The Full English – Envirobubble

What’s piqued my interest this week?

I’m returning to a couple of last weeks news ‘events’, because they’re rant worthy. First, there was this piece from the Beeb, “Why you have (probably) already bought your last car(1). What a piece of London-centric horse tripe.

The author accepts our incredulity, but goes on to state (1):
“A growing number of tech analysts are predicting that in less than 20 years we’ll all have stopped owning cars, and, what’s more, the internal combustion engine will have been consigned to the dustbin of history.”
So a group of industry-focused early adopters, who likely live in major urban centres, are suggesting that we should all do away with our regular transport. There are some valid points in the article. Electric cars are being widely adopted, are more efficient, simpler mechanically and will change the way people travel. Autonomous self-driving cars are also a great move, they’re safer in theory (watch out insurance services) and the idea of being able to work (or sleep, read etc) while commuting is amazing. I look forward to writing blogpieces at 60/mph on the M5.
The article falls down because it demonstrates a spectacular lack of understanding of anyone who lives outside a place with regular public transport, or who doesn’t work in one place. If you drive for work are you going to use a taxi everywhere? What about couriers, farmers, electricians, plumbers, gas line workers, etc. All of whom are going to multiple sites every day and rely on a vehicle to get them to where they need to be.
The following line grates:
Don’t worry that rural areas will be left out. A vehicle could be parked in every village waiting for your order to come.
Oh, so in my village of 300 people we’re going to only be able to have three or four people travelling at a time? I grew up in a village that size. We had four bus services a day, a 20 minute ride to the nearest town of a few thousand people. How are autonomous taxi services going to be cost-effective in that scenario? If I need to get somewhere I don’t want to wait 20 minutes for the next available taxi to travel over from the nearest town before starting my journey. Uber and public transport may be ubiquitous in the urban centres, but for rural areas the community-minibus remains a lifeline where market forces run out.
The second article I’m returning to is also environmentally focused. Quite a few outlets picked up the story about meat’s huge climate impact (2). Undoubtedly climate change is the biggest global threat currently, outweighing even Trump’s ego. The effect of meat is something we’ve known about for a while, but is rarely brought to the surface or acknowledged by politicians (3). The scare numbers in this story are simple, western meat consumption needs to fall massively, 90% for beef, to prevent a ‘climate breakdown’ (2). The meat produced to fill western diets is resource intensive, wasteful, and with intensive farming is hugely damaging to the environment.
Most of the articles point people towards becoming vegetarian the majority of the time, with meat reserved for special occasions. This is much more the diet that has been eaten historically up to the C19th, when greater wealth and the growth of middle class along with cheap transported or imported meat meant that the treat could become everyday. Since then the ‘meat and two veg’ has become ingrained in western culture. A culture we are exporting worldwide. Just look at how John on GBBO struggled with vegan food to see how deep that culture runs. Practically therefore changing our culture so everyone only eats meat once a week is going to be bloody hard. Try being the politician selling that song to your community hall.
Thankfully, I think market forces will come into play. Meat is expensive to produce. We recently started getting monthly boxes from a butcher, where they track all of our meat from their farm to my fridge. They upload monthly video updates from the farms on the animals. I pay for this premium. I know I’m getting meat from well-cared for animals, produced in a sustainable(ish) manner. The meat going into your McNuggets is not going to be grown to that standard. As the demand for a western diet rich in meat spreads, and supply struggles to meet (groan) demand, prices will go up.
Companies working to exploit this rise in price are already positioning themselves. Lab-grown meat is coming. Many of the start-ups have big backers, and are positioning themselves for high end consumers (4). It is effective proof-of-concept to those who will set trends (5). Theoretically lab-grown meat should have lower overheads and be cheaper to produce. It will lack the subtlety of the 28-day hung Aberdeen Angus, but it’ll do for your 99p McNuggets. I look forward to my ChickieNobs and conversations with MaddAddam.
Have a great weekend,
The Shrink
N.B. I’m off grid and on holiday for the next three weeks, so no more updates until Mid-November. Happy Halloween all!
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

The Book of Dust – Philip Pullman

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.bbc.co.uk/news/business-45786690
  2. https://www.theguardian.com/environment/2018/oct/10/huge-reduction-in-meat-eating-essential-to-avoid-climate-breakdown
  3. https://www.bbc.co.uk/news/science-environment-45838997
  4. https://www.wsj.com/articles/is-lab-grown-meat-ready-for-dinner-1539701100
  5. https://www.scientificamerican.com/article/lab-grown-meat/
  6. http://www.bbc.co.uk/news/business-45859722
  7. http://www.bbc.co.uk/news/business-45860769
  8. http://www.bbc.co.uk/news/business-45858107
  9. https://edition.cnn.com/2018/10/11/tech/facebook-stock-dip/index.html
  10. https://www.bbc.co.uk/news/business-45875599
  11. https://www.bbc.co.uk/news/business-45886791
  12. https://www.theguardian.com/technology/2018/oct/14/dont-believe-world-bank-robots-inequality-growth
  13. http://www.thefrugalcottage.com/dividend-income-september-2018/
  14. https://tuppennysfireplace.com/living-a-simple-life-inspiration/
  15. https://tuppennysfireplace.com/things-we-cut-food-shopping-list/
  16. https://simplelivingsomerset.wordpress.com/2018/10/16/what-colour-is-your-parachute/
  17. https://drfire.co.uk/million-pound-question/
  18. https://inspiringlifedesign.com/posts/what-would-you-do-if-you-were-given-1-million.html
  19. https://earlyretirementplanning.wordpress.com/2018/10/12/what-would-you-do-if-you-got-given-1-million/
  20. https://mydebtdiary.info/2018/10/17/my-goals-update-for-october-2018/
  21. http://www.msziyou.com/my-anti-monetisation-manifesto/
  22. http://www.msziyou.com/quietly-saving/
  23. http://quietlysaving.co.uk/2018/10/19/i-just-got-paid/
  24. https://indeedably.com/asset-allocation/
  25. https://indeedably.com/cashless-payments-disrupted-busking/
  26. https://indeedably.com/emergency/
  27. https://gentlemansfamilyfinances.wordpress.com/2018/10/11/pay-less-into-your-pension-to-retire-early/
  28. https://www.theguardian.com/business/nils-pratley-on-finance/2018/oct/18/the-fed-is-ignoring-trump-it-knows-this-is-a-fight-he-cannot-win
  29. https://youngfiguy.com/mr-yfgs-backstory/
  30. http://diyinvestoruk.blogspot.com/2018/10/inflation-and-state-pension-increase.html
  31. http://diyinvestoruk.blogspot.com/2018/10/impax-environmental-markets-new-purchase.html
  32. http://monevator.com/an-ethical-quandary/
  33. http://monevator.com/what-did-low-us-treasury-yields-ever-do-for-us-anyway/
  34. https://ofdollarsanddata.com/what-is-your-financial-tipping-point/
  35. https://www.ukvalueinvestor.com/2018/10/portfolio-review-2018-q3.html/
  36. https://agentsoffield.com/2018/10/14/jobs-to-do-this-month/
  37. https://twothirstygardeners.co.uk/2018/10/how-to-make-beetroot-chutney/

 

 

 

 

 

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Quarterly Returns Q3 2018 – Goal-scoring accuracy

Quarterly return posts supplement my monthly Financial Dashboard, covering investments in detail and looking at my yearly targets. Here I track purchases and sales, document progress against my (in progress) investment strategy, and discuss re-balancing and changes over time.

