It is Obvious

Chris Rick has got altogether too much to say

Archive for January, 2013

Same as it ever was

Posted by chrisrick13 on January 31, 2013

It is obvious: put the oven on

This week I heard a proposal to put a 20p (or was it 20%) tax on sugar filled soft drinks.  If applied it will generate £1bn that will be spent on…something worthwhile, but it won’t so I didn’t bother retaining the information.   It will also stop people buying those drinks or maybe not so many of them as they will run out of money.  It is an anti-obesity initiative.

The food industry responded to this idea.  It said that on average sugar filled drinks made up less than 2% of the average food consumption in the UK.  A lovely bit of spin.  I would hardly call one of those drinks food.  Also less than 2% is what?  1.99% perhaps or maybe 1.01%.  Then there is that word: average.  If you are not average, like me, then you might drink a couple of glasses a year.  I am insensitive to the cost.  I also am not obese, even if I am over-weight.  It does not matter I will be giving my extra couple of pounds a year to a good cause.  What if you are not average at the other end?  You drink 10 glasses a day.  You are obese.  Then there is a chance that it will have the desired effect.

The food industry does not care about me but they do want to keep pumping those drinks into the obese people.  Bring out an average and all will be well.

The Land Registry published it figures for house prices last year.  It is always late as real data is much harder to deal with than the other stuff.  Again I forget the figures for last year – a small increase I think.  What those numbers show is that house prices have dropped 17% since their peak.  What about inflation over that period.  Using the most optimistic figure of 14% then house prices have descended by about a third since their peak.  If I use other figures that are to my mind more realistic, then the price of a house has dropped 40% from its peak.  There are two types of houses to consider.  The largest group is those where the owner lives there.  The owner has had to pay council tax, insurance and maintenance.  This all comes out close to a nice round 50%.  Were you not there you would be paying rent and in a market the cost of a rental and an ‘own’ converge or lots of people move from one to the other.  That is, unless they are trapped in an ‘own’ where they have negative equity or following a move will have no money and will be unable to rent.  How many of those are there?

The other type of house is where the owner rents to another person.  They have had a 50% loss just the same as an owner.  However whatever money they have in the property could have been in the bank or at least earning interest through some instrument or another.  After tax they would not have covered the loss due to inflation but it would be ameliorated instead of losing 50% perhaps leveraged by a loan on the property.

In the report there is a note that this is the average loss since in London property rose nearly 10%.  This is put down to foreign money coming into the London property market.  Gordon Brown and the BoE engineered a 25% reduction in the value of the pound a few years ago.  So it was a good bet moving money to the UK.  There are big chances of a large gain and, relative to other places where they might put their money, not much chance of a loss.  So the average price movement covers up a large subsidy for foreign buyers.

I do not understand why there is not much publicity about the 50% loss to home-owners over the last 5 years.  One answer I have is in the form of some questions: where do you see house prices going over the next year or two and what do you see inflation doing given BoE inactivity over the last 3 years on that measure (other than to encourage its increase)?  If you are a first time buyer what would your strategy be if you knew you were about to make a leveraged investment that is almost guaranteed to wipe out your capital and saddle you with a debt of up to 4 times what you put in yourself?

It is obvious: put the oven on I’ve got some new numbers to cook

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Let me say that another way

Posted by chrisrick13 on January 26, 2013

It is obvious: there is no hope that those in charge will do the right thing

The last quarter had UK GDP negative.  This figure is based on about 40% of the data.  So a revision is almost inevitable and the revisions seem to be mostly down.  It will get worse.

A recession, should you call it technical or not, is defined as two quarters of shrinkage in GDP.  I hear loonies like Ed Balls warning of a triple-dip.  I also hear and see the media saying that a triple-dip recession would be the first in history.  Hold on a moment.

By that definition we are actually entering a 58-dip recession.  You have to define when you are out of a recession to be able to say that you are entering a new one.  It seems to me that two quarters are needed to define a recession so how many are needed to define an…excession?  I would suggest at least two and possibly more.  I do not see a well described definition.

So the media (and the loonies) are crying ‘triple-dip’.  A better view would be to wait for the full data or at least most of it.  Beyond that as there are so many one-off factors an average or a moving average is a better view.  The average GDP growth over the year is zero.  The two quarter moving average over recent quarters is:

2008  Q2 -0.4
2008  Q3 -1.35
2008  Q4 -1.95
2009  Q1 -1.8
2009  Q2 -0.85
2009  Q3  0.1
2009  Q4  0.4
2010  Q1  0.5
2010  Q2  0.65
2010  Q3  0.65
2010  Q4  0.1
2011  Q1  0.0
2011  Q2  0.25
2011  Q3  0.35
2011  Q4  0.15
2012  Q1 -0.25
2012  Q2 -0.3
2012  Q3  0.5
2012  Q4  0.3

Same numbers but a very different picture.  A nice solid recession running through 2008 into 2009.  Then a bump along the bottom to 2012 where recession hits again.  Then we have a debate and a wait for the numbers.  Did we get out of the recession in the latter part of 2012?  0.3% growth sees no recession by any measure but the moving average for less growth indicates that there is no recession yet.

