What caught my eye this week.
Very interesting news this week from Belgium is not a phrase that has grown stale from overuse.
But as the world gropes towards a better post-pandemic work-life balance I read:
…workers in Belgium will soon be able to choose a four-day week under a series of labour market reforms announced on Tuesday.
The reform package agreed by the country’s multi-party coalition government will also give workers the right to turn off work devices and ignore work-related messages after hours without fear of reprisal.
“We have experienced two difficult years. With this agreement, we set a beacon for an economy that is more innovative, sustainable and digital. The aim is to be able to make people and businesses stronger,” Belgian prime minister Alexander de Croo told a press conference.
Ten years ago you sought financial independence to get out of a stifling office culture. It was about finding a better balance between making ends meet and the freedom to control what you did and when.
But now everything from hybrid working to four-day week trials to more calls for a universal basic income shows the system may be adapting, too.
Capitalism co-opts and exploits – one big reason it’s so successful. What was rebellious in the 1960s was mainstream youth culture by the 1990s, for example.
4% for all
While it’s hardly a serious prospect, some have wondered: what would happen to economic growth if FIRE1 went mainstream?
They’ve even couched the less productive population that might result as morally irresponsible.
But while it’s an equally unlikely prospect, I wonder: what would happen if it was the other way around, and the mainstream went FIRE?
Could more of us end up – whisper it – happy at work?
From Monevator
Quantitative tightening and you – Monevator
What is the cause of high inflation? – Monevator
From the archive-ator: Stocks and shares ISAs: Everything you need to know – 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!2
UK wage growth lags rising cost of living – BBC
Rents rising at fastest rate for five years [albeit only 2%…] – Guardian
Natwest and Royal Bank of Scotland to close these 56 branches in 2022 – Which
Covid bounceback loan or grant on record could cost you a mortgage – ThisIsMoney
Developers face ban on building new homes if they don’t pay to deal with cladding – Which
MoneySupermarket expecting zero revenue from energy switching due to lack of any meaningful choice for consumers – ThisIsMoney
Basic income: Wales pilot project offers £1,600 a month to care leavers – BBC
Government’s 5% mortgage guarantee scheme has been a damp squib – ThisIsMoney
The looming threat of long financial Covid [Search result] – FT
Products and services
How to be a savvier shopper at the supermarket – ThisIsMoney
NS&I doubles the rate on Green Savings Bonds to 1.3% – Moneyfacts
Is it worth taking the Open University’s free ‘midlife money MOT’? – ThisIsMoney
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Will insurance cover Storm Eunice and how do you claim? – Guardian
Can smart meters really drive down energy bills? – ThisIsMoney
Power of Attorney in desperate need of overhaul – Which
How (and why) you might invest in forestry funds – ThisIsMoney
Homes for those inspired by the Winter Olympics, in pictures – Guardian
Comment and opinion
A down-to-earth story of striving to financial independence by 33 – Humble Dollar
The psychology of the meme stock ‘revolution’ – Spencer Jakab
Boomer mathematics: why the old can’t understand the young – New Statesman
Facade – Indeedably
Larry Swedroe: market declines are normal – Advisor Perspectives
Here’s why diversification rarely feels good – Peter Lazaroff
Look out for scams, especially as you age – Humble Dollar
Nine reasons why active investing is difficult – Banker on Wheels
10 lessons learned from 10 years pursuing financial independence – Aussie FIRE Bug
FIRE RIP – Tawcan
Progress in economics – Klement on Investing
More on inflation mini-special
Why are inflation-protected bond funds losing money? – Morningstar
The inflation hedges haven’t hedged – Morningstar
Why the stock market doesn’t like high inflation – A Wealth of Common Sense
Crypt o’ crypto
When you count users instead of dollars, the NFT world is tiny [Search result] – FT
Why proof-of-work staking offers eye-popping returns – Business of Business
