The Full English – The Sam Vimes Boots Theory

What am I buggering on about this week?

I’m really enjoying my Starling bank accounts features, so it was good to read an article in The Verge this week about the touted move by Monzo into the US (1). Much of The Verge article is fawning which is unsurprising given the readership overlap between The Verge and the challenger banks. However the US market is ripe for the taking, struggling to even move to chip and pin payments or any sort of account switching service (2). A good time to be invested in one of them.

One of the features I’m really enjoying is the ‘goals’ or ‘spaces’ feature of my Starling account. After keeping my accounts last year I’ve been able to set accurate budgets, and the spaces allows me to put money aside without it ‘appearing’ in my balance. This has meant I can build up money for professional expenses, without having to dip into my credit card. I’m also, for the first time ever, putting money aside each month for clothes and holidays, meaning I don’t try to find the cash as and when I need it to replace holey shoes.

Putting money aside every month for predictable expenses, alongside having an emergency fund, is a cornerstone of good financial stability. The Boots Theory of Socioeconomic Unfairness is a great way of explaining why. If you’ve not heard of the theory, it’s taken from the late great Terry Pratchett’s Men at Arms (3, 4)Captain Samuel Vimes thought process goes that “the reason that the rich were so rich… was because they managed to spend less money”. An example:

“Take boots, for example. He earned thirty-eight dollars a month plus allowances. A really good pair of leather boots cost fifty dollars. But an affordable pair of boots, which were sort of OK for a season or two and then leaked like hell when the cardboard gave out, cost about ten dollars. Those were the kind of boots Vimes always bought, and wore until the soles were so thin that he could tell where he was in Ankh-Morpork on a foggy night by the feel of the cobbles.

But the thing was that good boots lasted for years and years. A man who could afford fifty dollars had a pair of boots that’d still be keeping his feet dry in ten years’ time, while the poor man who could only afford cheap boots would have spent a hundred dollars on boots in the same time and would still have wet feet.”

A good theory is often one that is obvious once it’s pointed out. This is one of them. I’ve fallen into this trap so many times. I’ve continued to live like a student, buying cheap clothes when my current threads wear out. I’m now trying to buy better quality (when it’s on sale of course), with the intention things will last longer. The Barbour jacket and flat cap isn’t far away.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.theverge.com/2019/6/13/18663036/monzo-starling-mobile-banks-uk-report
  2. https://www.cnet.com/news/apple-card-beware-monzo-is-bringing-its-bank-of-the-future-to-the-us/
  3. https://en.wikipedia.org/wiki/Sam_Vimes
  4. https://moneywise.com/a/boots-theory-of-socioeconomic-unfairness
  5. https://citywire.co.uk/investment-trust-insider/news/what-is-board-of-flagship-woodford-patient-capital-doing/a1237314
  6. https://www.thisismoney.co.uk/money/markets/article-7121795/Backlash-hits-UKs-largest-investment-platform-Hargreaves-Lansdown-investors-flee.html
  7. https://www.thisismoney.co.uk/money/mortgageshome/article-7124605/Majority-UK-homeowners-expect-house-prices-grow-despite-property-market-slowdown.html
  8. https://www.timeout.com/london/news/this-new-website-will-help-you-find-your-nearest-zero-waste-shop-and-save-the-planet-060619
  9. https://www.theguardian.com/business/2019/jun/12/worlds-biggest-sovereign-wealth-fund-to-ditch-fossil-fuels
  10. https://www.bbc.co.uk/news/business-47643456
  11. https://www.theguardian.com/environment/2019/jun/13/mild-but-windy-winter-was-greenest-ever-for-uk-energy-use
  12. https://www.independent.co.uk/news/world/americas/climate-change-breakdown-arctic-frost-thawing-canada-environment-a8959056.html
  13. https://www.dailymail.co.uk/news/article-7139695/British-pensioners-run-money-10-YEARS-die-senior-economists-warn.html
  14. https://www.evidenceinvestor.com/neil-woodford-a-lesson-in-humility/
  15. http://aswathdamodaran.blogspot.com/2019/06/teslas-travails-curfew-for-corporate.html
  16. https://monevator.com/trust-life-assurance/
  17. https://theescapeartist.me/2019/06/12/whos-the-bitch-in-this-relationship/
  18. http://www.retirementinvestingtoday.com/2019/06/back-to-powerful-fi.html
  19. https://earlyretirementnow.com/2019/06/12/my-thoughts-on-small-cap-and-value-stocks/
  20. https://youngfiguy.com/mrs-yfg-what-i-wish-i-knew/
  21. https://cashflowcop.com/introvert-make-extra-money-working-from-home/
  22. http://quietlysaving.co.uk/2019/06/14/half-a-century/
  23. http://thefirestarter.co.uk/perfection-is-the-enemy-of-happiness/
  24. https://ditchthecave.com/unpopular-opinions/
  25. https://drfire.co.uk/unpopular-opinion/
  26. https://indeedably.com/against-the-tide/
  27. https://awaytoless.com/thought-experiment-6-miss-way/
  28. https://asimplelifewithsam.com/2019/06/14/saving-ninja-thought-experiment-6/
  29. https://thesavingninja.com/unpopular-opinion/
  30. https://www.msziyou.com/dating-and-fi/
  31. https://pursuefire.com/monthly-net-worth-report-12-may/
  32. https://www.iretiredyoung.net/single-post/2019/06/14/Early-Retirement—our-net-worth-investing-journey-1
  33. https://www.jackwallington.com/allotment-month-43-priorities-supports-and-progress/
  34. https://agentsoffield.com/2019/06/09/i-love-big-butts/
Advertisements

The Full English – Student Loans Review

What am I buggering on about this week?

Lately I’ve been watching lots of finance videos/ podcasts. One of my guilty pleasures is The Dave Ramsey Show. If you haven’t seen it, it’s a highly successful call-in show based in the US, where Dave dishes out financial and often plain common-sense advice, which is syndicated and streamed on YouTube. It’s also sometimes akin to Jeremy Kyle, and I watch with morbid curiosity. Dave, being in the US, takes a fairly aggressive approach towards student loans as part of a drive to get rid of debt (1, 2):

But here across the pond we have a very different student loans structure. I did have to take a loan for my education, but luckily it was Plan 1. The current interest rate (1.75%) is less than the RPI. In practical terms my debt is reducing in value even if I don’t pay it off. I also had a maintenance grant with no expectation of repayment. These have since been scrapped. The student loans system in the UK functions more like a graduate tax. You only pay once you earn over a certain threshold (dependent on your plan), and then you pay a nine percent of those earnings. There’s lots of useful resources to guide you on this, including the government website (3, 4, 5). Another podcast I’m enjoying, Meaningful Money, explains it really well (6):

I’m very thankful I’m not on Plan 2, the current scheme. It’s significantly more painful than my scheme. The interest rates are significantly higher (3):

Student Loan rates

Six bloody percent! And because of the structure of it you only pay 9% of your earnings over the threshold, so your actual repayments are fractional. It just sits there, accruing until you reach the 30-year post-graduating threshold when it gets wiped. The only people who stand a chance of clearing it are the higher earners (>£50k), but if you’re just over that mark it will act as a continuous drain on your monthly takehome pay.

