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Weekend reading: We might have bigger problems than a bad Brexit

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Trigger warning: Thoughts on Brexit and politics more widely, followed by the week’s good reads.

The few innocents who still believed Jeremy Corbyn could be a Bobby Ewing character to wake the country from its bad Brexit dream have had a nightmare week.

The Euro-sceptic Labour leader wrote to Theresa May setting out a Brexit compromise, and as the FT [search result] puts it:

The letter not only shows how the Labour leader is trying to wriggle away from a second referendum, to the frustration of shadow Brexit secretary Keir Starmer.

It is also a symbolic moment that gives succour to the many Labour MPs who are tempted to back the government because they fear a no-deal exit.

Labour MPs are turning on one another, while the right of the long-fractured Tory party is playing some kind of Keyser Söze move against itself.

As this two-year farce approaches a head, you’d find more trust among slip-sliding latecomers to the Red Wedding.

No wonder the exasperated EU let slip the pretense that it believes it is negotiating with grown-ups who know what they’re doing.

Surely even the most sensible and sober-minded sovereignty-seeking Leave voter must be embarrassed by now.

Yet Remainers can’t gloat.

Two years in and the Brexiteer MP Kate Hoey is still able to label elected MEP Guy Verhofstadt an ‘unelected bureacrat’ to social media applause, with no effective push back from Remainers or the press.

Meanwhile other Brexiteer MPs state nonsense like “no Marshall Plan for us, only for Germany” – when Britain was the chief beneficiary of the Marshall plan – only to get slapped on the back by a dad’s army of Barry Blimps desperate to stockpile cabbages in an old Anderson shelter at the bottom of the garden.

The civil service is paying particular attention in its no-deal contingency planning to those same regions that cheered on Brexit – because those areas will be hardest hit by the no-deal that many of them seem to desire.

And our negotiating strategy? It’s come down to shouting “the EU will sacrifice their politics for economic reasons” whilst defending our Brexit as “more important than economics”.

Honestly, at this point party politics seems irrelevant.

Indeed expressing a view on Brexit nowadays is not so much like revealing something about yourself through a Rorschach test as playing a bookish version of Cards Against Humanity.

We’ve gone beyond parody.

Won’t anyone think of the capitalists?

Negotiating Brexit through Parliament has devolved into constitutional Jenga played by blindfolded drunks over a fire pit.

But when the dust settles we’ll (presumably) still be a functioning capitalist democracy – and then the old questions that helped fuel Brexit will return.

Among the most important: What can be done to bring ‘the people’ back to capitalism, and pronto?

To some Monevator readers over the years, my concerns about, say, income inequality or environmental degradation have sounded excessively socialist.

Which is ironic given that among many of my friends and most my family, I’m caricatured as a Vulcan-like free marketeer who knows no such thing as society and only barely has time for Building Societies.

The truth is – insert cliche – somewhere in-between.

I believe capitalism is a force for good, but it must operate within constantly reworked rules designed to spread the bounty of its golden eggs without killing the goose that laid them.

Whenever you propose a new rule – or even just a rule tweak – the laissez-faire ultras accuse you of being a confused Marxist with a share dealing account.

But I’m pragmatic.

There’s abundant evidence that well-regulated capitalist economies lead to huge wealth creation.

So regulate we must.

In contrast, planned economies lead to surplus tractors and starvation, and unfettered capitalism leads to surplus oligarchs, overpaid CEOs, cronyism, and bad taste.

Nobody except the oligarchs and CEOs want that, but that’s what we seem to be getting more of.

Few true believers

So I think it’s fair to say capitalism has seen better days in the West.

It works for me and it probably works for you.

It works-with-bells-on for the 1%.

But too many feel left behind, and a fair chunk with good reason.

Rising nationalism – Brexit, Trump – and the daily internecine battle that is politics on Twitter are signs of ebbing faith that capitalism is working.

And given capitalism is the greatest economic tool we have for fostering productivity, innovation, and higher living standards, I find that mildly terrifying.

My article How To Be A Capitalist was my own small attempt to win back some of Thatcher’s childish children (and grandchildren) who sneer at markets and vote for Corbyn while jetting around the world taking selfies on iPhones whilst decked out in designer brands.

