What caught my eye this week.
When I first began writing about investing on Monevator in 2007, I wondered when I’d run out of things to say.
The basics of good personal finance can famously be written on a Post It note.
At the same time, index funds were already mopping up retail investors’ money like baleen whales feasting at an all-you-can-eat plankton buffet.
As for the economy, the UK chancellor Gordon Brown boasted he’d put an end to boom and bust.
What would there be left to talk about?
Of course the Great Financial Crisis soon kicked such complacency into touch.
And shortly afterwards The Accumulator started writing for Monevator. His beady forensic eye for the hidden costs and frictions to avoid in passive investing – and his awareness of the psychological landmines that abound – proved this blog could be a writing project to take us into old age, if you guys will keep having us…
(AI notwithstanding!)
Harder, better, faster, stronger
What I didn’t see coming in 2007 though was that the mechanics and tools of private investing would continue to evolve…
…or devolve, depending on your perspective.
We already had index funds, ETFs, cheap share trading for those who wanted it – though not zero commissions yet – and innovations like all-in-one and target-date funds that wrapped best investing practice into products that enabled you to buy good investing habits off the shelf.
There was still a wealth of venerable investment trusts for old nostalgics like me to kick the tyres on should we want to do something different, too.
Were we crying out for free share trading, levered and short ETFs, and Bitcoin?
Probably not, but they came our way anyway – and there’s no end in sight.
In just the past few weeks I’ve been reading about:
- Mirror notes from the investing platform Republic (formerly Seedrs) to enable UK investors to get exposure to the performance of unlisted SpaceX.
- The new stablecoin legislation in the US. Boosters say it lays the groundwork for moving the financial rails wholesale onto the blockchain.
- RobinHood’s tokenised stocks – now available in Europe – which combine both these ideas to purportedly enable you to bet on the future of OpenAI, say, again via the blockchain.
- The UK’s FCA relenting to allow everyday investors to buy exchange-traded notes tracking Bitcoin and potentially other crypto assets from 8 October.
Is such innovation a good thing?
Well… perhaps more than seems likely right now.
Get lucky
Paul Volcker, the inflation-beating chairman of the Federal Reserve, notoriously remarked that the ATM was the only useful financial innovation of the past 30 years – at least as of the time of his quipping.
But even as he spoke, the seeds were being laid for the very welcome private investing revolution that I outlined at the start of this piece.
So maybe we should be humble about where these latest developments might lead?
It’s easy to be cynical about whether the average person has any need to buy crypto-based exposure to Elon’s rocket ships.
But perhaps we will all be doing something similar a couple of decades hence – and maybe not even realising it?
On the other hand, I have some sympathy with Bill McBride, who won a bit of renown in the blogosphere nearly 20 years ago by predicting the financial crisis.
And his view of these latest innovations is sobering:
The key to preventing a financial crisis is to keep the non-regulated (or poorly regulated) areas of finance out of the financial system.
A good example is the Tulip Bubble in the 1600s. Some people got rich, others were wiped out, but it had no impact on the financial system.
Unfortunately the current administration has embraced crypto. They are allowing it to creep into the financial system, and allowing 401K plans to hold crypto (aka future bagholders).
There has been some discussion of allowing financial institutions to lend against crypto holdings – like for a mortgage.
This is mistake and increases the possibility that crypto will be the source of the next financial crisis.
Time will tell. But hopefully we’ll be here to report on the unfolding drama again should the worst happen…
Please share your thoughts in the comments below, and have a great weekend.
From Monevator
Sticking to a financial plan when the honeymoon is over [Members] – Monevator
From the archive-ator: Seven unusual ideas for a better value wedding – Monevator
News
UK GDP slows as economy feels effect of higher business costs – Sky
Employers hire virtual staff and contractors to combat the N.I. hike – This Is Money
House prices are falling, but it’s a mixed picture across Britain – This Is Money
Over 3.6m investors pay dividend tax [Twice as many as in 2021] – Yahoo Finance
Average mortgage rates below 5% for the first time since Truss budget – BBC
Oasis tour injected £1.1 billion into the UK economy – This Is Money
London developer must pay ex-wife £15m after hiding assets in ‘sham’ trust – Standard
Fees predict performance – Basis Pointing
Inheritance tax speculation mini-special
Treasury looking at IHT again to plug deficit [No Brexit cited, as usual] – Guardian
Gifting and the seven-year rule are apparently in the spotlight – Morningstar
How does IHT work today and what might be changing? – Guardian
Yet another take – This Is Money
How onshore bonds can help beat inheritance tax – MoneyWeek
The already-planned changes largely protect family farms, study finds – CenTax
Products and services
Celebrate your birthday with 35 freebies and discounts – Which
Beat the base rate for three months with Prosper’s 4.5% fixed-rate savings – T.I.M.
