It is Obvious

Chris Rick has got altogether too much to say

Archive for March, 2013

A fistful of paper

Posted by chrisrick13 on March 31, 2013

It is obvious: in all, timing is everything

You put your money in a bank.  Why?  A large part of the reason for doing that  is because you can easily pay bills.  Your salary comes into it (if only).  It will make money available to you all over the country or even the world.  You do it because the ‘retail’ banking works very well.

As a business there is not much danger in this.  Money comes in and mostly only goes out if there is arrived-money to match it.  Money is not hugely efficient in its passage through bank accounts so there is opportunity to use the money and…gamble with it…until the person wants it back.  Of course the banks can charge for their services but they don’t.  Except they do in a fairly underhand set of service charges and outrageous fees for foreign exchange and other less heavily used functions.

If you want to leave money in a bank to earn some interest you can.  What you won’t do is to keep up the value of your money against the forces of inflation and taxation.  As Lenin said: “The way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation”.  It’s good to experience a right-wing government doing that to us.

So if you want to keep your money away from a bank then buying yourself a decent safe and bolting it to the floor is not too bad an option for at least some of your money.  It will lose value but not much beyond keeping it in a bank.  If you were in Cyprus it turns out it was a lot safer than keeping that money in the bank.  The problem comes when inflation takes off at a decent pace.  Then you need to empty your safe and buy stuff.  Go reasonably illiquid with things that you can use to survive with or trade.  However those pound notes in your hands are very liquid and turn into stuff at speed when needed.

The FIAT money that we all use is vulnerable.  However if that money goes then things will have reached a poor state.  We will be into buying shotguns not least to shoot and eat the squirrels and cats that come into the garden.  I don’t believe we will go that far and I can’t think of any useful preparation.  Perhaps it is just a being chased by the bears syndrome: you don’t have to run faster than them, just don’t be slowest in your party, and that is easy to do.

Running is something that is happening a lot.  You sit there with a warm glow that you have spread your money around a number of banks.  Nowhere is it more than £85,000 in an account so it is all safe.  Then you look at Cyprus and realise that it is not.  You also notice that the money over £85,000 is as far from safe as it possible to get.  Why is there not a differential rate for all the money over £85,000 as it is at more risk?  Simply because banks can set a lower interest rate and nobody says anything.

So having money under your carpet is not a very smart thing to do.  Neither is having it invested because any investment involves a bank somewhere along the line.  Banks are not safe.  They never have been.  The difference is that now we have seen it in action.

It is obvious: in all, timing is everything but in waiting for a bigger fool you might discover there isn’t one.


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Told you so – 4,672

Posted by chrisrick13 on March 28, 2013

It is obvious: I keep telling you

Not done it recently but an extension of my 4-cents-a-passenger-mile theme was to mention how big a cheque we would each have to write to put things right.

Really, I never thought it would happen, but it has in Cyprus.

Have you thought how you might prevent yourself having to write that cheque should Mr Cameron come knocking at your door with the NHS standing behind him (more dangerous and frightening than the army).

It is obvious: I keep telling you and I think I might have to start listening to myself

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Lot of rats about

Posted by chrisrick13 on March 28, 2013

It is obvious: I can count

1997 – I was faced with an uncertain future (sic).  I had also watched, so called, investments going in only one direction.  House prices had just started what I judged to be a long upward climb and not the jet-propelled elevation that happened.  I decide to buy a second house rather than just a bigger one to live in.  It had to earn its keep which it just about did and I funded the mortgage by stopping payments into one of my pension funds.  Not cashed in yet, though neither have I done so with my pensions, but it is the best investment I have made…apart from shares in Unipalm.

If I make nothing from it there is one big advantage it has over a pension.  All you can do with a pension is look at it from a distance.  Rather you can look at someone else’s description of it from a distance.  At least with my pension I have been in it, slept in it, rodded its drains, painted its walls and dug its garden.  Look at numbers on paper is all that many of us might ever do with our pensions.

