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Weekend reading: five graphs that justify the gloom

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What caught my eye this week.

I have often been chided for being too negative over the past few years – both in comments on Monevator and elsewhere.

Just last week, regular reader SLG asked:

It might just be that my complainy pants news filter is set too high to assess the state of the nation but are you sure you’re getting a balanced reading breakfast to keep your glass topped half way up @TI?

That was in response to a post where I was indeed being negative about the returns from investing lately – once you excluded the big gains from the so-called ‘Magnificent Seven’ US tech giants.

Well, investing returns – equities and bonds alike – have been mediocre-to-bad since I first got negative in late 2021 and then more so. Especially once you adjust for inflation.

I do understand this is in on top of my multi-year negativity about the rubbish results from Brexit, though.

Eeyore stories

Let’s be clear. I wholeheartedly agree there’s plenty of great stuff going on in the world, from new vaccines to the renewable energy cost collapse to the ongoing joys of K-Dramas.

But (geo) politically and economically it’s been rough sledding. Better, in some respects, than it might have been, especially when it comes to the US economy. But thin gruel elsewhere at best, and war at worst.

Here are five fairly random graphs I came across just this week that shine light on the gloom.

Graph #1 from: Britain has been reduced to Trabant-status among the West

In this Telegraph article the author rightly accuses the British State of self-harm against its own economy and citizens, but studiously avoids mentioning Brexit as one of the causes. (See Goldman’s latest estimate on the damage from Brexit in the links below).

Anyway his graph illustrates why workers feel they’ve not gotten any richer for many years.

It’s because they haven’t. That’s a fact, not me being negative.

Graph #2 from: UK economy falls into recession

Here we see the UK economy has stagnated for two years – and was in recession for the second half of 2023.

That’s a fact, not me being negative.

Graph #3 from: What is the UK inflation rate and how does it affect me?

Households are living through the worst inflation shock for generations. January inflation unexpectedly held steady – a small rise was forecast – which was welcome. But inflation is still double the official target rate.

Inflation should fall fast from here (more global strife notwithstanding).

But the pain is real and it will have lasting consequences.

Graph #4 from Where UK house prices officially fell the most in 2023

Falling house prices are good news from the personal perspective of priced out would-be buyers. You can argue too that a permanently lower level of prices would help the economy, by aiding mobility or redirecting investment to more productive areas.

Nevertheless, their own home is many people’s biggest investment and asset. Lower prices make them and the country poorer.

Property prices fell in 2023 as mortgage rates leapt higher.

That’s a fact, not me being negative.

Graph #5 from Decarbonsation, an annually-updated presentation by analyst Nat Bullard

You may be a Blimp-ish climate change denier – aka scientifically wrong – but for the rest of us, this is grim viewing.

Happily there’s far more positive visuals showing progress in the fight to curb carbon emissions if you click through the rest of Nat’s presentation.

But that’s for the future. Right now things are bleak.

When the facts change I’ll change my mind

I’m not having a go at any reader who feels Monevator has been a bit morose in recent years. Reader SLG above was perfectly civil about it – and I appreciated their nice words about the effort that goes into compiling these weekly links, too.

I am fed up with the negativity myself. The difference is I believe it is out in the world, and that noticing it is warranted.

Putting your fingers in your ears doesn’t make it go away.

Coming out of the financial crisis Monevator was sometimes accused of being a haven for happy-clappy permabulls. I look forward to getting there again.

And as I’ve already said, it’s true things could be worse.

The greatest architects of Britain’s self-harm – among the worst set of politicians we’ve seen in power in the UK for hundreds of years – are no longer fully in charge. The virus that was responsible for even more of the recent misery is a fading memory. Wars lamentably rage on, but so far they’ve not metastasised a into wider conflict.

Oh and at least it’s not the 1970s, as a wonderful series of podcasts from The Rest Is History this week reminded me. Start with that first podcast covering 1974 and work your way through the darkly comic chaos.

We survived the 1970s and we will get through this. Poorer, but who knows maybe wiser for the journey.

Have a great weekend.

From Monevator

Excess reportable income – Monevator

FIRE-side chat: why escape from work you enjoy? – Monevator

From the archive-ator: Bring me sunshine [February 2020]Monevator


Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.

UK inflation sticks at 4% in January… – Which

…but Britain fell into recession in the second half of 2023 – Reuters

Will UK households enjoy a better year in 2024? [Search result]FT

Brexit Britain has ‘significantly underperformed’ other advanced economies, Goldman Sachs says – CNBC

Brexit frictions hurting firms, says British Chamber of Commerce – CityAM

Construction of affordable homes in London grinding to a halt, Gove told – Guardian

The US stock market rally is fuelling another wave of early retirement – Yahoo Finance

US Bitcoin ETFs now account for around 1% of the circulating supply – Blockworks

Index funds have officially won [US but relevant]Morningstar

China retrenchment mini-special

China versus India or Xi versus the West? – Adam Tooze

Hong Kong is self-destructing – The Atlantic via MSN

It pains me to say Hong Kong is over [Search result]FT

Products and services

Energy bills set to fall by £300 a year to two-year low – Sky

LNER’s simpler fares trial adds more than £100 to some journeys – Guardian

Get between £100 and £5,000 cashback when you open a SIPP with Interactive Investor before 29 Feb. New SIPP customers only. Minimum £10,000 account value. Terms apply. Capital at risk – Interactive Investor

Annuity sales jump to highest levels in years on higher rates – This Is Money

The cost of looking for love on dating apps – The Times

Fixed-rate mortgage rates fall for sixth month in a row – This Is Money

Open an account with low-cost platform InvestEngine via our link and get up to £50 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine

Best places to live in the UK ranked [Tool at bottom]Garrington

Challenger banks top the tables for customer service – CityAM

[US] spot ETF’s trading debut in six charts – Morningstar

Homes for sale near great pubs, in pictures – Guardian

Comment and opinion

Telegraph journalist tries life on a bare bones pension for a week – via Yahoo Finance

‘Bed and ISA’ and ‘Bed and Pension’ to save tax – Vanguard

Downsizing can deliver big retirement funding boost, study finds [Search result]FT

Most stock markets have a concentrated top ten – A.W.O.C.S.

