Good reads from around the Web.
I have not been alone in wondering whether politicians and central bankers might someday look to cure the world’s debt problems via a burst of high inflation.
Paying off a massive debt with a little bit each month takes ages. Run inflation at 3-5% for a few years, however, and you’ve got a big ally in whittling away your borrowings. Inflation was the Help to Buy scheme enjoyed by our parents and grandparents.
As things have turned out though, most inflation measures have remained subdued in the wake of the financial crisis. Indeed, fears have as often turned to deflation.
Asset prices have arguably been inflated, especially government bonds. But their resultant low yields only make the little sense they do in a world in which investors believe that central bankers will at least keep inflation in its bottle, and where there’s also a fear of stagnation.
What if markets are wrong about all this? What if after years of hysterical commentary about hyper-inflation and returning to the gold standard and – each and every month for the past seven years – the bond bubble being called to burst but doing no such thing, everyone has become complacent just at the moment when central bankers finally play their hand?
What if the governor of the Bank of England just said:
“Our judgment in the summer was that we could have seen another 400,000 to 500,000 people unemployed over the course of the next few years … so we are willing to tolerate a bit of overshoot in inflation over the course of the next few years in order to avoid that situation, to cushion the blow.”
Only in the face of a persistent rise in inflation would the central bank raise interest rates, Carney reportedly went on.
I am definitely not saying Carney just rang the bell at the top of the UK bond market (though I’d get a lot more traffic if I did do that every three months).
For what it’s worth I spend more time warning people against second-guessing the bond market than I do predicting its reversal! People, especially over-confident blog commenters, have been wrong, wrong, and wrong again. Far better for most to invest passively with a strategy that doesn’t rely on them being right about such things.
Have a great weekend!
From the blogs
Making good use of the things that we find…
- When the world beckons [US but relevant] – Vanguard blog
- The consequences of risk taking – A Wealth of Common Sense
- An open letter to an MP calling for an inquiry into investing costs – TEBI
- Dividend yield looks overvalued – The Value Perspective
- The most complicated simple problems – Morgan Housel
- How to add money to existing shareholdings – UK Value Investor
- The Outsiders – The Waiter’s Pad
- A half-dozen things learned from Robert Cialdini – 25iq
- How not to evaluate investment performance – The Cordant Blog
- Yield and return – White Coast Investor
- Be rich, happy, and save the world [Video] – MrMoneyMustache
- One more year? – Retirement Investing Today
- Spend, spend, spend – SexHealthMoneyDeath
- Is Derren Brown a Mustachian badass? – The FIREStarter
- Free monthly budget planner template for Excel [Download] – PC World
- How much should you leave to your kids? – Darrow Kirkpatrick
- Michael Pollan’s simple rules for eating – Farnam Street
Product of the week: Opening an Innovative Finance ISA is set to become a more realistic proposition, reports The Telegraph, after peer-to-peer provider Lending Works became the first major platform to win full approval from the FCA. The platform is currently touting an interest rate of 4.2% for money lent for three years, rising to 5.2% if you stash your cash for five years. As always, riskier than normal savings, even with that FCA approval.
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1
- Vanguard: “We’re nudging investors away from their UK bias” – Telegraph
- When indexing goes too far – MarketWatch
- Why the falling pound has helped your shares soar – ThisIsMoney
- Swedroe: More reasons to diversify across factors [Geeky] – ETF.com
- A profile of ‘The Oracle of Oxford’, Neil Woodford – Bloomberg
- Takeover tips: “Earn 40pc” when US firms buy these companies – Telegraph
- Hedge funds fail across asset classes… – ETF.com
- …indeed so many hedge funds, so little alpha – Bloomberg
A word from a broker
- Five traps all investors should avoid – TD Direct Investing
- Government should unscrap its scrapped Lloyds sale – Hargreaves Lansdown
Other stuff worth reading
- Interactive Investor has acquired TD Direct Investing – Citywire
- SIPP customers stung as firms increase fees – Telegraph
- Merryn S-W: Cloud over pound has silver lining [Search result] – FT
- Buy-to-let is still booming – ThisIsMoney
- How two ETFs lost 90% of their assets in a day – ETF.com
- Does a price war loom for [US] ETF providers? [Search result] – FT
- Are computers are setting us up for disaster? – Guardian
- A more optimistic take on AI – Vox
Book of the week: Regular reader Gregory – who often points me towards all kinds of useful stuff – has now flagged up Your Complete Guide To Factor Investing, a new book by Weekend Reading regular Larry Swedroe and co-author Andrew Berkin. According to the publisher: “By the end, you’ll have learned that, within the entire ‘factor zoo’, only certain exhibits are worth visiting and only a handful of factors are required to invest in the same manner that made Warren Buffett a legend.” (Beware the 800lb gorilla!)
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. [↩]