An investment returns earnings based upon the risk associated with it and its liquidity.  A pension is mostly illiquid at the extreme end.  All you can do with it is buy an annuity.  It is supposedly risk free but as an Equitable Life pension holder I could have a long conversation about that.  It has tax breaks.  However even in a good pension I am convinced there are much better things to do with your money.  The exception is when your employer chips in with some cash…lots of it.

My wife has just joined her Local Authority pension scheme retrospectively for last year.  £6,000 has gone into the fund of which she has paid £4,500.  Not quite.  She got £1800 tax relief.  So she has paid in £2,700 that she could have otherwise spent in Cafe Nero.  She could tomorrow declare the fund done and take out £1,500 as cash tax free.  This means that she would have paid in £1200 net.  What does she get for that?  A pension of about £360 for the rest of her life or until the global financial system collapses.

In yesterday’s world that deal is an easy one to judge.  She could have put the money, after tax, into a bank account earning interest that is also taxed and does not come close to matching inflation.  That is the price of risk…or the lack of it.  But she could call at the bank on her way to Nero and grab a tenner for her coffee any time of the day or night.

Except that it is no longer the case in Cyprus.  You can look at your money, but you can’t touch it.  Someone already came along and threatened to take 7% and if you are unlucky enough to have a lot of money then you have lost it all (trust me).  So this meets all the requirements for a very high interest product: you can’t touch it and it is very risky.  Alas the interest rates on these accounts has been move to zero.  Oh dear.

But it does not matter you can get 300 Euros a day if you live in Cyprus.  They are in the eurozone so what is that all about?  Thought there was free movement of money?  Thought that the Euro was the same everywhere?  Clearly it isn’t in Cyprus.  So all the eurozone rules about debt and deficit levels and common currency are just abandoned when convenient…or inconvenient.  So this money does have some liquidity.

But it is OK these look but don’t touch rules are only going to be in place for 7 days.  Did you get that: 7 days.  Are you counting?  Day 1 is done.  I’ll be back in a week.

Eurozone banks are leveraged at about 26 to 1.  I bet the Cypriot ones are bigger than that.  Cyprus is not a big country, I lived there long enough, and now it is in two bits so both bits are pretty small.  Say there are 100,000 local accounts in the various banks then for every 3 days the banks are open £1bn disappears from the banks.  On its own that is a huge logistic problem.  Also the career move in Cyprus now has to be burglar.  However every 3 days there are £26bn of loans that have no backing whatsoever.  Another 6 days.  Just £2bn and then the floodgates open.

It cannot go on long.  The motivation levels in people with all they have worked for destroyed and no future are very high.  They will force things soon enough.  The politicians will do what the people want which is fair enough…but, cowards.

I have said that you ought to have some cash sitting around (losing value) because you need to bridge a bank holiday.  Did I really believe that I would see one?  Perhaps my equation was that I would get peace of mind for a small cost each year.  Keep my irrationalities happy.  Now I am thinking beyond that.  What happens if a million people in this country decide to stick £1,000 under the carpet?  Will we have a bank holiday?  Will Greece or Italy?

6 days…I am counting.

It is obvious: I can count but I do wonder about the ECB, IMF and EU.  (BoE as well for that matter.)

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Here we go

Posted by chrisrick13 on March 27, 2013

It is obvious: put your fingers in your ears and close your eyes

I saw a black and white film many years ago about an asteroid approaching earth.  It was before green screen and digital.  It would be laughable and the dialogue would be…dated…were it seen today.  However it had a nice ending.  The hero (and his heroine) did everything they could to avert the disaster to the state where they were able to launch the missile in time to intercept the missile.  However it was by no means a done deal.  The last scene was in a newspaper office where they had the print run set up with one of two headlines to print, the staff were just standing around listening to a feed from mission control.  Mission failed Earth doomed, or Asteroid destroyed we are all saved were the two headlines.  Fade away, roll up credits.

I have banged on about triggers over the past 3 years.  Cyprus has all the characteristics of one.  But I think we stand with two headlines for tomorrow.  The Cypriots will get their money from the banks and collapse them and/or there will be chaos and I can easily see some of the people in charge paying the greatest price unlike everywhere else in the world.  Perhaps along with parking we will see, the death penalty for incompetence in banking.  There is a chance we will see it tomorrow.  So there are a couple of endings but both of them are bad.

