It is Obvious

Chris Rick has got altogether too much to say

Watch out – here comes a number

Posted by chrisrick13 on April 12, 2011

It is obvious: words can have more than one meaning

I have held back from acidic comment and predicting the end of the world.  It is not good for my health…I am told.  Trouble is I have seen Dr Bartlett’s lecture and am forever tainted.

Today I got angry at the media again.  “Surprise fall in inflation” was the headline, and then “The drop was…”  So inflation is going down.  All our worries were misplaced!  How about: Inflation still double the level the government wants it to be?  Or maybe: Inflation still at unacceptable levels.  How about the more dangerous: the rate at which the rate of inflation is increasing slows?  What about: Inflation still higher than any return on any ISA.  Then there is: The much more accurate 3-month moving average of the rate of inflation still shows it increasing.  Finally how about: The two measures of inflation diverge – which is right?

There is a world of difference between the absolute size of something and the rate at which it is increasing (or decreasing).

Another, hardly reported, set of numbers came out today.  One of the number watchers updated their figure for total UK indebtedness.  This is the actual debt of the government, the unfunded pension liabilities, the PFI, money lent to banks, and private debt.  I have mentioned it once or twice before.  Their new estimate is £3.6tn.  This is the reverse of ‘4 cents a passenger mile’.  It is £130,000 per household.  Luckily we have some good assets in there.  If the government can tread the fine line between being seen to punish the banks and letting them make profits then £1.2tn will be recovered from their disposal.  Then it will only be £83,000 per household.

I am pessimistic about house prices.  It seems that I have been all my life.  I have a very local test running at the moment.  3 years ago the lady next door died and (eventually) her house was sold at auction.  Two guys bought it for £250,000.  They spent 8 months working on it.  A new roof, rendered outside, all internal walls re-plastered, new central heating, new bathroom, new kitchen, new floors throughout.  It has been up for sale for 14 months.  They want £340,000 for it.  Given their labour and the materials and external contractors, I reckon that it must come to £50,000 what they have spent on it.  They have buying and selling costs, interest on the money tied up, and running costs for the house (insurance, council tax, heating and lighting).  Say another £10,000?  This gives them £30,000 profit.  Less CGT, if they sell for £340,000 then they will have £21,000 in their pockets.  Given that my numbers have precious little in them for their labour costs, I can think of better ways to earn a living.  I also suspect that they are following the market down.  Six months ago they advertised it at £360,000.  If they had put it on at £320,000 then they likely would have sold it.  Now they are looking at £300,000.  I would offer them £250,000 but I don’t like seeing grown men cry or getting thumped in the nose.  I am predicting a distressed sale this year or next.  I might well go along to that auction.

It is obvious: words can have more than one meaning.  Numbers are just as tricky.

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