Good reads from around the Web.
I have greatly enjoyed reading blogger Ermine’s lambasting of the more delusional middle classes over the years.
I think he is a canary in the coalmine – one of their own1 who speaks truth to (fading) power, like a court jester in a cozy cardigan.
I am highlighting Ermine’s latest rant simply because I wish I’d written the metaphor he deploys while explaining how globalization means the world’s workforce is chasing down on comfy middle-class lifestyles:
“They want to eat your lunch and your nice sinecures where Mr Wealthy but Dim used to cling to the pipes of capitalism like slime moulds slowing down the system a bit.”
Wow. Write a book man!
Meanwhile, over at the Financial Times (search result) Merryn Somerset-Webb is typically brilliant in explaining how political meddling and the resultant stupid tax and benefits system is turning financial common sense on its head.
She usually tells young people:
“If you want to get rich, stay rich and retire in style, I say, avoid taking on too much debt, save early, save often, put the money away in cheap tax efficient investment products and let maths do the work for you.”
But?
“But the more often I say this to the young, the more I think to myself that it isn’t a message for the modern world, filled as it is with distorting financial incentives.
Working and saving hard might be one way to have a go at creating a reasonable retirement.
But, perhaps what I should really be saying to my students is that a much better route to wealth is to work 16 hours a week, borrow money to buy a house on the side, and to devote the rest of your time to being really nice to your relatives in the hope that they will favour you in their wills.”
As for me, here’s my message, whether you’re a middle-class ‘meh’ income earner still dreamily following your parents’ scripts or a young person wondering who is looking out for you.
Nobody is looking out for you.
That is why you must learn how to be a capitalist for yourself.
From the blogs
Making good use of the things that we find…
Passive investing
- The role of luck in your portfolio – A Wealth of Common Sense
- Beware of bad data [Canadian, but relevant] – CCP
- Comparing fund platforms: A case study – DIY Investor (UK)
- The intellectual case for international stocks – Oblivious Investor
Active investing
- When the next big crash comes – The Reformed Broker
- 5 profitable, debt-free dividend growers – UK Value Investor
- Is it now smart to be dumb? – The Investor’s Field Guide
- 10 non-investing quotes with great lessons – Clear Eyes Investing
- Amortisation: Ignoring the bad stuff – Richard Beddard
- The value and pricing of cash – Musings on Markets
Other articles
- 3 paths to spending like a Jedi – The Escape Artist
- What stuff really delivers value? – Under the Money Tree
- 5 ways to start investing – Save the Student
- Gifting the inheritance away – Keeper of the Cauldron
- Big raises and lifestyle creep – Nerd’s Eye View
- Annuities are more useful than understood – Squared Away
Product of the week: The trouble with taking money out of a six-year old bull market is that you have to put it somewhere. With ISAs full of shares and the Santander 1-2-3 account fully topped up, a young middle-aged man’s thoughts naturally turn to premium bonds, where the limit is set to be raised to £50,000. I still haven’t bought any, despite following them for years. The Guardian also summed up the pros and cons this week.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.2
Passive investing
- Roth: Can indexing become too big? – AARP
- Burton Malkiel: Smart Beta is just smart marketing – AP
- Swedroe: No refuge in dividend stocks – ETF.com
- Are you devoting too much time to niche asset classes? – Morningstar
Active investing
- 9 AIM shares to buy and hold forever… – Interactive Investor
- …and 10 expected to grow their dividends – Telegraph
- The young Wall Street traders who’ve never seen rates rise – Bloomberg
- The tanker market’s warning to oil bulls – Bloomberg
Other stuff worth reading
- 8 reasons you make bad decisions with money – Guardian
- Carl Richards: Short-term, go for the bird in the hand – NY Times
- Patagonia: The anti-growth company – NY Times
- Michael Lewis: How crazy we all are – Bloomberg
- Market crashes haunt investors for decades – Bloomberg
Book of the week: Everyone knows we’re nuts these days – an almighty stock market crash like 2007-2009 will do that to people’s perceptions. No wonder that behavioral economics has become the new orthodoxy. Get a longer term take from one of the gurus in the field, Richard Thaler, with his new book Misbehaving: The Making of Behavioral Economics
Like these links? Subscribe to get them every week!
