20 Oct 2017, 11:02pm
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  • Investing for Brexit

    The Ermine has two retirement resources. One is my DB pension, which is easily enough to live on at the moment – it is deferred for only a couple more years, because the Ermine is grizzled of fur and will reach normal retirement age for most of that pension accrual, some time after Brexit, sadly. But it’s denominated in pounds, and there’s an inflation cap on it. Neither of these had been a particular concern until June 2016.

    The other is my stock market holdings, which are in two ISAs for platform diversification. I hold equities and ETFs with TD Direct, which by a quirk of fate don’t incur platform fees because TD make its money on the buy and sell commission. The ermine is not a source of rich pickings here, as my aim is to never sell in the case of the HYP or a world index ETF. Sadly TD Direct have been bought by iii, and I fell out with them a while ago for stupidly hiking fees in an attempt to make us all churn our portfolios. That good fees fortune may not stand.

    I also hold funds with Charles Stanley, or rather a single fund, the excitingly named B2Q6HW6, which tracks the FTSE World (ex UK) Index. The original aim of this was to lean against the home bias of my HYP.

    Brexit changes the risk balance

    The classic view is a DB pension is steady as she goes, as close to gold as you can get, whereas equities are an exciting but unreliable floozy on the side. Brexit changes that because it is likely to hammer the value of the DB pension in real terms by devaluing the pound. It’s a massive risk to the UK. The rest of the world will probably tootle along just fine. Now it’s entirely possible that the Brexiteers are right and nothing of note will happen, or having flung off the yoke of the EU we will do well. Trouble is, I am very heavily exposed to the UK – the ISA is worth only about half the notional value of the DB pension, so even if it was all in foreign assets I’m more than half exposed to the UK. And what I’ve experienced so far of Brexit is inflation, and we ain’t even left yet. Now on a contrarian basis there’s an argument for buying the UK, but I felt a bit bad writing that last time, and @hosimpson and @Neverland  weren’t sold. No, I can’t really convince myself either. There might be a case to do that if I weren’t in the eye of the storm – a Frenchman could consider a small contrarian punt on the UK, but the trouble is if the  UK goes titsup so does my main pension. I don’t need any increase in UK exposure.

    There are some things I could do with the pension – I could draw it a couple of years early, shovel those years into my ISA. But then I get to pay tax on my SIPP that I haven’t cleared out yet. I could take a pension commencement lump sum, which commutes some of it to cash, and invest that, but the rate isn’t terrific.

    Doing nothing is iffy, I am sitting on half a house worth of cash much of it borrowed from my ISA and a Brexit steamroller coming to pummel the value of that into the ground.

    The Ermine takes a sneak peek behind enemy lines

    Most of what I hear of Brexit boosters comes from the Brextremist wing of the Tory party, for the simple reason that they seem to be doing most of the running these days. I obviously hear the endless barrage of whiny Remoaning, to which I am adding here, but it’s always good to hear other voices. I thought I’d look wider, and in amidst a lot of Googling, I came across these guysI confess that I quite like the cut of their jib on a lot of things, since it appears that I share some of the sovereignty issues 1, though I am nowhere near as worked up about them as they are, and weight the economic hit much greater which explains why I am still a pusillanimous Remoaner.  I also kinda like North’s descripton of blogging as a way to learn 😉

    In the search I came across all sorts fo flotsam and jetsam, I was tickled by this piece by an anti-fangirl of Jacob Rees-Mogg, as a cheerful interlude before we get on to what Peter North thinks Brexit will mean, as led on by the no deal wingnuts. In some ways people who voted Brexit seem almost more pissed off by the mess May and her crew is making than Remainers. At least the latter know they lost the fight.

    The phoenix must burn to emerge

    Bloody hell, and I thought it would be bad, and North is still a fan of the process.

    all JIT export manufacturing will fold inside a year… Across the board we will see prices rising… Britain is about to become a much more expensive pace to live. It will cause a spike in crime…  lot of engineering jobs to be axed since a lot of them are dependent on defence spending. It will kill off a number of parasitic resourcing firms and public sector suppliers. it will wipe out the cosseted lower middle class and remind them that they are just as dispensable as the rest of us. 

    major rationalisation of the NHS and what functions it will perform. It will be more of a skeleton service than ever… a lot of zombie projects will be culled and the things that survive on very slender justifications will fall. We can also expect banks to pull the plug in under-performing businesses. Unemployment will be back to where it was in the 80’s…. Anyone who considers themselves “Just about managing” right now will look upon this time as carefree prosperity. There are going to be a lot of very pissed off people.

    young people actually start doing surprising and reckless things again rather than […] tedious hipsters drinking energy drinks in pop-up cereal bar book shops or whatever it is they do these days. We’ll be back to the days when students had to be frugal and from their resourcefulness manage to produce interesting things and events.