Why not 100% equities? [Bit nerdy]AQR

FIRE versus ICE – Humble Dollar

Invaluable simplicity – Money With Katie

The Holy Grail of Investing… – Cullen Roche

…versus The Holy Sale of Investing – Of Dollars and Data

Death by retirement – Humble Dollar

Why election years are dangerous for investors – Behavioural Investment

Saying ‘enough’ to stuff – Abnormal Returns

Maybe stocks aren’t quite so sensitive to rates in practice – Finomal

Naughty corner: Active antics

ISA millionaires have a lot more in investment trusts… – Trustnet

…yet investment trust sellers are at an all-time high – Trustnet

Yield is not return – Verdad

The CPI overshoot is a statistical artefact – Calafia Beach Pundit

What’s the true bankroll? – The Diff

The Berkshire Hathaway playbook – Rational Walk

Can ChatGPT improve your stock picks? – Alpha Architect

Kindle book bargains

How Not To Be An Antiques Dealer by Drew Pritchard – £0.99 on Kindle

I Will Teach You To Be Rich by Ramit Sethi – £0.99 on Kindle

The Tipping Point by Malcolm Gladwell – £0.99 on Kindle

Money Box by Paul Lewis – £1.99 on Kindle

Environmental factors

Plastics producers lied to public about recycling potential – Guardian

So much for the lithium shortage battery crisis – Marginal Revolution

Scotland’s critically endangered marine and coastal species – The National

People want to work for good companies –  Klement on Investing

From turtles to fruit bats, migratory species under threath – Guardian

Relationships mini-special

What to do if love is not working out for you – The Atlantic via MSN

Reimagining life with friendship at the centre – Culture Study

The Lonely Girls Club – BBC

How to date when you’re a woman who doesn’t want children – Guardian

Why Americans suddenly stopped hanging out – The Atlantic via MSN

Off our beat

14 lazy sleep myths, busted – Guardian

The Slough sixth former taking 28 A-levels – BBC

Tim Urban after 40 hours inside the Apple Vision Pro – Wait But Why

Steve Wright: radio giant and feel-good friend to millions – BBC

Young people can’t read long texts anymore – Slate

What does banning AirBnB et al really accomplish? – HBR

The real-life diet of longevity expert Mark Hyman – GQ

And finally…

“If trouble comes when you least expect it then maybe the thing to do is to always expect it.”
Cormac McCarthy, The Road

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{ 57 comments… add one }
  • 1 W Reeve February 17, 2024, 12:24 pm

    You argue that inflation should fall fast from here/4%.

    One factor I think you and other commentators underplay here is minimum/living wages. We have a ~10% rise coming in April. Along with the 2% drop in NI that landed in January, and never mind any Hunt tax cuts coming later this election year, this is a significant jump in disposal income for the bottom two quartiles on the income scale. Into a macro environment which has low unemployment (though 5m disability benefit claimants, heading up to 7m https://data.spectator.co.uk/welfare ), this feels inflationary to me.

  • 2 Mark February 17, 2024, 12:35 pm

    Wage growth has been negative for 15 years. The Brexit vote took place half-way through that period, so cannot have been its cause. Perhaps the reverse is the case? People voted for Brexit in response to negative wage growth, which they perceived to be the result of us importing large numbers of relatively low-waged workers from Eastern and Southern Europe?

    And yes, wage growth has continued to be negative since Brexit too. Blame that on politicians, substituting non-EU migrants for the EU variety. In both cases, serving the needs of capital, rather than those of citizens. But at least policy is now within Westminster’s control, even though there’s a duopoly in place currently depriving us of a meaningful alternative.

  • 3 Paul_a38 February 17, 2024, 12:43 pm

    Well I started work in 1975 having been a student through the Yom Kippur war, petrol crises, 3 day week etc but was too young and ignorant to be as miserable as I should have been.
    Politics on both sides of the Atlantic and the rearmament going on is depressing but I think it’s more a return to business as was usual.
    Never quite sure if your Brexit takes all logic is really sound, the decrease in real earnings doesn’t show a clear post 2016 turning point to me. Perhaps importing cheap labour and zero hour contracts and the like are better candidates ? Capital v Labour and all that.
    Now, where to find productivity growth…..

  • 4 PC February 17, 2024, 12:47 pm

    Thanks for the links.

    Especially enjoyed FIRE v ICE .. ICE is my way of thinking, I didn’t know it had a name ..

  • 5 far_wide February 17, 2024, 1:28 pm

    @PC, I took a look out of interest. This rather sticks out to me:

    “From the get-go, we might pick a career less for its income and more for its joy—because we envisage doing it for as long as our mind and body allow”

    Which sounds great. Unfortunately though, when I graduated Arsenal didn’t seem overly keen on me picking them to play as their striker. So, I asked Steven Spielberg if I could help out directing movies, and he said “security!” and then a stocky gentleman escorted me out of the studios I had infiltrated.

    So as a penniless grad, I applied instead to approximately 75,000 grad schemes which mostly didn’t even bother replying. When one finally accepted me, I had the choice of doing the work they offered me or working for minimum wage on the tills at Morrisons.
    So after deep consideration over the following ten seconds, I went with the grad scheme and after several years of grinding, secured some promotions and earned a decent wage, and bought a house. I wasn’t loving the work, but starting again from zero with a big mortgage wasn’t really an option despite the notable absence of my joy.
    So I looked for other sources of joy instead, and that turned out to be mostly things not involving my work.

    Which I think is my very long way of saying that I’m surprised that of the two objections the ICE author could imagine to the concept, that not everyone being realistically able to secure a job which doles out joy on tap “from the get-go” wasn’t one of them.

