What caught my eye this week.

The Litquidity video below is in horribly bad taste. I believe the Normandy landing scene in Saving Private Ryan is a truth-bomb for humanity. Every Twitter keyboard warrior should watch it a dozen times before venturing more views on Ukraine, Russia, and NATO.

On the other hand even my saintly co-blogger The Accumulator found it funny.

And as the ‘boomer PM’ you’ll spot 59 seconds in, I found it cathartic:

Saving Capital Markets – coming soon to a theater near you pic.twitter.com/pd17DZD4TT

— litquidity (@litcapital) May 11, 2022

(Follow those links to watch the video if you can’t see it embedded here.)

Talking of The Accumulator, he’s been even more of a rubbish trench buddy than usual in 2022.

Don’t get me wrong, he’s exactly the sort of comrade-in-arms you should really want.

The Accumulator ignores the market. Doesn’t sell. Barely knows whether shares are trading today.

But for an active investing junkie like me, his ignorance of the gyrations can be infuriating.

The Accumulator hasn’t even been spooked by his starting FIRE a year ago.

Sequence of returns risk might as well be a 1970s prog rock band for all he cares.

Pump up the volume

Besides his eternally doughty disinterest in short-term market movements, the other reason for The Accumulator’s stoicism is probably that he’s a British investor.

Because one thing missing from Litquidity’s meme-fest video is the weakness of the pound1.

More than 60% of a global tracker is in US assets. So UK investors have been cushioned from some of the slide that kicked off six months ago – even if their portfolios are free of home bias.

Here’s a chart crime graph plotting USD/GBP against UK and US flavours of Vanguard’s global tracker fund (as of my writing this on Thursday afternoon):

As you can see, UK investors in Vanguard’s All-World tracker (yellow) have been superficially spared much of the pain, thanks to sterling’s fall.

I say ‘superficially spared’ because our spending power really has shrunk – compared to our American cousins – over the period. We’re poorer on the global stage.

The cost of living crisis will be made worse by our weaker currency.

But I’d still take superficially over definitely any day.

Always on my mind

Where I do see many Monevator readers getting angst-y is with their bond portfolios.

UK government bonds are sterling-based, obviously. No cushioning here as yields have risen with higher inflation and rate expectations.

Further, investment grade and higher-yield bonds losses have lately been compounded by recession worries. (An economic downturn is bad news for indebted companies.)

Below we can see how bonds have sold off this year:

Prior to a sharp bounce this week, the picture was even worse. And people really hate seeing their bonds go down. Much more so than stocks.

Understandable. For years no long-term investor has bought bonds expecting much in the way of a return (even though that’s actually what they got, at least until recently).

Rather, bonds were for buoyancy in the bad times. Yet now they’ve been taking on water – just when we’d want them to float.

Unfortunately this was pretty inevitable.

Global yields hit multi-century lows after the financial crisis. Sooner or later they were likely to rise.

The snag was everyone who ever said ‘sooner’ was wrong – up until the past six months. Now we have to pay the piper.

Worse, the same issues roiling the bond market are also what’s pulling at least some of the strings of the stock market. Hence shares and bonds falling together.

The good news is lower bond prices mean higher yields, and hence higher future returns.

That’s little comfort if you already own a bunch down big. But the declines are starting to make government bonds half-attractive again, and reinvesting your bond income will help eventually.

All presuming, of course, that central banks get inflation back under control.

You win again

Anyway if your biggest problem in 2022 is that your bond fund has fallen, pat yourself on the back.

It suggests you’ve probably been doing everything right.

Because nearly everything riskier you could have bought has gone down – bar some value, commodity, and energy plays.

The video above wasn’t exaggerating.

Please note: nobody need hurry to the comments to tell me I’m overreacting and everything is calm in their mill pond.

If you’re a passive investor feeling unruffled, I get it. That’s the whole counterpoint to this article!

In contrast every active investor I know – including the UK-based ones who invariably fish in the mid and small cap arena – has been dragged through a hedge backwards.

(Important exception being the faultless Monevator house troll who will tell us in the comments he sold everything and put it all into shares of BP on 3 January and who can doubt him?)

For most of 2020, picking stocks was like shooting fish in a barrel.

In 2022 it’s been like being the barrel.

It’s a sin

The sell-off began with the raciest growth stocks, as I flagged up in December. Even the best of these have continued to fall.

Many of the highest-fliers are now priced below where they started 2020 – despite having doubled or tripled their revenues over the past couple of years.

