It is Obvious

Chris Rick has got altogether too much to say

Archive for March, 2011

I’ve got a pension – still and just

Posted by chrisrick13 on March 30, 2011

It is obvious: if you are in the boat you should help to bail it out.

I’ve got a great deal for you.  Give me money every year for 30 years.  I’ll charge you for looking after that money.  At the end of that period I’ll give you money for as long as you live.  I’m not going to tell you what I will give you because if I screw up handling your money, which you paid me to do, I’ll just give you less at the end.  Guarantees?  No we don’t do that it is too risky.  Have I got a name for this deal?  Yes, its called a pension.

The people who have offered me this deal are: pension companies, the government, and PLC’s whose likelihood of surviving 30 years seemed to me to be small.  I’m not sure I really want any of them holding my money.

So what did I do?  I bought some pension provision (including Equitable Life).  I might get some out of the government.  I saved some money.  I recently chose to live longer than my parents and chose parents who only wanted one child.  So I sit here with maybe 10% of my possible future income sitting in a pension fund.  Another 10% is sitting in the government pension fund…ooops they don’t have one, so it is sitting in the willingness of the next generation to work and pay taxes.  The rest is either in assets I can put my hands on or in banks.  That does not sound good at all does it.

At least if you have a pension there is nothing you can do.  Just wait until retirement age and watch it hit your bank account every month.  I suppose you could sit and worry…for all the good that will do.  You could skill yourself up so that you can work some more.  You could invest in an allotment, barbed wire and a shotgun (I have said this before.)

I, however, have a lot to worry about.  What do I do with the money?  I have said that I’m tempted to get on with spending it while it actually buys something.  So implicitly I have a worry about inflation.  There is nowhere that I can put it with low risk and beat inflation.  I have another perspective that I have family in OZ and the US, so putting money there is an option.  I will become a currency trader…and I know I will get that wrong.  Will the USD fare better than the GBP…probably, but it is by no means clear?  Will the AUD stay up if China runs into problems, as it will?

I might invest some money in generating my own power, but I don’t think being the only house on the street with lights on is a very good idea.  However there is a good return.  I’m still committed to the idea of investing in myself…and my wife.

At least I have freedom to make my own mistakes.

It is obvious: if you are in the boat you should help to bail it out, saying “I told you so” does not help.

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Keep going

Posted by chrisrick13 on March 29, 2011

It is obvious: the end is nigh

I have been reminded today that Liam Byrne left a note for the incoming coalition from the Labour party saying that there was no money left.  He used the words “I’m afraid”.  It was a close run thing as the Labour party had to spend and commit at a ferocious rate in the last months to make sure.  I have long said that the last thing Labour wanted was to be in power now – facing a mess that they had created.  They relied on the lust for power to ensure they were not running things.

As I have predicted, Labour is not being identified as the culprit.  Forgotten are the much spouted words: “No more boom and bust”.

What of the march on Saturday?  Protest the cause of the cuts.  Protest the manner of the cuts.  Do not protest the cuts.  I suspect that those without ulterior motives are angry at effectively being on the dole for the last few years as they were lured into non-jobs paid for by running up debts.

We are dancing on the heads of pins yet again.  All Labour can do is to complain at the speed of the cuts saying it will wreck the economy.   Any other attack will have the finger pointed back at them as the cause.  When did they become experts on economics such that even that argument could  be believed?  The last 13 years are no testament to their abilities.  They are on safe ground though as there is nothing to be done to stop the pain.  Save the economy?  Maybe, but not without pain, not without misery, not without injustice.

But it is not the end.  In a number of years, maybe a large number of years, the deficit will be fixed, the debt will be reduced, we will be living a lower lifestyle and maybe the economy will be growing again (the enemy).  The prior years will seem like a bad dream.  It is a time to plan for the future even if those plans are quite defensive for a while.  Just as triggers start bad events there are triggers that start good events or trends.

It is obvious: the end is nigh which means that the beginning is not much further away.

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How long before we get there?

Posted by chrisrick13 on March 28, 2011

It is obvious: the process has started

When driving the car, with my family in it, I was constantly asked “how long before we get there?”.  This could be translated to: “I’m bored”.  After a number years I developed a standard answer: “Ohhh, about an hour.”  It took a while before they caught on and stopped asking.  In any case my wife dealt with the fall-out from three bored children.  For the journey there was the excitement of anticipation.  Then there was the interest of travelling.  Finally there was the desperation to get there, to experience it.