  • 6 Factor February 17, 2024, 1:36 pm

    @TI Typo (tiny) alert:

    “….. but so far they’ve not metastasised a into wider conflict.”

  • 7 The Investor February 17, 2024, 1:49 pm

    @Mark — Agreed Brexit is not *the* cause. I said one of the causes (and more meant the wider stagnation/underperformance he references). For what it’s worth though the recovery in real wage growth clearly reverses in 2016.

    My read is the UK was especially hard hit by the financial crisis (very City-orientated economy etc). The recovery had begun, but then Brexit (/uncertainty /political nonsense and distraction) set us back again. Then the pandemic was an even bigger hit, as I do say in the piece.

    No argument many people felt miserable and so voted for Brexit.

    The argument/problem is they only made things worse, especially for themselves versus the mild ‘elite’ like me / most readers of this site (professional, middle-class, more relocation options due to wealth, investments overseas that benefited from weaker pound, etc).

  • 8 Factor February 17, 2024, 2:08 pm

    @PC #4

    Importantly, ICE (“in case of emergency”) is also the recommended prefix for any next of kin contact number(s) on one’s mobile phone.

  • 9 xxd09 February 17, 2024, 2:09 pm

    As this really an Investment blog working with in the exigencies of the stockmarket-that particularly human construct—I feel that commenting on stockmarket behaviour allows me civil discourse without having to go down the various interesting but ultimately distracting human rabbit holes of politics,economic and social policies etc etc
    So.. the stockmarket has been a good friend to me -now 78 and 21 years retired
    This leads me to the conclusion that we humans are all on the right road -at the moment-and have been for a very long time ie life has got better and has continued to get better for most of us over a very long period
    Of course there will be moments or times for countries and people that are horrendous but……
    The stockmarket graph is ever upwards -so far -in the scheme of things this seems to be likely to continue ……
    I am therefore filled with hope based on this unarguable historical reality that this happy state of affairs will continue to go on to be more likely than not -it therefore instils in me the very opposite of a gloomy outlook!

  • 10 ZXSpectrum48k February 17, 2024, 3:02 pm

    @TI. You only spin the negative side. You totally forgot to mention that pensioners have seen real wage increases over the same period. You also forgot to mention that the total number of millionaire pensioners has more than tripled over that period. Over 25% of pensioners are now millionaires, from just 9% in 2010. All that pension and housing wealth they “created” for themselves. We’re so very fortunate that they didn’t leave us with anything nasty to solve. Such as a massive fiscal hole or a total unaffordable free health and social care system. Or damaging our economy by leaving our largest trading bloc.

    Plus, if anything that is going wrong in the UK, then it’s just the fault of the elites in London and Westminster, right? Citizens cannot be to blame for anything, It’s never the fault of the people who voted. Shocking productivity is not their fault either. Always someone else is to blame. Must be the immigrants.

  • 11 John Charity Spring February 17, 2024, 3:11 pm

    No good times without the bad times. Night is darkest before the dawn and all that.

    I read that wage growth chart different. First, it ain’t linearly scaled. Second, sharpest drop to 2014 (pre B Word). Then up slightly/sideways with the inflation grenade on the end. Still ain’t pretty.

    Shame about HK. Then again, Thatcher signed it over rather than fighting. The Chinese enjoyed that moment greatly. Far greater personal and economic damage there than Brexit.

    Last one out if the UK turn off the lights? Actually never mind, there won’t be any electricity left anyway even if you could afford the bill!

  • 12 Geoff February 17, 2024, 4:16 pm

    The world economic growth rate has been positive since 1961 except for two years. The global picture is one of increasing prosperity up to the present day. Peak real terms prosperity for the average Joe passed long ago in this country and much earlier in the US, but the world’s poor are much better off. The UK outgrew both the US and Germany while we were members of the EU, but that has come to an end. Nonetheless, the big picture now is climate change. Our present troubles hardly register on that scale.

  • 13 ermine February 17, 2024, 5:17 pm

    @far_wide #5

    > I’m surprised that of the two objections the ICE author could imagine to the concept, that not everyone being realistically able to secure a job which doles out joy on tap “from the get-go” wasn’t one of them.

    Bravo. FFS, if there’s ever an illustration that you shouldn’t but an old head on young shoulders, the ICE argument is that in spades. Sure, someone like HD who has made their stash can choose joy over income. At the start of one’s career, not so much.

    Getting established in life in a first world country is a hard scrabble to get some of the necessities of life, and some of these, shelter in particular, as capital-heavy. So no,

    > we might pick a career less for its income and more for its joy—because we envisage doing it for as long as our mind and body allow. As the saying goes, if we can find a job we love, we’ll never work a day in our life.

    HD seems to offer a great recipe for getting a good acquaintance with sleeping on the street, if implemented early in life

    The trope of the artist starving in a garret and the resting actor working McDonalds is the better side of what happens if you decide that the joy side of the equation beats income at a young age.

  • 14 Adrian Steele February 17, 2024, 5:39 pm

    @TI – i largely share your pessimism though not I expect all the reasons or solutions for the low growth state of our economy. I wanted to explore your optimistic view about the collapse in renewable pricing. With respect to wind the economics seem impenetrable but it is clear that once you include the grid costs and backup supply costs (a lot of commentators don’t) then it isn’t that cheap at all. The failure of a recent auction at quite a low strike price is evidence of that I think. Genuinely interested in your take on that. It is probably simplistic but once you have to have nuclear and other back up for wind the question of why to bother wind at all seems pertinent.

  • 15 dearieme February 17, 2024, 6:06 pm

    “Night is darkest before the dawn and all that.” That can be believed only by people who are not used to getting up early.

  • 16 gary senior February 17, 2024, 6:21 pm

    I find it fascinating that many who write and comment on here appear to live on different planets from each, when I think in reality we don’t.

    I know so many people are living the best lives they ever had, in different age groups where your data graphs appear to have little relevance to them – and that’s not to suggest the data is wrong, it isn’t, it is what it is!