Regulators have cryptocurrencies in their sights [Search result] – FT
Legendary VC Sequoia’s new $600m active coin/token trading fund – The Block
Naughty corner: Active antics
Leaving the casino: how active investing can mess you up – Calvin Rosser
Revaluing the mega tech behemoths – Musings on Markets
Will this truly, finally, be ‘the year of the stock picker’? [Search result] – FT
Covid etc corner
The trouble with one-way masking – Slate
So can I eat on the bus again? And other post-pandemic concerns… – Guardian
…though sadly not everyone can get out and about now – Guardian
How the enemy is decided [US but relevant] – Slate
Kindle book bargains
Real Life Money by Clare Seal – £0.99 on Kindle
The World for Sale by Javier Blas and Jack Farchy – £0.99 on Kindle
The Joy for Work by Bruce Daisley – £0.99 on Kindle
The Perils of Perception by Bobby Duffy – £0.99 on Kindle
Environmental factors
Can going green (with renewable energy ITs) fight inflation? – ThisIsMoney
Merryn S.W.: divesting fossil fuel stocks is so last year [Search result] – FT
More than eight million trees were lost in the UK this winter – BBC
Off our beat
A reminder of why I too sometimes delete comments on Monevator:
The problem with unmoderated online spaces is that a few people will always ruin them. Most conflicts between Reddit can be traced to a handful of active users with a history of angry comments. A mere 0.1% of all Reddits generate 38% of attacks on others, and 1% accounts for 74%. pic.twitter.com/yMbZLFAs78
— Ethan Mollick (@emollick) February 5, 2022
[The comment policy on Monevator is there isn’t one. This is a dictatorship. I delete comments on my whim. Almost always the comment will be troll-ish or abusive but maybe I got out of bed the wrong side. Who knows? That’s the policy. I typically only delete one or two comments a week. Thanks to the 99% of posters who make our comments a great discussion forum!]
The thing about a gold rush – Seth’s Blog
Your next job interview could be with a robot – Axios
Seven habits that lead to happiness in old age – The Atlantic
The man who really feels your pain – BBC
An ancient language has defied translation for 100 years. Can AI crack the code? – ROW
And finally…
“The ease of online dealing makes many people act as if investing was positively scored, but the arithmetic of compounding dictates that it is really negatively scored. Success in investing consists mainly of avoiding big mistakes.”
– Guy Thomas, Free Capital
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- Financial Independence Retire Early. [↩]
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@TI – a glitch with the New Statesman link? I get an Investopedia piece on Coinbase ….
@TI
I think the New Statesman link is meant to be https://www.newstatesman.com/society/2022/02/boomer-mathematics-why-older-generations-cant-understand-the-millennial-struggle-to-buy-a-house
Currently it links to an Investopedia entry for Coinbase.
@NewInvestor @Tyro — Gosh, two weeks in a row! Thanks both.
@TI
We all have off days.
Looks like this link is wrong too – Can smart meters really drive down energy bills? – ThisIsMoney
Should go to – https://www.thisismoney.co.uk/money/bills/article-10516205/Can-clock-watching-smart-meters-really-drive-energy-bills.html
But the current link is for a Which article.
Boomer mathematics, interesting, I looked at where I lived (Slough) and the salary scale of my previous job, easy to find the current rate.
House prices x10 and salary x5
Proportion of income consumed by the mortgage is a lot less now, than in 1984. Interest rates are much lower, deposit requirement is now probably 6 months to a years after tax income, back then it was minus …( They lent the legal fees, mortgage protection policy etc)
Interest rates were rising, now and then and a fixed rate is much easier too obtain now.
Taxes were higher then, than now, other costs were definitely higher then.
Inflation eroded the real debt back then and now ? Who knows.
The deposit requirement is the biggest difference by far, the ease of obtaining a mortgage then is a close second. Back then I bought a house, with a work colleague in a single day, viewing, purchase agreed, mortgage offer obtained and solicitor instructed. “Action this day !!”