Winning the pandemic turned out to be a curse:

Source: AWOCS

More recently the tech behemoths were pulled into the vortex. Apple, Amazon, Google and Facebook – the engines of global markets for a decade – are down around 20-30% or more.2

Cryptocurrencies have been hit for six. A leading (so-called) ‘stablecoin’ came apart, evaporating billions. (See the links in Crypt-o-Crypto below).

As for the frothiest shares – almost anything floated via a ‘SPAC’ in the mania of 2021 – it’s becoming a case of “dude where’s my decimal point?”

Falls of 80-90% are widespread.

The blue chip Nasdaq 100 was down nearly 30% by the worst of the midweek sell-off. The US S&P 500 was only a few tenths of a percent from the definition of a bear market, at least until stocks bounced on Friday.

Unusually though, UK large caps have held firm.

The FTSE 100 comprises long-despised value dinosaurs. Having survived the growth investing meteor strike – for now – they’re finally having their moment.

Stand by me

As the self-styled Tom Hanks wannabe on this metaphorical battlefield, I’d love to say I saw all this coming and I dodged all the pain.

Unfortunately like him I’m here getting shot up too.

By luck or judgement I got some things right. I saw the big and little clouds in 2021. I later sensed regime change and took fairly decisive action (not least with an eye on my interest-only mortgage.)

But as usual I also started buying apparent bargains too early.

Some of the cheap growth stocks I picked up in what I thought were the Christmas sales have since been cut in half or worse.

I almost always buy too soon. But I usually also buy ‘too good’ – I invest in higher-quality defensive companies at the bottom of bear markets.

In time they bounce, but they are far outpaced as the riskiest firms left for dead rise like a phoenix.

It’s hard to avoid fighting the last war as an investor.

So this time I deliberately looked to buy back into fallen angels like Shopify and PayPal and Square, after what seemed like decent declines.

Yet they just kept spiraling down.

Never gonna give you up

I blame the autocrats.

In late 2021 I expected inflation to have peaked by now. But China and Russia threw a spanner into that forecast, albeit in different ways.

Hence the bottom was just a trapdoor.

Is there further to go?

If we see a recession without an easing of inflation and rate expectations, then who knows when the wider market will stabilise.

Plenty of cyclical and value stocks that have done well could suffer in a stagflationary environment. The last prop would be kicked away from the indices.

That said, I’d like to believe we’re closer to the end than the beginning, at least for the better growth firms. Perhaps I’ll do a naughty active investing post about it. (Bring on our membership area so I don’t have to worry about inflicting such views on sensible passive investors!)

But wherever we go from here, we knew the pandemic market party had to end.

And end it has – with a bang.

The most important thing is to keep pushing on. Just keep buying, as the man said.

Long-term sensible investing is nearly-always rewarded eventually, whether you do it passively or via a coherent active strategy.

Short-term meme stock pump-and-dump traders can win for a while. But eventually most pay for their ride.

Indeed a lot of newer investors are getting off the rollercoaster feeling a bit sick and wondering where they lost their wallets.

I hope they’re not put off investing for life.

As I said the other week, I also wonder when all this will reach the real economy.

We’ve seen a hint with rate rises and the cost of living squeeze.

I suspect central banks have been talking especially tough because they want to scare the markets into tightening conditions for them, to try to avoid excessive real-world pain. Jawboning up tighter market conditions may reduce the direct discipline they need to mete out via actual rate rises, or even forcing a recession to choke off demand. (Not that the latter will help with borked supply chains.)

But usually something big blows up in the real-world anyway.

We’ll see. Enjoy the weekend!

p.s. Alas we didn’t win in the British Bank Awards, although apparently it was close. However the organizers were kind enough to send me some of the comments (without names) you submitted in support of your votes. And they made our week! Far better than any prize to hear such generous reviews of Monevator and its impact on your life. Thanks so much to everyone who took the time.

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1. And indeed the Euro. [↩]
2. I’m using their common names for familiarity, stock ticker sticklers! [↩]

What caught my eye this week.

I am a couple of weeks late to this. But I can’t be the only investing nerd who hadn’t heard – and was surprised to learn – that Bill Bengen has broken his own 4% rule.

For those new to these parts, a short summary.

In the early 1990s Bengen interrogated the historical return data for US shares and bonds. He determined that a 4% withdrawal rate from a retirement pot – increased with inflation after the first year – would nearly always see you through a 30-year retirement without you running out of money.

