Saturday, 9 January 2016

An Interesting Week

Blowing bubbles
Source: wikipedia
Rather than a particular focus this week my brain has been a little all over the place.  Maybe it’s the after effects of too much Christmas and New Year cheer...  What it means though is that instead of a detailed focused post today what you get is a smattering of random thoughts.  If that’s not your thing then you might want to move onto your next piece of Saturday reading.

Stock Market Fun

The big boys and girls seem to have come back from their Christmas vacations and (started to?) put the markets back in their place.  On the week:
  • China’s Shanghai Composite Index is down 10.0%;
  • The US’s S&P500 is down 6.0%;
  • Japan’s Nikkei 225 is down 7.0%;
  • Our FTSE100 is down 5.3%; and
  • Our FTSE250 is down 4.0%

It’s only a week of market action but I thought it might be interesting to compare that action to a diversified portfolio that has different asset classes across multiple countries.  I hope I have one of those so comparing to my portfolio I’m down 2.3% on the week.  I’m not yet at FIRE but even now in pounds, shillings and pence that is a fall of £19,320 which is more than a year’s worth of post FIRE post home purchase living expenses.

London Housing

It’s all too rare that The Investor over at the excellent Monevator has a good rant but there was some good value this week with the post they don’t tax free time.  Like The Investor I've watched the London property market go insane so this comment

“But with London prices having moved from extreme to insane to “oh, so this is what my grandmother meant when she said flinched at 50p for a bag of chips that used to cost a ha’penny”...”

was particularly amusing.  Now every year I try and assess the house value of all the counties ofEngland and Wales so I already knew it was insane and really no longer a place for anyone who isn't an oligarch or money launderer.  Hell even the bankers can’t afford it any more.  In light of this throwing this chart together this week did make me smile:

London first time buyer gross house price to earnings ratios
Click to enlarge, London first time buyer gross house price to earnings ratios

Does this make my first picture today relevant?

Spendy Matrices

Mr-Zombie’s-Spendy-Matrix was an interesting piece this week.  He built a simple 4-box comparing Income and Spending habits of punters and then looked at what their respective net worth might be after 10 years:

Mr Zombie’s Spendy Matrix NetWorth

Looking back I would say that I have been through 2 distinct phases in my life thus far.  I started out as a Jones’s (High Earner, High Spender) and in recent years I’ve moved into the Goldilocks Zone (High Earner, Low Spender).  It’s therefore not surprising that my progress towards FIRE (effectively a change in net worth chart) looks like this:

RIT's change in net worth with time
Click to enlarge, RIT's change in net worth with time

Valuing the FTSE250

It was good to see John over at UK Value Investor valuingthe FTSE250.  I've been valuing the FTSE100 for some time now but have never moved onto the FTSE250 and it’s now particularly relevant to me as I've started to further diversify my UK Equities with new money goinginto this index.  John suggests that fair value might only be about 12% below current prices.  I thought it would have been worse than that given the FTSE250’s current price to earnings ratio of 19.4.

Do you have any financial thoughts from this week that you’d care to share?

As always DYOR.


  1. Hi RIT, thanks for the mention. The 250's average PE since 1993 is around 19.5, so we're pretty much bang-on average on a PE basis, and that just happens, at the moment, to also tie up with an almost average CAPE ratio as well.

    I also thought the 250 would be more overvalued, but when I dug into the numbers it appeared not.

    1. No problem, some nice work. Also glad you've decided to do it which saves me having to :-)

  2. RIT, thank you for the inclusion.

    The graph of your progress towards FI is staggering, in a good way. You can pinpoint the time when you did make a step change in your lifestyle, and the financial benefits are strikingly obvious. Amazing :)

    It was an interesting opening week to 2016 in the markets, followed by quite a few articles saying the bear is just around the corner...who knows.


    1. That chart of yours is incredible. So incredible that if you weren't on the journey or weren't interested in doing the maths an average punter might call nonsense/impossible/liar on it. Given I've seen it first hand and also run the maths a long time ago you have me as a believer.

      Re bear. I know my crystal ball is very broken so I'll just keep doing what I'm doing.

  3. Thanks for the mention, glad the rant was of the welcome variety.

    That is one terrifying graph -- scary to miss it, and scary to be in it, and scary because whatever happens next (gains or bust) it can't be good... :(