Advantages and Disadvantages of Reading with a Kindle
Over the past month or so I’ve acquired a bunch of PDFs of books on finance and investment, and stared with the first one, Reminiscences of a Stock Operator by Edwin Lefevre, a fictionalised biography of the legendary trader Jesse Livermore, who was notable for shorting the market in the Great Depression.
However, reading it on laptop is the damnedest way to read anything that was designed as a book or other long-form document. I learned to read before I went to school, so I have a higher reading speed than most people. However, probably because I didn’t learn to read from a computer screen, my reading speed drops dramatically on the laptop, and it costs me 20 W of power just to hold the page on my screen. I can’t read it in anything other than a sitting position, the whole thing is a pain. Paying for Stock Operator in book form almost starts to look attractive, but I have another 20 or so books to read like this. The reading experience needs to get better, and a Kindle could do it.
I’ve come across the Kindle before, though I hadn’t seen one, and my first reaction was along the lines of
this is like a games console or similar consumer thneed designed to create a locked down consumer space to part the simple-minded from their money.
If used as intended, that’s exactly what you get. You can get a Kindle version of Reminiscences of a Stock Operator for £9, and off you go. That’s not bad for this book if you compare the dead-tree versions, though the secondhand market will come up with the goods in real form for £6.42 at the time of writing. My copy is a PDF, and was the result of a Google search. The book was from 1923.
Monevator’s Kindle books on investing article made me think about this again, particularly as I have now collected even more PDFs from the fascinating period between 1900 and 1930 when the Haber-Bosch process of creating artificial fertiliser from natural gas hadn’t been refined, and all sorts of bizarre methods were tried in agriculture using electrical discharges.
At the same time Martin Lewis’s moneysaving expert website warmed me up to how to get a WiFi Kindle for £75-ish so I figured it was time to revisit this, so I bought one, and loaded it with PDFs. You get a 30-day trial during which you can return and get your money back less delivery if you don’t get on with it, so I figured I could take a flyer.
the total Kindle area is similar to the book, but the screen is a lot smaller
As the picture shows, a Kindle isn’t the same as a paperback, because the screen is smaller than the page of a typical paperback. And though I am middle-aged I can see easily enough that the resolution of the screen isn’t the same as a paperback, but it is far, far, closer to it than my laptop.
It’s good enough. I’ve got my normal reading speed back, it’s a lot more convenient and I can read anywhere. I’ve only read PDFs on the Kindle apart from the instruction manual, and the image quality of the result with PDFs isn’t as good as with a true Kindle book. To get a whole A4 page onto the Kindle screen results in a small and ill-defined font. However, you can spin the Kindle through 90 degress and read in landscape mode. It doesn’t reformat automatically, I would have thought an orientation switch would have been an easy win, but it can be done manually. The result is much sharper than reading the same PDF on my laptop, even though the screen is physically much larger on the laptop.
Landscape mode is easier to read on this PDF and matches the book font size more closely
So I’m a convert – but I won’t be buying from Monevator’s list yet. I don’t like paying for what I can’t touch in terms of media, and there’s no used market for Kindle books, because they’ve presumably stitched things up so you buy a license and not a product. Embodying your media in Real Stuff has the advantage of giving such monoplistic control freaks the shaft, they surrender control of the secondhand market as soon as they let go of the physical embodiment. Hoever, if I don’t buy ebooks I don’t get to eat that crow. The Kindle works well for PDFs, and Google can turn up all sorts of good stuff.
The go anywhere appeal is the best part of the Kindle, in all sorts of surprising areas. At the electronics bench, once upon a time you could have databooks with device pinouts and application data. Since the 1990s you had to print out the PDFs, and datasheets aren’t concise. With a Kindle, all the datasheets are to hand at the bench. That go anywhere feature is what makes this transformational. For other people it will be having recipes in the kitchen to hand, or workshop manuals in the shed – all places where taking a laptop is doable, but a right pain.
Oh an if you haven’t got a PDF creator, Google docs creates PDFs if you want to print something, as the cloud hasn’t got access to your print drivers. The Kindle can take these too, so you don’t have to pay the Adobe corporation for the privilege of using your Kindle. Two proprietary closed shops designed to part the punter from their money circumvented at a stroke 
The Kindle works for me. I have my reading speed back, I don’t have to put up with the intermittent noise of a fan and I can focus on what I’m reading as I used to be able to with paper. There are things wrong with the Kindle, colour would be nice, the screen could be 1.5 times bigger, the sturm und drang on the screen associated with a page turn isn’t so great, though it is over quicker than a page turn. It would be nice if it would slowly scroll the page itself as you can do in Word. But I’m carping here – the overall experience delivers.
reflections: alternative vote nick clegg proportional representation
by ermine
4 comments
AV or not to AV – proportional representation and stuff
Yesterday there was a referendum on changing the UK voting system to something I struggled to understand. The mechanics are easy enough to understand for the alternative vote, but what it would mean aren’t clear to me at all.
For what I guess must be historical reasons Britain groups its voters into relatively small clusters called constituencies, and currently the ~ 70000 voters in a constituency vote for one of the candidates. The candidate with the most votes wins that ‘seat’.
I can see the case to be made for proportional representation, possibly with a 5% minimum vote cutoff, and perhaps we may move to that one day. However, to make PR work, to my eyes we would have to eliminate the small constituency groupings.
The reason for this is that all electoral systems are a map of the voters’ views, and they come with their own distortions. Let’s take a 5% accuracy as good enough – we would then need up to 20 MPs for an area, so each can represent 1/20th of the popular opinion. In a constituency with 40% Lab, 40%Con and 15%Lib and 5% Monster Raving Loony Party, we’d have a chamber with 8Lab, 8Con, 3 Lib and 1 MRL members.
Suffolk, the region I live in, currently has 7 MPs each serving about 70,000 voters so unless the cost of politicians’ salaries is going to rocket up, we’d have to upscale the size of the constituency, to 70,000 * 20 = 1.4 million voters. We could do that – indeed we do when we elect members of the European parliament, where there are 72MEPs representing the UK. The actual process whereby they allocate MEPs strikes me as overly complicated, but doable.
IMO we either have to do this job properly or not at all. Either we get rid of our small constituencies (along with the link to the local people and MPs surgeries etc) and accept the large faceless constituencies that go along with getting a more accurate representation of the vote, or we retain the small constituencies and accept the distortions, but at least we can hold politicians to account for their manifestos, something that is lost with coalitions.
In practice the distorting issues of first-past-the-post voting seem to integrate out over time. I have voted for all the big three parties, depending on the issues of the day, and overall I feel my views were acceptably represented. In some ways the UK stumbles along veering from left to right as the inconsistencies inherent in any excessive duration of one extreme or the other start to upset enough people that they switch allegiance.