Now cleverer bods than I have clocked the coming hole in government funds. Hence the recently commissioned government review. It reported last week, and the findings have prompted much discussion (7, 8). They include such progressive ideas as reducing the maximum from £9,250 to £7,500, and reintroducing means-tested grants. They counteract this by bringing the repayment threshold down, and extending out the cancellation deadline to 40 years. The net result is that the highest earners will still pay more than the rest but less than under the current system. Middle earners will pay more, and more will pay off in full. Lowest earners are better off (9, 10).

Lifetime student loan

The whole system seems ponderous, and designed to confuse. The treasury would be happier with the proposed scheme (one suspects), as more people will pay it off in full. Ultimately these are all by-products of the attempt to commercialise higher education under the guise of widening access and equal opportunities. Beware of greeks bearing gifts.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.daveramsey.com/blog/how-to-pay-off-student-loans-quickly
  2. https://youtu.be/CodCjMrYB1Y
  3. https://www.gov.uk/repaying-your-student-loan/what-you-pay
  4. https://www.moneyadviceservice.org.uk/en/articles/repaying-student-loans
  5. https://www.moneysavingexpert.com/students/student-loans-tuition-fees-changes/
  6. https://youtu.be/08NVnDG7UlY
  7. https://www.bbc.co.uk/news/education-48451474
  8. https://inews.co.uk/news/education/slash-tuition-fees-and-student-loans-interest-government-review-to-recommend/
  9. https://www.bbc.co.uk/news/education-48459910
  10. https://www.thetimes.co.uk/article/cut-university-tuition-fees-to-7-500-and-slash-interest-on-student-loans-review-n8lbkhz3s
  11. https://www.thetimes.co.uk/article/newcomer-vanguard-knocks-hargreaves-off-the-top-spot-g08jx50w9
  12. https://www.telegraph.co.uk/investing/funds/blackrock-launches-rival-vanguard-lifestrategy-funds-should/
  13. https://www.bbc.co.uk/news/business-48433692
  14. https://www.theguardian.com/environment/2019/may/30/renewable-energy-jobs-in-uk-plunge-by-a-third
  15. https://www.theguardian.com/money/2019/may/31/uk-house-prices-slump-as-confidence-remains-subdued-says-survey
  16. https://www.thisismoney.co.uk/money/mortgageshome/article-7090137/UK-house-price-growth-falls-0-2-consumer-confidence-remains-subdued.html
  17. https://www.theguardian.com/money/2019/jun/03/neil-woodford-blocks-investors-from-pulling-cash-from-flagship-fund
  18. https://www.msn.com/en-gb/news/world/no-way-to-stop-it-millions-of-pigs-culled-across-asia-as-swine-fever-spreads/ar-AACtx3M?ocid=spartanntp
  19. https://www.bbc.co.uk/news/business-48553193
  20. https://www.thisismoney.co.uk/money/investing/article-7102797/Casual-investors-blocked-investing-10-P2P-firms.html
  21. https://www.wired.co.uk/article/uk-coal-power-energy-renewables-new-record
  22. https://www.independent.co.uk/news/uk/home-news/trump-uk-visit-penis-stansted-airport-protest-climate-change-real-essex-a8941271.html
  23. https://www.theguardian.com/business/nils-pratley-on-finance/2019/jun/06/nicky-morgan-must-ask-questions-of-regulator-after-neil-woodford-saga
  24. https://citywire.co.uk/funds-insider/news/david-stevenson-beware-the-risk-of-uk-stock-market-bias/a1232783
  25. https://monevator.com/life-expectancy-for-couples/
  26. https://monevator.com/blackrock-mymap-fund-of-funds/
  27. https://monevator.com/index-funds-versus-superstar-investors/
  28. https://www.ukvalueinvestor.com/2019/06/sainsburys-discounted-share-price.html/
  29. https://theescapeartist.me/2019/06/05/the-inestimable-advantages-of-paying-yourself-first/
  30. http://www.retirementinvestingtoday.com/2019/06/back-to-powerful-fi.html
  31. https://cashflowcop.com/should-i-charge-my-child-rent-the-pros-and-cons/
  32. https://cashflowcop.com/the-morning-brew-vs-finimize-financial-news-summarised-for-busy-people/
  33. http://earlyretirementextreme.com/the-danger-of-lifestyle-consumption.html
  34. http://diyinvestoruk.blogspot.com/2019/06/tr-property-final-results.html
  35. http://diyinvestoruk.blogspot.com/2019/05/capital-gearing-final-results.html
  36. http://quietlysaving.co.uk/2019/06/07/investing-mistakes/
  37. http://quietlysaving.co.uk/2019/06/01/may-2019-other-updates/
  38. http://thefirestarter.co.uk/caravan-psychology-and-economics-101/
  39. https://ditchthecave.com/break-the-routine/
  40. https://drfire.co.uk/may-2019-report/
  41. http://fiukmoney.co.uk/may-19-net-worth-and-monthly-update-10-504531-69688/
  42. https://thesavingninja.com/im-now-a-property-investor-savings-report-11/
  43. https://littlemissfire.com/the-importance-of-side-hustle-diversification/
  44. https://awaytoless.com/monthly-spending-may-2019/
  45. https://gentlemansfamilyfinances.wordpress.com/2019/05/31/month-end-accounts-may-2019/
  46. https://gentlemansfamilyfinances.wordpress.com/2019/06/06/whats-woodford-good-for/
  47. https://gentlemansfamilyfinances.wordpress.com/2019/06/05/waspi-hypocrisy/
  48. https://gentlemansfamilyfinances.wordpress.com/2019/06/07/green-money-greencoat-uk-wind-share-offer-update/
  49. https://financeyourfire.com/2019/06/04/portfolio-update-may-2019/
  50. https://pursuefire.com/monthly-each-way-betting-report-11-may/
  51. https://obviousinvestor.com/p2p-lending-portfolio-update-for-may-2019/
  52. https://www.iretiredyoung.net/single-post/2019/06/01/Early-Retirement-Couple—Part-2
  53. https://www.iretiredyoung.net/single-post/2019/06/07/Early-retirement-costs-targets—May-2019
  54. https://asimplelifewithsam.com/2019/06/07/may-spending/
  55. https://simplelivingsomerset.wordpress.com/2019/06/03/an-engineering-cameo-at-the-royal-bath-west-show/
  56. https://indeedably.com/gone-awry/
  57. https://indeedably.com/midlife-crisis/
  58. https://lovelygreens.com/when-to-harvest-potatoes/
  59. https://twothirstygardeners.co.uk/2019/05/wild-bees-natural-hive-attract-allotment-gardeners/
  60. https://twothirstygardeners.co.uk/2019/05/wormwood-making-vermouth-vermut-el-bandarra/
  61. https://agentsoffield.com/2019/05/26/first-harvest/

The Full English – Evolving radicalism vs Thanatos

What am I buggering on about this week?