I saw Jacob Taylor, the author of The Rebel Allocator, express a similar view in a Q&A on Abnormal Returns this week:

“Capitalism itself is under attack. I believe this to be a mistake, perhaps even an existential one for those of us in the US.

It’s easy to take for granted the little everyday ways capitalism conspires to make our lives better.

When was the last time you went to the grocery store and all of the shelves were barren? How do we coordinate to make sure we make the right amounts of everything without too much waste and rarely shortage?

I’d call that a miracle hiding in plain sight.”

There’s a disconnect between the system that supports us and how many of us feel about it.

That’s dangerous. Living with an incoherent and economically pointless Brexit could yet be the least of our concerns.

From Monevator

Our updated guide to help you find the best broker – Monevator

From the archive-ator: Coping with the guilt of losing money – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

UK watchdog puts property funds on daily watch as outflows surge [Search result]FT

Halifax: UK houses prices already falling in 2019… – City AM

…number of new builds declines sharply on Brexit jitters, too – Guardian

Brexit uncertainty scars prosperity, says Bank of England – BBC

Number of young adults living with parents up 26% in 20 years – Guardian

Gold-plated dilemmas for half a million who opted for pension freedoms [Search result]FT

Japanese pensioners are pursuing financial independence by going to jail – BBC [h/t Luca]

No-fault divorce to become law – GuardianYour regular reminder that most active managers don’t beat bad markets – Indexology

Products and services

Lloyds’ new open banking app feature shows rival products under one roof – ThisIsMoney

A pitch for using a low-volatility emerging market ETF – BlackRock

Ratesetter will give you a free £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter

Poundland has sold 20,000 £1 engagement rings – Guardian

A look at ‘Green Bonds [aka Climate Bonds]DIY Investor UK

Comment and opinion

The patient investor sees the world more clearly – Pragmatic Capitalism

Do you really need to chase the market’s return to hit your goals? – Demonitized

Buffett’s Betas – Morningstar

Managing retirement drawdown – Retirement Investing Today

The real cost of raising a child – The Humble Penny

Should pension funds invest in riskier assets, just because they can? – Young F.I. Guy

Where big leaps happen – Morgan Housel

Classic cars as an asset class – CXO Advisory

Why now’s the time to sort out your PPI – David Sawyer

Work Bitch – The Escape Artist

Using free cash flow to find safer dividends – John Kingham

No pain, no premium – Flirting with Models

There’s no good reason to trust blockchain technology – Wired


No-deal Brexit risks rise as UK-Japan trade talks stall [Search result]FT

New ‘Brexit Party’ backed by Nigel Farage gets the go-ahead – Mirror

Britain’s financial heartland unbowed as Brexit risks deepen – Reuters

Government’s Brexit crisis command centre starts hiring civilians – Guardian

Imperial College researchers [tenuously] claim Brexit could cause more heart attacks – I.C.

Kindle book bargains

Antifragile: Things That Gain From Disorder by Nassim Nicholas Taleb – £1.99 on Kindle

ReWork: Change the Way You Work Forever by Jason Fried – £1.99 on Kindle

Unscripted: Life, Liberty, and the Pursuit of Entrepreneurship by MJ DeMarco – £0.99 on Kindle

Off our beat

My disabled son: “The Nobleman, the philanderer, the detective”BBC

The battle for the future of Stonehenge – Guardian

No thank you, Mr. Pecker – Jeff Bezos

If you’re a fan of Dan Carlin’s Hardcore History as well as Game of Thrones, you’ll love this [Podcast] – via YouTube

The death of a dreamer – Quillette

Ghost apples [Image] – via Twitter

And finally…

“Just about everything you learned in school about life is wrong, but the wrongest thing might very well be this: Being well rounded is the secret to success.”
– Seth Godin, The Dip: The extraordinary benefits of knowing when to quit

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  1. Note some 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”. []
{ 20 comments… add one }
  • 1 Caveman February 8, 2019, 10:58 pm

    You make some good points about the challenges to capitalism. I wonder if the biggest though is that so many people don’t have any capital. If you don’t have property or a stable job then why should you care about the system. In fact is it not logical to want to tear the whole thing down?

