≡ Menu

Weekend reading: DIY disaster capitalists

Weekend reading logo

What caught my eye this week.

When I began investing in the early 2000s, the September 11th attacks still loomed large in investors’ minds.

Of course, that shadow extended everywhere then. The West was at war in Afghanistan and soon Iraq. Terrorist plots exploded or were foiled with numbing regularity. It all hogged the news like Covid or Brexit.

In investing circles there was seemingly an extra moral question, too.

Was it right to try to profit from the share price moves that resulted from this chaos?

I spoke to some investors who had lost friends in the attack on New York.

Others had been able to profit from the gyrations – although the slow, grinding bear market of those years hardly gave one FOMO.

Welcome to the Terrordome

When equities moved in response to this advance in the conflicts or that hideous attack on civilians, vocal investors were split.

One camp believed life – and investing – went on.

We live in a capitalist economy, and markets are vital to its functioning. Giving up on making a profit and improving our lot was what the terrorists wanted. If you didn’t scoop up a bargain due to moral squeamishness, someone else would.

The other camp basically reacted as many of us do when faced with sudden, horrible news: really, is that what you are thinking about right now?

For the little my pennies mattered to the world, I was in the first camp.

I didn’t wish for more ghastly opportunities that scared investors witless. But I stood ready to act if they did.

After all, who knows or cares now who bought or sold shares during the Cuban missile crisis or on the eve of World War 2?

This too shall pass.

I also find it hard to believe that the world would be a better place if markets went haywire and prices crashed towards zero every time something awful happens. Quite the opposite.

And it’s not like I was being torn away from important official business as these dramas unfolded. Making my little trades to support efficient markets maybe even felt like a small contribution from the Home Front.

Convenient thinking, no doubt.

Many did – and do – disagree.

Public Enemy No. 1

The Covid pandemic has been interesting to watch through this lens.

Firstly, you can definitely believe that terrorists want to stop life going on as normal – and that we all need to resist this where we can.

The virus, however, ‘wants’ life to go on as normal, so it can replicate and spread. This time it really was in our interests to disrupt our everyday life.

Then there’s the lockdown trading boom that has taken off with nary a word of ethical debate.

Sure, some wonder what manipulated meme stocks mean for markets, or whether crypto speculators will end up millionaires or bankrupt.

But we saw little if any push back urging today’s bedroom traders to spend more time thinking about virus victims in the ICU.

Maybe the world has gotten tougher, or greedier?

Or maybe we understand that we’ve all had to find our distractions where we could since March 2020.

Either way the explosion in wealth that has occurred right alongside the miserable pandemic has been much reported on – but little reflected over.

Incidentally, I’m sure some of you passive purists out there are now shaking your heads – if not your fists – and grumbling over talk of such greedy opportunism, while you sit sedately in your tracker funds.

Fair enough, but remember the reason you have seen those funds bounce back from the Covid crisis lows is because some active investors looked through the noise and bought back expecting better times ahead.

Indexing is a great strategy – one driven by the decisions of active investors.

911 is a joke

I thought about all this as I found myself enjoying – literally – a recap of the early days of the Covid crash in The Atlantic.

An extract from Adam Tooze’s new history of the Covid era, Shutdown, it’s a reminder of how crazy things got in the early days of March 2020:

The trillion‑dollar Treasury market, which is the foundation of all other financial trades, was lurching up and down in stomach‑churning spasms.

On the terminal screens, prices danced erratically. Or, even worse, there were no prices at all. In the one market where you could always be sure to find a buyer, there were suddenly none.

On March 13, JP Morgan reported that rather than a normal market depth of hundreds of millions of dollars in U.S. Treasuries, it was possible to trade no more than $12 million without noticeably moving the price.

That was less than one‑tenth of normal market liquidity.

This was a state of financial panic, which, if it had been allowed to develop, would have been more destabilizing even than the failure of Lehman Brothers in September 2008.

This all happened little over a year ago, yet I’d almost forgotten how mad things were for a few weeks back then.

I do remember huge chunks of value falling off my portfolio early on, like sheets of ice shearing off a melting iceberg.

But in the rosy afterglow of Central Bank intervention and the bull market that followed, my memory of the initial drama has faded.