    A few years in and we will then have started to rebuild EU relations […] we are looking at a ten year recession. Nothing ever experienced by those under 50.

    I really recommend you read the whole thing, I like his style, but I think he graduated at the Nietzschean school of dialectic, perhaps with coaching from Tim Gurner regarding da feckless yoof, who seem to have dropped some smashed avocado into his beer at some stage.

    That which does not kill us, makes us stronger.

    Mind you, I need to be careful what I say, I was/am part of the cosseted lower middle class and an engineer to boot, so already up against the wall in his world. He’s saying that the economic fallout from Brexit will blight a third of the amount of life I have left, statistically speaking. The bear case always sounds smarter. 2It’s poles apart from keep calm and carry on, and it’s a more dramatic story. But this narrative of woe comes from a fan of Brexit. Leave alliance has the most cogent takedown of the no-deal it’ll all be OK with WTO rules stance of the wingnuts – it’s not all about the tariffs guys. But in the end it’s for the Brexiteers to sort out what Brexit means, beyond the gnomic tautology of Brexit means Brexit.

    In the time we have left, is there a brace position?

    Foreign assets, basically. That FTSE World (ex UK) Index. There’s not enough time and I don’t have smarts enough to do anything better. It’s the world according to Lars  Kroijer but I get to atone for my seven years of nonchalance in not anticipating that my fellow countrymen would suddenly perform an act of economic hara-kiri with the ex-UK slant.

    I did have a look to see if I could buy that in a L&G ISA to get rid of Charles Stanley’s platform fee but sadly the L&G ISA index funds list doesn’t include the L&G fund I want. Go figure.

    It won’t be enough to compensate, but it may slow the fall a little bit. I will probably have to pay health insurance to make up for the fact the NHS will be eviscerated and life will be a bit more shit in many ways, but we will have taken back control. The same sort of control of the pilot taking a hammer to the autopilot and getting in a flat spin, but goddamn it, it’s his own flat spin till the crunch comes.

    OTOH it may well go all swimmingly, bluebirds will be tweeting and there will be the fine sound of leather against willow on a thousand village greens in the joyful sunlit summers that will come when the foul yoke of the EU superstate is thrown off.

    Fair enough – so what’s the worst that will happen out of my attempt to brace for Brexit if it all goes swimmingly? I will end up with a ISA that is more or less balanced according to the advice of Monevator’s tame ex-hedge fund manager, albeit oddly with the old HYP core. I guess there are worse things that could happen.

    Plus I increase my risk of devaluation due to a stock market crash, since valuations are high, but then I am almost guaranteed another value of cash sort of crash with Brexit, so I’m stuck between a rock and a hard place. A market crash usually comes good in a few years, whereas Brexit looks like it will hammer the pound for a decade – and that’s according to parts of the Brexit camp, they have so little faith in the competence of Her Majesty’s Government to know their arse from their elbow. I need to pay back my ISA from the cash from the house sale, pay this year’s 20k in and get me some Brexit ballsup insurance in the form of foreign assets while the pound is still worth more than a bucket of spit.

    There aren’t any good answers here. Unlike Rees-Mogg and his band of happy Brextremists I am not rich enough to come out of Brexit unscathed. I will go down with it, it’s a question of how much. I need some light relief. Let’s hear some Moggmentum from Madeleina Kay, JRM No 1 fan – not.

    Notes:

    1. I haven’t searched all the Leave Alliance, but I note they don’t really say much about immigration
    2. It seems to be a more general case in more than investing
    16 Oct 2017, 10:47pm
    personal finance rant:
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  • So what does all this Brexit baloney really mean then?

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

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

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

    H.L.Mencken, 1915

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

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

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

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

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

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

    Cats will fight

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

    What does a successful Brexit look like?

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

    It should have been more nuanced – for instance

    Should the UK remain a member of the EU or leave

    Remain a member of the EU

    Leave the EU

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

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

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

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

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

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

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

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

    rich Brexiters fuss about sovereignty, the poor about immigration

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

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

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

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

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

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

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

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

    […]

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

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

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

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

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

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

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

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

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

    The personal finance angle – what to do?