What’s happening to car insurance premiums? – Which
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this affiliate link. Terms apply – Charles Stanley
The pros and cons of an immediate needs annuity – This Is Money
Savings will be taxed directly from pay packets from 2027 – Standard via Yahoo
How to avoid getting stung for hidden hotel charges – Be Clever With Your Cash
Try health service Thriva via my affiliate link and we both get £30 in credit – Thriva
How to complain to the Financial Ombudsman Service – Be Clever With Your Cash
Homes for sale near golf courses, in pictures – Guardian
Comment and opinion
Un-exceptional US stock market earnings? – Elm Funds
How the top rate of income tax became a middle-class problem – The Times
Retirement is only halfway up the mountain – A Teachable Moment
Everything is disruptable – Abnormal Returns
More meetings means less thinking – Behavioural Investment
How to use Bitcoin in your portfolio – Morningstar
The first $10,000 is the most important – Of Dollars and Data
Is London’s financial future evolving or eroding? – CNBC
Why the first years of retirement matter most – Retirement Researcher
Wealthy people buy more insurance than theory predicts – Alpha Architect
Investing and longevity mini-special
How likely is it that an investor will outlast their savings? – Maths Investor
Investing in the inevitable tides of demographic change – Polymath Investor
What are your chances of ending up in a care home? [Paywall] – FT
Naughty corner: Active antics
Three big ideas for understanding how stocks work – Fortunes & Frictions
Retail traders are driving crazy post-earnings volatility – Sherwood
How much cash should companies hold? [Research, PDF] – Morgan Stanley
The damage done by MiFID II – Klement on Investing
Shorting is hard – Inside the Mind of Mojo
A Novo Nordisk deep dive – Quartr
Super-long Japanese government debt: the new widow-maker – FT
Kindle book bargains
What They Don’t Teach You About Money by Claer Barrett – £0.99 on Kindle
Too Big to Fail by Andrew Ross Sorkin – £0.99 on Kindle
50 Economics Ideas by Edmund Conway – £0.99 on Kindle
Mastering the Business Cycle by Howard Marks – £0.99 on Kindle
Environmental factors
Europe bakes and burns, turning holiday hotspots into infernos – Guardian
Government inexplicably tells citizens to delete old emails to save water – Tom’s Hardware
Squid and chips? UK’s warming waters could change what we eat – Independent
What might happen to cities as sea levels rise? – Klement on Investing
Why ‘best time to visit’ no longer applies – BBC
Plight of the bumblebees – Biographic
Our wasteful culture has led us to Wet Wipe Island – Standard
Study finds whales and dolphins regularly hang out togother – The Conversation
Robot overlord roundup: ChatGPT-5 edition
OpenAI moves fast and breaks ChatGPT – Spyglass
GPT-5 – “a legitimate expert in anything” – can’t spell – Sherwood
An AI nerd rounds-up all the other takes on GPT-5 – Don’t Worry About The Vase
GPT-5 and other LLMs are not human brains. They never will be – Gary Marcus
Not at the dinner table
The permanent stain – Andrew Sullivan
Trump administration asks NASA to draw up plans to destroy its own climate-monitoring satellites – NPR
How big are Trump’s tariff revenues, really? – NPR
Mimicking China isn’t how the US should race against China – Faster, Please
Why a Leeds teenager woke up with a Chinese bounty on her head – Guardian
Is America about to solve its housing problem? [Podcast] – The New Bazaar
Off our beat
China’s unemployed young adults who pay to pretend to have jobs – BBC
Meta (Facebook/Instagram) makes at least $25 a month per US user – Sherwood
As thousands of teenagers scramble for university places…why? – Guardian
The rise and fall of musical ringtones – Stat Significant
Dining across the divide – Guardian
Wandering in Woolwich – Propegator
No printers or PCs says Starbucks Korea to its customers – BBC
And finally…
“Have some humility – plenty of clever people get spanked regularly by the markets.”
– Tim Hale, Smarter Investing
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How are you going with the Thriva stuff TI? You learning much from it? Getting some sort of ongoing value? Tricky to know if it’s useful or just another 23andme..
The TIM article on changes to IHT quotes a partner at a law firm saying that “parents … may after the next budget suffer an additional tax on death”. That’s quite a claim. I wasn’t aware of any evidence of an after-life, let alone claiming to know of the suffering people’s souls may encounter when they get there. 🙂
There’s no innovation in blockchain. No good examples I can think of. When it was all the rage plenty of the world’s biggest companies tried to use it, and ended up giving up. Trump is a huge fan of crypto, because it has allowed his family to make billions, through cryptos only use case, scamming money from financially ignorant bag holders. Over in bogleheads and on here, I’m yet to meet any millionaires who are into crypto. Personally I find it too pointless to consider, and can’t forgive the environmental damage it has caused for no reason either.
