It is Obvious

Chris Rick has got altogether too much to say

Archive for March, 2012

I mean what I say

Posted by chrisrick13 on March 29, 2012

It is obvious: I know what I’m doing

Ursula Martinez of disappearing red hanky fame has a Spanish mother living in the UK.  She tells that she often has arguments with her as mothers and daughters do.  In exasperation at the end of one argument her mother proclaimed: You think I know b*gger-nothing when I really know b*gger-all.

So today the OECD predicted that the UK economy would contract during the first quarter of 2012.  We are into predictions again…or are we.  The end of the first quarter is just a couple of days away.  Perhaps they have been monitoring and this is a long way away from a prediction?

Should this quarter show a contraction then the UK is in recession.  Who cares what it is called?

I should have known that would be the case because the Governor of the BoE said a few days earlier that the UK economy would zig-zag in and out of growth.  Again this is hardly much of a prediction as it has been doing that since 2010.  However as soon as Mervyn opens his mouth I confidently expect something opposite to what he says.  To be fair two quarters of contraction after one of growth followed by one of growth is a zig-zag.  I just wished someone had asked him to define zig-zag when he said it.  Because if you look at the GDP numbers over all of history then they are a zig-zag.  Very few graphs of this type aren’t depending on how you define zig-zag.

Still he is a master at what he does.  Shame it isn’t anything useful.
It is obvious: I know what I’m doing, just don’t ask me what I’m doing

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Don’t panic Mr Mainwaring

Posted by chrisrick13 on March 29, 2012

It is obvious: numbers are interesting

I bumped into some interesting numbers yesterday.

When I was in Australia in January I had a car and was doing a lot of trips to and from the airport.  My son advised me to buy petrol only on Mondays, Tuesdays, and Wednesdays.  I asked him if it was a superstition thing but it wasn’t.  The petrol stations put their prices up at weekends.  The have wireless digital control of the pumps and can change prices in seconds.  So prices go up at the weekends and in some petrol stations that includes Thursdays.  You save 10% by getting into the right habit.

At the moment we are making a switch and I know that the petrol stations in this country wished they had that level of control of their pumps.  There are really six places where petrol is stored: in the ground, in tankers and pipelines,in refineries, in government strategic stocks, in petrol stations, in car tanks.  For a while at least the biggest of these is in the ground.  After that comes car fuel tanks.  Or rather it does when there is a panic on.  I have to note here that the great British public do not need politicians to tell them when to panic.  We can manage that quite well on our own.

So we have emptied petrol stations into our car tanks and are inefficiently moving a week’s worth of petrol around the country rather than letting it lie in a tank in the ground.  That long supply of oil and in particular the output of the refineries cannot be much changed so quickly.  Instead of a balance there is a lot of fuel inefficiently being dragged around our roads and not much underground at petrol stations.  Now that we are topped up the petrol stations will gradually be filled up with not much business. Then we’ll all run out and go back to the pumps.  So in a series of jerks the situation will return to balance.

I had a look at oil numbers.  Bear in mind that there is not one type of oil.  So I am talking averages.  (I love averages as they cover so much nasty stuff up as you will see later.)  A barrel of oil is 40 Us gallons.  Reduce that by 20% to get UK gallons.  It is 158 litres.  If I step aside a moment and do a quick run around: a pint of pure water weighs a pound and a quarter, 454 grams in a pound, water weighs pretty much the same as petrol.  What comes out the other end is that there are about 4.5 litres to the gallon.  So petrol advertised at £1:50 is about £6.75 a gallon.  This is only important for old people.

Back to oil and that barrel produces about 20 gallons of car petrol and 10 gallons of car diesel.  It also produces about 12 gallons of other stuff.  Something for nothing you might say, but there is a gain during the processing.  I’ll leave that one to you.

The price of oil, Brent Crude, is about $125 a barrel which is pretty close to the price we pay for the half of it that becomes petrol.  Today it has dropped because of threats by the US and UK to release some strategic reserves.  That is ridiculous because even should they do that they are unlikely to release more than a few days of consumption.  I don’t suppose they have much more!  What if you want to book some oil for 5 years hence?  Sounds a bit like a pension scam, but you can ‘fix’ the price of oil that you want for 5 years into the future.  That will cost you $90 a barrel.  Somebody out there who probably knows a thing or two about oil and lots of other things thinks that it won’t just be cheaper in real terms but will be cheaper in absolute terms.  That sounds like a mighty good bet provided you think that someone that stupid will exist in 5 years making that kind of offer.  Of course you will have to remember to sell it before a super-tanker pulls up at your nearest bit of water asking where you want it.

