What caught my eye this week.
I am late with the links this weekend, so let’s get stuck in with a “show me the money!” moment.
And not just any money, mind, but the 8,800lb coins of Yap Island in the Pacific Ocean:
A Yap island coin: We’re going to need a bigger sofa.
Writing on Medium, Jamie Catherwood explains that:
For centuries, the natives of Yap have used ‘rai stones’ as a form of payment, and store of value.
These ‘stones’, however, were actually gargantuan limestone discs weighing up to 8,800 lbs., and standing 12 feet tall.
The natives ‘minted’ (mined) their currency on Palau Island, and upon their return the Chief of Yap valued each rai stone in front of the entire population.
In the same ceremony, locals would then purchase the currency.
Money is nearly always an abstraction. Trust is usually where the value lies, not in any intrinsic value. Even the gold and silver coins of antiquity were debased and inflated away.
Catherwood writes:
After considering Bitcoin’s value within historical context, it should be clear that criticizing the crypto-currency for being “based on nothing” is a weak argument at best.
He points out that in the past even rather ghoulish religious artifacts have been used as a store of value.
I haven’t made my mind up about Bitcoin yet.
But I’m pretty sure it’d be an easier sell if instead of the dollar, Visa, or PayPal it was up against giant limestone discs and the teeth of long-dead saints…
From Monevator
Taking more risk does not guarantee more reward – Monevator
From the archive-ator: The one number to beat if you want to retire early [Dated in modern thinking, but I still believe a decent goal for ambitious 30-somethings] – Monevator
News
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
Property buyers dive in as Turkey’s lira plunges – Guardian
New Zealand bans sales of homes to foreigners – BBC
House prices fall at fastest rate since financial crisis, sales tumble 65% – ThisIsMoney
Buy-to-let lending slumps as landlords take fright at tax changes [Search result] – FT
London’s planning application postcode lottery – ThisIsMoney
Emerging markets investors feel effects of Turkey crisis [Search result] – FT
Wake up call: Even Germany looks set to miss its climate goals – Bloomberg
Products and services
Invesco Perpetual at the top of ‘top dogs’ funds list – Investment Week
Banks to check payee’s name matches account number [At last!] – ThisIsMoney
Cracking summer: UK insurers expect rise in subsidence claims – Guardian
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
Lovely bubbly: a case for investment in English sparkling wine [Search result] – FT
Why your holiday insurer may refuse your claim – even if thieves break in – ThisIsMoney
Royal Mail changes redirection fees to ‘per household’ rather than ‘per surname’ – Guardian
US angel network wants to mobilize 100,000 women investors – Fast Company
The case for multi-factor funds – Morningstar
Do ESG (environmental, social and governance) funds hurt your returns? – ETF.com
Ticketmaster closes resale sites, but will this fix alleged over-pricing? – Guardian
Millions of Virgin Media customers to be hit with inflation-busting 4.5% price hike – ThisIsMoney
Comment and opinion
We all have it now – Of Dollars and Data
How to change somebody’s mind about investing – Oblivious Investor
Index funds will be just fine confronting cruel markets – Bloomberg
More: Are index fund investors more vulnerable to bubbles? – Behavioural Investment
The half-life of investment strategies – A Wealth of Common Sense
Your lying mind – The Atlantic
Saving rates revisited – My Deliberate Life
How we track our expenses – Young FI Guy
Get rich with simplicity – The Escape Artist
A high net worth investor re-calibrates his portfolio – Fire V London
Is Ted Baker the perfect dividend growth stock? [PDF] – UK Value Investor
Can we afford an electric car? Let’s run the numbers – The FIRE Starter
What could Christiano Ronaldo have to teach us about QE? – The Value Perspective
When earning $1 million a year is not enough to retire early – Financial Samurai
Kindle book bargains
Making a Success of Brexit and Reforming the EU by Roger Bootle – £0.99 on Kindle
Liar’s Poker: From the author of the Big Short by Michael Lewis – £0.99 on Kindle
Nudge: Improving Decisions About Health, Wealth and Happiness by Richard Thaler – £1.99 on Kindle
Freakonomics: A Rogue Economist Explores the Hidden Side of Everything by Steven Levitt & Steven Dubner – £1.99 on Kindle
Brexit
Open letter to the No Deal Brexiteers – Andrew Adonis via Twitter
Disorder, deal, or dead-end: Various Brexit scenarios explored – Reuters
Companies in Brexit ‘supply shock’ as fewer EU nationals arrive – Guardian
Off our beat
The biggest trend in economics today is too often ignored – Bill Gates via LinkedIn
How to avoid loneliness when you work entirely from home – HBR
More: Four ways to prevent loneliness wrecking your retirement – Reuters
UK asylum seekers’ 20-year wait for Home Office ruling – Guardian
Losing Earth: The decade we almost stopped climate change – New York Times
Australian Geographic nature photographer of the year [Gallery] – Guardian
Vienna is named the world’s most liveable city – ThisIsMoney
And finally…
“Banking may be necessary, but banks, as we know them, no longer are. New financial technologies, and the advance guard of fintech pioneers, are already hammering at their gates.”