Don’t believe the hype

The truth is I had a good pandemic, trading-wise. I sold down into the falls and mostly bought back before the climb.

By 22 March I was pretty sure the sell-off had become a headless panic and tweeted as much:

Yet re-reading that is suitably humbling. I got some things right but many things very wrong.

Remember when just two weeks of self-isolation seemed worth fussing over? I recall a bunch of Hollywood stars singing that we could make it through – and that was about three days in.

My prediction of the death count, even if I was only thinking about the UK, was also woefully short.

In some ways, however, that’s the point.

When investors lose their bearings you can afford to get a lot wrong and yet for it still to be right to invest.

That’s because at such times your ‘margin of safety’ – typically squeezed dry by today’s mostly efficient markets – becomes a chasm. If you’re brave and you have the spare capital, you can bridge it with some confidence.

Or at least you always have been able to in the West, so far.

Maybe someday you won’t, and such a Tweet will look like hilarious hubris.

(But by then you may well have bigger worries on your mind, if so.)

Brothers gonna work it out

Thinking about how mis-priced securities were in early 2020 makes me wonder if I should simply sit in trackers until such times roll around again.

Remember, I’m the naughty active investor here at Monevator HQ. And a lot of the time my activity feels like running on a hamster wheel for just a few basis points of out-performance.

Maybe I should just wait for those rare moments when the markets go back to the 1950s? When Warren Buffett’s golden apples lie all around on the floor, ready to be scooped up?

Well perhaps, but again that’s probably hindsight speaking.

What’s more, the reason I have hitherto had the confidence to buy stuff that others are throwing overboard in bear markets is because of the months and years of trying to understand where the value was beforehand.

Fight the power

I do feel sheepish about admitting I now look back to March 2020 with a sort of grim fondness.

Only from an investing perspective, obviously. But I appreciate it’s still not a great look.

I saw the same nostalgia in the aftermath of the financial crisis. Indeed people today watch The Big Short not to be horrified but to laugh and toss popcorn into their mouths and remember how insane things were.

One thing is certain, as a potted history of the 1792 crash at Investor Amnesia this week showed, financial panics are old as markets.

So we’ll all be tested once more – on whatever axis of character you believe is most important – before too long.

For now though, have a great weekend!

From Monevator

How to save money on travel – Monevator

Which portfolio tracking tool to use – Monevator

From the archive-ator: Five lessons my frugal dad taught me about the value of 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

Retail sales dip for fourth consecutive month as supply chain crunch bites – ThisIsMoney

UK inflation in record August jump as food and drink prices rise – Guardian

Rishi Sunak takes taxpayer stakes in kombucha, solar power, and VR startups with Future Fund – Yahoo Finance

Half a million homes to be given new energy supplier after two more go bust – Guardian

China has successfully devalued all its giant companies out of the global top 10 – Yahoo Finance

Computing pioneer Sir Clive Sinclair dies aged 81 – Guardian

Smooth investing returns in the US for the past decade point to choppier times ahead – Compound Advisors

Products and services

Monzo launches Monzo Flex: a ‘better’ buy now, pay later? – Which

Too tiny? A 400 sq ft London home from Barratt – ThisIsMoney

Will Covid and Klarna kill the credit card? [Search result]FT

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

Securing a catchy stock ticker is getting competitive in the US – Axios

Earn up to £500 cashback when you transfer your pension to ii [Offer ends 30 September 2021] – Interactive Investor

Interactive Brokers adds crypto trading to US platform, with plans for global rollout – The Block Crypto

“I’ve lost all trust since being scammed” says victim of £64,000 bank transfer fraud – Which

Homes for sale near Michelin-starred restaurants, in pictures – Guardian

Comment and opinion

The first 1% on the road to financial independence – Getting Minted

William Bernstein: bad bubble behaviour [Podcast]The New Bazaar

Why financial manias persist – A Wealth of Common Sense

Losing money can help you earn money – Darius Foroux

Rebalancing your portfolio the right way – Peter Lazaroff

Mr Money Mustache: how I retired, aged 30 [Search result]FT

Anchors aweigh – Indeedably

How you feel about money – The Irrelevant Investor

Investing vs mortgage repayment: advanced considerations – Banker on FIRE

50 things learned in a decade of blogging about quant retirement finance [Nerdy, mostly]Rivers Hedge