    Your views always interest me, because you have an opposite perspective to myself, and I think it’s important to read different views.

    Keep on the good work, and the links are great as always!

    Objectively, perhaps there are five graphs out there to show that right now is the best time to be alive in the UK, since the dawn of time…

  • 17 indyinv3.0 February 17, 2024, 7:18 pm

    It is hard to argue with the evidence of pessimism that is presented. However, these types of articles are usually written somewhere near the bottom.

    I actually think we are on the verge of a five year bull run in equities similar to the 1960s/ 1990s, for various reasons.

  • 18 Brod February 17, 2024, 7:18 pm

    Interesting set of graphs.

    So, the last time the base rate was 5.25% was early 2008, when the average house was price was £180k or so. It’s now about double that (nominal). Real wages adjusted for RPI (we’re talking about property, so seems the appropriate measure) were £40k in 2008 and are now about £35k.

    So are we going to see a massive suck out in real house prices to re-balance?

    Could be interesting. In a Chinese proverb sense.

  • 19 Mike February 17, 2024, 7:56 pm

    Gosh that archive Monevator piece from early 2020 really rattles chains like Marley’s ghost. However bad it may or may not be now, it sure as hell isn’t as bad as what it was then. “A bit of Spring might slow this thing down”… enough to bring tears to your eyes.

  • 20 SLG February 17, 2024, 8:52 pm

    Quoted on Monevator! I’ve just redefined “enough”.

    For the inferences in all of those graphs, through a pursuit of FI, I’ve designed my life to feel in control over their impact on me and my family. You cant manage risk properly without good data (so head in the sand dosent work). This (imaginary) control of the future helps me feel positive about what comes next.

    Past performance is no guarantee of future results. History dosen’t repeat but it rhymes. With that approach, I still get to choose how I feel about the past and the future so I do my best to live in hope and not fear. Not least, because fear is really contagious. You have to watch which wolf you feed (and all that…)

    I vote for the happy clappy permabulls eveytime (at least for life, if not for GDP and spending power). We have been, and still are, on a rocky road of change in unchartered territory for our modern world. I’d bet my house it will be like that for the rest of the week, month, year, decade etc. I wouldnt bet tomorrow will be great, but I’d bet if I go into tomorrow looking for great things, I increase my chances of finding them.

    Set a FIRE action plan into the Satnav of life, belt up, strap on a smile and enjoy the ride. Why not?

  • 21 Vic Mackey February 17, 2024, 10:14 pm

    UK per capita GDP started flat lining around 2006, and we know what was building up around then. If you were in the “mild elite” (sic), you just weren’t very aware of it. It seems you are now though. Getting woken rudely from a deep slumber is never very pleasant.

  • 22 ermine February 17, 2024, 10:19 pm

    > Monevator was sometimes accused of being a haven for happy-clappy >permabulls. I look forward to getting there again.

    ISTR one actual quote, by Lemondy, was

    ‘Monevator views sunrise as a bullish indicator’

    but google was not my friend on this occasion. And we are all much older now 😉

  • 23 Curlew February 17, 2024, 10:40 pm
  • 24 The Investor February 18, 2024, 12:11 am

    @ermine — Haha, excellently remembered, I recall that too! Top marks thank you sir.

    Wonder where @Lemondy ended up…?

  • 25 G February 18, 2024, 8:05 am

    Re: ICE etc. There seems to be a concerted effort in the states to undermine the notion of retirement as I’m seeing it crop up in a few different blogs and podcasts. No doubt it is a response to the post-covid great retirement.

    If you are still working and enjoying it in your 60s & 70s, it’s likely because you are lucky. Lucky to have good health and a full set of good enough physical capabilities (there’s only so much you can control via lifestyle factors alone, despite what longevity “experts” will tell you), lucky enough not to experience ageism in your field, lucky enough to have work which is satisfying.

    But you can still do purposeful work full of meaning even while not employed. Work does not need to be for anybody, or to be paid. Working on your hobbies, helping out friends etc can easily fit into the category of work.

  • 26 Wodger February 18, 2024, 9:20 am

    @G — “But you can still do purposeful work full of meaning even while not employed. Work does not need to be for anybody, or to be paid. Working on your hobbies, helping out friends etc can easily fit into the category of work.” I wholeheartedly agree! I can only assume that the most vociferous opponents of FIRE don’t have many interests outside of their career. @ermine’s “hinterland” is a good metaphor.

  • 27 Better boy February 18, 2024, 11:11 am

    Things were better in the 70s

  • 28 Al Cam February 18, 2024, 11:21 am

    Thanks for this weekends set of links and the five graphs too.

    I think the link that will stay with me is from A.W.O.C.S – which highlights that the “Magnificent Seven” (or the top 10 really) phenomena is far from unique to the US.

    The Morningstar passive indexing link contains some interesting historical details.

    Lastly, the AQR note about 100% equities is IMO less nerdy that ERN’s take on this.

  • 29 old_eyes February 18, 2024, 12:25 pm

    @Adrian Steele (#14).
    ” I wanted to explore your optimistic view about the collapse in renewable pricing. With respect to wind the economics seem impenetrable but it is clear that once you include the grid costs and backup supply costs (a lot of commentators don’t) then it isn’t that cheap at all. The failure of a recent auction at quite a low strike price is evidence of that I think. ”

    We have to state our assumptions. Mine is that burning stuff to generate electricity is not a viable route for the future. In that I agree with the majority of scientists and national governments. Economists, I am not so sure about, but their assumptions often seemed based on wishful thinking rather than reality.

    So there are really three options:
    1) Nuclear
    2) Renewables (hydro, tidal, wave, solar, wind, geothermal)
    3) Burning fossil fuels with carbon capture use and storage (CCUS).

    Carbon capture of the required efficiency has NEVER been demonstrated economically and at scale. Lots of work going on, and we may get there, but it shares something with fusion – it has been 10 years away for the last 40 years.

