What caught my eye this week.
You don’t need to commission a full-on report to know that we all have wildly different ideas about money – and about how much of it is, well, a lot.
And you don’t need to be a dedicated peruser of the personal finance Internet to know the rule is that the more money you have, the higher you set your number 11 on the That’s A Lot Of Money dial, either.
Just witness the regular handbags swinging on Reddit – quite possibly over the price of a handbag – or even the more respectful differences of opinion that follow some of our FIRE-side chats.
One person’s obliviously rich princeling is another’s squeezed middle striver.
But my job isn’t just to ponder the nature of these eternal tugs-of-war.
No, I’m here to introduce the latest one…
This time it comes courtesy of HSBC, whose new Wealth Report was covered this week by This Is Money:
Nine in 10 Britons earning £100,000 or more a year before deductions do not view themselves as wealthy, despite being in the top 4% of earners, new data claims.
On average, most Britons think an individual needs to rake in £213,000 a year before they can be considered wealthy, according to HSBC Premier’s new research.
At over £200,000, the sum most people view as the wealth threshold is over six times the national average annual salary.
Read the rest of the article to spot all your favourite features of the genre!
There’s the map of Great Britain showing how out of touch London is. The claim that Gen Z cares more about buzz than bonuses. And the must-have interview with an obviously rich person who splits her time between the UK and the US but who’s unfortunately benchmarking herself against peers earning millions, and so she feels a little brassic.
Tax twister
Okay, we all understand this.
Money is relative. Taxes eat very nearly half of seemingly vast salaries. A two-bed flat in Zone Two costs £1 million. And won’t anybody think of the school fees?
A more novel twist comes though when you pair this discussion with new research about high-earners’ attitude to taxes. Or how “we all deserve to be rich”, as Joachim Klement put it on his blog this week.
Again it’s no surprise to read how the research found that people who believe their good fortune is down to their skill or effort will then favour lower taxes on the proceeds.
I’ve thought that at times myself, and most of you will have too.
But as Klement explains, researchers at the University of Warwick also showed that even people who derive their winnings entirely from luck will call for lower taxes, compared to those who won nothing.
You can see this effect in the following chart, although it’ll possibly only make sense if you read the full article:
The bottom line is people who have a lot of money don’t want it taken off them, while those who don’t have the money think more of it should be.
Again, hardly rocket science. But I suppose there are only so many well-paid jobs for rocket scientists?
Keeping up with the Jones’ parents
Now I’m not sharing these thoughts because I think £100,000 a year is a vast fortune. Nor am I calling for another round of tax hikes.
If anything I believe that after many years of real terms wage stagnation, the UK has a poverty of ambition about what constitutes a very high salary – certainly versus our US peers.
And as for taxes, the national take approaching a post-war high seems like a pretty good place to say enough is enough, and that perhaps we need to draw a line in the sand and to try something different from here.
However it does all serve as yet another reminder as to how and why it’s so hard to talk to each other about all this. Let alone to reach a political consensus.
Entrenching wealth inequality will only make it worse.
I’ve been warning for years of the increasing risk of what I call ‘neo-feudalism’. It’s one reason why I favour high inheritance taxes.
Meanwhile an article in The Standard this week argues that London has become an ‘inheritocracy’.
The author concludes:
The major frustration in all this is that our 21st-century inheritocracy contradicts everything we were told: work hard, get good grades, land a solid job, and success will follow.
But that promise has crumbled.
Wages don’t keep up, work doesn’t pay, and in London, opportunity is inherited, not earned.
Leaving the city feels like failure, but the real failure is a system where talent loses out to wealth and good fortune.
Have a great weekend.
From Monevator
Which asset classes beat inflation after the pandemic? – Monevator
Infrastructure [A few weeks old, Moguls follow-up imminent!] – Monevator [Members]
From the archive-ator: Bring me sunshine [Covid hits in 2020] – Monevator
News
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.
Complaints about leasehold homes rise by 67% – Which
The UK’s net zero push is driving growth, finds CBI report – Morningstar
LSE boss says UK needs to change ‘perverse’ view on retail investment – CityAM
UK house prices rise more than expected in February… – Reuters
…as price gap between houses and flats hits 30-year high – This Is Money
National Grid sells US renewables to Brookfield for $1.7bn – Bloomberg via F.P.
A billion Indians have no spending money – BBC
The true streaming battle is between YouTube and Netflix – Sherwood
Products and services
New TIPS ETF solves inflation hedging. Gilt version to follow? – FT
Energy price cap increases by 6.4% in April – Be Clever With Your Cash
How furniture flippers turn trash into treasure – Guardian
Get up to £1,500 cashback when you transfer your cash and/or investments through this link. Terms apply – Charles Stanley
Cash ISA providers fail to support new flexible rules – Guardian
How to get a free will in March – Which
VCTs have little reason to celebrate turning 30 [Search result] – FT
Open an account with low-cost platform InvestEngine via our link and get up to £100 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Few will qualify for HSBC’s new 3.98% fixed-rate mortgage – This Is Money
Brutalist and modernist homes for sale, in pictures – Guardian
Comment and opinion
Wow, have you seen the stock market lately? – Mr Money Mustache
Buy-to-let: RIP – Fire V London
How should your asset allocation change with age? – Of Dollars and Data
It’s five years since Covid came out of the left field – Humble Dollar
Swedroe: all risk assets experience long periods of poor performance – W.M.
