4 May 2015, 3:50pm
living intentionally personal finance:
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  • The ethical investment conundrum

    As an example of living the FI principle, every so often people ask me “what is this investing thing you speak of – isn’t it all just a grand casino”. And I point ’em right over to that Monevator fellow who has done most of the hard work, specifically to the passive investing section. Although for a few pints I will talk the specifics of their situations I try and emphasise it’s all ideas and DYOR and all that – everybody is different ,in philosophy, temperament, risk tolerance and lifestyle. However, there are some things people often miss – a few people at The Firm were pointed at investigating AVCs and some others to consider a SIPP. Pointing people at passive investing is pretty much like buying IBM was in the old days – nobody gets fired for it, though it’s curiously passionless at times.

    And then every so often somebody comes along and throws you a curve-ball – in this case it is Mrs Ermine, who is looking at pension investing, and to date the general answer has been something like Vanguard Lifestrategy 100 – do so for 20 years and you’d expect to get about the amount you put in monthly back. This is because of the 5% SWR limit and ignoring compounding, as a rule of thumb it’ll do. This is part of her pension savings, Mrs Ermine is far more entrepreneurial that I am so some of the assumptions one makes for wage slaves don’t really apply.

    Unlike myself, Mrs Ermine thinks about the wider issues and comes to the conclusion that she wants to invest ethically. This is totally outside my ken. First thoughts are that it obviously reduces the action space somewhat and therefore will intuitively underperform. It also immediately debars you from index funds; you’re becoming an active investor if you decide that fossil fuels are a no-go area, f’rinstance, along with the whole Guardian thing. I know some other PF bloggers have given this some thought – Keeper of the Cauldron on fossil fuels and on wider ethical considerations here. The search for ethical solutions seems to take Cerridwen into racy territory – Abundance crowdfunding strikes me as having a risk profile way ahead of publicly quoted equities and terribly difficult for members of the public to qualify the risk balances.

    A last look at our unscarred friendly skies before flight resume

    A last look at our unscarred friendly skies in April 2010 before flight resume

    Now I have to admit that the cynical me doesn’t see a world of people deciding to leave fossil fuels in the ground unless something cheaper and hopefully less polluting comes along. I only have to see the 4x4s on the school run, listen to the increasing racket of jets in the sky and look at the concomitant scarring of our evenings with vapour trails and how quickly no third Heathrow runway at the start of the Coalition became a firm proposal for one to think that this is the wrong side of the bet, and that’s without the increasing power drain of IT since you’ll only prise smartphones from the cold, dead hands of the addicted consumers. I’d be surprised if this happens in my lifetime, and to be honest, if it does, I think all our investments are going to be written off in such a zero-growth or negative growth world. Capitalism needs growth like a vampire needs fresh virgin blood. It’s perfectly possible to postulate successful zero or low-growth economies, and indeed we seem to be going ex-growth as it is, but they don’t look like industrial consumerism, and they don’t have endless smartphones, city breaks and foreign holidays in them for most people.

    But this isn’t my fight. To invest ethically you have to decide either what is ethical, or conversely what isn’t. At the moment Mrs Ermine is in the latter camp – fossil fuels and industrial agriculture are what she wishes to avoid. It’s probably not exhaustive – indeed one of the issues of ethical anything is that it’s fundamentally difficult to be a blameless consumer if you chase anything to its logical conclusion. One should probably add CAFOs to the list, so Smithfield Foods probably fall into the beyond the pale category as well.

    An Ethical Investor is an Active Investor?

    To my eyes the two go together, although I’d like to hear different. By definition you’re selecting a subset of the investable universe. Now one option would be to be a stock picker, but that’s probably not how Mrs Ermine wants to spend her time, so it’s probably along the lines of this list of ethical funds. Now I don’t do funds unless they’re index funds and the history of non-index funds isn’t illustrious. I observe that Vanguard do offer a couple of socially responsible index screened funds in this list but again, what does that mean? Are there options for ethical investment trusts?

    The investment return is low enough as it is – that 4-5% real return hasn’t got much fat in it. To combine active investment and artificially reducing the investment universe seems to be a tough headwind to fly into. Even in the ITs – take Impax Environmental f’rinstance – over the last 5 years the improvement in NAV seems to have been buried in the -12% discount to NAV.

    The whole thing does my head in and I have no idea where one would start. The Ermine, with the libertarian social bias is not going to be an expert in this sort of thing but hopefully some readers have given this some thought. Am I missing any rich seams of knowledge or obvious goto places for ethical investment at low cost?

    1 May 2015, 11:56am
    economy:
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  • Representation without Taxation

    There’s an election in the offing in Blighty, as it’s been nearly five years since the last one. There’s much hue and cry, although to my eyes less separates the three main parties than there used to, much is about the details and less about the big picture. Some of the big picture stuff is changing, and it’s changing is some pretty rum ways.

    Many years ago, in the 1770s in the reign of good ‘ole King George there was a bunch of uppity upstarts in one of the colonies of the Empire that got all het up about paying tax without any say in how it got spent, and their rallying cry was no taxation without representation. They had a point, and the rest is the history of the United States of America, no longer a colony for over 200 years.

    Now one of the aims of becoming financially independent is of course to minimise taxes. One of the curious twists of fate in Britain is that it’s much easier to do that when you have money – you can influence how much tax you pay by using pensions and by controlling your income. As a wage slave I was always a PAYE employee, so the main option I used was using pensions, but the ways of controlling your income are much greater for the self-employed. In particular paying yourself in limited company dividends can be a lot more attractive that paying yourself in cash income.

    However, a more recent accelerating trend seems to be increasing the personal allowance, which lifts more and more people out of the tax system altogether. Of course they still pay consumption taxes like VAT; another curious twist of fate is that those chasing financial freedom probably pay less of this sort of tax simply because you probably buy less Consumer Stuff.

    From a personal point of view, that’s dandy. And yet I do wonder what will happen as this trend increases, and we have a larger and larger number of people represented in elections but who aren’t personally impacted by the grubby costs of all the jam today we would like. Some of this trend is simply the results of increasing inequality of income and wealth, of course – if the 1% own 99% of the wealth and most of the income then it isn’t surprising that most of the tax revenue comes from a smaller tax base. Although I don’t agree with all of his conclusions, I think the Torygraph’s Jeremy Warner makes an interesting case in his article about the tax and benefits system –

    it also makes the government dangerously reliant on those with increasingly less direct interest in what the money is actually spent on, the more so given the growing focus on pensions, health care and other welfare entitlements. The contributory principle in taxation has all but disappeared. By progressively raising the tax-free allowance, the Coalition has turbo-charged this process of disassociation between revenue providers and users.

    Obviously the Torygraph is there to bang the drum for Wealth, but his case is supported by Mona Chalabi’s brilliant Guardian article that shows that higher rate taxpayers contribute the vast majority of tax revenues, though they are only 15% of the taxpayers by number.

    Contrast this with the situation when the Ermine started work in 1982. Ignoring university infill summer jobs and suchlike, this was my first real job, a junior test engineer lining up electronic sensor heads. I was intrigued to find that after compensating for inflation it paid better than the average wage is now. However, the personal allowance in 1982/83 was shockingly low – £1565, so most of that salary was taxable, and the basic rate of income tax was 30% with an additional ~9% national insurance. The young Ermine paid nearly 40% tax/NI on a higher proportion of his salary at the beginning of this career than the 2006 higher-rate taxpaying Ermine.