We, as a society, are crap about talking about death. We don’t like to talk about it. It’s not polite conversation. It’s morbid. It’s uncomfortable. Yet we should talk about it. Getting old is part of life. Dying is part of life. You start off in nappies, get taller, get smarter, achieve your potential, then get smaller, ending up back in nappies. That end nappy part may be an uncomfortable thought, but it needs to be considered. Firstly because, as I’ve said before, that sort of care is expensive. Secondly, as The Accumulator at Monevator pointed out this week, longevity risk is a significant sword of Damocles over your portfolio that we’re increasingly error-prone at calculating (1).

I’m a pretty morbid sort on this blog. I suspect it comes from spending most days discussing suicide. But why as a society are we so bad at it? Fear of death is innate and hard-wired after millions of years of predation. Our ancestors evolved senses to not only hunt, but not be hunted. After all, you can’t procreate if you’re someone’s dinner. The awareness of this fact is intrinsically to the concept of ego and self-awareness, and has therefore been around for as long (2, 3). The logical step from ‘I think therefore I am’. You become aware of your identity, a self. An argument states the pressure of death anxiety led to the formation of early religions, as a way of placating anxiety at the extinguishing of the self and the maintenance of ego.

Death is therefore something the classical psychoanalytical types spend a lot of time on. Freud’s Todestreib (death drive) was in opposition to Eros, the life instinct/ drive (4). It is sometimes referred to as Thanatos. It was the drive and deep-rooted instinct towards destruction in opposition to the life instinct, which pushes us towards creation and fertility. All life had an innate drive to not exist; to return to a non-conscious state. Melanie Klein took this further in her description and psychoanalytical approach. As part of object-relations theory, Klein would suggest that elements of anxiety and fear are deep-rooted at an early stage, as part of a fear of death (5). In general I find Freud and Klein too contrived, too derivative and too full of collective assumption, without practical observation.

I much prefer Erik Eriksons’ explanation – it’s easier to understand and relate to. As part of the Psychosocial Stages of Development a person reaches a stage in their life called ‘Ego Integrity vs Despair’ (6). Conventionally it could be understood as a point where a person is a wise elder. If we accept our life cycle is our one and only chance, and we feel we have been successful, we are inherently satisfied. If feel guilt, we felt we have been unproductive or we did not accomplish our life goals we become despairing. Erikson said this applied from age 65+, but I feel this is much more flexible, and people’s ego states can move in or out.

Why am I talking about this? Well I think a lot of articles base their word count on this very contrast. I’m not just talking about that Guardian article about millenials smashing avocado (7). I’m talking about a huge quantity of the opinion pieces that litter written media. I was prompted to write this by an article, “How the baby boomers sold out”, that was in last weeks New Statesman (8).

Every generation has a hill it dies upon in it’s youth. As the radical fire is burnt out it becomes indentured. It develops Stockholm Syndrome for the capitalist society that props it up and provides it’s creature comforts. Erikson defines this as “Identity vs Role Confusion”, as part of defining the self and one’s political/ social/ moral beliefs (6). If you extend that out across a generation you see how each successive group of teenagers seeks to define itself against it’s elders. Thus every generation, in the course of normal self-development, will be in conflict with those older than it and their expected societal margins. You can see it now in the school strikes. It has existed since the concept of self. The old have always complained about the young in turn. Aristotle said:

“They [Young People] have exalted notions, because they have not been humbled by life or learned its necessary limitations; moreover, their hopeful disposition makes them think themselves equal to great things — and that means having exalted notions. They would always rather do noble deeds than useful ones: Their lives are regulated more by moral feeling than by reasoning — all their mistakes are in the direction of doing things excessively and vehemently. They overdo everything — they love too much, hate too much, and the same with everything else.”  (9, 10)

So next time you read an article which complains about the young, or rails against the boomers, remember your own life course. This is the path we all tread. Reflect on what you were radical about, and enjoy this new generations radicalism.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://monevator.com/why-your-life-expectancy-is-much-longer-than-you-think/
  2. https://sites.ualberta.ca/~jennyy/PDFs/13713823.pdf
  3. https://en.wikipedia.org/wiki/Death_anxiety_(psychology)
  4. https://en.wikipedia.org/wiki/Death_drive
  5. http://www.melanie-klein-trust.org.uk/paranoid-schizoid-position
  6. https://www.simplypsychology.org/Erik-Erikson.html
  7. https://www.theguardian.com/lifeandstyle/2017/may/15/australian-millionaire-millennials-avocado-toast-house
  8. https://www.newstatesman.com/culture/2019/05/how-baby-boomers-sold-out
  9. https://proto-knowledge.blogspot.com/2010/11/what-is-wrong-with-young-people-today.html
  10. http://www.bbc.com/capital/story/20171003-proof-that-people-have-always-complained-about-young-adults
  11. https://www.thisismoney.co.uk/money/markets/article-7066265/Stagecoach-launches-second-legal-action-Government-block-rail-bids.html
  12. https://www.bbc.co.uk/news/business-48306172
  13. https://www.theguardian.com/technology/2019/may/19/google-huawei-trump-blacklist-report
  14. https://www.bbc.co.uk/news/business-48347711
  15. https://www.theguardian.com/cities/2019/may/23/zero-recycling-to-zero-waste-how-ljubljana-rethought-its-rubbish
  16. https://www.theguardian.com/world/2019/may/21/belgian-monks-grimbergen-abbey-old-beer
  17. https://www.numbeo.com/cost-of-living/
  18. https://seths.blog/2019/04/the-avocado-principles/
  19. https://www.vox.com/platform/the-goods/2019/5/14/18563375/zero-waste-products-straws-jars-tote-bags
  20. https://www.businessgreen.com/bg/opinion/3076069/renewable-energy-is-now-a-commercially-attractive-investment-opportunity
  21. https://monevator.com/will-the-passive-investing-revolution-eat-itself/
  22. https://www.ukvalueinvestor.com/2019/05/cranswicks-low-dividend-yield.html/
  23. https://theescapeartist.me/2019/05/22/dont-be-a-nice-guy-be-a-good-guy-part-2/
  24. https://gentlemansfamilyfinances.wordpress.com/2019/05/17/green-money-greencoat-uk-wind-share-offer-may-2019/
  25. https://earlyretirementnow.com/2019/05/22/how-to-lie-with-personal-finance/
  26. http://earlyretirementextreme.com/why-do-so-many-people-hoard-so-much.html
  27. http://diyinvestoruk.blogspot.com/2019/05/vanguard-lifestrategy-60-year-4-update.html
  28. https://firevlondon.com/2019/05/26/holding-up-the-mirror-to-my-own-trading-behaviour/
  29. http://www.frugalwoods.com/2019/05/24/drink-whisky-look-at-stars-make-maple-syrup/
  30. http://quietlysaving.co.uk/2019/05/26/serious-investing/
  31. http://thefirestarter.co.uk/home-comforts/
  32. https://ditchthecave.com/love-your-job/
  33. https://thesavingninja.com/thinking-about-the-future/
  34. https://littlemissfire.com/springmount-gin-has-launched/
  35. https://awaytoless.com/productivity-systems/
  36. https://pursuefire.com/monthly-net-worth-report-11-april/
  37. https://pursuefire.com/meet-the-bettors/
  38. https://www.iretiredyoung.net/single-post/2019/05/24/Early-retirement—life-as-a-247-couple%F0%9F%A4%B7%E2%80%8D%E2%99%80%EF%B8%8F%F0%9F%A4%A6%E2%80%8D%E2%99%82%EF%B8%8F%F0%9F%99%84
  39. https://asimplelifewithsam.com/2019/05/26/treat-yourself/
  40. https://indeedably.com/flying-money/
  41. https://indeedably.com/ennui/
  42. http://twothirstygardeners.co.uk/2019/05/an-interview-with-medwyn-williams-veg-growing-ace/
  43. https://sharpenyourspades.com/2019/05/10/allotment-jobs-for-may/

The Full English -HM Rev & Customs MVP

What’s am I buggering on about this week?

