Yes, this is the inevitable post on the upcoming General Election. I won’t mind at all if you skip to the links below.
Like most of you, I spent Easter wondering why there’s so little political debate in our lives these days. Such a cosy consensus! Everyone just getting on with the important things in life like laughing, cooking good food, dancing, comparing low-cost investment platforms, and curing cancer.
Thank goodness Theresa May divined again the mood of the nation and called a snap General Election.
Less than a week in and politics is already all we’ve heard about since. Which hardly makes a change from the past 10 months. (How I chortle when I think back to readers telling me the EU Referendum was old news and to move a week after the vote. One problem with people being newly engaged in politics is many of them don’t understand how it works. See also D. Trump.)
The months since the Brexit result have been interesting. While I can make my excuses for why the economy hasn’t missed a beat – specifically the delay in triggering our formal exit – the reality is I was wrong-footed by its ongoing strength. (I console myself that I at least had the flexibility to see that as early as September.)
Will my longer-term misgivings prove equally wide of the mark, too? Economically it will be hard to tell. I was never predicting doom – that’s a straw man, really – rather worse than we would have otherwise had. Socially and culturally, how bad things get may depend on how far politicians go in implementing the self-destructive Will Of The People.
As Brexit-fan Merryn-Somerset Webb writes in the FT this weekend [Search result]:
The rise of populist sentiment (which we can define as parts of the electorate asking for things that mainstream politicians think are both stupid and impossible) pretty much never leads to populist policies being implemented (they are often indeed stupid and impossible).
But it does have a long and useful history of changing the direction of mainstream politics.
Merryn deserves plaudits for being one of the Liberal (-ish) Elite who came out for Leave before the vote, and whose predictions to-date have been better than most.
She is also one of those who believe May called the election to strengthen her hand against the Brexit extremists in her own party. Get this done properly, Merryn argues, and we can have a fairly decent trade deal, fairly free movement of people (with tougher welfare caps), an acceptable exit bill, and the all-important regaining of parliamentary sovereignty.
I hope Merryn continues to be right. And the pound has already rallied on this sort of thinking, reversing some of the windfall gains I talked about when I suggested it might be time to investigate currency hedged ETFs back in January.
Deciphering the new doublespeak of politics
But whatever kind of Brexit we ultimately get, as I’ve said before I don’t think the ends – of which taking back full control of UK law was by far the most legitimate – will justify the means.
The dog whistle politics, the NHS bus boast, the telling people they can have what they can’t.
So even if people like me should be pleased the Prime Minister has called an election that could ultimately lead to a softer Brexit, the ratcheting up of the populist rhetoric in her speech is another black mark on the UK’s political record.
Savvier people than me are keeping tabs on this stuff. The New Statesman published an annotated transcript of May’s speech that dissected its Orwellian rhetoric before noting:
Sometime in the 17th century, Louis XIV is said to have told a gathering in Paris, “L’etat, c’est moi” – I am the nation.
Whether he ever actually uttered that phrase is disputed, but it sums up his unshakeable belief in the divine right of kings – that there was no difference between the interests of France and those of himself.
Well: today we learned that Theresa May feels exactly the same. To convince the world she has brought Britain together, she must find a way of dismissing those who disagree as somehow illegitimate. Opposing her is opposing Britain. Voting for anyone but the Tories is thus unpatriotic.
I wouldn’t mind so much, except she’s going to win in a landslide.
May’s speech announcing the election was, paradoxically, profoundly anti-democratic.
“At this moment of enormous national significance, there should be unity here in Westminster, but instead there is division,” she complained. “The country is coming together, but Westminster is not.”
This rather charmingly combined a totally made-up fact (the country is coming together) with a bizarre whine that parliamentary democracy is functioning as it should.
Any persistent total unity in an elected assembly, after all, would signal that it had been hijacked by a fascist.
If there were no “division” in Westminster, we would find ourselves in a de facto one-party state, in which the wisdom of the dear leader is all – a vision of “strong leadership” at which Vladimir Putin would nod sagely.
Poole noted it’s a speech that Lenin would be proud of. Which makes the Daily Mail take ironic as well as depressing:
When this cover went viral many people assumed it was a parody, which shows how far we’ve traveled (down) in a few months.
Panic the ballot box
This is supposed to be a General Election about a range of issues. But barring some kind of campaign trail gaffe it’s going to be Brexit, Brexit, Brexit.