“I’m 68 and I just spent £189,000 on an annuity” – This Is Money
Norway’s sovereign wealth fund should be open to everyone – FT
Trust in a black hat world [On U.S. deregulation but relevant] – Dave Nadig
A money psychologist on how rich people can feel wealthier – This Is Money
Micro-retirements: Gen Z’s brilliant fix for burnout – Guardian
Investing like an endowment mini-special
Can we all invest like Yale? [PDF] – Cambria
…maybe, but the high fees on alts mean we shouldn’t [Research] – SSRN
Naughty corner: Active antics
The inevitable capital cycle – Flyover Stocks
Probabilities and payoffs [Research, PDF] – Morgan Stanley
Warren Buffett’s annual letter to shareholders… – Berkshire Hathaway
…and how Berkshire might change after Buffett – Rational Walk
The 15 most value-destroying stocks of the past decade – Morningstar
Kindle book bargains
Poor Charlie’s Almanack by Charlie Munger – £0.99 on Kindle
How to Run Britain by Robert Peston and Kishan Koria – £0.99 on Kindle
Invisible Women by Caroline Criado Perez – £0.99 on Kindle
Chip War by Chris Miller – £1.99 on Kindle
Environmental factors
A climate solution on the half shell – Noema
One tiny island is redefining travel to Thailand – BBC
Battery storage: a quiet revolution in energy industry [Search result] – FT
The elegant math model that could help rescue coral reefs – Quanta
Total collapse of Atlantic currents unlikely this century, FWIW – Guardian
Robot overlord roundup
Y Combinator deletes posts after A.I. startup’s demo goes viral – TechCrunch
Amazon’s souped-up Alexa+ arrives next month – Wired
The new aesthetics of Slop – The Honest Broker
Not at the dinner table
This has never happened with an American president before – New York Times
Tories discover that Britain is located in Europe [Search result] – FT
The case for DOGE… – We’re Gonna Get Those Bastards
…and the case against – Culture Study
How to buy your way out of a Federal lawsuit – Popular Information
Consumers shun companies whose bosses kowtow to Trump – Guardian
Off our beat
Rare frescoes unearthed in Pompeii shed light on ancient rituals – Reuters
What we learned from ‘that dress’, ten years on – Slate
There’s a small chance asteroid YR4 might hit Earth in 2032 – The Conversation
Seeing foreign languages: how synaesthesia can help language learning – BBC
How many episodes should you watch before quitting a TV show? – Stat Significant
The Murdochs x Succession – SatPost
What’s it all about? – Humble Dollar
And finally…
“A capitalist economy cannot be maintained, however, if it oscillates between threats of an imminent collapse of asset values and employment and threats of accelerating inflation and rampant speculation, especially if the threats are sometimes realised.”
– Hyman Minksy, Stabilizing an Unstable Economy
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Annuities: I see the point of the level annuity and the RPI-linked annuity. I’m sceptical of the merits of the annuity that “escalates” at a fixed % per annum.
I can see some attraction, for some people, of a with-profits annuity but that could also be a with-losses annuity. Equitable Life!
@dearieme — Yes, the 3% escalator annuity seems a bit of a pointless in-the-middle product to me, too, given the whole point about future inflation is that it’s uncertain.
You’re basically just giving them more money upfront only for them to give it back to you over time at an escalating rate, and you’re not protected from the inflation spikes like we saw in 2022/2023 at all.
I don’t mind paying high taxes but it’s the sneaky ones that infuriate me. Mainly the 67.5% income cliff at 100 – 125k in Scotland if you’re ignorant or desperate enough not to be able to pay it into a SIPP. Also the loss of child benefit, free child care and loss of benefits if working more than 16 hours at the lower end. If you make it complicated, smart people will just play the game.
Great discussion points here
I don’t think inheritance tax will do the equality “thing” as much as is thought
The “rich” will always find their way round any human construct because they are as clever if not cleverer than those who construct the financial hurdles
What society should do is cut loose those fortunate few with superior drive ,egos,and genes etc while at the same time installing a sense of community and social responsibility in the well off for those less well endowed and less fortunate
I think by and large in Western societies our better off do indeed shoulder most of the tax burden without debate- very unlike in most societies in the rest of the world -any world traveler will notice this obvious factual difference between the West and the rest
However if you overly constrict your wealth creators/buisnessmen you run the risk of killing the growth engine -too few equities and too many bonds?
The rich may move because they can and that’s not a long term endurable scenario for our society
Perhaps we are now approaching an over taxing situation and sadly serious rearmament with all its costs seems a certainty
Something will have to give -probably we will all get poorer for a while -hopefully not
Free societies have a lot of resilience which often manifests itself at its best when under serious pressure
Tough times indeed
xxd09
There’s a hoot of an article in this morning’s paper copy of the Telegraph. Chap earns £178k as a contractor, wife also on high City income. Money, though, is tight. He virtue-signals that they don’t use private schools and then admits to using private tutors – a touch of the Toniblair’s there.
He contributes to JISAs while still carrying credit card debt – sounds loony to me. He spaffs £3 or more on coffee several times a day and – here I admit I nearly sobbed – the poor bugger eats chicken four times a week.