the max into my ISA, which made bridging the gap much harder. Now as it was, that was a lucky sort of error, because after a while that Osborne fellow came along and totally turned my retirement plan around. I was going to have to draw my pension early about now and eat a 25% actuarial reduction due to it being paid five years early. Then Osborne comes along and tells me I can burn up my AVC savings before the main pension. I saved those AVCs in the last three years of working, and because this was a combination of 40% taxed earnings and salary sacrifice I only gave up net income of about 40% of the amount saved. Thank you Osborne, and goodbye to actuarial reductions. The Firm can bloody well pay me what it contracted to for the amount of time I was there and my final salary. And I can leave my ISA be, and indeed add to it over a few years.

    networth from that fateful appraisaement in 2009 (it doesn't include house or main pension)

    networth from that fateful appraisement in 2009 (it doesn’t include house or main pension) The ISA is less than half

    Most of the variation post 2012 is stock-market variation on the ISA, my spending is in the noise at this scale, indeed I failed to spend more in total than the stock market gained (in reality I should deflate this by the rate of inflation, though that hasn’t been terribly high over this period, the aggregate fall since 2012 is about 10%). Now that I have a basic income that is fine for my needs the 100% equity invested ISA looks more reasonable although it would be considered madcap aggressive in an IFA attitude to risk assessment.

    If I invest my PCLS  in the ISA then perhaps I should draw the natural yield of the ISA and spend more. I have never drawn money from my ISA, but it will probably be better if I increase the capital and draw the return rather than leaving the ISA static and running down the cash across five years. The annual cash income from the SIPP is enough to keep the wolf from the door and a few treats, which is just as well, at current valuations a stock market crash is pretty much guaranteed some time in the next five years. Shame the mini-crash earlier this year didn’t really get its boots on now I have a load of cash.

    I don’t know what to do with cash, it is the asset class I most loathe, though inflation hasn’t been as high as I once feared. You seem to have loads of itty bitty aggravation to make it work. Yes, there’s P2P but after the kicking Osborne doled out to the scalpers of the young otherwise known as Britain’s army of leveraged BTL landlords there’s one thing I know from experience, and that is that negative equity is a bear, and faced with keeping the overpriced house or paying back the P2P loan which one are people gonna do? I have some P2P, but no more than I can afford to lose. Matched betting, I didn’t stop work to try and grind out a living trying to arbitrage the fine difference between lots of big numbers on a screen. And I’m always scared by wizard wheezes where I can’t see what value is being rendered to the world by introducing myself as the middleman, P2P falls squarely into that category too. Too many methods of making cash turn a return these days have a whiff of financialisation and arbitrage rather than value-add. We’re fighting central banks if we want a return on cash, and let’s face it, the punters are the small guys in that fight. Gimme a stock market crash, and pronto, guys, the same forces are inflating equity prices.

    The move from a definitely optimistic to an indefinitely optimistic outlook

    I read Peter Thiel (one of Paypal’s  founders) ‘s book Zero to One today – had to read it in the morning because the library wants it back. He had an interesting taxonomy of views of the future, he was applying this to civilisations, not individuals, but it holds true in the micro as well as macro scale. His taxonomy had four quadrants

    Definitely optimistic

    This was the western world I grew up in, Thiel classes this as the US up to 1982. If you are definitely optimistic you expect the future to be better than today and you have some idea of what that will look like. So it makes sense to understand it in advance and apply yourself to making it happen. You spit on your hands, roll up your sleeves and get to work – moon landings, railway electrification, Arpanet, satellite communications.

    Indefinitely optimistic

    Thiel classes this as the US post ’82. You expect the world to be better tomorrow, but you’re buggered if you know how. Thiel says

    indefinite attitudes to the future explain what’s most dysfunctional about our world today. Process trumps substance: when people lack concrete plans to carry out, they use formal rules to assemble a portfolio of various options […]

    A definite view favours firm convictions, instead of pursuing many-sides mediocrity a definite person determines the one best thing to do and then does it

    You can be definitely pessimistic (China – you then take what worked for others and do more of it, but don’t innovate) and indefinitely pessimistic (Europe since 1970 – you know tomorrow will be worse than today but not how quickly, so you party while you still can and kick cans like Greece down the road.)