If you look at the optimistic forecasters (ONS, BoE, IMF) then there will be growth in 2012.  Anyone who has been close to accurate in the past has us in shrinkage.  In August 2011 the BoE forecast that growth for the UK in 2012 would be 2.5%.  As you can see it was around 0.25%, so only a factor of 10 out or if you like percentages it was wrong by 1,000%.  So what do you think of their prediction for 2013 of 1.0%?

It is obvious: there is no hope

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Pay attention!

Posted by chrisrick13 on January 20, 2013

It is obvious: I pay interest to important stuff

Twice I have had chance to vote explicitly on EU matters.  Or is it three times.  It is obviously so important.  On those two (three) occasions I voted ‘Yes’…or was it ‘No’.  It is obviously so important.

I do remember trying to get unbiased information so that I could decide which way to vote.  I know I failed in that.  So my vote was a coin toss.

If I re-state my view that the EU is about to become an irrelevance you might wonder why I bother to discuss it.  It will become an irrelevance because it will fail.  The damage that it does or rather that those in charge do, is quite relevant.

If I assume that it will continue and prosper I wonder how they might punish us for not being members.  For example there is a large trade imbalance in favour of EU countries.  So a trade embargo will do little to hurt us: we ban you from buying our stuff.  I think that China, India and many other countries will happily step in.  Perhaps even the Commonwealth countries might welcome a return.  Remember New Zealand lamb?  We would have to follow EU regulations to export to the EU, but would have no say in their formulation.  Plenty of other countries do that already.  We would not make net contributions to French peasant farmers under the CAP.  What a huge loss that will be.  We will be able to extradite terrorist without reference to European courts.  That does not seem a problem.  We will be able to control immigration from EU countries.  As we were one of the few countries to impose no restrictions on Polish and other eastern bloc country immigration within the EU, we will just be doing what those other EU countries are doing already.

So my very poorly informed view is that we will suffer little if we are not in the EU and quite possibly will do better out than in.  Trouble is that I still can do little to check out my views.

The only thing I can say is that when I have seen debates about ‘In’ or ‘Out’ the ‘In’ proponents have been less convincing.


It is obvious: I pay interest to important stuff but it doesn’t seem to help much

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Gizza Job still

Posted by chrisrick13 on January 15, 2013

It is obvious: small wins feel as good as big ones

Into the jobcentre.  A cursory hello.  Get out the note recorder paper and pencil.  Stare at jobcentre-man.  A deal of embarrassed paper shuffling.  Then a hunt for a form.

“Sign this.”

At the top it says I should read it before signing.  So unfold it for a slow 2-minute read.  It is not some ruse to get me to join the army but asks if I have worked recently.  I am happy to confirm I have not.

Hand it back, pen poised and first question ready for his verbal thrashing.

“Can I have your appointment card”

Hand it over.  Much tapping and clicking on the keyboard and mouse.

“You will see Zeta next time.  Will Tuesday 29th at 09:00 be OK?”

Dancing in the streets!  I’m on the two-weekly signing regime. Grab the card and run out.  32 minutes, kitchen table and back again with espresso sitting in my hand!  I can live with that.

I’ll live with that.  No money but I’m getting NIC credits.  What is the point you might ask as you have your 30 years?  On Monday the pension reforms were announced and qualification is now 35 years, so we’ll wait to see if they retrospectively get me in 2017.  If they do, either through working or signing on I will have the 35 years.  Pays to play the long game.

It is obvious: small wins feel as good as big ones but there are lives to be led.

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I wonder

Posted by chrisrick13 on January 10, 2013

It is obvious: simple solutions never are

The Bank of England decided not to increase the £375bn it has injected into the UK financial system – QE.

The BoE does this to stimulate the economy.  I would suggest that I don’t see much of a stimulated economy at the moment.  The trite answer, and one that cannot be disproved, is that it would be worse if they had not done it.  Oh for a parallel universe to experiment in.

It occurred to me that £375bn is a lot of money.  What if instead the BoE had:

funded a fusion power research programme
put fibre broadband into every home
built tidal power barriers across some of our estuaries
funded carbon capture for any coal-burning power station built
funded recycling of our landfill sites
put solar panels on every south-facing roof
paid to fix all the leaks in the water supply

In fact just about anything that improved infrastructure, employed people, increased skills in this country.

