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Weekend reading: is UK property cheap or is it expensive? It depends which UK…

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What caught my eye this week.

Perhaps the most fanciful of the many ultimately costly reasons I found for not buying my own place in London for decades – missing the entire boom, before finally doing the deed after it ended – was self-driving cars.

Yes really.

My thinking was that when AI can drive us about everywhere, there will be less of a premium on living near the action.

Instead you could fall asleep drunk in a cheap robot taxi that drives you back to your home anywhere. You could live up a mountain, miles from public transport. You could commute in a bed-car.

Location would still be important, but that would be re-calibrated. Maybe views would be at a premium, or peace and quiet, or being a drive away from several social hubs rather than being at the heart of any one of them.

I didn’t know exactly how London’s pricey postcodes would be affected. But I was wary of placing a bet.

Needless to say, while we now have chatbots that can bluster as convincingly as any sixth-former who didn’t do their homework, we’re still waiting to be ignored by a passing autonomous black cab.

So much for that great reckoning!

More recently the pandemic – and working from home  – was touted as doing something similar.

Remember the countless stories about people moving out from the cities in 2020?

Yeah, well lots of them moved back. Or perhaps found they couldn’t afford to do so, because others had rushed in to fill the spaces they’d left behind.

Bonnie’n Inverclyde

And so the UK remains a country divided by house price to average earnings ratios as much as by absolute house prices. Higher-earning bidders pay relatively higher prices for already pricey property.

Indeed this week we learned that the most affordable place to live on the basis of such ratios is Inverclyde.

No, me neither. According to The Guardian:

Inverclyde, which boasts a saltwater Lido looking out over estuary, has an income ratio score of just 2.9, compared with central London’s score of 16, the research shows.

It is closely followed for affordability by Dumfries and Galloway (3.2) and East Ayrshire (3.3).

And here’s a comparison in table form, again from The Guardian:

The salaries behind the ratios are regional. Which means that while they don’t have the granularity of the local authority house price data, we’re at least not seeing those Scottish house prices made comparatively cheaper by being set off against bankers’ bonuses in Canary Wharf.

Of course it has been like this to some extent forever. But the ratios really do look extreme now.

If you live in Hull and I live in Islington, can we even have a mutually intelligible conversation about the price of a first-time home?

How does it end? More of the same?

Perhaps tribes of highly-skilled tech workers who can work remotely could get together to set themselves up in luxury in Scotland – creating a critical mass to bring sufficient baristas and craft beer breweries in their wake.

Perhaps not. As one blogger put it during the pandemic:

The more people can be anywhere, the more they will want to be somewhere.

And with no offence to those living far from the madding crowd – hey, it’ll be me someday – I expect that for most such bright young people, London will continue to be the UK’s centre of gravity.

Whatever the ratios say.

Another membership housekeeping note

Last week’s site housekeeping note flushed out a new issue, which is that a tiny handful of Monevator members hadn’t been getting any premium emails at all.

Which is distressing. Because we’re grateful for the support of every one of our members!

The issue seems to be that if you’ve ever unsubscribed from Monevator emails, then when you sign-up for membership the system assumes you still don’t want them.

Blame GDPR and all that malarkey.

The solution is to resubscribe to our free emails. This should ensure that as a member you get all our emails – including your special member content.

I know there are some people who are better than me who like to keep pristine inboxes. If that’s you, I suggest reading the Mavens and Moguls articles by logging in on the Monevator website.

(Remember you must allow third-party cookies to log-in. But there are no ads as a member, at least).

Have a great weekend all!

From Monevator

Where to invest a low amount of money – Monevator

The investor sentiment cycle – Monevator

From the archive-ator: Why your house is an investment, and an asset – 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.

Average property asking price down by £7,000… – This Is Money

…and house viewings have fallen off a cliff – This Is Money

UK poised to confirm fifth delay to post-Brexit checks on imports – Guardian

How much could the UK state pension pay in 2024? – Which

Taylor Swift is fuelling a 2024 booking boom for Travelodge – This Is Money

Ex-Vanguard CEO joins VC to guide investments in advisor fintech – Investment News

OnlyFans owner paid £268m in dividends as profits surge – Sky News

Ofgem energy price cap falls back below £2,000 – Guardian

Products and services

Annuity sales jump on high interest rates [Search result]FT

NS&I launches Green Bond paying 5.7% – Which

Open a SIPP with Interactive Investor and claim £100 to £3,000 cashback. Terms apply – Interactive Investor