    On the micro scale of my career, I used to know one definite way of adding value – engineering. The young Ermine switched my career in this direction, against the backdrop of the definitely optimistic time when science and engineering were sorting a lot of problems 9. I have surrendered that – I have moved to being indefinitely optimistic, and that means

    they use formal rules to assemble a portfolio of various options

    which we otherwise know as index investing, indeed the name passive investing already kind of flags Thiel’s point. I am slightly definitely optimistic in that in my HYP I use individual stocks, but there’s still a lot of the indefinite optimism that lies at the heart of diversification. Peter Thiel sticks the knife into the Efficient Market Hypothesis with verve and doesn’t take prisoners –

    “The efficient market hypothesis is the idea, that people can’t have ideas.”

    it is a poster child for for the wider way the West has lost it’s mojo and the way productivity is flatlining as more and more human effort is going into finance and lawyering. Maybe he has a point. If you look at what Physics graduates of Imperial College do after graduation 10, IT, banking and accountancy take over 25%. You don’t particularly need a Physics degree to do any of those.

    I now have time for reflection – no longer the desperate trying to build an ISA which throws off an income I can believe in, to compensate for an actuarially reduced pension. My plan didn’t survive contact with the enemy, but in a good way. In financial terms, I have reached journey’s end. I crossed the three and a half years without an income and without destroying my liquid capital, because I had enough cash savings, inflation was low, the markets were kind to me, and I learned to be less of a damn fool in them than the first time round. I got roughly a 50% uplift in the unitised value as of 2010, rabid indexers will tell me I could have got roughly that with VWRL and they’re right – I have a big hole in my asset allocation of the US, because it’s been too dear throughout my investing time. So I’ll give that point. OTOH I will load up on the US when they take the sucker punch at some point. And the VWRL dividend yield at 2.8% is too low for me 11, I get about 4.8%, though it’s a moot point as I don’t draw from it yet.

    I have work to do now. To know myself, to roll back the years of activity without thinking, unpick the characteristics amplified in my Shadow by the increasingly competitive nature of work 12. To deepen, and grow, to experience things that transform me. That is for me. It’s not for everyone, vive la difference and all that. For sure, I am poorer in money than if I were still working. I will never be worth a million pounds in today’s money. But I am richer in Life, and accreting these riches of experience faster as I return to shape after the straitjacket of three decades of working life. Although I am far more comfortable with Jung’s concept of individuation, Sheehy’s description of the midlife gateway is more generally understandable

    dangerous years when we confront the loss of youth, the fading purpose of old roles, career changes, spiritual dilemmas, but also find the greatest opportunity for self-discovery and renewal

    It’s not a bad description of the point of retirement. Getting the money sorted is necessary. But it isn’t sufficient. You have to roll with the change of that stage of life too, and grow, otherwise freedom to will turn into dissipation, decadence and decline.

     

    Notes:

    1. There is an argument to be made that the investing gain wasn’t earned, I guess, but it’s still not risk-free unearned ancestral wealth of the sort that exercises the Torygraph’s old buffers
    2. discharging my mortgage before I started saving to get out had been a topsy-turvy form of saving, you can of course save a lot more if you don’t have a mortgage to pay
    3. the rules of real-estate still apply – a bad house on the right side of the tracks beats a good house on the wrong side, because all the others residents are carrying the cost
    4. I am slowly cutting that down, but there is a fine line between intellectual curiosity and rabbit-holing for the sake of vacuous novelty
    5. Mrs Ermine tells me this is a guy thing, but look at the caricature of this writ large that is the CEO and officer class – think Robert Fuld, Fred Goodwin and anybody with a yacht in the harbour that is driven by ‘staff’ rather than skippered by themselves
    6. I am still young enough that much may change within and without. One should never say never. But it’s my current state
    7. Carl Jung’s observations were derived from his patients, by his hyptheses merged these, Sheehy cites individual lifestreams, and they are closer to our times than Jung’s
    8. I have no mobile phone subscription, I pay most things cash upfront or on a credit card cleared each month, I have not had a car loan for 25 years, I have no mortgage, compared to normal Brits I am a debt cleanskin
    9. later in Thiel’s narrative he says that the Baby Boomers experienced the world getting better for the first 18 years of their life though it had nothing to do with them , and extrapolated this to be just the way things were, whereupon the mainspring of innovation in the West ran down because they switched it from definite optimism to indefinite optimism
    10. Why Physics? Because I did Physics at Imperial. I would have been classified in technical consultancy/R&D, after a period in manufacturing and Others
    11. yes I know, in theory there’s now’t wrong with running down your capital. You try doing that and feeling good about it though, once you aren’t accumulating
    12. It all seems a terribly long time ago, but once upon a time it was possible to progress at work by simply becoming a better engineer, learning from others and sharpening the saw which showed as skill in action, showing up in better, faster or cheaper work. Skill in action takes time to accrue and show, years not months. The change to performance management meant you have to tell a story each quarter that is better than the last, and to pump up minor successes into major triumphs, and shout louder than everyone else – a microcosm of the short-termism of quarterly reporting by companies. That sort of thing emphasises form over function. Real Life doesn’t show monotonic progress on a quarterly basis.