    People in those days were much more involved in the costs side of the tax and spend equation than they are now – if the personal allowance goes up to £15,000, which of course I am all for, personally :), then a typical two-person household earning the average UK household income of £27,000 need not pay any tax at all if they both earn roughly half. The whole tax/spend/representation thing is very different to how it used to be. Perhaps the argument is that inequality has gone up and so this is inevitable.

    Inequality has risen since 1982

    Inequality has risen since 1982

    There’s some support for that argument in the change in GINI coefficient since 1982, unfortunately although the figures show inequality has increased I have no feel for how significant a shift from ~33% to ~37% actually is.

    Maybe representation without taxation is just what you get as power shifts from labour to capital. I figure it’s going to lead to some strange places at times. It’s easy to make the case to no taxation without representation. I’m not so sure the other way round won’t have difficult birth pangs of its own…

    28 Apr 2015, 2:03pm
    living intentionally
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  • Caledonian Contemplations and an encounter with the Weasel of the Trees

    An Ermine has been touring Scotland for the last couple of weeks, seeking out wild places and fellow mustelids. It’s been a time of reflection and inqusitiveness – up in the wilds of the north it has been good to get away from the virtual and into the real. I did have a computer to transfer pictures and sounds but connectivity was ratty and very low speed – even the weather forecast was iffy at times. But I got to stay by the side of lovely lakes and see hawks circling over mountainsides.

    Loch Garten, Abernethy forest

    Loch Garten, Abernethy forest

    It surprised me how remote some parts of Scotland still are – I had somehow expected the tentacles of the mobile phone networks and suchlike to have penetrated far more than they did. Because of its open spaces Scotland shares an enlightened approach to wild camping with places like Scandinavia. Most of the interesting places and creatures are in the remoter unenclosed regions, though I am a slack bastard and use a camper van. Campsites often don’t work for me, because they cost more than I typically use in fuel in a day, they cluster around ‘attractions’ and they also often discourage movement between 7pm and 7am – some of the best light and interesting sounds are to be heard in that period.

    Shin falls

    Shin falls

     

    There seems to be an election going on and everyone is talking tactical details and nobody is talking strategy…

    It’s odd hearing the odd snippets after the weather forecast on the radio – with time to reflect it seems increasingly bizarre. The airwaves are full of micromanagement and pork-barrel politics. A lot of energy is being wasted on the micro and not enough focused on the macro. So here’s some of the big picture things an Ermine would like to see getting attention. Most of them seem to theme around a rapid loss of diversity in may ways of organising human affairs:

    Improved communications and lower cost of transportation is decreasing homogeneity and leading to concentrations of people and job opportunities. It’s not what we expected to happen – the idea of the freelancer able to access the world from a laptop in one of those wild places (or even a market town in the north of the country) was part of the early promise. Didn’t work out that way, so we have London with shitloads of jobs and sky-high prices of housing and other cost of living bits, and a lot of the rest of the country bombed out. Is this a problem, and if so is there anything that can be done to alleviate the human suffering?

    Along with the geographic inhomogeneity the improved communications are creating winner-takes-all effects in big parts of life. Internet services – for many people Facebook/twitter ≡ the Internet, and we are losing diversity in many network services not through standardisation but through de-facto sole suppliers and network effects.

    The distribution of money/resources is also becoming more unequal – capital is winning the fight against labour, a little because of globalisation but more largely automation seems to be developing apace. There’s nothing wrong with humans doing less work – it’s a trend that has been going on since the Industrial Revolution. But if fewer and fewer people are getting to keep the spoils of war then it seems a tough deal – what makes them so special apart from being in the right place at the right time.

    Why do we have this Calvinist fetishisation of work as being noble? It’s being used to spoil a lot of little people’s days, because They Must Work It is Good For Their Soul. I can see the problems of money for nothing, but benefit scroungers pale into insignificance compared to welfare for well-funded lobby groups. That seems to be an odd perversion of free market principles in industries like farming and banking. George Monbiot took the battle to the enemy in terms of farming subsidies of £3bn p.a.

    Why do we permit lobbyists at all? Why do we not debar any minister in an department connected with an industry from working in or having worked in that industry for two years either side of their term of office. I get the argument that it’s good to have domain knowledge, but I am reminded of Adam Smith’s observation

    People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices…. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies, much less to render them necessary.

    Never mind the assemblies, let’s keep these dudes out of assembling within the flippin’ government where they get to make the rules to featherbed their conspiracies… Caroline Spelman, she of ex GM lobbyists Cormack Spelman and associates was Environment Minister for a couple of years, obviously there was no conflict of interests.

    The game of tag ‘twixt Greeks and Germans is still going on

    I guess if you’ve been doing something for two years now then why change a winning formula, strange how little seems to have changed over a few weeks, still the same people calling each other names. Oh well. Despite this

    the markets are in serious nose-bleed territory

    UTMT observed this a while back and it’s still going on – indeed having come back I need to get in and sell my CGT limit of The Firm. But what to buy in it’s place. In general WTF is going on, everybody seems to be having a touch of the vapours, even the Russkies aren’t as much down shit street as they used to be. This ain’t real, guys. Has that ugly sucker Putin stopped being nasty to people? Surely not – the twisted wreckage of his psyche would take more than the collected shrinks of New York and California to iron out into something approaching normally convoluted grey matter. This really can’t carry on like this.

    Of legacy, and an odd glimpse of the bizarre inequity of children inheriting wealth…

     

    Loch an Eilein with its castle

    Loch an Eilein with its castle

    Forty years ago I came here as a teenager and took a similar picture of this lovely lake with its enigmatic island topped by a castle, though the teenage Ermine took that picture in the light of the noonday sun because that’s when we were there. It’s in the relict part of the ancient Caledonian forest, and part of the Rothiemurchus Estate. It so happens that the current head honcho, Johnnie Grant, happens to be a decent sort of egg, but I kinda took a double-take with this part of the guidemap.

    Shouldn't that be owned by us for generations, paid for my you?

    Shouldn’t that be owned for generations, paid for by you?

    There’s a teeny bit of sense of entitlement here, Johnnie. Now Britain does have an extensive history of aristocratic ownership of land, and indeed the aristocracy did do a lot to advance knowledge, particularly from the Enlightenment onwards. Charles Darwin was an aristocrat – like an Ermine after 30 years of work, Darwin could afford to pursue his own interests, but he didn’t need the 30 years of work. The British aristocracy were the main body of people who had the time to pursue non-pecuniary interests in those times.

    The conjunction of a lot of this with Britain holding a large empire did throw up some valuable additions to the body of knowledge – the Victorian expeditions around the Empire bringing back specimens are one of the reasons the Natural History Museum is one of the key plant archives of the world and there is such a vibrant gardening and plant-breeding tradition in the UK. Britain also has more veteran trees than typical for this part of Europe, partly because of that tradition. Just as well all this plant collecting came back to an established and fairly robust natural environment and not too many of the alien species caused trouble here, eh 😉 We could have done without Japanese knotweed and grey squirrels, but it didn’t turn out too terribly.