    The strike price for nuclear was £92.50/MWh in 2012 – indexed to inflation. By 2022 that figure had reached £128/MWh by 2022, and will continue to be inflation indexed for 35 years after construction is complete (https://en.wikipedia.org/wiki/Hinkley_Point_C_nuclear_power_station).

    At that price EDF are taking a bath and whining that they need more money from the UK to avoid a stonking loss. The UK is struggling to find anyone to build nuclear here without eye-watering subsidies from the UK taxpayers.

    Renewables costs have fallen dramatically and continue to fall. Lazards do a regular analysis of the levelized cost of energy (LCOE) for a variety of technologies, including conventional (https://www.lazard.com/research-insights/2023-levelized-cost-of-energyplus/). LCOE looks at capital, fuel, R&M over the life of an asset. LCOE has its critics, but it is the only agreed global measure we have for comparing alternative sources of energy. Looking at their chart for unsubsidised generation, we can see that LCOE for utility scale PV + storage, and onshore wind + storage, is lower than any other solution except the low end of coal costs and combined cycle gas turbines (not peaker plants). They do not give figures for these with CCUS, which would be the equivalent to renewables plus storage, because there are no plants and therefore no data.

    So renewables costs on a downward trends, nuclear on an upward trend, and no solution for fossil fuel burning plants.

    Looking at storage development alone, this open access article from a group at Imperial College looks at the levelized cost of storage (LCOS) for various storage technologies in various applications (https://www.storage-lab.com/levelized-cost-of-storage)/ TLDR – its getting cheaper and better, and storage is not really a problem for grids with high levels of renewables, either in cost or potential for deployment.

    And this paper from 2022 shows the technical consensus is that reliable grids with 100% renewables are entirely practical around the world (https://ieeexplore.ieee.org/document/9837910).

    All of the above is why we bother with wind.

  • 30 Tangerine February 18, 2024, 1:16 pm

    Can’t agree more about The rest is history 1974 and I was there as an oblivious 18yr old student in earshot of the Brum pub bombing ( Thursday night watching Monty P if I remember correctly). As a lifelong Labour voter if I really understood what was going on I would have voted Thatcher in 79! Makes those Brexiteer fanatics seem competent.

  • 31 Rosario February 18, 2024, 2:18 pm

    I read the FIRE vs ICE piece in the week and have a slightly different take on it, more FIRE and ICE. As previous comments it’s just not feasible for most to find work that’s enjoyable. I certainly wouldn’t do many jobs if I had the choice and have the view that most careers are a balance of finding something that pays reasonably well with something that we’re reasonably good at and can tolerate.

    What I do think is a worthwhile point is that by having a reasonable pot you can choose to lessen to degree of inconvenience that comes with work. Work at home, take a lower paid but less pressured role, not work for a poor company / boss / customer

    It’s been written about on lots of previous blogs but for me I think that’s the most widely applicable route to FI, is sustainable and has many benefits well before reaching full FI.

    That’s much more practical than advising to find something you love as a career. Cliched BS in my opinion.

  • 32 xeny February 18, 2024, 3:09 pm

    @old_eyes. I entirely concur with you that CCS is a pup and burning fossil fuels isn’t sustainable going forward.

    However, I think the paper you cite glosses over some challenges. Section VI part B. “Dealing With Variability and Stability” is gloriously non quantitative.

    Certainly all the arithmetic I have done for a European scale grid suggest that resolving issues of intermittent supply remains a significant engineering challenge for the foreseeable future, unless we accept really quite dramatic price signals to manage demand during periods of low supply.

  • 33 Wolds Wanderer February 18, 2024, 5:12 pm

    Totally agree about Rest is History series on 1974, one of the best and funniest I’ve listened to in a while. As someone born late in that year, and so building up to a big birthday this year, I was starting to wonder whether I should be celebrating at all, given the sorry state of the world…

    The RIH miniseries certainly makes it sounds like maybe things generally (and UK politicians specifically) aren’t quite “the worst they’ve ever been…” unless the current lot in number 10 are spending all their time arguing about who gets to eat lunch with whom, whilst plotting to murder each other, as was apparently happening back then :).

  • 34 platformer February 18, 2024, 5:26 pm

    In what year would you choose to be born?

    In 1950, 53% of the world lived in extreme poverty; in 2018 that was 10%. In Western Europe the equivalent figures are 20% to 1%.

    In 1970, median daily income per capita in the UK was $18; in 2020 that was $46 (2017 prices).

    In 1950, 51% of the world received no education; in 2020 that was 14%.

    In 1950, 4% of children in the UK died before 5; in 2021 that was 0.4%.

    Our World In Data has 100 more of these.

    To answer the question, you’d choose 2024.

  • 35 Jim McG February 18, 2024, 5:37 pm

    Reading the FIRE v ICE debate, I can’t help but recall the great quote from Derek Smalls, bass player of Spinal Tap, where he found his place in the middle of the Fire of David St Hubbins on vocals, and the Ice of Nigel Tuffnel’s lead guitar, “you know, kind of like lukewarm water”. That sums up my position on “retirement vs work” nicely.

  • 36 Jim McG February 18, 2024, 5:41 pm

    @ Wodger “I can only assume that the most vociferous opponents of FIRE don’t have many interests outside of their career.”
    In the same way, I can only assume that the most vociferous proponents of FIRE absolutely hate their work and would rather be doing anything else. Which seems a bit sad really.

  • 37 ermine February 18, 2024, 7:41 pm

    > most vociferous proponents of FIRE absolutely hate their work and would rather be doing anything else. Which seems a bit sad really.

    Not if they manage to win the prize, it’s called living intentionally 😉

  • 38 Seeking Fire February 18, 2024, 8:37 pm

    It seems patently obvious that a) it’s better globally to be living today (generally) than any time previously b) if you had the option to spin the roulette wheel and wherever it landed your country of birth was shifted mostly people in the UK wouldn’t and shouldn’t take that option.