    I think that another element here is that the promises of capitalism have not come to pass. I’m particularly thinking of the promise of trickle-down wealth. That worked OK through to the mid-2000s but in the last decade or so the wealth of the rich has increased while most people have faced stagnant wages and steady inflation. That’s not a particularly attractive combination.

    One easy answer could be a sustained period of global growth. Sadly it may be that the evidence is suggesting that global economy is heading in the opposite direction…

  • 2 Norfolk February 9, 2019, 12:39 am

    Most Brits today have no real idea of what it was like to live under the Soviet system, unlike in central Europe where it is still a living memory; a big reason why those former Russian vassals seek the protection of a European club. Those Brits willing to think for themselves would understand that the UK’s socialism gave them the likes of union protection against zero-hours piece-work, a roof over their heads with council housing and the NHS amongst other basic certainties comprising the post-war social compact.

    That entailed accepting rule by an undeserving, hereditary elite in a pseudo-democratic state in exchange for a level of comfort and security. This has been broken by endless austerity which will soon no longer be able to be disguised by scapegoating the EU via a sea of lies. People now think what capitalism means is international corporations and ‘high-net-worth’ individuals with more power than govts., not paying taxes, while buying up the land they stand on, while real incomes evaporate. Of course they’re turning against what doesn’t include them while delivering only pain, indignity and insecurity.

    Jezza is like a tenured university professor in his ivory tower thrown into the real world, actually wielding power reduces him to a rabbit in the headlights, where pretty speeches alone don’t work. Why would people vote for the cowardly lion from the wizard of Oz when they can have the real thing, the Tories who at least enjoy being talons-deep in silencing the lambs. As for the Lib dems, their vote will never be relevant to an electorate drifting ever extreme in it’s fear and frustration, who are neither liberal or democratic.

  • 3 Chris February 9, 2019, 6:23 am

    In terms of the balance between capitalism and socialism, the answer will probably always be “we haven’t got it quite right”. Economic systems should exist to increase human well being otherwise what’s the point?

    The world’s particular blends of capitalism have done quite a good job in terms of improving the lot of all, but are still highly geo-centric and strongly class centric. Well being shouldn’t depend on the accident of being born in a particular part of the world to a particular set of parents – but it still largely does. The chance of someone uplifting themselves from slum like poverty to wealth akin to that of the British royal family are almost infinitesimally small. Yes, it can be done – but it’s deeply unfair to say anyone can do it if only they have the right mindset and work hard enough (and…erm…why should they when some are simply born to it?) On the flipside, simply redistributing all of the wealth doesn’t seem to work either.

    Another major issue I have is that capitalists seem to have no real fix for obesity, addiction and mental illness – all of which challenge progress in human well being and are likely being aggravated by the market in food, social media, advertising and other market driven behaviour modification approaches.

  • 4 TahiPanasDua February 9, 2019, 8:14 am

    We lived and worked in the USSR former satellite states of Slovakia and Romania about 10 years after the overthrow of their authoritarian socialist regimes. Many locals seemed to genuinely miss some of the certainties and security of the previous era. However, they would willingly recount the horrors of their former daily existence. Truth to tell, while interesting it all sounded a bit remote and historical even after such a relatively short time.
    However, while it may seem relatively minor, I was appalled by a hangover aspect of that time. Officials still seemed to a man to be unbelievably abusive and arrogant which presumably was the result of them having been top dogs in communist times. To some extent you can understand aggression in policemen, customs and immigration officials but insults from post office workers, for example, was a revelation.

    Due to the nature of our work, we had the privilege of living in former diplomatic accommodation in the same areas as senior officials of the regimes. These suburbs were, and still are, beautiful areas with elegant mansions that echoed the houses of the western super rich. Nothing too egalitarian about that.

    Finally, the new governments provided that luxury accommodation for us complete with a maid who in each case admitted to being employed by the previous secret services to report on their employers. This was common knowledge.

    I am sure it will all be different next time.