I am not standing around head in hands waiting for the end of the world as I know it.  I think that getting to a new world quickly is better than trying to keep the old one going longer.  Different does not mean worse.

Tomorrow will be a trigger or history will see it as just the first event of many that were inevitable (in hindsight or the foresight of independent observers).  The end of the bank holiday might be delayed in which case it is the trigger – run for the hills!

It is obvious: put your fingers in your ears and close your eyes, scream if it helps

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…and now a miracle

Posted by chrisrick13 on March 25, 2013

It is obvious: I ought to be doing something

Have you seen Mme Lagarde on television?  She looks lost.  She speaks nonsense: Cyprus has moved to a secure footing able to progress…  She can see the presidency of France slipping away.

What has happened.  A deal has been done.  Most importantly this deal does not involve the duly elected representatives of the population of Cyprus.  The people of Cyprus have been bypassed.

For those of you in the UK you could imagine Frau Merkel agreeing with the Queen that she will lend us a few bob as long as the Queen agrees to give Germany 10% of all deposit accounts.  It does not end there.  A lot of money went out of Cypriot accounts on Friday of the previous week, Frau Merkel gave the nod to the Queen and she had 24 hours to empty her bank accounts.

Sounds incredible, but my analogy is pretty close.

So what does the bailout do.  For Cyprus: nothing.  A lot of EU banks will have their investments in Cyprus maintained at par instead of sinking to zero.  The Cyprus economy that was in a bad way will be forced lower with austerity measures.  The large debts of the country, and of the population, will be increased by £10bn or over 50% of GDP.  That ‘few bob’ for us would be £700bn.  The problem that would happen today will just happen later and bigger with a lot of suffering in between for the population.  They will never climb that debt mountain.

The main thing that will be achieved will be a little more time.  This is to give the friendly aliens a little longer to turn up.

It is obvious: I ought to be doing something but I can’t think what might help

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What now?

Posted by chrisrick13 on March 24, 2013

It is obvious: it is time for bold action.

The OBR has UK debt going up to ‘crash’ levels before the election.  Have you heard anyone mention Tory cuts for a while?  That shut Labour up, at least on that one.  However the OBR is in a parallel universe to ours.  I read today a comment on their numbers with the throwaway line that nobody believes them.  So we have debt going to a disastrous level by the OBR’s numbers which include GDP growth of at least twice and probably four times that which every independent observer forecasts.

Already it seems that the disaster of Labour economic policy over 13 years has been forgotten.  Now the Conservative party are to blame for all our troubles.  By that token Labour have miscalculated.  They will return to power in 2015 if not sooner…and it will be too soon.  I think that the Coalition might well be able to avoid apocalypse and leave it to Labour in 2015.  I wonder if Mr Milliband is ready for his place in history?

Growth is the word.  All who use it are right.  They are right in the sense that it is the only thing that could get us out of trouble.  Were we to do it, which we won’t, then I am sure the party in power would not pay down debt but instead use it to achieve…more growth for a better future a few more years away.  Bah!

Who creates growth?  You and I do.  Governments do not.  The best they can do is to create the conditions where you and I might be inclined to get of our backsides and grow something.  There is one problem with this – it takes time.  It is all very well training 100,000 apprentices or giving tax breaks to start-up companies the resultant growth does not come for many years.  Even were they in place now, any useful measures that the government might come up with will not affect growth until 2020 and beyond.

If you are old enough you might remember on the news every Friday night (it seemed) there were the numbers for balance of trade with shock and horror as it vacillated and oscillated within a few millions of zero.

United Kingdom Balance of Trade


It is obvious: it is time for bold action – that rules me out.

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Will no one rid me of this turbulent…idiot?