Keep working mini-special

We should work for longer, but different [Podcast]Morningstar

The joy of work – Humble Dollar

Four reasons to work in retirement – Mullooly Asset Management

The hook – The Escape Artist

Naughty corner: Active antics

A free curriculum for would-be security analysts [PDF]Verdad

Getting to grips with returns from crowdfunded startups – Crowdcube

It’s hard to sell – Humble Dollar

Why institutional investors are looking beyond Bitcoin – Institutional Investor

Michael Mauboussin: sports teams and investing [PDF]Morgan Stanley

Weed stocks look shunned enough to be cheap – The Felder Report

Covid corner

Can England avoid ‘lockdown lite’ this winter? – BBC

What might happen with a ‘mild’ breakthrough case of Covid – NPR

Kindle book bargains

Stuffocation: Living More with Less by James Wallman – £0.99 on Kindle

Total Competition: Lessons in Strategy from Formula One by Ross Brawn and Adam Parr – £0.99 on Kindle

Captivate: The Science of Succeeding with People by Vanessa van Edwards – £0.99 on Kindle

Understand Psychology: Teach Yourself: How Your Mind Works and Why You Do the Things You Do by Dr Nicky Hayes£0.99 on Kindle

Environmental factors

Britain’s last coal power stations to be paid huge sums to keep the lights on – Guardian

Asos and Primark set out new green pledges – BBC

The big problem of building waste and how to tackle it – BBC

ESG investing could do more harm than good – Musings on Markets

Off our beat

UK government to require public broadcasters to produce more ‘British’ content – Deadline

The last glimpses of California’s vanishing hippie utopias – GQ

Havana syndrome: the mystery illness affecting spies and diplomats, blamed on microwaves – BBC

The effects of home working on collaboration at Microsoft [Research]Nature

How a ‘tragically flawed’ paradigm has derailed the science of obesity – STAT

Let it die: the slow Internet death of once-loved media brands – On Posting

And finally…

“Saving not only frees your time in the future but also gives you a buffer in the present.”
– Ben Carlson and Robin Powell, Invest Your Way To Financial Freedom

Like these links? Subscribe to get them every Friday! Note this article includes affiliate links, such as from Amazon and Freetrade. We may be  compensated if you pursue these offers – that will not affect the price you pay.

  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”. []
{ 21 comments… add one }
  • 1 NewInvestor September 17, 2021, 2:51 pm

    …I’m sure some of you passive purists out there are now shaking your heads – if not your fists – and grumbling over talk of such greedy opportunism, while you sit sedately in your tracker funds.

    Not at all, no :-)…but then my behaviour didn’t change as I just kept on with monthly additions whilst the turbulence continued. In other words, I was doing exactly what you and The Accumulator have been advocating to unsophisticated, non-alpha bearing investors like me.

    Besides, there was little I could do to influence the course of the pandemic beyond minimising contact with others and following other such guidance.

    Passive investors just carry on. It takes a nation of millions to hold us back. (Or not.)

  • 2 Andrew September 17, 2021, 3:34 pm

    I’m going to need to do some math on the ii SIPP offer.

    I have a S&S ISA, Dealing account and SIPP at YouInvest, which if you stick to ETFs is capped to £204/yr. Paying £36/yr more and having access to a wider selection of investments and capped fees on holding funds might just about work out better for me.

  • 3 Neverland September 17, 2021, 8:40 pm

    Got to laugh about the FT doing a podcast with MMM

    I mean…

    Money Moustache blog launched 2011

    2013 articles in the New Yorker , Washington Post etc.


    2021 interview with the FT

    Sometimes you get reminded you live in a small island backwater…

  • 4 MarkT September 17, 2021, 8:41 pm

    I’ve just retired 3 years early and it is all down to you guys at monevator. I read the articles, bought the recommended Tim Hale and Lars Kroijer passive investing books and put my plan into operation and it worked! Even during the stock market covid blip, because of your articles, I didn’t panic, I didn’t sell, I had been given the confidence and knowledge to believe in my strategy. Cheers guys.

  • 5 Gentleman's Family Finances September 17, 2021, 10:29 pm

    20 years ago – seems like an age and it is.
    I does seem like 2001 was an era defining point with the dot-com bubble and 9/11.
    2020 seems like the same with covid, the end of Trump (?) and maybe Afghanistan….