  • 5 JimJim February 9, 2019, 9:50 am

    @TI, Nice piece. As a card carrying socialist, I have little problem with capitalism if, like you say, it is well regulated. A lot of my socialist acquaintances think the two are mutually exclusive (whilst having large D.C. and D.B pensions). I think the situation in France at this moment is more than just a rile against the capitalist machine. This article from a few weeks back makes interesting reading.

  • 6 xxd09 February 9, 2019, 10:36 am

    Good to see you arriving at this point Investor
    I have long thought that the SNP,Trump and Brexit etc are symptoms of something bigger
    The majority are not starving ,are housed ,have a widescreen TV and yet are profoundly upset
    Unless we attend to the Causes of this the nightmare will continue to manifest itself in new forms
    Our leaders really do not seem up to the job . As for asking the People again -so that we can return again to the previous status quo -good luck with that
    What is bugging the populace?
    We are not machines .We something to believe in .It does seem to be more of an existential crisis than anything else
    We are missing religion and it’s philosophical ideas
    Unfortunately religious leaders seem to be as incompetent as everyone else
    Debate will bring the answer eventually
    To which this website is making a great contribution
    Sorry for the Rant!

  • 7 dearieme February 9, 2019, 11:11 am

    “The world’s particular blends of capitalism have done quite a good job in terms of improving the lot of all”: good grief! Since somewhere about 1800 the lot of mankind has changed utterly for the better. For the first time in history, or prehistory, mankind has escaped the Malthusian trap. In countries like Britain, people – including unskilled and unemployed people – live at a higher material standard than medieval kings or Roman emperors. Women don’t die in childbirth, children survive infancy, people don’t die of plagues or famines; innovation has been relentless. This modern world spread from Britain to the Continent, North America, Australia, NZ, Japan, and more recently to Taiwan, Hong Kong, Singapore, South Korea, and even China.

    Some of its features – especially increased lifespan – have spread even to those countries that Mr Trump so eloquently calls “shitholes”.

    And you call that “quite a good job”! Maybe you should develop a sense of proportion.

  • 8 FI Warrior February 9, 2019, 11:30 am

    Apparently, back in the day, people in the Soviet Union put up with their grey, dismal lives with only absolute basics not only because of fear, but psychologically it was more bearable if everyone you knew was the same. The elite there were more separated from the rest and hid their privileges better as it was against their nominal ideology and hence socially disapproved of. Under capitalism, you can be comfortable even, but if your colleague at work/neighbour at home has noticeably more than you for no more effort expended, or superior skills to explain the difference, people become seriously unhappy.

    So it’s the injustice here that eats away at people, endlessly feeding the anger; it’s also leveraged by the social approval of wealth/status encouraging the winners to flaunt it. The biggest losers are left with the obvious conclusion that the best they can do if they never have a real chance at the toys, is to knock them out of the hands of those who do. The answer is simple but not easy, people have to have unity to see any real change. They have to use their electoral power to strengthen democracy and then leverage their control of the vote to restore regulatory balance to protect all their rights. But I just can’t see this happening as they are so easily divided and ruled by our puppet-masters, expending their energy in always fighting each other instead, as a bonus for the puppetiers’ amusement.

    If the laws were working for all instead of mainly the ruling caste, the restoration of capitalistic balance would ensure a fairly good standard of living and so security of our basic needs, which is what we all unconsciously desire. Only that will end this current robber-baron strain of capitalism with its steady privatisation of profits for the elite and socialisation of losses, (deliberately too big to fail entities) forced onto the blameless masses who then pay for it with ever-falling quality of life.

  • 9 Mark February 9, 2019, 11:45 am

    I think a trend is taking place across much of the developed world that is misunderstood by politicians and commentators because they’re not part of it. Capitalism is increasingly being called out as a busted flush, not just by the hard left but by people in the mainstream who might be expected to support it. Whether it’s the rise of the new oligopolies such as Facebook and Amazon and the destruction left in their wake (the death of quality journalism and High Street retail respectively), the egregious rises in CEO pay, the unpunished criminality of bankers and the cover-ups perpetrated by overpaid Big Four auditors, the hollowed out middle class has had enough.