I cannot see that oil will be that cheap in 5 years.  What price will it be?  I have no idea and would not try to make an estimate.  it is impossible.  But a price is being put on that oil today.  I suppose you get to invest the money for 5 years.  I also suppose that during those 5 years you can watch the oil price and if it goes below $90 at any time you can buy offsetting oil futures so that you can guarantee your profit.  What has it to do with the real world…not very much.

£92,000,000,000 – that is a nice number if there is a chance it is yours.  Alas it is not.  This is the amount that pensioners owe.  Comes to £8,130 ish each.  Not many of the retired people I know owe any money.  I’ll bet that the number is better expressed as £16,000 owed by 5.5m pensioners or half of them.  It is quite an intriguing number as it does not include the retired people who have huge amounts of money.  It makes no claims of assets such as houses and pensions.  Don’t worry.  I’m not going to come round for a cheque.  Those pensioners will be writing one for £30 every week though to service those debts.  That makes a nice hole in the state pension.

The Nationwide has just said that the average price of  house has dropped by 1%.  It is at  £163,327.  Prices have gone up in some places.  It is an average there is no single house on offer for this price.  If they are right, and I have my suspicions, then the average house owner lost £9,800 on their house in the last year.  Was it worth the effort some put in to hang on to it?

It is obvious: numbers are interesting to a certain type of person

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I’m hungry

Posted by chrisrick13 on March 27, 2012

It is obvious: the end justifies the means

 When I was a child I lived in West Bridgford.  This had been a village south of the Trent and was now essentially part of the city of Nottingham.  It still had its own identity as the river separated it and deterred development to the south.  Being in the county the Nottm Forest football ground is in West Bridgford and is called the City Ground.  Across the river in the city is the Notts County football ground, fairly obviously called the County Ground.  This being one of my proofs that I live in a real reality.

The buss service for West Bridgford was run by West Bridgford.  In reality the local council owned the busses but a group of business men, all in the round table, sat on the board and ran it.  Every year it turned in a tidy profit that helped run Bridgford.  Then suddenly the City council took over running the busses.  I was never clear whether the board decided to turn it over to the City or they were forced with some local government amalgamation.  Within a year it went to making big losses and did so all the time I lived there.  It might be that cars were just becoming affordable and busses were set for decline.  It might have been that elected City councillors have not the slightest idea how to run any enterprise.

There is no correlation between brains and money I keep saying.  However there is a strong correlation between money and smart.  I could add cunning and even devious.  Smart stands out though.

So if I want advice I might turn to academics.  I might turn to field experts.  I might turn to road-sweepers.  My best chance of getting some good advice is to talk to people with money…they are likely to be smart.

On that basis only talking to people who can afford £250,000 for lunch seems a good idea.
It is obvious: the end justifies the means but only if I can afford it

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Posted by chrisrick13 on March 23, 2012

It is obvious:I hate people who come with trite, ‘simple’ solutions to problems
Am I the only person in the UK with a rudimentary understanding of NIC?

The employee part is simple, or rather was until Gordon Brown got his hands on it.  It is a tax that is particularly aimed at the low-paid.  More accurately if you earn more than £7,000 a year you pay 12% NIC on all earnings above that up to about £40,000 a year.  For most people in the country that operates exactly as income tax does.  So your basic rate of tax is not 20% but 32%.

How easy to get rid of that and make a big simplifcation: increase basic tax rates by 12%.  Very little will have changed except large savings on tax collection will be made.  There is the argument that this is also a mechanism for qualifying you for a pension.  So run pension qualification off the taxes you pay, what is the difference?  Perhaps better still give everyone a pension of the same amount when they retire.  If not the computer payroll systems are easily capable of recording qualifying contributions.  It is about a third of tax paid and is only really of interest if a certain figure is not met.

At a stroke I have saved the country billions.

Above £40,000 a year NIC is 2% so it gets easier.  Increase higher rate tax by 2%.

It gets better than that.  For many years I have been paying myself by dividends and guess what you don’t have to pay on dividends: NIC.  So a tax avoidance loophole has been closed.  We can be done with IR35.
Is it that simple?  Of course not.  There will be endless boundary cases.  That is easy.  Every year for the next 6 years move 2% from NIC to basic rate tax.  Give everyone time to arrange their affairs to their best advantage.  They can move themselves over the boundary in whatever way they please.  They are rational and will act in their own best interest.

