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Weekend reading: Here’s one we made earlier

Weekend reading: Here’s one we made earlier post image

What caught my eye this week.

Rummaging around to select an old post from the Monevator ‘archive-ator’ each week can be bittersweet.

On the one hand, it seems I used to be smarter, wittier, and more productive.

But a compensation for these memento mori moments is coming across those little nuggets that have aged rather better than me.

Take these comments on tech stocks from December 2010, in a post about what I called the investor sentiment cycle:

For a contrasting unloved sector, consider technology companies.

It’s hard to remember a time when half the office owned shares in nonsense companies like Baltimore, Webvan, and NTX. Yet it was only a brief decade ago that the Dotcom stocks were doubling in a month on a good press release and a name change.

Today roughly nobody except institutional investors bothers with individual technology shares.

Yet the Nasdaq tech market in the US has been quietly beating the Dow and the S&P 500 for months.

Maybe the seeds are being planted for a new boom in technology share investing:

  • The first shoots will be obscure magazine articles on the Nasdaq’s recovery.
  • Then you’ll discover a friend or a bulletin board poster who has tripled his money betting on cloud computing micro-caps.
  • Perhaps Facebook or Twitter will float for what will seem a crazy valuation, but will look positively modest a few years later.

…and so on.

It was very hard for most people to care much about tech stocks in 2010. That was why I used them as my illustration.

Yet by the end of 2019, the tech sector had proven the best place to have been invested for a decade.

And 2020 has only kept that up with knobs on!

I don’t bring this up (entirely) to blow my own trumpet. Digging through the archives also reveals plenty of howlers. (London residential property is massively over-priced in 2007, anyone? Oops.)

Rather, it’s fun to see that Monevator is now so old we’ve actually been around to see some of these cycles play out.

Tech’s unexpected recovery since 2009 proves the point I was making. Investing and the economy are cyclical, and investor sentiment can be downright faddish.

Never expect the status quo in the markets to hold forever.

It won’t.

Working from home poll

Exciting additional news: the results are in from last week’s poll. Over 2,000 of you voted to say you would prefer to work from home:

So two-thirds of Monevator readers would like to work from home most or all of the time. Interesting!

I guess the remaining 4% are brain surgeons worried about the carpets.

Have a great weekend.

From Monevator

Cheapest stocks and shares ISA hack – Monevator

From the archive-ator: Here’s a great way to boost your income in an hour – 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

Self-employed grant to double with Income Support Scheme revamp – BBC

Sunak’s latest bailout package pushes annual budget deficit towards £400bn – ThisIsMoney

Bank of England is not poised for negative interest rates, says chief economist – ThisIsMoney

Rents down as much as 34% in some London postcodes – Evening Standard

Coronavirus crisis has intensified UK wealth divide, data reveals – Guardian

The rise and fall – and future rise – of digital Nomad workers – Bloomberg via MSN

Products and services

PayPal to allow Bitcoin and other crypto spending – BBC

New ‘Thank You Saver’ bank account for NHS workers pays 1.65% – Principality

Monzo launches £180-a-year premium account – Guardian

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

Flava: the first ‘buy now, pay later’ supermarket – Which

Do you have to register an appliance to claim on its guarantee? – ThisIsMoney

Bitcoin’s role as an alternative investment [PDF]Fidelity

Nationwide to issue credit cards made from recycled plastic – ThisIsMoney

Homes for sale on British islands – Guardian

Comment and opinion

How Covid-19 may be unconsciously affecting your financial decisions [Search result]WSJ

A world awash with debt: What can governments do? – Prospect

Live like you’re already retired – Incognito Money Scribe (h/t Abnormal Returns)

The confusing investment path to saving the planet [Search result]FT

Why own bonds when rates are so low? – Of Dollars and Data

Simon Lambert: Make the stamp duty cut permanent – ThisIsMoney

An interview with Bill Bengen, creator of the 4% SWR rule [Podcast / transcript]Kitces

Target achieved: £1 million net worth – Gentleman’s Family Finances

Recycle – Indeedably

An investing strategy update – IT Investor

Remembering massive market crashes – MarketWatch

Naughty corner: Active antics

How much should you allocate to angel investing? – Fire V London

Sweet talking CEOS are starting to outsmart the robot analysts – Bloomberg via MSN

