(Nothing to do with) Selsdon Wood Nature Reserve

Afternoon all.

For those of you looking to put away some cash a little bit each month I’ve noticed that first direct are currently offering an 8% AER rate if you open a Regular Saver account and pay in between £25 and £300 per month. No idea how that compares with other regular saver accounts out there (I’m sure moneysupermarket and the like will tell you), but it seems to be a decent rate at the moment. I think you need to have another account with first direct as well, but check out the website for details. (No, I am not on commission!)

Good luck

Chancellor Stroydont

They live in a house, a very big house in the suburbs

I’ve never been that interested in financial matters. When the Chancellor announces the budget, for example, I may take a quick look at one of those handy “How might this affect you” summary reports but even then I’m scanning through for any big headlines (has beer gone up?!?) rather than reading with any interest. I guess this is probably because I don’t need to pinch every penny and, unless I lose my job tomorrow, I am fairly comfortable at the moment (for which I feel very lucky). However, talking to the 3 couples I know who are in the process of buying and/or selling a property got me thinking about something this morning on the way to work. In particular it was a conversation with Tim and his wife Loz where she was incredulously asking how anyone could afford to buy a £400k house. My immediate reaction to this was that I’m pretty sure my parents and almost all of my friends’ parents have houses worth £400k and generally speaking they bought them when they were significantly younger than I am and a good 10+ years younger than Tim and Loz are. Not only that but in quite a few instances, certainly in the case of my parents, at the time that they bought the house only one person in the couple was working full time while the other brought up the children.

A quick check on Zoopla proved me right about the price. In fact the average price for a house on Oaklands Avenue is more than £500k and number 57, the nearest one to my Dad’s that is listed, is valued at £450k. Now, I’m not an idiot and I realise that they didn’t cost even a quarter of that when my parents bought it 30 years ago, but then my Dad’s pay has increased significantly over the last 3 decades too. Would he be able to afford to buy it now? Who knows, I haven’t got a clue what he earns or whether he has any savings. Anyway, my point is that there is no way on Earth that I could afford to buy a similar house and I can’t even envisage a point in my life when I would be able to. My current flat is worth less than a third of that which, taking a very simplistic view, means my salary needs to increase threefold whilst house prices stay the same. Even if I were to one day get married to someone with a similar salary and we decided not to have any kids and both keep working it still seems somehow out of reach.

So where does this leave us? It seems to me that we’re going to end up with as a situation where older generations are living in large houses with big gardens whilst each successive younger generation will be living in smaller and smaller places. I thought it was tough for me to get my flat but if I had to save up a 20% deposit I’d have been living with my Dad for a further 2 years before I could have bought. However at some point, and I apologise for being slightly morbid here, the older generations will no longer be with us and their assets will presumably be passed down the generations. The thing is, with the advances in medicine and a little bit of luck our parents will be around for another 25-30 years or more so by the time we come to inherit from them we’ll be approaching retirement ourselves and will (hopefully) not need another house. Therefore it seems logical to me that these valuable properties would skip a generation and go straight to the Elliots and Edwards of this world. We’ll then be in a situation where all the younger people will be living in big houses while their parent (i.e. us) are in more modest homes. But then I realised that could have been what it was like for our Grandparents’ generation. Certainly my Dad’s Dad always lived in a much smaller house than my Dad does. So are we just in a continuous cycle where each successive generation switches around? Will this continue ad infinitum and, if so, will this cycle get gradually longer and longer as life expectancy and working lives increase? I have this image in my head of a graph with age along the x-axis and house value on the y-axis and an oscillating sine wave showing the relationship.

Of course, this may just be something that applies to middle class people like ourselves. Maybe both the parents and children in rich families will always live in massive houses while the poorer families will always be confined to council houses? I don’t know the answer, but it certainly gave me something to think about on the long, wet, passenger-free journey into work today.

Posted by Si

What Are The Odds?

Last night I was playing poker with my friends from work and a popular and oft quoted poker conundrum was brought up once again.  Now, I know many of you have absolutely no interest in poker at all, but as Adam has recently started a thread on stock trading and likened that to gambling, I figured I would try and transpose that problem to the world of trading to get some opinions from people.