    Where things get interesting is that they don’t, in the main, want to replace capitalism with state socialism (witness Corbyn’s -55 net approval rating, the lowest for any major UK party leader, ever). What they want is genuinely free, participatory, contestable markets, ones that allow workers to sell their labour for a living wage, shareholders not to be ripped off by managements and consumers to get a good deal.

    Currently no UK political party offers this. Theresa May used the rhetoric when she became PM but the words were Nick Timothy’s, not hers. Brexit offers a reasonable proxy for it ends the right of capital to flood the labour market with cheap workers imported from crisis-hit Southern and middle-income Eastern Europe, escape the protectionist Customs Union so we can cut tariffs and trade with more nations. Yet even that is likely to be subverted by Big Capital and turned into perpetual Customs Union membership and something approximating to freedom of movement.

    We in the FIRE community are capitalists, in the sense that we accumulate capital assets with the intention of supporting ourselves through the returns generated. Yet even we should consider whether capitalism and free markets are any longer synonyms. Surely we too would be better served by a political system that sets as a central goal a laser focus on preventing markets from being rigged by incumbents and the advantaged.

    Rant over!

  • 10 abc February 9, 2019, 1:29 pm

    Arguing about the terminology of “capitalism” or “socialism” or if this would turn the UK into the Soviet Union misses the point. The specific policy proposals for education, pensions, health care, public transport, taxes etc. sound a lot like my home country in Northern Europe which as far as I know hasn’t abolished capitalism. It’s a wealthier country than the UK so it’s a legitimate question if adopting some policies could make sense here.

    A heavier reading suggestion: Robeco published an interesting paper testing factor premiums going back 200 years.
    Summary https://www.bloomberg.com/opinion/articles/2019-02-07/eternal-market-patience-offers-eternal-rewards
    Full paper https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3325720

  • 11 David February 9, 2019, 1:33 pm

    Sensible and sober-minded sovereignty-seeking Leave voter here. I’d describe myself as pro-European and pre European trade, but I’m opposed to the UK being drawn into the European political project. As well as seeing what’s happened in Spain and Greece for example, I’ve also experienced EU corruption first hand. So overall I felt Leave was the right choice, but only marginally.

    It seems like most people disliked a lot of things about the EU for decades before the Brexit vote. That’s why Theresa May keeps trotting out her list – end to free movement, paying vast sums to the EU, ending the fisheries policy, common agricultural policy, court of human rights, etc. Against that background, a vote to Leave or Remain without any campaigning would surely have seen a large majority for Leave across the country as a whole, although probably not in London.

    But we didn’t have a campaign-free vote – instead the establishment lined up a parade of daily scaremongering stories like Osborne’s ‘punishment budget’, even getting President Obama to say the UK would be at the back of the line for a trade deal. But despite all this, they still lost, and all those 17m people voted to Leave. A lot of commentary now tells us that Leave mis-sold their case with lies about the NHS on the side of a campaign bus. It’s hard to see how that had a greater impact than the overwhelmingly pro-Remain news coverage on the BBC for example, but that’s just my opinion and it’s something people seem very angry about so I know I won’t change anybody’s mind.

    I’m now trying to ignore the “noise” of the politics and keep reminding myself that No Deal is in nobody’s interests. Calamitous for the UK, but also enough to push the EU into recession. There’s no reason why a compromise deal shouldn’t be possible. We are a much larger economy than Norway or Switzerland. It doesn’t make sense for the EU to try and inflict economic harm on the UK just to prove a point.

    As for the fears of socialism, it’s now 40 years since Thatcher was elected by a landslide against the background of disastrous left wing governments, which means anybody under the age of 58 was still a child at the time. We might have to experience another dose of that for younger generations like mine to understand why it’s not a good idea. The Conservatives should be doing more to prevent that. Take rental accommodation as an example – why didn’t they pass that law about making buy to lets fit for human habitation, and when are they going to ban letting agent fees which they promised to do years ago? It just plays into the hands of politicians like Corbyn with more extreme policies like rent control. The result could be a backlash against uncontrolled capitalism gone too far, after which it will be back in favour again, hopefully in a better version of itself.