- Yes, I am going to pull the ridiculous working class roots card here for kicks. I wouldn’t have 10 years ago, but then I started to meet the families of proper middle-class people, which was eye-opening to a young-ish lad raised in the far-flung provinces. [↩]
- Note some FT articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]
Merryn’s first quote is pretty much exactly my game with the exception I probably started a little late. 7 and a bit years into my journey and I’d say the quote is a sensible one that will get most a very long way.
Thanks for the callout!
I second “be a capitalist”. I got away with not building capital until I was middle-aged – that sort of slowness won’t cut it nowadays, sadly 🙁
Outstanding collection this week. So pleased you got Merryn’s in there — really is true that the evils of society – booze fags n jobs – attract the punitive rates.
Wish I had more time to read them all, but am busy printing out KotC’s article for the old man…
“9 AIM shares to buy and hold forever”
I think the AIM index has done astonishingly badly over the last 15 years, still down over 50% or something, making the FTSE 100 look like a star performer, so it’s pretty brave of anyone to promote AIM shares. I was amused at the ticker for James Latham (LTHM), unnervingly close to the acronym of a certain disastrous “hedge fund” that hedged rather badly.
@david — I don’t know if you’re a stock picker or a passive investor, but that index has been totally screwed by all kinds of things, from micro-cap resource companies to Chinese frauds to jam tomorrow blue sky growth stocks.
I’ve made plenty of money buying and owning AIM companies by treating them like investing in businesses (a la Buffett).
I wouldn’t choose to but wouldn’t lose sleep if I was told I *had* to at gunpoint put all my money into a dozen AIM stocks this coming Monday, provided I could freely choose which companies I bought.
I’d weep for a day if I had to buy that index! 🙂
@ermine — Indeed. You may be interested to hear also that I am finally getting very slightly worried about the future, for reasons other than environmental collapse. (Artificial Intelligence, since you didn’t ask… 🙂 I may write a post on this soon.)
@Mathmo — Hah. Yes, inheritance lottery by another name really but I understand the motivation and admire the clear thinking in face of a difficult problem set.
@RIT — Me too! But I’m not 18 these days, and I was never going to follow the conventional path. Clearly Merryn is picking her counter-examples to make a point, but it’s a good one I feel.
Thanks for the list. Article re indexing getting too large was interesting. Possible? Feels like if it went that way active investing would start to get more market share again as opportunities of values arose… I’ll carry on for now with trackers
Lots of interesting stuff there, thanks… and in the comments too.
I can see you’re moving on from worrying about globalisation to robotisation (AI), although if you’re worried about AI wiping us out I’d say we’re likely to do a pretty good job of that ourselves, with those things we invented almost a century ago called nukes.
Personally I’m not too fussed. It’s not as if immortality is an alternative anyway.
@david — related to the inheritance issue — if you can’t persuade the older generation to follow KotC’s lead… One of the stunning attractive things about AIM stocks is that they can be held inside an ISA and are inheritance tax free (mostly — depends on company by company basis, HMRC don’t make it easy, most real companies count) after just two years of holding. Totally tax free all round, then.
This solves the usual conundrum of the older investor rather well: put it in AIM stocks (LTHM is one that I’ve put in a portfolio I manage: spectacularly well-managed company) and it is there as a rainy day fund if needed and IHT free if it is not. And just two years to wait for exemptions instead of the usual seven. There is capital risk and volatility here, but actually there are some solid stocks in there as well as the expected collection of coconut shys, get-rich-quicksters and fantasists.