I was reminded today of two more reasons to keep my tv.  Both Panorama and Dispatches provide occasional interest, Panorama doing it today.  At least a trailer for it did.  (I then have to admit I was watching 24hour news.)  I have a friend who has to work at home in silence, but I like the background noise.  Normal people use music I suppose.

Panorama today has the theme that with average take home pay of £20,000 plus a bit we are all about £1000 worse off from the peak achieved two years ago.  That is about 5%.  Adjusted for the devaluation of the pound over the last couple of years it makes the labour cost of anything we produce about a third cheaper to anyone buying from abroad.  Of course the reverse applies for stuff we buy from abroad.  However that is relatively fixed.  All that happens is that we buy less – fewer bangs per buck.

Of course that average is the average of those who have a job.  I get daily e-mails about jobs and have done for a long time.  One of them lists jobs in the US, Europe, and UK to my search criteria.  Today there were none listed for the UK.  I wonder if the average takes account of those who do not have jobs?  They bring the average down but are not contributing.  I guess we would be talking about average household income or average adult income or some similar figure if it were so.

I did the simple arithmetic for an employed person on £20,000 being made redundant.  It saves, but not a lot.  The biggest saving is that it is more efficient to pay someone benefits directly than to make up a job for them.  There might be a case for reducing the persons income, but that can do nothing about the £20,000 of costs to keep the person working.  There is also the well defined point where it is better to claim benefits than work.  They are complicated numbers.  Simpler that we get to a dollar a day as soon as we can.

I am pro the pain.  Once we have done it then we can build again.  (I nearly said ‘grow’ but that is the enemy.)  I think short is much better than long as far as pain is concerned.

It is obvious: the process has started – how many will be in denial and for how long?

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Slash and burn

Posted by chrisrick13 on March 26, 2011

It is obvious: we still don’t get it

The numbers below are all billions of GBPs.

The GDP for the UK last year was £1,474, assume a bit of growth in this quarter and to fiscal year end it is £1,500 – close enough.  Remember that unless you are Japan the point at which the debt moves to a debt default cycle, the point where the economy gets truly wrecked is about 80%.  So a national debt of £1,200 is dire but recoverable.

The current debt is £909 and is predicted to be £1,359 by end 2016.  That is a rise of 50%.  Does that seem like cuts to you?  Don’t forget that GDP is not income.  What the government receives in the way of income is a lot less.  This is merely a statement that a sovereign nation can run a perpetual deficit, if the markets will let it, relying on growth to keep funding it.

So to continue the maths, in 2016, in 5 year’s time, for £1,359 to be a squeak less than 80% the GDP will have to be £1700.  That is an annual growth rate of the GDP of 2.5%.  I find it difficult to believe that the GDP will grow at 2.5% at any time over the next 5 years let alone all of them…and certainly not the first one.  The coalition will miss its target.

It is poor for us, and please remember that I have not included unfunded pensions, PFI, or personal debt.

But have a look at Labour’s, slower cutting plan.  I am not sure of the numbers as they are short on detail, but I have seen that they plan to cut £100 less out the budget over the 5 year period.  That being the case we would need a growth rate of 3.7% to stay solvent as a nation.  I think the coalition will fail but I am very sure I don’t want Labour even to try!

Today the TUC has organised a large anti-cuts march.  I don’t know why I do it to myself but on the news the TUC spokesman was given several minutes of broadcasting her message, full of  points that needed challenging, without a single interruption from the interviewer.  At least the question was eventually asked if she was against the cuts.  She said no but that they were too deep.  So she just wants smaller cuts.  Given that we are going to increase the national debt by over 50% in the next 5 years it does not sound much like deep cuts to me.  In fact the TUC lady seemed quite reasonable as she was not picked apart by the interviewer.  You could have believed that she was an expert on economics…she is not.  However there were then the interviews in the street that I so abhor.  I liked them today: to a man/woman they all stridently said “stop the cuts”.  Nowhere did I hear “reduce the pace of cuts so we need 3.7% growth over 5 years rather than 2.5% growth”.

Finally I want to remind any readers that Gordon Brown stood up and said that we were the strongest economy, better placed than all others to come out of recession.  History will judge…recent history will do nicely we don’t have to wait 30 years.

