Is the visible FIRE movement changing for the worse

When I started my journey to FIRE (financially independent, retired early) in late 2007 there wasn’t much on the topic in the public domain.  To my knowledge at that time the term FIRE hadn’t even been coined and the US based Jacob at Early Retirement Extreme was just getting going with his blog.

When I started this blog in late 2009, which was predominantly aimed at holding me accountable, learning from others and sharing my journey to early retirement in the small hope it might help some others, even Mr Money Mustache hadn’t yet arrived on the scene.  To my knowledge that didn’t occur until 2011.

Even at that point the UK FIRE blogger scene was still pretty quiet.  Of course the great Monevator was running full steam ahead but at that time my feeling was that his site was more investing focused for which I must once again tip my hat and say a massive thanks for everything he has taught me.  To my knowledge the UK FIRE blogs didn’t really start to ramp until around 2013 after which blogs like The FIRE Starter and Quietly Saving appeared who each continue to put their own unique and interesting spin on things.  This has continued to the present day with new unique blogs like Young FI Guy, Ms Ziyou, Gentleman’s Family Finances and Fire v London all sharing something new regularly.

Victims

In my travels I regularly come across 2 types of people.  The first are those that will set themselves a stiff challenge and then go for it.  The second are those that won’t because it’s not possible for some reason or another.  This second group I call the VICTIMS and I have little time for them.  Note here I am not talking about people who look at a goal, look at what it will take to achieve it and decide it’s not for them.  That is a conscious decision and admirable.

This week I saw the victim card being played on a couple of forums as a reason why the Save Hard, Invest Wisely and Retire Early strategy that we follow here wasn't possible:

“Forgive me if I am wrong, but isn't your entire savings strategy based on earning a top 1% income? Not possible for the other 99%.”

“Retirement Investing Today is probably the one to read if you're a captain of industry, he's very 'on' when it comes to reducing tax, expenses and coping in a high cost of living area. That said, he does have a fairly chunky salary from memory (£90k?) which makes everything flow a bit more smoothly.”

These comments frustrated me a little so what follows is a bit of rant.  If you’re not into rants I’d encourage you to move on to your next piece of regular Saturday reader.

So somebody believes that ‘my entire savings strategy is based on earning a top 1% income’.  The implication then being that because 99% don’t, the strategy can’t work for them, so they’re not going to try it.  A victim if ever I saw one.  Let’s clear this one up shall we.  The top level objective that I set myself way back in 2007 was simply that I wanted to Save Hard which would be achieved by both Earning More and Spending Less.  In the interests of full disclosure if I look back at my earnings when I started this journey and compare to some national statistics I can see that I was in the top 7% of earners in the country.  I therefore freely admit that I wasn't poorly rewarded but I was also a long long way from being in the top 1% of earners as I am today.  My strategy has allowed me to become an earnings 1%’er rather than my strategy becoming possible because I am a 1%’er.  A significant difference.

Giving my bonus to those better able to spend it

I believe that I work hard.  In fact I'm now at the point (and have been for a few months) where I'm wondering if I can increase my discretionary energy further or whether doing so will result in burn-out.  I'm therefore for now maintaining status quo while I better understand my long term capability.  Fortunately, that hard work typically transfers into results meaning another year has passed where my personal work objectives have been yet again knocked out of the park.  Great I hear you say, another year of big bonuses, which you’ll save all of, which will pull you even closer to FIRE.  I wish it were true...

Firstly, bonuses at my company are structured in such a way that it considers your objectives as well as the objectives of the company as a whole.  I can sort of understand this as it protects the company in very bad times such as those seen at the bottom of the Global Financial Crisis.  So has company performance been good this year?  Unfortunately the answer to that question is a resounding no.  If I was asked was the company doing well I would of course give a very different answer but hey ho.  The end result of all this is that a large portion of my bonus will not pay out.  Of course the portion not paid out goes straight to the bottom line meaning a large portion of my hard work this year has gone to enriching the owners of the company.

Consumer for a day

All this Black Friday talk has given me flashbacks to my last consumer experience a few weeks ago.  Now before I go on I do need to warn you that this might be a little biased in its viewpoint given I actually opted out of consumerism many years ago and so far this year have had an average monthly spend on clothing of £2.64, miscellaneous (which covers gifts, gadgets, a suitcase, non-work/entertainment related public transport and homewares) of £15.80 and entertainment of a hefty £56.15.