What’s happening to the cost of renting? – Which

Beware this new parking app scam – Which

Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine

What happens if you can’t pay your energy bill? – Be Clever With Your Cash

Jim Cramer ETF to close, attracted just $1.3m [US but quirky]Investment News

Why mobile phone signal is still so scarce at music festivals – Guardian

Homes for sale with uplifting views, in pictures – Guardian

Comment and opinion

The cake/fruit salad theory of asset allocation – Oblivious Investor

The journey is everything when you invest in bonds – Fortunes & Frictions

Financial superpowers – Humble Dollar

Everything and everyone underperforms eventually – AWOCS

How you feel about money changes over time – The Irrelevant Investor

Naughty corner: Active antics

One investing trait to rule them all – Flyover Stocks

If the UK stock market is cheap, why doesn’t it go up? [Search result]FT

Investing is the study of human decision making – The Big Picture

A mid-year review of a dividend stock portfolio – UK Dividend Stocks

Across the multimanagerverse [Search result]FT

Venture capital mini-special

Venture capital funds are mostly just wasting their time and your money [Search result]FT

SPACs were the result of VCs opting to get rich quick – Newcomer

The state of the faded investment unicorns mania – Morningstar

Kindle book bargains

Tribe of Mentors: Advice From the Best in the World by Tim Ferris – £1.99 on Kindle

Factfulness: Ten Reasons We’re Wrong by Hans Rosling – £0.99 on Kindle

Doughnut Economics by Kate Raworth – £0.99 on Kindle

Trillions [Inventing the Index Fund] by Robin Wigglesworth – £0.99 on Kindle

Environmental factors

How to plan a green funeral – BBC

Reefs made from dead trees could help biodiversity – Guardian

Farmers unsure what to plant as post-Brexit payments delayed – Guardian

Does the ocean floor hold the key to the energy transition? – Noema

Dredging threatens shipwrecks as well as marine life – Hakai

Up close and personal with bluefin tuna – Inside Hook

Robot overlord roundup

The authors whose pirated books power generative AI – The Atlantic via MSN

Off our beat

Intelligent versus smart – Morgan Housel

The story of Subway, which was just sold for $9.6bn – Sky News

Believing myths about ageing makes growing old worse – Time

Love advice from a divorce lawyer [Podcast]Art of Manliness

Here’s how the new weight loss drugs could change everything [Podcast]Odd Lots

Inside Michael Lewis’ hero factory – Semafor

Meditation is more than either stress relief or enlightenment – Vox

Why would you rent a flat again after buying your own house? – Dwell

And finally…

“Some have observed that naming a sports arena is a good way to identify short-sale candidates.”
– David Einhorn, Fooling Some Of The People All of the Time

Like these links? Subscribe to get them every Friday. Note this article includes affiliate links, such as from Amazon and Interactive Investor.

{ 34 comments… add one }
  • 1 Marco August 26, 2023, 10:42 am

    Inverclyde is a beautiful part of Scotland and I go there frequently at weekends with the kids. House prices are cheap there for the usual reasons, high levels of poverty/deprevation. House prices in the good bits are actually quite expensive, although you will still get a large 4 bedroom home for less than a 2 bedroom flat in an undesirable part of London.

  • 2 FitandFunemployed August 26, 2023, 12:45 pm

    “Some have observed that naming a sports arena is a good way to identify short-sale candidates.”
    – This sounds witty, but I don’t get it. Can someone explain (/kill) the joke for me please?

  • 3 xeny August 26, 2023, 1:29 pm

    I don’t think there is humor there. More an observation that when management starts looking for sports they can sponsor to that extent, their eyes are too far off the ball.

    An example that springs to mind is Lendy and Cowes week.

  • 4 FitandFunemployed August 26, 2023, 1:49 pm

    Ah, I see! Thanks.

  • Mogul
    5 Christopher August 26, 2023, 2:04 pm

    Sports stadium sponsorship is a signal that the guy in charge puts his own passion ahead of managerial prudence. Another signal that used to be cited is don’t invest in a company with a water feature in the HQ’s foyer.

  • 6 dearieme August 26, 2023, 5:14 pm

    “we now have chatbots that can bluster as convincingly as any sixth-former who didn’t do their homework, we’re still waiting to be ignored by a passing autonomous black cab.”

    Yup. AI bots are Regurgitation Engines. Driving a car is not a regurgitation job. I wonder whether driving a train is.

  • 7 Alan S August 26, 2023, 6:48 pm

    Before retirement I worked in a very minor way on some engineering aspects of self-driving cars. The meeting I attended where using ‘value to society’ indicators as a way of resolving the trolley bus ethical dilemma for the self-driving AI was suggested was an interesting one. Worryingly, retirement has probably lowered my VtS score considerably.