Q3 Returns:

Net worth Q3

Getting married and moving house were fantastic experiences, the peak of our year in a summer that will be remembered for sun, but they would not please Mr Scrooge. Rough sums suggest we spent around £15,000 on our wedding, half the national average of £30,355 (1). The actual figures in my spreadsheet are less, but some things like the price of MrsShrink’s wedding dress I’m just not allowed to know! About a 1/3rd of the costs were paid for or made by family. Like Mr & Mrs YFG at some point I’ll probably relate how we kept our wedding cheap (2). Moving house cost another £~5k through stamp duty and solicitors fees though this didn’t come out of our bank accounts. We safely avoided a painful potential £8k early repayment charge on our mortgage. We saw the £~5k cost through loss in our net worth as it was paid out of the equity in our previous property.

We’ve spent another £4,240 to date renovating the house, with new fixtures, fittings and soft furnishings throughout. This was mainly materials (and bloody curtains) as I can turn my hand to most DIY, and MrsShrink is a dab hand with a paintbrush. We did spend £1400 on plumbing work, but I’ll detail all when I get round to writing a property renovation post. The majority of the work is now done, with just a chimney cap rebuild (Jan 2019), new bathroom (~Q3 2019) and new kitchen to go (2020ish). My net worth has gradually increased during these months, but at a slow old rate. Current investment assets stand at:

  • Cash Savings Accounts £1000 (+£600)
  • Investments £0
  • Cars £3000

I am starting to value my books and art. I’ve accumulated a number of first-editions over the years, and a few original pieces of artwork by famous illustrators. I may keep this ‘off the books’, but interesting to know as a fallback.

Yearly Targets:

Goal 1: Build an emergency fund.

As per the r/UKpersonalfinance flow chart, I’m working towards building an emergency fund (3).

We currently have a month’s outgoings in our joint account (some of this will be eroded by our honeymoon), and I’ve another months parked in my savings account. MrsShrink and I will aim to build six months worth of our combined household expenses held across multiple high-interest current accounts. We’ll maximise the returns on this using the bank account savings website (4).

Goal 2: Pay off debts

At the start of Q3 my short term debts were £1.25k to family and £4.1k on 0% interest credit cards. We’ve talked with the family member who lent us the money, who doesn’t want it back until next year. I’ve instead focused on my credit card debt, which now stands at £3.6k. Some expensive exams and unexpected work costs haven’t helped. In future this will be budgeted for, with the emergency fund just in case. I still need to close my two redundant accounts, which currently prop up my credit score (as % of total credit used is low). As TI says over on Monevator, I’ve been borrowing from my future self (5). Following the good advice, I’ve been selling unwanted items to try and clear this further. I’m also planning to increase my monthly credit card payments from £250/month to £350/month to clear it earlier

Goal 3: Reduce superfluous outgoings.

Some serious differences been made here. The major influence has been that we’re no longer paying rent in one city where we live and mortgage on another home we never see. This has seen our monthly outgoings drop by at least £600/month. I’ve also made progress on my own personal spending, cutting down to a monthly budget. We’ve got further to go on our household grocery expenses, and on my hobbies, but all progress.

Goal 4: Commence investing!

This was the target for Q3, but I now recognise this was a little naive. As mentioned in this week’s Full English I’ve been watching the market ‘turbulence’ with interest. The argument that the earlier you invest the better is strong, and I’m well aware of the benefits of dollar-cost averaging (6, 7). Then there’s AWOCS’ tale of Bob, the world’s worst market timer (8). I’m uncomfortable commencing investing whilst my short-term debts, particularly my credit cards, exceed my liquid cash. Therefore the aim is to complete my investment strategy statement this quarter.

I’ll check in again in three months and see how things are getting on.

References

  1. https://www.independent.co.uk/life-style/love-sex/wedding-cost-uk-average-how-much-marriage-ceremony-bridebook-a8460451.html
  2. https://youngfiguy.com/our-unconventional-and-cheap-wedding/
  3. https://www.reddit.com/r/UKPersonalFinance/
  4. https://www.bankaccountsavings.co.uk/
  5. http://monevator.com/why-you-must-get-out-and-stay-out-of-debt/
  6. http://uk.businessinsider.com/compound-interest-retirement-funds-2014-3
  7. https://www.investopedia.com/terms/d/dollarcostaveraging.asp
  8. https://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

The Full English – Are we nearly there yet?

What’s piqued my interest this week?
Caution, monster link-fest ahead. 
Well this has been a busy old week in the markets, eh? The FTSE sunk off the back of US losses, due in part to rising Federal Reserve interest rates (fuelling a drop in bond returns, therefore loss in confidence, therefore sell-off), and losses on tech stocks, particularly the FANG lot (1).
Lots of our compatriots have seen a slide… Monevator  FirevLondon, RIT (2, 3). This is all excellent fodder for the press, who have called it everything from a correction, turbulence, to a “global market MELTDOWN, the beginning of the next CRASH” (4, 5). Hyperbole so ballistic SpaceX will be after the patents. And to be fair, lots of people have been voicing that we’re in the late stages of a bull market and we should be expecting a recession imminently. It only takes one person to yell fire to start a stampede.
Look past the press, noise and short-term numbers and see that actually, big down days aren’t that uncommon. The US blogs A Wealth of Common Sense and the Irrelevant Investor both had some excellent posts on this (6, 7, 8). Shamelessly stealing their graphs and tables, this was the 20th -3% day on the S&P 500 since the end of the 2008 bear, however 80% of 3+% down days were in a sell-off/ recession.
What does this tell us? You can’t predict the future, especially looking at just one measure, and if you’re well diversified and holding long term it shouldn’t matter. And will we even see a ‘great crash’? People are jumping on index investing in ever greater numbers, spurred on by pieces like this weekends NYT article (9).  This is supported by the Morningstar Barometer continuing to show passive beating active returns over the past 10 years (10, 11). Ten years of passive investors watching an incoming tide lifting all boats has had people warning of the end of active investing (12). Passive ETFs had grown to an estimated 35% market share by 2017 (13). I couldn’t unearth more recent figures, but it seems reasonable that this will have grown in the last year. Even the great Bogle was warning of danger. But if 35%+ of the market is in trackers which move with the market, what effect will this have on when the market moves? If all the trackers are holding, or at least slow in their re-balancing, theoretically it should create an undercurrent of stability within the market, mitigating investor psychological panic moves. Additionally, for us Brits, Brexit has introduced such a level of uncertainty into the UK economy that perhaps people have been holding off while across the pond they’ve continued to make hay. I bloody love YFG’s post this week on this very topic (14).
It’s also worth remembering many young investors (me, etc) have no experience of big down days and drops. I was doing my best to get horizontal at pound-a-pint student nights during the last recession. Woohoo, cheap beer! And as someone with a lifetime of saving ahead, I should be praying for a recession (15). I’m sitting tight at the moment. In my Q2 goals it was a target, but this was naive. Had I stuck all my money in Wolf Minerals as I planned when I was first starting out, I’d be buggered (16). Instead I’m going to continue building my emergency fund in cash, set a solid plan and keep a finger in the air to see which way the wind is blowing. To mix metaphors, I’m going to get myself fully shipshape before bracing any storm.
If there is a storm. Howdy Callum!
Have a great weekend,
The Shrink
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Smashed through The Windup Girl in a week, fantastic atmosphere but a bit of a damp squib in the end. On to… The Book of Dust – Philip Pullman