In this way a rough path is trod, in a similar way to how your central heating maintains an acceptable temperature, despite the fact the boiler can usually either be either running flat out or not at all. A set-point is established, and if things are too cold the boiler is run, until the temperature gets too hot, and then it is turned off. The temperature is never exactly what you set, but it’s near enough most of the time.
We’ve had a run of tax and spend for a while, and it was nice for some Britons while it lasted, but now enough voters sort of came to the conclusion we need to stop paying so many people to do nothing. That tends to go too far as well, as anybody who remembers the early 1980s can recall.
So I voted no, either fix this right or leave us with the imperfection we are used to. If we want PR then let’s have it. Perhaps we can have this debate again with the elected House of Lords if it ever happens.
Of course, there’s the other issue of it being one in the eye for Nick Clegg. On the occasions where I have voted LD I was after something reasonably left wing. If I want Tories I’ll vote for them, thanks all the same Nick, I don’t need a proxy. It would have really pi**ed me off if I had voted LD last May and ended up being part of making a a Tory led Coalition happen. Whereas had I voted LD and ended up with a LibLab coalition I would not be too surprised, as I view them as two similar flavours with different emphases.
The trouble with getting a hold of a tiger by the tail. Nick, is that you end up going where the tiger wants to go… Something gives me the feeling that’s not the same direction as where most of your voters wanted to go hence the hammering you got last night. As he said
“Clearly what happened last night – especially in those parts of the country, Scotland, Wales, the great cities of the north, where there are real anxieties about the deficit reduction plans we are having to put in place … we are clearly getting the brunt of the blame,” he told reporters.
“To the many families, in those parts of the country especially, there are some very strong memories of what life was like under the Thatcherism of the 1980s, and that’s what they fear they are returning to. We need to get up, dust ourselves down and move on.”
I’m not sure how you do “move on” from that, what part of “Why are you enabling the Tories to do this to us” do you not understand, Nick?
I don’t know what the results of the AV vote are, but either way it will have served to open the debate. This was rushed and the wider issues of changing the constituency system were not aired well. We may be happy to rattle along using first-past-the-post and accept that over time we get something approximating to what we want, or we may reflect that we would prefer something more accurate in the 21st century. It’s no bad thing to think about that.
reflections: christianity niall ferguson Protestant work ethic
by ermine
11 comments
Civilisation – The West and the Rest, Protestant Work Ethic Redux
Earlier this year here at the Ermine’s Nest we pondered whether there was a case to be made for saving £140 odd by outing the TV. That may seem obscure to non-UK viewers, but in the UK there is a thing called a TV licence that you are meant to have if you watch TV as it is broadcast. This largely pays for the BBC, whose programmes don’t have commercial advertising.
Anyway, we decided that we would see if we could find something that pleased us enough to justify the £140, so I occasionally look for stuff that may interest me. The recent Panorama Finished at Fifty was one of these, and I had recorded Niall Ferguson’s Civilization -The West and the Rest. This was presumably a TV series of the book
Watching this was rewarding and I learned a few bits and pieces I hadn’t known before. Niall comes across as a dapper and personable enough chap, and according to this review in the Grauniad he targeted this series at teenagers. Which explained why he had this infuriating catchline where he comes across as “Dad trying to be down with the yoof-speak and with it”, by endlessly referring to the six “killer apps” of Western Civilisation. I know he titled his book civilization but I just can’t bring myself to spell it that way, I have enough unwitting typos without adding deliberate ones 
Anyhow, that killer apps yoof-speak got on my nerves, because nothing made by the Apple corporation has darkened my door because I don’t have money to burn, and I am a crabby old git who has nothing to do with media and so I don’t refer to apps and folders on a computer but directories and programs. When I see job ads for appers rather than programmers I’ll rethink that.
Despite the killer app-speak, Niall was informative and reasonably to the point, though his perspective is a lot more upbeat about the advantages of the European empires than I am used to. Some people will hate it for that alone. He did at least tip his hat to Mahatma Gandhi’s delightful one-liner on what he thought about Western Civilisation, something to the effect of “yes, that would be a good thing”.
One takeaway I got from the series, particularly in the last program, was the effect of the Protestant work ethic on the success of the West in economic terms. I’ve spent my fair share on here slagging off the Protestant work ethic, but Niall did make me think that perhaps I should be more nuanced about it.
When I was in America, it did strike me that there were an awful lot of churches about, both in New England and in California (I haven’t been anywhere else in the US, other than NJ, NV, MI, CO and AZ so it may be very different elsewhere). The sheer density of churches was remarkable. Niall made the case that this has something to do with the dynamism of the US economy compared to those of Western Europe, a part of the West he considers in relative decline vis a vis the US, as it became largely secular after the Second World War.
It puzzled me because the presentation of Christianity in the US came across to me as extremely in-your-face, of a type which I believe is called evangelical. The last time I had significant dealings with Christianity was in the 1970s, and this sort of thing wasn’t around then.
In Niall’s program they showed some clips of what went on in US churches, and what strikes me is that the entire message seems to be mediated through the emotional centres, with rah-rah sessions of ‘Can you FEEL the power of the Lord’ together with the raising of arms and clapping. The sort of thinking and reflection that I had observed in Christians in the Old World, albeit three decades ago just wasn’t there.
That sort of thing makes me uneasy – somewhere at the back of my mind I feel that if the Good Lord is worth believing in, He wouldn’t demand that His adherents check their brains in at the door. Each to their own, but I could see how this might lead to people being persuaded to defer gratification for other goals. And a lot of economic success seems to be about deferred gratification, so Niall makes the case that Protestant Christianity was a large part of the economic success of the West. In his final program he makes the case that as this fades, so the power of the West will also fade, particularly as it appears that Christianity is on the rise in China.
Now this is a TV program, and though Niall is bright he isn’t infallible. For instance he perpetrated a howler in saying Edison was associated with AC power in the US – he opposed it intensely in the war of the currents due to patent considerations.
I have no way of verifying a lot of what he claimed. I would agree with him that there is a decadence and a lack of people taking responsibility for the consequences of their actions in the West nowadays. There is a general infantilisation of public discourse, where we all too often resort to “the Government should” or “They should” fix one of the current malaises, often the result of earlier aberrant behaviour. For instance the years 2000-2007 where we all believed house prices would go up forever so it was worth lending NINJA‘s money in the knowledge the rising house price would enable them to pay off the loan?
It is also possible that the increasing secularisation means that one common source of a moral compass is lost, and this is why we are regressing and becoming decadent. It isn’t the only explanation, and humanists among others would object to the concept that only religion can provide a moral frame of reference. An alternative explanation would be that life has got materially easier, so we can get away with more lax behaviour. Or I might just be getting older and it’s all really okay as it is, despite the financial crises and the disappearing jobs that the POTUS noted a while back
So all in all I can probably get my £140 worth, over the year. This programme was not on the BBC, so it was infested with ads. However, my Humax Foxsat PVR seems to be programmed well inasmuch as two taps of the >> button skips the whole ad break, so I am not troubled by companies trying to push consumerism on me. I win much of the simple living/frugality battle by busting as much advertising and junk out of my sight as I can .