    the great sucking sound of retail investors heading for the hills

    We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.
    Some well-known investing chap you may have heard of
    The big problem, of course, is that it’s hard to do. We all have to do the old run for the hills thing some time, and I’ve BTDT – more than ten years ago. The mistake is doing it a second time. Either get out and stay out, or if you do get in again then listen to what Mr Market is telling you about yourself. There’s nothing wrong with paying for learning, well, as long as it doesn’t wipe you out for a decade like houses can, but that’s a different story. Shares are safer and more dangerous at the same time. The trouble with houses is you borrow money to buy them, which means you make out like bandits when things go up, which is most of the time. Get that wrong and you get shellacked big time. But shares, well, you shouldn’t be borrowing money to buy shares. 1
    The trouble with the stock market and the retail investor like you and I, is that we get massively interested in the stock market when there’s recent proof that people have made loads of money from shares. So we buy. Then, when things go pear-shaped, we head for the hills, and exactly that has been happening. To the tune of 450million sods, indeed. Some of us sell, then go rinse, repeat.
    Laith Kalaf of Hargeaves Lansdown put it well
    “There is no shortage of bad news now, but, if you invest when everything is smelling of roses, the chances are you are paying a premium for the comfort of doing so,”
    Quite. I’ve been grizzling about too much smelling of roses, so I spent a fair amount of last year buying gold. Unlike some of HL’s investors I didn’t sell shares to buy gold, I simply couldn’t think of much of fair value, after dabbling in some EMs. This year has been more interesting, with a hit on the FTSE100 and a hit in my second ISA (which is more suited to funds) on a Global ex-UK fund approved of by The Accumulator no less, though I found it independently when looking to repeat what I used to do in my pension AVC fund – invest in a 50:50 Global:FTSE100 fund. I can’t buy that in an ISA, so a mix of VUKE and the L&G International ExUK will have to do. The original plan was to track these, buying 1k of one in one ISA and 1k in the other, but I will probably focus on the L&G fund, because I have more money as cash in that account – a straight transfer of a Cash ISA I had from 2009 as part of an emergency fund I need much less of now, as I will start getting a pension income as of next tax year.
    The L&G fund

    The L&G fund

    The heft at the end of this chart is not so much that the stock market has decided to go gangbusters. No. That, dear fellow UK reader, is the great sucking sound of the pound falling relative to everything else. It makes sense to shovel as much money out of the country or into hard assets as possible, and preferably by last month. It was some of the rationale behind the gold buying last year, but now that Mr Market has taken a bit of a swoon, productive foreign assets are also of interest. The UK stock market is looking less bad than it should do at the moment because though denominated in pounds it also contains a fair amount of foreign assets, though all that mining and oil is probably still tracking down in price measured against foreign dev world currencies.

    Braver souls than I trade forex. The trouble with that is it’s still holding cash, it’s sort of like holding gold, and the trouble with owning an asset like that that is not only do you have transaction and holding costs, but when the hell do you decide to sell and buy rotten-looking assets? It’s the old retail investor dilemma again, you have to make yourself do it.

    So I take heart with that sucking sound of retail investors beating it. It means it’s time to keep on buying and ramp up 🙂

    Now I happen to be in trouble now on that front, because there’s another investment opportunity for me, which is a cash investment, into the SIPP holding my AVCs. I will toss my entire earnings for this year into that, to maximise my tax-free PCLS (if we still have one after the Budget). Ideally after March 16th’s budget, because I am hoping for a flat-rate 25% tax bung replacing the existing 20%. I will therefore flatten myself into this, because I have coasted for three and a half years on savings and these are almost all out. I don’t want to spring cash from my ISA because now is the time to invest, and I don’t want to liquidate my NS&I ILSCs because you can’t reload them and no other cash-like savings beats inflation these days without fiddling about with a zillion accounts, which I can’t be bothered to do.