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/2018/oct/11/why-are-stock-markets-falling-and-how-far-will-they-go
  2. http://monevator.com/weekend-reading-looking-down-when-the-tide-goes-out/
  3. http://www.retirementinvestingtoday.com/2018/10/2018-quarter-3-review-readying-for-fire.html
  4. https://www.theguardian.com/business/2018/oct/12/ftse-100-falls-to-six-month-low-amid-fears-over-us-interest-rates
  5. https://www.express.co.uk/finance/city/1030145/global-markets-meltdown-equity-financial-crash-why-global-markets-are-down-today
  6. https://awealthofcommonsense.com/2018/10/big-down-days/
  7. https://theirrelevantinvestor.com/2018/10/10/u-g-l-y/
  8. https://theirrelevantinvestor.com/2018/10/09/a-bullish-washout/
  9. https://www.nytimes.com/2018/10/12/business/index-fund-investors-simpler-approach-may-enrich-returns.html
  10. https://www.fnlondon.com/articles/passive-beat-active-over-the-past-decade-finds-morningstar-20181001
  11. https://www.moneyobserver.com/news/active-funds-have-underperformed-passive-all-two-sectors
  12. https://bit.ly/2CJjgNY
  13. https://www.forbes.com/sites/greatspeculations/2018/09/19/are-we-headed-for-a-passive-index-meltdown/#137fbde4413e
  14. https://youngfiguy.com/brexit-and-finance/
  15. https://awealthofcommonsense.com/2018/10/who-benefits-from-a-market-correction/
  16. https://www.bbc.co.uk/news/uk-england-devon-45812974
  17. https://www.bbc.co.uk/news/business-45854817
  18. https://www.bbc.co.uk/news/uk-england-bristol-45770028
  19. https://www.theguardian.com/environment/2018/oct/10/huge-reduction-in-meat-eating-essential-to-avoid-climate-breakdown
  20. https://on.ft.com/2PrHbnT
  21. https://metro.co.uk/2018/10/11/wh-smith-to-start-closing-stores-as-it-struggles-on-the-high-street-8027099/
  22. https://www.bbc.co.uk/news/business-45822650
  23. https://www.independent.co.uk/news/business/news/rbs-savings-account-best-interest-rate-goldman-sachs-a8578996.html
  24. https://www.theguardian.com/business/2018/oct/11/brexit-uncertainty-taking-toll-property-market-rics-research
  25. https://www.theguardian.com/business/2018/oct/11/profits-slide-at-big-six-energy-firms-as-14m-customers-switch
  26. https://www.moneywise.co.uk/news/2018-10-08/chancellor-philip-hammond-planning-to-cut-pension-tax-relief-the-autumn-budget
  27. https://www.theguardian.com/money/2018/oct/13/uk-millennials-costs-eu-pay-rent-transport-grocery-revolut
  28. https://www.bbc.co.uk/news/health-45750384
  29. https://www.bbc.co.uk/news/business-45786690
  30. http://thefirestarter.co.uk/september-income-expenses-report-up-and-running/
  31. https://deliberatelivinguk.wordpress.com/2018/10/05/september-2018-review/
  32. http://www.mrmoneymustache.com/2018/10/05/the-fire-movement/
  33. http://monevator.com/preparing-to-take-a-retirement-income/
  34. http://monevator.com/ratesetter-high-interest-offer/
  35. https://youngfiguy.com/financial-independence-and-dieting/
  36. https://thesavingninja.com/what-would-you-do-if-you-got-given-1-million/
  37. http://www.msziyou.com/if-i-won-1m-tomorrow/
  38. http://thefirestarter.co.uk/the-million-pound-question/
  39. https://indeedably.com/million-pound-question/
  40. https://theirrelevantinvestor.com/2018/10/08/built-to-break/
  41. https://awealthofcommonsense.com/2018/10/the-case-for-bonds/
  42. http://diyinvestoruk.blogspot.com/2018/10/climate-changebe-change.html
  43. https://www.morningstar.com/blog/2018/10/01/low-carbon-economy.html
  44. https://indeedably.com/accountability-cant-be-outsourced/
  45. https://theescapeartist.me/2018/10/09/get-rich-with-hobbies/
  46. http://ukfipod.space/004/
  47. https://www.theguardian.com/money/2018/oct/13/because-of-my-upbringing-ive-always-been-careful-with-money
  48. https://www.ukvalueinvestor.com/2018/10/hargreaves-lansdown-dividend-yield.html/
  49. https://www.jackwallington.com/allotment-month-34-happy-herbal-apple-disaster-persistent-prairie/
  50. https://sharpenyourspades.com/2018/10/11/love-garlic-then-you-have-to-grow-your-own/
  51. https://lifeatno27.com/2018/10/01/spuds-gluts-and-deliciousness/

The Full English – The Decline of the Middle-Class Brand

I referenced a Nil’s Pratley opinion piece in the Guardian on Tesco’s new budget store, Jack’s, last weekend. I’m returning to it as the comments are worth a look on their own. In amongst them is this pearl of wisdom.

What Aldi/Lidl are doing well is taping into the change in incomes and what “middle class” means now and that, basically, people aren’t really middle class.

We have a much smaller genuine middle class (2 holidays a year, 1 skiing, then 2 weeks in the sun over seas, new cars that they own, large house with minimal debts…) than we used to have and now there’s really just a much larger upper working/lower middle class who like to think that they can live the life but know that they really cant so actually need shops like Aldi and Lidl so that they can buy wine (as they can’t afford to from Majestic or whomever where it’s bought by the case, as a real middle class person would) and meat that they can claim is fancy still (not from a proper butcher, like real middle class would) to pretend that they are living well, but at a cheap price. (1)

Spelling errors aside, this observation is interesting. Is the middle class ‘brand’ sliding down as a consequence of aspirational executive types? I’ve noticed this amongst car manufacturers in my little hobby. The old executive companies; Mercedes, Audi, BMW etc, now produce small bland euro-boxes starting at very reasonable prices on solid finance deals. One argument is that this is a consequence of EU directives dictating all manufacturers reach a certain efficiency target. Others would say it’s good business sense, as the aspirational lower middle classes want ‘the brand’ and therefore will pay slightly more for a comparative bland euroboxcar with a three-pointed star than one from a Korean microwave manufacturer. That’ll be the (demise of) Daewoo (2, 3)?

Extend this line of logic out to supermarkets, and Aldi/ Lidl allows people to feel they lead a middle-class lifestyle; the food is more affordable so a bottle of wine, halloumi, olives and smashed avocado on toast dahling is less of a luxury item. The treats associated with middle class life can be every day. And to be fair, I’ve seen Bentleys being filled up with the weekly shop at Aldi, because you don’t stay rich buying Waitrose essential vermicelli nests (4, 5).

So if the lower middle-class have decided that Lidl and Aldi’s budget kale smoothies are a taste of the good life, where are the upper middle-class off to? The trendy local deli and the Riverford food box, or the organic inner-city farming co-operative (I regret nothing)? The hotly anticipated pop-up keralan-fusion van? Some other half-cooked, over-spiced ‘superfood’ containing slop cooked by an unwashed fake-prison-tattoo-sporting manbun-topped ‘entrepreneur’?

It seems they’re actually off to buy something of quality. Because that’s what they’ve always done. That’s what brands used to mean. There’s an excellent anecdote about the demise of Rover from when they were owned by BMW in the 90s. When BMW built seriously well-engineered cars (the same ones that can now be found drifting round empty retail car parks at night). The story goes that engineers were discussing a part at a meeting in Germany, and the question around the table was “How can we make this better?”. Those same engineers came back to Rover in Birmingham and were asked “How can we make this cheaper?”.