IMO the current government are utterly inept. That doesn’t stop the civil servants in the Palace of Westminster though, oh no. And some clever dick in HM Rev & Customs has been playing in a blinder over the last few years. Act 1) Letting inheritance tax quietly roll in. TI covered this in the Monevator weekend reading a few weeks back, but I wanted to look in further detail (1). The increasing CGT returns has partly come from increasing inheritance tax. This is the wealth of the baby boomers, coming home to the treasuries roost. To quote the i article, in the past 20 years the total value of people’s estates has more than doubled, so that as a percentage of income it’s reaching 1930s levels (2). It will continue to rise as the wealthiest generation die off.

I don’t particularly like inheritance tax. Beyond personal reasons I see it as an inefficient method of redistributing wealth stinging the middle class rather than the truly rich (who can circumvent it), and essentially double-taxation. YFG said it better on Monevator than I ever can (3, 4). Inheritance tax is currently at a relative effective low, but there are many calls for change. Some of this is driven by the way inheritance tax is stinging younger generations, who due to house price change have not been able to afford property and so have been waiting for inheritance to give them a step on the ladder (2). A survey published this week by Charles Stanley suggested that for many this expectation was unrealistic (5). Millennials were expecting 10x the median inheritance amount. The expectation was that this would act as their housing deposit, whereas in actuality the people they were inheriting from are living longer and more likely to use their house equity for nursing homes and then inheritance tax bills. Silly millennials.

What about Act 2? The BTL taxation noose. I’ve talked before about how I believe BTL is HMRC’s low-hanging fruit of choice. Now landlords are looking to sell-up as the new rules come into force (6). I think this is a really clever piece of rule-making. In the changes to Section 21, the government have made it harder to evict no-fault tenants, appeasing a big voting base (7). In the increase in stamp duty and removal of income tax relief they’ve stung profits, but harmonised with other income sources (8). Offsetting mortgage interest payments against income tax makes some sense from a business world point of view; like using stock write-downs and depreciation to reduce income assessments. It doesn’t make sense when you compare it to other private property scenarios, where you can’t offset your income tax bill with your domestic mortgage interest. Here it levels the playing field. The changes to the minimum EPC rating required for rental (now E), and tightening of BTL lending controls are just the kicker (9).

Practical upshot of tightening the rules on the BTL free-for-all, hobby landlords are driven out and professional landlords remain. Landlords come in all shapes and sizes, but those just about making the sums work are now going to struggle. The sale of these previously rented properties provides a nice CGT boost to the treasury, and also brings new property onto the market at a time when there is a housing stock shortage: double win! Just a shame these properties are generally only fair to middling quality, being ex-rental.

No longer interested in a BTL? Well you could go for a REIT, but I learnt this week about REAPs; Real Estate Annuity Plans (10). A sort of real estate investment bond, which funds affordable housing developments. Return is only 3%, but you get a nice warm glow inside without having to trigger your poverty allergy.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://monevator.com/weekend-reading-capital-gains-tax-receipts-are-soaring-a-good-bad-problem/
  2. https://inews.co.uk/news/business/britain-entering-golden-age-inheritance-baby-boomers-leave-assets/
  3. https://youngfiguy.com/inheritance/
  4. https://monevator.com/inheritance-tax/
  5. https://www.bbc.co.uk/news/business-48213333
  6. https://www.which.co.uk/news/2019/05/landlords-should-you-sell-your-buy-to-let-properties/
  7. https://landlords.org.uk/support-advice/april-2019-changes-to-section-21
  8. https://www.moneyadviceservice.org.uk/en/articles/buy-to-let-property-investments
  9. https://www.gov.uk/government/publications/the-private-rented-property-minimum-standard-landlord-guidance-documents
  10. https://www.theguardian.com/money/2019/may/04/ethical-housing-reaping-the-benefit-while-helping-out
  11. https://www.which.co.uk/news/2019/05/almost-700000-fewer-savers-open-cash-isas-are-isas-still-worthwhile/
  12. https://www.bbc.co.uk/news/business-48185806
  13. https://www.theguardian.com/commentisfree/2019/may/06/universal-basic-income-public-realm-poverty-inequality
  14. https://www.bbc.co.uk/news/business-48174797
  15. https://www.cnbc.com/2019/05/05/traders-brace-for-sharp-sell-off-on-trumps-tariff-threat.html
  16. https://www.theguardian.com/business/2019/may/06/zombie-firms-a-major-drag-on-uk-economy-analysis-shows
  17. https://www.independent.co.uk/environment/uk-coal-renewables-record-climate-change-fossil-fuels-a8901436.html
  18. https://www.bbc.co.uk/news/business-48215896
  19. https://www.autocar.co.uk/car-news/industry/analysis-just-how-green-are-electric-vehicles
  20. https://news.sky.com/video/i-owe-it-to-patients-to-work-extra-hours-but-im-being-penalised-11714585?fbclid=IwAR2cS3aGhMMhk0wyWBpo4K0q3H-fr7adUyEzSDaZB9eKoYA2bsNoSFN3QA0
  21. https://www.theguardian.com/technology/2019/may/05/airbnb-homelessness-renting-housing-accommodation-social-policy-cities-travel-leisure
  22. https://monevator.com/personal-financial-disaster/
  23. https://www.mrmoneymustache.com/2019/05/08/tesla-procrastination/
  24. https://www.ukvalueinvestor.com/2019/05/reckitt-benckiser-share-price-decline-good-value.html/
  25. https://www.ukvalueinvestor.com/2019/05/selling-compass-group-after-share-price-gains.html/
  26. https://3652daysblog.wordpress.com/2019/05/06/stocktake-q1-2019/
  27. https://cashflowcop.com/multi-millionaires-and-still-have-to-make-choices-johns-story/
  28. http://earlyretirementextreme.com/what-permaculture-and-ere-have-in-common.html
  29. http://diyinvestoruk.blogspot.com/2019/05/im-getting-up-to-speed-on-climate.html
  30. https://firevlondon.com/2019/05/11/april-2019-were-back-on-top-of-the-world/
  31. https://ditchthecave.com/love-to-lose-my-job/
  32. http://fiukmoney.co.uk/april-19-net-worth-and-monthly-update-9-434843-561/
  33. https://thesavingninja.com/dont-borrow-worry-from-tomorrow/
  34. https://awaytoless.com/why-we-keep-our-finances-separate/
  35. https://awaytoless.com/monthly-spending-april-2019/
  36. http://eaglesfeartoperch.blogspot.com/2019/05/two-islands.html
  37. https://www.iretiredyoung.net/single-post/2019/05/10/Some-early-retirement-confusion
  38. https://indeedably.com/challenge-the-premise/
  39. https://indeedably.com/history-repeats/
  40. https://www.jackwallington.com/long-term-planting-on-the-allotment/
  41. https://sharpenyourspades.com/2019/05/10/allotment-jobs-for-may/
  42. https://paulnelson90.wordpress.com/2019/05/10/what-to-do-with-radish/

 

 

 

 

The Full English Accompaniment – A life like Miss Havisham?