    So I will borrow money on credit cards at 2% p.a. to invest in bigging up my PCLS. Because I can eat paying 2% if there’s a 20% tax-free bung in it. Although I am looking forward to getting a hold of my pension savings in the new tax year, because I don’t like carrying debt. So I will be adding to the statistics of Britain as a nation of spendthrifts going bananas on their credit cards.


    source: tradingeconomics.com

    However, unlike my fellow-countrymen who are spending this on consumer goods and holidays in the sun, I will be buying cold, hard, cash with this – not at the usual rate of -2% but at +18%. I think Mr Micawber would let me off. As for the others rushing for the exits – if you can’t buy in, at least sit on your hands FFS, guys!

    Notes:

    1. I am actually considering doing exactly that, so this is definitely a do as I say not do as I do, but I have some good reason. Don’t they all say that, eh?
    23 Feb 2016, 8:42pm
    personal finance:
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  • wither pension tax relief and lump sum again?

    OLYMPUS DIGITAL CAMERA

    The flowers are coming out, there is the sound of the robin and the dunnock singing, Spring is in the air, and along with the snowdrops and early daffodils there are some stories in the press that come round every March/April time. Oyez oyez, it’s the last chance for you lucky higher rate taxpayers to get pensions tax relief. And as for you lot expecting to pay off your BTL mortgages with the pension commencement lump sums, well, better do it now while you can 1. ‘Twas ever thus

    1602_DSCN2798

    Going, going, gone…It’s the oldest trick in the book

    Sale – Must end Now – punters are suckers for a bit of FOMO, and pension providers always like to hit us with a quick giddy-up at this time of year. It’s always the same old story, sometimes it’s the PCLS that’s due for the chop, sometimes the tax relief. That’s not to say that adverse changes don’t happen with pensions, but they tend to come from left field – the reductions in the annual allowance ,and the introduction of the Lifetime Allowance are two, although these only hit the well-heeled. Presumably these well heeled got to be well-heeled because they had the odd brain cell to rub together; if they can’t be bothered to work it out for themselves Merryn Somerset-Webb of the FT is there to sock it to you straight between the eyes.

    The result is still up for grabs but one thing at least is clear: the game is up for higher earners. Whatever the new system is, it will further cut the reliefs given to them.

    Well, yeah, but it’s going to be more of a whimper than a bang, at a guess – they will be sliced and diced.

    The PCLS was introduced in 1988 I think, when the concept of a personal pension came into being, and every year since then the same stores have been trotted out by the pensions industry trying to stampede the rich into getting their money into a pension, like NOW. The poor, of course, well, they don’t save for retirement anyway.

    Despite having told HL for the last three years that I am an Ermine of very modest means, less than £3600 p.a. indeed, which is all I can save for a pension, they clearly think I am still one of the movers and shakers with a six-figure salary. As such I got my very own copy of this missive. No wonder HL is so damned dear for holding investments, as opposed to cash, if they have to mail so much cruft out to us all. I have nothing against them, well, apart from them demanding I pay £500 to be advised that transferring my AVC funds was a good idea, something I had worked out quite nicely for myself thanks. I observe they have got themselves into this advice game themselves, nowadays, clearly jobs for the boys is a revenue stream too good to miss.

    I am just a poor boy 2 though my story’s seldom told

    There’s a corollary here, which in fairness HL did list in a throwaway paragraph

    1602_DSCN2799

    Quite. Your impecunious scrivener, having failed to avoid earning about £5k can put this into his SIPP for the initial outlay of £4000. I’ve never really understood the status of the remaining £1k, obviously if I had been earning £20k then it would have disappeared into the taxman’s maw, but instead remains to be spent on beer and fast cars, or beaten down stocks. Anyway, the taxman adds the £1k back into the SIPP despite not taking it off me. The speculation on changes seems to vary between divvying up the HRT break into nothing extra for anyone, 25% tax relief for all, 33% tax relief for all, and zero tax-relief for all but the chance to have any gains tax-free in an ISA-like savings vehicle, but presumably one you can’t access before you are grizzled of years. I struggle to see the attraction here. Most people don’t save £15k a year into their pensions, so they may as well fill their ISAs first. The average DC pension capital on retirement is about £100k , elementary arithmetic indicates this is not saving £15k p.a. for 30 years. You read about all the options here. I am not sure that the savers of Britain are ready for a second major overhaul in the retirement savings structure and ethos in as many years without becoming suspicious refuseniks, but there we go.