Memories of the crash of ’87 – Albert Bridge Capital

Riskier alternatives to bonds as a portfolio hedge – Bloomberg via MSN

Follow the Fed [US but relevant]Humble Dollar

Why you’ll need to be lucky to find the next Amazon – Klement on Investing

Covid, Brexit, politics

Why is the novel coronavirus so deadly? – BBC

PM admits failings as England’s Covid contact-tracing system hits new low – Guardian

Plans for ‘tier 4’ restrictions if current rules don’t tackle the second wave – iNews

Why can’t we talk about the Great Barrington Declaration? – Spectator

Chip shops and cafes back Marcus Rashford’s free school meals campaign – BBC

Irreversible: Covid’s impact on work habits – Banker on FIRE

Why New Zealand rejected the populist ideas other nations have embraced – Guardian

Marina Hyde: Worried about no-deal Brexit? If Gove says it’ll be better that’s good enough for me – Guardian

Kindle book bargains

Think and Grow Rich by Napoleon Hill – £1.99 on Kindle

How Will You Measure Your Life? by Clayton Christensen – £0.99 on Kindle

Reinvention: How to Make the Rest of Your Life the Best of Your Life by Brian Tracy – £0.99 on Kindle

Just Fuck*ng Do It: Stop Playing Small. Transform Your Life by Noor Hibbert – £0.99 on Kindle

Off our beat

Make the connection – Humble Dollar

The vicious cycle of never-ending laundry – Vox

Lots of overnight tragedies, no overnight miracles – Morgan Housel

The top female company founder in every country [Graphic]Visual Capitalist

Happier and more positive founders get VC funding, then under-perform – Yale

And finally…

“The fact that a thesis is flawed does not mean that we should not invest in it as long as other people believe in it and there is a large group of people left to be convinced.”
– George Soros, The Alchemy of Finance

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  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”. []
{ 45 comments… add one }
  • 1 Rich October 24, 2020, 9:25 am

    Were you actually wrong about London residential property being overpriced in 2007? Even though government policy has pushed prices to even more eye-watering levels, I don’t think so.

  • 2 { in·deed·a·bly } October 24, 2020, 10:30 am

    That call is worthy of a victory dance TI!

    For what it is worth, London property was overpriced in 2007 when viewed through our 2007 lens of the value of money. It is simply more overpriced today.

    Which is fine providing the population continues to grow, ensuring demand exceeds supply to continue pushing prices upwards. However, with a birth rate is 1.65 per woman, that demand push needs to driven almost entirely by immigration. Which is a tad problematic in the current political climate.

  • 3 Rich October 24, 2020, 10:36 am

    I don’t think people living in London are worried about immigration.

  • 4 Silverpound October 24, 2020, 12:49 pm

    Just by way of balance, I’m one of the 4%. The reason being I’m a Research Scientist and being at the bench in the lab is a million times better than sat at home reading boring Research papers..!!

  • 5 Vanguardfan October 24, 2020, 2:08 pm

    It just shows the highly unrepresentative nature of Monevator readers’ work. Apparently less than half of employed people worked at home in April:
    https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/coronavirusandhomeworkingintheuk/april2020

  • 6 Tony Edgecombe October 24, 2020, 2:33 pm

    @Rich That didn’t stop the rest of the country voting for Brexit.

  • 7 ermine October 24, 2020, 7:35 pm

    > Flava: the first ‘buy now, pay later’ supermarket

    OMG, a crime against personal finance in all respects.

    Groceries are a steady, predictable and recurring cost. There is absolutely no point in doing this on buy now pay later. If you can’t afford to buy your groceries now you never will be able to, and the tiny number of edge cases where this doesn’t apply should use a credit card for that anyway.

    It’s the Brighthouse of eating, and while I despised Brighthouse in so many ways Flava is even worse. I hope they go bust or get banned as the payday lenders that they really are

  • 8 Snowman October 24, 2020, 7:58 pm

    ‘Why is the novel coronavirus so deadly?’ Perhaps a more open-minded less biased question to ask would be ‘How deadly is covid-19?’

    https://sebastianrushworth.com/2020/10/24/how-deadly-is-covid-19/

  • 9 Jonathan B October 24, 2020, 9:50 pm

    Thanks @Snowman for linking that interesting commentary. The author reasonably makes the case that the “real” mortality rate of Covid-19 is quite likely in the vicinity of 0.2% (depending on the age and comorbidity characteristics of the population) even though he pulls in one or two challengeable issues as evidence:
    – while Sweden’s strategy looks to compare favourably with many (but not all) other places, the fact it has rising numbers of cases doesn’t fit with his conclusion it has reached “herd immunity”.
    – comparisons with the 1918 Spanish flu are spurious, at that time vast numbers of patients succumbed to secondary bacterial pneumonia which nowadays would be treated with antibiotics
    – leaving aside very elderly patients (where I agree they would have been susceptible to pretty much any respiratory infection) he works out a Covid mortality rate of 0.05% for patients under 70, which while very low is I suspect not consistent with his statement that Covid is less deadlly than the “common cold”.