Needless to say the Labour party opposition is so poor that even avowed floating voters like me despair. A tactical voting spreadsheet spread like wildfire across my left-leaning Liberal Elite echo chamber. It purported to explain how to vote to get the Tories out of power.
But I am torn. Labour are sort-of pro-Brexit anyway. I take Merryn Somerset-Webb’s point (also made by others, of course) and I’d ideally want a softer Brexit. Particularly when I see the likes of Jon Redwood posting on Twitter:
I can't breathe pic.twitter.com/OEPR2h4gzI
— Jeremy Vine (@theJeremyVine) April 21, 2017
True, I could vote for the Liberal Democrats if I took this ‘second referendum’ at about-face value. But where I live my vote would be wasted. Meanwhile my local Labour MP is thankfully more New Labour than Corbyn’s Old Labour, I’m in a swing seat – and playing game theory with May’s secret motivations only gets me so far.
I have voted Conservative in the past (I’ve voted for all the main parties) but I have no appetite for a right-wing coronation right now.
Many people like me will be playing this sort of mental Jenga in this election. Hardly ideal.
It’s not the economy, stupid
What are the personal finance and investing consequences?
I joked to a friend a couple of weeks ago that the Conservatives might have to call a General Election if their ‘no mainstream tax rises’ pledge proved crippling in the face of bad Brexit. I can’t help wondering if the fiasco over National Insurance in the recent Budget helped tip May’s hand towards the red button.
Some Tory hardliners are already panicking at the prospect of tax rises to come, but the reality is the pledge itself was a panicked move in the last election. Governments need to be able to adjust the tax base at the best of times, and the next few years are unlikely to be that.
But again, who really knows? Perhaps if the talks drag on for five years, the pound stays low-ish, and we stay in a fast-recovering EU for much longer than expected then the economy will continue to boom. Not much use if you’re a poorer Brexit-voter facing rising prices caused by the weak pound and a falling real income, true, but not so bad for the majority of Monevator readers.
No, much like the past year or so, the frontline of this battle will be fought on emotional territory, not economic matters – whatever people on either side of the fence may believe about their cold-headed analysis of the facts.
Divided we fall
I will admit that I’ve had to learn a few things in the post-EU Referendum climate. I thought I was ahead of the game in noticing how inequality was setting up fault lines in our society. However I underestimated the emotional divisions wrought – or at least brought out – by globalization.
In particular I hadn’t noticed what’s since been well-documented – to massively oversimplify the deep differences between those who believe that you should get up and go, and those who think we should stick to what we know and support those who do so.
Both impulses have their place in fashioning a society that works. But it was (and is) much easier for me to empathize with Claudia, an Eastern European immigrant and reader who despaired that having traveled to an unfamilar country to crowd into over-priced accommodation far from her job and a plane ride from her friends and family and now working long days at the sharp end of the service industry, she was being scapegoated as part of the problem by people who won’t move from one ex-industrial town to the next.
I think we can agree that these relatively low-paid service jobs will not magically move up to Northern England after Brexit, hence the poor people there who were willing to vote out immigrants of the UK because they supposedly make everything worse, will actually have no gain out of the situation.
As somebody who left home for London and who has swapped careers/industries twice to keep myself moving forward, I’m still on the same page as her.
Yet months of reading has helped me understand better those who don’t like the direction that society is going. The people who are upset or alienated by the rate of change, the erosion of previous values, by too many unfamiliar voices or faces on their High Street, or by the opaque (if in my view concrete) benefits even to them of globalisation and integration.
The trouble is there’s not much to be done with this new understanding. I now see better that people can feel that way, but that still doesn’t make their argument logically correct as far as I’m concerned. And they would say the same about me.
I don’t believe Brexit can deliver what many of those people want deep in their hearts. It’s near-impossible, short of some new Dark Ages that reverses at the least technological progress and I doubt they’d really want that. Perhaps stopping immigration and erecting trade barriers would soften the blow emotionally (although not economically) but it probably still wouldn’t be enough.
Yet even in its softest form, Brexit will leave the other half like me unhappy.
It’s like we’re in a marriage where one partner has confessed to an affair and we’ve decided to make a go of staying together, but something has changed forever.
A landslide win could give Theresa May the mandate – and votes – to overwhelm the extremists on the fringes of her party and deliver some sort of workable Brexit.