While I opted out many of those around me haven’t and so I was asked if I’d like to partake in a little ‘retail therapy’ with a close friend.  I hadn't caught up in a while and am conscious I've lost a number of ‘friends’ because of my lack of interest in consumption so I agreed to spend a few hours in a very large East London shopping centre.  It really did reinforce to me that this was no longer my thing.  It particularly hit home when I was looking at a scene not unlike this:

Source: Wikipedia.org

Firstly, not a single thing was as nature intended.  It was all concrete, steel, glass, lights and colours designed to heighten your senses and draw you in like a moth to a flame.  Importantly though watching the shoppers themselves moving through the walkways and aisles really did remind me of a hoard of zombies lumbering along in pursuit of the unknown.  It was all just so passive with everyone moving along to the next bargain waiting for stuff to just wash over them.

Has Technology Reached Peak Usefulness

A couple of events this month have really had me asking myself if we are at peak technology usefulness.  Now before you start accusing me of being one step away from off grid living (which I do respect people for pursuing but for which I'm probably a little lazy), hair shirt weaving and/or tin foil hat wearing let me first clarify that I do think technology is incredibly useful and has certainly helped me get ahead.  I'm just questioning if all the newer stuff provides any real benefit to the user.

Firstly, let me give a couple of examples of the good stuff.  I've certainly benefited from the ability to achieve rapid price discovery.  For one I don’t believe I’d be sitting on an investment portfolio, all tied up in wrappers, with total expenses of 0.27%, with all the benefits that brings, without the ability to trawl the offerings from many providers in a matter of minutes.  Would I even know them all let alone know the cost to start with?  The ability to talk to and see someone across the globe in real time for ‘free’ has also helped me hugely.  The thing is that these possibilities are nothing new; the technology to provide them has been around for many years now and importantly is relatively unchanged.  My rapid learning on how to be a successful investor has certainly been helped by fantastic sites like Monevator but here I would have also been more than ok with excellent books like Smarter Investing which requires no technology.  I would have also been well educated on finance and investing with excellent books like When Money Dies: The Nightmare of the Weimar Hyperinflation and The Millionaire Next Door instead of the great internet.

Let me now jump forward to more recent times and see if new technology is helping me.  This week our friends at Apple released some new products.  Now I’m not an Apple fan boy/girl so if I have it wrong then please do correct me in the Comments below but all that I see is things that are bigger/smaller, slightly faster with more mega pixels.  An iPad Air 2 with decent storage and Wi-Fi ‘only’ costs £559.  Who knows what an iPad Pro is going to set one back but I’d bet it will be more expensive.  Is this new bit of tech about to obsolete my Nexus 7 Tablet which today can be had for £141.11?  In my case it certainly isn't as what I have today does everything (and more) than I currently need.  What about a new ‘tasty’ iWatch which from what I can see tells the time unless you have it tethered to an expensive iPhone?  Then as if by magic it does things that your phone can do...  I think I’ll stick with my mechanical watch which I guarantee will still be running long after the latest iWatches are consigned to the scrap heap.  I’d actually nearly bet that my watch will actually still be running and telling the time as well as any future iWatch technology long after I've popped my clogs.

No Record High for UK House Prices, says RIT

“UK house prices rose to a new high in August, according to the Office for National Statistics (ONS)” reports the BBC.  “House prices in August were 3.8 per cent higher than the previous year at £247,000 - topping the previous all-time high recorded in January 2008, according to the Office for National Statistics” reports The Telegraph.  “Average house prices in the UK leapt to a record high of almost £250,000 during the summer” reports The Times.  Sometimes I really do despair.  Is there no decent journalism left in this great country of ours?  Before we even get into this posts content let’s be clear.  A new house price high has not been hit.  The last high was back in 2007 and we are nowhere near that today.  Let’s now run the numbers to prove it.

Firstly it’s important to understand that there are a multitude of UK House Price Indices out there with every one of them measuring something different.  I track five of them:

• The Rightmove House Price Index.  It calculates its house price by simply taking the Arithmetic Mean or Average asking price of properties as they come onto the market.  This means it will be affected by price changes, if the mix of house type changes and if the mix of location changes for houses coming onto the market.  It is not seasonally adjusted and covers properties from England and Wales.  So this index really doesn’t track house prices as no purchase is required for it to appear within the index making it pretty much worthless.  I only use it as a possible leading indicator (see below).
• The Acadametrics House Price Index.  This index uses the Land Registry dataset but in a different way.  It calculates its house price by taking the Arithmetic Mean or Average of bought prices.  It then mix adjusts the data to take a constant proportion of property types, from a constant mix of geographic areas.  It is seasonally adjusted and covers properties from England and Wales.  It covers buyers using both cash and mortgages.  
• The Halifax House Price Index.  This index is based on buying prices of houses where loan approvals are agreed by Halifax Bank of Scotland.  It uses hedonic regression to remove type and mix variations thereby measuring the price of a standardised house.  I use the non seasonally adjusted dataset and it covers the complete United Kingdom.  
• The Nationwide House Price Index.  This index is very similar to that of the Halifax except it is based on buying prices of houses where loan approvals are agreed by Nationwide.  
• The Land Registry House Price Index.  This index uses repeat sales regression on houses which have been sold more than once to calculate an increase or decrease.  As it analyses each house and compares the latest buying price to the previous buying price it is by definition mix adjusting its data also.  This is then combined with a Geometric Mean price which was taken in April 2000 to calculate the index.  It is seasonally adjusted and covers properties from England and Wales.  It covers buyers using both cash and mortgages.  