Why are the government studying the problem.  Just get on with it.

I’ve already dealt with illegal parking and now NIC.  What next?
It is obvious:I hate people who come with trite ‘simple’ solutions to problems – sometimes they are even right, but not often.

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Cut and paste

Posted by chrisrick13 on March 22, 2012

It is obvious: everybody runs like mad

Any rational entity will act in its own best interests or go extinct.  There are a lot of complications in that statement but if I restrict entity to mammals and specifically me or people like me then I can use that as a working hypothesis.

At a time that the budget is news, and I wonder just how long that time is, I hear a lot of people shouting stridently.  Mainly they are acting rationally and want the best they can get out the budget.  They use any number of artifices to dress up their own interest as being in the best interest of some larger group.  This gives them authority and believability  They feel smug as well.

So I hear demands that fuel duty be decreased.  Sounds good to me.  Let’s do it.  Now the government has lost a number of billions of £s from its income.  We cannot run a deficit (sic) so they have to get the money from somewhere.  We’ve agreed the cut so how will we make up the income for the government?

There are two thoughts here.  First the government spends less and second some other group contributes more.  For the moment I am discounting the thought that the economy will grow as a result and the government will simply get more income from all other sources.  This blog is not about fairy tales…at least not much.

So the government spends less.  What shall we cut?  This is at a time that the government is trying to cut anyway.  So cut fuel tax and cut…ambulance service.  Check out the body count.  What about education no need to have our children reading they’ll only start demanding tax cuts.

The other way round is to have someone contribute more.  What about pensioners?  They are living longer and there are more of them.  They are also expensive to look after.  They can contribute more.  How do they do that…give them less.

Perhaps it is better to hit the rich.  Devise some tax that will squeeze money out of them.  There is one thing about most of the rich.  They have money.  How did they get the money?  They got it by being (mostly) pretty good at something.  So instead of having them doing what they are good at we’ll get them doing two things: working out ways to avoid tax and going somewhere else if they can’t.

I have an idea.  Perhaps the government should draw up a list.  It consists of things we are going to stop doing to balance the budget.  Then we’ll have a referendum where we can all vote for one thing to stop doing and one thing that we must keep doing.  Then we can all vote on it and the things can be ranked in order of largest number of votes to stop.  Then the government can cut and simply reply to any criticism: democracy at work.  Then take a percentage off the top 10 items sufficient to pay the deficit.

lets see how we manage without: customs, police, army, tax collectors, social workers, food inspectors, teachers.  We can see how powerful each self-interest group is.  Pensioners might be effectively running things.  It would also encourage the government to sell-off services to the private sector.

At least the BBC would have to find something else to talk about in the news.

Remember that while we are spending more than we earn a cut for someone means an increase for someone else.  Next time someone demands a tax cut or a payment increase ask them who will be balancing them and how.

It is obvious: everybody runs like mad and they all end up where they started…but few realise it

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Bangs per buck

Posted by chrisrick13 on March 20, 2012

It is obvious: everyone needs a budgie

I noted that I handed over running our family finances to my wife a while ago.  I can report that I am not in a debtors prison yet.  Indeed being in charge of the money has changed her attitude…but not much.  What bothers me is that she will hear nothing of budgeting.   I see a budget as information that frees you and not a set of manacles.  There is no uncertainty: you know how much money you have.  That is the key.  You have £10,000 in the bank so you can blow it on…anything you want.  But next month you are going to have to replace the car and that will cost £9,000.  So although you can see £10,000 in the bank you can only spend £1,000 of it.  You save up £500 to spend on a new fishing rod and then your washing machine blows up and a new one costs…£500.  If you are budgeting then you will have money sitting somewhere that is to replace white goods on the basis that at least one of the major items goes bang very year and you put £40 a month aside.  You might only have saved £100 as a result so you will really value that fishing rod or decide that the old one still works and you are better off buying two tickets to go and see England play Ireland.

My view is it enables you to get the best bangs per buck.  Given that I don’t have an infinite amount of money I really ought to spend it on the things that do the most for me…and hope that my wife has similar values!  However my wife does not see that a budget is needed.  My mantra has long been to spend less than you earn which she has now adopted.  But she will not take into account that we are creating obligations for the future beyond our attempts to create a living for 70 years out of 40 years of earnings.

I think a lot of people budget in that way.  They manage their monthly expenses below their income but take no account of the spikes that will occur and smooth them over the year.  Spikes include: Christmas, holidays, new cars, repairs and replacements on stuff in the house, repairs on the house, birthday/wedding/christening presents, training.  As a result they live pretty miserable lives.