This also helps me in the fight against my power bill as it has a standby power usage of < 1W. Obviously that’s still more than if I got rid of the whole TV receiving system, however it is very low, so I can live with the £2 it costs me in power a year, as it spends most of its time in standby.
personal finance reflections: Loughton Monkey Money Saving Expert MSE retirement
by ermine
10 comments
What is your number? How much do you need to live on?
I swiped some of the title from this thread on Money Saving Expert, which is about how much you need to live on in retirement. Don’t start reading the thread from the beginning, because there is a lot of bad humour and flame wars to start off with. The link I’ve posted gets you past the worst of that, and all credit to the OP for persevering in the face of adversity!
It was an interesting tale, as it was the estimation from a whole bunch of real people independently trying to estimate how much a couple would need to live on in retirement. Clearly there will be a range of responses, but there was a surprising commonality eventually settling on around £27,500
The £27,500 can be broken down into:
Food £6,000
Car/Transport £5,000
Bills/Utilities £5,000
Holidays/Leisure £6,000
Clothing/Cash/Other £3,000
Repairs/replacements £2,500
This figure is predicated on a owner-occupier couple who have paid off their mortgage and have no dependents living with them. This figure is roughly corroborated by real retirees living off a similar amount; in practice real retirees seem to be able to shave a little bit off their estimates.
Although hard to express analytically, I get the feeling that those posters who have had children (ie those mentioning DD, DS in MSE-speak) are at the lower end of the Number targets, the child-free at the other end. No huge surprise there, I suppose
Something that surprises me is that for a single person the costs are only a little bit less, there seem to be significant economies of scale for couples. I operated a household as a single person for over a decade early in my career, I wonder if perhaps this set me back more than the extra cost of having children, as when I compare myself with my colleagues they tend to live in slightly more fancy houses, although they are often still carrying a mortgage at the same age.
Poster Loughton Monkey made the good point that you can overcook focusing on how much you need to retire. His alternative, which is closer to the ERE approach is to drive your running costs to below your income, which is broadly how I do it. I then save the excess. There is more drama in my approach, particularly now where I am saving > 70%, but LM has been more consisent throughout his working life. Slow and steady wins the race, fortunately I also have the benefit of a company pension scheme to keep me in the slow and steady for all the years where I didn’t save explicitly. In favour of my younger and more profligate self, I did pay down the mortgage
Loughton Monkey retired at 56, and he saved about 25% of his income. This roughly squares with ERE’s calculations when you add in the State pension later on and he also seems to be saving more than he had originally anticipated. The trick to early retirement is living below your means. There isn’t any other way that doesn’t depend on scarce luck or criminality.
Unfortunately for me, there are significant differences in my lifestyle which make me wonder whether either I am wrong or I may end up short of money or having to work a little bit longer. These differences are:
Firstly, all these people are assuming that industrial society carries on in much the same way, so the past is a reasonable guide to the future. My view is darker, and therefore some of the assumptions about the world they live in are different for me. The MSE posters may be right, but I have to chart my path according to my own lights.
To be honest, I am amazed at the implicit assumption that everything carries on as normal. The best I can imagine for the UK economy is that somehow Peak Oil and other resource crunches are shown to be a chimera, the result of more industrialising economies drawing on resources that have a limited rate of production instead of a Limits to Growth type of brick wall. Even then I still see many years of grinding decline deleveraging the stupendous UK debt overhang in government, in households and in companies. Alternatively we can deal with the results of defaulting – currency crisis, skyrocketing inflation and horrendous unemployment. In my view the PIIGS have already bought their tickets for this one-way ride out of the Euro, and Britain is only separated from that scenario by having a currency it can devalue.
Yes, Monevator may have been right when he said Britain is booming again when viewed though the selective prism of the stock market. But it isn’t going to feel like that for the average punter on the street. It will take decades, if it ever happens, to pull out the survivors from the twisted wreckage of the British and Western economies, and all the time wealth will probably concentrate towards capital rather than labour.
That means more jobs haemorrhaging away, more unemployment and a domestic economy stuck in low gear for years. The shattered education system of Britain which was the result of our failure to man up to the hard task of telling some children that they are less bright than others won’t help our economy in that case, and will take many years to repair with money we may not have. Hopefully most of the problem is in the perverse value systems that seem to have have confused equality of outcome for equality of opportunity.
Another difference in my circumstances compared with the MSE folk is that I may start one project that may add more expense to my outgoings for a while, which again is different from the normal pattern of living.
So I am a little bit off target. My outgoings are significantly lower than most of the posters, and my savings are probably higher than many. My “number” is about 18k, which given that I have a darker view of the future, possibly slightly greater outgoings than the typical retired couple shows that either I am wrong, or that I have no accurate way of evaluating my attempts to get myself less exposed to the money economy by saving energy and producing food.
Loughton Monkey is probably the closest approximation to the trajectory I would like to take. He is older than me, and worked for 34 years. Although I have 31 years of NI contributions I don’t think I have worked for 31 years; I believe that when I went to university NI stamps were accrued though I wasn’t earning any significant amounts of money. If I retire in 2012 I will probably only have clocked up 30 years of working, so I am 10% short of his earning years.
Something else that I learned in reading that thread is that I am lucky so far in terms of physical health for my age, I have no significant issues there, apart from the minor slights and injuries one accumulates through life. I have visited the doctor considerably less than once a year and aim to keep it that way. Part of retiring early is to to try and preserve that.
I am entering a time of life when I lose some resilience physically, and looking at colleagues at work the stress of the workplace can cause some serious ill-health. I have been lucky there too, the way this has manifested for me is that it is easier to pull muscles for things that really shouldn’t be over-exertions and that the resultant aches take a long time to clear. It is observable that this is much more likely to happen when the working environment is being particularly bad, though since I am in an office job the exertion is always outside work. But it is a warning, and I only have to look around me to see that others have been less fortunate indeed. One guy, who was lived a healthy lifestyle and was into walking and hiking on his holidays with his wife was saving into AVCs like mad and hated the work environment. He looked a lot fitter than me, but he didn’t even get to see his 55th birthday…
So it’s important to remember that quality of life isn’t all about lifestyle and it isn’t all about the number. I would rather run out of money than run out of health.
the Energy Conundrum
Seems appropriate to tackle this one at the moment, when the nut-case Gaddafi appears to be bashing seven bells out of his people, the energy situation could take a turn for the worse.
It’s not so much the uncertainty over the Arab world, which supplies most of the oil used worldwide, though not as much as it used to. It’s the fact that we’ve probably all got to have to start getting used to using a lot less of it. The uncertainty in the Arab world may bring this on sooner, but only by a few years.