     

    the enigmatci catle on the lake

    the enigmatic castle on the lake

    However, in a different universe, Johnnie could be a hedonistic twat keen on yachts and fine living, in which case the stewardship of the estate could be a very different matter. One of the things that an Ermine occasionally gives thought to is that perhaps I may not run down all my capital – it depends on the kindness with which Fate graces the older Ermine, and to that effect I reflect on where I would want to aim the residue of my estate. One of the things that did concern me in some of the obvious diretcions is that I am not sure that having large tracts of Britain in the hands to the likes of the RSPB and the National Trust would necessarily be kind to future generations of Britons. These would not be my children because I am child-free but despite a common stereotype I do have compassion for the future population of this country, and concentration of ownership is one thing that seems universally bad in human affairs. Until I read Johnnie Grant’s little missive – which brought home to me that I’ve grown up in a Britain where huge parts of the land have been in the ownership of individual families for years – and to be honest I’d rather than conservation charities in charge of these now, because any one of Johnnie’s three kids could be a spendthrift wastrel. There is a lot wrong with charities – in particular how much of the money seems to walk out of the door in executive ‘cos we’re worth it‘ salaries, but there’s even more wrong with ancestral wealth.

    Even Johnnie agreed, when he sold a lot of forest to the Forestry Commission, although that’s not exactly a safe home either. Not only did that incompetent nincompoop Caroline Spelman try and flog this off to the highest bidder until it was halted by the outrage of half a million of the UK’s good men and true.

    a forestry comission landscape

    a forestry commission landscape

    As well as being sell-offable by newbies the Forestry Commission also gives us harsh and blasted moonscapes like this, with their homogeneous monocultures suitable for 25-year clear-felling, compared with the antiquity of some of that ancient Caledonian forest

    Abernethy forest

    Abernethy forest

    So all in all I feel better about the RSPB owning big chunks of the land than the laird. Mind you, the long arm of the aristocracy did make sure that embedded into the Constitution of the RSPB was the following, hamstringing the nascent society from taking a general view of the welfare of birds:

    The Society shall take no part in the question of the killing of game birds and legitimate sport of that character except when such practices have an impact on the Objects.

    Obviously game birds aren’t birds, ‘cos the toffs wanted to carry on blowing the suckers out of the sky when this was enacted in 1957 1. It was okay for the little ladies to set things up to prevent egrets being killed for their white feathers used in the millinery trade, when when it comes to the man’s business of massively breeding game birds and getting your serfs to beat the suckers in the air and shoot one of the many young birds driven into the sky to show what a hard man you are and how skilled a shot you are by aiming somewhere into the air then that’s a different matter and Must Not Be Touched. Thus the RSPB is officially neutral on shooting game birds.

    The aristocracy did historically do some good stuff, but they did also have it in them to treat people like shit. They came to the conclusion it was cheaper to raise sheep in the Highlands. There was one small problem – there were too many people on the land to make this work. One Sheep farmer, Patrick Sellar, delivered himself thusly

    “Lord and Lady Stafford were pleased humanely to order the new arrangement of this country. That the interior should be possessed by Cheviot shepherds, and the people brought down to the coast and placed in lots of less than three acres, sufficient for the maintenance of an industrious family, pinched enough to cause them to turn their attention to the fishing.

    A most benevolent action, to put these barbarous Highlanders into a position where they could better associate together, apply themselves to industry, educate their children, and advance in civilisation.”

    He hard a charming habit of roasting people alive in their houses if they wouldn’t move first. Which is why you see so many abandoned cottages in Sutherland. The time of ancestral wealth and using agricultural land a a store of dynastic capital  is for the chop in the modern world IMO. Indeed, the whole inheritance thang and the way people get het up about it is bizarre. For starters, if you truly love your children and have raised them right then you can give your entire estate to them free of tax – just do it while you are alive and survive seven years – stand by your principles. If you don’t trust the blighters not to turn you out of your ancestral pile when you go ga-ga then a) you should have dragged them up properly and b) why should future generations of Britons be subject the the boot of these ne’er-do-wells just because they were related to you. If you can’t trust them with power why should the rest of us have to deal with them empowered by capital they didn’t earn?

    The current threshold of IHT is also unreasonably and recent-historically high. The aristocracy held a stranglehold on land capital until the wars, when the reforming governments saw that the little people who had been slaughtered in their millions for King and Country did deserve a little bit more of this green and pleasant land than they used to have – for instance the plot of land their small hovels stood on. It still took time – in 1969 my parents bought a house in London. A house, mind you, a suburban semi, not a caravan on wheels, but they didn’t get to buy the land it stood on (freehold possession, in modern parlance). They had to buy it leasehold, because if there’s one thing that old money doesn’t do – it doesn’t sell off the capital, and so many of the houses built in the post war era were sold on long leases of 99 years. Ten years later they took up the opportunity to buy the freehold for about 5k in today’s money, presumably the estate that wanted to hold onto the land was skint due to paying IHT. Inheritance tax was an equitable way of breaking up these historical accumulations of wealth – in the end we all inherit the earth from previous generations and yield it to future ones. Of course what you accumulate through a working life should be inalienably yours 2, but if you believe that you have a problem with Taxes after you’ve succumbed to Death then you’ve not used your time on earth well to familiarise yourself with its ways… The dead really do pay no taxes. It’s your grasping children who will pay the taxes. Since it’s a windfall for them anyway, easy come easy go…

    If you own your house freehold you have IHT to thank for it prising the land rights out of the cold dead hands of the aristocracy gifted it by William the Conqueror 3. What goes around comes around  – what makes your progeny so damned entitled to free money so they can stamp all over their peer group who aren’t so fortunately endowed? If you want to give them your money, show ’em the love – do it when you’re alive and trust to the upstanding personal character you have instilled in them to look after you. You should at least share some of the risk with the rest of us if you want to disadvantage others and featherbed the fruit of your loins beyond the grave.

     An encounter with the Weasel of the Trees and other mustelids

    Not only did I see a fine male Stoat crossing the road on my travels, but thanks to Johnnie Grant’s tree-hugging tendencies I got to say hello to the Tree-Weasel of old – the noble pine marten, once persecuted by gamekeepers (a lot to answer for, these grouse estates!). I can’t claim talented fieldcraft and stalking skills here, I took the easy way out and paid Speyside Wildlife £25 to sit in their pine marten lodge and look for one taking the peanuts laid out for them

    Pine Marten

    Pine Marten

    The trouble with mammals is that many of them are nocturnal, and they have way better senses that we do. I could actually still see in colour to take this picture because they have low floodlighting. It was a tough picture, throwing everything I had – f5.6, ISO 1600 this was still a 1 sec exposure, which is why the picture is so bad. The marten could probably still see the hairs in her fur clearly. So you need edge to see nocturnal mammals, £25 in this case. With badgers thrown in too.

    1504_badge_IMG_3061_lznThe pine marten has an interesting  service to offer us, too. They have a penchant for eating squirrels, but in a curious twist of fate they are a friend of the smaller red squirrel. Pine martens chase squirrels into the trees and follow them along the branches, but the red squirrel can go further out on the branches that can support its lighter weight but not that of the marten. Not so the grey squirrel. As Monbiot describes, once the Irish stopped killing pine martens, the martens have been driving grey squirrels out of the west of Ireland – and now they have hemmed them in east of the Shannon river, and presumably as the martens build their ranks they will eventually drive the greys into the Irish Sea.