So it is for governments that they need to plan for the future and try to smooth their expenses…but they don’t.  They really have a 5 year perspective and that is it.  A small bit of future stuff is done, but not much.  I have sympathy for them.  For example the OBR has recently given this years GDP at 0.7%.  I have difficulty calling it a forecast as we are nearly a quarter of the way in to the period.  However their proper forecast a few months ago had our GDP for this year at 2.3%.  How can you plan for the future with such forecasting to aid you.  (0.7% is wildly optimistic.  Apply Rick’s law and 0.3% looks better…but still optimistic.)

So the government is going to try to get companies to take over running some of our roads on the basis that they can do it more efficiently than it can.  Why does the government care about roads?  Oil is getting rare and expensive there will be fewer vehicles on the road in the future and over the short-term the rate of increase in the number of vehicles will reduce as well.  However the prediction the government is working to is a 40% increase in traffic by 2020 (I think).  It is worth improving the roads as the country loses many billions each year due to congestion and accidents.  Maybe the percentage play is to hang on until the traffic volumes go down and save the money.

So I differ with the government!  The government is also proposing to spend a lot of money on a train link to Birmingham.  I have already commented on that particular lunacy.  It is a similar amount to what they think they need to spend on the roads.  Cancel the train link and do the roads.  Better still do neither and invest it in fusion power research and fibre optic links over the whole country or build a spaceship to go to the asteroid belt and bring back an asteroid of rare earths.  Then we would get some real bangs.

It is obvious: everyone needs a budgie or is it a budget?

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Pinch yourself

Posted by chrisrick13 on March 20, 2012

It is obvious: I think


Do you sometimes wonder if you are part of some great experiment?  This is not reality but some super simulated world.  I have thought about it and there is no easy way to work it out.  There is no easy way to work out the more likely situation that there is a reality that your body is in but your mind is living in some fantasy.  Don’t get me started on the people I see around me who definitely are.

I remember a book I read, that I think is now a film, about a man and his relationship with a woman.  He was involved in a company that ran a cyberworld that was used for marketing.  It was a good simulation!  You could enter the world and ask the inhabitants questions and use it for marketing.  The twist was that his world was a cyberworld.  I’ll spoil the story: he eventually escaped up one world into the body of the bad guy.  His lady in the cyberworld was actually an interviewer from the next world up so they lived happily ever after.  Inevitably there was a twist at the end which left it open as to whether that world was real.

However I have now come up with a way to decide that my world is real.  If you can observe events that are so bizarre that no rational person could think them up or which could not have any useful information to pass to a marketing company or whatever then this has to be a real reality.  There is no point to having something so bizarre.
At the weekend the International Monetary Fund (IMF) head, Christine Lagarde, said that China must stop its economy being too dependent on exports and investment.
It is obvious: I think, therefore I think I am

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Cut it out

Posted by chrisrick13 on March 17, 2012

It is obvious: you should not believe all that you are told.

I have not written much as I have been earning a living, or, more accurately, being paid for turning up.  A lot has happened recently, or, more accurately, not happened.

Greece defaulted.  It was not a default of all its debts, just a bit at the edge.  Only £3.5bn.  That is £3,500,000,000.  Were we paying in this country it would have been £60 each.  Who did pay?  So far I don’t know.  Much of that debt was subject to CDSs or they would have taken the deal offered by Greece.  Just a drop in the ocean: £3.5bn.  It was not a disorderly default so everyone is happy.  Or at least the companies paying out the CDSs will have hidden those losses.  What happens next?  I really don’t know.  There are a lot of candidates.  I think the start could be Sarkozy losing and the new guy pulling out of the latest treaty as he promised.  Perhaps it is just a negotiating ploy to extract another CAP for France.  I am sure that at some point soon someone will raise their leg to kick a can and miss it completely.

What about the ‘Tory Cuts’?  Well I might talk about them were there any.  The Labour government left the economy on a trajectory of rising overspend.  So far the coalition has not cut any expenditure at all.  They have started to slow the rise but they haven’t cut anything.  The Labour position is that we increase the overspend and the economy will magically start to grow and then the government will tax the bigger economy to get to a position of underspend and bring the debt back, maybe, to where it was when they took power.  In a world economy that is probably going to be flat or in recession for some time, growth is not going to be an option for the UK.  The coalition will fail with austerity measures.  We as a nation are spending more than we earn at every level and are living beyond our means.  How many years before we do a ‘Greece’?  Not that far away, but there may be so many more doing the same that we will hardly be noticed.

