What caught my eye this week.
Unlike every other personal finance blogger around, I’ve started 2020 wondering whether it’s time I spent more money.
Definitely not going bananas – financial independence is too precious a salve for that!
But making little effort to further grow my wealth.
This is a novel thing for me to consider. Saving comes naturally (genetically?) to me. I’ve mostly left The Accumulator to write posts about mental fortitude and so on, because I’ve no great insights in this area – I just do it. Being in the black has been normal for me since I was eight or nine. I often have to strain my powers of empathy to understand why anyone with a reasonable job and no dependents is different.
And so for decades I’ve occasionally amused myself with compound interest. Even sleeping overnight in a hospital when my dad was in intensive care – and the financial crisis raged abroad – I’d plug in my numbers like some comforting ritual, to see what ludicrous rate of return I needed to catch up with Warren Buffett. (I was also reading The Snowball. And no, I’ve not caught-up!)
So what’s changed?
Well, it’s not that I think we’re doomed to low returns from equities for valuation, or other market timing reasons to act. I don’t see any great evidence for that, provided you’re globally diversified.
And I couldn’t give two hoots about a run-of-the-mill bear market.
Perhaps it’s just getting older? Childless friends my age are forever traveling, urging that you can’t take it with you.
Maybe it is just middle-age? There was a story going around on Bloomberg this week that mid-life misery peaks at just over 47. I’m within shooting distance, but that sort of estimate is usually tied to responsibilities I don’t have, like sleepless children.
Still, I do suspect it’s the ‘years’ field on my old friend, the compound interest calculator, that has set me off.
Because, frankly, when I look around at the world today, I’m more hesitant about entering another 40 years into that box.
Woe is me
Stand down that “actually…”, my friends…
As someone who has often sent people Hans Rosling’s infamously positive TED talk about how the world is getting better – and who regularly includes similar graphs in this round-up – I’m well aware many indicators are going the right way.
I also notice exciting progress in my active investing forays. Genetics-based biotech and the coming-of-age for renewables are two exciting areas to watch.
But I wonder if it’s too little, too late?
Recent politics doesn’t help my mood, obviously. One reason for sharing those hopeful graphs is all the debating with people – left and right – who have become openly scornful of the systems that brought us peace and prosperity – capitalism, markets, a social safety net, international cooperation. See Brexit and Donald Trump for more.
Politics also matters because we’ve had a gun to our head for six decades, and yet nobody talks about nuclear war anymore.
My feelings on nuclear weapons are summed up by this quote attributed to Bertrand Russell:
“You may reasonably expect a man to walk a tightrope safely for ten minutes; it would be unreasonable to do so without accident for two hundred years.”
When you look at the glib nationalism now prevalent in the UK and the US – and the renewed posturing of Russia and, arguably, China – you can’t help remembering we’ve already been balancing on that tightrope for quite some time.
And then there’s the environment.
Again, not a novel concern – see my post from 2010 on why environmental degradation is the biggest thread to your long-term wealth.
But honestly? I thought I’d probably easily make it out before a true collapse.
If anything I’d become less militant on that front. I’ve got no kids, so why was I curbing my short-haul flights and offsetting carbon via a share of fresh woodland I bought? My friends were constantly in the air with their two or three children who would inherit the results.
Maybe the Australian bush fires are a wake-up call? Evidence has been abundant for years – as a once would-have-been marine biologist I’ve long read about coral reefs dissolving from ocean acidification with dismay – but the Aussie footage is ominous.
Finally, I’ve also just read Dan Carlin’s The End Is Always Near.
As a fan of Carlin’s podcasts I’m familiar with his dour take on the murderous and careless nature of human beings. But you’re whacked over the head with it in his book. It’s hard not to conclude we’re living on borrowed time.
If I told you Carlin wonders whether intervention by an alien caretaker might be one of humanity’s best and only shots, you’ll get the picture!
Enough is enough
The other day I mused whether a Plan B was required in case the politics in Britain continues to deteriorate towards irrationality. A bug-out escape option, maybe, to some more hospitable political climate.
Many readers engaged with the idea. A few said I was being ridiculous or irresponsible for ‘predicting’ such a thing.
Let’s try the maths again, eh?
I’m guessing there is a 5-10% chance of this bug-out option being needed – up from ‘negligible’ 20 years ago. So I’m estimating at most a one-in-ten chance. In other words, I ‘predict’ that nine times out of ten the UK won’t reach this sorry state. That is not a forecast of certain or even likely disaster.
The point is even a small chance of a truly dire outcome is worth insuring against, however. It’s the same reason you insure your house against it burning down, though that’s never happened to anybody you know.
Unfortunately there’s no good Plan B against a global catastrophic dislocation – nuclear war, environmental collapse, the singularity, or perhaps a global pandemic – except to get your business done beforehand.
That is, to spend more money.
