It is Obvious

Chris Rick has got altogether too much to say

Archive for April, 2013

What is worse than a weather forecast?

Posted by chrisrick13 on April 29, 2013

It is obvious: Cassandra had lots of problems


Have you heard the joke about the brick-layer who built a wall and when the foreman inspected it he declared it the worst wall he had ever seen.  He was about to fire the man who defended himself that it was not that bad a wall as walls go.  The foreman said that if he could show him a worse wall he would not fire him.  The brick-layer took him to another part of the site and showed him a second wall.  The foreman had to admit it was worse.  Reluctantly he agreed to keep the brick-layer on but asked him if he knew who built that second wall. “I did,” replied the brick-layer.

I read today that the Spanish government expects the economy to contract by 1.3% this year and not the 0.5% contraction it predicted before the year started when it could still be called a prediction and not a ‘statement of the bleedin obvious’.  What a surprise.  Are any of these numbers ever revised upwards?  At least they are following Rick’s law closely.

It also predicts that the economy will grow next year by 0.5%.  I can’t offer any fact based comment on that. 

Last year the economy contracted by 1.37% which was almost a record.  Of course the prediction for last year was one of growth.  What a surprise.

Sit and have a think of any factors that might affect the Spanish economy over the next two years.  I can see lots of EU countries with contracting economies.  These are major trading partners of Spain, so no growth there.  I can see a lot of Spanish banks that are not very healthy due to non-performing property loans.  So that will dampen business activity in the country.  I can see more than a million empty houses with nobody remotely interested in living in them.  I cannot see any strong factors that will likely cause the needed 2% change in the economy for the prediction to come true other than downwards ones taking it in the opposite direction.

I bet, and will put money on it with anyone who cares to take the bet, that the Spanish economy will not grow next year.  I might also bet that not only will it shrink next year, it will shrink more than this.
It is obvious: Cassandra had lots of problems that you just don’t get today


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Buzz off

Posted by chrisrick13 on April 26, 2013

It is obvious: I look after myself

When I was young I remember seeing on tv bulging nets of huge healthy fish being hauled on to trawlers in the North Sea.  Roll forward and we have been through the Cod Wars with Iceland (OK in the Atlantic) and huge trawlers from Spain and other European countries fishing North Sea until there are no fish there.  Recent pictures of nets being pulled on to trawlers are of small amounts of very odd-looking fish.

The evidence was that unless fishing stopped there would soon be no fish.  However that is tomorrow’s problem.  For all the fishermen who made a living in the North Sea and the countries that needed the fish to feed their populations there were fish there so drag them out.

Now we have few fishing boats on the North Sea coasts as there are no fish for them to catch.  Perversely as there are few boats the fish are starting to come back.  No doubt we will go through the cycle again of recovery, overfishing, no fish, recovery…

During that period of overfishing, now proved beyond question, there were endless presentations of arguments and counter arguments that fishing was OK.  Sufficient that fishing continued to where we are today.  I remember the same situation with the evidence that smoking was bad for you and the thirty year rear-guard action by the tobacco companies delaying the start of proper action to limit smoking.

One of the arguments was that we could stop UK trawlers but foreign ones would just ignore the regulations and fish.  So why not let ours do it?  One of my acquaintances bought ivory trinkets when he was abroad and his argument was that they were in the shops so the elephant was already dead – what harm was he doing?  Same incorrect argument.

So it is with decisions made by the government.  On what basis are they making them?  Whenever the government enacts laws in an area I know a little about it seems that the decision is mostly based on some poor evidence from an interested group.

I have loan-bees at the bottom of my garden.  The crops on my fruit trees have more than doubled in the time that they have been there.  We lost one of the hives over the winter and there is a constant watch by the owners for problems with the hives.

Near to my house in Dorset there is a field of Oilseed Rape.  Over a million plants in the field.  In order to get a crop there are 20 million flowers need pollinating.  One of my hives with 50,000 bees does it in a day easily.  They go back the next day and do it all over again.  If the farmer did not have the bees then maybe 10% of the crop would pollinate and produce seeds.  He could use, say, 1,000 people and they could pollinate 90% of the crop in a week.  Perhaps this is an answer to unemployment over the summer: get them in the fields pollinating.

The farmers are spraying their crops with pesticides.  They are on sale and instead of losing 20% of the crop to pests they only lose 5%.  That extra 15% of crop pays for the pesticides many times over.