And now everyone is asking, “How can we make this cheaper?”, to squeeze every inch of profit from the ‘Brand’. But that’s not sustainable, because cheaper quite often means poorer quality, and engineered obsolescence and throwaway white-goods don’t fit with the fashionable sustainable movement. See the rise in repair cafe’s as an example (6). Miele may not be in every home on the rabbit-hutch new estates with financed-Mercs on the drive and 0%-interest Samsung american fridge-freezer in the kitchen, but it maintains it’s market share because it sells solid products. And you can buy spare parts and have them repaired. And they last 10 years.

How the hell does this relate to Jack’s? Lidl and Aldi buck the trend. They’re not focused on brand, they’re focused on reasonable quality for a value price. Tesco bosses also have to learn that lesson, and not sell Jack’s as a budget brand. Brands are dead. Long-live quality without a badge.

Have a great weekend,

The Shrink

Side Orders
Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

The Windup Girl by Paolo Bacigalupi – Fantastic world building in this dystopian Hugo & Nebula award winner.

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks#comment-120594908
  2. https://worldview.stratfor.com/article/daewoo-motors-demise
  3. https://www.economist.com/business/1999/08/19/the-death-of-daewoo
  4. https://www.buzzfeed.com/floperry/sesame-and-poppy-seed-thins
  5. https://thetab.com/uk/2017/08/10/a-definitive-list-of-the-most-un-essential-items-from-the-waitrose-essential-range-45294
  6. https://www.theguardian.com/world/2018/mar/15/can-we-fix-it-the-repair-cafes-waging-war-on-throwaway-culture
  7. https://www.bbc.co.uk/news/business-45714224
  8. https://www.theguardian.com/technology/2018/oct/04/elon-musk-sec-twitter
  9. https://www.bbc.co.uk/news/business-45744552
  10. https://www.bbc.co.uk/news/business-45757437
  11. https://www.theguardian.com/business/2018/oct/05/uk-house-prices-fell-sharply-in-september-amid-brexit-wariness
  12. https://www.theguardian.com/business/2018/oct/05/man-who-got-swagger-back-for-aston-martin-is-ready-for-long-game-stock-market
  13. https://www.theguardian.com/business/2018/oct/05/unilever-scraps-plan-move-london-rotterdam-uk-netherlands
  14. https://www.youtube.com/watch?v=GxLw_wHOMGY
  15. http://quietlysaving.co.uk/2018/09/30/september-2018-plus-other-update/
  16. https://simplelivingsomerset.wordpress.com/2018/09/27/fire-in-the-news-liar-liar-pants-on-fire/
  17. https://theescapeartist.me/2018/10/02/wired-for-financial-independence-an-immigrants-story/
  18. http://monevator.com/weekend-reading-financial-independence-against-the-odds/
  19. http://monevator.com/the-slow-and-steady-passive-portfolio-update-q3-2018/
  20. https://www.ukvalueinvestor.com/2018/09/are-investors-overpaying-for-diageo.html/
  21. https://awealthofcommonsense.com/2018/09/what-if-stocks-dont-crash/
  22. https://www.morningstar.com/articles/883860/so-much-for-the-bond-bubble.html
  23. https://youngfiguy.com/mrs-yfg-anxiety-and-working-in-law/
  24. https://youngfiguy.com/unknowable/
  25. https://youngfiguy.com/mrs-yfg-7-things-ive-stopped-caring-about/
  26. http://www.msziyou.com/budgeting-by-values/
  27. http://www.msziyou.com/why-i-give-a-fck-about-the-news/
  28. http://www.msziyou.com/net-worth-updates-september-2018/
  29. http://www.realmensow.co.uk/?p=4707

The Financial Dashboard – September 2018

The goals for September were:

  • Do a piece of automotive DIY – Success
  • Establish weekly and monthly joint account grocery expenses – Success
  • Sell five items from my hoard – Success
  • Repair or purchase a new bike – Failure
  • Finish reading Tim Hale’s Smarter Investing – Failure

Checking the assets and liabilities:

September 2018 Assets

September 2018 Liabilities

These are taken from my Beast Budget spreadsheet. My net worth grew by £1152 (5.58%), my best increase this year. This matches my best savings rate – 22.39% (not including my DB pension). I saved £200 in my 5% interest Santander saver and paid off £1025 of my credit card (although I put a fair bit on due to organising a friends stag do, which will be paid off with the other Stags). We’re still spending heavily from our joint account, this month on our honeymoon (once in a lifetime!). I’m going to have another look at how I calculate my savings rate in the near future, as moving most of our house DDs to the joint account has made the spreadsheet fairly confusing.

Goals:

Goal achieved: Do a piece of automotive DIY

As mentioned last month I have decided to reduce my automotive spend. This month I gave in my notice on my £120pcm storage unit. Goal number one for next month is therefore: Clear out and sell/ dump items from the storage unit. Minimalism it is not.

I also began work on the red car. It’s had a number of issues which have kept me using it regularly, so I spent a couple of hours one Sunday troubleshooting. Upshot is they’re not simple problems (a couple where I’m way out of my depth), and I’m going to need to spend some cash to fix them. For the time being my new goal is to Service the red car.

Goal achieved: Establish weekly and monthly joint account grocery expenses

Bugger me, the big black hole of my gob doesn’t just radiate crap, it also vacuums it up. I think what has been most surprising here is our shopping pattern. Ensuring all shopping purchases go through our joint account has produced an accurate picture of how much is going out. There is skew as we had two parties this month and spent big to host, but even so our food spending is far more than expected! We appear to have a tendency to do an Aldi/Lidl shop 2-4 times/week, spending between £10 and £30 each time, and then do one big Tesco/ Sainsbury’s shop for toiletries at £100. We also get a veg bag (middle class yo!) for £10.50 a week and a butcher’s box (oo-er missus) for £60 a month. I’m going to continue this to for another couple of weeks to get better data, and then set a budget when we get back from the honeymoon.

Goal achieved: Sell five items from my hoard

A big success here as setting myself a public goal motivated me to offload some tat. I’ve sold £50 worth of teenage toys through eBay, with another six listings still running. I’ve also started taking photos of spare furniture to sell through Gumtree to free up further space. The cash will go into my Starling account as an emergency fund. I want to keep this up, so I’ll continue the goal.

Goal failed: Repair or purchase a new bike

I’m going to park this one (pun intended) and come back to it in a few months, as the shop I want to get one from is only open on for two hours on a Saturday morning (council charity affair) and I’m not going to get a chance to visit it until mid-November.

Goal failed: Finish reading Tim Hale’s Smarter Investing

Started it, was really enjoying it, left it at the in-laws on the bedside table. Bugger. Off to the library.

Budgets:

  • Daily living and entertainment – see above
  • Transport – budget £300, spent £166.80, last month £279. Much better here
  • Holiday – £100/ /£~800/ £35.22. Lots to come
  • Personal – £50/ £0/ £93.32
  • Loans/ Credit – £200/ £1025/ £500
  • Misc – £50/ £0/ £90

In the garden:

We had the first crops off our new garden this month, and I’ll be keeping a track here so I can come back next year and see how we got on by comparison. I’m quite motivated to do a cost comparison like Jono at Real Men Sow (1). This month we’ve had: radishes, mizuna (a big fat nope from MrsShrink), romaine lettuce and red lettuce. The radishes are slowing down, but the salad leaves continue to thrive in the greenhouse (which needs repairs). The lawn has been resown and is coming through well, and I’ve been earthing up winter potatoes.