I would like to mention interest rates and my friends at the BoE.  The base rate is at 0.5%.  I remember that when I last had a mortgage it was at base rate plus 0.24%.  They quickly moved away from that so I did as well.  So how are people faring now?  Mortgage deals vary but the SVR for most banks was around 3.5%.  Not even close to the base rate.  In the last couple of weeks 3 banks have put their rates up and one has served notice that they are going to hit 5%.  I have several observations.

The first is that in the current economic climate it will be mighty difficult for any borrower to switch mortgage to a better deal.  Indeed if they switch then they are likely to find the new mortgage going up anyway.  We have low interest rates at least partly to keep a lot of people with not much money from defaulting and all that it will entail for the economy.  That is now going away.

Why are interest rates going up?  It is because the banks are finding money expensive to buy on the international money markets.  I find that difficult to believe but if so what is QE doing?  Certainly not what the BoE tells us it is doing which is to reduce interest rates.  Might as well put interest rates up.  See if savers can re-float the economy.  At the same time do something to restrict banks’ profit margins.

So a lot of captives are being tortured.  There are nearly a million in negative equity.  All they can do is keep paying the increased mortgages or go and live in a hole in the ground.  There are a million with less than 10% equity.  They cannot move as they will have nowhere near enough money left after a move to put down as a deposit to gain anything like a decent interest rate.  They have little choice but to pay or sell, go and live in a hotel for a few weeks, and then move to a hole in the ground.  Then there  are another million who are close to a neutral position.  They could probably sell, get some money back and then go and rent in a ghetto somewhere.  Moving from a semi in a calm area to a flat at the top of a block in a war-zone but at least able to pay the rent.  Mixed in among these and not counted yet, with higher equity, are a lot of people who are in arrears or now have no job and are burning savings before moving into  arrears.

So much good news I don’t know what to talk about next.

It is obvious: you should not believe all that you are told.  The percentage play is not to believe anything.

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Dark deeds

Posted by chrisrick13 on March 17, 2012

It is obvious: logic is always right

The soldier who killed 16 people in Afghanistan was clearly ill.  He was not a simple, easily led person persuaded to kill by evil manipulators, as all the suicide bombers are.  His actions were only logical in a damaged view of reality.  He will suffer the most in terms of the punishment applied to him.  However being ill he will likely suffer little in his mind beyond where he already is.  The greatest suffering will be by the people left.

The reactions to this killing in Afghanistan will be big.  The population will be incensed.  Many simple people will be manipulated into committing equally brutal acts.  This is on the basis that two wrongs do make a right.  Logic dictates a different course.  So far though I have seen reactions in the West and some words directed at specific ears within Afghanistan, but little else.  Why?

The Taleban have killed many thousands of people in equally horrible ways and circumstance.  They have caused much more harm and suffering than one American soldier.  Had the Afghan people reacted in proportionate manner then they would be free now.  In charge of their own destiny, proud to be called Afghans.  Logic dictates this.

So why have they not done it?

It is obvious: logic is always right and often painful

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Clip clop

Posted by chrisrick13 on March 10, 2012

It is obvious: the fat lady is overrated

I am deafened by the sound of approaching horses.  It is my friends disease, famine, war and death.  The first three are riding up in full pomp while death is trailing along behind in embarrassed superfluity.  Death is busy enough without duties on the apocalypse.  Time for him to go.  But the ‘Three Horsemen of the Apocalypse’ does not have the same grandeur for a team name.  They need a fourth.

Perhaps you can think of a suitable sub?  Perhaps, disease, famine, war, and PC support specialists.  Or maybe investment bankers.  A few short years ago it would have been lawyers or estate agents or meter maids.

I have my own thoughts but they don’t ride horses that well.  I could go for global warming and as a result we might have thirst sitting proudly on a horse.

I also have another candidate for removal along with death.  I saw a program on obesity in the US today.  I don’t know the provenance of the figures but they sound right given that I worked on a receivership that was part of the psychic readings over the telephone industry which was close on £10bn in the US at the time.  Americans spend about $120bn on snack foods each year.  They also spend about $60bn in the diet industry.  This results in about $140bn costs in the healthcare industry.  Famine might do the US a lot of favours.

So I have my revamped four horsemen:  Disease, War, Thirst, and a Big Mac.

It is obvious: the fat lady is overrated and she needs to diet a bit as well

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