The pesticides are killing the bees.  So the farmers can have 95% crop and in a few years cut to 10% or they can have 80% in perpetuity.

The government agriculture minister has said that the evidence does not point to pesticides being a problem and is about to vote against a ban being proposed by the EU.  I don’t want to say I told you so in a few years.  I have signed the petition and will be in Parliament square to protest today.  I will also be voting for anything but Conservative in the next election.

It is obvious: I look after myself because the government does not

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I’m giving up smoking

Posted by chrisrick13 on April 25, 2013

It is obvious: headlines are very interesting


East Croydon station is my worst habit.  I can’t hold my breath long enough,coming off a train, from the barriers to get away from the smokers clustered just out the building to a smoke free zone.  Same for going in.  When I leave Waterloo I have to hold my breath from the top of the stairs down to the road below and about 20 yards along it.  Then there is a short period where I gulp in air before running the gauntlet into the building I’m working in.  When I’m asked by doctors if I smoke I should answer that I’m trying to give it up.

I really did wish that I smoked because I could improve my health hugely by giving up.  I’m not exercising at the moment because I damaged my back rowing.  It is not easy reducing calorie intake to compensate.  I think that all the exercise did for me was to allow me to indulge in eating a lot of unhealthy stuff.  Perhaps for the sake of my health I should give up exercising.

Life is so perverse.  The BoE is putting in place a lot of schemes to encourage banks to lend at low rates of interest.  This will encourage businesses to borrow and increase the GDP of the country thus getting us out of our financial…mess.  Alas banks are reverting to type.  Typically they only lend to entities that don’t need the money: if you are a good credit risk then you have lots of money and few debts.  Also the banks might be getting cheap money but they are lending it expensively.

The main problem is that businesses do not want to borrow.  They have different sources of information to government.  Or perhaps they have the same information but are not constrained to put a brave face on things, a euphemism for lying.  So it is a horse to water time.  If there was one group of people I might listen to it is the people running successful companies.

I bemoaned the lack of advertising for ISAs this year.  The banks don’t need the money why bother chasing me for it.  I was going to move some money from NS&I to an ISA.  I can put £11,000 into an ISA for both of us.  The ‘improvement’ in interest over a year is less than £100.  I should get every penny I can but I’m not going to do it.  Being in cash is not a good idea at the moment.  Being in a bank similarly.  Being in a government might be better,but I’m not convinced about that.  I think being in gold might be good and that pays no interest at all.

I’m back to one of my favourite jokes: what is the best way to get to London?  Don’t start from here.  There is a race going on between the reducing house prices, (that are down over 30% from their highest point) and their use as a store of value in the face of a large reset in the economic system.  I think that if you are starting from here, then stay here.  It is no good doing this unless you are confident that you can feed the beast through any rest to come out the other side.

As a reluctant commuter I read AM on the train today.  Bankia made a profit in the last quarter.  This is the bank that the Spanish government created by joining a bunch of failed, what we maybe call, building societies.  The government put a teeny bit of money and watched.  Sure enough a year later it declared a £2bn loss and asked for a bailout that eventually ran to over £30bn.  The government then took all the non-performing loans away from Bankia and put them in a ‘bad bank’.  This left Bankia with 3 things: a name, a retail banking business, good debts.  Difficult not to make a profit, but is it really Bankia any more?  No it is not.  I hope the publicise the progress of the ‘bad bank’ just as much.  Who owns the ‘bad bank’?  The Spanish government went around collecting cheques off the population.  They will go round a few more times yet.
It is obvious: headlines are very interesting, shame they don’t ever carry useful information

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Watch out there’s an idiot about

Posted by chrisrick13 on April 18, 2013

It is obvious: do not open your mouth

It is every citizen’s duty to avoid tax.  You should pay exactly what the law says you should pay and no more.  Consider a tax system where everyone pays 20% on everything that they earn or profit from by trade of any sort.  A bit fuzzy.  I am not an expert.  But for most people their tax affairs will be simple and the tax cannot be avoided.  There would be a lot of wailing and some groups would be a lot worse off than they are now.  Not going to happen and nor should it.

I can see one big hole where there are people who can move income from one tax year to another.  But it will make no difference they will pay 20% on it next year.