    Should this go the 25% relief I guess I can hope for £1250, so there’s a potential £250 in it for sitting on my backside for a few weeks. Because I am entirely a cash saver in a SIPP, I always leave it to the last minute to contribute, because there’s no point in locking money away before I need to (to get the win of the tax break). Obviously the big money for HL is with the well heeled, but there are crumbs in it for the little sparrows in doing exactly the opposite of what is advocated in that HL exhortation. Indeed, for someone who is post 54 and intending to retire next year, the difference is respectable if they are earning, say £32,000 and toss the lot in. They could get £6400 at the moment going up to £8000 if the 25% tax relief happened. Of course it may not, or it may be deferred, but a potential £1600 would be worth waiting three weeks for. Obviously if you are one of the six-figure vHRT fellows then throw caution to the wind as HL advocate!

    Lifetime Allowance, Marginal Tax Relief, Annual allowance – one, not three

    I benefited well from higher rate tax relief, but even then my higher rate tax paying years were perhaps a third of my working life. Careers tend to be more contrasty now, they peak earlier, but people also burn out earlier. I’ve already put my colours on the mast for the lifetime allowance, which most accurately defines the ambition of tax-privileged pension savings to my eyes. All this fiddling with marginal tax relief and annual allowances sucks IMO – you should be able to get to the LTA in a couple of furious years in finance or 30 years of steady Eddie saving. It’s about the destination, not the journey.

    All the annual and lifetime restrictions combine to make tax-privileged pension saving more suited to your grandfather’s career arc than today’s sort where even the better off are likely to experience feast and famine, or burn out prematurely. Even I would have rubbed up against the annual allowance at the end of my career, and I got nowhere near the LTA.

    Erstwhile pensions minister Steve Webb scares the horses on the PCLS

    Meanwhile, Steve Webb says the pension commencement lump sum is due for the chop. Well, sort of – if the principle of tax-free pension saving on accumulation is iced, then yes. But those of you sitting on a potential PCLS, including me, this doesn’t mean you have to hook it out by the 16th March. Adverse pension changes are usually trailed at least a year ahead – such as the reduction in the LTA which was announced last year. Positive pension changes sometimes have immediate effect – the announcement of the pension freedoms was announced in March, giving me just enough time to open a SIPP in the old tax year.

    Pensions are still giving me a hard time to qualify the opportunities

    Say I take my PCLS this April, and start to run out the pension below the personal allowance. Let’s ignore that fact I am earning chickenfeed at the moment, say that is £0. I am still allowed to save £2880 a year and the tax man stumps up another £720. By rights 25% of that should be available as a PCLS – after all, say I opened another HL SIPP which had just that £3600 in it, there would be no quibble. I don’t know if HL are smart enough to be able to track that sort of thing.It isn’t as good as the deal used to be for me, because 3/4 of the tax credited is taken back again, so the gain is reduced from £720 to £180, but it’s still free money

    In theory, therefore, even I earned £10k all of which would be taxable at 20% because I am drawing pension income up to the personal allowance there would be a win to pass this through the SIPP. Because of the PCLS I could reduce my basic rate tax liability by a quarter. Paying tax at 20% × 0.75=15% seems like a step in the right direction, saving me £500 in that case. Of course changing to a post-tax savings regime would rain on my parade. Pretty much everything about pensions is hard, counterintuitive and full of wrinkles, that’s the nature of the beast.

    Notes:

    1. what with some of the changes to BTL tax relief on leverage there is more sense to that, but for different reasons
    2. Irony,dear reader, irony… ‘ere I take heat for being a PT b’stard.
    10 Feb 2016, 11:37am
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  • Markets are squiffy again. Pound is also slip-sliding away in the background

    After a bit of cheer I was starting to wonder if the buying opportunity last month was a flash in the pan, but no, general squiffiness means an Ermine sticks a paw into the back pocket and buys another lump of VUKE in the ISA. I aim to do that once a month, to average into the unknown future shape of this bear market. I like to do it on days when the headlines are saying things like Shares dive as fears mount for health of global banking although this morning also looks good with Stock market rout intensifies amid fears central banks are ‘out of ammunition’. In moods of general jitteriness I’m not aiming to be smart, but I am aiming to be out there, buying something. There’s just so much out getting better value, and the £1k a month limit acts as a brake to spread myself out in a measured fashion rather than do the kid in a sweet shop grab all in one go scenario.