    The eternal sunshine of the spotless mind of Owen Paterson

    Owen Paterson, a Tory gent with a penchant for the politics of Enoch Powell, believes shooting greys will be effective. Even allowing for the fact that Owen seems to be a bit on the dim side with an antipathy for science unless it suits his ends (Climate change bad, well, simply non-existent in that spotless mind, culling and shooting good even if it doesn’t work and blame the bloody badgers for moving the goalposts) he’s clearly not been familiarised with r/K selection.

    1504_badger_owenYou have a decent chance of killing off a species that reproduces slowly but occupies its ecological niche at carrying capacity by culling. Pine martens, humans, African big game, yup, you could clear an area of these species that way. Grey squirrels breed twice a year so fall into a r-selection pattern- you need to carpet-bomb the place and then secure the perimeter to be sure of killing off enough of them that they don’t simply renew their ranks. Or set the pine martens on them 😉 The difference between the pine martens and the shooters is that the pine martens keep on coming, whereas the shooting stops when the Government sponsorship runs out, whereupon the skwerls repopulate the joint. Quickly – and you’re back to square one.

    Paterson is a odd fellow, aristocrat by marriage, a chap who when faced with the right answer to something and the wrong answer to it, unflinchingly chooses the wrong answer particularly if it benefits his rich countryside buddies.  For example, this Soviet-style special interest pleading:

    Andrew George (St Ives) (LD): It is, of course, right that public money should be spent on public goods. At a time of severe austerity, what public good is there in spending hundreds of thousands of pounds—indeed, £1 million cheques—on large landowners who do not need the money?

    Mr Paterson: I thank my hon. Friend for that question. The fact is that we are going from 7 billion to 9 billion people. There has been complacency in this country over recent years, because there was unlimited, safe and easily accessible food to be bought abroad. We want to make sure that we have an extremely efficient, high-tech agricultural sector producing food. I take food security extremely seriously and welcome large, efficient farmers.

    Dear Owen, you are so full of shit. Food security may be an issue one day, but the security bit comes to play when the global system is stressed, and in that case we want a resilient and lower-tech system that isn’t all interlinked with just-in-time connections. High-tech food production has massive sprawling inter-country supply chains as evidenced in the horse for beef scandal.

    Alternatively, if we want cheap food then here’s a radical idea. You know that thing called the free market? Howsabout it – get your damned Government pork out of our food system, stop picking bloody winners  like your aristocratic buddies in their huge estates leased out to contract farmers to whom you piss in huge amounts of the proletariat’s VAT taxpayer money as subsides. While proles claiming benefits are of course labelled lowlife scum, the rich storing their ancestral wealth while sucking loudly at the Government teat of ag subsidies is noble policy and an essential bulwark against Britain being starved out of the future, because of course the history of central planning in food production has such an illustrious history, eh?

    Let’s take a look and what this highly complex subsidised high-tech system has brought us in recent years. There’s the whole GM thing which seems to be forced upon us despite European customers being rich enough to say we don’t like the idea of that – a free market without Monsanto and Syngenta etc pulling the strings  would give us the choice in the same way as if you want something without nuts or organic you can go get that, clearly labelled.

    We have horse in our beef, we are all becoming fat bastards and now the WHO tells us that the magic Roundup which is what this whole GM stuff is designed to promote isn’t good for us either. Maybe the place for Government in this area is regulation and monitoring (like when it sez beef it is beef) rather than spraying taxpayer’s cash around to rich people and their buddies to maximise profits, minimise resilience and charge every UK household about £250 p.a. to keep them in the style they’re accustomed to.

    If GM really is more profitable without subsidy, then drop the objections to labelling the stuff as such, FFS, and let the market decide. In the battle between cheap and good, the evidence is overwhelmingly that the punters will go for the cheap.

     

    Notes:

    1. I have never, ever, seen grouse on sale to eat, which would at least be less wasteful of life. I don’t even know if you can eat grouse. The market value of pheasant is low, basically because too much is shot as sport for the demand as food, so a lot of this is wantonly buried
    2. subject to the usual rules of the land and taxation
    3. history buffs will gripe over running roughshod over the details
    30 Mar 2015, 9:31am
    personal finance
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  • Rust never sleeps – 20% inflation in five years

    In March 2010 I wanted to gift my future self a regular income, and came up with a great way of doing it. Every month I would buy a three-year NS&I inflation-linked savings certificate of £500, in three year’s time I would have a three-year steady income of £500 a month. Ideally that would have been more, but I was saving in pension AVCs and  filling ISAs at the same time.

    I only managed to do that twice before NS&I ILSCs disappeared like summer rain – when they briefly reappeared I hit ’em straight between the eyes with the full £15k. The low-maintenance high-security non-taxable inflation-proofing of NS&I is too valuable to waste. These NS&I savings I consider strategic reserves against the unexpected. Because the value isn’t destroyed by inflation these savings are an in emergency break glass sort of thing to the extent that I will borrow money for short-term requirements rather than break into this, because once they’re gone there’s nothing else available that will preserve liquid cash across the years without stupendous amounts of faff. I don’t expect much of cash, I’d just like to find the same amount of value when I come back for it rather than have it melt into the ground.

    Rust never sleeps, they say, but it came as a surprise to me to receive this statement, on a rolled over echo of that first £500

    photoshopped to ice the details

    photoshopped to ice the personal details

    In only five years 20% of the value of that cash has quietly died in the night; it now takes £600 to represent the same value that £500 did in 2010. (Update – Bruce correctly pointed out I missed that ILSCs offered 1% over inflation for the first three years!) It summarises everything that’s wrong with cash – a great medium of exchange but a dreadful store of value. NS&I ILSCs fix the store of value problem, but since debasing the currency is how promises are paid for they aren’t sold any more.

     

    25 Mar 2015, 10:33am
    personal finance rant
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  • how Britain fell back in love with borrowing

    In the Ermine world, people clearing their unsecured debts sounds like A Good Thing in general, after all, when I was growing up there was no unsecured personal debt 1 and people survived, the sun rose each day and they seemed to have fewer financial crises… In the Through the Looking Glass world we have now that’s all bunk. Apparently, more unsecured borrowing is a good-news story. Let’s hear it from PriceWaterhouseCoopers

    Just as daffodils herald the beginning of Spring, it’s a sure sign that people are feeling better about their economic prospects when they dust off their credit cards. […]

    In the five years after 2008 people worked hard to reduce their debts and managed to clear almost a quarter of their unsecured borrowing. But the latest report shows a sudden and sharp return of unsecured lending

    […] In cash terms, that’s more than ever before and a reflection that many people feel more confident about their finances than they have in a while.

    Matthew’s Moronic Money Muppetry

    On the radio I hear such a stupendously moronic statement from a mouth-breather that makes me  ask WTF is going on here? Did I stick shift somewhere and end up on a different planet rather than a different lane?

    The man-child Matthew tells us something at 16:44 that informed me that the fight is futile, the good guys lost and the bad guys won.

    Q: Are you spending money you don’t have:

    Err, yes, people do these days, things are expensive, you have big outgoings, …Christmas, I put things on credit card… then you get into a cycle of just paying the minimum amount…transfer the balance again…hopefully that won’t run out

    I definitely use credit cards to pay for major times like …Christmas… I’ll spread that over the year, won’t be gone by the end of the year…you wanna have a good time, wanna have nice food and things…it’s important for me to keep a good credit score

    Q: when was the last time you were credit free?

