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/
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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 – UK bloggers I follow

What’s piqued my interest this week?

As the glorious summer of Brexit discontent and trade wars continues, I’ve mainly ignored the press in favour of my new garden and unpacking.

Last week a few people commented about the extensive list of links I put up. I’ve got into the habit of reading financial blogs in my spare time at lunch. I thought therefore this week I’d make a list of those I follow. The first ten or so I check every couple of days, other I may look at fortnightly, saving up posts for a stack of reading. I favour UK bloggers, those that write informed (evidenced) guides and experiences, those that share their numbers and those that don’t preach opinions. If a blog starts giving me their own theories based only on anecdotes I quickly switch off and diagnose quackery. I’m aware others have made similar lists, but hopefully I’ll bring to light someone you’ve not read before. Without further ado:

Non-UK:

Anyone obvious I’ve missed? Get in touch.

Have a great week,

The Shrink

 

Side Orders

Other News:

Opinion/ blogs:

What I’m reading:

Eric by Terry Pratchett – light relief

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. http://monevator.com/
  2. http://quietlysaving.co.uk/
  3. http://thefirestarter.co.uk/
  4. https://firevlondon.com/
  5. https://simplelivingsomerset.wordpress.com/
  6. https://youngfiguy.com/
  7. https://youngfiguy.com/mrs-yfg-why-we-dont-fight
  8. http://thefireeng.com/
  9. http://diyinvestoruk.blogspot.com/?m=1
  10. http://diyinvestoruk.blogspot.com/2018/07/brexit-fudge.html?m=1
  11. https://www.ukvalueinvestor.com/
  12. http://financiallyfreeby40.com/
  13. http://www.thefrugalcottage.com/
  14. https://littlemissfireblog.wordpress.com/
  15. http://www.msziyou.com/
  16. http://www.msziyou.com/inflation-friend-or-foe/
  17. http://www.msziyou.com/nature-or-nurture/
  18. http://fiukmoney.co.uk/
  19. https://3652daysblog.wordpress.com/
  20. https://firethe9to5.com/
  21. https://tuppennysfireplace.com/
  22. http://www.earlyretirementguy.com/
  23. https://sexhealthmoneydeath.com/
  24. http://financialindependenceuk.com/
  25. https://makesaveinvestmoney.com/blog-page/
  26. https://theescapeartist.me/
  27. http://www.retirementinvestingtoday.com/?m=1
  28. https://www.mrmoneymustache.com/
  29. http://thecannycontractor.com/
  30. http://diversifiedfinances.com/
  31. https://www.physicianonfire.com/
  32. http://www.bbc.co.uk/news/science-environment-44841123
  33. http://www.bbc.co.uk/news/business-44838413
  34. http://www.bbc.co.uk/news/business-44840953
  35. http://www.bbc.co.uk/news/business-44891786
  36. http://www.bbc.co.uk/news/business-44893625
  37. http://www.bbc.co.uk/news/business-44882861
  38. http://www.bbc.co.uk/news/uk-england-cornwall-44879858
  39. https://www.tax.service.gov.uk/help-to-save/about-help-to-save
  40. https://www.theguardian.com/business/2018/jul/19/more-than-500-gaucho-cau-workers-lose-jobs-as-restaurant-group-collapses
  41. https://www.theguardian.com/environment/2018/jul/19/subsidies-for-new-household-solar-panels-to-end-next-year
  42. https://www.theguardian.com/money/2018/jul/19/radical-plans-to-end-huge-costs-of-buying-a-freehold-unveiled
  43. https://www.theguardian.com/money/2018/jul/12/new-build-clawback-overage-persimmon-complete-survey
  44. https://www.theguardian.com/business/2018/jul/11/pounds-unexpected-robustness-may-point-to-underlying-strength
  45. https://www.bbc.co.uk/news/44880278
  46. https://www.bbc.co.uk/news/business-44851363