  • Mogul
    8 Time like infinity August 26, 2023, 10:40 pm

    Odd that the combined fallout of Brexit, WFH and higher rates haven’t had more severe impacts on residential property, especially upon London prices (absolutely, or relative to rest of UK). Seemed like the last price hike cycle (wave?) in East End went from 2012/13 to 2015/16 (Mrs TLI and I had left the big smoke for the rural North by then). In that period of just 3 to 4 years, on our former EE street, house prices almost doubled. Quite unreal. 2022/23 sales on Rightmove show prices on the same street from minus 2% or 3% to plus 3% to 5% compared to a 2016 baseline (depending upon house type), so flatish over 7 years. In our current area of low pop density (even for rural North) house prices are up 25% to 30% over the past 6 or 7 years (in line with inflation and wages during that time), but with no recovery before then from 2009. Price to salary earnings higher here than in Scotland, but obviously much lower than South East and capital. I’d say around 4x to 5x ratio overall. The lack thus far of significant falls in prices in London seems a rather muted reaction to the parlous state of the economy (and, indeed, to the state of everything in Broken Britain). Perhaps not all of the recent home buyers in the capital got the memo about the UK now being functionally bankrupt?

  • 9 ermine August 26, 2023, 11:14 pm

    > Perhaps not all of the recent home buyers in the capital got the memo about the UK now being functionally bankrupt?

    They probably did, and went ‘meh’. The city-state of London != the UK, which arguably is the thesis of this post 😉 It is distilling the professional and managerial class, who can afford to pay more. Britons are polarising into the Eloi and the Morlocks of HG Wells the Time Machine, though Wells was off by eight hundred thousand years in his calculation of how long it would take for this to come to pass.

    London generates over a fifth of UK GDP, and is more than twice that of Scotland and Wales put together. As wiki[ put it

    The London fiscal surplus, £32.5 billion in 2016–17, mostly goes towards funding services in other parts of the UK

    , so, quite frankly, London doesn’t give a damn about the hinterlands, because it pays the piper, so it gets to call the tune. I kind of wonder if it will secede in the future.

  • Mogul
    10 Time like infinity August 27, 2023, 12:27 am

    @emine #9: re: London seceding; Trussite-Kamakwasi/IDS/JRM mob would, if they could, unmoor London from the Thames, up anchor, and move it across to either the Hudson River, next to the financial district of lower Manhattan, or to San Francisco Bay, adjacent the techy quarter. The rump UK statelet remaining, bereft of it’s capital, could then fulfil its historical destiny to become the one true Brexit island, a failed state off the shores of Europe, and a sort of Brexity, stagnationist DPRK to the EU’s dynamical South Korea. Quite what effects this Brexit Sparta might then have on house prices in the rest of the UK is moot.

  • 11 ZXSpectrum48k August 27, 2023, 11:08 am

    With regard to the article on multi-managers. I would agreed that, like macro, it’s become a too consensus to like these types of funds in the last five years. Many are just too big now, whereas in 2018 they were small. Where I disagree is on the details. It’s not clear that they charge more (or less tbh). The fee scheme is just different. Plus I really don’t see how Millennium having a 5-year redemption policy on capital puts it at more risk. The biggest problem is that with the more successful funds now closed to new capital, the money is streaming into the also rans.

    @TLI. It would be typical of our timing that, if we did ship everything inside the M25 across the Atlantic, this would almost certainly coincide with a new civil war in the US. During the last few weeks of Trump’s presidency, the US didn’t qualify as a democracy but was defined as an anocracy. It will be no better whoever wins in late 2024. Some in the GoP are reiterating that the US is a republic, not a democracy. When it comes to secession, the US has form! I do wonder if the market will have a panic into the next election when it thinks about the (not so) tail scenarios.

    As for Europe, as much as Brexit was a bad idea, it has to be said it’s also sliding in the wrong direction. Illiberal democracy, anocracy, neo-fascism. Hungary and Italy already gone. Poland close. AfD on the rise again in Germany. LePen a constant threat in France.

    Might be better to stay where we are, even if the UK is a bit broken!

  • 12 JABA August 27, 2023, 12:03 pm


    A Trump win in 2024 is, perhaps foolishly, the thing that worries me most when it comes to my finances.

    Given the way the US electoral college works, it would only take a swing of a few hundred thousand votes, or less, to give that orange sack of s**t the presidency.

    Now that the Republican party is a cult, and the comments of him and his ilk about suspending the constitution, and removing whatever checks and balances remain, if he wins there is a fair chance that it could be the end of the republic.