The trouble is that we’ve been mining the power of ancient sunlight for many years now, and its let us get ahead of ourselves a bit. It’s also come in a damned convenient form, which with a bit of refinement and chemical wizardry enables us to get a very compact store of energy.
For a lot of energy applications the compact storage doesn’t matter – I’m not so concerned if my electricity comes from great hulking lumps of coal or from tiny amounts of nuclear fuel. But when it comes to fuelling my car, I have got awfully used to being able to load enough fuel good for about 400 miles in about five minutes.
In some ways even if we didn’t mine oil we’d have to invent it – it’s a really convenient store of energy, and indeed you can make oil from wood. So we can cancel all that hoo-hah about peak oil happening in 2009 then, and kick back and enjoy the ride, and another few hundred years of continuous growth?
Not so fast. There probably is a place for synthetic oil even if we don’t get it from the ground, because of a hundred years of experience in handling it in transportation applications. Although in Hollywood movies car crashes result in stupendous fireballs, we have got good enough at designing fuel storage that it doesn’t happen that way so often.
Obviously we may want to use electricity in future, and there is an awful lot ot be said for electrically powered traction in land vehicles – you get to lose the need to gear-shift to match the load to the narrow power band of an internal combustion engine. However, storing electricity is still a right mess, and high energy density batteries tend to use exotic materials, compared to the low-tech of a petrol tank.
People often cite human ingenuity as being ready to solve all our energy problems, so let’s assume we have decent, safe compact energy storage, even when it is no longer economically viable to mine oil to use as an energy source. We might still use it as a feedstock for plastics etc, but say that the cost of oil per unit energy rises above the value of the industrial output it can facilitate.
The trouble with human ingenuity it that it has no answer for the fundamental question
where is the energy going to come from?
and that is a real downer. Ingenuity will never find a solution to the First law of Thermodynamics. The last time humanity lived within the scope of the energy it could sustainably harvest from the sun was about 1900. Okay, so we can probably catch a hell of a lot more than they did then, but as David MacKay analysed in Sustainable Energy Without the Hot Air renewables just ain’t gonna cut it for the UK, leastways not if we want to eat, or pretty much want to see any of this green and pleasant land rather than covering it with solar panels and industrial clobber.
One area we really could get to use some of our much vaunted human ingenuity is to apply ourselves to wasting less energy. That divdes into two areas – cutting down frivolity and improving efficiency. There isn’t any real excuse for air travel city breaks and domestic air conditioning (in the UK) and the sooner that sort of thing is priced out of the reach of the average Brit the better in my view, it’s the market doing the job it’s designed to do, not a revolting attack on the common man as it is sometimes portrayed. You’re entitled to air, not air travel…
According to David MacKay, the average annual energy usage of someone in the UK is 125kWh/d, broken up into 40kWh/d heating, 40kWh/d transport and 18kWh/d electricity consumption, with the rest being lost in transmission. I assume he’s counting the usage by industry, otherwise we are wasteful indeed in the UK – my personal usage is 15/13/2 for comparison.
Apart from air travel,the whole work/commuting/house price mess is susceptible to reductions. At the moment cheap energy/transport is distorting our economy and living patterns, concentrating them and leading us to commute long distances. In an energy challenged world we just won’t be able to do that, and hopefully the requirement to produce bulk consumables (food, building materials etc) closer to the point of use will spread things out a bit more.
I haven’t really come to a view yet on how an energy challenged world will change the balance between capital and labour. In today’s world, capital has used cheap energy to drive te cost of labour down, but this has been facilitated by better communications. We will probably retain most of the better communications, but we may end up focusing more on the basics and essentials of life.
I also haven’t taken a view on the effect of an energy crunch on human population because I haven’t got any way of getting my head round the data. It will probably range somewhere between the living standards of the 1960s in the West and the sort of thing dieoff.org is all about. It’ll probably be different from life today, and curiously enough I think that some of that difference may not necessarily be a bad thing.
Specialisation – is it making stuff better and cheaper but ruining our quality of life?
Even at school I learned that one of the things that set Man apart from other creatures was the division of labour. We don’t all have the same talents, I am a better engineer than horticulturalist or painter, whereas others probably paint better than design electronics or software. So it make sense I stick to the engineering and others to the painting, growing food etc.
That all works really well up to a point. Can it go too far? When I was sat school I believe that a town’s football team was drawn mainly from kids in the county. I’m not totally sure of that since I was never that into football, but let’s run with it. These were trained up, and as a result there was a wide variety of football clubs playing at various levels.
Now they are basically businesses rather than football clubs – the pool of footballers is global, and more and more money chases fewer and fewer players. Obviously this optimises the quality of the football at the top – it’s probably miles better than it was decades ago. However, it also makes it more inaccessible and remote – there’s probably a much lower chance of the football-mad kid across the road getting a chance to make a living wage playing football. That has been swapped for a very remote chance of him getting richer than Croesus playing football if he happens to be that exceptional.
That seems to be the general problem with our economic system – it is trending towards a winner-takes-all world, one of outrageous competition and stupendous rewards, or nothing, rather than one where there is a range of opportunities where most people can find a living that matches their aptitudes.
This winner-takes all seems to apply across talent ranges and even geography. In more self-sufficient times Britain was more evenly settled, but the modern economy is concentrating jobs and people more and more into the south-east. In itself that wouldn’t be so bad, but it inflates house prices unreasonably, and stretches transport infrastructure.
It is one of the dreadful ironies that just as information technology gets to the point that remote/home/tele working becomes practical and economic, we comprehensively reject the whole idea and concentrate our industries into specific parts of the UK. The M4 corridor for your engineering companies, Cambridge for advanced IT and software and biotechnology, London for finance and lots of other things.
The corollary of this is that you can either live where you can get a job but then you can’t afford to buy a house, or you can live where you could buy a house but there aren’t any jobs there, so you have to spend a fortune commuting. That will start to go up as oil prices increase, and it’s not going to a good place at all.
Globalisation has taken this pathology to a whole new level, as President Obama called out in his State of the Union address recently.
At some point, hopefully soon, we will have to ask ourselves what is our economy for? Is it to make as much stuff as possible for as little as possible? Or is it to give as many people as possible a good quality of life? I don’t claim to be an expert, but I suspect the economy we will end up with in the former case will look very different from the one to realise the latter. And at the moment we are running down the first path.
economy reflections: Michael Porter new capitalism Oswald Spengler robert peston
by ermine
6 comments
A New Capitalism – can it ever work?
You might have noticed we’ve made a right mess of our economy of late. It seems to be a general fit of collective madness, though I should acknowledge I’m looking at this from Western eyes, and from 1950 to 2000 we’ve been king of the hill, particularly if we lived in the US.