If volatility is an issue, then according tax rules, you can actually sell them after two years and sit on cash for a couple more and then stick it back in the market so actually experience less volatility than larger caps, done right. Probably good to take proper advice if you’re going to do this.
* * * *
Personally I took a little sit down, a cup of tea and a long look in the mirror after the “The Reformed Broker” crash piece — but aspirational too:-
“I’m so passive, I don’t make a single trade all year.”
“Oh yeah? Well I’m so passive I dropped the login password for my accounts into a river.”
“Oh yeah? Well I’m so passive, I don’t even get out of bed during market hours.”
“Well take this – I’m so passive I don’t cast a shadow.”
“I’m so passive I don’t even f***ing breathe.”
Probably not the point he was making…
@UK Value Investor — I’m not worried at all about globalization! 🙂 I have argued with people for years about that being a positive picture in the grand scheme of things. (Me and Ermine used to have this discussion a lot).
e.g. This article:
http://monevator.com/public-love-sweatshops/
What I *am* worried about, which may be the cause for confusion, is the resultant local inequality. (I think it reduces inequality on the global stage). And when I bring it up it’s often because people say something like “politicians and rich bankers make us more unequal” and I am pointing to globalization (among other things) as a bigger cause.
I am not actually *that* worried about *robots*, either. However I am worried that AI might be something slightly different, for a variety of reasons that would take hours to discuss.
But here’s a good stab by someone else:
http://nymag.com/daily/intelligencer/2015/05/jeopardy-robot-watson.html
The bit I am concerned with robotics is that it will generate a hell of a political problem, one called out a long time ago about control of the means of production (once labour is no longer a significant factor of production). What goes against the likelihood of The Singularity to my mind is that so many key players seem to think it theoretically possible you can reboot a deceased frozen human head. And restart the original personality from the brain-state-less cadaver.
If we get that right, and I am not clever enough to have any idea what right is, then I’m with Keynes’s Economic Possibilities for our Grandchildren and NYmag
Work really isn’t all that it’s cracked up to be. It’s taken me over 50 years to shoot it. Progress would be dropping that figure – I’m a little bit sore that Keynes’ prediction didn’t happen in my working lifetime. There no danger of getting bored. The world is plenty full of interesting stuff and it doesn’t seem to be running out any time soon!
@Mathmo,
Your quote from the ‘Reformed Broker’ made me laugh out loud. A rare event and one much needed after the last few days I’ve had.
Have you got any more like that?
Just to say thanks for the mobile version, I know you were reluctant but I’m grateful I no longer have to squint while catching up with my favourite weekend reading on a Sunday morning in bed.
A great selection as usual, keep up the good work!
Nice links again I must admit that the reformed broker bit sounded a bit like special pleading for expensive financial advice. My reading of the last down turn was that the equity funds with the lowest rates redemption were in the low cost passive group.
Loved the Michael Lewis book review and have bought Misbehavin on the back of it.
I have a major weakness of pop economic books and really enjoy Tim Harfords stuff and ‘Thinking fast Thinking slow’.
@ermine – Just last night I watched a 1978 Horizon “The Chips are Down” (part of the BBC Collection on iPlayer) about the development of the microprocessor and what it might mean for the economy. This was followed by a studio debate between now-defunct Big Business dude, now absorbed Union honcho, and the still functioning SPRU at Sussex University.
Fascinating thing was what the programme got right and wrong about the progress and impact of the sikicon chip.
Also fascinating was the debate afterwards on what people would do to earn a living once we automated away secretaries, petrol pump attendants and car production line workers. They really struggled with the idea of things like design or ‘software’ as an exportable product. The interviewer in particular kept wanting to come back to the idea that only physical goods have value and that software was not a product but a tool for making products. They also all seemed to think that shorter working hours would be inevitable (cue hollow laughter).
I was watching with my 20’s son (historian) who found it a fascinating piece of social history. “Why is the union representative there, and why do they keep asking him whether we should embrace, or even allow, automation?”