    So if the US becomes a banana ‘republic’ does the US dollar become the peso? Which then raises the question of what happens to the whole global financial system, never mind the stock market.

  • 13 Warren August 27, 2023, 1:01 pm

    House Prices – no need for any violins but central London house prices have been flat since 2014.

    Trump – will at least be good news for the S&P.

  • Mogul
    14 ermine August 27, 2023, 3:02 pm

    @Time like infinity #10

    > The rump UK statelet remaining, bereft of it’s capital, could then fulfil its historical destiny to become the one true Brexit island, a failed state off the shores of Europe

    Sometimes I wonder if the problem isn’t an aspect of the resource curse. The resource was inadvertently discovered by Thatcher, which is that London’s timezone and a base of natural human capital with skills in that direction could mine capital, once started it drew in more resources. That London makes a fifth of the UK’s GDP* is a measure of that resource, and countries with large natural resources tend to engender corruption and impaired institutions. Some of this is observable in the current administration. We’re all going to be paying for Bozza and Liz’s vanity peers/jobs for the boys and girls, as a minor example, and the repeat scandals of Tory fingers unduly close to the till. It really is time that we stopped MPs holding ‘second jobs’ – if they don’t like it then they can sod off, it’s not too much to ask that running the country is a full-time job.

    *we should note London’s 9 million makes up 13% of the UK population.

  • 15 ZXSpectrum48k August 27, 2023, 4:58 pm

    @JABA. The market might well take a Trump win well. It would depend on how he wins. Long-term, though, I hear you. If nothing else an isolationist, anocratic USA leads to a clearly more unstable and multi-polar world. The USD reserve status would clearly suffer with hard to predict consequences.

    The problem is that a Biden win could easily lead to very severe civil disobediance. There is a significant minority in the US who just wouldn’t stand for it again. How markets react to that isn’t clear either.

    It’s 50:50 who wins right now and it’s over a year away so markets can ignore it with lots of other wood to chop.

    In other news, shadow chancellor Reeves has ruled out wealth taxes and increase to 45p rate. Another reason to hold fire for another few years on the UK bug out plan. Plus reduces any risk of a firesale of prime London properties!

  • 16 Gentleman's Family Finances August 27, 2023, 5:45 pm

    As someone who lives on the list of places with the lowest house prices to income* I’m shocked at how crazy the rest of the UK looks.
    It’s so cheap here, we are effectively stuck – especially as wages stagnate here and prices rise elsewhere.
    So, we’ll probably sit it out, raise the kids for export (just as mine did back in N. Ireland) and enjoy the benefits of a low cost of living.

    *always worth being cautious with figures like this. Many of the higher paid jobs where I live (e.g. doctors) work in the area but commute in from outwith – because Quality of Life here isn’t as good as the rural hinterland. I’m sure Invercylde is the same.

  • Mogul
    17 Time like infinity August 28, 2023, 12:34 am

    @ermine #14: perhaps it will be Mauritius and not Zug, Dubai or Singapore which shapes up to become the new 2nd fiddle to New York in the global financial system after London’s descendancy. About half way between Asia-Pacific and America, plus roughly synching with Europe. Quite favourable taxes and regulations. Terry Smith moved his operations there already.

    @JABA #12 and @ZX #11+15: For all its seeming kaleidoscopic craziness and polarisation, the US retains tremendous geographic, economic, demographic and institutional advantages: unthretened to north and south; easy access to both of the world’s great oceans; dominating it’s hemisphere in a way that neither China nor India can pull off in theirs; traversed by great rivers for cheap transportation of materials; huge and easily accessed reserves of coal in Appalachians and oil in Texas and the Gulf of Mexico; a growing population; truly world class Ivy League universities; a highly entrepreneurial and innovative business culture; the network effects of Silicon Valley; one of world’s highest GDP and wealth per capita figures (albeit unevenly spread); second highest overall GDP PPP in world (where the current leader, China, is only narrowly ahead, with benefit of 4x no’s of people, and now stumbling with a declining population, indebtedness, housing oversupply and overinvestment); facing no credible alternative global reserve currency (who is really going to commit to using the Yen, Euro, Yuan/RMB or rupee as an international settlement medium); being the backbone of the world’s capital markets; possessing a seemingly sound series of Constitutional safeguards; and having a formidable military, with 2nd to none resourcing and technology, both being tested out many times since 1941.

    So, whilst the US has several rivals, it has no obvious viable peer challenger. China may eventually push the US out to beyond the Pacific’s first island chain, but the US will remain the preeminent world power for our lifetimes so long as it desires to have that role and remains willing both to bear the financial costs and to carry the political responsibilities coming with it.

