BOE 3rd November Rate Announcement
Discussion
DonkeyApple said:
Cash at the moment can give near 5% via the gilt market etc. That's ok. Some will say it's bad because it's below inflation but inflation is personal and someone just retired might not really be subject to much inflation at all. It all depends on spending habits.
I think too many people don't grasp this. My old man spends £120 a month on energy, around £80 a week on food, £10 on his phone, £100 on Sky and broadband and some council tax.
He was moaning yesterday about inflation but he has the best part of £800k giving him a return.
I said he needs to sit and do the maths.
okgo said:
It’s one of the good things about the FIRE movement really. It doesn’t perpetuate the idiotic stock picking we see on the big thread on finance here - much rather a slow and steady approach.
That said I’ve got a fair bit of money in Fundsmith and think it’s probably nearly time to bin it as he is beginning to show that his performance was mostly due to a rising market where f
king it up was difficult.
FIRE is quite amusing as at heart it is the taking of boring, common sense and rebranding it to sound sexy and to enable the rinsing of mug punters via subscription fees and seminars etc. That said I’ve got a fair bit of money in Fundsmith and think it’s probably nearly time to bin it as he is beginning to show that his performance was mostly due to a rising market where f
king it up was difficult. While I chuckle at the product, the root essence is perfectly logical and sane. It's still the key benefit of using an investment manager. They can't get you out performance (if they could they wouldn't be in that job but what they can deliver which is invaluable is boring non activity (the kosher ones).
All of those things are inflationary aren’t they? So he ‘is’ paying a percentage more for all of them than he was at a point in the past. And that percentage ‘is’ likely higher than his return?
What you’re suggesting isn’t I think what DA talking about in that example… could be wrong.
Sitting on cash if you’re mostly buying things that are not inflationary of course is different.
What you’re suggesting isn’t I think what DA talking about in that example… could be wrong.
Sitting on cash if you’re mostly buying things that are not inflationary of course is different.
okgo said:
All of those things are inflationary aren’t they? So he ‘is’ paying a percentage more for all of them than he was at a point in the past. And that percentage ‘is’ likely higher than his return?
What you’re suggesting isn’t I think what DA talking about in that example… could be wrong.
Sitting on cash if you’re mostly buying things that are not inflationary of course is different.
Yeah of course they are, but he spends hardly anything a month. What you’re suggesting isn’t I think what DA talking about in that example… could be wrong.
Sitting on cash if you’re mostly buying things that are not inflationary of course is different.
The things he buys are inflationary, but when you are buying such small amounts it doesn't really make a difference.
He likes to keep money available, he just does, and for him, the return on that money far outweighs the extra £80 a month on food he spends or the £30 on energy.
Not like a young family who needs a family home with a mortgage, needs two cars, spends £200 a week on food, has to cloth 2 kids and yourself, has a £400 a month energy bill because the teenage daughter spends 2 hours in the shower twice a day etc.
He does 2000 miles a year in his car, fills it up 4 times a year, we fill both our cars up every 5-6 days. When it suddenly jumps from £80 a tank to £100 that is an extra £2000 a year for us, for him it is £80.
I think what DA was saying is inflation is far more of an issue to some people than others, my Dad is a good example, yet he watches the TV and thinks he must be worse off.
As a longtime single stock investor and someone for whom doing it properly has been a major enabler of financial freedom, I feel obliged to say that it doesn't have to be a hiding to nothing; with the right temperament and capacity to work at it, it's certainly possible to accumulate a lot of capital slowly and steadily through equity investment without owning index funds or paying other people to try and do it for you. That said, for the vast majority it obviously does end up playing out exactly as DonkeyApple describes and as you see throughout human existence, where people give in to their innate desire to get rich quickly with no effort instead of thinking like a long-term business owner and steward of generational wealth.
Indexes have equally done well because of QE correlation.
In a world where everything succeeds, and increasingly succeeds because of this trend, it’s a self fulfilling QE driven event.
The next 10 years might see managed (well) investments doing better again.
Cash has zero fees and a good yield. I can see the attraction when no one is offering a compelling investment logic.
I suppose fundamentally we’re still at the whims of government and central bank policy.
If the government can pull big fiscal stimulus projects like HS2, and BofE change prospects with their QT and interest rates, it does fundamentally put one off investing in anything.
A commitment to anything but uncertainty would encourage me to invest.
In a world where everything succeeds, and increasingly succeeds because of this trend, it’s a self fulfilling QE driven event.
The next 10 years might see managed (well) investments doing better again.
Cash has zero fees and a good yield. I can see the attraction when no one is offering a compelling investment logic.