Goals for next month:

  • Clear out and sell/ dump items from the storage unit
  • Sell five more items
  • Service the red car
  • Establish weekly and monthly joint grocery account expenses
  • Finish reading Tim Hale’s Smarter Investing

What’s in the pipeline:

  • Frugal Motoring – Should I buy a petrol car?
  • Learning from our property renovation
  • Investment Strategy Statement – Part 2 – Goals
  • Quarterly Returns Q3 2018 – Setting targets
  • Plus the usual Full English Accompaniments and other drivel…

Happy October everyone,

The Shrink

Referenced:

  1. http://www.realmensow.co.uk/?page_id=175

The Full English – Saving Money vs Saving Misery

What’s piqued my interest this week?
Hey look, FIRE made the mainstream last week as TEA got interviewed in the The Times (as screengrabbed by Firevlondon), prompting The Guardian to fire some shots and a Daily Mail banshee wail (1, 2, 3). A flurry of activity followed from Monevator Inc and TEA, and wonderment that worst kept best secret was out (4, 5). There was particular derision from the Daily Mail readers…
But collectively we shrugged it off. We were in the know, right? In TEA’s words:

Over the years, I’ve noticed that in life there are 2 types of people: the talkers and the doers.  Talkers talk and doers do.

You don’t get into FI club by talking about FI club.  Nor by arguing on the internet. You get into FI club by working hard, saving hard and investing wisely.   Its a marathon not a sprint and so getting to financial independence is temperamentally suited to people who get their head down and grind out the reps. Talk is cheap and actions speak louder than words. (4)

But amidst the derision in the comments there is a note, a chord, of caution. People wasting their “peak energy years” twiddling their thumbs. As the prize-winning laureate Nickw862003 says in the Mail comments:
“And who the hell, unless you are on a fair bit can save half a salary a year? I mean i done it while saving for a mortgage, but i was living like a hermit to cater for this!” (3)
Do we consider our appearance from the outside? Switch back to /r/UKPersonalFinance or /r/Financialindependence and see people with savings rates of 50-60%, countdown to FI of 4 years, lamenting boredom as they live their frugal lives. They’ve given up the consumerist forms of pleasure, but have not replaced them. At times the Financial Independence community has echoes of the Ancient Greek asceticism, austere minimalism, giving consumerist culture the cynical evil eye (6). In those halcyon days pleasure was derived from the act of abstinence and self-disciple. But we can’t all be Diogenes, living in our ceramic jars, pissing on those that irritate and telling Alexander the Great to bugger off (7).
What’s the point here? Eating basics beans on basics bread in the dark is not a recipe for a happy or healthy life (increasingly found to be interlinked). Ascetism died out in western culture because people are social creatures who seek fulfillment and enjoyment. The FI community helps with the former. The latter requires either moving the goalposts and finding enjoyment in sitting in the dark, or finding cheap interests compatible with the lifestyle. Light a candle, don’t shout in the dark.
Have a great weekend,
The Shrink
N.B. In keeping with the growth of my own gardening hobby, I’ll be adding a little section below once a month keeping an eye on gardening blogs.
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.thetimes.co.uk/article/modest-earners-find-formula-to-retire-in-their-40s-fbk3p63bk
  2. https://www.theguardian.com/money/shortcuts/2018/sep/17/retire-early-fire-movement-never-work-again
  3. https://www.dailymail.co.uk/news/article-6175445/How-retire-FORTIES-without-earning-fortune.html
  4. https://theescapeartist.me/2018/09/24/hold-everything-someone-is-wrong-on-the-internet/
  5. http://monevator.com/weekend-reading-fire-and-forget/
  6. https://en.wikipedia.org/wiki/Asceticism
  7. https://en.wikipedia.org/wiki/Diogenes
  8. https://www.moneysavingexpert.com/news/2018/09/economy-energy–to-honour–fixed-tariff-after-price-hike-blunder/
  9. https://www.thisismoney.co.uk/money/investing/article-6142957/How-check-performance-robo-adviser.html
  10. https://www.theguardian.com/lifeandstyle/2018/sep/18/your-fathers-not-your-father-when-dna-tests-reveal-more-than-you-bargained-for
  11. https://www.telegraph.co.uk/money/consumer-affairs/new-blow-landlords-177000-homes-face-new-test/#
  12. https://www.bbc.co.uk/news/business-45561908
  13. https://www.bbc.co.uk/news/uk-45520517
  14. https://www.bbc.co.uk/news/business-45634362
  15. https://www.thisismoney.co.uk/money/mortgageshome/article-6185301/The-20-fastest-growing-areas-new-housing-UK-past-7-years-counted-down.html
  16. https://www.thisismoney.co.uk/money/saving/article-6207595/How-Goldman-Sachs-banker-American-giant-launches-UK-account-paying-1-5.html
  17. https://theescapeartist.me/2018/09/19/eliminating-fear-with-bio-hacking/
  18. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks
  19. http://thefirestarter.co.uk/liquid-superfood-huel-challenge-its-like-soylent-the-throwdown/
  20. http://thefirestarter.co.uk/august-income-expenses-report-a-bit-of-an-odd-one/
  21. http://monevator.com/its-an-emergency-fund/
  22. https://firevlondon.com/2018/09/24/complexity-costs/
  23. https://firethe9to5.com/2018/09/18/finding-the-fun-in-fire/
  24. https://firethe9to5.com/2018/09/22/the-do-i-have-enough-toolkit/
  25. http://www.msziyou.com/comfortable-being-the-product/
  26. http://diyinvestoruk.blogspot.com/2018/09/turn-back-clock.html
  27. http://diyinvestoruk.blogspot.com/2018/09/city-of-london-final-results.html
  28. http://diyinvestoruk.blogspot.com/2018/09/woodford-patient-capital-new-purchase.html
  29. http://www.realmensow.co.uk/?p=4702
  30. http://twothirstygardeners.co.uk/2018/09/how-do-i-tell-know-when-my-hops-are-ready-to-pick/
  31. https://clairesallotment.com/2018/09/06/harvesting-the-first-of-the-brassicas/
  32. https://urbanvegpatch.blogspot.com/2018/09/in-septembers-sweet-spot.html

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Strategy Statement – Part 1- Investment Philosophy

Inspired by Firevlondon, Weenie et al and as advised in Smarter Investing, over the course of a few posts I’ll aim to set out my Investment Strategy (1, 2, 3). To an extent I am concerned about the face validity of such a series, as my current investment experience runs to a Fidelity fund up to 2007 and cash savings. I aim to have a strategy in place for commencement of my portfolio, rather than changing my portfolio to fit a later strategy; “if you don’t know where you are going, you’ll end up someplace else”. As recommended by the textbooks and others I’ll be starting with my investment philosophy, and the rest of my statement will be set out in line with that suggested on Bogleheads (4).

Core philosophy:

“Buy-and-hold, long-term, all-market-index strategies, implemented at rock-bottom cost, are the surest of all routes to the accumulation of wealth” – John C. Bogle

Tenet 1: Diversification

Diversification, as wide as possible, as advised by Modern portfolio theory etc (5, 6, 7). Holdings will be diversified across global markets, ultimately in multiple accounts held with multiple companies. Property, cash accounts and tangible assets (cars, art, books) will further diversify my portfolio.

Tenet 2: Passive-focus

I will accept market returns, and will not change funds based on timing. I won’t rehash the evidence that passive investing is a superior strategy for long term returns (1, 8, 9). I lack the time and luck to ‘beat the market’ with active selection of stocks. In the past I held an active investment which did rather well in the run up to 2008, when I sold pre-crash by sheer blind luck. As my investment timeframe is 20+ years I am not interested in short term gains, so passive will work fine.