    The orange one unquestionably is the US’ enemy within, MAGA/QAnon are clearly symptomatic of many deep maladies, and Trump would undoubtedly be even more unhinged and evil in a second act. But he may already be barred from running for office again under Article 14, section 3 of the Constitution, after the events leading up to and on 6th January 2021, regardless of whether or not he’s actually convicted of the federal charges (SCOTUS will have to decide). Furthermore, even if he can run and then wins, all branches of the executive still serve the Constitution, and not the person who, from time to time, may occupy the office of president. Supra majorities of both houses of Congress are needed to amend/suspend Articles in the Constitution, with certain Articles also requiring the consent of the majority of State legislatures. It will not be easy to overturn democracy wholesale in the US.

    Without meaning to be complacent, we survived one 4 year period under Trump’s malevolent but childishly incompetent misrule, and we did so without seeing it occasion a market crash (the S&P 500 / NASDAQ both went up substantially).

    Moreover if things got really bad, then the $ and Treasuries could strengthen as safe haven assets, notwithstanding that the US itself would then be the source of danger.

    In any event, the US has such unsurpassed advantages internationally that it would surely remain a lynchpin of global economic and financial order regardless of whether it was a democracy, anocracy or autocracy. So, no need for anticipatory portfolio fiddling now for it only to then be regretted later.

    @All: 4 FT articles linked to in Weekend Reading are each excellent. Eye opening to see someone actually try and break down why the FTSE 100 and 350 have not gone up despite apparent cheapness and what’s actually going wrong. Seems optimistic on UK Small Caps, but as it notes momentum effects have historically been strong there.

    VC article an eye opener. Bonkers range for outcomes.

    @ZX #11: if the pass through fee for global macro MM hedge funds are in the range 3%-7% of AUM p.a. (say 5% being typical) and those funds’ performance fees are mostly in the range of 20% to 30% of any gain over the last highest nominal NAV then, assuming a stylised example of 10% long term future GBP nominal returns from global equities (with 5% future trend UK inflation, a 5% real return (all income reinvested) and with annualised volatility of 20%); a macro MM fund would need to make a gross of fees (but otherwise net) return of 20% nominal over long periods to even match the equity tracker: i.e.: a 20% gross return less say 25% of all gains as a performance fee and also less the 5% of assets as the pass through fee = 20% p.a. minus 10% (5% + 5%) = 10% p.a.

    How realistic would you assess that it will actually be for global macro MM funds which are still open to new investment by UHNWs to now run at consistent long term (say 20 year horizon) gross annual rates of nominal returns that are at least double those of global equities – i.e. per the above example, 20% p.a. versus 10% p.a gross returns?

    I’m leaving out from the question here the potentially relevant issue of the much lower volatility of hedge funds which utilise aggressive stop losses and CLE-LPR trading styles.

  • 18 Rappelle August 28, 2023, 8:15 am

    Good article but I’ll admit as a Scot that the suggestion nobody would have heard of Inverclyde irked me a bit. Inverclyde is on the edge of Greater Glasgow (i.e. the fifth largest urban area in the UK). It’s not an obscure place in the wilderness.

  • 19 Matt August 28, 2023, 9:23 am

    @Rapelle – it’s Monevator’s one thing that annoys me, the occasional slip into anything outside London being dark and mysterious (and sometimes pointless – descriptions of ‘irrelevant provincial manufacturers’ still grate). A shame as it’s otherwise an excellent website.

  • Mogul
    20 Time like infinity August 28, 2023, 9:54 am

    @Matt #19: with 87% of the people and 99.4% of the land being outside London (using the ex GLC boundaries), and with 4 different nations (and 3 separate legal systems) across the UK, it’s astonishing to me how debates are so often framed in terms of London versus the rest with the unspoken premise that the rest is of no more than equal importance. Boris whose one big idea was meant to be ‘levelling up’ couldn’t even manage the tokenism of temporarily moving the House of Lords to York whilst the Palace of Westminster was patched up.

  • 21 The Investor August 28, 2023, 9:59 am

    @Rappelle @Matt — It’s a fair cop in that I do write this sort of thing from time to time. (I think @TA is less prone to it). However I don’t intend censoring myself in an attempt to be more palatable or ‘correct’. I don’t mean any offence by it, but it does accurately reflect how many people in London and the South East think of the rest of the country. In my case at least it’s not disdain, but it is ‘London and everywhere else’.

    Furthermore, I hadn’t ever heard of Inverclyde and I’m a pretty knowledgeable chap who is occasionally brought in as a ringer on pub quiz teams. 😉 Again I could have lied or Wiki-ed it or written something bland, but all writing of colour is going to annoy someone and I think this is the acceptable end of the spectrum, personally.