How simple is tax in this case?  PAYE is simply 20% of everything that a person receives.  They can pay it up front.

If not that then how about a tax rate of zero which makes collection very easy, and VAT at 30%.  You can avoid tax: don’t spend any money.

When a politician comes along with a stupid law on tax then you must avoid as much as you can.  This might stop them introducing stupid complications.

Suppose that with the complex laws you spot the revenue have charged you too much tax.  Note that the revenue gets 60% of all tax calculations wrong.  You will, if you realise, challenge it and avoid paying tax.  The error might well be something simple like they forgot to include your pension payments and credit you with the tax relief.  But what if the error is that there is a complex loophole in the tax regulations that the revenue did not take into account as they did not realise it existed?  It is exactly the same as missing a pension relief.  The tax system it defined and it was not applied correctly in both cases.

The soon-to-be-governor of the Bank of England said today that if there is a persistent ability to avoid tax that the burden falls on those who are paying their fair share and then have to pay more than their fair share.  This sounds very like plunging interest on ISAs and other bank savings products, tariffs on telephones, TV, gas, electricity and many others.  You avoid paying more than your fair share by learning all the rules and making sure you are in the best place.

So it is with tax.  If that is a problem Mr Governor-to-be then get the tax rules simplified.  Idiot.

It is obvious: do not open your mouth unless you are hungry or have something worthwhile to say

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Somebody else’s money

Posted by chrisrick13 on April 17, 2013

It is obvious: most the people are wrong some of the time

In the 1980’s there was a very funny program called “No the Nine o’ Clock News”.  Funny and novel.  I remember the sports section one night.  It showed a penalty being scored in a football match and then in the slow motion replay the goalkeeper saving it.  It reminds me of the £100,000 a week footballer taking a penalty last week and hitting it over the bar.  He is sure to be offered a job by a bank, the government or the IMF when he has done playing…did he even start?

It was in 1981 that Margaret Thatcher was trying to run this country and get its economy into a stable state.  There was high inflation.  There was a recession.  The public finances were in a mess.

It sounds a lot like today except that the unions are not running the country and inflation is relatively low.  At the time 364 economists wrote an open letter to her criticising her policies.  She ignored them, got inflation down, got growth back, put the budget into surplus and started paying down the debt.

It is ironic that one of those economists was Mervyn King.  He has a recession.  He has public finances in a mess.  He is working on getting inflation up.  Perhaps he is waiting for that final condition so that Thatcher’s policies can then be enacted as a sure way to solving the problem.  Does he care really?  He has a pension and it is index linked.

I do not think that the government is doing the right thing.  There are those better at describing  scenarios that might work such as Shaun Richards.  I’ll leave it to them.  What is interesting is that yesterday the IMF said that the UK was doing austerity too hard.  Much less austerity was needed.

I need a quick review of the performance of the IMF.  3 months into the year the IMF has cut the prediction for growth in 2013 for the UK from 1% to 0.7%.  Not much has changed since December when they last forecast in the trajectory of all the statistics.  Surely their model could have done better?  I will forecast that they will cut again in June to 0.4% or lower.  I cannot call these numbers forecasts as their is so little future in them and they never keep a forecast the same from one period to the next.  Indeed that is the evidence of good forecasting: revised figures, in the light of more and more recent evidence, that change little.  Certainly reducing amounts of change moving to obvious end point.

So we have 4 countries under the control of the IMF: Portugal, Ireland, Spain, and Italy.  I could add Cyprus but I don’t think that qualifies as a country any more.  These 4 are undergoing severe austerity at the behest of the IMF.  Austerity much, greater than ours.  This is the IMF method and they only have one.  Cut back expenditure and get the budget into surplus at whatever cost.  It is one of reduced employment, reduced public services and poverty for a lot of people.  It is required medicine, best taken in big doses to get the illness over quickly.

Suppose that tomorrow we threw ourselves on the mercy of the IMF?  What would they do?

It is obvious: all the people are wrong some of the time; all of those in charge are wrong most of the time

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Margaret Thatcher

Posted by chrisrick13 on April 17, 2013

It is obvious: I can count

I went to see the hearse go past today.

I read in several places of people complaining about the £10m cost of the funeral today.  Margaret Thatcher negotiated a rebate from the EU that in today’s terms has so far put £300,000m into the UK and continues giving to us every year.  Let them take the £10m out of that.