N.B. The exception to this rule is where active funds offer access to investments (i.e. unlisted companies) I’m targeting for growth in an experimental corner of my portfolio which I’ll go into in more detail at a later date.

Tenet 3: Reduce costs, taxes and fees

Maximise the % growth by minimising the amount I’m paying out for it. Minimise tax expenses through the use of ISAs and tax-free savings (10, 11).  I’ll use calculators like Monevator’s to select the cheapest platform available for my portfolio mix. (12) I’ll track expenses across all my investment and produce expense ratios.

Tenet 4: Grow and hold

My investment timescale is long, and my ultimate goal is not to use my portfolio for drawdown (discussed in Part 2 – Investment Goals) (13). I continue to earn and am in a (relatively) secure job. Therefore the aim is to accumulate diversified holdings for the long term. Preference for Acc funds and reinvestment. Preference for growth over dividends, for expansion and (in the experimental corner) for disruptive companies. Preference for physical assets, avoiding derivatives, synthetic or other complex financial products; I am beginning to understand these, and while I comprehend the theory I don’t feel comfortable with the additional counterparty risk (14, 15). Physical assets are to be a theme throughout my portfolio.

Tenet 5: Stick to allocation

As fits a diversified passive-focus portfolio my global allocation will mirror world markets, using all world tracker funds and ETFs (16). I’ll review world market data yearly, and set re-balancing targets based on global market cap weightings as the market  moves (16, 17). Since my timescale is long, my employment is (in theory) secure and my pension scheme is (supposedly) generous, I’m happy to take a reasonable amount of risk for my portfolio. Allocation will initially be set at 70% equities, 15% cash, 10% alternative assets, 5% property (18, 19) . Equities are split between a core 80% passive tracker portfolio and a testbed active portfolio (10% active funds, 10% stocks) aimed for growth. Allocations will be reviewed and re-balanced quarterly. Re-balancing will be through purchasing with new income where possible.

In summary:

  • Tenet 1: Diversification across world markets, and through multiple asset classes, held with multiple companies
  • Tenet 2: Predominantly passive focus to portfolio
  • Tenet 3: Reduce fees and maximise tax efficiency through use of ISAs and tax-free savings accounts
  • Tenet 4: Hold and grow investments through re-accumulation and compound investing in simpler financial products
  • Tenet 5: Monitor mix of investments against target allocation quarterly, investing to rebalance

In the next post in this series I cover my goals.

The Shrink

References

  1. https://www.waterstones.com/book/smarter-investing/tim-hale/9780273785378
  2. https://firevlondon.com/my-investment-policy-statement/
  3. http://quietlysaving.co.uk/2017/06/08/investment-strategy-updated/
  4. https://www.bogleheads.org/wiki/Investment_policy_statement
  5. https://seekingalpha.com/article/151352-portfolio-diversification-and-risk-the-basics-of-beta
  6. https://en.wikipedia.org/wiki/Modern_portfolio_theory
  7. https://youngfiguy.com/asset-allocation-and-the-uk-efficient-frontier/
  8. http://monevator.com/category/investing/passive-investing-investing/
  9. http://monevator.com/why-a-total-world-equity-index-tracker-is-the-only-index-fund-you-need/
  10. https://www.gov.uk/apply-tax-free-interest-on-savings
  11. https://youngfiguy.com/pensions-isas-the-basics/
  12. https://www.gov.uk/marriage-allowance
  13. http://monevator.com/commit-to-investing-strategy-for-the-long-term/
  14. http://monevator.com/types-of-investing-risks/
  15. http://www.morningstar.co.uk/uk/news/108970/understanding-the-risks-of-different-etf-structures.aspx/
  16. http://monevator.com/investing-for-beginners-the-global-stock-market/
  17. http://monevator.com/world-stock-markets-data/
  18. https://en.wikipedia.org/wiki/Alternative_investment
  19. https://youngfiguy.com/how-i-invest-my-money/

The Full English Accompaniment – Switching energy suppliers

What’s piqued my interest this week?
The Shrink household is currently switching energy suppliers. If you’re here, then you’re probably smart enough to already be doing the same on a regular basis. I’m not going to go into how much you can save, MoneySavingExpert does it much better (1). On moving into casa-del-Shrink we had a number of problems with the existing supplier, particularly surrounding pre-existing debt on the pre-payment meters. We switched to British Gas. Big mistake, as we continued to have problems paying off the previous tenants debts, and found out how bad British Gas complaints procedure is. Cue hours of interminable hold music, patronising ‘we’re listening letters’ and complaints being closed unresolved (2, 3). The actual staff we spoke to were helpful, but appeared constrained by a draconian “computer says no” system. We weren’t the only ones having problems with British Gas this year, who’ve been fined £2.65m for overcharging customers (4). When they put their prices up in August we voted with our feet and left to avoid exit fees (5).
We’ve gone back to Bulb, one of the smaller energy companies outside of the ‘Big Six’ who buy from entirely renewable energy sources and who we’ve had excellent service from before. We considered using the MSE Credit Club, but I get a little tin-foil-hat about giving out my personal info willy-nilly (6). In the same way we avoided Flipper, an app touted on Moneybox which automatically switches you onto your cheapest supplier (7). Sadly we’ve been told we’ll also be having an immediate price rise (8, 9), which takes Bulb out of the MoneySavingExpert’s cheapest list. The government via Ofgen recently implemented a cap on energy prices to protect vulnerable customers (10, 11). But despite this it looks like most peoples energy prices will go up, with suppliers citing increased wholesale prices (12, 13, 14). Time to break out the coal braziers and pile up the logs, we’ve got a long winter ahead!
Have a great week,
The Shrink
Side Orders