I’m not so sure that readers from Asia would feel the same – I can’t say from personal knowledge but I would imagine Chinese and Indian folk could say they have had a pretty good financial crisis, thanks very much. As Oswald Spengler said, civilisations rise and fall, sic transit gloria mundi… In his seminal work The Decline of the West (Der Untergang des Abendlandes) Spengler opined in the 1920s that we were living in the winter time of the Faustian civilisation, where the populace constantly strives for the unattainable. It’s not a bad definition of the rat-race.
Not all the ills of the current time can be placed at the door of capitalism – population growth and environmental degradation are as much to do with our life choices as they have to do with capitalism. However, it’s probably fair to say that in the West the current gut feeling is that capitalism has gone wrong somewhere.
Enter the New Capitalism
If ‘new’ is good enough to promote soap powder, maybe it’s good enough to fix some of the things that are wrong with capitalism. A couple of respected commentators have postulated the idea of a ‘new capitalism’ which is presumably less rapacious than the old form. Less of the robber barons, more of the kindly face of philanthropic Bill Gates, fixing the world after he spent three decades making such a mess inside your computers, trashing you work with the blue screen of death and disclaiming all responsibility with his impertinent ‘nothing to do with me’ EULAs.
In the dark days of 2008, when it seemed that in the turning gyre the falcon could hear the falconer no more, it seemed that if we could hold our heads and recall the wayward bird of prey then everything could be different. No less a sage that Robert Peston, he of the BBC and ex FT, with his somewhat nerdish manner but excellent sense of timing and pace, delivered himself of this statement
A New Capitalism is likely to emerge from the rubble. And although it’s impossible to be precise about how the reconstructed economy will operate, parts of its outline are taking shape. What lies ahead can be determined from an understanding of what’s gone wrong with the existing model.
This, in itself, is no reason for gloom or despair. For many, the New Capitalism may well seem fairer and less alienating than the model of the past 30 years, in that the system’s salvation may require it to be kinder, gentler, less divisive, less of a casino in which the winner takes all.
It is easy to be caught in the crossfire of history, and lose perspective. Yet Peston is backed up more recently by Harvard’s Prof Michael Porter, who breezily acknowledges that Harvard Business School pumped up all those MBAs to charge around Western companies beating the outsource, downsize, reduce drum but he’s changed his mind now and perhaps business should be less rapacious and look to some of the externalities it imposes on society.
Porter elucidates on Peter Day’s World of Business, available from this mp3 from the BBC. He talks a good talk, even offers a mea culpa for some of the outsourcing excesses of globalisation that has degraded the world of work for many in the West.
The solutions he proposes were to skew capital gains tax to favour holdings of more than three years, hmm, we used to call that taper relief and we’ve just got rid of that. He was also advocating social enterprises, which sounds all well and good until we remember that the skills to run a successful business are not that widely spread in the community. You need a certain degree of self-interest and low cunning to do well in business…
What do we want of the New Capitalism
Perhaps we should ask ourselves first, what does capitalism do for us? In the Adam Smith version, capitalism allocates effort in the most optimal fashion, and indeed when Adam Smith wrote that, he was talking about businesses that were largely SMEs. He may not have approved of multinational corporations, judging by what he had to say about the East India Company, probably the first MNC.
in 1698 a proposal was made to Parliament, of advancing two million pounds to government at eight percent, provided the subscribers were erected into a new East India Company, with exclusive privileges.
It quite warms the cockles of your heart, just how open a company could be about what we would call bribery and corruption. “Here’s two million quid, mate, so we can stitch this market up like a kipper”. Oh, all right then…
The modern Adam Smith Institute is, of course, a bunch of right-wingnuts but we shouldn’t visit the sins of the children on the fathers…
Let’s be a bit simpler about it. What is it that a capitalist enterprise does for society?
- It provides goods at the cheapest price
- it generally tries to not pay for any external costs imposed on society by its activities (pollution, noise, mine tailings etc)
- in conjunction with other capitalist enterprise and according to the principles laid down by Smith, it allocates stored resources (capital) in an empirically determined optimal way.
- it develops new technologies and ways of doing things
That’s what most people think a company does for us. We miss something very important out here, however.
- it provides jobs, and pay for people to buy the products of the company or those of others
That is the bit we’ve lost sight of . Another thing we have an issue with is that there is a wide range of human abilities, so it would be good if in aggregate our companies were to provide a range of jobs that matched the bell curve of human intellectual and other abilities.
Some of the other things we might like our companies to do work-wise are asking the impossible. We humans and frail, egotistical and greedy types. Just as the head of a sweet shop will never want for sweets, is it really so surprising that the the chiefs of a money shop, a.k.a. banks, decide they are so special that they need lots of…money?
Indeed since money is desirable, is it such a surprise that the heads of bigger companies decide they are particularly special, so they need lots of money? Especially when you put a bunch of these guys together to slap each other’s backs and set each other’s pay as part of a remuneration committee? I mean, heck, I would, wouldn’t you I don’t know what we can do about the ratcheting up of executive pay, but I do know that we used to have long lasting successful companies before this all started to happen 20 years ago, after Bill Clinton forced companies to set performance related goals for their executives in 1991.
So that’s an awful lot more that we want the New Capitalism to do for us than the Old Capitalism. Where Peston and Porter are a bit on the hazy side is how we get from where we are to where we would like to be. It’s all very well having goals, but you also want to have a roadmap for how you’re going to get there.
Without that roadmap, and the will to follow it, and a big enough stick to bash the vested interests arrayed against the New Capitalsim (CEOs of the world’s multinationals, we’re looking at you, kid) I just don’t see how this ones going to fly. There may be other forces that may roll back the forces of globalisation enough to improve the world of work, but these forces will come from without.
With a hard layer of embedded vested interest scum at the top of capitalism, it ain’t going to want to change of its own accord. It held the line in 2008, ably abetted by the taxpayers of the then rich world. It’s basically ‘so long, taxpayers, and thanks for all the fish‘, now let’s get back to business as usual.
Maybe I’m wrong. I’d like to think so, but my money is on the slow thighs of the rough Beast slouching towards Bethlehem…
personal finance reflections: avc employee share plans new year resolution tax
by ermine
6 comments
New Year’s Resolution 2011 – I want to pay less tax
Losing weight, getting fit – it’s all so passé IMO. What I want to change in 2011 is to reduce the amount of income that HMRC steal from me. I haven’t lived beyond my means over the last ten years and I’m damned if I want Hector the Taxman to swipe my cash to keep the bankers in champagne and dancing girls, or indeed the feckless to sit on their butts and breed us into Idiocracy.
Don’t get me wrong, I’m all for bankers, booze and birds as long as it’s not on my dime. I do think a pair of housebricks applied sharply to the offending organs might address Keith McDonald’s animal instincts but if he manned up and turned up for work to pay for them then 15 kids mightn’t be so bad. Either way, there’s enough that I seem to end up paying for, and I don’t want to pay for them any more, along these lines, though my bugbears are subtly different.