    That’s not mutually exclusive with acknowledging that generating a decent standing of living in the UK is getting harder. Wages are equalizing with many countries who have a lower standard of living / earning (eg Mexico and Indonesia) and it’s going to be tough (and tougher) relatively speaking for a lot of people. Still there’s very few people who don’t have their own toilet in comparison to an estimated two – three hundred million people in India (various research).

    At least in the UK we are starting to acknowledge there’s a big problem. Unfortunately I suspect we wont go for growth until we’ve had a really good go at taxing wealth now income is nearing the limits of what can be taxed and raise meaningful additional revenues.

    Brexit obviously hasn’t been helpful economically and comparing us to other European countries isn’t helpful. It’s where we would have been that’s relevant. Still the last laugh is those who voted for brexit, many for immigration reasons are having to acknowledge that ever major party is going to casually waive through 1/2 million plus new immigrants ever year as there only option for GDP growth. It’s called our university system amongst other things.

    Only just recently Barclays and BNP have announced they wont lend to any new fossil fuel developers. I’m a massive proponent like most people of renewables but do we seriously think the US banks aren’t going to take this business? And obviously Barclays / BNP don’t use any plastics day to day lol. Corporate greenwashing….

    Am thinking a wealth tax is still unlikely so the plan if one is still accumulating is to buy low yielding assets and hope CGT rates one day falls once they’ve equalized with income tax. What do people think about Berkshire Hathaway acknowledging the grim reaper has already claimed one of them.

    I’ve not idea how a young twenty – thirty year old has a hope of accumulating a large amount of wealth over a couple of decades unless they are earning 300k plus.

    Biggest trend I think will be collapse in birth rates in countries such as the UK which will really play out over the next few decades. Has some really positive possibilities and some major challenges!

  • 39 ZXSpectrum48k February 18, 2024, 9:27 pm

    @Seeking Fire. Yes, there is no doubt that of the circa 108 billion homo sapiens that have lived and died, that those who are living right now in the UK are in the top 1%. Even compared to the 8 billion currently, we’d struggle to argue we are not in the top 10%. We have nothing really to complain about.

    Yet, as a bunch of tribal apes, we don’t measure our position in absolute terms. It’s about relative position in the hierarchy. Across the developed world, people feel their exalted and unjustified position in that hierarchy is slipping. They are correct.

    The actual problem is information technology. It’s the great leveller. It’s destroying the moat that most of the population in the developed world have relied on for a number of generations. An individual with 50th percentile ability was able to obtain a 90th percentile outcome due to the luck of their birth location. That’s going to converge to a 50th percentile outcome. Not much can stop that.

  • 40 xxd09 February 19, 2024, 12:27 am

    One of the trips I always wanted to do in retirement was to visit the fantastic Maya ruins in Central America -does everybody remember the temples sticking out of the jungle in Starwars?
    The Maya created a fabulous empire with incredible art ,architecture and writing etc etc over a period of 1000 years from 200BC to 800AD
    They also along the way destroyed their local environment and did it all by themselves by various means -deforestation etc
    The people just suddenly walked away abandoning their “elites” ,their temples and their Gods -all now being rediscovered in a pristine state rather like the Marie Celeste!
    It’s a fabulous trip to do
    Such a lesson for us all-how civilisations boom and eventually bust-the final days too came at the height of their civilisation but it was to no avail and too late -their resources were all used up

  • 41 Boltt February 19, 2024, 8:18 am

    @ XXd09

    I did a similar trip visiting parts of Mexico Guatemala and Belize. The guide said the fall of the empire was linked to population growth (lack of decent food), leaders who were dim, and who were interbred suffering many disabilities (and who thought being different was special and god like).

    Not sure if it was true – but it’s starting to rhyme!

  • 42 JimJim February 19, 2024, 8:54 am

    @TI, I look forward to a day when the titles in the weekend reading are taken from the lines of the Blockheads classic, reasons to be cheerful pt 3. (Homework perhaps?)
    But thanks for the take, who knows which way we go from here, the heady days of cool Britannia behind us, empire a distant spectre that only haunts us, the post war rise of labour over capitals reversion to mean normal dwindling due to a strengthened labour market
    Nothing would surprise me from here on – and I can’t predict it, and can do precious little to influence it – just keep on investing in the future of the world and hope it all works out

  • 43 Jonathan B February 19, 2024, 11:24 am

    Of @TI’s pessimistic indicators, the one that worries me least is the decline in house prices. 1.4% is less than the transaction costs of moving, and a lot less than the uncertainty in valuing a property for sale in the first place.

    More pertinent is the rise in housing costs, whether mortgage payment for owner-occupiers or rents. I imagine that significantly exceeds inflation, particularly income inflation.

  • 44 The Investor February 19, 2024, 2:08 pm

    Thanks for all the interesting comments!

    @Jonathan B — Yes, hardly a huge move though moreso of course in inflation adjusted terms. One can argue in fact that house prices have undergone something of a real terms crash. I was reading this morning that price-to-earnings ratios for London property is now back to 2014 levels. As I noted, one can call this optimistic, too, of course. 🙂

    On that note, I wouldn’t necessarily call them pessimistic indicators, at least in that I don’t see them as leading indicators. I was simply pointing out that things have been hard.

    I understand readers who say “hey, this kind of miserableness is what you see around a bottom”. I don’t disagree. 🙂 But people have been calling me pessimistic for 18 months, saying nothing to see here etc.

    There is actually a stage between euphoria and despondency that one has to go through… and which we’ve been going through. Are we nearer the end than the beginning? Maybe, on inflation for sure. Economically perhaps not, especially in the UK where we’ll be slogging through treacle for years I suspect, short of ‘Barber boom’ type un-sustainable fiscal moves or some enormous upsurge in immigration or whatnot.

    Ideally we’d throw the towel in on Brexit, take our lumps on losing our special access, and enjoy a boost across the board. But that’s a 2035 onwards project I expect, sadly.