I read in several places of people complaining about the £10m cost of the funeral today.  Margaret Thatcher caused ‘Big Bang’ to happen.  It turned the UK into a major financial centre.  It is a large part of our GDP and contributes large amounts of tax to the government every year.  In todays terms it is worth £600,000m and continues giving to us every year.  Note it was nothing to do with the banks and the credit crunch.

I read in several places of people complaining about the £10m cost of the funeral today.  Margaret Thatcher was instrumental in the downfall of the USSR, the removal of the threat of nuclear destruction and the consequent peace benefit.  Something like £100,000m and it continues giving to us every year.

The £10m cost of the funeral is not the incremental cost.  The police and armed forces are there anyway – fully paid for already.  However the security forces have had a full-scale exercise to sharpen their skills.  The benefit is easily measured by my body-count index and we might well have those bodies alive when they would not otherwise have been.  That cost is incalculable.  But the incremental cost?  Not even £5m.

Even without counting many other factors this country has £1,000,000m which it would not have had were it not for Margaret Thatcher.  Take the £5m out of that.

It is obvious: I can count and I can challenge

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Hope I die before I get old – Pete Townsend

Posted by chrisrick13 on April 16, 2013

It is obvious: I can do better

The inflation rate (CPI) for the last year was 2.8%.  I live somewhere, as do most people in this country, so I’ll go with RPI inflation which includes housing costs and has inflation at 3.4%.  I could go with some other views of inflation with a better provenance which have it at 5.2% but I’ll stay with RPI.

Wage inflation over the same period was 1.2%.  This means that we are well placed in the race to the bottom.  Every 35 years our wages will buy half of what they bought before.  Wonder what that will do to house prices?

I have not found an ISA that pays 3.4% so it is not possible to insulate even a small part of any savings I have made against inflation.

I wonder if the Bank of England have thought of swapping their inflation numbers with the GDP growth numbers?  Probably nobody would notice.  A bit radical I know, but they could try policies that would get that effect as the ones they are pursuing have done the opposite of what they want.  Why not increase interest rates and suck back QE money?  Cannot be worse than what they is happening now.

It is obvious: I can do better – difficult to do worse

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Are you sitting comfortably?

Posted by chrisrick13 on April 15, 2013

It is obvious:  I will have to go to the bookies

Then I’ll begin my fairytale.

The IMF, EC, and ECB have just predicted that the Greek economy will return to growth in 2014.

Greece has debts of about 160% of GDP and the troika (the 3 organisation mentioned above) have said that debts must be cut to 120% of GDP to be sustainable.

Now sit uncomfortably.

Debts of 80% or more of GDP are and have been for a long time considered and proven to be a death spiral.  The big exception is Japan because of the way they save.

The Greek economy is contracting.  This is for many reasons, not least because of the austerity imposed on the country by the troika.  For the economy to recover and for income to exceed expenditure (not least after paying interest on troika loans) requires huge increases in productivity of what Greece does at vastly improved efficiency.  Greece does not do a lot and there is no good reason to predict it will do more of it in 2014.  Chances are it will be even less.

An increase in GDP is a good thing provided it is producing an income greater than expenditure.  An increase in GDP from a very low base is increasingly possible…but not useful.

With a large percentage of the population not working I can see wages in Greece reducing as ever more desperate people are prepared to work for anything to enable them to survive.  Greece is leading the European race to the bottom on wages, hotly pursued by Cyprus and Portugal.

There is no way that the Greek economy will grow in 2014.

However there is an opportunity here.  If I was able to trade in exotic financial instruments I could effectively bet against that prediction.

It is obvious:  I will have to go to the bookies – are they still taking bets on the winner of the 1966 world cup?

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Margaret Thatcher

Posted by chrisrick13 on April 15, 2013

It is obvious: I remember
There has been and will be strident publicity seeking from the left in this country.  Part of this is anger at her significant part in the downfall of the USSR.  She helped remove the threat of nuclear Armageddon and pushed the people of the USSR on to a fate that might so far not be better, I think it is, but at least one that is much more of their own choosing.

She was sceptical of the EU and got us our rebate.  As a result this country is over £100bn better off than it otherwise would be.  However she was not just an implacable opponent of the EU.  She attempted to work within the EU to improve it.