So how do you avoid tax, legally?
For wage-slaves like me on PAYE, there are only three easy ways to reduce one’s tax bill.
- Earn Less
- Spend Less
- Shelter taxable income in tax shelters like ISAs
1 and 2, the earns less/spend less do the heavy lifting here for wage slaves. If 3 is doing a lot for you you’re probably not on PAYE. What that means is to get a win here you have to be prepared to change your lifestyle. That’s why the taxman can raise enough money to waste on the aforementioned fripperies – because most people want to spend all they earn as they earn it.
Earn less, you might say, well, that’s like cutting off your nose to spite your face. However, there are ways you can reduce your taxable earnings while keeping hold of the money for deferred usage – things like pension AVCs (provided you can convert the saved money into a tax-free lump sum), some employee share plans and similar things like salary-sacrifice childcare schemes are ways to do that.
Of these, my weapon of choice is pension AVCs. Previously I have had a moderately successful run with employee share schemes, but you can only shelter £1500 a year that way and you take stock market risk. You can accept a lot of stock market risk in return for removing the risk of the taxman stealing 41% at source mind you.
AVCs are an easy win for me as I am probably within five years of drawing a pension. For younger people or those my age and not preparing to retire early the choice is harder, since a desperate government can change the rules at whim. At the moment one can draw 25% of a pension pot as a tax-free lump sum, and since I don’t want to draw this from the pension pot itself it makes perfect sense to save up 25% of my nominal pension pot on top in the form of AVCs, to withdraw tax-free rather than paying 40% tax on it. However I wouldn’t bet on that possibility remaining for ever…
I plan to use the £1000 extra tax allowance in 2011/12 that is one of the few useful outputs of the Lib Dem part of the Coalition. By controlling my taxable income I can avoid getting hit by the reduction in higher tax threshold and the increase in National Insurance to keep the money in my pocket, rather than Hector the Taxman’s. Incidentally, the same techique would enable Britain’s hard pressed ranks of impecunious middle-class parents to avoid the higher-rate tax child tax credit hoo-hah quite legitimately. Don’t want to lose your child tax credit? Don’t pay HRT. Simples. I think you have until 2013 to get ready for that change, so you can warm Tarquin and Jemima up to the fact they may have to share the iPad next Christmas rather than get one each…
Reducing tax by reducing taxable income is easy enough to understand, though harder for some people to implement that others. However, the the gains to be had by spending less is due to a nasty hidden tax bomb that people often miss. Say you choose to live in Hastings and work in London, so your train season ticket costs £5192. For sure, Hastings is probably cheaper to live in, but you are losing £6800 of gross salary each and every year for the enjoyment of being packed in like sardines every working day, since you have to pay 20%tax, 12% NI on the money earned to pay that season ticket. The taxman also gets 20% of the ticket price as VAT (no he doesn’t, thanks to Ken below for setting me right on that) , so in total you are paying 50% tax for the privilege of going to work. Or if you are on higher rate tax then 60-70% of what you had to earn to pay the ticket goes to the government. I am assuming that if you earn over £100,000 and work in London you probably don’t live in Hastings If you did then you are being rushed even more.
Live below your means to get the flexibility to pay less tax
So the way to pay less tax is to spend less and do more for yourself. You have to have space in your budget to be able to do that, ie live below your means. If you spend out every penny you earn, you have no room for manoeuvre. The Government is smart this way and knows that most people in a consumer society end up living at, or above their means. As far as consumption taxes go, Governments pump up taxes on two classes of consumables – things people can’t easily eliminate from their lives, and wants that people can eliminate from their lives.
Fuel duty is one example of the former – over 60% of what you pay at the pump goes into the Government’s hands (and remember you’ve already paid about 30% tax on that money before it got into your wallet). Eliminating this sort of cost is difficult in the UK. For all the greenwash, public transport is a joke in the UK. I live 6.5 miles from work and the cost of the bus round trip is over £5 which is way more than twice the cost of the fuel. I actually have a choice here, and have driven down the annual cost of fuel considerably by cycling to work. That’s obviously not an option for our Hastings dwelling London commuter, and it highlights one of the issues about living below your means. You have to gain flexibility and control in your budget, and that means be very careful about picking up ongoing commitments.
Ruthlessly eliminate fixed costs from your lifestyle, consistent with your values.
These come with alls sorts of price tags and timescales. They’re bad because they suck flexibility out of your life, flexibility you could use to bust sociopathic managers and bad employers out of your way. On the upside, these fixed costs make a lot of good stuff happen for you life keeping the rain off your head, and reality TV to deaden the pain of your existence as a wage slave.
Commuting is a big fixed cost with a timescale matching how long you want to do the job/live where you do. An iPhone is a fixed cost, but at least it is a smaller cost that you can get out of after two years. Sky TV is a fixed cost to keep you from doing something else with your time, and a way to amplify your need for thneeds that you didn’t realise you thneed.
Taking financial responsibility for something that eats is a fixed cost that tends to be associated with a long timescale of about two decades, be it a kitten or a child The costs, and rewards, are different for the kitten and the child, but they are fixed costs, and because the cost and the commitment duration are both high, it pays to be sure that’s what you want to do. Unfortunately for the country’s population of songbirds, and fortunately for the continuation of the human race both seem to find wide favour.
A mortgage is a high fixed cost, possibly one of the highest most people will take on, and it also has a long duration. It is crazy to take on a mortgage without a reasonable expectation that you will service it to the end (though accepted, not necessarily in the same house) since it hamstrings your flexibility and you lose so much on repossession.
Fixed costs are budget-killers because they are inflexible, though they are often associated with the greatest rewards. If you fall on hard times then you can switch from Waitrose organic salmon to ramen in a week, and you can forego the purchase of Manolo Blahniks and the spa session.
Reducing the mortgage, or the cost of your children’s clothes or kitty food are a whole different ballgame. Hence the personal finance stalwart of having an emergency fund of three to six month’s essential running costs in savings. Most of that emergency fund is there to address the fixed costs. My view is that three months is far too short. Take a look at this graph of the percentage of the unemployed who have been unemployed for more than 12 months
Percentage of unemployed who are long-term unemployed for over a year
The data is taken from the ONS. Now you have to ask yourself, with 12-month unemployment being the experience of a third of the unemployed, how good do you feel about a 3-month emergency fund? Now, granted, that 12-month statistic does include chavs like Keith McDonald so perhaps the odds aren’t so greatly stacked against people who actually want to work. However, if we assume the feckless are represented by the 20% figure in the boom times of the mid-2000s, the current 15% excess are probably real people, and look where that graph is heading.