It is obvious: we still don’t get it, we really don’t

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Whose pain do you want?

Posted by chrisrick13 on March 24, 2011

It is obvious: there is a lot of hot air about.

I was reading my Kindle but had Newsnight on last night.  It was background noise and sometimes there is the bonus of Paxman nailing someone deserving of nailing.  I had to go out near the end but there was a debate on the budget that included Irwin Selzer.  He is becoming a candidate for hero.  He writes for The Times and is a member of a think tank.  He is American.  The debate was convoluted and complex by the other members, then they turned to Mr Selzer.  He said it was very simple: there was a plan that the government has proposed and worked hard to put together in some detail and there were a few ideas sketched out by the Labour party.  As these were the only two games in town it was a very simple choice.

It rather deflated that debate.  We can argue about the cuts and the pain, but there has to be pain simply to pay for the last 13 years.  Do we want coalition pain or Labour pain?

My view is that were Labour in power they would fudge and delay us into a much bigger problem a few more years down the road.  I think I would rather have it over now.

It is obvious: there is a lot of hot air about…and, dammit, I’m contributing.

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They just don’t get it.

Posted by chrisrick13 on March 23, 2011

It is obvious: public opinion is a slow and stupid beast.

On the day of the budget I had the misfortune to listen to the news. I managed to turn it off eventually. Indeed I have almost worked up the courage to get rid of the tv. I watched Ireland-England at the weekend, or at least about 10 minutes of it, I tolerate ‘Waking the Dead’ and ‘Silk’ is quite engaging. Other than that it is a race to the bottom across the channels that usually ends up on the news channels. I can think of one more exception which is ‘Bring on the Dogs’. I have already enthused about Blade, Razor and their mates dishing out summary justice to fleeing criminals.

Today was lots of talk about the budget. It started off with the presenter unable to distinguish between debt and deficit. This made the interview very tricky. Then there was a nice man from the AA saying that petrol prices were unfair. His solution was to cut the tax. I wonder how many brain cells they have. The government is spending more than it receives. It can do this for a while and then we’ll hand over the running of the country to foreigners or become a third world pariah state. Perhaps that is a good move? If the government cuts its income from anywhere then it will have to increase it somewhere else. Given that there are no ways to earn more money the government has to cut its spending. Is this just a competition of the interest groups? The weakest interest group gets its taxes put up or its income cut?

On a personal note, my wife has been made redundant. Essentially she will get a year’s money in her hand next month. She already has a new job offer. Some 20 years ago she started investing in herself. Already a qualified teacher she started doing courses in the general area of language and literacy culminating in an MA course at Birmingham. She is doing an MEd at the moment…which she will not complete due to the redundancy taking her off the course, and is only two modules away from a degree in Psychology. Lucky? No, just investing in herself.

My daughter is in sheltered housing. Every two years Croydon Council come along and propose putting her somewhere better suited to her needs. This is inevitably at the top of a housing block in an area where it is dangerous to go out at night and not much safer during the day. The only thing about the proposal is that it is cheaper. My wife and I mount a defence, a strong defence, and, so far, they go away. Where do they go to? They go to everyone else and find someone who cannot mount a defence this time round, and they get moved to a living hell. It is unrelenting and the first time my wife and I are not around my daughter will be moved. Every time we succeed someone else suffers. You don’t have to run faster than the bears, just don’t be slowest in your group.

I hear the howls of…Labour and lots of other people who I know do know better. They talk of increased interest rates and cuts as setting the economy into a recession. That might well be the case, but if the deficit is not tackled now it will be a lot worse problem in a few years time. I would ask though that with record borrowing last month if any cuts are actually happening? Economics is a convoluted business so that a cut saves government expenditure but reduces income. However this ignores an important mechanism. If cuts are mostly about jobs then if the government pays someone £20,000 a year they might take £4,000 in income tax. Suppose that they take about half of all the other expenditure in VAT or fuel or booze tax. It has cost the government about £8,000 to employ the person. However as a rule of thumb it costs about double the salary to employ someone…but all that other expenditure sees a return in taxes. So the government spends £40,000 on a person and it costs about £18,000. If they are fired and go on benefits, those benefits will be less than £18,000 and there is a real saving made. The person suffers as their standard of living reduces. We suffer because it was a nurse/teacher/fireman/policeman/anti-terrorist officer/dustbin man. It is more efficient to hand out benefits directly rather than through a job. Efficiency is not a word that has been out and about a lot recently.