    6 or 7 years ago

    Q: is there any end in sight?

    when those interest-free offers run out, and I do pay interest on some things; when that all comes on top of me I will eventually get a loan, and then it will stop..until then it works for me.

    Fundamentally my lifestyle revolves around exceeding my income and I think that’s a normal thing

    There are times that you weep for all the previous life-forms that struggled their way across the geological aeons, the fish that left the sea, and indeed our own human forebears who endured desperate privation to produce the pinnacle of wisdom delivered by Matthew encapsulated in

    Fundamentally my lifestyle revolves around exceeding my income and I think that’s a normal thing

    Live intentionally, Matthew. Christmas should be about gratitude, not spending to make corporations rich

    Go on Matthew

    Go on Matthew. In the unthinking stir-fry that occupies that cranium of yours, ever look at things like this and ask yourself if there’s more to life that rolling over your Christmas consumer debt from year to year?

    Now I know you’re not a fellow who’s given to deep thought on the meaning of life and all that jazz, but Matthew, has it ever occurred to you that the purpose of your life on this sparkling blue planet may not be totally summed up in doing as you’re told and buying shit you can’t afford to make other people rich? Let’s take a look at that Christmas thang, for starters. What is Christmas? Why is it there? Ever thought about that, y’know – why do you want to have a good time, drink yourself stupid on wifebeater and pig out? Let me tell you a story

    more »

    Notes:

    1. this isn’t strictly true, there were ways and means but usually associated with the threat of violence for defaulters. What we know as consumer credit to buy Stuff was regulated hire purchase secured on the goods
    24 Mar 2015, 10:18am
    personal finance:
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  • Diversifying an HYP with a global index

    Most PF savers have a stock market accumulation horizon measured in tens of years. I don’t – I realised I was going to take the expressway out of the world of work because otherwise it would drive me round the bend. I was James, not Pat, in this story of how to be a wage slave and play the game, so I did the celibate monk in a brothel thing, saved up shedloads of money and jumped out of the runaway vehicle of my erstwhile career and let it crash.

    I was dealt a kind hand by the stock market. You didn’t have to be smart in 2009 to do well out of the stock market. You had to get in it, despite everything saying Wrong Way; it wasn’t easy.  I started building a HYP in my ISA in the eye of the storm that was simultaneously terminating my career. On a 4% SWR on my HYP investment capital I can make up the damage done to my pension from quitting early and losing a third of my pension contributions 1. From 55 which is not so far now I can use a short SIPP to give me a DC pension for five years before drawing my main pension at the NRA for The Firm, so no actuarial reduction for 90% of it.

    Nothing comes for free – I had little fun in the last three years of working, and I’ve run down some separate cash for the last two and a half years. Later this year I am probably ready to re-enter the middle class income fray, but hopefully without pissing away my income/wealth on the sort of garbage I used to do when working.  I will spend more, but not at wage slave me levels. There is an interesting perspective from one of the Telegraph’s interviewees about realising a pension that is adequate. I shall never be rich or poor, assuming, of course, that society survives reasonably intact. War and hyperinflation can change that in the blink of an eye, of course…

    The Coffee Can portfolio and HYP Rule #1 – do not sell

    I started off with a HYP because my experience of stocks have shown me  I am a rotten seller – jumpy and fearful, I will bail too early. With an HYP one of the tenets is you don’t have to do that. Over the years I’ve also learned how to benchmark a portfolio. Unitise the sucker – compared to XIRR and all sorts of other ways unitisation is simple, it’s the basis of how mutual funds work except you are the mutual fund manager and, although I don’t decumulate at the moment, it can track how well you are doing as a manager even through decumulation. The instructions are here. My aim is to beat VGLS100, over my investment period and with what I’ve put in over time, because that’s probably what I’d have bought otherwise. So far I’ve done fine. And I don’t have to sell units to derive the 4% SWR income.

    The Ermine is a capricious investor, many would say irrational. I aim to buy in bear markets and when people are rioting in search of decent trainers at a knockdown price (revisionist alternative view that this was a correct response to Not Having Stuff here) and things that people hate. I try and take breaks in times like the last couple of years, just buying my own stuff back tax-wrapped instead of unwrapped. It’s a messy approach. Observing that most of the behavioural biases that clobber my returns are usually on the selling side and taking that out probably helped me.

    bunch of contract notes from two years of my dotcom days

    Two years of my dotcom days. I have a natural tendency to churn ;)

    The Do Not Sell was inspired when I read Robert Kirby’s The Coffee Can Portfolio from 1984 2. That sings to me because my errors were in churning, and here was a way to stop that. I like the standfirst

    You can make more money being passively active than actively passive

    more »

    Notes:

    1. Because of crafty changes made by The Firm to the pension scheme that last third of my working life wasn’t worth a third of the accrual, reducing the amount I had to catch up
    2. the formal reference is DOI: 10.3905/jpm.1984.408988 though I am not educated enough to know what the hell to do with that. A Google Search will be a profitable source of PDFs if you want to read the whole thing
    17 Mar 2015, 12:50pm
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  • Why doesn’t the middle class understand how bad their situation is?

    Matthew – Assets £700k, age 42, two children, SAHM, GSOH. Wants to meet lifetime income of 40k in 2015 terms to enjoy the rest of his life

    So he’s in the plush City offices of independent financial advisers Ermine, Ermine and Ermine Ltd and there’s a gimlet-eyed white mustelid  sitting behind a big leather desk with oak-panelled walls and one of those green banker’s lamps on it.

    Good grief, Matthew. According to the Trinity study a 4% SWR you will get an income of £700,000 /25 = £28,000 1. That’s not that far short of £40,000, so ease off on the consumerism by about 25%, send that SAHM out to work – those kids are 13 and 15 FFS, and then you can have your well earned break. Next!

    Maybe not…

    Let this book tell you a story about the middle classes, Matthew

    It never fails to surprise me how much the so called middle classes haven’t realised just how deep the shit is that they’re in. Matthew is thinking along the right lines – he’s not that far away from the dreaded 45 so he doesn’t want to rely on making shitloads of money as he was. But there are some unfriendly trends happening, which he wants to think about. He could do worse that listen to the story this book I’ve been reading tells him.

    Broke

    Broke

    The first part of the story is told by the physical book and how it came into my possession. It is clearly a fairly new library book – the Ermine is all for library books, because I can educate, inform and entertain myself for free, and not only that, but I don’t have the problem of storing clutter after I’ve read it. And I borrowed this from Suffolk libraries.

    I had to pay £1 for that, because Suffolk Libraries have stopped buying books to a large extent because of cuts. They have been resourceful, and struck a deal with neighbouring county Cambridge. The computer systems can search across both book collections, but as a Suffolk resident I have to pay £1 to borrow from the Cambridge holdings. Now I don’t mind, in the end I can afford to pay the odd £1 to read a book,  but it’s a tiny metaphor for where things are going. One of the reasons Suffolk council had no money is they pay shitloads to their chief executives, step forward Andrea Hill paid £200k to outsource everything, including the libraries. Eventually the charge will rise until it meets the price of alternatives like a Kindle book/secondhand copies on Amazon and then the outsourced operation will go bust. I am pleased to observe we now pay only £150,000 for the head honcho of the council Deborah Cadman, and intrigued by the implied nepotism of her husband getting the job she vacated at St Edmundsbury council. Jobs for the boys, eh? I’m sure it was all above board, and I’m still puzzled why it costs more to run Suffolk than that Cameron chap costs to run the country.