    Investment Trust discounts seem to be showing up too. I don’t buy ITs at a premium, and the premium/discount mechanism seems to amplify market sentiment, free money on offer when others are fearful. Last month I pitched for some CTY.L that I was sore about missing out on in 2009 after I read this on should you swap your shares for an IT on a discount. At the time I didn’t have any shares but the sound of the discount was nice, so I bought MRCH, then focused on building up a cash ISA firewall against getting canned and shoved money with both hands into AVCs, using a Global:FTSE100 50:50 fund which was one of the three choices available.

    Now that AVC move was good, because the Global part hedged me well against a 25% fall in the pound that also occurred, so it impressed upon me that one of the side functions of shareholdings is to hedge against governments torching the value of the currency, by say printing shitloads of it… That is the trouble with money, it is a relative scale, and it moves around all the time

    Going down - value of the pound in US dollars

    Going down – value of the pound in US dollars

    So although I am not particularly discriminating in terms of buying at the moment, if I had access to that L&G fund I’d probably use that

    1602_lg-ukx

    which performed thusly relative to the FTSE100. Sadly iii doesn’t go back far enough to show the deep joy that buying this from before March 2009 onwards was, I liquidated in March 2012 and stayed in cash, so obviously I kissed goodbye to another 30% lift in this AVC fund. However, I believed at the time that I would have to call on this very soon after leaving work. As it was this wasn’t true, but I will call on that money this year. You shouldn’t have money in the stock market you will need to use in the next five years, I’m easy with walking away from the 30% uplift. It’s not like I didn’t get any uplift in my ISA between 2012 and now, one should always leave a little behind in the markets for the other guy, otherwise you get greedy 😉

    I don’t think I can buy that fund outside a pension, perhaps even outside the Firm’s AVC scheme which I am out of now. There is a L&G fund BKF0  (ISIN GB00B2Q6HW61) which sort of does the International ex-UK half of that, and this will go up roughly by the fall of the pound, times of course the performance of the underlying assets. 57% North America equities, oy vey, I haven’t wanted to buy into the overpriced US market for the last few years, although I did in a Dev World ex-UK fund I held unwrapped. And very nicely that overheated market did for me. I can’t sell that unwrapped fund because I am up against the CGT limit for this year, but in April, assuming it’s still worth ‘owt I may do that, shove the wedge into my new Charles Stanley ISA and buy some of this L&G international, to get out of the pound and lean against the UK bias of my TD ISA which holds my HYP, which is largely big UK based fish.

    I also have two Cash ISA contributions from years back transferred into Charles Stanley. So maybe it’s time to start getting out of the pound. It has a nice 8% loss YTD, when I’m buying something generic like that I do like to see the previous owners losing money, because it means I don’t pay that on buying it. With individual shares you can go wrong with that principle, but it’s safer with broad index funds. I went with Charles Stanley because I am trying to break up my ISA holdings because of the government guarantee and in the interests of diversifying against platform counterparty risk, although this means I will have several accounts, which is always a pain to manage as an integrated whole. TD are very cheap to hold shares on, no annual fees on the account or for shares, Charles Stanley are cheap to hold funds with for small total amounts, and I will try and stay below £50,000 on there. So I will do funds on Charles Stanley, ETFs and shares on TD.

    Other ways of hedging the pound

    I bought a lot of gold last year in my ISA, because I couldn’t really bring myself to buy the in my view overpriced UK stock market or the US. Of course the cheap EMs that I bought in 2015 got cheaper but that’s life 😉  That gold seems to be reacting to the fall in the pound by going up a fair way. I don’t really feel terribly good about having 10% of the ISA in gold, but it’s working for me at the moment. It is, of course, possible to hedge the pound using spread-betting and FX, but that is a harsh mistress full of tiny changes in points bought/shorted making humdingers of changes in the total amount at risk, and these vary shockingly day to day. What I’d really like to do is buy SDRs from the IMF because what I really want to do is hedge the pound against a bunch of currencies, but I guess the Ermine economy is too small by a few squillion pounds to get a seat at the IMF. An ISA letting me hold the cash part in SDRs would be nice 😉

    Simulating SDRs by averaging forex holdings is tough, there are high carrying costs with spreadbetting FX. Well, paying anything to carry cash is bad news, because it is generally a wasting asset, not a productive asset. I’m already sore about screwing up and buying PHAU in my TD ISA, although the gold has gone up I failed to spot this is denominated in USD so I ate FX costs buying and no doubt will take the same hit on selling. In fairness the rise in the value of the gold will pay me handsomely for my trouble, but nevertheless it is a drag on performance I missed. Doing anything with FX is just like that, too many people with a hand in the till on every transaction.