    Funnily enough, maybe it’s my age but my formative thoughts back then in 2001 at age 18 have stayed with me – largely the fears of ending up on the wrong side of the millennial cliff edge. Property, pensions, profession…

    The rest is history.

  • 6 Michael September 18, 2021, 1:42 am

    No one going to pay the Public Enemy references? Yeah, boyeee . Love the site and your work, thanks

  • 7 Hak September 18, 2021, 8:17 am

    As someone that reached FI pretty early by a mix of passive and a couple of heavy investments in individual stocks (well, two actually), I have learned to just tune everything out and plod on. Ignorance can be bliss during times of crisis so all I did in March was continue with my direct debit into my trackers and sticking spare cash into my rainy day fund (which, when it gets too big I send into my trackers). Whether this is entirely rational is another matter.

    I have always enjoyed Mr Money Mustache’s writing but he is rather disingenuous in claiming to be retired. He runs a blog bringing in 400k a year and always continued to work on construction projects which brought in an income.

    Good links as ever.

  • 8 Warren Bogle September 18, 2021, 8:20 am

    I’ve made many mistakes over my investing career but one thing I did get right was selling my bond allocation and buying an equity fund on March 23 2020. I also wrote in these comments buy, buy, buy equities.

  • 9 Licensedtotilt September 18, 2021, 9:21 am

    It takes a nation of millions to hold us back

  • 10 Lee Briggs September 18, 2021, 10:48 am

    Great post and numerous interesting attached articles.

    Feeling uneasy at the current high values of global shares!

    Loving the Public Enemy quotes @The Investor, @New Investor

  • 11 Bill September 18, 2021, 12:36 pm

    Thank you for the STAT article on obesity. It has definitely made me rethink my adherence to the eat less / move more orthodoxy.

  • 12 ZXSpectrum48k September 18, 2021, 1:33 pm

    I do find it naive that many seem to think that if the S&P goes from 3000 per USD to 4500 per USD, then their wealth has increased 50%. Do they never think it might be that the USD has just gone down in value? When people are buying everything at high valuations, not just assets like stocks/bonds/property, but anything – Bitcoin, paintings, wine, Rolexes, gaming GPUs etc, that it might just be that it’s isn’t “stuff” that is going up but the metric going down. We measure everything in bilaterals. Both the numerator and denominator can and do change.

    Moreover, what matters is relative wealth, not absolute wealth. If your wealth has gone up 50% but so has everybody elses, I don’t see you are any better off. All I clearly see is a private sector that is better off and a public sector that is worse off. Just an accounting transfer but net zero in total. Is the global economy actually better or worse that pre-COVID? Not clear at all.

  • 13 Grumpy Old Paul September 18, 2021, 4:50 pm

    Re the STAT article. The author is Gary Taubes. He’s been banging this drum for a long time. See https://blogs.scientificamerican.com/cross-check/thin-body-of-evidence-why-i-have-doubts-about-gary-taubess-why-we-get-fat/ .

    Just for clarity, I’ve no objection at all to the link. I have no qualifications or background knowledge to comment on the subject matter but I will make a couple of observations about the content of the article. Firstly, at the start, Taubes makes a reference to the increase in prevalence of obesity worldwide but nowhere does he explain how the alternative paradigm to the energy balance model accounts for that increase. Secondly, it is very widely recognised that there is a link between insulin and fat deposition: diabetic patients whose condition necessitates insulin injections are routinely warned that they are likely to gain weight. Those better qualified than me can comment on “orthodox” medical opinion and the references to thermodynamics.

    For what it’s worth, I eat and drink whatever I like yet I’ve maintained pretty much the same weight for over 50 years. I have no idea whether it is genes, diet (possibly through innate preference), exercise, some combination of those three factors or grumpiness!

  • 14 Grumpy Old Paul September 18, 2021, 5:12 pm

    Re my previous post: I linked to the Scientific American blog without reading it because of its association with the Scientific American. A variant of the halo effect?
    A better link would have been to https://www.stephanguyenet.com/bad-sugar-or-bad-journalism-an-expert-review-of-the-case-against-sugar/ .