I was a touch impetuous then, as I only decided to buy a house that morning and its surprising that a work colleague agreed to share the purchase after about 30 seconds consideration, that’s the benefit of youth !
Oddly, within 9 months I sold my share of the house and my work colleague purchased the nearby flat of our buyer, tidy ! The house price had risen by 20+% in 9 months…
(That was being impetuous again and quitting my career to go to America, another story)
It’s different now but the level of difficulty not so much.
There are at least three things that would happen if everyone tried to Fire. The first is that growth would slow down and govt deficits would increase as people spend less and save more. The second is that as more people retired early, then without a corresponding increase in productivity of those still working, inflation would follow as there are fewer people to meet the consumption of retirees. Finally there is Keynes paradox of thrift, in which if everyone tries to save the outcome isn’t more saving, but more unemployment.
@HariSeldon – I lived in Slough for 17 years. It felt longer…
The house prices were/are surprisingly high considering the general unloveliness of the place. There’s a new development on the old Horlicks site (amusingly called the Horlicks Quarter) with 1 bed flats (sorry, ‘apartments’) going for a shade under £300k. Head down the road to Windsor and it’s even worse. Arthur Road has a long stretch of terraced houses – in saner time they would have housed normal ‘working class’ people. Now, you’re looking at a typical £500k, which would imply a £50k deposit and a salary of over £100k for a 4 x mortgage… What happened ?!
@Aron – Argh! Thank you. Was at a crowdfunded brewery event today, trying to drink my return. 😉 Fixed now!
@HariSeldon — Interesting story and perspective. 🙂 To be honest I’m not sure you could even fill in the mortgage paperwork in a day now. (Well, you could, but at least with my bank there was all sorts of stress testing and checklist ticking, perhaps more of it because it was interest-only.)
@SteveT — I’m not so sure about inflation. This comment was made on the inflation thread, too. Fewer people earning would mean less money to chase those fewer goods and services, ceteris paribus. As you know a vast amount of what we consume is essentially feel-good fluff and marketing premium and affordable luxury. Axing all that out (by necessity) would be pretty deflationary for starters. 🙂 Anyway I’m sure there’s serious academic research done on this somewhere; perhaps I’ll dig some out for a follow-up.
@BerkshirePat — Oh dear, I’m feeling like the ‘friendly bombs’ never came for someone… 😉
@TI – When I read your finishing sentence “Could more of us end up – whisper it – happy at work”?
I couldn’t help thinking about Bertrand Russell’s view on this matter:
https://harpers.org/archive/1932/10/in-praise-of-idleness/
@HariSeldon @ BerkshirePat
Slough is a commuter town, and with the Lizzie line will just become more so. A friend of mine bought there more than 10 years ago, has used the Rent-a-Room scheme to rent out a room tax free to help pay down her mortgage, and has seen the value of her home double.
Back in late 2020 she was looking at getting her boyfriend to sell his flat and between them getting a place together in Windsor while keeping her Slough home to rent out, and lamenting the 3% additional stamp duty on second homes.
A few doors down, an identical property has been stretched from 3 bed to 5 bed via loft and basement conversion and houses what seems like a dozen people, some just on housing benefits, and some poor nurses working at Wexham Hospital who can’t afford anything better.
Slough is an exemplar of everything wrong with the UK housing market.
Love the mental gymnastics of golbugs when reality doesn’t fit the narrative.
Inflation is high, but gold is not going up. “Hmm… It must be that inflation is not real, or it’s the wrong type of inflation”
@The weasel is that from that inflation hedge article?
I tried to invest in oil when it was negative beginning of pandemic but couldn’t pass the test on the investment platform to become a sophisticated investor. I just bought tullow oil instead. Should have bought more and a few different energy shares but easy in hindsight eh.