    Overall, since I want to be a net buyer into a bear market hedging the pound then buying a global ex UK index denominated in pounds isn’t such a bad way to do it. I shall leave arcane forex shenanigans to the truly wealthy, like people bumping up against the lifetime allowance and the brave, like ERG. I haven’t got brains or balls enough for raw forex. Sometimes you gotta know when to hold ’em and when to fold ’em. Buying foreign productive assets to shovel money out of the UK I can relate to.

    It’s also worth noting that the contents of the FTSE aren’t totally GBP assets, a lot of these big fish make their money outside the UK. Mind you, at the moment making money isn’t something some of these FTSE100  firms are doing in a big way!

    Why is it all going titsup again?

    God knows. If it were just the markets that wouldn’t be so bad, that’s just what markets do, they have regular hissy fits. It’s their job, it is how they transfer capital from the timid to the brave 😉 But other things aren’t right. Moneyweek and the Torygraph say it’s all debt, I don’t think that we took the hit from the first credit crunch enough. In the past we used to take the hit of recessions straight between the eyes – Paul Volcker in the mid 1970s, Thatcher in 1979. The price of those interventions was some very serious economic pain – I had the bad luck to graduate into the very deep recession of 1982 that Thatcher’s medicine invoked, and was unemployed for six months at the start of my career. Since the dotcom bust we just aren’t prepared to take that sort of hit, which seems to smear everything out by driving the crap underground, for it to pop up in unexpected places. The oil price just ain’t right, and we aren’t going to stop using oil in the next 10 years; the exploration  investment that isn’t happening now we are going to rue bitterly in 10 years’ time, although we will hopefully use renewables for a larger proportion of our global energy consumption than currently used.

    Where is the bit that says buy UK residential property, BTL etc?

    I have had the experience of selling a house for nearly half the purchase price and endlessly pissing money into the mortgage for that hole. Every other bastard believes that house prices in the UK only go up, I know that this is not true from personal experience. The Ermine Does. Not. Do. Res. Property. I don’t care how great it is, why it will only go up, and up, and up. Quite frankly, I don’t give a damn. It’s worth owning the roof over my head, and after that it’s enough with the madness of crowds that is British res property. So often you hear punters say the stock market is a casino – well at least the chips are productive assets. Even being a total momentum-chasing asshole in the dot-com boom and bust I lost less money absolutely and proportionally to the capital invested than on housing. 1

    Why do I want to shift out of the pound?

    One word. Brexit…

    There may be a teeny bit of noise and hum associated with that, whichever way the referendum goes. And hell, finally the US stock market which seems to dominate ex-UK funds is getting less overpriced. So the stars are kind of aligning to make this the flavour of the first part of this year for me. Of course, this being the stock market it could all go titsup and the sky may fall and it all turns into endless pouring rain. In which case, well ,what the hell, perhaps let’s take a tip from the guys at Powerswitch and spin this doomer anthem from the last financial crash.

     

    Notes:

    1. because I have been in it for 28 years overall I am past the breakeven point on housing even taking the hit into account, because of subsequent rises. The stock market has been considerably kinder to me than British residential housing. Plus the trouble with thinking you are rich when your house rises is value is that you have to move out of it to realise that money, and observation shows old people don’t like to do that until they absolutely have to. The people who may benefit from the rise in value are your children when they come back from the crematorium, but you pushing up house prices means they couldn’t afford to buy earlier in their life. Funnily enough it’s always people with kids who go on about how great it is their house increased in value so they can leave it to the fruit of their loins, if I were the kids I’d slap ’em around the chops with a wet fish because that sort of thing is part of the problem, not part of the solution IMO. But British residential property is not my circus, not my monkeys.

    In praise of the pensions lifetime allowance

    The deal with pensions is this. In return for saving money for when you get old, you get to save before tax is taken off. There aren’t many legal ways of avoiding tax, but that’s one of them. The downside is that you don’t get your sweaty paws on the money until you are 55 1. And even then, if you want to preserve the tax-free status of that lump you are rate-limited on the amount you can draw, which is also fitting IMO. My pension savings are worth nowhere near the lifetime allowance, I will still be a taxpayer as a pensioner in a few years.