    But it is thought-provoking, and a useful counterpart to the usual scaremongering.

  • 10 Algernond October 24, 2020, 10:53 pm

    Thanks @Snowman also from me.
    Most sensible stuff I’ve read also puts the IFR at around 0.2%.
    Seems like the Rona is being used at every opportunity to put onto death certificates. It maybe now the only way to track whether there is a ‘second wave’ or not is to look at excess mortally compared to the 5-year average. This nice summary chart from @Inproportion2 compiles the data from various sources very nicely (ONS, NHS) and is updated daily (ONS every Tuesday). No excess mortality since early June:
    http://inproportion2.talkigy.com/dashboard/overview.html
    When I show people this chart, they often comment that it seems the epidemic was over by June….

  • 11 Learner October 25, 2020, 2:20 am

    You weren’t wrong 2007. Funny to read figures for the time though; I don’t think we’ll be seeing 6% interest on savings any time soon, if ever again. The closing comment about the property lottery still holds true however.

    (Can we cool it with the Covid conspiracy theories for once?)

  • 12 Vanguardfan October 25, 2020, 8:43 am

    IFR is not a fixed property of the infection. It depends hugely on the age of those infected and the quality of treatment, so can be expected to vary by country and over time.

    We have our own figures in the UK for both the community prevalence and incidence of infection, and deaths. I calculate the following, for England:
    Deaths within 28 days of a positive diagnosis occurring between 10 and 16 October: 697.
    Estimated new infections in the week 13-19 September: 67200.
    IFR=1.0%
    Or alternatively, covid mentions on death certificates week ending 9 Oct: 474
    Estimated new infections in the week 4-10 Sept: 42000
    IFR=1.1%
    Sources: https://coronavirus-staging.data.gov.uk/details/deaths
    https://www.ons.gov.uk/peoplepopulationandcommunity/healthandsocialcare/conditionsanddiseases/bulletins/coronaviruscovid19infectionsurveypilot/englandandwales18september2020

    This is about twice as high as I was expecting, so happy to have my calculations checked. My best speculative explanation is that the ONS survey may be underestimating true infection rates, either due to bias in the types of people responding or false negatives (most likely a combination, but I’m not sure if they adjust for false negatives). So perhaps we are already be at the predicted 50,000 infections per day suggested by Vallance on 21 September.

    Vallance also suggested 200 deaths per day by the end of November was a possibility, and actually this is looking like an underestimate given that the most recent ONS survey (to 16 October) estimates 35,000 infections per day. On the 1% IFR figure calculated above, we look to be on course for 350 deaths per day by mid November, based on infections that have already occurred.

  • 13 Vanguardfan October 25, 2020, 8:46 am

    (@learner, apologies).

  • 14 Vanguardfan October 25, 2020, 9:00 am

    I’ve just realised the likely cause of the discrepancy – the ONS survey excludes care home residents. The deaths data don’t allow separation of deaths of care home residents (only if the death occurred in a care home, no time to look at that just now). Could they account for half of deaths? That seems a bit high (first wave I think was about a third).

  • 15 Al Cam October 25, 2020, 12:44 pm

    @Vanguardfan:
    Did we not discuss the apparent discrepancy between ONS infection rates and those found by Imperial a few weeks back – from memory was there not an unexplained circa 1:4 difference, see e.g. comment #121 at https://monevator.com/weekend-reading-daddy-what-did-you-do-in-the-great-pandemic/comment-page-3/#comments

  • 16 Factor October 25, 2020, 2:42 pm

    @TI and @Learner #11 @Vanguard #13

    And to me too please Vanguard, if you would be so kind.

    TI, as a reader here for very many years now, my gratitude to you for all the help that Monevator has given to me is boundless, but I really do not want to have to endure people’s Covid opinions/theories, nor even their second hand facts, well-intentioned or not, when I “call in” here. Personally, I would be deeply grateful if you felt willing to put a moderating stop it!

  • 17 Vanguardfan October 25, 2020, 2:53 pm

    @factor, I am not peddling conspiracy theories. I would gladly see the back of them.