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

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

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

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

     

     

     

    Notes:

    1. A measure of the hypocrisy of the scumbag Hannan and that of Nigel Farage is that they were MEPs sucking at the teat/gravy train of their supposed arch enemy FFS, Hannan since 1999
    2. Attempts to replicate Galt’s Gulch didn’t go very well “Ayn Rand’s Capitalist Paradise Is Now a Greedy Land-Grabbing Shitstorm” for the same reason communism didn’t work – human nature. Better luck with Seasteading, eh, chaps?
    3. I wish I had taken my camera with me, I saw an animation in people quite unlike any election before or since, and the turnout was huge
    12 Jul 2016, 9:49am
    reflections:
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  • Down the rabbit hole

    This is gonzo politics and puzzlement. What goes for normal service will be resumed when the dizziness goes away. I’ve tried to be equally offensive to all sides here, because none of them comes out with great glory.

    I’m wondering if someone’s put LSD in the water supply. It’s less than a month since some of us including me discovered the limits of our filter bubbles. It’s like waking up covered in engineer’s blue with a cow looking at you strangely and surrounded by Swiss guys in lederhosen and thinking “Eh? I only started out last night with three bottles of cider in Croydon”. There’s only one thing to do – invoke the spirit of Yeats

    Turning and turning in the widening gyre
    The falcon cannot hear the falconer;
    Things fall apart; the centre cannot hold;
    Mere anarchy is loosed upon the world,

    Vada a Bordo …Cazzo!

    Where’s Gregorio Falco when you need him? Been less than a month since the referendum and we’ve discovered that Cameron is made of the same stern stuff as Francesco Schettino. Having run the ship aground trying to appease the headbangers in his party that lacked the spine to join UKIP he starts calling for Mummy and abandons his post as the ship is taking on water. We then see a string of effective knifings and backstabbings which end up with the last woman standing allocated the role of top dog, while loathsome Leadsom who asserted having children uniquely qualified her for the top job exits stage left at the eleventh hour, pursued by a bear, the press pack and her own folly of denying the evidence of a tape recorder. Beware the hermeneutic rule about the bullshit before the but, dear lady, you parse such sentences by crossing it all out from the beginning until the t of but…

    Yes. I am sure Theresa will be really sad she doesn’t have children so I don’t want this to be ‘Andrea has children, Theresa hasn’t’ because I think that would be really horrible but genuinely I feel that being a mum means you have a very real stake in the future of our country, a tangible stake. She possibly has nieces, nephews, lots of people, but I have children who are going to have children who will directly be a part of what happens next.”

    1607_mummy2560

    Children – not prohibitive but not necessary and not sufficient to be PM, Andrea

    Reproduction has been done since time immemorial with unskilled labour, and anyway, that’s not why we’d hire you to run the country, though I admire the swift decision to exit the kitchen due to an excess of heat. Next time feel the bloody door for heat before you open it, huh?

    Back to the seminal question of the rabbit hole. Not only did I discover something about my fellow countrymen that I’d rather not have known, but okay, at least that’s opinions and like other parts of the anatomy we’ve all got one. It’s the succession of ghastly putative leaders in quick succession that did my head in:

    the effete narcissist BoJo, motto “think only of yourself” and let the devil take the hindmost

    cut down like a tree by the creepy wierdo Gove, who is apparently clever though he despises expertise in its many forms, frying pan, meet fire,

    Leadsom’s self-immolation would have been entertaining if it hadn’t been for the real possibility of her trying to steer the ship off the rocks, presumably into a watery grave because she mistakes enthusiasm for ability. After all, Angela Merkel is child-free and appears to be a competent head of state, though perhaps not a competent head of the EU finance department… more »

    1 Jul 2016, 12:18pm
    economy personal finance:
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  • Those stock market rises you’re seeing ain’t real, guys

    I am surprised at the nonchalance in the UK personal finance scene about the fall in the pound as a result of the Brexit vote. I am not making a long-term prognosis about whether or not Brexit is a good thing, but what is incontrovertible is that it has led to a sudden drop in the pound relative to other currencies. To avoid the vicissitudes of other countries’ fortunes I am using IMF Special Drawing Rights to compare the pound with. Let’s have a definition

    The value of the SDR is currently based on a basket of four major currencies: the U.S. dollar, euro, the Japanese yen, and pound sterling. The basket will be expanded to include the Chinese renminbi (RMB) as the fifth currency, effective October 1, 2016.