What’s piqued my interest this week?

Lately I’ve been struggling to post regularly to this blog. One of the things that’s kept me busy in recent weeks is helping out a couple of friends with their house. How they came to it is like the plot of a B movie. It goes like this:

Mr & Mrs X worked for many years for an old lord, taken on to look after him in his dotage. The old lord lacked heirs, and all his family were long dead. When he died in the 1950s, virtually destitute, they were surprised to inherit his house, a rambling 6 bed Tudor/ Victorian lump (plus outbuildings and grounds) in commuting distance to London. Being lowly housekeepers well into their 50s they could not afford the upkeep on the pile. To pay the bills they took on a lodger, Mr Y, newly qualified in his profession and looking for cheap accommodation. Mr & Mrs X had no children and came to look on Mr Y as their adopted son. He helped around the house, did some modernisation and gradually took care of them as they got older. When they died, they left Mr Y the rambling house, which he cared for and maintained.

Our friends parents, Mr & Mrs A, met Mr Y some thirty years ago. Mr A and Mr Y worked in the same place, shared many interests and had the same taste in cars. They developed a good friendship, that lasted after Mr A moved to work elsewhere. Mr Y stayed in touch with Mr & Mrs A, seeing them monthly or so, and even providing gifts for their kids as the family grew. Our friend has fond memories of playing in the garden of the big house and exploring the rambling outbuildings; the old forge, stables, garages, piggeries etc. As the family got older they grew apart, Mr Y becoming reclusive, but they still saw him a few times a year. Mr & Mrs A moved further away, downsizing for their retirement on their pension.

A couple of years later Mr & Mrs A got a knock on the door in the middle of the night. It was the police. They were informed Mr Y had died, and could they identify the body and act as executor of the will. They arrived at the house to find it, in effect, derelict. Two rooms were accessible, which Mr Y had retreated to towards the end; the living room heated by a coal fire, and the kitchen where he boiled drinking water on a single ring stove and ate tins of spam. There was no heating. Electrics had been wired in ad-hoc by Mr Y, mostly in the 50s. Water was pumped from a well to a lead tank in the attic every day. Most rooms had simply been shut up and left.

In order to identify Mr Y they had to find documents to prove who he was. This involved entering rooms locked for years. One room was full of Victorian trunks containing the old lord’s family papers, including an invite to Queen Victoria’s birthday party. Another room was full of bees. Another had no floor, just a void to the cellar. The loft was inhabited by rooks. In a box in a closet in the spare bedroom was an expired passport.

The final kicker lay in Mr Y’s 20 year old will. It specified that the house was to go to Mr & Mrs A but they had to live in it as a family for two years before they could inherit. The house was uninhabitable. Cue the current situation, where Mr & Mrs A are living in a caravan in the grounds, slowly cleaning, updating and renovating.

Are there any lessons to this story or is it just a good dinner party anecdote? Mr & Mrs A were retired, drawing down their pensions and were not expecting to sink megabucks into a restoration project. Now they have a poisoned chalice. It doesn’t matter what you inherit if you can’t afford to maintain it (see here UK aristocracy). Plus there’s definitely other people out there like Mr Y, saving and making money on the stock market and living like misers (1). It’s a lesson not to forget that the money you earn, the property you own, must serve a purpose.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.bloomberg.com/news/features/2019-04-27/the-mystery-of-the-millionaire-hermit?srnd=businessweek-v2
  2. https://www.bbc.co.uk/news/business-48119158
  3. https://www.theguardian.com/business/2019/apr/29/big-tech-regulation-facebook-google-amazon
  4. https://www.nytimes.com/interactive/2018/10/07/climate/ipcc-report-half-degree.html
  5. https://www.bbc.co.uk/news/business-47960657
  6. https://www.theguardian.com/society/2019/apr/15/short-notice-evictions-face-axe-in-tenant-rights-victory
  7. https://www.bloomberg.com/news/articles/2019-04-29/u-s-lags-china-expands-in-race-for-electric-vehicle-dominance
  8. https://www.thisismoney.co.uk/money/howmoneyworks/article-6812847/Money-Diaries-Im-24-earn-43k-struggling-pay-debt.html
  9. https://monevator.com/find-the-best-online-broker/
  10. https://monevator.com/understanding-bond-index-funds/
  11. https://www.ukvalueinvestor.com/2019/04/invest-in-rolls-royce-plc.html/
  12. https://www.ukvalueinvestor.com/2019/05/2018-stock-market-correction-and-the-art-of-being-patient.html/
  13. http://earlyretirementextreme.com/get-a-push-lawn-mower.html
  14. http://www.frugalwoods.com/2019/04/29/vegetable-seed-starting-supplies-and-other-march-2019-expenditures/
  15. https://cashflowcop.com/daring-to-dream-financial-independence-vs-childcare-costs/
  16. https://tuppennysfireplace.com/how-to-reduce-food-waste-save-money/
  17. http://quietlysaving.co.uk/2019/05/04/april-2019-other-updates/
  18. http://diyinvestoruk.blogspot.com/2019/05/pssttwanna-own-wind-farm.html
  19. http://thefirestarter.co.uk/autopilot/
  20. https://ditchthecave.com/april-2019-update/
  21. https://thesavingninja.com/crazy-gains-savings-report-10/
  22. https://littlemissfire.com/monthly-update-april-2019/
  23. http://www.thefrugalcottage.com/april-2019-a-month-in-review/
  24. http://www.thefrugalcottage.com/dividend-income-april-2019/
  25. https://gentlemansfamilyfinances.wordpress.com/2019/05/01/month-end-accounts-april-2019/
  26. https://gentlemansfamilyfinances.wordpress.com/2019/05/03/what-i-learnt-from-my-dads-early-retirement-aged-60-part-2/
  27. https://financeyourfire.com/2019/05/01/portfolio-update-april-2019/
  28. https://financeyourfire.com/2019/04/29/lifes-a-budget-and-then-you-die/
  29. https://pursuefire.com/monthly-net-worth-report-10-march/
  30. https://obviousinvestor.com/p2p-lending-portfolio-update-for-april-2019/
  31. https://www.iretiredyoung.net/single-post/2019/05/03/Early-Retirement-Costs—April-2019
  32. https://asimplelifewithsam.com/2019/05/04/april-spending/
  33. https://simplelivingsomerset.wordpress.com/2019/05/04/brexit-not-in-my-name-thanks/
  34. https://indeedably.com/self-inflicted/
  35. https://www.visualcapitalist.com/world-population-pyramid-1950-2100/
  36. https://youtu.be/yrwDx7tS_bE
  37. https://paulnelson90.wordpress.com/2019/05/01/beltane-the-best-month-of-the-year/
  38. https://www.jackwallington.com/allotment-month-42-weeding-asparagus-and-carrots-potato-chilli-and-artichoke-update/
  39. http://twothirstygardeners.co.uk/2019/05/sustainable-growing-medium-coco-coir-coconut-peat-test-garden/
  40. https://lifeatno27.com/2019/04/30/bring-on-the-boston-beets/

The Full English Accompaniment – Blogroll and some updates

What’s piqued my interest this week?