It wasn’t meant to be like this – in the 1970s we were promised more leisure time. Capitalism delivered on part of the deal, though its dark, evil Calvinist heart hates increased leisure time for its workers, because that increases switching time and management costs. Materially, if you want the basics that so enthralled people in the 1950s, you can have that, but nowadays you only need to work half the time to pay for it.
You could argue we sort of have that now – Keith McDonald has worked out how. All he needs is a mug working full-time to sponsor his lifestyle of 100% leisure. I have realised that I can’t have the job I was promised, a 20-hour week paying me half my gross salary.
I am closer to that 1950s lifestyle than many as I don’t have:
- an iPhone
- an iPad
- an i-anything
- a mobile (other than the work-provided one I use only for work)
- a flat screen TV (I am toying with outing my TV this year anyway as I don’t watch it enough)
- a wii/games console
- Sky/cable TV subscription
By storing the excess half of my income, preferably keeping as much of it out of the hands of the Government as I can, I can quit working about fifteen years earlier than my Dad could. I was slow on the uptake – other people like Dreamer and ERE have managed a lot earlier in their lives than me.
My extra time working hasn’t been totally wasted – I have more stuff than Jacob including a house, and living in a motorhome is not totally my idea of good living, and the harsh exercise regimen is also not to my taste, I’d rather not prolong life by hating a lot of it… Each to their own, however, Jacob will live longer than me
Sin taxes on elective wants
How about taxes that the Government puts on wants, that people can eliminate from their lives? The classic sin taxes on cigarettes and alcohol are examples of that, but there are others more nuanced, such as air passenger duty.
Although you wouldn’t think it from the way some people carry on, you don’t actually need to go on holiday, and even if you did, you don’t need to fly there. As for all that BS about air travel being good for people, well, it’s noisy for the rest of us on the ground, pollutes our air and buggers up our sleep. For the travellers, it is nasty, stressful and demeaning nowadays. If 80% of the travellers could be priced out of the sky I’d be all for it, I’d much rather save up and fly once a decade in comfort than once a year in a seething morass of humanity. Unfortunately, saving up to go business class wouldn’t help me, since it is the security theatre and airport experience which is the ugly part. I haven’t flown anywhere since a 2007 work trip which reminded me just how unpleasant air travel has become. Jean-Paul Sartre was spot-on, L’enfer, c’est les autres.
Warren Buffett has the right idea, if you want to do air travel, get a private jet. Since Warren is ever so slightly richer than me, I do without. By the way, if you really find the extra £100 APD an unbearable imposition then for heaven’s sake use your brains, APD is levied on flights from UK airports. Travel to Amsterdam-Schipol to start your long-haul flight, tax avoided, job done. Less racket in the skies for the rest of us above the UK too, what’s not to like?
Smoking. I don’t smoke, but if I smoked 40 a day it would cost me about £4380 a year according to the NHS. If I were a basic rate taxpayer I would have to find a job paying me £5840 a year more gross, to take into account the tax and NI I would pay before spending £4380. According to these guys, the cigarette duty on that hypothetical habit is £3942, so the total tax and duty in £5402.
Sin taxes are easy to avoid, don’t do the sin. I save myself nearly £4000 in tax by not smoking 40 a day. It’s kind of difficult to get a buzz out of the saving since I’ve never smoked 40 a day, but it’s there. There are also ways round some of that – if you have the capital to buy 7000 cigs every 6 months a regular trip to France may be in order, and indeed even pay for the holiday including APD…
Alcohol is the other biggie in sin taxes, and I get hit with £2 per bottle of wine roughly. So I know what to do if I want to reduce this
A New Year’s resolution that’s actionable and not too hard to do
Easy and fun is my approach to New Year’s resolutions, none of this cold showers and swimming in the sea. My aim is for the amount of tax taken in the 2012 P60 form to be less than the one in this year’s April form. That means I have to understand Osborne’s shenanigans in changing the basic rate and HRT thresholds. The first time I tackled this, in 2009, my aim was to pay no tax at all so I forced my pay down to close to the £6,500 p.a. that matched the tax threshold.
Athough I could live on this, I found it massively got in my way as far as investing in the business and funding my ISA so I became less hard-line on tax reduction. It was, however, good in the first six months to see a monthly tax of £8.70 rather than the figure I had been used to.
Now I probably need about £15000, to be able to fund my ISA and maintain running costs. Unfortunately I can’t see a way of funding the ISA without paying £3,000 tax on the money earned to go into it.
Everybody wants to pay less tax. And it can be done – but not while spending everything you earn. Therein lies the secret…
living intentionally reflections: early retirement meaningful work Minsmere volunteering
by ermine
1 comment
Early Retirement as opposed to Meaningful Work
I’ve rudely pinched much of the title from BripBlap’s Early Retirement or Meaningful Work? post. It makes for interesting reading, and his post contains many of the things people say about work – that good work does far more than pay the rent, it gives you a structure and meaning. Steve gives this concept its head in the last paragraph -
But I have realized that my real dream is not early retirement, as I often thought it was. I dreamed of days of leisure. I’ve had those days now, as I’ve been unemployed. I don’t want leisure. I want work with meaning. My real dream is finding meaningful work, and it should be everyone’s dream.
Hmm, well I have to take issue with the last few words. Obviously if meaningful work is Steve’s dream, who am I to gain-say that, have at it, but there’s no reason it has to be everyone’s dream. Perhaps I am unusual in this, but I hear the distant drum of the Calvinist work ethic here, and I don’t like it.
Now for sure the initial impetus for me shooting for early retirement is that I find work sucks, both in what my own job has become specifically and what work has become in the post Thatcher-Reagan era. I have no personal experience of working pre Thatcher, but I saw the background radiation of the post-war employer/employee contract that preceded it in three of the four companies I have worked for, and the quality of my job has gradually degraded as it becomes more management-by-numbers rather than leadership by common sense. Indeed what has particularly changed over the last three decades is that managerialism has taken over from leadership, grinding out innovation and inspiration across the board. However, that’s a rant for a different day.
Early retirement, for me, is all about power. It’s not about meaning. Financial independence, for me, is about being able to meet my needs and a modicum of wants from resources that are mine and under my control. I want nobody to have power over my time, and I want to be at nobody’s beck and call.
The modern world of work is about debt slavery – borrow money for college, for a house, and while you are in hock you are owned by your job. I have served nearly my entire time with that, and I am buying my freedom, to be and to live according to the light of my own lamps, to chart a course guided by my own compass. Of course I will accommodate people or goals that are special to me, but the Company isn’t special to me. I work so that I get money, and I use some of that money to buy my freedom from debt slavery.
Having now eliminated all debts, the debt slavery I am now buying myself out of is the slavery of future incurred debts. Once I have my running costs and some spare I am safe from that.