For more detail read our articles on sustainable withdrawal rates.

I’m not delving into the specifics today. What’s fascinating to me is the man made famous for partially solving the retirement problem / neatly branding a nifty bit of data-mining (pick your poison) has bailed on it in his 70th year.

Alas the primary source for the Bengen revelation lies behind a Wall Street Journal paywall (though a reader letter in response is viewable). I picked up the news on a recent Animal Spirits podcast.

In the podcast retirement demigod Wade Pfau says he hopes the news that Bengen was now 70% in cash will make people realize there’s no one-size-fits-all approach to income after work.

Indeed Pfau estimates that only about a third of the population have the right mindset for an equity-heavy total return drawdown strategy in retirement.

If that’s right then it means most people should be doing something different!

There’s not one rule to rule them all

Too often discussions of alternative approaches to retirement income (such as our old contributor The Greybeard’s equity income trust preference) get talked down as irrational or atavistic.

But in my view the only investing that ever works long-term is the style that works for you.

And as I’ve said many times before, in retirement a different set of problems may mean you’re best off turning to a different solution.

Of course if people making unfounded claims – that dividend income gives you a free lunch, or that an annuity is the only sensible way to invest your retirement pot, or that buy-to-let properties guarantee superior results, or that you need active managers to get you through a bear market (Merryn Somerset-Webb’s latest in the FT ) – then such specifics can be challenged.

My point is simply that there are trade-offs and advantages to all the approaches.

And that includes the ‘4% of a total return’ route – which might still, equally, be exactly right for you.

For once though you don’t have to take my word for it. Just look at the lived reality of Bill Bengen.

The man who wrote the rule on retirement investing is breaking that rule in spectacular fashion, because it turned out not to work for him. I commend him for sharing this so (sort-of) publicly.

Have a great weekend!

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This is part seven of a series on planning and paying for long-term social care in later life.

We’ve previously covered: 

• The gap between social care need and provision. 
• How the social care funding means-test works. 
• The social care thresholds that determine your funding eligibility. 
• How you can estimate care home costs for future planning.
• A case study showing how social care costs impact retirement finances.
• The financial products best suited to paying for social care.

In this final post, we cover free sources of support that can help everyone fund their care.

Long-term social care is not free at the point of delivery, unlike NHS treatment. Most social care is means tested – with complexity, arbitrariness, and under-provision shot through the system like tracer dye revealing contamination.

Very few people will get all the help they need. However there are some little-known free social care options that are universally available. 

These avenues of support typically depend on your need, not your bank balance.

They fall into three main categories:

• NHS-funded care
• Home adaptations and equipment
• Non-means tested benefits 

Let’s briefly review each free social care category. I’ll also link out to useful sources of further information. 

NHS Continuing Healthcare (CHC)

NHS Continuing Healthcare can fully fund your care and accommodation – if you qualify for it. You may qualify if you require complex, ongoing care to manage severe and unpredictable illness or disability.

You won’t necessarily be made aware of CHC, even if you’re eligible. The first formal step is to ask your GP for a CHC assessment. 

However I recommend finding out more about the process first, through the Beacon social enterprise.

Why? Because qualifying for CHC is known to be difficult – so much so that NHS England fund Beacon to help guide people through it. 

CHC has been replaced in Scotland by Hospital-Based Complex Clinical Care. This scheme only covers people receiving long-term care in hospital.

NHS-funded Nursing Care (FNC) 

If you don’t qualify for CHC then the next stop is NHS-funded Nursing Care. This may cover your nursing care fees if you live in a care home that provides registered nursing care.

FNC pays a standard rate for nursing directly to your care home. The rate varies by UK nation. 

Your home should demonstrate how this money will reduce your bill. 

If you’ve had a CHC assessment then you should also get a FNC verdict. Contact your GP if this hasn’t happened. 

Nursing care in your own home is provided free of charge by community nursing services. It should be arranged by your GP if you don’t qualify for CHC. 

NHS Intermediate Care

The NHS Intermediate Care service is meant to help you recover your independence and get back to normal after a hospital stay, short illness, or fall. Intermediate Care also gives you a chance to assess your needs when you’re considering a permanent move into residential care. 

Care is free but short-term – lasting up to six weeks. It can be provided in your own home, a care home, or community hospital. 

Hospital staff should arrange intermediate care for you before you leave. Speak to the discharge coordinator if that isn’t happening. 

If you’re discharged without a care plan then contact social services. The hospital isn’t responsible for your care once you leave. 