Posted by chrisrick13 on March 22, 2013

It is obvious: when the revolution comes there will be a lot of people lined up against the wall

The government numbers for dealing with our debt work because the OBR has fantasy growth rates into the future.  It cannot get away with current GDP but they just accept it and then project even more unlikely rates a couple of years hence where it cannot be absolutely refuted: this is what the model says.  At some point the pattern will become so obvious that the deception will not even work for the most stupid voter…well maybe it will.  I would like to see the debt numbers for the economy assuming that GDP will be 0.3% for the next 10 years.  A horror story no doubt.

The problem is that there is no recipe for getting growth.  Where we are now needs growth to prevent a step change of large proportion.  This is no bad thing as I have said.  However a lot of people will suffer and have their hopes dashed.  I suppose that I ought to back efforts to manage the situation for that reason except that I see plenty of people suffering to pay mortgages and handle the burden of negative equity.  There is some choice of exactly who will suffer.

The best that a government can do is to create an environment where growth is possible.  Sometimes they can manage things to get to the point where it is probable.  Were there a recipe for growth we would have used it a long time ago.  Not only can a government not click the growth button, all the wisdom from earlier years does not apply now – things are too different.

So I am heartily sick of turning on the radio or television and hearing Ed Balls telling me that the government have it wrong and if only they had listened to him there would be growth.  That being the case, and it isn’t, why didn’t he do it when Labour were in power for 13 years?  He was the chief architect of getting this country into the worst possible state to withstand the credit crunch that it was possible to do.  He does at least have a value.  The government have got no chance, but of all the possible options available, given his track record, Ed Balls eliminates one wrong option.

It is obvious: when the revolution comes there will be a lot of people lined up against the wall – not so many actually as I’m contemplating an early start.

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Nearly man

Posted by chrisrick13 on March 21, 2013

It is obvious: there is a lot I don’t need

I watched the 20 minutes of the film Elektra a couple of nights ago.  I missed it when it was in the cinema.  It sits somewhere between science fiction and fantasy.  Given my predilection for D&D I’m surprised I missed it.  It has a plot and a couple of neat twists.  It has some characters of substance, the acting is not bad and Elektra (Jennifer Garner) is very pretty.  I only watched 20 minutes as I had seen it in full on one of the cable channels more than a year ago.  I was busy with something and it was an indulgence.

So it is with my tv that I sit down and start at 101: BBC1.  I end up at 601:  BBC 24 hour news.  There is often nothing between to watch and I annoy my wife intensely with it left on the news channel as a default while I read a book.  The tv is part of my package from Virgin.  I have the smallest possible and were I to give it up would save little money.  What I would do is to increase the bangs-per-buck of my life.  I watched the 6 nations rugby…I could manage without it especially after the defeat by Wales.  I watch NFL in the early hours of Mondays to set my week off to a poor start.  I mentioned Elektra because that is the other thing that I do.  I watch repeats of films that I have already paid good money to watch or have seen before on their ‘network premier’.

I can nearly manage without a tv.  Indeed in my bedroom there is a freeview box giving nearly the same channels that costs nothing as I have already invested in the hardware.  I have yet to have the courage to dump the tv.

I have often bored my friends with the claim that we can nearly manage without a car.  Not permanently but only hiring one when we needed it or using a taxi.  After all our bus travel is free and trains mostly are.  The costs of all that hiring are much less than owning.  It is just inconvenient.   Hopping in the car and…going to spend money is so right.  I might be less inclined to buy things if I had to think about how I might get them home.

So I come to my phone.  Got a smart one.  Smarter than its user I often suspect.  Nobody rings me on it.  My wife texts me a lot coordinating travel and meeting up.  I ring nobody and only text my wife.  A phone with a pay-as-you-go SIM will do it.  Not sure I even need it.  I take it abroad but daren’t use it as the costs are so high.  I need a similar phone in the US and Oz.  I might go that route next time.  Instead of getting a £100 extra on my phone bill for the month of the trip, buy a basic phone with a pay-as-you-go SIM.

Most of the communication I do is by e-mail.  For most of that I can wait until I get to a friendly router and suck it all up on someone’s already paid unlimited use contract.  It is enough.  My laptop does that.  I could go to a tablet.  I would not do a 3G one as the contract for the data is horrendous.  I could get a pay-as-you-go mifi.

