Category: Analysis & comment

The biggest day of my life

FIRE v London5 Comments

What an incredible feeling.  Waking up on Friday 24 June at dawn to learn that 17m of my fellow countrymen have voted for Brexit.  Never mind my own personal milestones – leaving school, getting married, buying a house etc – history is truly being made today. And it feels terrible.

London has voted over 60% to remain in the EU.  The boroughs of Camden and Islington (not to mention Wandsworth, the City of London etc) have voted 75%.  Oxford and Cambridge – those outposts of London-like life in so many ways – have voted 70%+.  The Scots have voted to remain in.  If you’re educated, you’re in.  If you’re not, you’re dragging us all down with you.

But from an investing perspective, what’s not to like?  My investments have risen in value by a six figure sum overnight.  Provided you measure that sum in pounds, of course. I’d rather not work out my net worth in any other currency right now.

The social media stream predicts FTSE will fall.  I’m not so sure.  What is clear is that if FTSE falls, with the pound itself down ~10%, then it feels like a roaring buy opportunity – especially when so much of FTSE-100 is global business – stretching far beyond even the EU.  Cheaper currency means higher priced assets.  But just in case the panic creates some juicy overreactions I’ve got some limit orders set up.

I have some petrocurrency interest in my old house, which is for sale.  I assume that their budget, in pounds, has just risen by 10% since I went to bed last night.

But if a ‘punishment budget’ is ahead of us then the new chancellor (Gove?  Farage?  The mind boggles) can’t raise much from your average Brexiteer and so us Remainers are likely to be the targets.  If we’re still in the country.

London’s squeezed middle

FIRE v London14 Comments

I really enjoyed two recent FT articles about the squeezed “middle” struggling on £200k household incomes.

The first FT article profiled a 45 year old married lady living south of the river with her husband and kids.  Their earnings “nudge £200,000 a year”.  The lady says:

“In theory, with our household income, we are in the top 5 per cent of the UK population and yet it does not feel that way,” she says. “If you’re earning millions of pounds, then you’re OK — and at the other end of the spectrum you get everything paid for. We are caught in the middle where we are paying for everything.”

The article lists various things squeezing couples like this:

  • School fees.  Killik & Co reckon there has been a 342% increase since 1990 in average private school day fees.
  • Childcare.  Nursery costs have risen by 69% in 10 years.
  • Loss of child benefit. This benefit, worth a maximum of £1k per child, feels more symbolic than real to me for £200k households, but the symbolism is powerful.
  • House prices.  Up 475% in 30 years.  And transaction costs have risen from less than 4% to potentially 15%. This means the old ‘upgrade every 7 years’ no longer works.

The article also cites a real issue of pension provision, as the funds required to maintain incomes of anywhere approaching £200k per year are far beyond what most ‘squeezed’ couples can dream of amassing. And more to the point the maximum tax-free pension pot of £2m per couple would not generate anything like their pre-retirement income.

In his article the following week, Janan Ganesh brings wonderful scorn and observation to the uproar that the first FT article caused.  Without even mentioning the article’s obvious omissions about lower mortgage costs and lower inflation, and with a down-to-earth groundedness that many of the FIRE community would appreciate, Ganesh reminds us of the average incomes in this country: Continue reading “London’s squeezed middle” →

How’s my $100m tax-free account developing?

FIRE v London6 Comments

About a year ago, I wrote a post explaining why there is apparently over a 10% chance that my & Mrs FvL’s tax-free ISA accounts top $100m in our lifetime.  This took the £330k lifetime ISA savings we’d amassed to date, assumed 1) we never dipped into the pot, 2) that we maintained an above average risk preference, and 3) that the UK tax rules remained unchanged.  About one year on, how are we faring?

The last year hasn’t gone very smoothly.  Our ISAs performance was about -5%.  This knocks a £330k pot by about £16k. This performance was worse than the market average, but not by much. The resource crash and the China/Asian downturn were starkly visible in our ISA portfolio, with BHP Billiton down 31%, BP down 13%, Henderson Asian Dividend UT down 16%, and HSBC down 23%.  Pearson, down 37%, certainly didn’t help either. Isolated gainers including iShares Euro High Yield Bonds (+10%), Zoopla (+40%) weren’t numerous enough to compensate.

We both moved the maximum permitted topup into our ISAs, of £15240 each.  Even though a £330k pot sounds like a lot, in fact it is small enough that a 5% drop in value is less than the amount we can top it up.  As the pot grows, eventually this won’t be true; a £1m pot dropping 5% would fall by £50k, which dwarfs an individual’s annual allowance.  But for now, by topping up our ISAs to the maximum allowed we grew the pot.

Continue reading “How’s my $100m tax-free account developing?” →