It is obvious: simple solutions never are but it doesn’t mean they cannot be  tried

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Gizza Job

Posted by chrisrick13 on January 10, 2013

It is obvious: there are those who work and those who are busy

I hope not to report on my clashes at the Jobcentre again.  Not least I hope to get a job.  However I have been accused of enjoying in too much.

Yesterday I visited after a cancellation.  I was talking to someone in the USA about a job at the time of my last appointment and could not prove that I had.  I suggested that if they did not accept my word then they were calling me a liar.  That was denied and we went round the loop a few times before the person let it drop.

Then I took paper and pen out and started making notes.  Asked why I was doing it I said I wanted to get it accurate for when I published the account.  The person was not happy.

I asked what the purpose of the meeting was and was told it was to help me get back into work.  I asked how it had helped me get back into work.  Of course there was no answer to that as it had not.  Then he changed and said it was making sure I satisfied conditions.  I asked what conditions had to be satisfied and he said I had already been told those conditions.  I said I would like to hear them again and was he holding me to conditions that he was not going to tell me about.  Then I asked if he was going to help me get a job.  The response was to ask me what help I wanted.  I pointed out that he was the job expert and I was hoping that he might come up with some ideas.  He was by this time somewhat rattled.  He said he could help me to set up my own business.  I pointed out that I had got one of those and had used it for 30+ years.

I asked why I was being called in more often than once a fortnight to sign on and he actually said: to help you get a j…  Before he caught himself.

I had exposed them.  They have formulaic answers that they spout.  Challenging them is easy.  I think that I am getting this person to think about the futility of what he is doing.

He then said that my time was up and he was going on a break.  I asked how long I got and he replied it was 10 minutes.  Then he caught himself as he saw I was writing it down and he said that it was 10 to 20 minutes.  Of course I said that this was so interesting that I wanted my full 20 minutes.  He repeated that he was taking a break and had stood up.  I asked that I get the full 20 minutes next time and turned his screen around so I could see it.  He sat down and grabbed it back.  So I asked him if his break was over.  He told me to leave.

I looked at my appointment card…I’ve got him next week.  So I said that I would see him again soon.

It is obvious: there are those who work and those who are busy and they are not the same group (and I need a job)

PS  I have just got a letter from the Job centre concerning an appointment I missed because I was not well.  It tells me that I can be sick twice a year and must not be ill for more than 14 days on each occasion.  I love it.

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So rich they taxed me twice

Posted by chrisrick13 on January 8, 2013

It is obvious: I’m stupid

The government and many others talk of reducing the deficit.  This is a matter of getting what we spend as a nation closer to the income.  Eventually the deficit is eliminated (sic) and the excess of income is used to reduce debt.  This is a virtuous (and I nearly said virtual) spiral.  For every pound saved and applied to debt a certain amount of interest no longer needs to be found.  We are on a trajectory to increase the debt for some long time.  It will be limited by the amount of time that entities with money are prepared to lend to us.  There is no way out of this unless there is significant growth and a determination by the party in power to save and not spend.  Both of these are very unlikely.

Yesterday Nick Clegg voiced the reality in a challenge to Labour.  He asked what would be cut if benefits were not cut.  Would it be health, education, defence?  That is the point.  Something has to be cut.  Some lots of things have to be cut.  Those cuts means people will suffer.  This is a set of questions that we can debate and choose…for the moment.  Without action, and there is not nearly enough of it, someone else will choose for us.  It will be the investors who not longer invest here followed by the IMF stepping in with an austerity package.  Look at Greece to see what happens.  This is the most optimistic of the scenarios that seem quite possible.

How does the government raise money?  It does it with taxes.  Here the Laffer curve steps in.  It helps little other than to show that there is a limit to the amount the government can take from the population.  It should be a smooth curve like…a breast.  However government has engineered taxation so that it has a very wiggly shape that no woman would want.

The wiggle is a bit like this.  I go to university so pay huge fees because I will earn more when I work.  I work and do indeed earn more so I don’t get child benefit, and pay higher rates of tax.  If I stop working I have too many assets to get any benefits.  When I get older I inevitably get frail at some point and have to pay for my care because I have too many assets.  When I die the government takes inheritance tax ensuring that I don’t pass too much on to my wife and children.  So I earn lots when I’m younger and pay lots of tax on it.  When I’m older the state does not help me at all until I have spent all my assets.

I’ve been heavily taxed on what I earn and then am forced to spend my assets surviving until I have nothing when the state will start to help me…a little.

So my strategy should be to earn enough to live how I want to and concentrate on enjoying myself.  I should get skills that will be in demand all my life so I can work all of it.  Hope for a quick death.  Working hard when I am at my most active to accumulate wealth to give to the state is a poor strategy unless I am Warren Buffet and how many are there of him?

It is obvious: I’m stupid and so are all the other clever people

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