What it means is that deep cuts work, but take a lot longer than you might at first think. Everyone of us will suffer, but the pain will not be evenly spread. I have to listen to a lot of rubbish on the tv while the process takes place.

It is obvious: public opinion is a slow and stupid beast, but once it gets going it stampedes off. Lets hope it is in the right direction and you are standing somewhere else.

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Stupid question (2)

Posted by chrisrick13 on March 17, 2011

It is obvious: stupid questions are obvious.

Still the poor information comes from the media.  A meltdown is not a problem.  The first thing that happens and did happen is that Boron damper rods are dropped into the core.  This slows the reaction going on by absorbing free particles.  Still heat is generated for some time afterwards.  Hence the need for cooling.  If the core gets hot then the fuel rod containers will melt.  This causes the whole core to puddle in the bottom of the reactor vessel.  If it continues hot then even that will eventually melt.  It then drops through to the containment vessel.  Thick concrete and steel…particularly at the bottom.  The core will not melt through that…theoretically.  Problems grow if the containment vessel is breached.  Problems also grow if the fuel rods from the shut down reactors, that are in an external pool, start to heat up.  These have no containment.

Japan is a country of high standards.  Not least the requirement to build buildings that don’t fall down when an earthquake occurs.  Indeed there is not one mention of a building collapsing due to the earthquake.  There is no report of a nuclear power station being damaged by the earthquake.

Many houses are built of wood, much like they have been over the centuries.  They do not fall down in an earthquake.  However they do wash away in a tsunami.

So if they (the Japanese) build nuclear reactors that are resistant to earthquakes why did they not also build them resistant to tsunami?

It is obvious: stupid questions are obvious…eventually.

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Trigger time?

Posted by chrisrick13 on March 17, 2011

It is obvious: there are small triggers.

Triggers are a favourite theory of mine yet we have had two big ones, Arab revolts and Japanese tsunami, and nothing has happened. I know stock markets have dropped with the FTSE approaching 10%, but they have the feel of short drops with recovery to come and not the first few feet as you go over the edge of a cliff. I nearly bought BP at the bottom a few months ago. I wonder if I’ll have the courage to go shopping now. A candidate trigger is just that or a buying opportunity for one asset or another.

There is still a lot of misinformation about the Japanese nuclear reactors. A meltdown is a disaster for the power company but inside the containment it is not a major problem. The square buildings that have been blown apart are only for keeping weather off the equipment and staff, not for containment. The pool of spent fuel rods is another problem all together. Perhaps in future they won’t store them so close to the reactors? Rather obvious I would have thought. A high price to pay but it means there will be a lot fewer horses running around free in future. But it also might mean that a much bigger price a few years down the road will not now be paid. You could ask the question why this has happened after Chernobyl but they are different situations. There still is the small chance for an evacuation of Tokyo being required though.

So triggers are what makes forecasting so difficult. Trends follow nice graphs until a trigger comes along and kicks it off the line…and some events look like triggers but they are not. That can never be predicted. So investing is about timing or a quick reaction and then a contrarian move, buying at or near the bottom.

Are there triggers that can be predicted? There are certainly events in the future that are inevitable but which are not triggers until a large number of people realise or accept that these events are on the way. Perhaps the internet will help here with information being disseminated without a vested interest ‘spinning’ it. I can think of two triggers. The first is the perennial peak oil debate. Much like cigarette companies holding back the evidence that smoking causes lung cancer in the 60’s, will peak oil be commonly accepted some time in the near future. Perhaps Saudi oil, about which the Saudis are so secretive will end very suddenly soon. Then there is the uranium supply. There is not much of that and as yet there is no vested interest saying that we have a thousand years of supply left.

So I hang around looking for triggers.

It is obvious: there are small triggers, big triggers and a lot of impersonators.

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Another day

Posted by chrisrick13 on March 15, 2011

It is obvious: we get up in the morning.

When I was in my teens I remember reading an SF story (I read no other) of which I cannot remember the title, plot, or author.  I do remember that a part of it was an off-hand remark that American Express had nuked Buenos Aires because of a bad debt record.