Other News

Opinion/ blogs:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor. This is turning out to be real heavy-going so has been ignored a bit.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.moneysavingexpert.com/utilities/you-switch-gas-electricity/
  2. https://www.telegraph.co.uk/bills-and-utilities/gas-electric/british-gas-make-customer-services-listen-complaint/
  3. https://www.thesun.co.uk/money/7154739/british-gas-customers-waiting-38-minutes/
  4. https://www.theguardian.com/business/2018/aug/29/british-gas-pays-out-265m-pounds-for-overcharging
  5. https://www.bbc.co.uk/news/business-45111743
  6. https://www.moneysavingexpert.com/cheapenergyclub
  7. https://flipper.community/
  8. https://www.moneysavingexpert.com/news/2018/09/bulb-price-rise/
  9. https://www.thisismoney.co.uk/money/bills/article-6155853/Bulb-customers-hit-price-hike-energy-providers-raise-prices-time-year.html
  10. https://www.theguardian.com/business/2018/aug/20/rise-in-power-bills-expected-despite-government-cap
  11. https://www.telegraph.co.uk/bills-and-utilities/gas-electric/does-ofgems-price-cap-mean-dont-need-switch-energy-supplier/
  12. https://www.bbc.co.uk/news/business-45095030
  13. https://www.bbc.co.uk/news/business-45297336
  14. https://www.independent.co.uk/news/business/news/sse-energy-price-cap-ofgem-gas-electricity-bills-share-price-profit-warning-a8533856.html
  15. https://www.theguardian.com/business/2018/sep/14/archbishop-of-canterbury-to-lead-wonga-rescue-effort-payday-loans
  16. https://www.bbc.co.uk/news/business-45516678
  17. https://www.theguardian.com/business/2018/sep/15/low-prices-no-frills-can-tesco-defeat-lidl-and-aldi
  18. https://www.bbc.co.uk/news/business-45371502
  19. https://www.hl.co.uk/investment-services/active-savings?clickid=27kUVE08pSocXyqW5fRnFzyIUkg2h0UQPV2z1s0&iradid=82616&theSource=AFSKI&utm_campaign=AFSKI_IMPR1&ir=1
  20. https://www.thisismoney.co.uk/money/saving/article-6159671/Barclays-launch-new-fixed-rate-savings-account-aimed-retirees.html
  21. https://www.thisismoney.co.uk/money/diyinvesting/article-6155463/Dont-invest-cheap-trackers-Hold-mix-active-passive-funds.html
  22. https://theescapeartist.me/2018/09/05/this-is-an-emergency-part-2-dealing-with-time-wasters
  23. https://theescapeartist.me/2018/09/12/live-local-think-global/
  24. https://youngfiguy.com/social-media-is-poison/
  25. http://monevator.com/commercial-property-what-can-we-expect-from-this-asset-class/
  26. http://monevator.com/weekend-reading-download-a-free-e-version-of-ray-dalios-new-big-debt-crisis-survival-handbook/
  27. http://www.msziyou.com/patriarchy-ever-pervasive/
  28. http://www.retirementinvestingtoday.com/2018/09/the-wealthsimple-experiment.html
  29. https://www.ukvalueinvestor.com/2018/09/guide-to-dividend-investing-for-beginners.html/
  30. http://diyinvestoruk.blogspot.com/2018/09/help-to-save-scheme-launched.html
  31. http://diyinvestoruk.blogspot.com/2018/09/uk-v-global-investment-returns.html
  32. http://diyinvestoruk.blogspot.com/2018/09/mid-wynd-full-year-results.html
  33. https://gentlemansfamilyfinances.wordpress.com/2018/09/11/help-to-save/
  34. https://gentlemansfamilyfinances.wordpress.com/2018/09/10/airbnb-and-me-part-1/
  35. https://gentlemansfamilyfinances.wordpress.com/2018/09/11/house-hacking-airbnb-part2/
  36. https://abnormalreturns.com/2018/09/13/you-do-you-passive-investing-edition/
  37. https://quittingteachingblog.wordpress.com/2018/08/21/in-defence-of-private-landlords/

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Musing On… Motivation: Are you running from or running to?

What motivates your financial choices?

Reading a variety of FI and finance writers, it has occurred that those who blog are a rag-tag bunch. You have to be a bit different to move away from the credit-to-the-eyeballs herd. The reasons to go down the various financial paths, and then write about it are even more nebulous. A scientific mind led to attempts to discern some patterns among the noise. One such pattern is the writers motivation, and where the drive to save/ live frugally/ be financially independent arises.

Running from

For some, it seems the drive to be frugal is innate, inherited, learnt behaviours from early childhood. LittleMissFire talks about it as leaving the ‘shop floor mentality’, the mindset of a household living week-to-week, month-to-month, without financial planning (1). The crux of her post about the ‘shop floor mentality’ is the drive to better oneself, and leave behind the stress, envy, anguish and heartache of poverty (1). Understanding financial planning and making frugal life choices are just a short psychological hop from FI, and there seems a lot of overlap between frugal living and so-called ‘lean-FI’.

This drive to leave behind an unpleasant situation also appears prevalent on the FI forums I frequent, but here it’s less about a memory or experience of struggling for money, and more miserable working environments. For example (2):

And an example reply (2):

Small talk, alarm clocks, office politics, performance reviews, managers talking about you behind your back, tracking metrics, spreadsheets, deadlines, cubicles, dress code, meetings, daily existential crises, passive aggressiveness, emails with manager cc’d, scrum meetings, being taken advantage of, erosion of self esteem, etc. Etc.

I assume it was among those so miserable in their work that the term “Fuck You Money” arose (3). You’ve built up enough cash to say “Fuck You” to that miserable environment and walk away… but what then? How do you adapt your austere lifestyle out of work, with it’s focus on minimising all outgoings, to your new-found freedom (4):

Running towards

I sort of class myself amongst the running towards school-of-thought. I enjoy my job, to the extent that I am happy to go into work every day to perform it (especially after a slight change into a less front-facing role). I would probably keep doing it to some extent even if I wasn’t paid, because it is my ‘ikagai’ – a Japanese word whose closest translation is ‘the reason for which you get up in the morning’ (5, 6). Despite this I think the world is full of wonder, and I could spend whole other lifetimes doing different things. There are too many things to do and not enough time to experience them all whilst also working to support myself. FI, as The Frugal Cottage puts it, “gives you the option of spending your limited time however you want” (7, 8).

Just enjoying the run

This seems to be the final stage in FI nirvana fulfillment. Some suggest that by it’s nature, being frugal has a sort of contrarian cool (9). An echo of the counter-culture in a rejection of consumerism (10)More hippy than hipster I hope. Some bloggers, like TEA, enjoy the journey to FI and beyond because they developed an enjoyment of “the process of wealth building” (11) TEA writes about learning to enjoy these things by using conditional rewards; a big juicy carrot for the FI stick, training your brain to associate putting the financial graft in for a reward (11). Or writers like FIREvLondon, who enjoy the writing about their process, discussing ideas, commenting on experiences (12). This is a far better path to happiness, where any goal you set or any target you make can bring you fulfillment. Enjoying the process of blogging, the sharing of knowledge and community.

Why does it matter?

Understanding your motivation is inherently tied to your ability to complete the goals you set yourself for financial independence and frugal living. If your goal is off from what you truly want you’ll lack motivation, and if you’re motivated for only a specific purpose you may find yourself unfulfilled and lost when you reach that goal, or unable to reach it altogether. As I’m setting my goals, I’ve been noticing many are around things I’d do after being FI. I risk that there will always be one more goal or target. It’s time to think about my enjoyment of the pursuit, and I would urge others to ask, why do I want FI?

References:

  1. https://littlemissfireblog.wordpress.com/2018/03/24/do-you-have-the-shopfloor-money-mentality/
  2. https://www.reddit.com/r/financialindependence/comments/8ogyp8/people_who_are_trying_to_reach_fi_because_they/
  3. https://theescapeartist.me/2018/07/24/the-art-of-wealth-preservation/
  4. https://www.reddit.com/r/financialindependence/comments/94kmku/first_day_of_retirement_at_40_yo
  5. https://www.telegraph.co.uk/health-fitness/mind/finding-ikigai-japanese-secret-health-happiness/
  6. http://monevator.com/weekend-reading-what-is-your-reason-for-being/
  7. http://www.thefrugalcottage.com/everyone-early-retirement/
  8. http://thefirestarter.co.uk/early-retirement-in-5-years-in-the-uk-is-it-possible/
  9. https://www.psychologytoday.com/gb/blog/the-eclectic-professor/201102/the-psychology-thrift-why-not-frugal-cool
  10. http://thefirestarter.co.uk/about-me/
  11. https://theescapeartist.me/2018/02/13/get-rich-with-the-process/
  12. https://firevlondon.com/about/

 

 

The Full English Accompaniment – On Brexit, social psychology and market timing

What’s piqued my interest this week?
I’ve been reading Tim Hales Smarter Investing over the last couple of weeks, which appears considered essential reading by most FI/ passive investment sources (1). It has prompted me to write down a philosophy and a draft set of goals for my investment plans. One of the cautions is against market timing, because it’s very statistically difficult to be good at it, incorporating not a small amount of luck. Much better to go Bogle, and buy then hold a low cost tracker (2). So far, so sold.
There’s another section of the book which documents how one of the most important, most overlooked parts to a portfolio decision is target country allocation. This is where I’m currently stuck, as Brexit presents a big hit of unknown outcomes, and is turning my market timing milk sour. Oh look, another r/UKPersonalFinance post triggered me (I’ll cut out all the Reddit relevant-only bits)…

Everyone, put on your tin-foil hats and join me on a journey considering a Brexit scenario…

I’ve personally suspected that Brexit is being pushed along despite it outwardly, appearing to be in no-one’s interests perhaps as a textbook example of Naomi Klein’s ‘Disaster Capitalism’ but maybe just as a way for massive money to be made from the lurches in exchange rate and FTSE etc.