    In itself the degradation of the library service isn’t the sort of thing that will impact Matthew’s finances, but it is a harbinger of tougher times to come. There is another service that is degrading which most of us get to use sometime. The same outsourceing thinking is applied to the NHS as decribed in “Serco grapples with watershed [Suffolk] NHS contract” [and makes a pig’s ear of it]. I would be very surprised if in 10 years time the NHS were free at the point of use, or so degraded that if you were used to the sort of lifestyle Matthew were used to you wouldn’t want to wait. Some of my excessively large emergency fund is set against that sort of thing – and I am so far in good health for my age, but I wouldn’t want to wait months for a hip operation were that necessary in 10 years time, so I would pay for that sort of thing privately (it’s about £12,000). There are some things you can’t buy your way out of at any reasonable price; in the end you gotta go some time and you may be better off saving the money and letting it go.

    I am about a decade older than you, Matthew, so I will die 10 years earlier. You will experience more of this erosion of public services, so you at least need to think about how you are going to buy your way out of it. Not all of your money is going to go on skiing, holidays and paying your children through university. Some of it will go on health insurance. Hopefully Britain will adopt the German or French method of co-payment rather than the ghastly US system which is fantastic for the rich with the best medical care in the world, but keeps frightened wage-slaves pliant to The Man in fear of losing their health insurance. I believe the ‘free at the point of use’ is part of the problem – there should be a small, flat charge for visiting a doctor, similar to the €23 cost for this in France.

    The rich have always lived longer, on average, than the poor. It’s not stupendously surprising, but Matthew would be unwise to ignore the straws in the wind. Like me, but more so 2, he is on the way down, not up in this fight against the 1%. And that’s just the story told by the library charge, the contents of the book will make you blanch, Matthew.

    Let us purview the rest of your situation. Ah, children, it’s the way the modern world really gets to the middle classes. On the upside, there are only two, which is good. You need to be rich or poor to afford more these days, let’s hear it for poster child Shona and the trouble her four got her into. The time will soon come when the middle classes will only be able to afford one child if they want to keep it in the lifestyle they believe they are entitled to. Let us assume that that nice man Mr Miliband gets in, so your eldest goes to university with £6000 p.a. fees, and let us assume a student needs £4000 p.a. for accommodation and beer these days, making a nice round figure of £30,000 for a standard three year course. You need to find twice that because you have two children, which in my book is a knock of £60k, 10% of your capital assets

    The question, of course, has to be is this a useful allocation of capital? After all, invest it and it’s an instant boost of £1200 a year for her for life, sort of inflation protected. It would be a useful deposit on a house, outside London. You have to set this against the tax-like version of student loans  – see MSE’s discourse on this which derisks the financial case if they take the loans. Bearing in mind that there are the twin massive forces of automation and globalisation tearing middle-class jobs out of the economy, there’s a strong case to be made that university is an unaffordable luxury – basically your children will be less able to build wealth by earning money across their lifetime particularly if they want the lifestyle you had, and inherited wealth is possibly much more important. So if if you want to make sure your children have a decent future then:

    • Don’t have too many, because it splits your estate
    • Have them late, because then they will get the inheritance earlier in their lives, (you will die when they are younger) That also helps damage the career of the primary caregiver less.
    • Teach them the values of grit and determination
    • Don’t autopilot on university. A degree was much more valuable in the 1960s and 1970s when <11% of people went, as opposed to 50%. Looking at some of the illogical thinking, rotten grammar and mush written by university-trained intern journalists now compared to the school-leaver journos of yesteryear the Flynn effect is obviously too slow to have made four times as many people academic in the last couple of generations. We’ve simply lowered the bar, which is a git because now employers can’t tell the bright from the dim bulbs and everybody has to pay because there are five times as many students as there were when the taxpayer supported them through university. I personally would like to see the taxpayer support students through university again, but I’d like to see a much lower percentage go, no more than 15% with full grants for tuition. If you can’t pass the exams, well, I guess there’s nothing wrong in paying for a vanity degree…

    Anyway, on to other things

    Rule 1 on page 1 of the book of personal finance is know thyself. Without self-knowledge you are doomed

    Hmm, so you realise you are “quite risk‑averse”, do you, Matthew? Absolutely nothing wrong in that, and indeed holding nearly half a million in cash would seem to support the assertion. I thought I was mad holding more cash than property, but I tip my hat to your good self. And yet on the other hand

    “waiting for a stock markets crash – after which I would dive in”

    Matthew, me old mate, do you have any idea of just how hard that is to do? I did it in 2009, and I had to fight the primitive lizard-brain every inch of the way. Do you know what it feels like to lob cash into a diving market and see yourself lose 25% of it in the next few weeks, and do you know how you have to practically seize one hand with the other to stop selling back out because every part of everything is telling you wrong way, step back, run for the hills, Gateway to Hell and total oblivion this way?

    That is just not something risk-averse people do. Know thyself. Risk averse people need to be sated with the general long-term lift of the market over many years, which is sort of 5% real though there’s good reason to think it may be a bit lower. Passive, index investing is what you need. Spend the time you save on otherwise obsessing about money with your kids, Matthew, the days are long but the years are short. You’ve already missed five-sixths of your eldest daughter’s childhood and two-thirds of the youngest…

    Mr and Mrs Ramsden also want to invest some of the capital in a business venture together. He’s thought about setting up an auction house but Mrs Ramsden plans a tea room.

    People in business are not characteristically risk-averse. Else they wouldn’t do it, given the ghastly odds of 50% failure in the first two years, more so in the restaurant biz. Cripes…

    There’s hope. A word in your shell-like – cut spending

    Unlike some of the other wannabee early retirees, with a bit of  cutting his cloth to match his resources Matthew could do well. He needs to lose that £40k figure – he’s just not that rich. Half of it, however, he do do without breaking a sweat. If he really has had the experience of

    20 years of constantly working hundreds of miles away from his family

    he is probably used to a high-spending lifestyle while away, all on expenses and making up for the rotten nature of that sort of thing. For a few years I worked on a project that involved international travel about once a month, and that was about right, particularly as I was single at the time so I could use the travel opportunities. But even then, all the married colleagues with kids were frazzled and hated it and were always rushing back. If you are doing much more of that you spend loads of money because, fundamentally, you are bored in the downtime – one hotel room looks pretty much like another, you’re too frazzled from long days to do much tourism  and you are looking forward to the weekend. That’s why such jobs pay well, because they’re a little bit shit in the lifestyle department.

    There’s probably room to spend less but live more. I think he can do it. But it’s not a financial makeover he needs. It’s a lifestyle makeover – a what am I doing, what really matters to me, what are the risks and opportunities ahead drains-up. It’s not surprising he wants to downshift after that. He could also do with harmonising these life goals with his wife – after all in five years his children will be adults. If he and his wife want that £40k then maybe they could consider working at a low level, though the way this is going a 20 year gap it’s not going to look good on his wife’s CV.