  • 18 The Investor October 25, 2020, 7:34 pm

    @Factor — I understand where you’re coming from but it’s tricky. A bit like Brexit after the ill-advised pro-Brexit vote, I initially gave a platform to discussion of the pandemic because it was clearly going to be dominate our lives — including financial — for years to come. However it has become a somewhat circular and factionalized, and dominated by the same voices every week, most of whom tend to think *they* are the sane voices in the room. Never a great situation to be in.

    I don’t say those voices have nothing to add — on the whole I think they all add something – but it does tend to drown out discussion of other topics represented in the links.

    And clearly there are some readers, like you, who are happy to leave the pandemic to those we’ve appointed to deal with it, rather than second-guess them. I’ve been second-guessing those decisions since the start though, so it’d be a bit hypocritical of me to chastise that now. On the other hand I think talk of a deliberate distraction / conspiracy or whatnot is hyper dubious. It’s just human beings muddling through as best I can tell. I’ve tended to lean on that stuff pretty hard.

    Ideally I’d prefer Covid discussion to only happen when it’s the main subject of the Weekend article, but I can’t really will it on our audience.

    As I always say, the comments are very optional. We’re lucky to have good ones on Monevator, but I think we have to expect there to be a bit of Zeitgiest-y feel to the Weekend Reading ones. Personally I don’t read comments on any website! 🙂

    But for the avoidance of doubt, I am moderating virus talk here, on both sides.

    Anyway, definitely something to be alert to in the weeks ahead but not sure there’s an easy utilitarian solution to go to.

    Apologies for any typos above. Froze my posterior off sitting outside a pub drinking a few semi-social beverages with friends until an hour or so ago. Still warming up! 😉

  • 19 JohnG October 25, 2020, 9:54 pm

    TI – Completely respect your position on this and am really grateful for all your work on the blog, however I will say that I share Factor’s view on this. We may just be outliers in this, but I know I’ve gone from consistently reading the comments section to rarely even skimming it; given that the comments section used to be a real bonus in addition to the sites content it diminishes it overall (and where the authors add additional value). It’s not the way things are discussed, but the discussions are rarely economic in nature and I’d be saying exactly the same thing if the forum had been dominated for 6 months with high quality debate about whether electric cars were the future of transportation or any other tangental subject.

  • 20 The Investor October 25, 2020, 10:03 pm

    @JohnG — Yes, as I say it’s definitely a live issue. I’d argue it’s really only on these Weekend Reading posts though. There’s little to no virus (/Brexit) discussion in the core articles, except perhaps where we stray into low yields / bonds / future of the UK economy.

    In other words, the other articles still have some great reader comments on them. Perhaps if/when we get back to two weekly articles plus the Weekend link list (we’ve been running at 1+WR for a few months) the perception of skewed conversation may calm down.

    Ultimately I have to confess I’m partly motivated by my own interests (/whims), too. I enjoyed the free thinking discussion we had on the blog about Covid at the start, including where I disagreed with some readers et cetera. I don’t think the position is massively clearer now than it was in April but many commentators on both sides are talking like it is. For me that’s a turn-off, and the likeliest thing to lead to a curbing of Covid chat here.

    It would be on topic I suppose if there were more focus on the impact of the pandemic/lockdown on the economy (my main bugbear) rather than armchair epidiomology (which I’ve definitely been guilty of myself, too).

    The snag is I’d have to take the virus out of the links, too.

    Anyway thanks for the feedback, silent potential majority noted. (Maybe another poll!?)

  • 21 Matthew October 25, 2020, 11:50 pm

    Buy now pay later on groceries isn’t new – credit cards
    It’s even where HP sauce got it’s name – you bought it through Hire Purchase

  • 22 Learner October 26, 2020, 12:19 am

    Apologies, that really wasn’t a jab at TI. Just that when comments veer toward accusing the NHS of fudging statistics and the virus being “over” already I tune out completely.

    On a far lighter note, and well off our beat (hopefully!!)..
    How to prepare and eat cat food
    https://www.youtube.com/watch?v=-pVRTSd8kak

  • 23 Seeking Fire October 26, 2020, 12:46 pm

    Agreed on many of the CV comments although the ones that are less closed book in nature, with accompanying research links are certainly interesting to read. For me the whole event has brought into far sharper focus the importance of being financially independent (noting an extreme tail event could torpedo any plan). Being in a strong / very strong position myself albeit has reduced stress levels very substantially with sympathies to those who are not.