  • 45 ZXSpectrum48k February 19, 2024, 3:02 pm

    @TI. On a purely technical level, we should all stop using RPI and use CPIH. For all the debate over how to measure inflation, the conspiracy theories over it being manipulated etc, one thing is not in doubt. That RPI as a metric of inflation is archaic and definately not best in class. Using RPI is like going back to using Imperial measures. It might make the Moggsters happy but it’s basically crap. We should start looking at all these graphs vs. CPIH. My only wish is that the ONS would backbuild a proxy for that going back 100y+.

  • 46 Al Cam February 19, 2024, 3:43 pm

    @ZX (#45):
    I agree – and FWIW I used to favour RPI until I did a deep dive a good few years back. Probably worth noting that the RPI [in name only] is not going to go away BUT, as of February 2030 RPI index values will be calculated using the same methods and data sources that are used to calculate the CPIH.

    The simplest proxy – if nothing better is available – is CPIH (or even CPI) is approximately RPI minus 1%.

    The link below provides monthly RPI index data from 1915: http://www.wolfbane.com/rpi.htm

    Other sources I have compared are: ONS [from 1987/1948 : monthly/annual IIRC]; and Barclays Equity Guilt Study 2016 – annual data only – which incidentally goes back to 1900.

    There are some discrepancies between the three sources albeit that in the round they seem to pretty much agree.

    I generally use/prefer the wolfbane data as it is monthly back to 1915.

  • 47 SemiPassive February 19, 2024, 4:15 pm

    I’m firmly with far_wide and ermine on the FIRE vs ICE argument.
    To tie in with the FT article I’ve even gone as far as downsizing home, although we never really needed a large 4 bed detached so it was an extravagance to start with.
    Although it hasn’t provided a pension pot directly from the proceeds, it has wiped out a mortgage that would have taken several more years to pay off, enabled us to fill both of our ISAs for this year and next, and made it possible for me to triple or nearly quadruple pension contributions.

    One could forgive millenials and Gen Z for being a bit peed off if they end up exempting boomers and Gen Xers from stamp duty on downsizing though. Reaping the benefits tax free while younger generations face working until 71 to afford their Blackrock-owned HMO room rent, rented electronic devices, AI girlfriend/boyfriend subscriptions, and armoured street riot proof Deliveroo drone deliveries.

    The Verdad article on high yield bonds was timely, I have limited exposure to a US high yield bond ETF. So just a reminder not to take the YTM literally and factor in the higher default rate. Although it would only be HY index weighted anyway.
    I do wonder what HY vs IG bond ETF total returns will be like over the next decade. Maybe everything will deliver about 6% pa, including equities.
    I’m not holding my breath for anything better than that.

  • 48 Jonathan B February 19, 2024, 6:08 pm

    @ZX and @Al Cam, thanks for getting me to at least skim the surface of the difference between RPI and CPI.

    I can see that the geometric approach of CPI is better particular for items where volatility is high, and that inclusion of some measure of housing costs as in RPI (and CPIH) really ought to be accounted for because it is a significant proportion of most of us’s spending. But beyond that there seem to be multiple technical differences which are difficult to distinguish.

    @ZX’s point is good though, if CPIH is the most appropriate long term measure why not create a retrospective index? As far as I understand they all use similar input data, which could be recalculated.

  • 49 Al Cam February 19, 2024, 7:38 pm

    @Jonathan B:
    The so-called formula effect (geometric vs arithmetic) explains most of the difference between PRI & CPIH. The 2015 paper: UK Consumer Price Statistics: A Review by Paul Johnson provides IMO a good (but somewhat lengthy) explanation of this and the other issues.

    If you take a look to this ONS page, https://www.ons.gov.uk/economy/inflationandpriceindices
    the ONS publishes the RPI index every month back to 1987. The CPIH index is available from 1988 on that ONS page too.
    There is annual RPI data available somewhere else on the ONS, back to 1948 I think.

    If you want to go back farther and IIRC then you need to use other sources – see comment #46 above.

  • 50 Rhino February 19, 2024, 9:14 pm

    If ever Monevator wanted to put out an article on computing inflation adjusted returns then A.L. Cam would be the consultant to call on!
    That said, wouldn’t be at all surprised if just such an article already existed in the back catalog..
    Having been through the process recently (with the help of the aforementioned) I can vouch for being both fascinated and aghast with the results. Working out your real returns and notional £ losses is a Pandora’s box that cannot be re-closed

  • 51 ermine February 19, 2024, 9:57 pm

    @xeny #32

    > I entirely concur with you that CCS is a pup and burning fossil fuels isn’t sustainable going forward.

    what I would like to know is why nuclear is not regarded as fossil fuel? Is it the question of scale, the whole e=mc^2 making m trivial in the grand scheme of things relate to other fossil fuels? Are the resources plentiful enough, say like oil in the 1950s? Arguably the fossil part is having to bury the end result for 10,000 years rather than the uranimium extraction, but it sure looks like a fossil fuel to me 😉 Obvs you don’t need CCS for nuclear, though arguably wrangling the pollution has challenge enough of its own

    I don’t have a specific axe to grind re nuclear and I am old enough for it not to matter for me anyway, but the terminology always puzzled me.

  • 52 FireIT February 20, 2024, 8:43 am

    @ermine I believe Nuclear isn’t regarded as a fossil fuel as fossil fuels are literally the fossilised remains of ancient forests, whereas nuclear material consists of refined ores that would originally have been created through the merger of neutron stars (https://en.wikipedia.org/wiki/Nucleosynthesis).

    My personal opinion is that safety requirements for nuclear generation are vastly over-specified, leading to huge unnecessary expenses. The anti-nuclear brigade, which mostly grew out of the anti-atomic bomb movement is probably one of the biggest causes of global warming thanks to their failure to differentiate between nuclear reactors that cannot be used to weaponise fissile material and those that can. If you look into the science rather than public statements from biased groups it’s quite infuriating. The irony of the so-called green party’s policies is not lost on me.