So one outcome I suspect is that the pound will stay relatively weak to the EUR/USD etc, keeping the FTSE reasonably high, until we suddenly hit a point where it gets revealed we’ll basically stay in the EU (or EEA), perhaps after a 2nd referendum, so…

If the timeline of this is the next 6 months, how will the politicians and their chums be looking to maximise the person financial benefit to themselves? Assuming a, say, 15% increase in the value of the pound, and 10% drop in the FTSE 100, would they be looking to sell most investments, have cash and then be ready to re-invest after the correction?

What would you do in this scenario if you had this inside information? (3)

This is a little tinfoil hat brigade, although the murmuring the Nigel Farage shorted the value of the £ when he found out the result of Brexit before it was officially released could provide some evidence (4). An ex-investment banker wouldn’t call up his mates still in the industry with privy information would he? The main issue I have with the above is that it appears to go against the political wind and public opinion polls. The Conservatives and Labour are both loath to go back on the stated plan to exit (would be seen as weak?), and YouGov’s last poll in July found that a fraction greater percentage thought Brexit was the wrong decision than didn’t (5). Opinion polls may be a pretty poor judge, but they’re not so bad as to miss half the nation suddenly decided they do want to stay in the EU, after all (6).
Brexit therefore represents a challenge to the efficient market hypothesis (7). Pre-Brexit vote, a commentator in Forbes discussed how the referendum would represent an excellent testbed for efficient markets (8). It truly did, as the unexpected (to the city) voter decision was integrated into share prices in a number of hours. The fact that the referendum result was unexpected and therefore prompted such a dramatic shift in the markets challenges the efficient market hypothesis, and specifically what makes it efficient. The efficiency relies upon the sum of all the traders individual access to information. To bring it round to psychological terms, it is a form of social Gestalt theory, where the individual chaotic pieces of information/ action contributes to a total pattern (9, 10). Market traders were unaware of the depth of feeling in favour of Brexit prior to the vote (those pesky polls again), and were suddenly exposed to it and integrated it into the markets on referendum day.
But why were market traders so unaware? I wonder that the possibility of a Leave vote did not comply with the collective conscience of market traders and ‘the city’ and therefore was not appropriately considered by the markets (11). To go back to Durkheim’s original use of collective consciousness (very separate from Jungian collective unconsciousness), it is the ‘general feeling’ towards a position, experienced and perceived by the individuals in the collective (11). A shared unconscious understanding of social norms. In the city, it was a social norm to be pro-EU. In the general populace, not so much. Therefore the true risk of a Leave vote to the markets was a Rumsfeldian ‘unknown unknown’. To be pro-Leave in London pre-Brexit went against social norms, it didn’t fit with the social reality constructed in that environment, even if it did fit with the social norms and social reality of the wider UK (12).
Which brings me to my market timing and allocation conundrum. The market is efficient when it is integrating information which makes sense within it’s system; IPOs, sales data, quarterly returns etc. It appears less efficient at integrating popular opinion and behaviour. The market is vulnerable to collective psychological effects (herd behaviour etc), and changes in the market are made by people. The people who change the market (traders etc) operate in a different social world (‘social reality’) to the general populace, by nature of their social interactions. Yours is visible in day-to-day life in your twitter or social media sphere, which may differ from general public opinion. The markets will therefore be generally running on the market traders social reality, whilst the rest of us live in a slightly different social reality. Politicians span the divide, but take their lauded mandate from the general populace’s social reality. The difference comes to the fore when the market has to integrate decisions which are made by the wider populace that didn’t fit with it’s reality, e.g. Brexit. The reddit comment quoted above appears to sit well within the market reality bubble; we’ll stay in the EU in the end, it’s all a sideshow. My concern is that the general populace appears fairly relaxed about a ‘No-deal’ Brexit. Knowing that we’re a few short months out of formal Brexit, do I choose allocations based on that worry which insulate against this outcome. Does even thinking about this represent market-timing, and I should just bung my cash ‘somewhere’ and sit it out. Your opinion welcome here…
Have a great week,

 

The Shrink

 

Side Orders

Other News

Opinion/ blogs:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor. This is turning out to be real heavy-going.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Financial/dp/0273785370/
  2. https://www.bogleheads.org/wiki/Getting_started
  3. http://www.reddit.com/r/UKPersonalFinance/comments/9cnsqj/the_potential_effect_of_a_massive_shift_in
  4. https://www.theguardian.com/politics/2018/jun/25/nigel-farage-denies-shorting-value-of-sterling-on-night-of-brexit-vote
  5. https://yougov.co.uk/news/2018/06/23/eu-referendum-two-years/
  6. https://www.nature.com/articles/s41562-018-0330-7
  7. https://www.investopedia.com/terms/e/efficientmarkethypothesis.asp
  8. https://www.forbes.com/sites/timworstall/2016/02/22/brexit-uk-financial-markets-and-the-efficient-markets-hypothesis/#31ab82161667
  9. https://www.britannica.com/science/Gestalt-psychology
  10. https://en.wikipedia.org/wiki/Gestalt_psychology
  11. https://en.wikipedia.org/wiki/Collective_consciousness
  12. https://en.wikipedia.org/wiki/Social_reality
  13. https://www.thisismoney.co.uk/money/pensions/article-6130445/Will-council-force-sell-house-cover-dads-care-bills.html
  14. https://www.thisismoney.co.uk/money/cars/article-6138267/A-1979-Lada-Niva-estimated-sell-75-000-goes-just-4K.html
  15. https://www.theguardian.com/money/2018/sep/07/house-prices-rose-at-fastest-rate-in-almost-year-says-halifax-august-north-south
  16. https://www.theguardian.com/uk-news/2018/sep/05/thinktank-calls-for-major-overhaul-of-britains-economy
  17. https://www.thisismoney.co.uk/property/article-6106049/A-downstairs-family-bathroom-lowers-property-value-6.html
  18. https://www.thisismoney.co.uk/money/news/article-6080099/Are-Monzo-Revolut-Starling-Transferwise-safe-bank-with.html
  19. http://monevator.com/10-things-you-can-do-today-to-reset-your-life/
  20. http://monevator.com/weekend-reading-what-is-your-reason-for-being/
  21. http://thefirestarter.co.uk/my-5-years-are-up-how-did-i-do/
  22. http://thefirestarter.co.uk/august-income-expenses-report-a-bit-of-an-odd-one/
  23. https://thefireeng.com/net-worth-update-august-2018/
  24. http://www.msziyou.com/yes-i-am-rich-now/
  25. http://www.msziyou.com/net-worth-updates-august-2018/
  26. http://www.mrmoneymustache.com/2018/09/05/what-really-goes-on-at-mmm-headquarters/
  27. http://theirrelevantinvestor.com/2018/09/04/gold-what-is-it-good-for/
  28. https://www.ukvalueinvestor.com/2018/09/sold-senior-plc-after-recent-share-price-gains.html/