    So in the spirit of being more on topic, I was extremely interested to read (twice) the interview with Bill Bengen and somewhat surprised by the lack of comment. After all I would say many FIRE type websites somewhere along the line boil down to 25x spending and hello a life of leisure etc etc etc (not this one of course :))…..So the interview brings up a few quite interesting points

    (1) – He’s indicating that given the low inflation environment – 4.5% or even 5% might be an appropriate SWR. I’ve been sceptical of 4% rule (or indeed any SWR given it assumes future events are contained in the past) but remain open minded. I’ve not seem much research on low inflation impacting SWR but the logic makes sense. Thinking around it, the risk is the future risk of high inflation therefore. Nonetheless if you are believer that low inflation is here to stay that’s potentially of use to you. I mean up to a 1% increase is a lot if you are a true believer no?

    (2) – He doesn’t seem to apply the research to his own strategy or that of his clients (fully or even partially). Note he makes use of market timing depending on valuations and did very well in 2008 and then missing the upturn. He’s also extremely wary of current valuations given central banks desire to devalue fiat currency. This is the opposite of the research that underpins the 4% rule? Note for myself, I have always been highly sceptical of my ability to merrily apply the 4% rule into the teeth of a bear market. I’d definitely adjust and I’m sure the majority of people would. I found it amusing to read blogger proponents of the 4% rule running for the hills at the first sign of downward volatility earlier this year. I’ve always preferred to observe what people do as opposed to what they say (talk is cheap etc) so this seems quite insightful. He appears to be running his portfolio a lot more conservatively (by measuring volatility) than your classic 75% / 25% equity/ bond portfolio – there’s a comment that he’s about 15% in equities. So I assume he’s 85% in fixed income investments probably a combination of US TIPS / Treasuries / Bonds. Note he’s 73 years old so that’s clearly driving his thinking – i.e. the upside of doubling his money is much less than the downside of it halving – That’s just a guess on my part on his thinking. But he’s still got an outside shot of making 100, which is 27 years to make the money last.

    After reading this i’m a little more sceptical to the idea of pulling 4% of the portfolio and believing I (or many other people) can stomach the volatility. I’m open to the idea that there are reasons why the current environment could be more conducive to 4% although consider the downside risks outweigh the upsides here.

  • 24 Snowman October 26, 2020, 12:55 pm

    I’ve been investing since 1996 and I’ve always only been a passive investor. I have been a member of a share club with friends also but that’s just been a social thing with relatively small amounts. Even in around 2008 I remember arguing that passive investing was the best practical means to invest on the MSE forums, but didn’t really get any support then. The main opposing undoubtedly concensus argument at the time, in particular from an IFA and someone who later became an IFA, ‘the experts’ if you like, were that you just needed to invest in a manager who had good returns in the past and knew what they were doing to beat your clearly second best passive investor, and Woodford was given as the main example of the manager to follow. I think I was right then but there are reasonable opposing views on active vs passive now, but the point is passive investing is clearly now mainstream. Any my passive investing thoughts have developed through discussing it with those advocating the active approach.

    There have been many things I’ve got wrong over the years also.

    I think you only ever work things out by learning from experience and being prepared to listen to the opposing view. That doesn’t mean you change your view if the opposing view still doesn’t make sense, but you listen to it, learn and adapt. That’s why I’ve tended to post here rather than somewhere such as the Lockdown Skeptics website which can be a bit of an echo chamber.

    So it irritates me significantly when people say that they want covid-19 comments that constructively challenge the popular narrative stopped because they are conspiracy theories. It’s like suggesting I and others advocating passive investing should have been censored in 2008 because passive investing is a conspiracy theory against our wonderful investment industry.

    I believe there has been high quality rational debate on the important covid-19 issue here. On at least a few occasions the covid-19 debate continued on the previous weekend thread keeping the latest weekend thread and mid-week comments to investing comments. Probably a mistake for me to have posted the ‘How deadly is covid-19 article?’ early on having been riled by the first covid-19 BBC link title ‘Why is the novel coronavirus so deadly’. That has started things off this time round and we probably all needed a break as we were to some extent starting to repeat.

    Ultimately it’s TI’s decision what subject matter is allowed in posts. And I understand some open-minded people don’t want the comments to be filled up with detailed covid debate, and I genuinely apologise if that has spoiled their enjoyment of the excellent monevator blog.