A bit of an odd Full English this week, as I’ll round up and catch up a few things.

Blogroll

First off, I don’t keep a proper Blogroll on my site. I posted a condensed list last year, but some have come, some have gone, so here follows a list of those I check at least monthly and I include when composing the Full English. I generally favour posts of ‘substance’, tending to shy away from SEO optimised material. I also only tend to share UK blogs, though I read others. The blogs can be split into broad categories, but with lots of crossover between them:

Information, guides, advice and motivation:

Personal experience and progress:

  • Firevlondon – full fat investing from a high net worth blogger
  • The Frugalwoods – the homesteading FIRE dream from the US
  • Quietly Saving – Weenie has been documenting her progress for 5 years, providing motivation for many a FIRE convert
  • The Fire Starter – Has also been going many years and has lots of links to resources as well as blogging his financial journey
  • Ditch the Cave – The Caveman is a professional in his 40s and has been saving for some time, but only started blogging this year, following his progress and thoughts
  • Dr Fire – Another blog started in the last year, interesting to me because of the shared academic background
  • FI UK Money – Fu Mon Chu is in his 40s and tracking his FI journey
  • The Saving Ninja – Blogs his own financial progress, but also lots of advice and the author of the popular ‘Thought Experiment’ series
  • Ms Zi You – Has been going about as long as I have, and alongside blogging about feminism and travel, runs the UK FI Podcast
  • Little Miss Fire – Blogging her progress, recently moved from their wordpress across to a dedicated site. No updates in a couple of months so may have dropped off the radar now
  • A Way to Less – New to the scene, professionals in their 20-30s documenting their progress
  • The Frugal Cottage – More frugal finance than FI blog
  • Gentlemans Family Finances – GFF blogs their progress but also tips on his process
  • The Finance Zombie – Has been tracking his saving and goals for many years
  • Where eagles fear to perch – The eagle does a bit on investment and a bit on gardening
  • Finance Your Fire – Offers his own experiences but also links to charts and lots of info
  • Early Retirement Guy – Periodically updating with his progress
  • Financially Free by 40 – Huw achieved FI at 34. His blogs been quiet for about a year, but I believe he’s still about on forums and at events
  • Pursue Fire – Dan at Pursue Fire has been going for about a year, blogging his monthly net worth and his matched betting
  • The Canny Contractor – Information on P2P, tools for contracting and quarterly income reports
  • The Obvious Investor – Blogs his growth and P2P portfolios
  • The English Investor – Quarterly reviews, company looks and general opinions pieces about the market
  • I Retired Young – David retired three years ago, and offers expenses and drawdown numbers as well as experiences from the other side
  • A simple life with Sam – thoughts, tips, habits and monthly spending reports

Finance and philosophical opinions:

  • Simple Living in Somerset – Opinions and sass from the learned Ermine
  • Indeedably – To be honest, Indeedably does a bit of everything, tracking his progress, offering charts and financial info, but I mainly follow for the philosophical reflections
  • FIREthe9to5 – Has left the working life behind now, but still gives their thoughts
  • Sexhealthmoneydeath – Lots of thoughts and reflections here, but no updates since last August means they may too have retired

Gardening:

  • Life at no 27 – Annabelle blogs about her allotment experiences and sharing the wellbeing benefits with others
  • Real Men Sow – Jono at Real Men Sow blogs about growing your own veg, and kept a financial track of money saved. Sadly no updates since last autumn
  • Lovely Greens – Tanya blogs about gardening frugally, sustainably and organically
  • Two Thirsty Gardeners – Gardening tips, along with homebrew, booze and restaurant reviews
  • Jack Wallington – An RHS qualified gardener, sometimes heard on GQT on R4, who blogs about his own allotment and garden
  • Sharpen Your Spades – Richard at Sharpen Your Spades posts tips, advice and experiences
  • Paul’s Patch – Paul blogs about growing in his small patch
  • Agents of Field – Period growing updates and advice from Sophie and Ade, who can also been seen in various media spots

I’ve probably missed some, so I may well come back and add more in the future!

Updates

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

The Right Way to Keep Chickens – Virginia Shirt – Another guide to our new pets.