    Since the SDRs include the pound, a fall in the pound slightly devalues the SDRs, so the picture looks slightly better than it really is for a drop in the pound 😉 If you don’t trust those cheese-eating varmints at the IMF you can see the same effect in the good ole United States Dollar down below.

    A fall in the pound relative to other currencies makes us poorer than the rest of the world. We have to exchange more pounds for foreign goods – these foreign goods include most of the food we eat and the fuel we heat our homes with and put in our cars, it’s not academic. Because of lags in the distribution of goods this shows up as higher prices over time, typically over a year. I was a Remain voter so my view is that this change is a strategic impairment of the pound. This is my opinion – it is perfectly possible that the pound will rise over the coming year as the myriad delights of Brexit make themselves manifest in a cornucopia of joy. In that case my thesis is entirely wrong, and it will all come good. If you believe, nay, if you know that to be the case then save yourself the trouble and stop reading this pusillanimous piffle right now.

    Let’s have a fact check – has Brexit made the pound fall?

    1607_xdrytd

    how many IMF SDRs (ticker XDR) for a pound

    I think that’s a yes, so far. Probably about 10% this year. It’s not the only time, we all got a hell of a lot poorer following the financial crisis. Stands to reason, we make jack shit 1 and sell financial services, and the GFC was, well, a global financial crisis. And that’s what most of the services are, I guess.

    We don't really make anything any more. Source is linked to image (fig 8)

    We don’t really make anything any more. Data source is linked to image (fig 8)

    So we took it straight between the eyes

    the 10 year story

    the 10 year story

    Does it matter?

    Well, Britain imports most of its food and fuel, while we focus on being clever whizzes at financial services, Ricardian advantage to the fore, eh. So you get to pay more for that food and fuel compared to people in other countries. However, there have been deflationary effects on these – the oil price has dropped since the GFC for instance. So let’s narrow this to does it matter to investors?

    Well, yeah. Let’s take a look at the price of VWRL in pounds. Hmm, that’s not so bad, it actually went up after Brexit. I managed to buy some in the confusion, so I am feeling chipper, look at me, ain’t I clever?

    VWRL in the GBP I have got

    VWRL in the GBP I have got

    Now if I were an American and had done that after the initial drop, I would be feeling different. Not bad, but no turbo boosters from the falling pound.

    VWRL in the USD I haven't got

    VWRL in the USD I haven’t got

    So the fall in the pound has made foreign assets dearer for me compared to if I were not buying with pounds. While that makes me think whoopee-do when I look at my ISA screen and I think hey, I am a fantastic investor. Not only did I stay the course through Brexit and even buy, I am up on the deal because all the numbers are going up, it also means something else.

    I have lost my compass

    I have lost my main navigational instrument, and my ISA allowance has just fallen by 10% in real terms compared to the rest of the world. So have my tax allowances, and for those rich enough to worry about such things, so has your Lifetime allowance.

    Now one of the cogent arguments against this mattering is

    Some commentators seem to think that there’s both a perfect level for sterling and that they know what it is. I didn’t hear wailing when sterling fell from over $1.70 in 2014 to under $1.50 in 2015. If it ends up at c$1.40 after the current turmoil, so what? No need to sacrifice our first born to Cthulhu just yet.

    Well, I was wailing earlier in the year 😉 There is something up with me, I am much more nervous about the pound than most other people. It scared me in 2009 as I was shovelling money into foreign assets in my AVCs while Mervyn King was printing money and devaluing the pound. So let’s take a butcher’s hook at the GBP against USD (unfortunately I couldn’t find one for IMF SDRs going out that far)

    GBP against USD

    GBP against USD

    This is not a continuous story of success, or even random noise against a mean, and it’s a headwind against UK investment – even against the Euro we are 20% down over the same period. If I’d held exactly the same portfolio as an American investor over those 12 years, I would pat myself on the back because my numbers on my screen would have risen 40% up on his. And I would be lying to myself. The truth lies somewhere in between, and we normally just don’t see that.

    So I’m not saying I know what the perfect level of sterling is. Devaluation of the currency is how governments charge us for the taxes we aren’t prepared to pay for the services we demand, though this last hit can’t be blamed on the government. So while I don’t know what the level should be, I do know that it’s headed in the wrong direction, has been for years, and I’m getting poorer relative to the rest of the world if I hold cash in GBP. We will notice that in higher inflation in the years to come, particularly if the oil price continues to rise in USD. Of course Donald Trump may help us with that in November, though I suspect we may have other problems then.