I also take the cynical view on why we do what we do each day.  It is because we are driven to put our genes back in the gene pool.  By natural selection we get pleasure from the things that cause us to do this…and not just sex!  Those who are better at those other things are more successful, in general, at gene placing, with no commentary from me on whether the genes are ones worthy of a return to the gene pool!

So if you are successful and earn a lot of money and have put genes back in the pool, why do you get up in the morning?  I have often, and more often than is good for me, wondered about how much money is more than enough.  If you have a million pounds in the bank you could live pretty comfortably without having to do too much that you didn’t want to do.  With five million you are probably in the realms of having your own private jet or at least hiring one when you want to go anywhere.  At ten million you have to work hard at being profligate and consumptive to run out.  So if you have earnt hundreds of millions what drives you each day?  You will never spend it all.

It seems to me that world affairs are driven by money.  To an extent they must be.  However it seems that governments act to manage money rather than nurture their population.  Even in a democracy, such as the UK, I feel that much government policy (of either colour) is not driven by thought for the good of the people.  It is driven by financial demands or desires and that means for the good of the banks or financial companies.  These companies have no genes to drop back into the gene pool.  Why do they keep doing what they do with such determination?  They are like a virus that destroys the host ensuring their own demise.  Viruses are very difficult to eradicate.

I turn to Bill Gates who has given up and spends a lot of his time spending his money to good effect.  Similarly Warren Buffet keeps going making money but is spending what he has got on good causes.  I can think of at least two other people with just as much money who do not seem to be spending it for the good of others: Hosni Mbarak and Gadaffy Duck.

It is obvious: we get up in the morning and a lot of us wonder why…or only do it because we don’t.

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Posted by chrisrick13 on March 15, 2011

It is obvious: there are standards in international politics.

I would be making wry and acerbic comments about how the news was full of Libya last week which does not now exist but for the reason why which involves the deaths of thousands, the destruction of the homes of half a million people, and the hardship and misery thrust on many millions in Japan. There lot is still not nearly as bad as those living in Somalia for example and many other places in Africa. I am again in deep water comparing levels of misery. Even one person suffering needlessly or not dying of old age is something that we as a race ought to be working towards stopping. We aren’t.

There is (was) much talk of Gadaffy Duck hiring mercenaries to fire on his own people. Though clearly if they are not in his tribe it is alright to fire on them. There is another country where the despotic ruler has called in mercenaries to help put down a popular uprising and they are likely to fire on the ruler’s own people…but of a different religion, so that is also OK. It is Bahrain. I hope that the international community readies itself for intervention, no fly zones and the freezing of assets. Interfering in another country’s internal affairs is something China is constantly giving as the reason for vetos in the security council. I wonder what it will do now?

I have heard a lot on the news about the nuclear power stations in Japan. I now believe a lot of it to be at best misleading. I know nothing about these beasts. A search on the internet quickly brings up a description of what is going on by someone who has run one of these reactors. In summary. When the cooling fails, or in many other emergency situations, the damping rods are dropped into the reactor. This stops the reactions by absorbing the particles that are released by the fission. This is a major part of the design and especially in Japan when there is a wobble of sufficient magnitude or many other conditions are met, the rods are dropped. This has happened. However there is still heat being generated for some while after. If cooling cannot be achieved through several backup mechanisms then the heat will start melting things. The explosions were a result of cooling water being converted to hydrogen and oxygen by the high temperatures which is highly explosive…and did. However this cooling water is outside the containment vessel. The containment is in 3 parts. Metal surrounding the pellets of fuel – fuel rods. If these melt then there is a puddle created at the bottom of the steel reactor vessel. If this melts then there is a steel and concrete container that has a very thick ‘saucer’ at the bottom around that. China syndrome (or given the location: USA syndrome) cannot happen. A lot of the ‘radiation’ is gamma and while dangerous, that quickly degrades. What cannot be measured (easily) is alpha emitting particles…and these have not been released into the atmosphere. The Russians had a much more cavalier attitude to reactor design and their explosions did rupture the containment throwing very hot fuel all over the countryside and high into the atmosphere that emitted alpha radiation.

As bad as it is there is little for us to worry about. Indeed at a time where we are girding our loins for massive investment in nuclear fuel (not just in the UK) the reaction to this disaster will be the slamming of stable doors long before the horse has even thought about leaving. Indeed it might be considered a good thing…but the price is high.

It is obvious: there are standards in international politics, most of them double.

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