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://www.mrmoneymustache.com/
  2. https://monevator.com/
  3. https://www.ukvalueinvestor.com/
  4. https://theescapeartist.me/
  5. http://www.retirementinvestingtoday.com/
  6. https://earlyretirementnow.com/
  7. https://youngfiguy.com/
  8. https://3652daysblog.wordpress.com/
  9. https://cashflowcop.com/
  10. https://tuppennysfireplace.com/
  11. https://firevlondon.com/
  12. http://www.frugalwoods.com/
  13. http://quietlysaving.co.uk/
  14. http://thefirestarter.co.uk/
  15. https://ditchthecave.com/
  16. https://drfire.co.uk/
  17. http://fiukmoney.co.uk/
  18. https://thesavingninja.com/
  19. http://www.msziyou.com/
  20. https://littlemissfire.com/
  21. https://awaytoless.com/
  22. http://www.thefrugalcottage.com
  23. https://gentlemansfamilyfinances.wordpress.com/
  24. http://www.thefinancezombie.com/
  25. http://eaglesfeartoperch.blogspot.com/
  26. https://financeyourfire.com/
  27. http://www.earlyretirementguy.com/
  28. http://financiallyfreeby40.com/
  29. https://pursuefire.com/
  30. http://thecannycontractor.com/
  31. https://obviousinvestor.com/
  32. https://theenglishinvestor.com/
  33. https://www.iretiredyoung.net/
  34. https://asimplelifewithsam.com/
  35. https://simplelivingsomerset.wordpress.com/
  36. https://indeedably.com/
  37. https://firethe9to5.com/
  38. https://sexhealthmoneydeath.com/
  39. https://lifeatno27.com/blog/
  40. http://www.realmensow.co.uk/
  41. https://lovelygreens.com/blog/
  42. http://twothirstygardeners.co.uk/
  43. https://www.jackwallington.com/
  44. https://sharpenyourspades.com/
  45. https://paulnelson90.wordpress.com/
  46. https://agentsoffield.com
  47. https://www.bbc.co.uk/news/business-47852589
  48. https://www.theguardian.com/environment/2019/apr/21/the-zero-waste-revolution-how-a-new-wave-of-shops-could-end-excess-packaging
  49. https://www.thisismoney.co.uk/money/news/article-6952181/Save-planet-cash-20-little-changes-2-500-extra-year.html
  50. https://twitter.com/HBP_Surgery_CHS/status/1117720690759753730?s=09
  51. https://www.moneyobserver.com/news/nhs-doctors-to-reduce-working-hours-unless-lifetime-allowance-changed
  52. https://monevator.com/weekend-reading-capital-gains-tax-receipts-are-soaring-a-good-bad-problem/
  53. https://inews.co.uk/news/business/britain-entering-golden-age-inheritance-baby-boomers-leave-assets/
  54. https://www.theguardian.com/money/2019/apr/20/an-isa-with-824-fixed-interest-a-year-is-that-simply-too-good-to-be-true
  55. https://www.bbc.co.uk/news/business-48015613
  56. https://www.msn.com/en-gb/news/uknews/half-of-england-is-owned-by-less-than-1percent-of-the-population/ar-BBW2oP3?ocid=spartanntp
  57. https://www.theguardian.com/business/2019/apr/17/house-prices-rise-at-slowest-for-six-years-as-brexit-drags-on-growth
  58. https://www.bbc.co.uk/news/business-47969528
  59. https://www.express.co.uk/life-style/life/1118865/state-pension-uk-how-much-is-state-pension-forecast-2019/
  60. The bull market continues because of the Fed
  61. https://www.which.co.uk/news/2019/04/interest-only-mortgage-crisis-how-can-older-borrowers-repay-their-loan/
  62. https://www.eventbrite.co.uk/e/playing-with-fire-the-london-premiere-tickets-60671084848
  63. https://www.bbc.co.uk/news/business-47956891
  64. https://www.theguardian.com/money/2019/apr/19/so-what-are-the-chances-of-getting-300-off-mastercard
  65. https://www.theguardian.com/business/2019/apr/23/us-stock-market-boom-us-china-brexit
  66. https://www.theguardian.com/commentisfree/2019/apr/16/why-went-viral-after-talking-about-evicted-sky-news
  67. https://www.theguardian.com/education/2019/apr/16/teacher-live-back-van-personal-story-anonymous
  68. https://simplelivingsomerset.wordpress.com/2019/04/16/in-praise-of-the-flexible-isa/
  69. http://diyinvestoruk.blogspot.com/2019/04/orsted-new-addition.html
  70. https://gentlemansfamilyfinances.wordpress.com/2019/04/16/what-i-learnt-from-my-dads-early-retirement-aged-60-part-1/
  71. https://gentlemansfamilyfinances.wordpress.com/2019/04/24/sweet-nectar-money-saving-with-amex-updated/
  72. https://gentlemansfamilyfinances.wordpress.com/2019/04/23/im-a-millionaire-but-dont-look-it-part-1/
  73. https://thesavingninja.com/a-weird-month-savings-report-9/
  74. https://asimplelifewithsam.com/2019/04/02/march-spending/
  75. https://monevator.com/how-to-improve-your-sustainable-withdrawal-rate/
  76. http://www.mrmoneymustache.com/2019/04/11/the-real-benefit-of-being-rich/
  77. https://ditchthecave.com/paying-tax-personal-polemic/
  78. https://ditchthecave.com/money-buy-happiness/
  79. http://fiukmoney.co.uk/hey-kids-whos-for-wallyworld-this-year/
  80. https://thesavingninja.com/how-to-increase-your-savings-rate/
  81. http://thefirestarter.co.uk/the-egg-hunt-is-just-as-enjoyable-as-the-chocolate/
  82. https://indeedably.com/exposed/
  83. http://eaglesfeartoperch.blogspot.com/2019/04/living-with-paroxysmal-atrial.html
  84. https://cashflowcop.com/financial-independence-score-directory/
  85. https://www.iretiredyoung.net/single-post/2019/03/29/Some-small-and-random-things-I-like-about-my-early-retirement
  86. https://www.themiddlesizedgarden.co.uk/how-to-create-an-easy-sustainable-garden/
  87. https://lovelygreens.com/building-raised-garden-beds/
  88. https://lovelygreens.com/how-to-divide-grocery-store-basil-into-healthy-individual-plants/
  89. http://twothirstygardeners.co.uk/2019/04/growing-spuds-in-a-massive-sack-maris-piper-vine-rituals/
  90. https://paulnelson90.wordpress.com/2019/04/27/over-wintering-abundance/

The Full English Accompaniment – Watch the population slump, and then the economy

What’s piqued my interest this week?

In the allocations section of my Investment Strategy Statement I mentioned that I favour emerging markets (a generalisation) because of changing demographics. Events of the past few weeks have prompted me to flesh my thought process out. I have a hunch/ theory/ feeling in my waters that long term stock market movements correlate to changing demographics (so far so normal), particularly the ratio of 20-40 year olds to other demographics. This has long been muted, but is difficult to prove, partially (I think) because it depends on where and how you define the demographics and stock market changes, and how you look at dependants (1). It should be noted by the passive investor because if you invest in a national index now you want to be sure that that same index is going to keep going up.

The Japan Problem

Japan is the canary in the coalmine. People have been noting for some time the relationship between Japan’s relatively stagnant growth and its ageing population. This has improved somewhat under Shinzo Abe, averaging around 1% growth over the past decade despite the significant headwind of a falling population. With the highest life expectancy in the world and a fertility rate of 1.4, Japan’s population is getting older, with the expectation the proportion of those >65 will go from 3 in 10 to 4 in 10 in the next 40 years, with the population shrinking by 25% (2, 3). By 2025 it will have an aged dependant per worker ratio of 75% (3).

This is a huge challenge for a social security system, as more people rely on pensions and the healthcare system than the funds that are coming in (4, 5). Public debt increases or the numbers of workers increase, or both.

Europe

The problem I see is the EU isn’t that far behind. There’s a big post-boomer bubble coming, made up of those born 1955-75 (6). Shock! Millenial not slating the boomers.

We’re already starting to see one sign of the problem, as companies struggle under the weight of increasing pension debts. It’s one of the things that’s dragged down BHS, Debenhams, HoF, and look at the ongoing saga with private railway company operators. Stagecoach and Virgin don’t want to be on the hook for the Railways Pension Scheme deficit (7). As the working population reduces and the dependant population grows this chasm in the unfunded public sector pension schemes will yawn wider. Executives are looking down the barrel and running for the hills, to mix metaphors. This is across Europe. Germany and Italy have expanding dependant populations, Bulgaria has a birth rate of 1.5 and has seen its population fall by 2 million in 30 years, Poland is closing schools due to the lack of children (8, 9). Some countries though, like Sweden, are bucking the trend through immigration.

The Global Picture

Look wider and there are notes of caution but also reasons to be cheerful. Globally birthrates are falling, the low levels in the developed world balanced by high birthrates in India, the Philippines and Africa (8). Emerging market populations are growing faster than the developed markets are shrinking, so the population will keep growing, but at a slower rate (9). This is good news for the planet, which can’t sustain the current growth rates indefinitely, but bad news for those who dislike immigration, as migration will be required to maintain labour forces in the developed economies with shrinking populations. Or will it?

Before I move on it’s worth focusing on three more countries: India, the US and China (9, 10, 11).

Things are looking peachy for India, which has an expanding population likely to drive greater growth even as it modernises and develops (although this is not without its issues). The US is in better shape than most of the developed world, with forecasts for a relatively flat or increasing population before you even take migration into account (12). This is one of the reasons, combined with global corporate and technological monopolies, that I don’t believe the NYSE is about to undergo a crash when the boomers call time and cash their retirement cheques. But what happened to China? The single child policy. We’re past its peak, and now China is looking at a reduction in its working age population of 212 million by 2050 (10). 212 million less people working. That’s the current population of Brazil. That’s what state top-down planning gets you.