    It is true that long term adjustments to exchange rates are A Good Thing. It allowed the Greeks to pay themselves more and more and feel good about that while the Drachma depreciated so tourists could still afford to go there and their rice filled vine leaves were cheaper in British supermarkets in Pounds. And then they joined the Euro. Basically floating exchange rates allow you to be lazy bastards collectively relative to the rest of the world and get away with it. If somebody asks you to take a pay cut of 10% there’s hell to pay and rioting on the streets. If you get the same pay and you currency drops by 10% then there’s the same fiscal result but no rioting. Stopping that happening is the original sin behind the Euro, but that’s a fight for a different day. I am still of the opinion that the Euro will blow one day, and we may be glad of our Brexiteering spirit as blood and guts rain down in the aftermath.

    Those stock market rises you’re seeing ain’t real, guys

    And being less productive is what we have all just voted for, but I am surprised at the simplicity of UK investors so being chuffed at their portfolios going up. Now of course that’s a win on having sat on the cash, or worse still, having sold and then rebuying, but do the thought experiment. Say you bought your portfolio with pounds the night of the Referendum. For some reason it bounces, so you issue the same purchase order now. And it’s dearer, so you get to pay more money for the same portfolio. That is Not a Good Thing. When that happens to the price of food, petrol, Starbucks lattes, wine and German cars that won’t be a good thing either.

    Which is why I wince when people celebrate on the rise in the stock market. It’s not real. Indeed, my portfolio is the highest it’s even been. My pension will be worth less, the cash I hold is worth less, yes I am richer in the ISA but poorer is so many other areas. Oh and I am stuck on an island with these guys.

    1607_stuck

    Deep joy. I’m putting a hold on the champagne.

    Notes:

    1. we actually manufacture more in real terms value than we did in the heyday of manufacturing in the 1970s, but do it with far fewer people
    24 Jun 2016, 11:12am
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  • Dude – where are my shares? Brexit across-the-board ISA fail

    An ermine wakes to a new world and it appears I was on the losing side. The good thing is that at least the outcome of the Brexit referendum is clear; a four point lead isn’t handsome but it’s not a knife-edge. So I thought I’d open a bleary eye and perhaps buy some shares with my increasingly worthless pounds. At least I am not afraid of redundancy in the shitstorm to come, and it’s an ill wind and all that. So I whip out my TD ISA, and consider buying, to discover that my six-figure ISA has been looted – evaporated into thin air, pffft – just like that. The robbers only left a little smattering of cash, I ought to be able to buy a bag of peanuts with it on the world markets in a couple of months 😉

    TD ISA FAIL

    TD ISA FAIL

    Bummer. So I yomp over to my Hargeaves Lansdown SIPP, and observe some shocking spreads, see if I can buy. I don’t actually want to buy in a crystallised SIPP cos of tax, but hey, any port in a storm?

    HL - computer says NO

    HL – computer says NO. I’m not actually sure I wanted to buy VMID at that price but it was the first code I could remember and I’ve never bought in HL before.

    We’ll see later on in the day, eh? Update at 10am – TD have given me my shares back. I am amazed at the fightback – I have lost a whopping 3% which is neither here nor there for the market mayhem promised. I mean, for God’s sake, does nobody remember January? The VUKE I bought then is still 5% up, FFS. This could, of course, be because the pound is going down the toilet so fast that the weight of the foreign assets I hold are lifting the numerical picture. This is then an optical illusion – my fellow countrymen have probably made me 25% poorer in real terms. Thanks guys.

    Now that I can trade I bought some VWRL. There’s a race going on here – the little matter of Brexit seems to have frightened the global horses more than I had expected, which makes it cheaper. As you can see it in USD

    VWRL in the USD I haven't got

    VWRL in the USD I haven’t got

    So I bought some in the GBP I have

    VWRL in the GBP I have got

    VWRL in the GBP I have got

    where you can see the pound falling faster than the assets. But to be honest I can’t actually see Brexit being such a huge deal for the rest of the world in the grand scheme of things, and if it’s good enough for Lars Kroijer it’s good enough for me. Yes, I paid more than I would have done yesterday, but then I thought Remain would win. Though I hold a lot of gold just in case 😉

    About the other passengers on the Brexit bus, there’s more of them that I thought…