    As a suggestion if TI is going to allow covid debate, then perhaps we can keep the ongoing discussion going on the next covid-19 article and avoid moving that discussion on to the following weekend article even if it contains covid-19 links. Perhaps the following weeks article can then still contain covid links but with a request that the covid discussion happens on the old covid post?

  • 25 Ruby October 26, 2020, 2:21 pm

    @ Snowman – I enjoy your comments and contrarian views even if others don’t. It seems to me that most of the noise these days comes from scientists, politicians, nervous nellies et al justifying the action that has been taken, ie lockdown, and comments which question it’s efficacy are regarded as heretical and therefore always the most interesting. That said, I rarely post on covid these days, and as a mental health tonic I can recommend it!

  • 26 Scott October 26, 2020, 2:26 pm

    @Snowman #24 – “I believe there has been high quality rational debate on the important covid-19 issue here”

    I don’t believe that, and even if the debate was high quality, it’s not what I expect to read about week-in, week-out on my favourite financial website.
    And as far the commenters who go to the trouble of collating their own figures, producing charts, etc. – aren’t there enough experts (and I mean true experts, with years of education and training, and working in this field) doing that already?

  • 27 cat793 October 26, 2020, 2:38 pm

    @ Seeking Fire.

    My take on the Bill Bengen interview is that despite being the creator of the 4% SWR concept he is at heart an active investor. It looks like he was more a wealth manager to high net worth people than a financial advisor. I imagine that if you are charging high fees to a relatively small group of wealthy clients then a passive investment strategy looks a bit like you are not working to earn your money. His views about inflation are pure active management crystal ball gazing. I suppose that there is no reason why someone who has conducted research on SWRs needs to be a passive investor by inclination. As for his asset allocation that looks to me like he is following the advice of William Bernstein (I believe): “When you have won the game, stop playing”. I guess the game is different for the very wealthy – they don’t need to take risks to get returns to accumulate while most of the rest of us do.

  • 28 MR W G October 26, 2020, 3:17 pm

    I’m one of the 4% and a teacher! Online teaching is painful and I have to share my classroom/office with a three-year-old son running around.

  • 29 Al Cam October 26, 2020, 3:44 pm

    @Seeking Fire & @Cat793:
    This may interest you both:
    https://earlyretirementnow.com/2020/10/26/low-inflation-vs-safe-withdrawal-rates/

  • 30 cat793 October 26, 2020, 4:15 pm

    @Al Cam. Thanks for the link.

    My view is that the 4% SWR was never intended to be a “rule” (as Bengen says himself in the interview) but an analysis of what would have worked historically. Thus looking forward it may or may not apply depending on circumstances hence his willingness to speculate about inflation. I think most quality FIRE and retirement commentators always add the caveat that you need to be flexible and adaptable to the actual sets of circumstances you face during the drawdown period with regard to SWRs.

    Having said all that I can see the temptation to treat the 4% SWR as a rule as it provides a simple rule of thumb and most people, myself included, need that. For example the article you link to rapidly deteriorates (from my point of view as a non technically minded person) into brain distorting complexity. The reality is that I am never going to be able to manage my financial affairs by straying far beyond simple rules of thumb such as a 4% SWR, diversification, pound cost averaging, keeping costs low etc etc. From what I can glean that most likely does not matter too much. At least we are on the right track and looking after the basics if we stick to that.

  • 31 Al Cam October 26, 2020, 4:37 pm

    @cat793:
    Re “For example the article you link to rapidly deteriorates (from my point of view as a non technically minded person) into brain distorting complexity.”

    I hear you.
    But having said that, the irony of this is rather neatly summarised in ERN’s conclusions, specifically:

    “A lot of people reached out and asked me for my opinion and I’d normally give a quick response in line with item #9 above. But I thought it’s worthwhile to do a more careful analysis and see where the skeletons are hidden in Bill Bengen’s study. The connection between 12-month CPI and future 30-year safe withdrawal rates is just too spurious.”

  • 32 Indecisive October 26, 2020, 9:21 pm

    @learner, @JohnG: I’m using a browser extension to hide comments on this site mentioning coronavirus-related terms. If you want to do this:

    1. Install UBlock Origin in your browser (Note: not available on many mobile phone browsers)
    2. Open its control panel, go to the “My filters’ tab and paste in:
    monevator.com##.comment:has-text(/(covid|coronavirus)/i)
    3. Click ‘Apply Changes’
    4. Enjoy reading Monevator 🙂

    As you discover comments that slip through but you want to block, you can add those words or phrases to the filter. All it needs is a pipe character | and the word(s) before the closing bracket. So to filter out mentions of “rona” you’d adjust the above to:
    monevator.com##.comment:has-text(/(covid|coronavirus|rona)/i)

  • 33 Brod October 26, 2020, 9:56 pm

    @Indecisive – super-cool! Thanks for the tip. Had to disable it to get your name, but this is just brilliant!