    Again I wouldn’t take it personally. As I have said before in the Brexit debates, I’m from the provinces (!) and still have family there, and I recognise some charms. Being part of the beating heart of the UK growth economy is not one of them, rightly or wrongly.

    Re: Factories I’m almost certain this would have come up again in Brexit debates. I’m not going to defend (or reiterate for that matter) that exact wording as I don’t know what I said, but I happily concede the Brexit economic argument was hinged on a load of jingo-istic / local-ist nonsense that did not make sense in the big picture, as I believe we’re seeing playing out now (the long slow puncture model of Brexit impact), albeit absolutely with Covid/aftermath being in the mix.

    I understand that if you tell somebody in a fishing village that their industry is irrelevant in the grand scheme of things, economically-speaking, they are going to be pissed off. But one reason I specifically use that sort of language is because the wooly generalizations of the ‘Remain’ campaign clearly failed to cut through (some family members in the provinces argue this all the time to me, even after now conceding that what ‘cut through’ for Leave was basically lies. It seems, per their own logic, that they were happier to vote for powerful lies…)

    When I last looked (12-18 months ago) the fishing industry had about the same turnover as High Street chain Halfords. No politician stood up to defend Halfords as a special interest, yet now it’s suffering from Brexit frictions and lower GDP like the rest of the economy. Fishing, meanwhile, still complains as usual.

    Ditto for manufacturing in this country. It will never ever be the most important contributor to UK economy again, absent some kind of economic shock that sends us into developing world status. UK economic policy should be (have been) made with high-end services, knowledge work, intellectual property, bespoke manufacturing, effortless import/export (because we import a lot of messy physical stuff), financial markets, free capital, London, some kind of free flowing immigration, and education (and our excellence in that area) at the forefront. Other sectors/regions shouldn’t be thrown under a bus, but the above is what drives our economy and maintains what status we have as among the very leading advanced nations, something directly imperilled unfortunately by the economically senseless Brexit.

    So I’m not going to write multiple paragraphs of waffle about the importance of UK shipbuilding or steelmaking etc. I don’t believe in it. Nice to have, sure, but not the main driver.

    The irony of course being the UK car industry hasn’t been under so much threat for decades, in my view partly thanks to Brexit. (Not entirely directly, they are blaming as much the transition to EV, but where would you put a new battery plant? In the offshore island with a bunch of frictions, or at the heart of the massive EU market? It’s a no-brainer.)

  • 22 ZXSpectrum48k August 28, 2023, 12:06 pm

    @TLI. Regarding the US, a significant white (often Christian evangelical) minority see the demographic changes happening to the US as unacceptable. They feel their dominant position, politically, culturally, and even economically, is at threat. CIA consultants have told me, if the US was a foreign power, it would be scoring highly for the risk of civil war in the next decade. To be fair, these sorts of pressures are building across the Western world but the US is the one that holds it all together. I completely take your point regarding the huge advantages the US has. The problem is that is very much in the price. The USD is not valued where it is due to its balance of payments or fiscal position. I’m not taking any action but it’s a risk that simply isn’t in the price and it’s not clear to me that it’s just an extreme tail event.

    On the multi-manager fund question. The FT article seems to double count the fees. The pass-through fee includes all costs and that includes performance fees (since they are a cost). You want to think of a multi-manager like owning each individual pod as standalone fund (hence the name). The exact fee drag is then a function of the netting risk between those pods. In broad terms, cost pass through benefits the client (over say 2/20) if there are a small number of losing pods and those pods don’t lose that much. Hence why most MMs have stops set at 5%-7.5% max.

    The other error is the FT is saying leverage is up to 6x. This is generally never true. The archetypal MM is Millennium. I”ve run a pod there and still invest in it. Millennium has a 14% return with 5% annualized volatility over 30+ years. It’s never lost more than 3.5% in a year and the last time it lost 1% in a month was Nov 18, almost 5 years ago. It’s not a 6x levered fund! I’ve just a left a fund that was genuinely 5-6x levered. It only has internal (mostly the principal’s) money. No clients would tolerate that level of leverage.

  • Mogul
    23 Time like infinity August 28, 2023, 1:51 pm

    @ZX #22: many thanks for your thoughts and insights.