  • 53 ZXSpectrum48k February 20, 2024, 9:57 am

    @AlCam. Yes, it’s approximately the case that RPI is 1% over CPIH. Nonetheless, the spread varies. Assuming a constant spread you lose the path dependence which is meaningful during stress periods.

    Moreover, the swerve to define RPI as CPI from 2030, while an effective way to avoid legal issues, does mean that people will continue to use RPI. Rather than the more appropriate measures such as CPI or CPIH. The lack of an official back history compounds this, meaning that historic analyses will continue to use the wrong inflation metric. It makes international comparison very hard.

    Given that many investment banks have produced a back history for CPI/CPIH, the ONS could even just take one of those (or an average).

  • 54 Al Cam February 20, 2024, 11:37 am

    @ZX (#53):
    Yup, the minus 1% approach is indeed just a broad brush proxy.

    From my study of the subject I gleaned the following:
    a) The first recorded consideration of the change in the general level of prices, and how to measure it, is believed to be a 1707 book (Chronicon Precosium) by Bishop William Fleetwood. Whilst this describes a good story (suggest you look it up), some people dispute that it is the earliest use and point to the Schumpeter-Gilboy Price Indices — 1661-1823.
    b) there were occasional official comparisons of prices for food in the late 19th century and early 20th century; the Government first began a systematic, continuous check on the increase in the cost of living in 1914.
    The Retail Prices Index, or RPI, is the longest running measure of UK consumer price inflation; it was introduced in 1947 as the Interim Index of Retail Prices.
    c) The Consumer Prices Index, or CPI, was first published in 1997 to measure inflation consistently across all European Union states. In 2003 the CPI became the Bank of England’s inflation target. The CPI is required by European law and the Office for National Statistics (ONS) has to produce the CPI to the specification of European legislation.
    d) CPIH was introduced in 2013. It includes a measure of owner occupiers’ housing costs CPIH is otherwise identical to the CPI, although its calculation and structure are controlled by ONS and so it may deviate further from the CPI in future.

    The ONS collects, analyses and disseminates statistics about the UK’s economy, society and population. Therefore, to my eyes wrt inflation the ONS, can/will only ever go back as far as 1947. Which it does for RPI IIRC.
    To go any further back you have to use other sources, e.g. see comment #46.

    I agree that the period from now to 2030 could be a bit tricky.

  • 55 old_eyes February 20, 2024, 4:25 pm

    @ermine (#51). “what I would like to know is why nuclear is not regarded as fossil fuel? Is it the question of scale, the whole e=mc^2 making m trivial in the grand scheme of things relate to other fossil fuels?”

    Fossil fuels are usually defined as ancient organic matter that has been buried for millennia, and converted under heat and pressure into oil, coal and gas. Radioactive materials needed for nuclear power are elements, not complex carbon-based molecules. These elements have been generated through the life of stars, in the death of stars, and in some major astronomical events – collectively known as ‘exotic processes’ such as colliding neutron stars or black holes.

    If you are going to burn a fossil fuel for energy, you will create CO2, and that will need to be captured if you want a zero carbon emissions energy system. Hence the move to renewables and potentially nuclear. Nuclear is not renewable, new uranium is not being produced on earth, but we have quite a lot of it. In fact proven reserves are going up faster than we are using it https://world-nuclear.org/information-library/nuclear-fuel-cycle/uranium-resources/supply-of-uranium.aspx. At current efficiencies we have about 90 years’ supply that is easily recoverable.

    Common discourse confounds low to zero carbon emission energy supplies with renewable energy. Low emissions is what we want, both renewables and nuclear are a way to get there.

    The problem with nuclear is three-fold. It is slow and expensive to build in areas of the world where safety is taken seriously, has an appalling record of leaking when safety is not taken seriously enough (See Dounreay where radioactive waste was dumped into a shaft that unfortunately had access to the sea. Guess what happened! https://en.wikipedia.org/wiki/Dounreay), and finally the long-term decommissioning and safety costs are hidden and pushed into the indefinite future.

    We know how to do the technology and engineering to provide safe nuclear power, but nobody wants to pay the cost. As much as anything, that history of faking the numbers and playing silly buggers for ‘national interests’ has made new nuclear expensive, and politically and socially difficult.

  • 56 ermine February 20, 2024, 7:27 pm

    @Fire_IT, old_eyes – thanks, I think it was the stuff getting mined out of the ground and running out rather than the fossil part, but I confused the two myself, d’oh. as you say I did exactly this:

    Common discourse confounds low to zero carbon emission energy supplies with renewable energy. Low emissions is what we want, both renewables and nuclear are a way to get there.

    Anyway, sounds like we are not short of the raw consumables, though I am not sure that only 90 years running is worth the long-lasting tail risks. But history has shown mining tech gets deeper into the available resources with time so that may be OK.

    Thanks for the enlightenment!

  • 57 old_eyes February 22, 2024, 1:16 pm

    @ermine (#56)

    On reserves, the figure I looked up described the ‘easily recoverable’ reserves lasting for 90 years. I think there is a lot of other stuff we could get at if we needed. Uranium is a fairly common element. Then there are all those tricks we can play with fast breeder reactors, thorium cycle etc. I don’t think running out of nuclear fuel is going to be a major concern, even if we do go all in on nuclear. And as I explained, we are probably not going to do that because it is progressively getting more expensive, whereas both renewable energy and storage costs are falling, and still falling quite fast. Add in the social and political issues and it is going to be difficult to radically increase the nuclear fleet.

    The existing fleet is also under threat from climate change. Nuclear plants use a lot of water and are normally sited on the coast or on rivers. France already have to switch off nuclear power stations in hot summers where there is a lack of water in rivers or the environmental impact of discharging hot water into already hot and depleted rivers is too high https://www.nature.com/articles/d41586-022-02817-2. Plants on coasts then have to manage sea-level rise and increasing storm intensity.

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