What caught my eye this week.

Happy Near Year! I hope you spent your New Year’s Eve in a Covid-proof bunker with Jools Holland – unlike those living near me or on my dating app who seemed to think the end of 2020 was a reason to get together for a party.

Most of us can’t think of a better celebration than seeing the back of that dreadful year, but we’re not out of the woods yet.

It’s been clear since October (and I’ve eaten my own humble pie on this) that hopes for a ‘one and done’ wave of Covid were misplaced. Its ongoing persistence has now been made even worse by mutation, with the new strain saying “Hold my beer” to good old SARS-CoV-2.

The result of this cocktail of misplaced optimism, mixing, and mutation is that this wave is already looking close to out-of-control in the South East, and it’s spreading fast.

There may yet be a tale to tell about Covid’s all-in impact on mortality. But it’s undeniable people are dying horrible deaths from it right now – even as others protest the virus is ‘a hoax’ outside their hospital doors. (So much for the change of calendar year… plus ça change, right?)

Peak pandemic

Now the interesting thing from our perspective as an investing website is how the stock market must hold these two contradictory facts in mind.

The pandemic is as bad as it’s been in Britain. Yet at the same time the vaccines are here. And while I believe our singularly inept Brexit-enabling government is even bungling the vaccine rollout they so longed-for, it is happening. [Update: I take back ‘bungling’. The UK is moving faster than I appreciated at the time of writing, by comparison with other countries.]

More convincingly, look at how how Israel is getting the job done:

Israel: The vaccine nation

Nearly 1 million vaccinated (11% of pop)

Daily rate: 150K (1.7% of pop)

~43% of all 60+ years old vaccinated

Expect to vaccinate ~80% of all 60+ in a week

Cases still rising across all age groups. Next week will be interesting pic.twitter.com/xtfEfpwY70

— Eran Segal (@segal_eran) January 1, 2021

In a fortnight or so, most people at risk of dying from Covid in Israel will have been vaccinated. At that point we can expect the death rate to collapse towards zero, even if the virus continues to spread.

It should eventually, belatedly, be the same story in Britain.

This is what the stock market latched on to a couple of months ago. Silly pundits railing against ‘irrational’ markets climbing even as Covid case counts rose forgot the stock market is a discounting machine – the world’s best guess at the future.

And – absent more mutative bad luck – in mere months that future should see deaths reaching a ghastly crescendo before suddenly falling away, at least in the West, even as the virus continues to rage.

How do you discount that forecast? How do you price that into the share prices of retailers on the edge of bankruptcy or holiday firms with enough cash to make it to May, but not to July?

How indeed.

We continue to think that in 2021 the vast majority of people will be best off putting money into index funds, month in, month out – and in 2022 and beyond, too.

If the past year has taught us anything, it’s that speculation can be dangerous for your wallet, and much else besides.

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What caught my eye this week.

I have a stuffed hamper’s worth of links below to help get you through the Christmas break. However I struggled with how to introduce what’s probably our last post of the year.

Covid? Too miserable, interminable, unresolved, and depressing.

Brexit? Ditto, with knobs on.

Even recapping this bonkers year is a hard task for an investment blog.

In March we stared into the abyss. In a rare show of animation The Accumulator charged into the fray, urging “Do not sell!” from the ramparts of our passive investing HQ like some calculator-wielding William Wallace. I even sensed an opportunity, but hindsight and global indices back at their highs are deceiving and make such calls look smarter than the hunches they were at the time. This year confounded, and confounded again.

As I was mulling all this over, I was also moderating the comments on TA’s Financial Origin story from Tuesday and I realised they are the best way to end 2020. More than 70 readers have now shared their financial journeys – and in some cases report they’ve already reached financial independence.

The stories make for a heartening read. Please consider adding yours.

Keep on keeping on

More than a few of the stories give Monevator a nod, among other blogs, as playing a part in their success. Talk about an early Christmas present! It’s great to hear we’ve helped nudge a few lives in the right direction.

Indeed thank goodness for the much-maligned Internet. Some of us have spent most of this year alone. But it’s rarely felt that way to me, partly because this blog reaches a vast audience – approaching three-quarters of a million individuals over the course of a year.

Monevator has at heart a simple message and a design that needs updating, but it still finds a readership. Hopefully we’ll all spend less time in front of our screens in 2021 – but do continue to make some time for us!

Until then have the best Christmas you can in the miserable circumstances. Maybe phone a lonely friend?

I continue to think that (again, like Brexit) the true toll of the virus and the countermeasures will be counted over decades, not months. But when it comes to the upfront impact, the worst is nearly behind us.

The global economy could well roar in 2021. Stay with it!

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It’s not normal to care about finances as much as we do. As a Monevator reader, you pay unusually close attention to your financial affairs. You’ve probably put a great deal of thought into building a wealth-generation engine that’s designed to secure the future for you and your family.

That’s not standard behaviour. The average bear doesn’t really care.

So what happened to you? What put you on the financial path you’re on now?

• A shock to the system?
• Your upbringing?
• Complete luck?