    It’s really scary to think that the risks of the USA and the Russian Federation both disintegrating over a 5 years window might be of order 5% now, rather than say somewhere between 10^-5 to 10^-3 p.a. only a decade ago. Both have experienced 5 year long civil wars in last 160 years, the former claiming 620,000 lives (about 2% of the then US population) over 1861-65, and the latter a staggering 14 mm lives over 1918-22 (if one includes the 5mm lives lost in the famine of 1921-22), being some 8% of population of the Russian Empire in 1917. In latter, civil war direct and indirect losses were 7x those that the Empire lost in WW1 immediately before.

    On pass through, I just hadn’t realised that it worked like that. God, do sign me up for any of Millennium, Citadel or BCM if they ever take new money again and can also see their way to accepting just 100,000s, rather than the normal multi millions minimum. In the meantime, I’ll have to make do with equity volatility for equity returns.

    The elite hedge fund industry stalwarts must laugh to themselves when they see funds like Standard Life GARS purporting to offer a similar low risk proposition, but without SL actually knowing what they’re doing.

  • 24 JABA August 28, 2023, 3:50 pm

    @ZX, TLI

    Thanks very much for the thoughts re the US.

    Agree that the even in a tail scenario, the consequences are hard to predict. It might be urban myth, but think I remember reading that the German stock market rose after the Nazis were elected.

    Perhaps that could be a result of a depreciated USD, which could have a similar FX move to GBP on the back of the Brexit vote, as marginal buyers who set the price step back.

    TLI, complete agree with your comments about all of the structural advantages of the US. Not sure if you’ve read his books, but Peter Zeihan makes very similar arguments, which make sense to me. However, when it comes to faith in the checks and balances and the constitution, I can’t help but think of the scene in Game of Thrones (random I know) where the dying King, signs a piece of paper making his honourable friend regent, only for the Queen to tear it up when it’s presented, and say something along the lines of ‘you expect a piece of paper to protect you?’. When push comes to shove the only thing that will matter is who the people with the guns take their orders from.

    Turning back to the economics, the bit that bothers me is that the ultimate global ‘risk free’ assets are US treasuries. The value of which rests on investors believing in the ‘full faith and credit’ of the US government. What happens to that faith if the republic falls? To my simple mind, the whole treasury yield curve would have to move higher as investors price in a higher risk of default. It might not be much but move the yield curve up rapidly by say 2-5% across all maturities and the resulting losses would probably be sufficient to wipe out the capital base of most large financial institutions around the world no?

  • Mogul
    25 ermine August 28, 2023, 5:28 pm

    @TI > but where would you put a new battery plant? In the offshore island with a bunch of frictions, or at the heart of the massive EU market? It’s a no-brainer.)

    Cough. Mind you, Tata is said to be spending £4bn but I suspect the government money slipped under the table was of a similar order.

    Not a terrible place to put it, I guess, close to the motorway network, close to a nuclear power station and also near a port.

    Oddly enough I was in the relatively well-heeled city of Wells, walking from the Waitrose car park to a community centre. It struck me that you now have to tune the old lugholes to the hum of EVs as well as the old ICE these days. So there’s progress, even in the provinces.

    > Furthermore, I hadn’t ever heard of Inverclyde and I’m a pretty knowledgeable chap

    haha, you young whippersnapper you. When I was a nipper Real Men built ships there, although it was declining rapidly, but you’d hear of the place on the news, usually in association with strikes 😉

  • 26 The Investor August 28, 2023, 5:47 pm

    @ermine — Yes, it’s estimated we need at least five by 2030. Europe has 35 built or in production. Obviously all these numbers are +/- whatever, but I stand by my statement that Bork-it hasn’t helped the case one iota and has probably massively harmed it.

    Further reading from the noble Lords: https://lordslibrary.parliament.uk/charging-ahead-future-of-the-uk-car-industry/

    (Edit: Oops, typo, not 2023, 2030!)

  • 27 Marco August 28, 2023, 7:34 pm

    Fun fact. The Inverclyde Lido is the cover art for Blur’s new album

  • Mogul
    28 Time like infinity August 28, 2023, 9:06 pm

    @JABA #24: somewhat strangely perhaps, the available historical data suggests it makes almost no predictable difference to future equity returns which party in the US (or indeed elsewhere) is in power, what policies they pursue, or what the GDP growth rate of a given country is. If you’d bailed on the SP500 and NASDAQ in November 2016 when Trump won, and then only brought back in January 2021 when Biden was inaugurated, you would have made a big mistake. Perhaps there are just too many complex, dynamic and interacting factors going into global and country level equity returns for either politics or the economy to dominate in a way that gives actionable information to base investment decisions upon. Best to stay diversified, stay fully invested with your preferred long term allocations as between equities and bonds, stick with plan, and just hope for the best. At the end of the day, there’s really not all that much that any of us individually can usefully do if/when the SHTF. I’m still around 95% confident that, for the USA, the very worse case political and economic outcomes of almost total societal breakdown and full state failure (think of a highly developed world version of either the Lebanon or Sri Lanka right now) won’t eventuate over the next 5 years, but this is notably down from the at least 99.5% confidence that I held a decade ago.