Imagine, if you will, that you had decided to dabble in the stock market and had invested $10,000.  However, you have an imposed time limit of 1 week on your trading. For almost 7 days you play the markets, spending up to 15 hours a day concentrating furiously on your goal, and after some impressive gambling you have increased the value of your shares to $5.5 million.  That’s a good week’s work!  It’s getting close to midnight on that last day when suddenly you get an intriguing proposition. An opportunity arises to invest your money in some shares that have been fluctuating wildly throughout the week, but by carefully watching the markets you know that you have a better than average chance that if you invest all you money in this company then your shares will be up to $9 million when you are forced to sell.  However, there’s also a reasonable chance that you will lose $1.5 million and be left with “only” $4 million.  Alternatively, you can just walk away with your $5.5 million right now. 

So, what do you do?  It’s a one time only deal, you won’t get the chance ever again, and you know that the stats say that most of the time you’ll walk away with extra $3.5 million.  Even if you do gamble and lose $1.5 million, you’ve still got $4 million for your troubles, that’s a good return on $10,000 and a week’s work.  But is it worth taking the risk? Answers on a keyboard to the usual address.

Posted by Si

Get out your parachute…it’s time to speculate!

So after months of dillying, with the odd moment of dallying, I finally got round to applying to my very own shiny account with an online trading platform. Buying and selling shares had interested me for a while and I realised that, although reading the theory was all well and good, there is no substitute for actually getting stuck in and giving it a whirl.

I’ve been at it for a couple of months now and I’m having a blast. I’ve been through the opening few weeks of beginner’s luck when all looked rosy and my holdings rocketed up. Easy peasy lemon sq…oh dear, something terrible has happened and there is a small, but significant horizonal bar in front of some of the numbers. Damn that minus sign. So, some early thoughts from a new plunger…

There is no formula. A lot of the books give helpful tools for calculating the value of a company. Dip into the FT and you will find P/E ratios, PEGs, growth forecasts and the like. I’m not doing these down for a moment, but they are far from infallible as you might imagine. After all, if they were accurate forecasters, everyone would be millionaires. So…you have to do your research and go with gut feel. Do you think a particular industry or sector will grow? Do you think Vodofone will crack the pay-as-you-go market for Christmas? What do you think of the new Chief Exec? I think you can definitely learn more by dipping your hand in your pocket and going with your view. Learn from both ups and downs.

Take tips with a pinch of salt. Following on from the theme of the one above. By all means listen to tips, but do your own research and come to your own view. Apart the common sense of not just blindly putting a monkey on Sad Ken in the 3.30 from Chepstow, think of your mental health and sanity. It can drive you nuts blaming the errant tipster when things go south. And, ultimately, blaming yourself for being so daft as to listen to the idiot in the first place. Incidentally, I’ve listened to two tips and bought at completely the wrong time and am currently scrambling to make a save.

Think about when to sell too. Have an end point in mind. Obviously it’s nice to see a share rocket up to a 100% increase and it does happen. But it’s rare. It depends on what you are after, but for most of us we probably want to see these speculations yield something more than what we get in the High Street. As we learn more, we can certainly be more ambitious (I, for one, am keen on actually making some money from this lark at some point – not just to squirrel money away). So pick a point to sell – say 15% increase. You can always review at this point. Do I have more information to suggest it will go up more? If yes, then set a new sell point. The same goes for getting out when things go bad. My old man is part of a shares club and they have let some of their holdings drop as a company has steadily gone bankrupt. Things of course may get better, but surely it’s preferable to sell if the value drops 15% rather than sitting tight and doing nothing as the share price drops to zero! Again, always think before selling, but give yourself a notional stop loss to minimise losses.

This is not investment. Some people think trading in shares is investment. Of course, we do it because we hope to pick shares that will go up in price. But, as the small print in adverts remind us, prices can go down as well as up. Let’s be honest, this is effectively gambling. So I prefer to use the word “speculation”. Remember that and I think you will make better decisions. And, back to psychology, it’s much more fun to feel the fear and enjoy the adrenaline. There are safer options which will give you more reliable, but smaller, yields. It’s well worth having those as well, but where’s the fun in only getting involved with that!

…Probably enough for now. I have more which I’ll bore you with soon.

Enjoy your plunging.

Chief Banker Stroydont