I suppose fundamentally we’re still at the whims of government and central bank policy.
If the government can pull big fiscal stimulus projects like HS2, and BofE change prospects with their QT and interest rates, it does fundamentally put one off investing in anything.
A commitment to anything but uncertainty would encourage me to invest.
okgo said:
He is worse off 
Makes slightly more sense, but I’d imagine the amount of pensioners with VASTLY more cash than they will ever need is probably not all that common. Most have not much and inflation will hurt.
But I don't think he is worse off. Let me caveat that.Makes slightly more sense, but I’d imagine the amount of pensioners with VASTLY more cash than they will ever need is probably not all that common. Most have not much and inflation will hurt.
He likes to have cash available, so has a couple of accounts with £100k in each.
These have been returning him sod all over the last few years, but having access to that money has made him feel better and has allowed him to buy/sell bits too. Could that have earned more elsewhere? Maybe, but not the point, he likes knowing he has instant access to it and he is 80 years old with his pension and no debt.
But those two accounts, that were giving nothing, are now giving him a four grand a year return he said.
That return far outweighs the inflation he is seeing day to day because he doesn't really spend any money, he buys some food, he has moved into a small 2 bed, well insulated bungalow and apart from his Sky TV doesn't really spend anything.
Inflation for him has probably pushed his cost of living up maybe two grand? But he is seeing far more than that back with the increase in interest rates.
In his position the last thing he would want is 0% inflation and back to 0.5% interest rates.
I don't even think he is drawing anything from anywhere else now either, his state pension and what he is getting from the £200k is covering everything, more than everything from what he said.
Here is the caveat, I don't suppose he is thinking about the buying power of his money at 80 years old in the same way most of us do. As far as he is concerned, of course he is losing wealth in real terms, he just sees his bank looking healthier and healthier. If he had to go and buy a new car or house, then yeah, it might look different and very quickly. But I think that is what DA was getting at when he said about inflation not hitting everyone the same?
Ed.Neumann said:
okgo said:
He is worse off
Makes slightly more sense, but I’d imagine the amount of pensioners with VASTLY more cash than they will ever need is probably not all that common. Most have not much and inflation will hurt.
But I don't think he is worse off. Let me caveat that.Makes slightly more sense, but I’d imagine the amount of pensioners with VASTLY more cash than they will ever need is probably not all that common. Most have not much and inflation will hurt.
He likes to have cash available, so has a couple of accounts with £100k in each.
These have been returning him sod all over the last few years, but having access to that money has made him feel better and has allowed him to buy/sell bits too. Could that have earned more elsewhere? Maybe, but not the point, he likes knowing he has instant access to it and he is 80 years old with his pension and no debt.
But those two accounts, that were giving nothing, are now giving him a four grand a year return he said.
That return far outweighs the inflation he is seeing day to day because he doesn't really spend any money, he buys some food, he has moved into a small 2 bed, well insulated bungalow and apart from his Sky TV doesn't really spend anything.
Inflation for him has probably pushed his cost of living up maybe two grand? But he is seeing far more than that back with the increase in interest rates.
In his position the last thing he would want is 0% inflation and back to 0.5% interest rates.
I don't even think he is drawing anything from anywhere else now either, his state pension and what he is getting from the £200k is covering everything, more than everything from what he said.
Here is the caveat, I don't suppose he is thinking about the buying power of his money at 80 years old in the same way most of us do. As far as he is concerned, of course he is losing wealth in real terms, he just sees his bank looking healthier and healthier. If he had to go and buy a new car or house, then yeah, it might look different and very quickly. But I think that is what DA was getting at when he said about inflation not hitting everyone the same?
OoopsVoss said:
Panamax said:
Looks like it might rain tomorrow.
Who knows, we might both be right with our inspired predictions!
Except I'm correct nearly all the time. According to some it's impossible to predict... keep up with the meta.Who knows, we might both be right with our inspired predictions!
I'll be correct about the BoE tomorrow too.
snoopy25 said:
OoopsVoss said:
Panamax said:
Looks like it might rain tomorrow.
Who knows, we might both be right with our inspired predictions!
Except I'm correct nearly all the time. According to some it's impossible to predict... keep up with the meta.Who knows, we might both be right with our inspired predictions!
I'll be correct about the BoE tomorrow too.
TX.
kiethton said:
Markets nailed on for another pause today, I think there is a chance that one member votes for a cut...
Unchanged (voting was 6/3):https://www.bbc.co.uk/news/live/business-67289625
PBCD said:
The 3 voted for another increase.Gassing Station | Finance | Top of Page | What's New | My Stuff