– Tim Price, Investing Through The Looking Glass
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Those yaps just remind me of (nerd alert) Ningis and Triganic Pus from Hitchhikers. Must dig out my old copy of that for a re-read.
Agreed that it’s good news on the banks checking account names when online payments are made, but am wondering how strict they will be about it. Will they insist on an exact match, i.e middle initials and all, or just check surnames. I guess they won’t be able to tell you the actual account name for security reasons.
Thank you for the link to the article about cognitive biases (The Atlantic).
Having spend a shedload on holidays this summer (under the excuse of needing to treat myself and being able to afford it due to not buying any stuff anyway), that article provided the necessary kick on the backside to steer me back towards The Path to FI 😉
“The most biggest trend …”: surely he must have meant ‘the most majorly biggest trend’?
This Is Money reports house sales down 46.2% in Cambridge over the year to April. That fits with what a friend told us yesterday – so many new apartments and terraced houses, not enough customers. (She is selling a 1920s house with a very large garden: plenty of interest is being shown in that.) But the builders around Cambridge have lots more sites in hand and the local planners are still busily planning new “settlements”. I suppose this is the classical cycle showing up. What do builders do if they’re part way through the preliminary civil engineering on a site but haven’t yet started building? Defer everything for a few years? Try to get planning permission for commercial buildings instead?
As for currencies – that’s the sort of thing you should learn at your father’s knee. When we were young we used to play all sorts of card games and board games with the old boy. We used cowrie shells as our gambling money. The lesson was explained until it stuck.
@dearieme — Hah, my fault with my headline edit, not Bill’s! Fixed now.
Thank you for the recommendation of Eye Of The Storm on Kindle a few weeks back. I finished this last night and was right up my street.
It seriously debunked Bravo Two Zero author Andy McNabb, which was rather interesting
A lot of people dream of living in paradise on an island like Yap – but over there they are obsessed with collecting giant stones!
Me too – except it’s pounds and pence
It is a puzzle of how money is a measure of trust, yet you wouldn’t say that the richest in society are the most trustworthy.
I wondered why they don’t increase the length of bank account numbers to include several more check digits, which would reduced the risk of a wrongly entered number being accepted to almost zero. But presumably the banks’ creaking ancient IT wouldn’t be able to cope.
It’s not the lack of check digits that’s the problem, it’s that a fraudster can substitute the bank account number for a different one which is genuine but for an account which they control. They then siphon the money off overseas as soon as the payment goes through. Criminals have sophisticated ways of changing the account numbers but the person authorising the payment doesn’t notice because the account names still match. Businesses are losing millions to this kind of scam but it’s rarely reported as it’s such bad PR and highly embarrassing for the finance team involved. If banks checked the names matched the account numbers then 99% of the scams wouldn’t work any more.