  • 12 Factor February 9, 2019, 2:06 pm

    @ dearieme (7)

    I’m with you (almost) all the way but in reality some women do still die in childbirth, some children still don’t survive infancy, and I could go on and on. “All that glisters [sic] is not gold” – The Merchant of Venice, 1596.

  • 13 xeny February 9, 2019, 2:57 pm

    @David – I believe the letting agent fee legislation recently went through the Lords and the fees are banned from June: https://www.moneysavingexpert.com/news/2019/01/letting-fees-to-be-banned-from-june/

  • 14 Pinkney February 9, 2019, 3:34 pm

    That link to the ft on Japan deal was absolutely the funniest thing I have read for a long time. The comments section was a read beyond compare it is enlightening to find that British humour is alive and well, the whale puns regarding the uks trade deals with the Faroe isles was priceless. I think humor is now all we have left as the good ship hope is now sailing away. Thanks for making me laugh so much

  • 15 Neverland February 9, 2019, 6:29 pm

    The way this tends to play out the labour party will put forward some policy, like energy price control or the banning of letting fees being charged by estate agents, which is already practiced in 10+ EU states.

    Then the entire British press (owned almost exclusively by Ayn Rand obsessed free-market fanatics) will declare as one in headlines that the UK in mortal danger and that the labour party intends to drag Britain into 70s style soviet style socialism.

    Average person in the street looks at proposed labour policy, sees it might their lives better, and wonders whats so bad about 70s soviet style socialism?

    Then a pollster working from a call center in the Philippines phones said average voter and asks what they think about capitalism…

    …finally, about three years after being proposed by the labour party there is around a 30% chance that said policy will be adopted as conservative party policy, as energy price control the banning of letting fees being charged by estate agents…

    …because it is popular with voters…

  • 16 Matthew February 9, 2019, 7:05 pm

    Your Jenga is expensive, i bought a tescos equivilent for £5, and ebay prices look around that mark when including p&p

    If theres a reason for people to feel disenfranchised with capitalism it’s the housing market – a product of low interest rates, whilst the cash savings most people know go nowhere vs house prices and in these times theres no reason to put off home ownership for fear of mortgage interest like people used to (imagine that) – so its all about interest rates, i believe

    If theres a second reason its that there are too many graduates chasing too few graduate jobs – people can’t blame themselves for not trying at school (like they used to) so they blame the system, even though there has never been an oversupply of good jobs and they mostly have equal opportunity to those that do achieve.

  • 17 A beta investor February 9, 2019, 7:09 pm

    Interesting fact from Radio Scotland this morning. Italy has had no economic growth at all, zero, zip, nada since the eurozone was formed nearly two decades ago.

  • 18 dearieme February 9, 2019, 9:52 pm

    @jimjim: interesting link. It hadn’t occurred to me before that the yellow vests are the equivalent of our Remainers: incoherent ranters against the result of a vote.

  • 19 JimJim February 10, 2019, 8:19 am

    My take away from that article was “the legend of the non conforming sparrow” as more appropriate than any comparison to incoherent ranting, which, most of us would agree, is apparent from both sides of that argument. I am too busy trying to guess the outcome and diversify away from the problems of any outcome to get involved with the argument… The Sparrow…
    Once upon a time there was a non-conforming sparrow who decided not to fly south for the winter. However, soon the weather turned so cold that he reluctantly decided to fly south. In a short time ice began to form on his wings and he fell to Earth in a barnyard, nearly frozen solid. A cow passed by where he had fallen, and crapped on the little sparrow.The sparrow thought it was the end, but the manure warmed him and defrosted his wings!

    Warm and happy, able to breath, he started to sing.

    Just then a large cat came by, and hearing the chirping he investigated the sounds. The cat cleared away the manure, found the chirping bird, and promptly ate him.

    The Moral of the Story:
    Everyone who craps on you is not necessarily your enemy
    Everyone who gets you out of crap is not necessarily your friend.
    And if you’re warm and happy in a pile of crap, you might just want to keep your mouth shut.

  • 20 Beancounter February 12, 2019, 2:24 pm

    RE Brexit, I think you will like the effort these 4 guys have been making at highlighting some of the more hypocritical statements by the Brexiteers. They’re publishing them on billboards.


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