    As for those IFAs –

    Okay, they agree with the general principles of the Ermine IFA partnership of cynical mustelids. I found the second IFA to be much more on the mark with the fundamental  issues. Matthew’s primary problem is not that he hasn’t got enough money, it is that he doesn’t know himself, so he doesn’t know what he wants. He knows what he doesn’t want, but ‘anything but this’ is a dangerous way to map your path. You’ll struggle in getting from London to Scotland just knowing you need to get out of London. You might end up in Bognor Regis or the Slough Trading estate.

    Word in your shell-like Matthew, one of the aims of life is to know yourself  else you’ll always be a stranger in a pathless land. Some of what he thinks about himself is inconsistent and incompatible. These are not financial conundrums, and some aren’t even solvable by money. There is serious tension between

    • risk averse : buying in a bear market and/or starting a business
    • seeing more of his kids: starting a business
    • featherbedding his kids: retiring early

    Either way, the odds are that his children won’t have the lifestyle he or in particular his wife had. Broke is a long-form story of how that got to be that way. The short form is that the 1% are eating their lunch, they have the firepower and the deep pockets. The halcyon days of the middle classes were when there was limited mobility of capital and labour, and automation hadn’t greatly dented the need for people in running companies and administering things. University for those kids is a chimera  – the vet may need it, and at least the job isn’t outsourceable which is very wise even if she needs 4 years at university but the “I dunno” is case unproven. The world is changing, and it’s not favouring their future in a First World country. Now if they were Indian, or possibly African, the hope of middle class parents might be more likely to be fulfilled.

    It’s an interesting book, Broke. There be trouble up ahead for people with certain kinds of aspirations… Matthew could do worse than read it.

    One fair question to ask is how much of that wedge is inherited, since the BTL he finds such a PITA to run was his Gran’s flat. I’ve charitably made the assumption he’s earned/saved it. If it is inherited, you need very specific and careful skills. The middle class is going to need to learm the characteristics of old money, and if this is ancestral wealth then it’s not his to spend – it is fossil wealth that should be husbanded across the years to benefit his dynastic line, if he wants his children to remain in the middle class. Old money never eats it’s seedcorn.

    “never spend your principal 3

    That’s why it’s old money 😉 You can spend the income it throws off, but the aristocracy holds its capital in trust for its children. Preferably in assets like agricultural land 4, where old money has negotiated tax-free status for its ancestral wealth.

     

    Notes:

    1. The Trinity study was on US stocks and for a 30 year drawdown. Matthew is younger so there are good reasons to suspect he may need more
    2. because he is younger and will see more of the end-game
    3. The child-free can be more relaxed on this
    4. obviously they don’t get their hands dirty farming their estates, they get contract farmers to do that
    12 Mar 2015, 3:03pm
    living intentionally:
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  • Congratulations to Patrick Pichette of Google, 52 (ret)

    The CFO of Google has achieved something that few high earners seem to do. In amongst all the Sturm und Drang of earning shitloads of money as CFO of Google, he heard the faintest sounds of the distant drum at 52, having climbed Kili. In itself that’s not particularly remarkable. What was remarkable, however, is that he took action. He switched the engine into neutral, and planned his glide path out.

    say cheese, guys

    say cheese, guys

    Now the cynical Ermine observes a massive helping of cheese in this pic. Hopefully that photo is a mock-up – it would really, really piss me off to pay all that money and go to all that trouble to find such a ghastly contraption bringing unauthentic consumerism with a Capital C to a natural place. Las Vegas is fine where it is 😉 But if it’s really there, well, it takes all sorts, eh.

    Be that as it may, and even if it’s a publicity stunt to promote the ailing Google Plus system, he’s outlined the fundamental problem. You’ve only got so much time in your life, and it’s running out 24 hours every day.

    His valedictory post has all the usual things the rich retiree wants to do – travel the world, blah blah blah blah. It’s great- each to their own. It reminds me of the things I thought I would do lots of once I had control of my own money and time. And indeed I may still do. All these things are projected outwards, but retiring well is also an inner journey. I am reminded of the words of the Swiss psychologist Carl Jung

    It seems to me that the basic facts of the psyche undergo a very marked alteration in the course of life, so much so that we could almost speak of a psychology of life’s morning and a psychology of its afternoon. As a rule, the life of a young person is characterized by  a general expansion and a striving towards concrete ends; and his neurosis seems mainly to rest on his hesitation or shrinking back from this necessity. But the life of an older person is characterized by a contraction of forces, by the affirmation of what has been achieved, and by the curtailment of further growth. His neurosis comes mainly from his clinging to a youthful attitude which is now out of season….

    Carl Jung, 1929 CW 16, para 75

    Translated into our times, in youth the ego is expands in strength and influence. Although the West has few rites of passage, the ego follows a well-signposted path, projecting and gradually gaining force and influence – job, career, relationships/marriage/kids. All this is promoted and is in the symbols all around us.

    We don’t have many symbols for success after the turning point – look at the ads around you, they are to hang on to youth, to beauty, most commercial symbols of ageing are negative. The ads assume we want to look like we are between 25 and 29.

    I lived some of Carl Jung’s neuroses in my 20s  – the young Ermine lived in a rented room in London, putting salt around the room to keep out the black slugs. I was in a decent job, 25, but I couldn’t buy a house and seemed stuck in all aspects of life other than work. I did finally sort my shit out and make changes. It wasn’t just me – the mid twenties seemed a really tough time for several of my peers too. Maybe it’s a London thing, or Imperial graduates. Maybe it’s birds of a feather sample bias. I have experienced worse lows in life since, but none as protracted. Bollocks to all the ads, I never, ever, want to be mentally again in the place I was in my mid to late 20s. For all the lows and the fortunately modest losses I have so far had since, the highs deepen and colour in with experience. That runs against the narrative of the Western Myth, and it is important to be prepared to surrender some of what was valuable in youth in order to deepen and grow. So far I have found Carl Jung’s map to be more true that that held up to me by the consumer society around me.

    I did not dodge the midlife crisis 1 – arguably the forces that pinged me out of The Firm were stronger because my inner values began to diverge more an more from the values of my younger life. In particular I found it harder and harder to suck it up to The Man’s stupid metrics and bullshit ways – little empires of small desperate people doing what their immediate higher-ups said despite it being often wrong (in engineering terms) or simply against common-sense, nature and experience. The misery of mendacious measurement and metrics enforcing mediocrity and digital Taylorism continues unabated, but at least it isn’t my problem any more. There are some who simply carried on turning the handle, and good luck to ’em. I wanted to determine how I spend my days. And while I probably have the edge on Patrick on some of the inner changes, he has lived more intentionally, choosing to throw the switches of his life in a controlled manner, unlike my uncontrolled derailment from the Work strand of life. So hat tip to Patrick – a great exposition in how to retire well.

    But a word in your shell-like Patrick, from someone else who retired at 52. Remember the question posited by Erich Fromm in To Have or To Be. What you do may matter less than what you become. Much heartache and angst waits for those who listen to the messages from their inner world with the coarse equipment that listened well to the messages from the outer world. We don’t help ourselves with that second half of life by trying to hold on to outdated forms. I liked this article on the adventure inward  – this passage speaks to me

    In youth the ego is expanding in strength and influence. Typically, it follows the well-posted paths of society, perhaps gathering accolades along the way. But at midlife the ego is challenged to become a servant of the larger personality and soul. This is why men often encounter a feminine guide–and women, a masculine guide–in their dreams towards midlife. These figures are manifestations, or symbols, of the soul 2. They invite and would guide us to an understanding of our deeper nature and a more personal spirituality. Thus, we could say that in youth the ego is educated mostly by family and society, at midlife and beyond, by the soul.