Let me give an example of how criminals can change the account numbers in a company’s payment run as it might sound far-fetched. The person who sets up payment runs stores the bank website in their browser favourites. One day they receive an email with the subject line “invoice” with a document attached – a frequent occurrence in a finance department. They download the (fake) invoice and a macro runs in the background which goes into the browser favourites and changes the website address to a very similar one with a minor typo that most people wouldn’t spot. Next time they want to log on to the bank they click on the favourite and it takes them to the fake website which has been designed to look identical to the bank’s website. They enter their security information but the website rejects the input and asks for different characters from the passwords. The user tries again and enters the requested information. The fraudster now has every digit of the passwords and can log into the company’s banking at any point and edit payment details. There are many possible variations on this approach and other scams as well – fake letters advising of a change of supplier bank details, using LinkedIn to work out corporate structures and then impersonating directors with emails demanding urgent payments, and so on.
Sounds too complex for me – I’ll stick to sending out badly written emails informing people of the large inheritance they have in a Nigerian bank account and how I can help them access it (For a small fee of course)
You can have faultless computer security and still be scammed. A simple example, a tradesman does some work for you and says he will send you an invoice, which he does. A few hours later you receive another email from the tradesman apologising that the bank details on the invoice were incorrect and supplying new details. You pay the invoice and after a few days the tradesman chases you up asking for payment. It turns out that the second email was fraudulent and has come about because the security on the tradesman’s computer was breached and the scammers read the original email containing the invoice.
It is relatively straightforward to send an email that looks as though it has come from someone you know. I make a point of always double checking bank details that I have been given, especially via email.
It’s not just the banks’ creaking ancient IT that wouldn’t be able to cope with longer numbers but also the IT and paper systems of every business that accepts payment by Direct Debit or makes payments by BACS or Faster Payments, not to mention the fun of adding one or more pseudorandom digits to EVERY bank account and its associated documentation: cards, cheques, pay-in slips, etc.. And after all that, it doesn’t stop a scammer providing a perfectly valid account number under their control for the victim to send their life-savings to.
What I want to know is how they transported them back? I mean, outriggers are pretty stable platforms for inter-island transport and fishing, but lugging 8800 lb stones?
On the Bitcoin vs Palau stones (or anything else) argument – the “problem” with Bitcoin is that unlike gold, which is inherently physically limited and difficult to get hold of, _and_ which has some practical value at least – after all, the majority of gold in existence is in fact in jewellery and to a lesser extent electronics.
Bitcoin is literally invented out of nothing, can be copied in the work of a few minutes (witness Bitcoin Cash and the many other “clones”), and in the specific case of Bitcoin, the absurd amount of energy required to simply exchange your bitcoins with someone else – currently of the order of 300kWh, so like running 150 kettles for an hour. Per transaction. And it keeps getting more difficult/expensive for inbuilt technical reasons.
There’s also the whole “it’s not like a fiat currency which a government can inflate away” – this basically isn’t true. The rules by which it all operates are essentially set by a majority of the miners – so if enough of them change the code they’re using to say allow more than the fixed 21 million limit, then tada – that’s what would happen. Since anyone can set themselves up as a miner, and most of it is currently done in China where power is very cheap, this means control of the network can in fact be a lot more centralised than you might think.
There are other cryptos that solve many of these problems, but again they’re all really commodities at best until they’re accepted for taxes and spent by governments – legal tender means a lot when we’re talking about things which are based on trust.
The anonymity thing is also a massive misnomer – what is happening is that you’re exposing your entire bank account and everything you’ve ever spent to absolutely anyone who wants to look, and just hoping that because there’s no registration of your account number against your name, that no one can work it out. But imagine you bought something from a company using bitcoin, and gave them your name and address for delivery – suddenly they can link a bitcoin address to a real person – and with a database you can build up out of these, you can start to understand everything everyone has ever spent. Not trivial I accept, but far easier than if you’re banking in a normal, private fashion.
Bitcoin is, for technical reasons, never mind practical ones, a dead end – it’s perfectly possible that crypto based currencies might become legal tender, but there are a huge number of reasons why it’s an awful idea and it’s solving a problem that in many ways doesn’t exist.