So there it is.  Dump my tv package, dump my phone, dump my car. Perhaps get a tablet and perhaps mifi.  Perhaps get a phone.  Will my life be worse?  Will my life be different?  Will I have the courage?

It is obvious: there is a lot I don’t need and I’ve got most of it

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Number 11 bus

Posted by chrisrick13 on March 21, 2013

It is obvious: image is everything

If I am generous then it is 50-50 that there is a god or not.  Trouble is, on the ‘god side’ there are a lot to choose from.  Which one is right?  For at least half of those gods it does not matter.  If you are a ‘good’ person then all will be forgiven – you’re in.  For most of them believing in a false god and you’re out.  The rest have you in hell for eternity or to the end of Coronation Street.

So not believing is 3-1 on as a bet, believing is more than 100-1 against.  So I’m playing it safe.

There is a sport that many of us non-believers play.  Ask a church member if there is a god why they have a lightning rod on the church spire?  Ask them why they bother with health insurance?  There a lot more fun questions to ask.  If there is a god though you are playing with fire…or is it lightning?

This week two leaders of Christian churches are being…enthroned?  I saw the pope coming down the stairs in a long dress or is it a frock.  He had a minder holding his arm as he came down the stairs.  Looked a bit doddery.   Perhaps he was just not used to wearing women’s clothing.  The soon to be Archbishop of Canterbury was on the news this morning jogging or even bounding up some steps.  A woman will install him today.

It is obvious: image is everything, cheaper than substance as well

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Shocked and dismayed

Posted by chrisrick13 on March 21, 2013

It is obvious: the budget measures will fool a lot of people

The government is to help first-time buyers to buy.  Houses that is.  Without first-time buyers there is no housing market.  If there is no market, then houses will have little value.  The prostitute’s question applies because there would be value where suddenly there would be more than one person interested in buying any given house.  This price is a long way below where prices are now.

We need a housing bubble.  That will keep the illusion of our personal and national wealth running…a little longer.

Do not forget that we have interest rates at a record low for a record time.  There is still the nonsense that it is to enable companies to borrow and keep mortgage costs low.  I will mention my last mortgage at 0.1% above base rate.  I do not see that on offer anywhere.  No matter, the mortgage interest rates that did not seem to go down much as the base rate went down will leap up when the base rate goes up.

In good times in the past the average price of a house was about 3 times the average yearly wage.  This is merely a function of the average interest rate affordable on that salary.  We are at over 5 at the moment and many people bought when it was much more than that.  There are many people who are not able to pay their mortgages.  There are many people punishing themselves to pay their mortgage (and not staying in my holiday home).  There are many people sitting in paid for houses smugly considering themselves rich.

Why are first-time buyers being lured into the housing market?  They might get in now but interest rates have nowhere to go but up.  House prices are down and have nowhere to go but down.  So why join the desperate people with a mortgage?  Hang in there.  Rent.  Go and live on the beach in Goa in your own hut with breakfast thrown in for £3 a day.  Get a bit of sun, a few tropical diseases and lose a few pounds.  Come back in a year and look at prices.  Then go away again.

Whatever you do, don’t get sucked into the bubble if it even develops.  As for the smug ones.  You have no hope whatsoever.  You can stay where you are and watch your wealth plummet.  You can move to a rented place and watch the value of the cash from your house plummet.  You might be lucky enough to watch the government arbitrarily take 10% of it and can bask in the warm glow of knowing that you contributed to the national debt…or more likely the interest on it.  If you can find a good home for your cash you can play the timing game: sell at the top stick you money away, buy the house back for a fraction in a few years.  There lies a nice moral hazard.

What is the best thing for first-time buyers?  Let houses find a market level at which first-time buyers will buy.  Then they can live in their own houses with realistic chances of staying in them.  The smug ones will not be so smug but they will still have houses and a market that will buy them when they come to sell.  Do not be afraid to let the bubble burst.

It is obvious: the budget measures will fool a lot of people, the people you need to pay your pension in coming years

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