Too many people conflate early retirement with not working. For me early retirement is not having to work. It is the freedom to do something, but to be able to flip the bird if anybody requires me to do something that conflicts with my own aims and desires in life. Freedom doesn’t have to be exercised – I might choose to go along with it if there is a greater good, but there shouldn’t be a coercive hold ‘do this or else we can make you lose your home’.
People get more awkward and cantankerous as they get older, because they accumulate power, and have seen stupid things lead to crap too many times before.You lose the starry-eyed belief that it is different this time, because it very rarely is. Many things have transformed the work environment over the years, but human nature has remained the same.
I have seen enough management initiatives, and TQM, MBWA, investing in people, corporate social responsibility, employee engagement (funnily never employer engagement) and similar claptrap to last me a lifetime. It’s all rubbish. What Western corporations are in dire need of at this time is competent leadership by top brass that actually gives a damn about the company, its customers and the people that work for it, rather than simply maximizing the size of their own remuneration package. We have never discovered a way of linking pay to performance in a way that doesn’t produce pathological behaviour, particularly at the top. The recent financial crisis is merely the results of this pathology writ large, across many sectors. It is endemic in our large companies, and they can only continue to turn a profit by grinding out efficiency in the layers below senior management, increase in scale or reduce workforce costs by outsourcing etc.
And I’m tired of working in systems run by chancers, yes. But though retirement can mean not working, it doesn’t have to mean not working. I was at RSPB Minsmere recently – the welcome desk is staffed by volunteers, as is the shop and tea room. Looking at these people, I would say most were retired, and they include a fair proportion of early retirees, indeed some faces were younger than me.
I presume none of them had to be there, they chose to be there. They had early retirement and, by evidence of the fact that they were there, meaningful work. The two are not mutually exclusive. Indeed, I would say that if meaningful work is what you crave, there’s a lot to be said for early retirement – it opens up opportunities for meaningful work that you couldn’t otherwise afford to take, such as those RSPB positions.
personal finance reflections shares: asset allocation passive investing
by ermine
5 comments
asset allocation review part 2 and passive investment
Lookinag at RIT’s carefully honed asset allocation, and pondering some of the comments on my post on why passive investing isn’t for me, I figured I might as well consider my own asset allocation. One of the parts I struggle with in the concept of passive investment is indeed the very act of choosing an asset allocation. In this post, TA/Monevator offer up nine different approaches.
They’re all good, I assume, but as soon as you’ve chosen one of the nine you are no longer a passive investor. You are projecting your own hopes and fears for the future upon the empty screen of your ISA; you are choosing and making an opinion. Okay, it’s better than following share tips in the Torygraph – you at least choose a consistent direction for your course, rather than selecting a new direction every day. But you have chosen a direction.
I’m opinionated enough to be prepared to declare my asset allocation is a function of my hopes, fears and expectations, my imperfect comprehension of the economy as a whole, of how I view my imperfect state of knowledge, and what I consider the downside risks to be.
ISA asset allocation
This only shows my ISA asset allocation – I hold more than my ISA in pension AVCs but I don’t have the sophistication to be able to factor them in. So how does my asset allocation reflect my views?
Well, I am distrustful of the UK government, which I believe will debase the currency, shafting savers and hastening in serious amounts of inflation. So the gold and silver holdings (these are ETFs) should be no great surprise. They let me think about things without having to worry about the likes of Mervyn King silently stealing the shirt from my back devaluing the £. Devaluation was bad when I first came across it as a child when Harold Wilson did it in 1967 and no things aren’t different now, it’s still bad. I hadn’t intended to be so overweight in gold and silver, but they both appreciated seriously over the period I’ve been holding them. Or should I say the £ has gone down the toilet while they stayed the same?
The fixed interest and the dividend targeted holdings (investment trusts focusing largely on UK FTSE 100/250 constituents) are a logical consequence of my need for income in the space between two years from now and five years from now, after which the income will compensate me for drawing my pension early.
The emerging markets (=IBZL in my case) is part of the zeitgeist and my expectation that countries with a young workforce and oil reserves will have a better future than the bombed-out and indebted West. Next year I will add to that. I don’t do China – I don’t understand it and don’t trust it, but I will do India, a bit of Australia for their natural resources, possibly Canada for resources, and more of the same UK based IT wise.
I’ll probably give gold and silver a rest unless the Euro or the $ go belly-up, the former for daft attempts to synchronise Greek wastrels with doughty Germans without a Central Bank of Europe and a Central Tax Office of Europe, the latter for the mind-blowing whirlwind that will follow the loss of reserve currency status if the Chinese and the oil producers get their way. I don’t actually want such a high weighting on that, so I will dilute it by focusing on other classes with next year’s ISA allowance.
What’s wrong with my asset allocation, well, no exposure to other emerging markets. In an ISA you can only do so much in a year otherwise you end up with a zillion fragmented holdings, so I will take some of that on next year. No bonds – I don’t understand bonds, I don’t like them, and my pension to be provides much of the function bonds would in a retirement portfolio so I can afford to indulge my prejudices and ignore this asset class. I may consider commercial property via REITs though it’s another asset class that I don’t understand so I may go with Warren Buffett on that one too – don’t invest in what you don’t understand…
Considering my overall net worth (updated 23 Dec because I got the original chart wrong re gold)
net worth asset allocation
the picture is more balanced, though it is overweighted in cash for someone who spends time moaning about profligate government inflation stoking. Howeer, most of it is in a cash ISA and some of the rest is in NS&I index-linked certificates. Some of this is simply the standard personal finance emergency fund at work, but I target much more than the three months running costs standard recommendation. I will run, not walk, to the dooors of NS&I if they offer more RPI linked savings certificates in future.
This doesn’t reflect the value of my house or the nominal value of any of my non-financial investments, because then ‘other’ would eat up most of the clock and compress the categories into a wedge and make it hard to read.
So there it is – an unashamedly opinionated and un-passive investment asset allocation. In the end money is only crystallised power, and I can’t relate to an investment approach that tries to be unemotional, it doesn’t work for me. If I want to project force, then I must couple my values and beliefs to it. That doesn’t mean I have to chop and change on a daily basis – though my views to the future change over time, they don’t swing that dramatically day to day.
Obviously I must accept the imperfect nature of knowledge, and my own awareness and limited skill. It is why I invest in the stock market even though I believe there will be crash mk2 in the years to come, which could wipe me out totally in financial terms. That is why I invest as if the glass is half full, and at the same time as if it is half empty. It’s not just asset classes where you need diversity – it is also in world-views.
Although passive investing doesn’t sing to me, there is one behaviour that goes along with that which I have adopted. It is the Warren Buffett doctrine – buy and then hold. You have to screen for a reasonable price if you do that – the old drip-feeding idea also doesn’t really cut it for me. I want to buy cheap, and then hold, which means I have to sit and simply accumulate cash if I can’t find a suitable opportunity. However, the stock market of the last few years happens to suit my buying phase, particularly where I am chasing income.