  • 34 The Investor October 26, 2020, 10:23 pm

    To repeat myself, what I’ve found frustrating is the side taking that’s become so apparent. We have had commentators on this site denying there’s even a second wave of Covid happening in the UK. This was still tenable in mid-September but now it’s clearly not. “When the facts change I change my mind.” The ‘one and done’ burn-through and a bit of immunity that some of us hoped for clearly hasn’t played out. Score one for the much-scorned experts, who said we’d probably see a second wave come autumn. It doesn’t do to keep moving the goal posts in a productive discussion in search of truth.

    Set against that, it remains very interesting that we’re seeing fewer deaths. This is some comfort for that prevailing view. Clearly there’s something complicated going on. Ditto when Sweden’s situation continues to look well controlled now. (And again on the moving goal posts front, the other side now says “ah, but Sweden is lightly populated” or whatnot when ‘their side’ was saying five months ago that without a stringent lockdown there’d be 100,000 dead in the country.

    Personally I can only admit I didn’t think we’d see another big wave like this in places like London and Paris. So I was wrong. I can cast about for reasons why I actually right (maybe the first lockdown choked the natural process etc) or I can step back and pause and try and be a bit humble. I’m trying to lean into the latter posture, which is why I’ve not written so much about Covid recently.

    I like @Snowman’s suggestion of directing Covid discussion to an older post and then moderating fresh Covid comments on future posts, at least unless and until the subject of the article is C19. At least it’s worth a trial because clearly there’s a tension here.

    This post doesn’t seem appropriate, even though it has largely now turned ‘Covidy’ — perhaps that one the other week which did host a pretty good discussion in the main (albeit tinged with some of the tendencies I’ve noted).

    Let’s give it a try with the upcoming Weekend Reading.

    Thanks for caring about the quality of comments here everyone!

  • 35 ZXSpectrum48k October 27, 2020, 1:41 pm

    I think the biggest vulnerability in the 4% rule for early retirees is that it assumes CPI-U as the metric for the inflator. “Keeping up” means different things to different people.

    Cost of living adjustments are not the same as standard of living adjustments. Based on CPI-U, the $1000 TV you bought in 1995, now costs $50. Problem is you might not be able to buy that CRT TV for $50 or, more likely, you want a flat screen TV. Similarly, the person retiring in 1980 didn’t need a PC, the internet or a mobile phone. The person retiring in 1900 didn’t need to budget for electricity, a car, a telephone. By 1940, the average person would have had all those items. Are you happy for your standard of living to be frozen at the point you retire?

    To ignore earnings is also dangerous. In 1900, the average wage was $0.25 an hour. Based on CPI adjustments by 1950 it was $0.6. The actual wage was $1.60, more than 2.5x greater. Many countries (including the UK) index state pensions to earnings. There are valid reasons for that. It’s been less noticeable in the last 20-30 years because earnings growth has been suppressed by demographics, globalization and technology. Two of those three factors are waning fast. Your lifestyle can go from average to poor using just CPI as the inflator if earnings growth outstrips inflation for any period of time.

    Instead of CPI-U, you could the US Consumer Bundle as the inflator. The consumer bundle is the average dollar value of annual expenditures for consumer units (goods and services). It’s another measure of “standard of living”. What is the SWR for a 40-year retirement using the consumer bundle? It’s 2.48% (1937). That 25x rule just became 40x.

    People spend a huge amount of time discussing asset allocation, fees, cunningly data-mined withdrawal rules but nobody really discusses the liability side. It’s simply papered over.

  • 36 Al Cam October 27, 2020, 2:01 pm

    @ZX:
    Not saying that I disagree with your views re the liability side and what inflator/deflator is appropriate – but what is clear is that that side of the equation is far more situational and idiosyncratic. If you like, our own situations are all just a bit unique/special!
    Having said that, over the last few years, quite a lot of work has been done on the general shape of post retirement liabilities [both here in the UK, in the US, and elsewhere] and, on average, this work definitely does not show the much spoken about [real] U- shaped or even flat inflation-adjusted consumption but rather a steady decline in [real] spending post retirement.