    One of the characteristics of the last two and a bit years is that I see that I made far too many simplifications in my model of the world and how it worked, they had served me okay in work and career. But they blinded me to faint signals from within, and also faint signals from the future too. I come to know much more how much I don’t know, and learning from others becomes easier to do but more daunting as I see the further mountains to climb in the search for wisdom.

    To take one example – writing this blog has helped me, both in the obvious way that articulating something makes it clearer and throws light on inconsistencies, but also I have learned from many of readers in the comments – sometimes I have been plain wrong, but all too often there are nuances I may have missed, things I’ve been unaware of and it is always good to refine my mental models closer to the territory.

    In this time I have perhaps focused on the inner journey. Maybe the time will come that I balance this outwards, though I’ll probably pass on Kilimanjaro, a quick google search still gives me the feeling of pumped up consumerism

    If you’ve ever wanted to do something truly amazing, something that’s as far removed from a lazy beach holiday as possible, then Mount Kilimanjaro is calling you! Join the great explorers and mountaineers in scaling Africa’s highest peak, hiking through lush rainforests, alpine deserts and glaciers that have been there forever. With our Kilimanjaro treks, you can take on a challenge and do something awesome in Africa.

    STA travel

    It seems a fave for mid-life crises – a fifty-something I know did it to make himself feel better after a divorce. Good luck to y’all, whatever floats your boat.

    For some reason I’ve focused on the inner journey in the first couple of years, but life has an ebb and flow. Maybe the time for travel and looking outwards is soon to come, to integrate some of the changed perspectives, to play across the strands of life. Patrick’s message is cheering, because it runs against the Calvinist Work is Good for you meme. Work is a means to an end, but it’s also good to know what enough looks like – when to consider a switch from having more to being more. Happy retirement!

    Notes:

    1. I don’t really understand Jung’s chronology he termed the years from c. age 56 to c. 83 the “afternoon of life,” using the analogy of the passage of the sun through the sky from morning to night. This kind of sits ill with the typical allotment of three-score years and ten.
    2. The translation of soul from German into English is hard. It has religious connotations in English which I don’t believe are in the German original
    10 Mar 2015, 9:50pm
    debt personal finance
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  • The cash conundrum

    Cash is a terrible ‘investment’. As far as I’m concerned it isn’t one -though there appears to be one period over which it outperformed the FTSE100 TR. If you were dumb enough to sit on a shedload of cash and invest it all in one go in December 1999 then you’d have been better keeping it as cash for 15 years. Well, yeah, but who saves for a pension in cash over half their working lifetime, chucks it all on red and then goes home? If you are such a soul, you deserved all you get. Most of us save for a pension as we earn, albeit at varying rates through our working lives. In general, if you suddenly have a whacking great lump like that you haven’t earned it, so tough luck if you came into an inheritance in late 1999 and blew it all into the dotcom bust. Easy come, easy go…

    £100, waiting to be turned into booze, Harry Wraggs and Sky TV vouchers

    £100 will remain £100 but won’t be worth £100 as time goes by

    In theory private investors can give up part of their lives to moving cash about between the latest best-buy accounts for years. You’ll be working hard for a lousy return, but at least no volatility.

    Cash is not an investment. It is a mediocre store of value but a great medium of exchange

    At the moment, interest rates are low. There is a lot of grousing about this, which I don’t have a huge amount of fellow-feeling for. I have never regarded cash as an investment. It’s a proxy for a claim on work in the future, and medium of exchange. It is crystallised power. It is symbolism, it is not procreative in itself. It still surprises me when people think they can get a real return on cash.

    The stories your parents told you about saving cash and it growing were largely a lie. They were right that if you add £1 a week you end up with £52 after a year, it grows as you add to it, rather than in and of itself. You still have to work for that. If you want it to grow in value by itself, well, that, indeed, is why you invest. Indeed, the story of the talents I was taught at school is a much more accurate portrayal. If you want your wealth to grow you have to put it to work in doing something. Merely digging it into the ground, sticking it under the mattress or putting it into a bank account isn’t good enough. You can put it to work in the stock market, you can put it to work in a BTL house portfolio, you can put it to work in building a business or buying productive capacity, be that training of yourself or machinery and plant to make better widgets. All of these need skill and judgement calls, and involve some element of risk because what you think should happen doesn’t always happen. There be dragons.

    If you want relative security of cash, it ain’t gonna grow – you will largely be running down your capital in retirement. There’s nothing wrong in that. It is what I am doing at the moment. It is what an annuity does. Everybody panics when they think of not getting an income. They want the security that the number at the bottom doesn’t change without their say-so. Clearly they’ve never read Lady Windermere’s Fan, in which Oscar Wilde summarises the problems of conflating price and value,

    a man who knows the price of everything and the value of nothing

    In doing that they miss that the value of that number slowly degrades with time, but that’s a different story.

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    6 Mar 2015, 7:31pm
    economy personal finance
    by

    30 comments

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  • Working for The Man post 45 is a risky business

    The Man is an unreliable dance parter, the hazard is in relying on working for The Man into middle age. The LA times has a mini series on the shrinking middle class. Unlike the British middle class whinathons and SAHM child benefistas and grizzling journalists that I’ve taken the piss out of earlier these guys are closer to the manufacturing industry end of things, and they seem less culpable than our lot with school fee ambitions for their progeny. All these guys seem to want is a house, two cars and a dog –  one of them sums up the feeling

    The promise that your kids would have a better life than you, with the house, the two cars, the dog and everything else, it’s gone.

    In fairness to the promise it  didn’t go away, it moved eastwards with globalisation. They were probably chuffed with how cheap DVD players and iPhones are these days… But it’s tough to feel good about that when it’s your end of the boat that’s sinking. Two things are common to all their stories:

    They relied on an employer in some form or another. The other is just like me, they failed to lift their eyes to the distant horizons, though they had fewer savings than I had.

    I don’t know the stats for the US, but in the UK most of us work for an employer. Fewer than 10% of us were self-employed when I started work in the early 1980s, rising to 15% in 2014.

    The Man seems to like ’em  25-35…

    You could could be lucky, get all the way to retirement working for him in one form or another. But The Man prefers younger models usually – they’re cheaper, probably more pliable, and in some industries like tech there’s the Zuckerberg doctrine of which more later. For occupations that need some skills he doesn’t like ’em too young, because he can’t see track record, but I’d say late twenties to mid thirties seems to be his favoured the age bracket, old rich favouring the young is not just a dating problem.

    There’s more change in technologies and ways of working now. Pretty much everything a young web designer starting now knows will be hopelessly obsolete in thirty years’ time, and this trend devalues and depreciates skills quicker than before. On the flipside things often improve faster now and we will probably be able to do more with less in those thirty years, whatever the equivalent of the Internet will be then. For consumers and users this isn’t all bad at all. There is a corollary of this.

    Your peak earnings are probably coming earlier in your career than for previous generations

    This is a terribly difficult one to tease out of the statistics. The ONS published this report that seemed to indicate this is true –

    1410_onswages

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