I thought about all the buzz about RAS (Robotics and Autonomous Systems), the Internet of Things and AI, and wondered whether we have any better view of what the next 40 years will look like than they did. I am an optimist because somehow through major changes in technology we seem to figure out a new model in which most people don’t starve as the result of technology shift.
For an interesting clooection of stats on how our economy has changed over the last 170 years, try this from the ONS http://www.ons.gov.uk/ons/rel/census/2011-census-analysis/170-years-of-industry/170-years-of-industrial-changeponent.html
old_eyes
Rather than looking at globalisation as a threat, why not treat it as an opportunity? Yes, these other countries are potential competitors, but they are also lucrative markets. As someone who’s been export driven from the get go (even while at university!) I just can’t get my head around the Little England mentality that makes people want to turn back the clock rather than invest in technology, learn about other cultures and markets, and export like crazy.
My team is now across four continents and we sell into all of the major world markets.
Yes, some traditional “middle class” jobs may have gone, but a whole load more have opened up.
@GOP
I can’t take any credit for that. TRB wrote it and TI found it. I just cut and paste the bit I read before I spat the tea out onto my keyboard.
@gadgetmind — As I say, I’ve got no problem with globalization and agree it’s a net gain for humanity, as it has been for hundreds of years. That doesn’t mean it doesn’t have local consequences that may not be fully understood. Nor does it have anything to do with my concerns about AI! 🙂
AI will continue to slowly do what mechanisation and industrialisation have been doing for centuries. Those who don’t get the opportunity to acquire valuable skills (or get the opportunity but choose to squander it) will find that they can only obtain menial work, if any. Slowly this barrier between useful and (more or less) useless will be raised as machines become capable of carrying out more and more menial, and then not so menial, tasks. The big question is how societies will handle the degree of wealth redistribution required to allow this to work.
@Laura — Glad it works for you! 🙂
@All — Interesting comments, cheers. I may well do an article on this anon. In the meantime, here’s one on a totally different subject that I missed and enjoyed:
http://www.theplaidzebra.com/this-family-sold-everything-they-own-to-visit-400-national-parks-in-an-airstream-bus/
Thanks for this great list TI. So much to read, so little time! Another reason to indulge my “escape to the Galician countryside with just a vineyard, some chickens and a field of Padron Peppers” -I could live off that for ever and read in between. Ermine’s blog is an inspiration in that respect. I also read a great article in The Observer yesterday (found on the bus!) about a man who did the Good Life swap in Exmoor after a drunken deal with his wife.
I can certainly appreciate the value of tending to animals (especially goats which I have enjoyed keeping in the past) and land as opposed to the typical commercial work of cities and the associated soul destroying commutes. Watching “Britains Craziest Commutes” yesterday, my teenage son said he wanted a job where he could work from home. I think his generation may have more chance of that simply because as people have to live further away from city centres, and technology has developed, business will wake up to the benefits of offering work from home. That will lead to more efficiency and productivity and will, I would imagine compete with AI in some industries. We humans will have to rise to the challenge of AI and instead of being slaves to technology will have to use and outwit it. Some of it is scary, for example the biochip technology for drug delivery slightly freaked me -and I work in medicine!
http://microchipsbiotech.com/technology.php
A great read on all this in a historical evolutionary context is Yuval Harari’s ‘Sapiens’ although he is probably less positive about the outcome for our species.
Many thanks for the mention.
Much thought went into this decision but it was precipitated by my oldest son having a spell in hospital which did concentrate the mind (that old time/money balancing act again.) Plus if they have some of the money now at least we know how they’re spending it and can sit on the sidelines and “tut, tut” if necessary 🙂
(@mathmo – :-).
careful with the technological naval-gazing – its almost certainly a futile hobby, old solomon probably had it about right..
The sun rises, and the sun goes down,
and hastens to the place where it rises.
…
Is there a thing of which it is said,
“See, this is new”?
It has been already
in the ages before us.