@TI @SteveT – Whilst being out of work certainly means a reduction in wages earned which in turn means less demand for goods and services, we need to consider the savings of the retiree which would presumably be pretty high, especially for the “early” retiree.
This would add to the inflation, given we have at the same time reduced aggregate output, but it would be difficult to forecast the overall impact on inflation. There is also the very real concept of “high prices is the cure for high prices” so a retiree may very well chose not to spend on certain items if non-essential and prices have risen – in order to try keep security of retirement intact.
I imagine any inflationary impact would be concentrated in the labor intensive areas of the economy which would be predominantly in the services sector.
Inflation is an incredibly difficult economic variable to forecast.
As regards to inflation hedge article:
I view crypto/btc more as an anti-establishment hedge so during a widespread societal breakdown (not necessarily caused by hyper inflation) crypto might come into its own (along with gold, guns/ammo). But then if during such a societal breakdown we don’t have servers. power etc that are needed for crypto to function, then it might just go to zero in that scenario.
I can’t see why anyone would want to hold crypto other than for this reason (with exception to certain illegal activities).
As for gold, oil, linkers as inflation hedges, well it all depends on what is already priced in when you are thinking of buying, as the article states. Much like many investment decisions.
Also I agree with the sentiment of the statesman boomer maths article but it’s a pity it focuses so heavily on allsopp. I believe this weekend there has been some type of correction with her being misquoted or something like that. I’m in my 30s and have grafted and had a few lucky breaks but generally anyone born 80s onwards has it harder than previous generations for financial security. I see big generational problems in store for the future.
Most working people will look at the spending levels required to achieve FIRE and decide they don’t want to make the sacrifice. They are in a prison of their own making.
Of course it’s easy to see how they arrived in this situation. There is a constant stream of propaganda telling us we need to spend in order to become successful. Without that SUV you aren’t a good parent, without the big house you can’t be a good partner, without the expensive holidays you must be a loser. Thank Bernays[1] for all of this.
Not many people can resist that and take a different path which is why we don’t need to worry about “what if everybody does it”.
[1] https://en.wikipedia.org/wiki/Edward_Bernays
Treating gold as an inflation hedge has always been too simplistic. It has multi-factor properties. One small attribute is it’s commodity aspect, which can be positively correlated to inflation.
The larger attribute is that it acts like a currency but those are also multi-factor. It can act as a reserve currency, which can be positively correlated with inflation. It can act as a risk-off hedge. In recent years it’s also started to act as a “high yield” currency (in the sense that vs. the EUR, CHF, etc, it offers positive carry since the yields on those are negative). In the last decade or so, both the risk-off and high-yield attributes have been positively correlated to global deflationary expectations.
Gold’s price relationship to inflation sits has a “smile” type structure. On the right tail, it becomes more correlated to higher inflation expectations. On the left tail, to more deflationary expectations. It’s been sitting more toward the left-tail, so before it can act as an inflation hedge, it needed to move back down the smile.
I don’t personally think that some of the statistics I’ve seen quoted on house affordability for young people are fair or meaningful. Anything looking at average monthly outlay on housing compared to income includes a lot of people well into their mortgages. I’m in the position of owing less than £5000 now and paying just over £100 per month. I’m well aware I’m really lucky (and had parents insightful enough to give birth to me in the late 1960’s). I feel pretty guilty being included in statistics that obscure the difficulties the young are having. Stats should focus on people in the first 5-10 years of their mortgage and leave cases like mine out,
Windy
I’m a ‘boomer’, born early ’50s. The Allsop comments are exactly the kind of stuff that gives us boomers a bad name, and just gives ammunition to those of a younger generation looking for a way to air their prejudices against older people. The New Statesman article is, for me, just an exercise in the latter. As dismal in its own way, as the opinions of Allsop.