Speak to your GP (or local authority social services) if you need help because of a fall or illness at home. 

If you don’t make a full recovery after six weeks of intermediate care then you should receive a plan to transfer to another service. That may involve paying for long-term care yourself. 

Intermediate care is also known as re-ablement or aftercare.

Section 117 mental health after-care 

Anyone detained under Section 3 of the Mental Health Act 1983 has a right to receive free aftercare once they’re discharged from hospital.

A care package must be provided by the local authority and the NHS so long as the person requires ongoing support that is:

• Connected to their mental health condition
• Reduces the risk of their condition worsening

Support can include paying for care at home or in residential accommodation. An aftercare plan should be provided before you leave hospital. 

Home adaptations and equipment

Home adaptations include stair lifts, ramps, walk-in baths, grab rails, lever taps and so on. 

Essential adaptations and equipment costing less than £1,000 each are likely to be provided for free in England. The limit is £1,500 in Scotland and considered on a case-by-case basis in Northern Ireland and Wales. 

Contact your GP or local authority1 for an occupational therapy assessment or a full care needs assessment. 

Means-tested Disabled Facilities Grants are available for more expensive adaptations. The amounts and specifics vary by home nation.

For ideas on adaptations and equipment that can help maintain independence, check out these lists:

• Home adaptations
• Mobility equipment
• Kitchen appliances
• Assistive technology

Universal benefits 

You should also look into some applicable benefits that aren’t means tested nor widely known:

Attendance Allowance 

Up to £89.60 a week is available if:

• You’re over State Pension Age
• Physically or mentally disabled
• Need someone to help care for you

If you permanently live in a care home, Attendance Allowance is not available if you receive local authority support.

Personal Independence Payment (PIP)

This is similar to Attendance Allowance but is only available for people aged between 16 and the State Pension Age. 

There are two parts:

• Help with daily living tasks – pays up to £89.60 a week
• Help with mobility – pays up to £62.55 a week

You may be eligible for one or both components. 

Other benefits

Age UK maintain a wider list of relevant benefits.

Money Helper also have a good care needs benefits page. It’s particularly strong on council tax discounts and exemptions.

Many people don’t claim all the benefits they’re entitled to. Use a benefits calculator to ensure you don’t miss out:

• Age UK benefits calculator
• Entitled To benefits calculator

Carer’s benefits

Thankfully carers can get help too. You don’t have to be related to or living with the person you care for. 

Carer’s Allowance

£67.60 a week may be available if you care for someone 35 hours or more a week. That person must also be eligible for certain benefits such as the Attendance Allowance. 

If you qualify for Carer’s Allowance you’ll get National Insurance credits, too. Scroll down to the Carers’ section.

Carer’s Allowance can have a knock-on effect on other benefits. See the link to the benefits calculator on this government page.

The government also lists more benefits available to carers. 

You may be eligible for the Carer’s Allowance Supplement if you live in Scotland. 

Carer’s credit

Carer’s Credit helps people who care for someone at least 20 hours a week.

The credits increase the value of your State Pension by filling gaps in your National Insurance record. 

Carer’s respite care

Local authority funding is available to enable carers to take a break occasionally. As ever, you must be assessed to qualify.

This NHS page lists organisations that can assist with carer’s breaks including charitable support.

Carers UK offers advice and guidance to unpaid carers. 

Free personal care

Personal care is available for free in Scotland and Northern Ireland.

Personal care is a defined set of services including washing, getting dressed, going to the toilet, meal preparation and medication.

For those in care homes, your local authority pays a set rate for personal care and nursing care in Scotland.

A set rate is also available for nursing care in a home in Northern Ireland. 

Personal care and nursing care is only available for free if your care needs assessment recommends you for it.

Charitable grants

The final free social care option is to apply for charitable grants. Turn2us has created a searchable database.

Care thee well

Needless to say, you can also explore all of the routes listed above on behalf of a loved one.

But for our part, that’s the end of Monevator’s series on long-term social care. 

Researching it has been a sobering experience. I dare say reading it hasn’t been a barrel of laughs either. 

If you knew little about long-term social care previously, then I hope the series has made it less of an amorphous threat. 

If your research is more urgent then I hope these posts have provided some help when you need it most.

Take it steady,

The Accumulator

Bonus appendix: social care funding – the diagram

This flowchart graphically simplifies the complexities of the social care system:

1. Health and Social Care trust in Northern Ireland. [↩]