She fought the miners.  This was on the basis that the government ought really to run the country and not the NUM.  I could put up a long case for Mrs Thatcher and her actions.  I have looked into it and lived through it in one of the big coalfields with all my family coming from North Nottinghamshire.  If challenged I will write a couple (of hundred) pages about it.

She persuaded the population of the UK that she was someone worth voting for on 3 occasions.  It was the majority of us.  After she had gone, John Major was able to win another election.  Partly this was because the economy had been moved to a good state.  The Labour government of Blair that took over had a great opportunity to build a very strong country economically but instead chose to spend and borrow.  I will bat aside any arguments for that with my body count costing model.

She said that Argentina could not just take the Falkland Islands off us.  On the basis of their claim a lot of other countries returned to their original owners that were ‘taken’ at the same time as or after the Falkland Islands includes the USA and Canada, Australia, China, Tibet, most of China, India,…  No Argentina’s claim has no basis.  …and now there is oil out there and it is ours!  She was right again but for different reasons.

I could mention some figures from the last few decades.  Do you remember them?  Jack Dash: he persuaded dockers in London that they could work for very few hours a week for huge amounts of money and steal anything they wanted provided they went on strike at any attempt to erode that power.  How are the London docks doing now?  Dead now with few at his funeral.

Derek Robinson or Red Robbo as he was known.  He was a communist committed to the downfall of western democracy.  He dangled carrots in front of British Leyland workers.  He persuaded them that they could also be paid huge amounts of money for little productivity.  Selling cars was irrelevant as the government would pay those wages for ever.  Will there be many British Leyland workers at his funeral?

In the list of memorable people of recent times I have to mention Gordon Brown.  I could mention Brown’s Bottom where he sold gold reserves at the lowest price possible, guaranteed when he announced that it was going to happen.  He complicated our tax laws beyond belief.  In his first day in office he took £5bn a year out of our pension funds.  Is there any wonder that so many pension funds are underfunded?  If the economy were in the same state when he got it as when the credit crunch started we would be in a very good place.  Instead he took it to a place where we are in a hole with no way out other than one from a selection of very painful options.  I wonder how many will be at his funeral.

I will be at the funeral.  I won’t defend her – she does not need it.  As she is not here herself her record will do it.


It is obvious: I remember a lot better than many others

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The hunt for a brain cell continues

Posted by chrisrick13 on April 11, 2013

It is obvious: if it moves: tax it

I have been aware of the proposed ‘Tobin’ tax that the EU is going to bring in very soon.  I have not paid it much attention as it is such an absurd idea that it will never be enacted…

The idea is that a small levy is made on all financial transactions.  I think the seller pays as he has some money that it can be extracted from, or maybe the buyer ultimately pays.

If the world puts it in place at the same time then it works because there is no choice.  If just one country does not apply it then they get all the business in the world.  If you lay 10,000 worms end to end…one of them would  be sure to wiggle and spoil it all.

In a business that often works on large numbers and small margins this tax is a killer.  They had a similar tax in the UK on gambling.  The small betting carried on and the punters just lost their money quicker.  The big gamblers simply went and bet in another country.  They have now abandoned it and the bookies pay a percentage on their profits.

This type if tax has been tried in several countries and abandoned as their industry simply went elsewhere.  France is doing it at the moment and it is to be generous a flop.

For those who might not like a particular situation but will tolerate it if everyone has to use the same rules I will point to the way French farmers and German car makers have been protected.  It hurts to say it but we ought to have UK bankers protected…in the same way.

It is a nonsense tax and it is staggering that the decision makers in Brussels could not see it thus.

That last sentence had me in a lot of trouble.  If something bad (or good) happens in the UK I can ask why the government/Cameron/coalition did not do the right thin.  I know who to attribute the blame to.  Who do I attribute actions to in Europe?  ECB?  EU? European Parliament? Commissioner for this that or the other?  President of the council?  Angela Merkel?  There is nobody clearly accountable and in line with Tony Benn’s 5 principles I have no idea how they got there, how I might remove them or who they are accountable to.

The Laffer curve operates everywhere.  It is a solid law.  If the curve is very narrow, as it is here, then it is easy to get into a lot of trouble and reduce your tax take to zero or below when costs are considered.

Perhaps it really is time to vote UKIP.

It is obvious: if it moves: tax it until it stops moving

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