August 2026 Update

Monthly Thoughts

The searing heat of summer in the desert is slowly subsiding into temperatures in the lower 40’s. The memories of the excitement earlier in the year are also subsiding as efforts seem to be concentrated on other countries. There’s been a couple of incidents in the last couple of months, but they’ve been nothingburgers.

Back at home, Andy Burnham has taken over and seems to be charming everyone so far. However, the big difficult decisions about how to put the country’s finances back on an even keel have yet to be taken, with no easy option on the table. Lets hope he takes the opportunity to be bold and aim for growth rather than compounding the death spiral of trying to extract more from less with further suffocating taxes. For starters, he should ensure things like this can’t happen: https://www.standard.co.uk/homesandproperty/house-building-london-mortlake-brewery-b1294907.html

Talking about countries with financial difficulties, on the other side of the Atlantic, an emerging bond crisis is unravelling with countries all over the world reducing their US treasury holdings causing falling prices and hence the debt servicing costs to soar even higher. Scott Bessent seems out of his depth with efforts so far to mitigate proving ineffective. In other interesting news, earlier in the year France repatriated it’s gold holdings from the US to Paris by selling and repurchasing and more recently, Netherlands have flown their gold from the US back to the UK citing ‘crisis preparedness’ and ‘better liquidity’. I suspect the less corporate language translation is ‘we don’t trust that crazy fool’. Talking of which, after irritating every other country in the world, he has now turned his attention to Canada, where he has mostly concentrated on demonstrating how little he understands about international trade. Mark Carney has come out looking like a class act and it seems the rest of the world now views Canada as their new bff.

An observation. I read this week that a record number of students will be starting university in the UK this year. It seems that the feedback loop hasn’t kicked in yet. I suppose I shouldn’t find this surprising, but I do. How much data is required to change behaviour? Based on current evidence, the majority of graduates will spend their lives repaying enormous student loans, working in average jobs and regretting their decisions. Right now, the country needs builders, plumbers and electricians, jobs where you can be self employed and be far better off than even graduates with sensible degrees. I’ve spent a career in engineering over the last 25 years and have for most of that time been comprehensively out-earned by the average self employed plumber. Now consider someone exiting an average university with a nothing-degree in humanties or social/political ‘science’. In the past they may have had a career in some middle management role spouting corporate jargon, attending meetings all day and building a bureaucratic machine to annoy the people who actually did work, but that’s looking like a less likely outcome. In a world where the tools to teach yourself anything and consequently where it’s more easy than ever to run your own business are so accessible, it makes no sense for a majority to attend university. What would I do? I’d swap a year out for two years to set up a business, or multiple businesses. If I failed, and still had a burning desire to commit to university, then maybe I’d reconsider.

Net Worth Comments

After last months flatness, the line steps up again caused by a mixture of both crypto and equities having a good month. After spending the last few months adjusting monthly investments to ensure asset allocations are more or less where I want them, I’ll be paying more attention from now on to keeping them there. Talking of which I need to bring both gold and cash up slightly in the next couple of months. The eagle eyed may notice that I’ve added in my defined benefit pension to the asset allocation figures. I don’t count this number in my net worth figure to give myself a margin of safety (probably irrational), but including it in the asset allocation chart is useful. I’ve calculated an approximate value as shown below. I then work backwards from the income as shown on my statments each year to calculate a value. It’s not perfect, but it doesn’t have to be.

RPI Annuity Rate = (15Y Gilt Yield + Base Capital Payout) * (1 - RPI Discount Factor)

• Base Capital Payout = 4.15
• RPI Discount Factor = 0.37

The DB pension allows me to take more risk than I’d otherwise take with other investments, so it’s good to keep tabs on how much of my portfolio it actually makes up.

In other housekeeping news

• ‘Shares’ include a mixture of ISA and GIA balances
• DC Pension consists of approximately 90% shares, 10% bonds
• BHAG = Big Hairy Audacious Goal

Talking of BHAGs, I’ve convinced myself that because I’m enjoying my role right now and taking into account my (subject to change) life plan, I can increase BHAG3. It’s only slight and it’s not ‘one more year’ syndrome, honestly. At my current trajectory I’ll be busting through BHAG3 anyway, so it’s kind of immaterial. Maybe I need a BHAG4?