    UKIP poster for leave says something to me, and I am not sure I like it

    UKIP poster for leave says something to me, and I am not sure it’s a good sign…

    The worst thing about the result is the thought of cocks like Farage and Boris running the country. Still, the will of the people has spoken, a primal scream against globalisation and austerity as well as a FU to the EU. Let’s hope the good people of the British hinterland who voted leave feel a bit more chipper about their jobs and public finances in a year’s time, eh. There were many good arguments to be made on both sides. One of the greatest wins of Leave would be the proletariat not having to support the landed gentry through farming subsides any more, but sadly that was promised away. It seems a curious own goal – the CAP is about 40% of EU spend and ceasing this redistribution of wealth from the poor to the rich would seem an obvious win 😉

    I didn’t like the people on the Leave bus, and it turns out the represent the slight majority of my fellow countrymen. I will investigate if I can get German citizenship by jus sanguinis – sadly it is through the maternal line so although it will help me I am not automatically entitled as it would be had my Dad been German. I was able to easily pass the citizenship test from my general knowledge of the principles of a democracy and a decent guessing of the German character, but my German is not good enough at the moment. I am in no hurry to cease being British, but I would like to see if I can get dual nationality and become a citizen of the EU. Some of the ugliness of the Leave side, in particular the potent racism and xenophobia, makes me a little bit scared about the Britain I will grow old in. I would like to have the option of somewhere to run to 1 should some of the heart of darkness I have seen recently begin to rise – neither of my parents was British by birth. When my mother came to Britain in the late 1950s, she had some trepidation, because of course only a decade before Britain and Germany had been at all-out war. She found 1950s Britain was a kind and tolerant country, and while there was the odd piece of hostility it was far outweighed by the gracious and kind welcome she encountered. I hope this is still part of our national character, because it was not overly apparent in the referendum campaign on either side. In general while there have been remarkable increases in tolerance and acceptance of differing lifestyles in the 60 years since she came, tribalism and incivility seem on the rise in a lot of areas.

    But perhaps I am seeing through a glass darkly; I didn’t get what I voted for. Britain is still a rich country with stupendous natural beauty and I believe a basically decent people. Perhaps they showed more wisdom – after all, I viewed this referendum as running against the tide of history, I would be surprised if in 20 years the EU were the monolithic mass it is now. I would be very surprised if the Euro were still used by as many countries as it is now, indeed if it still existed at all. I am not omniscient – there is heart of darkness enough in Europe, perhaps I will grow to be fond of the English Channel again from the vantage point of Das Inselreich.

     

     

    Notes:

    1. It’s always good to have options, I’m not giving a view on what will happen.
    23 May 2016, 10:57am
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  • Brexit or not – opportunities and hazards?

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

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

    Financial hazards and opportunities

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

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

    1605-gbpxdr

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

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

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

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

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

    Notes:

    1. in which case it’s highly unlikely to be my problem either way
    2. I don’t necessarily agree with all of the Spectator’s conclusion, but it’s a fun description and one by Americans rather than a slightly more balanced way of saying the same by us effete Europeans, which seems right in something that is essentially an American choice
    26 Nov 2014, 7:25pm
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  • I read the news today, oh boy…

    red warning lights are once again flashing on the dashboard of the global economy

    David “I wanna get re-elected” Cameron, G20 junket

    I know some wag said a week is a long time in politics so five years is prehistoric, but I do recall that a certain Mr G Brown tried to get re-elected by scaring the shit out of the proletariat five years ago. The problem is that the hurt of the original global financial crisis/credit crunch was bought off. Some of it was fixed in the aftermath, but when the questions got too hard or it was going to bugger up people’s living standards in some obvious way, the solution seems to be create some more money, whistle a dancing tune and look the other way.

    I'll be back...

    I’ll be back…

    The trouble is that some of these problems have got a bit of the Terminator in them. That’s not good.

    The last two years on the stock market have been tedious IMO, there hasn’t been a decent rumble on the markets since the Summer of Rage 2011. It’s all been frothy and up in the air, and generally what are we all doing up here mate. So far I’m made to with selling my own shares back to myself, drifting my unwrapped shares into my ISA.

