Don’t tell me what you “think”…

Many years ago, back in the days when I was a wage slave, I spent my weekdays sat next to a guy who hated Nassim Nicholas Taleb. I mean really hated him. “Taleb”, he would spit, “is an arrogant pr*ck”… after which he’d launch into some rant or other about the exact nature of the guy’s latest offences. This was before Taleb became well-known as an author; the ignition for the outburst was typically provided by a pretty dull but informative book Taleb had written called “Dynamic Hedging” that was kicking around the office and used to find its way onto my colleague’s desk whenever a bit of cheap entertainment was required.

I knew nothing at all about Taleb back then and I don’t think my views were influenced by this early exposure; to be fair, my colleague was himself, in the nicest possible way, an arrogant pr*ck. I think I was just entertained by the spectator sport of an intellectual type getting so viscerally offended by another intellectual type, for no real discernible reason.

If you’ve seen my book list for this trip (here), you’ll know that I have been reading Taleb’s latest offering, Skin in the Game. I think it’s fair to say that this is an author who is pretty confident in his own brilliance. If anything, he seems to be inviting the “arrogant pr*ck” label from almost two decades ago. Here’s what he has to say about the success of Thomas Piketty’s 2013 book “Capital in the Twenty-First Century”:

Economists got so carried away; they praised Piketty for his “erudition” because he discussed Balzac and Jane Austen, the equivalent to hailing as a weight lifter someone spotted carrying a briefcase across Terminal B. And they completely ignored my results – and when they didn’t, it was to declare that I was “arrogant”

At least Piketty is in good company: plenty of Nobel prize winners and other well-known figures come in for a direct slagging-off in this book, although Taleb does seem to reserve most of his venom for the social sciences in general and academic economists in particular.

There ARE plenty of interesting ideas in the book, all related to the central concept of “skin in the game”. Basically, don’t trust anyone who doesn’t have skin in the game. Politicians don’t have skin in the game – they can screw things up and walk away without a backward glance (cheers for Iraq, Tony). Similarly, many corporate executives, bankers and academics have no skin in the game. Fund managers need to have a significant proportion of their wealth tied up in their own funds to have skin in the game. You get the idea….

One thing that appealed to me was the concept that we really shouldn’t pay any attention at all to all the economists and forecasters out there busily creating narratives to explain the past and supposedly predict the future. That’s great news, as there’s a lot of that stuff out there and I don’t bother to read it; what could have been seen as a failure to keep myself informed can now be regarded as a virtue! Hurrah! According to Taleb,

Forecasting (in words) bears no relation to speculation (in deeds)

Or, really getting to the point now,

Don’t tell me what you “think,” just tell me what’s in your portfolio

I think he has a fair point. Right, here goes then. This is going to look nothing at all like the “stick it all in the Vanguard Total Stock Market ETF” approach beloved of many of the early retirement brigade posting online. You see, I’m a cautious bunny at heart:

chart (3)

Property comprises three flats in one building (collectively referred to in the blog as “home”): we live in one flat and rent the other two out.

Fixed Rate consists of fixed rate savings accounts with UK financial institutions. This category is slowly reducing over time as the accounts mature and I gradually invest some of the proceeds elsewhere.

Cash is everything that’s instant- or near-instant access (current accounts, instant access savings accounts, premium bonds etc). It’s looking very low at the moment as there are some funds due to mature from the fixed rate category in a few weeks’ time.

ETFs are broad stock market trackers (“World”, “US”, “Europe”, “FTSE 100” etc).

Aggressive is whatever I’ve bought because it took my fancy, generally stuff that’s currently out of favour and looking cheap. The amount in here does vary quite a bit over time. It’s quite low at the moment.

Defensive is a bunch of individual defensive stocks (utilities and the like); obviously there are some defensive stocks tucked away in the ETFs too. The Defensive category also contains some Gold. Yes, I know, holding Gold marks me out as a complete imbecile in the eyes of many (particularly those who’ve got most of all of their money in stock market ETFs, it seems), but hey, I am unrepentant!

I’ve left Mark’s assets out of this as he may not wish to participate in this public airing of laundry. Also, you’ll have noticed that I haven’t included any £ amounts. Baby steps, folks, baby steps. Complete transparency wasn’t built in a day.

9 comments

    1. I don’t bother trying to add up the value of “stuff” – vehicles, house contents etc. I mean, where would you draw the line? I can imagine Mark counting up the knives and forks in the kitchen drawers!

      Liked by 1 person

  1. The bonus I see here is income from the two flats funds your life in the motorhome
    That’s a plan I have too, and potentially selling my coffee business… just got to buy the home on wheels

    Liked by 1 person

    1. Hi Matthew, yeah, buying a house split into three flats does have advantages. It’s way easier to manage than having remote rental properties, and if you choose your tenants wisely they’ll even keep an eye on your own flat for you when you’re away 😎 Our tenants are worth their weight in gold (no, they’re not the gold in the pie chart, before you ask 😉). Oh, and the place always looks occupied…..
      Financially it’s a good backstop as well. The mortgage is paid off, so if all else failed investment-wise, we wouldn’t starve…

      Like

      1. I just read your comment to Mark and his immediate response was “it’s not Conor is it? Flippin’ heck, he’s only just opened his coffee business!”
        (See recent post “The Isle of Man TT for Non-Bikers (2)”)
        I’ve put him straight! 😂

        Like

  2. This stuff is way over my head. So long as my pensions incomes are credited to my bank account monthly. I’m a reasonably happy bunny. It buys the petrol and the bourbon!

    Like

  3. Yes, it is very low risk / low return. Being a cowboy would be so much more glamorous, but I’m allergic to horses….
    I guess I realise that I’ve been very lucky in life so far, and I’m very happy to stick with my current standard of living rather than aiming higher but risking losing the nice lifestyle I’ve got. I really don’t need a Ferrari / designer handbags / extensive stays in 5* hotels.
    I’m pretty sure that at some point in my lifetime, stock markets are going to crash horribly. I want my biggest worry at that point to be where I’m going next on holiday 😎

    Liked by 1 person

    1. Agree, if I had a Ferrari I’m sure I’d spend lots of timing worrying about it getting scratched.

      And yes, the crash is definitely coming, but will the markets go up 200% before then? The only thing I’m certain of it that I won’t be able to predict it!

      Liked by 1 person

  4. Hi – just found your blog and it’s ace! I want to be where you are in a few years.
    I find your asset allocation very interesting and it feels quite low risk/return to me – I veer more towards the cowboy end of the scale!

    Like

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s