To use these indices we must also remember there is a timing shift between the indices.  Firstly, a house is placed on the market for the first time (the Rightmove Index).  Secondly, somebody possibly buys the house using a mortgage (the Nationwide and Halifax Index).  Finally, the purchase is registered with the Land Registry (the Land Registry and Academetrics).  The best estimate of this timing shift is shown in the chart within the paper by Robert Wood entitled A Comparison of UK Residential House Price Indices.

Let’s apply this timing shift, place all of the indices onto a chart and look at what we have.

Click to enlarge  

The Nationwide, Halifax and Academetrics, while showing a recent uptick, are all nowhere near record highs.  The Rightmove Index suggests a record high was reached in August and Academetrics shows we have just seen one.  The argument is flawed though because all of these indices are measured in a currency which is being continually devalued through inflation and so is not a constant.  Let’s therefore correct for that and have another look.

Click to enlarge  

That looks pretty compelling to me.  UK House Prices are nowhere near a new high.

Now I’m Being Asked to Encourage My Own Rent Increases

I have little tolerance of the Assured Shorthold Tenancy (AST) process which is nothing short of a scurge in this great country of ours.  Having now just completed my annual AST dance which goes something like:

1. An email is received from the “Property Manager” of the Local Lettings Agent.  “Dear RIT.  Your current AST is due to expire.  Therefore if you want to stay in your current rental accommodation it’s time to renew.  The Landlord is looking to increase the rent by (insert a large random number based on no facts here).  Additionally we will be looking to extort a renewal fee of (insert a smaller random number again based on no facts here).”  I know they are also taking at least 12% of every month’s rent from my Landlord as they are so incompetent that they have occasionally sent me the Landlords monthly Statement so I’m assuming they’re also extorting renewal fees from that direction as well.
2. I then do some research and find out what rentals of a similar type as mine are going for in my area.
3. I send an email in reply which goes something like.  “Dear Property Manager.  Having now conducted local market rental price research for similar properties and in recognition of our long standing respect for the property which keeps the Landlords costs down (which I know all your tenants can’t claim) plus an untarnished record of continued on time payment of rent (which I also know all your tenants can’t claim) I believe a fair rent is (insert current monthly rental amount here) or (insert current monthly rental amount minus a few £'s here)."
4. This then results in some “healthy” negotiation until eventually they play the eviction threat card which goes something like “I want you out by (insert a date 2 months in the future here) and will be sending you a Section21 notice immediately.”
5. At this point I know I am close to the lowest rental amount possible.  This has in the past resulted in rent decreases, increases or freezes.  Unfortunately this year it was a 2.1% increase.

It was with much amusement that I today received a badly torn envelope in the post which had another local Lettings Agents name poking out and was addressed to:
     Private & Confidential: Please Forward
     The Legal Owner(s)
     RIT’s Flat Number
     RIT’s Street Number
     London

It’s an Advertisement not News

Apologies in advance for an uncharacteristic short post.  Most of my energies this week have gone into pulling together the fourth quarterly Monevator Private Investor Market Roundup.  ( )

Today BBC radio along with their web offering have felt the need to present us with the “news” that the Post Office is to offer current accounts.  I know it’s all very exciting (yawn!) but please stay with me a little longer before you run off and sign up (not!).  This apparently is all in response to the regulator claiming that the High Street today offers little choice for consumers.  Details are scant at the moment but I’d be willing to bet it will be pretty much more of the same with an interest rate on offer of between 0% and 0.1% AER.  I can’t see it correcting the “lack of dynamism” currently on offer from Banks such as Lloyds, RBS, Barclays and HSBC given that it will just be another offering from yet another Bank, albeit from another High Street.  Am I the only one who doesn’t see this as news but instead just a thinly veiled advertisement for a new current account being offered by the Bank of Ireland?