    I suppose all the QE had to go somewhere, and propping up share prices and house prices is one way to soak some of it up. The trouble is that there’s fire burning underground in some structural parts of the economy. The 3% p.a  growth of the second half of the 20th century seems to have been a positive anomaly, giving way to soggy growth which seems to be the British expression for secular stagnation. Wonder how Robert Peston feels about having another good recession

    I don’t know if Dave was trying to make us all feel better, because the Bank of England has been loading on the gloom, with Mark Carney who has obviously been watching Humans Need Not Apply, and, well, indicated humans need not apply. It’s a bastard that it’s the humans that are the voters, this ain’t gonna end well, do you bet on the immovable object or the irresistible force? Over to you, Mark, hit it:

    “My personal view is that there will be an increase in self-employment and part-time work relative to history, in part driven by the reality of technology. I think in the end, we won’t go back to historic levels, but that’s my personal assessment. There are some structural changes which are driven as much by technology as any particular policy.”

    Carney added that increasing automation in the workplace was increasing the supply of lower-skilled workers and keeping wages down.

    “The automation of a series of formerly white-collar tasks, the growth in computing power, has a consequence in adjusting the shift of types of jobs. If we’re not careful it will mean more people are competing for lower-skilled jobs as opposed to moving up.”

    Bloody hell. I had actually expected this to take more than just five years, so the Ermine is clearly behind the curve on the whole power-shift from Labour to Capital. Fast-moving world eh, I take a couple of weeks of well deserved rest and the lookout at No 10 and the Bank of England call in the Four Horsemen, and there I was thinking it’d be a generation. Or at least a few years.

    That means there are a lot of pissed-off people about, and often the blame gets placed on furreners. Hence the rise of the island mentality and the quite serious likelihood of Brexit, to add to the litany of external woes and boogeymen Cameron invoked.

    So the Ermine extends a furred paw to investigate my ISA, and mulls this possibility over a mug of tea. Not only has it been hard to find anything worth buying in my ISA but some of my calls of late haven’t done well. Now obviously if I am going to chase things that are bombed out I’m going to be travelling third class. The torygraph had a good graphic of stock market valuations by CAPE. Since they half-inched the graphic from Hargreaves Lansdown I’ll run it too 🙂

    Russia, Greece – good value in some odd places

    If you are going to slap a 10-year moving average on something you will slow your response to real shifts too, but nevertheless CAPE has something to be said for it. So I went and got me some HRUB to go ride with the madcap nutcase Putin. Somewhere you have to try to make sense of the twisted wreckage that lies within that braincase, but on the other hand the index is going for a song. Increasingly so, it seems – I am down 15%. Just as well I managed to miss the 21% fall earlier in the year, eh 😉 Still, that’s the advantage of diversification – I can afford the odd dog. To be honest my old mate Vlad isn’t making the sort of terminal hash of things that got me and my buddy Warren into trouble over at Tesco, Vlad’s got a long way to go to plumb those sorts of depths. But I’m sure he’ll explore more. As sub commander he’s the fellow yelling ‘Dive, Dive’.

    Russia has bad form

    In general, an index doesn’t go bust. But as the WSJ sez anybody with money in the St Petersburg stock exchange would have received diddly squat, even if they lasted the 70 years for the Phoenix-like rise of the MCSI Russia Capped Index

    U.S. Fracking: the Largest Red Herring in the History of Oil

    HRUB is all about oil and gas. Now everybody knows that fracking is going to make oil too cheap to meter, destroying old-skool oil. The West can bring back its military from the troubled Middle East and mind our own business, revelling in the glorious self-sufficient future. Well, the US can, and since they are the only people spending on their military unlike the cheese-eating Europeans so that’s all good.

    Fracked wells seem to run for 2 years and it also seems to be the devil’s own job to make money out of fracking – you can get enough oil out of the ground but turning a profit seems to be a git. Jeremy Grantham of GMO (hat tip to Monevator) has a level-headed summary of the oil issue here, and I pinched the subhead from him. It goes much wider, but fracking is more like tapping short-term storage than finding a new Ghawar field. So I don’t think Russia will have to wait for ever for the oil price to be favourable to them… The main problem with Russia seems to be that all the decent shrinks are in New York, and Vlad is in deep need of expert assistance to let the primal scream or deep historical upset within his mind out in a controlled way that doesn’t involved unnecessary force. Compared to that the other economic problems are probably tractable. But hey, a low CAPE needs a reason.

    Now you can have a low CAPE without the vodka, as Mebane Faber indicated

    You might end up “riding a country down as well as up,” says Cambria Chief Investment Officer Mebane Faber, whose firm this month launched the Cambria Global Value ETF, which invests in countries based on value measures such as long-term P/Es.

    Well, yeah. If you want a smoother ride get a more diversified index fund like VGLS. That’s the trouble with bottom-feeding. It’s bumpy down there.