What makes you different?

In my case I wasn’t different at all. Until the eve of the Great Recession, I was much like everybody else – a free-spending, live-for-the-moment, zero-savings kind of a guy.

I had no pension. I had an interest-only mortgage I wasn’t paying off. I had a ridiculous car that ate money.

I was dimly aware that something wasn’t right. Neither with the world, nor with my world.

One day a financially savvy acquaintance of mine said:

“The party is over.”

“This is a party?” I replied.

Reality dawned on T.S.H.T.F. Day at work in October 2008.

Plugs were pulled. Projects terminated. I was in a meeting with our main client when they got a call to turn off the taps.

We stopped hiring. We let people go. My inbox started to fill up with CVs from ridiculously overqualified people looking for refuge.

It was like the second act of a horror movie. We’d all been camping by the side of a beautiful lake. Now night had fallen and some maniac was taking a meat-cleaver to my compadres.

The world hasn’t been the same since, and neither have I.

Born again

My new religion was to save like Grandma.

Ditch that car. Pay off that mortgage. Slash outgoings. Crank up the pension. Learn about the stock market.

Like a balloonist heading for a mountain, I chucked the sandbags of my old lifestyle overboard.

Fewer people were needed in the post-2008 recession world. There weren’t other jobs to go to.

I needed to become one of the ‘invaluable ones’.

• Flexible like a yogi.
• Better value than Lidl.
• As diplomatic as a pair of breeding pandas.
• Harder working than, well, my competition.

I changed my clothes, I changed my hair, I changed my attitude.

I wasn’t getting any younger and digital disruption was spreading through my industry like ash dieback1. It was adapt or die time.

I used the early hours of the morning to learn new skills. I did online courses. I force-fed myself audiobooks on key topics. I took up a side hustle that helped me learn more about digital media. (Hello Monevator!) The last one also helped further my investing education.

A line-manager said, “If this place goes down, you’ll be one of the last ones left who has to switch off the lights.”

More was needed:

• 2008 taught me the sky can fall in very fast.
• Time felt short in a declining industry.
• Redundancies hit the company like waves, throwing people overboard.

My thirties were peeling off the calendar and there was a scrum at the door for upper management. Not everyone was going to get in.

I had childhood memories of an earlier recession – the early 1980s in the north-east. I was left with an afterburn image of a friend’s dad, on the scrapheap in his mid-forties.

Plus a reverse role-model in an old boss. Once brilliant and at the heart of everything. He’d grown complacent. He’d become expensive. He refused to learn new tricks. He didn’t think it could happen to him until it did.

Others were plain unlucky:

• Edged out in political battles.
• Not enough allies at the decisive moment.
• Skills unrecognised by senior management. 
• Simply cheaper to dispense with.

I met plenty of former high-flyers who couldn’t gain purchase at their old level anymore. 

Escape velocity

Financial independence was the answer. It wouldn’t matter if I was knocked off the three-dimensional corporate chessboard if I was playing a different game.

If I moved hard and fast enough then I could afford to be unlucky, ill, or old – the kind of hand that gets dealt to ‘other people’.

You can boil the shockingly simple math behind early retirement down to:

A high savings rate + index trackers + time

The other 90% of the story is mindset.2

Without money to burn, the only way you’re going to achieve financial independence in a decade or so is by giving things up.

Here’s what I haven’t missed:

• Believing that money equals happiness.
• Tying self-worth to money.
• High-status items: big house, flashy car, exotic holidays, big-boys toys. Anything where you’re paying over the odds to join the club.
• Sky-high expectations: the notion that your job should be high-paying and fulfilling, you should regularly score promotions, your family life should be perfect, you should feel happy and confident most of the time.
• Taking setbacks personally. It’s not the setback that defines you, it’s how you respond.
• Resentment, envy, revenge, and self-pity.

The mental side is an ongoing battle for me, but the more progress I make, the healthier and more resilient I feel. Whoever came up with the dictum that ‘Happiness = Reality minus Expectations’ is a genius.

I did it my way. What about you?

My journey began on the eve of a global financial crisis. The shock changed me for life.

The biggest revelation I had was that once I was on the right path, the financial side could mostly take care of itself.

The vast majority of the effort needed lay in developing the mental toolkit to survive at work and improve well-being, while waiting for my financial independence day.

But what about you? How did you find your way here?

I love to hear about Monevator readers’ financial-life experiences and motivations, so please let us know in the comments whatever you’re happy to share.

Take it steady,

The Accumulator

P.S. I enjoyed the Swiss Cheese mental model that The Investor linked to in Weekend Reading.

The idea is to prevent disaster by shielding behind multiple layers of defence. The framework also shows how threats can defeat a system by sailing clean through holes that are carelessly aligned rather than mutually covered.

Here’s my Swiss Cheese Defence for my journey to FI:

1. A virulent disease of ash trees. It is caused by a fungus, Hymenoscyphus fraxineus. [↩]
2. Assuming you’re not among the top 2% or so of earners. [↩]