The Full English Accompaniment – Negative interest rates

Life’s turning into a real tough place to earn a return. Lots of talk from the BoE over the last couple of weeks about the potential for negative interest rates in the UK (1, 2). I’m not fully sold on negative interest rates. Japan has been trying it for several years with minimal effect (3). Feels slightly like a last roll of the dice from desperate men. This video from The Plain Bagel has a good explanation of how and why they’re supposed to work (4):

Couple that with NS&I, the last bastion of inflation-beating/equalling interest rates on savings announcing a cut to it’s interest rates, and things aren’t so rosy (5). Premium bond rates are also getting a haircut (6). Can’t really blame NS&I. They were tasked by the government with raising money through national savings. They were so wildly successful their IT systems have failed to keep up (7, 8).

So savings interest is getting chopped, and the stock market is looking bubbly. Speculation and individual stock manias appear to be driving at least a proportion of portfolio returns (9). The sustainability of the current run is debatable. Taken together I have concerns about the viability of my FI plan. There was an interesting article in the Telegraph this week, discussing whether the 4% rule for pensions will stack up in the era of low interest rates and volatile returns (10). Plenty of FI-ers plan using the 4% rule, based upon those ‘long-run averages’, to return necessary FI goal numbers. If we’re heading into a further decade of 1% returns on bonds/ savings, people will have to take more ‘risk’, diversify into property or equities to try and maintain their required 4%. Will house price increases or BTL supply those returns, or will it all come down to bull markets? The future is looking murky, and we continue to live in interesting times.

Have a great week,

The Shrink

P.S. I appear to be particularly miserable/ morbid/ grumpy today, so sorry about that.

News:

• While us wage slaves stay above board, plenty of corruption continues according to leaks to the financial press (11)
• ARM being sold to NVidia, a nail in the UK’s tech coffin (12)
• Potential signs of life found on Venus, I look forward to meeting The Dwellers (13)
• Just in time, as it turns out microfibre plastics are just as bad on land as in water (14)
• Mini-property run- Will Smith is listing the mansion from The Fresh Prince on AirBnB (15)
• And some curiosities from London (16)
• And King’s Lynn (17)

Blogs/ Opinions:

• Weenie has now quietly saved £200k, congratulations! (18)
• I enjoy this cost calculation from Fire Musing on how much they spend on cake and cookies (19)
• Firelite at Path to Life 2 has a late August update for us (20)
• South Wales FI discusses Dividend stocks (21)
• While Money Grower has reasons they like Dividend stocks (22)
• There’s a bit of a meal planning/ prep theme this week, with some suggestions from Sam (23)
• Six reasons to batch cook from Money Mage (24)
• While Much More with Money has a Ration Challenge (25)
• Playing with fire asks whether you could reach your goal sooner abroad (26)
• One Million Journey continues an interview series with FI Educator (27)
• The FI Journey reflects on the new normal (28)
• Indeedably explains money to his kids (29)
• Sassenach Saving muses as they hit 50 (30)
• The DIY Investor UK adds Plug Power to their portfolio (31)
• The Average Money Man reminds us to cut out the financial noise (32) – probably like this post
• Michael at Foxy Monkey discusses beating inflation (33)
• DrFire reflects on the importance of soldiering on (34)
• Banker on Fire on using the 80/20 rule and keeping things simple (35)
• The GFF is considering a house move (36)
• MedFi explains financial flight distance through their own P2P experience (37)
• The IT Investor looks at Worldwide Healthcare Trust (38)
• MouthMoney warns us of the wannabe influencers peddling shite (39)
• Sparklebee reflects on September (40)
• TA considers cash bridging between ISA and pension (41)
• And finally, TI considers the changes 2020 will leave us with in this week’s Weekend Reading (42)

References:

1. https://www.theguardian.com/business/2020/sep/17/bank-of-england-keeps-interest-rates-at-01-but-warns-on-economic-outlook
2. https://www.bbc.co.uk/news/business-54314971
3. https://www.investopedia.com/articles/markets/080716/why-negative-interest-rates-are-still-not-working-japan.asp
4. https://youtu.be/pX3_3NMZa0k
5. https://www.theguardian.com/money/2020/sep/21/nsi-savings-rates-premium-bonds-prizes-direct-saver-investment-account-isas
6. https://www.bbc.co.uk/news/business-54232018
7. https://www.thisismoney.co.uk/money/saving/article-8775437/NS-plunges-meltdown-Delays-rates-tumble.html
8. https://www.thetimes.co.uk/article/ns-amp-i-says-sorry-for-poor-customer-service-as-it-slashes-rates-2bmk7pvsl
9. https://seekingalpha.com/article/4375276-macroview-newton-physics-and-market-bubble
10. https://www.thetimes.co.uk/article/how-low-interest-rates-killed-magic-4-retirement-rule-vbbvvdt3c
11. https://www.theguardian.com/us-news/2020/sep/20/leak-reveals-2tn-of-possibly-corrupt-us-financial-activity
12. https://www.thisismoney.co.uk/money/markets/article-8750989/Nvidia-hits-bid-block-deal-tech-giant-Arm.html
13. http://astrobiology.com/2020/09/phosphine-detected-in-the-atmosphere-of-venus—an-indicator-of-possible-life.html
14. https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0237839
15. https://www.airbnb.co.uk/rooms/44999445?_set_bev_on_new_domain=1600083186_IvH1VwA96IkDx8UK&source_impression_id=p3_1600083186_IFtPoKvH1zXUopRm
16. https://www.winkworth.co.uk/properties/sales/goldhawk-road-shepherds-bush-w12/SHE121014
17. https://www.rightmove.co.uk/property-for-sale/property-83955202.html
18. http://quietlysaving.co.uk/2020/09/15/milestone-reached/
19. https://www.firemusings.org/updated-cost-of-coffee-cake-cookies/
20. https://pathtolife2.com/2020/09/17/financial-independence-update-august-2020/
21. https://southwalesfi.co.uk/2020/09/18/why-dividend-stocks-arent-as-good-as-they-sound/
22. https://moneygrower.co.uk/10000-in-cumulative-dividend-income/
23. https://asimplelifewithsam.com/2020/09/18/ideas-for-meal-planning/
24. https://www.moneymage.net/6-reasons-to-batch-cook/
25. https://www.muchmorewithless.co.uk/ration-challenge-meal-plan/
26. https://playingwithfire.uk/living-and-working-abroad-can-you-get-to-fire-sooner/
27. https://www.onemillionjourney.com/millionaire-interview-series-6-educatorfi/
28. http://thefijourney.co.uk/wp/2020/09/20/project-2235-september-2020-update-a-new-normal/
29. https://indeedably.com/explain-money-to-me/
30. https://sassenachsaving.home.blog/2020/09/26/musings-on-turning-fifty/
31. http://diyinvestoruk.blogspot.com/2020/09/plug-power-portfolio-addition.html
32. https://averagemoneymanagement.wordpress.com/2020/09/25/blocking-out-the-noise/
33. https://www.foxymonkey.com/beat-inflation/
34. https://drfire.co.uk/the-long-tail/
35. https://bankeronfire.com/build-wealth-with-the-80-20-rule
36. https://gentlemansfamilyfinances.wordpress.com/2020/09/19/trading-up/
37. https://medfiblog.wordpress.com/2020/09/24/flight-distance-a-p2p-story/
38. https://www.itinvestor.co.uk/2020/09/worldwide-healthcare-trust/
39. https://www.mouthymoney.co.uk/beware-dodgy-sellers-targeting-wannabe-influencers-to-peddle-rubbish-goods-online/
40. https://sparklebeeblog.wordpress.com/2020/09/23/september-activities/
41. https://monevator.com/should-you-use-cash-to-bridge-the-gap-between-your-isas-and-your-pension/
42. https://monevator.com/weekend-reading-daddy-what-did-you-do-in-the-great-pandemic/