    Of risks and known unknowns like Brexit

    Anyway, I observe that I still have about £4k to toss into my ISA for this year, but it’s hard to drum up any enthusiasm even VWRL and VGLS are 50% US, and while I’d love to be holding more of the US at the moment I don’t want to be buying it at current valuations. None of the price alerts on real shares I want to get into are near tripping. Apart from TSCO and I got enough of that 😉 However, standing back and looking at the big picture:

    1. some blighter keeps on putting money into my ISA as dividends
    2. TD direct are a Canadian/Dutch operation, so at the moment the Dutch equivalent of FSCS covers some of this
    3. As a result of 1, I have drifted way, way over the FSCS compensation limit in capital value

    Those divi payments come in as itty-bitty lumps – though the invisible hand has contributed a decent whack, with capital growth more, indeed, than I contributed my first full year. I almost have some sympathy for TD direct’s low rent operation, when I look at the transactions in my order list with TD for the last 12 months, there are 59 line items for dividends and 9 purchases, so they are dealing with an awful lot of ratty transactions, for which they benefited about £110 mainly in sales commission. I observe that TD Direct’s FSCS status compensation is a serious mess – to wit

    Compensation Arrangements (see also Appendix E of our Terms of Service)

    Stock held electronically with us is placed in safe custody with a nominee company that has been established for this purpose in accordance with FCA rules. Stock held within the customer’s brokerage account is covered by the FSCS. This means that if we are unable or likely to be unable to pay claims against us, customers can apply to the FSCS for compensation.Cash held within TD Direct Investing is protected as client money and are segregated from firms money. In the event of failure of TDDI then the funds should remain segregated and should be repaid to the client in full. Should any shortfall arise due to discrepancies on distribution then each client will be entitled to make a claim under the FSCS.

    Any claim against the stock and cash will be limited to £50,000 per individual. Further information is available on the FSCS website at www.fscs.org.uk.

    TD Bank NV

    Your eligible deposits with TD Bank N.V. are protected up to a total of 100,000 euro by the Dutch Deposit Protection Scheme and are not protected by the UK Financial Services Compensation Scheme. Any deposits you hold above the 100,000 euro limit are not covered. Further information is available on the De Nederlandsche Bank website at www.dnb.nl/en.

    and heading over to Appendix E

    1411_tdterms

    So that’s all as clear as mud. For my ISA I am covered by the FSCS even for cash, but for the trading account cash balances I am with the Dutch scheme. So I need to ice that TD trading account in the next tax year.

    And I definitely need to open a S&S ISA with someone else next year, and possibly move the excess with TD, possibly to a third operation. Sadly a Brexit is one of those things where it all going titsup at once is something that could be expected. It will also be a time of opportunity, of course. I will make sure that these new ISA platforms are a) not related from a FSCS point of view, and b) are British, since in a Brexit I suspect the EU financial guarantee won’t be worth a huge amount.

    Platform charges

    You have to use a platform to have an ISA 1, and platforms either charge flat-fee or as a percentage of stock value. Over at Monevator they have delved into this, and the crossover point comes at roughly 25-40k. In theory I’d be looking for a couple of flat-fee brokers. However, I am a shares/ETF guy. That gives me some option to reduce costs, because I don’t aim to sell – my transactions per year have already slowed greatly, and many percentage fee platforms charge on fund holdings. TD is one of them – I paid them a platform fee of  £6.86 over the last 12 months despite being well over the crossover point. So I want out of funds, that means for indexing VWRL not VGLS 2. By thinning out funds and favouring ETFs I may not suffer too badly from the RDR platform fee increases.

    Looks like a rough ride ahead

    I’m with Cameron in one way, there may be trouble ahead. That’s not bad for a net buyer 🙂 On behalf of the British people and his voters, however, I really do think that he could steady on with the own goal mini-disasters. There’s enough trouble and fight in the world as it is. And God knows what the political solution to Humans Need Not Apply is going to be. At the moment it seems to be footnotes, but it’s something to be thinking about. If you have a child today, it’s quite possible that they will never find enough work as an adult to buy a house or get control of their life financially unless some of these political challenges are faced. We have had decent growth for a long time that was distributed widely. Carney seems to be of the view that this not going to be the case in the part-time self-employed future. That looks like Squeeze 2.0 ahoy.

    Notes:

    1. one containing more than one line of stock
    2. as a bonus to that it looks like VWRL is a better match to balance a UK-heavy HYP than the UK flavour of VGLS which is UK-biased
     
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