Bitcoin is still planet-destroying garbage … but … if there’s going to be a sudden inrush of money into what is by design a limited system, I am tempted to take a punt on it. I wonder if I can offset the CO2.
Obv’s agree no ‘innovation’ in Blockchain.
Nowadays it’s grifter’s paradise (witness the embrace of the Orange one).
Still, for the cyberpunks and libertarians who got in at the get go, and HoDL (more power to them), it’s been the ride of a lifetime: $100 (£60 at the time) got you 20,000 coins (@0.5 cents each) when the 1st CeX, BitcoinMarket, opened its doors (on 17/3/2010) under founder moniker “Dustbin Dollar (USA)” – that’d be ~£1.3 bn today for a UK coiner, after 24% CGT.
But that was then, and this is now.
BTC, ETH & SOL just ain’t gonna return what they did in their early days.
Mathematically impossible given size of global asset pool.
Sure crypto*could* still slightly outpace the winning companies in ‘Bessembinder’s lottery’ over the next 30 years; but I wouldn’t bet on it.
What was, in 2009-10, an ideal pursued by a few enthusiasts who’d read a bit too much John Brunner, PKD and Will Gibson (kids of the flower power generation meet Silicon Valley nerds and Ayn Rand), had already become, by the time Karpelès came along and brought MtGox, just another online casino/game of pass the parcel (or “empty box”, as SBF revealing admitted).
My highly heterodox view is that the innovation which we need, but will never get, is a closed end Investment Trust listed on a major UK exchange and ISA eligible which implements multiple (rebalanced) aggressive (levered) sector and asset class ETF rotation strategies (under one umbrella, with automated execution). The idea here being that someone in their early twenties puts (via ISA) £10,000 they’ve scraped together 80% into plain vanilla VWRL (their core straightforward global tracker ETF) and the last 20% into said ‘shoot the lights out attempt’ IT, and, thereafter in each month of the next and subsequent tax years, commits £1,000 p.c.m. split 90% into VWRL and 10% into the bonkers sector leverage rotation strategy (LRS) IT. Then repeat for 30 years.
If the mad sounding IT investment goes to naught, then you still end up with about 90% of what you would have had being 100% in VWRL, which is fine.
Perfectly acceptable maximum downside there.
But, if the LRS IT does work, and delivers (as many backtests and Monte Carlo simulations in investing Substack land purport to show) 30%-40%+ p.a. nominal returns, after trading costs (against, say 7% nominal, and 5% real, for a plain old VWRL ETF B&H approach), then you’d end up with many, many multiples of what you would have had invested 100% into VWRL alone (do the math 😉 ).
Obviously, as the paramount aim of fund management is not highly volatile multi decade performance but, instead, to gather and retain as much fee paying AUM as possible, and as ‘safety sells’ (or at least the superficial appearance of safety) no so such IT will ever be launched.
Noone will try and even if they ever did, then the FCA would shut them down.
Instead, as it suits those UHNWs to have bag holders to offload their unlisted assets, we’ll get unnecessary things like access to PE and VC late stage etc via ETFs which, like the SPAC scam of 2021, are all but guaranteed to underperform.
Shane. But hey ho 🙁
To be fair Gordon Brown boasted he’d put an end to Tory boom and bust.
Obvs Socialist boom and bust is a plain different thing.
#5: “Shame” not “Shane”, and apologies also for the errand “so” – God I hate this 10 minute edit countdown, and midget finger sized touchscreen phone keyboard!
@Invariant (#2):
Seems quality lawyers abound this week – the MS article quotes a lawyer “noting that this tax break [PETs/gifting] only exists in the UK, suggests that the government could go down the route of capping gifts” – which is absolute nonsense!
The MW article then adds further confusion by mentioning (possibly just the once) offshore bonds in its article about onshore bonds.
Good links (as ever). The time taken to compile them is much appreciated.
Pretty sobering those NPR and Andrew Sullivan ones aren’t they? 🙁
The NASA business is basically a IRL version of the plot to Don’t Look Up.
Question now is are we 1/8th way through this madness with the Mad King Mrk 2.0, or will this all just go on and on, and get even worse in different guises, a la Putin’s playbook?
I don’t take much comfort from the fact here that the condition of humanity throughout most of history has been one of feudalism, servitude and ignorance. Let’s hope that the future isn’t ‘nasty, brutish and short’, as Thomas Hobbes characterised his contemporary world.
@DH #7
“God I hate this 10 minute edit countdown, and midget finger sized touchscreen phone keyboard!”
Compose your response in a separate text editor/notes app/program, ideally on a desktop/laptop – it’s a far more pleasant experience. Leave it as a draft for at least 10 minutes. Come back to it and read it slowly, preferably several times. Correct/amend as desired. Then copy and paste into the Monevator comment box.