  • Maven
    29 LadsDad August 28, 2023, 10:14 pm

    Ref the debate on US election, I found the chart on this link interesting. Appreciate its slightly out of date, but shows the US markets perform well regardless of which party is in charge. As always, staying diversified should provide some hedge (though appreciate US does drive the markets)


    PS this message is sent from ‘the provinces’, I also pick up on the London / non-London vibe, but I find it entertaining. Its a friendly debate I often have with London-based mates, so it feels par for the course!

    PPS hats off for the Bonnie’n Inverclyde heading, this made me LOL!

  • 30 TahiPanasDua August 29, 2023, 8:30 am

    @Rappelle #16,
    I don’t think you should be offended, or even just surprised, by people’s lack of knowledge regarding Inverclyde.

    You probably don’t watch TV quiz shows like Pointless but, with monotonous regularity, seemingly pathetically simple questions about Scotland seem to stump most contestants. In truth, I would be the same on any Northern Irish topic.

    Readers can draw great comfort if they can answer the following two questions: I live in the smallest city in Scotland and grew up in the smallest county in the UK. If you can name them, apply to be on Pointless right away. Bad luck, however, if they happen to ask questions on other topics.

  • Mogul
    31 Time like infinity August 29, 2023, 9:49 am

    @ermine, @TahiPanasDua #30, @Rappelle #16 and @Matt #19: there’s something quite odd about the UK’s attitude to London, and London’s attitude to the rest of the UK. London’s a big city for sure, but there are larger elsewhere in continental Europe (Istanbul @16mm, Moscow @12mm). Excluding city-states like Monaco, the Vatican, and parts of countries like Hong Kong; 30 countries worldwide (16% of total) have at least a quarter of their national population in their largest city (e.g. Lisbon, Athens, Lima, Auckland, Tokyo etc), and 3 have more than half. London has 13% of the UK’s population. It just shouldn’t be as dominant as it is.

  • 32 The Investor August 29, 2023, 10:12 am

    @TLI — I’m guessing you saw the graph from the FT I posted a couple of weeks ago in Weekend Reading? (Link below).

    The summary is that London is by far the wealthiest region in the UK, ramping up the national average GDP per capita such that every other regions sits below that average, with only Manchester coming close. Moreover take out London’s contribution to GDP and other regions look outright poor (indeed poorer than the poorest state in the US).

    In contrast most other European cities tend to have a couple or more other such giants.

    We can certainly debate whether it’s desirable things ended up this way (perhaps not, though it does mean that our small and now more isolated country has a true global city, which is increasingly important) or even why.

    But I don’t think it’s surprising (or “odd” 😉 ) in the slightest that it leads to different attitudes and an orthogonal perspective at times. 🙂


  • Mogul
    33 Time like infinity August 29, 2023, 11:03 am

    @TI: it’s perhaps a somewhat high risk strategy to try to leverage the capital as the national ‘platform’ where it’s got only 9 mm out of 68 mm people in the country, and where (despite significantly higher incomes in London) the capital still ‘only’ has about a fifth of the national economy. We’re already something of an oddity globally by being a unitary state with 4 countries and 3 legal systems. But the UK compounds the anomaly by managing to be one of the most highly centralised of all members of the OECD. Although there has been devolution for the nations of the UK via the assemblies in NI and Wales and the Scottish Parliament, the individual regions themselves have little practical power. North to South transport links predominate and in England both East to West and the criss-cross routes are remarkably badly served by rail (slow, expensive, unreliable and infrequent). Public and private investment is very heavily concentrated in the South East and the capital. London’s two USPs of financial service provision and serving as a political bridge between Washington and the EU have taken a huge hit from Brexit. Of course, Brexit has affected the rest of the UK severely too. But London was especially highly vulnerable in some ways because of its predominance, and the sad fact that the WTO protections for international trade in goods are next to non-existent for cross border trade in services, meaning that the UK getting a close future trading relationship with the EU was essential for the City in particular and the capital in general. And we all know how that one turned out 🙁

  • Mogul
    34 Time like infinity September 7, 2023, 1:30 pm

    @ZX #22: “CIA consultants have told me, if the US was a foreign power, it would be scoring highly for the risk of civil war in the next decade.” You might find this piece today reassuring:


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