In the late 70’s, I was earning round about the average UK salary of the time, equivalent to about £26 -£28K pa today. I’d been renting bedsits, and done several houseshares, and had concluded that I would be unable to get a mortgage for a small house. I was living in Berkshire. My solution, for this, and for reasons associated with a desire for freedom from office politics, was to go freelance, and increase my earnings that way, at the cost of any semblance of job stability.
Fast forward a couple of years, I’d built up some cash, my mind turned again to house purchase. As I recall, until Thatcher and Co came along, the only way to get a mortgage was from a building society, and they required a substantial period of regular savings with them before you’d even get an audience with the branch manager. Thatcher, again as I recall, permitted banks to start doing mortgages, and Lloyds was my saviour, after having a number of outfits turn me down.
My basic point in all of this, is that I’m not sure , through the generations, that it ever really was particularly easy to buy one’s first home, unless you had affluent parents willing to help you along, or you just had loads of money by other means. My parents had no money, and I had to make a big decision regarding my working life to be able to buy my place. And no partner to share the costs.
I wonder if an under-discussed part of this discussion isn’t (only) that it’s necessary for so many first-time buyers to buy with parental help, but that so many parents now do have the spare money to help.
I don’t have the data to hand, but I would wager good money that in the 1960s and 1970s far fewer parents would have been in a position to give (perhaps multiple) offspring meaningfully chunky transfers of cash towards house deposits.
These transfers were frustrating me as early as the early 2000s in London, when I already saw vanishingly few people buying (unless top earnings in the City basically, or certain professions) without parental help.
And of course a lot of this money comes from prior house price growth making home owning parents a lot richer (because yes a house is an asset). (At the very least, getting on to the ladder when it was cheaper seeing interest rates fall rather than rents rise financially helped home owning parents versus those who rented, but the reality is there’s a lot more to it than that too).
Anyway, this wouldn’t matter perhaps if everyone’s parents had enough equity to help out. In such a rosy and equal world it’d be no more weird than everyone’s parents buying clothes and food for their kids.
But in the world we have, while (say, for argument, won’t be this high) 50% of parental households can help kids onto the ladder — that still leaves 50% of kids without help, seeing the other 50% get help, breeding at worst resentment of those peers and at best a feeling that this very core need/desire to own your own home is rigged against them despite their best efforts.
I bought my first flat in a good area in the late 80s. I was in my early 20s and had no parental support and it was fairly easy. I dont think its anything like as easy for young people nowadays. A professional person in the same field earning a starter’s salary would not be able to afford the same property without saving a substantial deposit over many years (much harder now with rising rents) or parents helping out. During my years of work I saw younger colleagues buying starter homes further out and that became the norm. Buying with a partner became the only way to buy less far out, especially those having a family. The older generation had homes (much bigger too) more central. I think it is so much harder for younger generation now without parental help.
@Steve T
If everyone saves more and aims to retire a few years early there would be no damage to the overall economy, and it should in fact be a positive. It’s just Bastiat’s seen and unseen – retirees stop spending on travel to an office every day and instead spend on heating their home and Netflix, or on travelling less often but further afield for leisure. A thriving economy is in any case the result of capital formation (i.e. savings), and the paradox of thrift was debunked years ago (e.g M Skousen ‘Economics on Trial’ – very good book). Countries with the culture and legal framework that favour saving and building up capital are throughout history the ones that got more productive and rich.
There is no paradox of thrift as there is just no situation (outside of a global war) where everyone stops spending on all things at once for any extended period – whereby the whole economy just stops like a heart attack. We all need food, power, shelter, transport, leisure, medicine, childcare, etc. If people stop buying particular products isn’t that an important sign the prices are too high? If many people are nervous of their income prospects in future and choose to save who is to say that is in error? Either they are right, and they lose their income and pretty soon spend those savings, or they are wrong and capital forms that can be used productively, e.g. for building, for better machinery, for training and education etc. To get more and better goods and services in the world you have to have capital in one form or another – cash, time, knowledge, infrastructure, etc.