  • 15 Jonathan B September 18, 2021, 5:59 pm

    Thanks @Grumpy for pointing out the track record of Taubes as an ardent advocate of a particular point of view rather than an unbiased commentator. However I did find his STAT piece interesting.

    Being trained in biochemistry originally, I agreed with him that the mechanism of energy storage by the body (including fat) is driven by hormones. He concentrated on insulin (which signals fat creation) and hardly mentioned its opposite number glucagon which comes into play to bring about the breakdown of fat. My suspicion is that the body needs the see-saw between the two – i.e. after a meal when lots of food nutrients are being taken up by the body insulin signals their storage, and a few hours later when that supply drops glucagon comes into play to make up the difference by releasing energy from stores. In practice there are different energy stores, and in the shorter term it is carbohydrate stores that are important so it needs quite a long time since the last food intake for fat breakdown to become significant.

    Now it is primarily sugar concentrations in the blood which control whether insulin or glucagon are dominant, and with modern lifestyles meaning relatively frequent snacking on sugar-rich foods the result is that insulin is the hormone in charge much more than glucagon. See-sawing hardly happens. Which means that bodies are in the state that stores energy (in particular, fat) much more often than they break it down again. Alongside the tendency to put on weight as a result, the fact that the insulin signal is hardly ever switched off means that the body starts to become desensitised to it so that the sugar levels in the blood cease to be as well controlled, resulting in type 2 diabetes.

    So I think there is something in Taubes’s arguments. He demonsises refined sugars, which scientifically isn’t strictly accurate; any simple and easily absorbed sugar would have the same effect including unrefined honey or maple syrup, though it is true that the cheap availability of refined sugar has made possible a lot of the sweet foodstuffs which people find tempting to snack on (like biscuits and cakes, or soft drinks).

  • 16 Tom-Baker Dr Who September 18, 2021, 10:24 pm

    Sad news about Clive Sinclair. I was lucky enough to get a ZX81 for Christmas from my dad in the early 80s. When the ZXSpectrum was launched my dad also gave me one as a birthday present. Back then many kids like me learned coding with Sinclair’s microcomputers. I learned BASIC and then Assembly for the Z80 microprocessor to code fast computer games. I still have a text book about quantum mechanics I bought in the 80s with numerical algorithms to solve quantum systems using a ZXSpectrum. It was impressive what you could do with only 48Kb of RAM!

  • 17 Calculus September 19, 2021, 10:19 am

    Indeed. My brother and I shared a ZX Spectrum 16K for Christmas too. Not long into its life it developed a fault (yes that!) so we returned, worried. It was sent back fully repaired and with a complementary upgrade to 48K! The joys! Incredible to read how Sir Clive started writing transistor circuit manuals at 19 or so (no Uni) and selling electronic kits from his kitchen table, to reach the heights of 500 million sales in the Spectrum. I dont know whether he really imagined the extent of the revolution he was part of but what a legacy. Thanks Sir C.

  • 18 The Hare September 19, 2021, 7:48 pm

    That Barratt home described as tiny is bigger than my flat and my flat also doesn’t have the wardrobes or palatial outside space.

    It’s a good concept but many very tiny (read very cramped flats) out there now already.

    This one being designed might be easier to live in. They could start with an assumption of a couple both WFH full time. That office nook is clearly only for one person.

  • 19 Andrew September 20, 2021, 9:36 am

    With these tiny Barratt homes, ask yourself which scenario is most likely:

    – A couple, each earning £35K, puts down a £30K (10%) deposit, share a £1,100/mo mortgage, and pay £200/mo each to commute in to Euston every day.

    – A single professional earning £60K does the same.

    – Someone earning £200K/yr flings some of their capital at a BTL mortgage on one of these, costing them £300/mo, and rents it out for £750/mo.

  • 20 Tom-Baker Dr Who September 20, 2021, 3:59 pm

    The New Bazaar interview with William Bernstein is excellent. I will definitely read his book about Bubbles now. Thanks for linking it!

  • 21 Calculus September 21, 2021, 12:21 am

    If the bond bull market is over will a bear follow? Article by Merryn Somerset Webb in FT Weekend/online is worth a read, questioning the point of holding bonds, given forward interest rate risks and low yields. Some alternatives suggested around value, property and commodities.

Leave a Comment