But I am not quite sure what – except perhaps time, economic growth, more conversation, and perhaps more redistribution – can start to fix the deeper issues.
Note: I’ve been as temperate as I can in the article above – within the limits of being a writer who has to produce something vaguely readable. I think we’d all benefit if anyone who wants to comment below tries to do the same. Thanks!
From the blogs
Making good use of the things that we find…
- Active less risky than passive? Yeah right… – The Evidence-based Investor
- Don’t accept all the risk of stocks for the returns of bonds – Oblivious Investor
- Is the MSCI World Value ETF mostly just a global tracker? – The Value Perspective
- Making sense of bonds [Podcast, beware Canadian specifics] – Canadian Couch Potato
- Stock picker? Avoid the worst stocks. Really! – The Irrelevant Investor
- 5 dividend champions with high returns on capital – UK Value Investor
- Howard Marks: The truth about investing [Slideshow] – Market Folly
- How to analyze a business, the Sherlock Holmes way – Safal Niveshak
- JP Morgan’s annual report is always worth reading – Brooklyn Investor
- Investing in a world of Black Swans – Investing Caffeine
- Do stocks outperform Treasury bills? [PDF, research] – SSRN (via Mike)
- Smash the system – SexHealthMoneyDeath
- 4 ways to manage sequence of returns risk in retirement – Wade Pfau
- An angry ramble through the British housing market – Simple Living in Suffolk
- What to do with a lump sum in retirement – Can I Retire Yet?
- Stress and comfort: Careful what you wish for – Morgan Housel
- Earth 2.0: What would our economy look like? [Podcast] – Freakonomics
- Change is not easy – Points and Figures
Product of the week: If you told people a decade ago that in 2017 you’d be able to get a mortgage charging just 0.89%, they’d have assumed we’d be living in a second Great Depression. With inflation over 2%, in real terms the bank is paying you to take its money! Yet as The Telegraph reports, that spectacularly negligible charge is exactly what’s being levied by Yorkshire Building Society. Catches abound: It’s a variable not fixed rate, you must have 65% equity in your home, there’s more than £1,500 in fees to pay, and also a 1% early exit penalty. (While I’m here, remember that super-cheap Atom Bank mortgage flagged up a fortnight ago that I said wouldn’t last? Well, it didn’t. It was withdrawn after just nine days! Be nimble if you can with these challenger banks).
Mainstream media money
Some links are Google search results – in PC/desktop view these enable you to click through to read the piece without being a paid subscriber of that site.1
- Another big strike against active management – Morningstar
- The world is running out of frontiers for the frontier index – Bloomberg
- Swedroe: Top investment consulting firms fail to beat passives, too – ETF.com
- The fearless market ignores perils ahead [Search result, deep dive on VIX] – FT
- Sure, US stocks are overvalued. Now what do you do? – Bloomberg
- The government has almost finished selling its stake in Lloyds – ThisIsMoney
- Look out for ‘Brexit stocks’ that could rise if the pound keeps rallying – Telegraph
Other stuff worth reading
- Buy-to-let slump puts first time buyers in the driver’s seat – Guardian
- How to get out of a Help to Buy home – ThisIsMoney
- Terry Smith: The unique advantage of equity investment [Search result] – FT
- What happens when markets as we know them cease to exist? [Podcast] – Bloomberg
- HMRC is over-taxing some lump sum ‘pension freedom’ withdrawals – Telegraph
- Put just £40 a week aside to enjoy a happy retirement – Guardian
- A stark, bitter, and funny take on the absurdity of London for young people – Vice
- Growth in unpaid internships raises fears over social mobility – Guardian
- How the six-hour workday actually saves money – Bloomberg
- Mentor people who aren’t like you – Harvard Business Review
- First coal-free energy day in Britain since the industrial revolution – BBC
- Time to be honest about the fears getting in your way – New York Times
Book of the week: The Book Essay feature in the Financial Times is an appropriately excellent read. It’s a wander through a topical subject via a few on-trend tomes. If you can scale the pay-wall [perhaps via this search result] then this week’s discussion on the intersection between the remorseless outsourcing of modern businesses and the dash for freedom by some of the self-employed is worth a read. The books highlighted include Down and Out in the New Economy by Ilana Gershon, The Amateur by Andy Merrifield, and Masters of Craft by Richard E. Ocejo.
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- Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”.