  • 37 ermine October 27, 2020, 2:59 pm

    @Indecisive #32 Blimey, now that is cool. I use UBI to can ads on the web, but I had been a typical end-user – plugged it in, fired up, job done. I had no idea that you could bust specific text elements using regexp, which is presumably how it works. Thank you for the learning!

  • 38 cat793 October 28, 2020, 8:58 am

    The Great Demographic Reversal: Ageing Societies, Waning Inequality, and an Inflation Revival by Charles Goodhart and Manoj Pradhan.

    Reading this at the moment which is interesting and takes the opposite view of Benger – inflation will rise in their view.

  • 39 JohnG October 28, 2020, 9:32 pm

    @snowman – I thought that was a very thoughtful post. I can’t speak for others but my issue is primarily that I feel it is diminishing the great quality comment content that isn’t COVID related.

    “As a suggestion if TI is going to allow covid debate, then perhaps we can keep the ongoing discussion going on the next covid-19 article and avoid moving that discussion on to the following weekend article even if it contains covid-19 links.”

    Some variation on this may be a happy compromise? A travel blog I follow was virtually ruined by the comments becoming toxic around the start of lockdown. They’ve kept it just about viable by posting a weekly discussion thread, and requiring comments on other posts to be relevant to that post. They post multiple times a day so something similar may not be viable here. I think the quality and politeness of discussion on here shows how deftly this has been managed so far.

  • 40 Seeking Fire October 28, 2020, 10:19 pm

    @ AL CAM / CAT793/ ZX

    Thanks and agree with what you have written. It seems a significant risk to assume low inflation into the future (not that I have any crystal ball). But were there to be higher inflation the impact on higher cost of living expenses combined with bond losses, assuming interest rates rose to compensate would be very negative on retiree portfolio’s long term ability to meet future expenses. I was surprised to see the article tbh. On lifestyle inflation, I agree although I suspect it’s more of a material issue for an early retiree but it is a factor that receives limited attention. Mind you I’ve not actually come across any one whose FIRE’d in there early 40’s and is living solely of a SWR (I’m sure there are some) based on the S&P500 /Intermediate bonds. Even ERN, whose fairly close isn’t exactly practicing the output of his research. At least the Bengen article had a healthy disclaimer that this was just the product of historic analysis and therefore couldn’t be relied on into the future. Most bloggers, even ERN (much as I respect his analysis), don’t seem to label this limitation prominently enough imho.

  • 41 Snowman October 29, 2020, 11:08 am

    @JohnG

    Thanks for your balanced response. Point taken that it is diminishing the great quality comment content that isn’t COVID related.

  • 42 Al Cam October 29, 2020, 11:38 am

    @Seeking Fire:
    Re: “Most bloggers, even ERN (much as I respect his analysis), don’t seem to label this limitation prominently enough imho.”
    Interesting observation – especially seeing as ERN fully acknowledges the issue, see e.g. the comments to his recent contra Bengen post.
    P.S. I wish ERN numbered his comments like Monevator!

  • 43 David October 30, 2020, 9:39 am

    Just to say that I’ve found your questioning of the official narrative on the Subject that Must Not Be Named very useful. The long-running comments and discussion have been interesting as well. I do agree that ring-fencing this somewhere would give people more opportunity to discuss the main article each weekend. But as for setting up filters to edit out those comments, how crazy is that? The internet is enough of an echo chamber without trying to hide things you might not agree with! Snowman’s analogy of passive investing being some kind of conspiracy theory against the active fund management industry is spot on. Some people are very naïve about how governments work and why they might decide to push certain messages.

  • 44 Al Cam October 30, 2020, 4:49 pm

    Re “the subject that must not be named”
    Apparent discrepancy between ONS and Imperial surveys has now dropped to around 1:2 (ie estimated 52k infections (ONS) [in England] vs estimated 96k infections); was 1:4 earlier. Latest ONS covers period 17-23 Oct and latest REACT (Imperial) 16-25 Oct. Sample size of Imperial study is c. 86k randomly selected volunteers and ONS study now seems to include around 179k participants.
    Following note – which I picked up from a BBC report – may be most illuminating explanation of apparent difference I have seen to date: “The ONS study tests people in homes in England so misses cases in care homes, hospitals and students away at university.”

  • 45 Al Cam October 30, 2020, 5:03 pm

    for clarity:
    …. (ie estimated 52k infections (ONS) in England per day vs ….

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