‘Abenomics’ and ways out

So how do we get out of our slump? Well we could open our borders to a motivated migrant workforce, but that would just be too sensible and easy. Some authors look back to Japan for the way out of this population pickle. Shinzo Abe has sustained growth in the face of a falling population primarily through recruiting more people into work who previously were not, alongside technological productivity developments (13). Japan in many ways is a deeply conservative country. The perceived social norm continues to be men go to work all day, women are home-makers. In 2013 Abe introduced ‘Womenomics’ (there’s a theme here), increasing female participation in the labour force through a number of methods (13, 14). I don’t feel this would necessarily translate to western European cultures, where women working is the norm. I think efforts in our economy to bring those out of the labour market for whatever reason into work, like zero-hours contracts, have been less successful. There’s more people in work, but productivity and earnings aren’t necessarily increasing.

Technology and automation, on the other hand, probably are solutions. Automation enables greater output with fewer workers, and can be applied to manufacturing, construction and some service industries, as it has in Japan (14). It’s not good news for the factory workers and low-skilled employees, which is all the more reason for Universal Basic Income – an argument for another time. There will continue to be some jobs robots will struggle with; caring roles or where intuition is required. As a shrink I’m probably safe. Robots are yet to understand human emotions.

Major caveats

Important flaws in this whole essay:

The stock market isn’t necessarily correlated with population demographics.

There’s lots of arguments and evidence of this. It can basically be boiled down to:

  1. You can’t correlate specific bear markets, like the dotcom bubble, to demographic/ population change points – this is often identification error
  2. External factors and drivers such as politics (e.g. the fall of the Berlin Wall/ communism etc) have unpredictable effects on a) markets and b) demographics
  3. The timescales and effect sizes are such that the end result on the stock market appears negligible (15, 16).

Add in the fact that we have an increasingly interconnected world, with global corporations taking earnings from multi-national operations, and it all gets murky. I don’t think any developed market is about to crash while companies listed on it’s market utilise cheap developing world labour (17). Just also don’t ignore a developing market with increasing capitalisation (18). Which is why I aim to hold more in certain developing markets. But you, as usual, should do your own research.

Have a great week,

The Shrink

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading (affiliate links):

The Right Way to Keep Chickens – Virginia Shirt – Another guide to our new pets.

Food Of The Gods: The Search for the Original Tree of Knowledge: A Radical History of Plants, Drugs and Human Evolution – Terence McKenna – An ethnobotanist explores humanitys’ fascination with hallucinogenics, and the role of altered states of consciousness on the development of human society.

References:

  1. https://bit.ly/2UVX1x6
  2. https://www.indexmundi.com/japan/age_structure.html
  3. https://www.weforum.org/agenda/2018/12/japans-economic-outlook-in-five-charts/
  4. https://www.economist.com/the-economist-explains/2018/11/26/the-challenges-of-japans-demography
  5. https://www.project-syndicate.org/commentary/japan-demographic-lesson-european-growth-by-daniel-gros-2017-11?barrier=accesspaylog
  6. https://www.indexmundi.com/european_union/age_structure.html
  7. https://www.theguardian.com/business/nils-pratley-on-finance/2019/apr/10/unloved-stagecoach-may-have-a-point-on-rail-franchise-pension-risks
  8. https://www.theguardian.com/business/2019/mar/31/birthrate-crisis-require-new-mindset-growth-population-prediction
  9. https://www.businessinsider.com/2-charts-tell-the-global-demographic-story-2015-12?r=US&IR=T
  10. https://www.businessinsider.com/changes-to-working-age-population-around-the-globe-2016-12?r=US&IR=T
  11. https://www.indexmundi.com/united_states/age_structure.html
  12. https://fat-pitch.blogspot.com/2018/05/demographics-growing-prime-working-age.html
  13. https://www.wsj.com/articles/how-aging-japan-defied-demographics-and-turned-around-its-economy-11547222490
  14. https://www.cnbc.com/2018/02/09/what-is-japans-secret-women-and-technology.html
  15. https://medium.com/street-smart/the-demographics-of-stock-market-returns-part-ii-a41a46622198
  16. https://global.vanguard.com/portal/site/institutional/nl/en/articles/research-and-commentary/vanguard-voices/demographics-and-equity-returns-vv
  17. https://www.economist.com/finance-and-economics/2019/03/28/slower-growth-in-ageing-economies-is-not-inevitable
  18. https://www.forbes.com/sites/advisor/2018/08/01/should-long-term-investors-own-more-emerging-market-equities/#3fcebc6854ee
  19. https://www.bbc.co.uk/news/business-47609539
  20. https://www.theguardian.com/business/2019/apr/04/sales-new-cars-fall-uk-consumers-continue-shun-diesel-brexit
  21. https://www.theguardian.com/business/2019/apr/04/us-china-risk-house-price-slump-trigger-recession-imf-lending
  22. https://www.theguardian.com/business/2019/apr/01/was-the-us-stock-market-boom-predictable
  23. https://www.theguardian.com/business/nils-pratley-on-finance/2019/apr/01/fca-supervision-lcf-london-capital-finance-investigated
  24. https://monevator.com/the-slow-and-steady-passive-portfolio-update-q1-2019/
  25. https://monevator.com/what-is-a-sustainable-withdrawal-rate-for-a-world-portfolio/
  26. http://quietlysaving.co.uk/2019/04/01/march-2019-other-updates/
  27. http://quietlysaving.co.uk/2019/04/11/freetrade/
  28. http://www.mrmoneymustache.com/2019/04/01/how-i-sold-this-website-for-9-million/
  29. https://gentlemansfamilyfinances.wordpress.com/2019/04/01/month-end-accounts-march-2019/
  30. https://gentlemansfamilyfinances.wordpress.com/2019/04/03/fire-health-the-diabetes-epidemic/
  31. http://diyinvestoruk.blogspot.com/2019/04/trig-share-offer-completed-update.html
  32. https://youngfiguy.com/audit-reform/
  33. https://simplelivingsomerset.wordpress.com/2019/04/09/through-the-brexit-looking-glass/
  34. http://eaglesfeartoperch.blogspot.com/2019/04/financial-planning-2019-annual-review.html
  35. https://www.msziyou.com/net-worth-updates-march-2019/
  36. https://www.msziyou.com/dating-as-a-feminist/
  37. https://indeedably.com/random-acts-of-bastardry/
  38. https://indeedably.com/feels-like-home/
  39. https://indeedably.com/designed-to-fail/
  40. https://www.ukvalueinvestor.com/2019/04/rightmoves-share-good-value-dividends.html/
  41. https://www.ukvalueinvestor.com/2019/04/three-value-traps.html/
  42. https://www.ukvalueinvestor.com/2019/04/three-value-traps.html/
  43. https://tuppennysfireplace.com/how-to-stockpile-food-shortage/
  44. http://twothirstygardeners.co.uk/2019/04/building-a-raised-bed%EF%BB%BF/
  45. https://sharpenyourspades.com/2019/04/13/allotment-gardening-and-the-power-of-to-do-lists/

View at Medium.com