You can’t save the world
Before anyone asks (thanks in advance!) I’m feeling fine. I’m looking forward to the wedding of an old friend tomorrow, and I have an interesting date lined up for Sunday. I do suffer from SAD a tad, but that’s nothing new.
These Weekend Reading posts are a chance to range more widely beyond asset allocation, ISAs, and SIPPs. And I have found myself pondering whether an uptick in living for today might be a rational response to how I see things have been progressing.
Wealthy people are living for longer, and we’ve written before that a retiree at even 65-years old should ideally have a plan that can see them out for 30-40 years.
However not all those years will be healthy, and that raises difficult questions when planning. For instance, should you spend more money on travel when you’re early into retirement? Or should you save more for later, when you may need care?
Very few of us consider the healthy life of the societies – or even the planet – when making such calculations.
That’s a luxury we take for granted. Few societies (including our own) have gone as long as the UK has without some major disruption, be it war, famine, plague, or revolution.
Globally of course the planet has always come through, but from Easter Island to the Mayans to most recently the likes of Egypt, the demise of local natural life-support systems has caused unrest if not extinction.
It’s a bleak subject.
Optimists make the best investors, and that’s the hat I’ll continue to wear when investing.
But as a saver?
Maybe it’s time for some pessimism.
How to maximise your ISAs and SIPPs to reach financial independence – Monevator
From the archive-ator: How to enjoy life like a billionaire – Monevator
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!1
UK becoming a country of ‘ghost towns’, says Adam Smith Institute – ThisIsMoney
Could new regulation spell the death of trusts? [Search result] – FT
Savers trapped in one of Neil Woodford’s frozen funds will be allowed to access their cash again next month – ThisIsMoney
UK tech investment grew faster than the US and China in 2019 – CNBC
Nobody feels overpaid – The Irrelevant Investor
Products and services
New Virgin Atlantic credit card reward bonus gives you enough miles to fly to Barbados or New York – ThisIsMoney
Santander slashes interest rate on its popular 123 current account to 1% and will cap cashback – Money Observer
How do I solve my transatlantic inheritance tax problem? [Search result] – FT
Ratesetter will pay you £100 [and me a cash bonus] if you invest £1,000 for a year – Ratesetter
UK collector pays record £1m for rare Edward VIII sovereign – BBC
HyperJar bills itself as a buy now, pay later app – ThisIsMoney
Testing via Thriva helped me lower my cholesterol. Will write-up someday! Get 50%-off with this affiliate link – Thriva
Homes for fitness fanatics [Gallery] – Guardian
Comment and opinion
If only… – Humble Dollar
The Investor’s Fallacy: Don’t bet against the US market over the next 10 years – Of Dollars and Data
Nobody can predict a coming market crash. So stop worrying about it. [Video] – Robin Powell via YouTube
Lifestyle design – Indeedably
No one gets rich by shunning new cars and lattes – Barry Ritholz
Should your employer pay your bills if you work from home? – Guardian
Why I won’t be taking up a savings challenge [Search result] – FT
Insanity and 2019 in review – Retirement Investing Today
Why Manhattan’s skyscrapers are empty [Clear parallels with London] – The Atlantic
…and is the side hustle a new dance seniors are learning? –Kiplinger
The dual Y-axis chart: Just say no [Geeky] – Tim Duy’s Fed Watch
How expensive are ESG stocks? [Research] – Factor Research
Naughty corner: Active antics
The fallacy behind the rise of passive fund management [Search result] – FT
You bet! [Howard Marks’ latest memo to clients] – Oaktree Capital
Tesla and Apple valuation questions – Jean-Louis Gassée
Mid Wynd International: global thematic investing – IT Investor
The periodic table of commodity returns – Visual Capitalist
Looking back, looking forward – EQ Investors
‘Woodford effect’ weighs on stock market minnows [Search result] – FT
Forget staying close to EU after Brexit, chancellor tells business [Search result] – FT
Brexit will have soon cost the UK more than all its payments to the EU over the past 47 years put together – Business Insider
Politics is completely broken. It’s time to re-imagine the state – Wired
Can you identify Iran on a map? Few US voters can [Understatement] – Morning Consult
Kindle book bargains
The Looting Machine: Warlords, Tycoons, Smugglers and the Systematic Theft of Africa’s Wealth by Tom Burgis – £0.99 on Kindle
The Making of a Manager: What to Do When Everyone Looks to You by Julie Zhuo – £0.99 on Kindle
Economics: The User’s Guide by Ha-Joon Chang – £1.99 on Kindle
Off our beat
A survey of 20,000 creatives suggests brainstorming is a giant waste of time – Quartz
How negativity ruins relationships – The Atlantic
How Slack ruined work – Wired
The Mandalorian is the only smart soldier in the Star Wars galaxy – Wired
“Index funds make up for their lack of short-term excitement by their truly exciting long-term productivity. The traditional index funds is designed to be held for a lifetime.”
– Jack Bogle, The Little Book of Common Sense Investing
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