    It costs money to run a civil society, and that money comes from taxation. There are issues in that running that society seems to get dearer and dearer and more and more complex with time, but that is a different fight. Nobody likes paying tax. Nevertheless, that civil society would have to support you when you are old, so easing back on the tax early in your life in return for you being less of a burden later on is the rationale for that deal.

    I’m not going to be popular for saying this, since many people affected by the lifetime allowance (LTA) are dedicated followers of Ayn Rand, who feel they have the resources to be entirely self-sufficient and apart from the rest of us lowly scum, but the reason that this tax bung is there is to encourage people to do something they otherwise wouldn’t do. It only needs encouraging up to a point, and that point is okay at  £1,000,000. The retired colonels of the Torygraph continually spit bricks about how unfair this limit is because it stops them saving more money into a pension, but I don’t see what the problem is, on two counts.

    • If you can save a million pounds then you are ‘king rich by British standards 2. It’s not like they point a gun at your head as say you can’t save any more, they simply take the tax break off you for any further savings. So save somewhere else, chump. And pay your tax, you aren’t Google, though by all means plan to pay as little as possible, legally. If you can’t manage the concept and you really don’t like it then there’s a whole world out there…
    • You can buy an annuity with that £1m of £28,000 p.a. for life rising at 3% p.a (presumably retiring at 65), which is more than the average UK household income for working sorts.

    That’s a pretty reasonable limit – we will give you a tax break to save enough until you reach the average UK household working income. Where I do think they are wrong is placing an annual limit of £40k. There shouldn’t be a limit IMO – the £1M LTA one is good enough to define the ambition of what this is designed to do. If you want more, then save more but end of the tax break for you. It doesn’t matter if you earned that £1M in three frenetic years as a young finance wallah or you plodded away for forty years. It’s about how much of an income that will buy you. I’m not that exercised about limiting the tax advantage to 20% either. There’s no big deal in having the rich get there faster, as long as the total tax break is limited by the LTA. Good luck to them – the rich still get old like everybody else 😉 I wouldn’t even limit contributions to earned income, your pension would be a much better place for your inheritance than going into jacking up the price of houses for everybody else.

    Yes, it doesn’t greatly favour FI/RE because you need more if you are going to pack it in at 30. But in the end exceptional results need exceptional efforts, and until the robots really do come for everybody’s jobs then there isn’t a huge case for incentivising people to retire early. Contrary to much of the bitching about the LTA if you happen to have saved more than the LTA historically when they dropped the limits from the original £1.8m then you can apply for LTA protection to protect your large pension savings from tax. The deal is then that you don’t take the piss by adding to them. Again, this is fair enough – you aren’t retrospectively shorn of your tax-advantaged hoard. You are already rich enough and don’t need any additional incentive to save for your old age. Celebrate your good fortune and knock it off  😉 Obviously if you survey your domain and decide you did build all that and want to live in Galt’s Gulch, well, er, go and knock yourself out. It appears that the perpetrators of this Randian paradise on earth haven’t solved some of the fundamental requirements of a government, such as defence of the realm

    Contrary to much of the commentary on the LTA you are not stopped from saving on reaching it. You are stopped from saving into a pension scheme and benefiting from advantageous tax treatment on your contributions. So save somewhere else FFS.

    Notes:

    1. this age is a movable feast drifting upwards with longevity over the years to come, intended to keep 10 years before state pension age
    2. To qualify this, you are in the top wealth 5% if your household has £900,000 in assets from all sources including home equity, so if you are bothered by a £1m pension limit you are embedded firmly in that top 5%
    21 Jan 2016, 9:53am
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  • sometimes you just have to hold your nose and do it

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

    Ermine approach to bear markets

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

    past investment performance provides no guide to future performance

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

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

    Valuation matters

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

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

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

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

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

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

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

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

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

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

    Buying into bearishness with index funds

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

     

    Notes:

    1. I have since asked them, and they have given me explicit dispensation for that
    2. that should probably be 5200 by the time I post this

    I want to learn to spend a little more, with grace, with gratitude and with a new map

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

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

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

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

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

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

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

    Decline and fall

    The turning point

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

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

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

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

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

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

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

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

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

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

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

    I am now an oddity in the PF universe

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

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

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

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

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

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

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

    What can go wrong

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

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

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

    What I know will go wrong

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

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

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

    ambitions in things other than finance too

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

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

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

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

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

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

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

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

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

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

    I’m not drinking homebrew again.

    I want to learn morse code.

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

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

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

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

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

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

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

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

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

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

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

    Notes:

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