It is Obvious

Chris Rick has got altogether too much to say

Archive for June, 2013

I know what you are doing

Posted by chrisrick13 on June 26, 2013

It is obvious:  I do not know what to do

I read yesterday that a pension fund of £30,000 puts you way ahead of the herd.  It will give you £1500 a year on top of your state pension.  I have an agglomerated fund of much,much more than that and consider it deficient.  Unlike a lot of people it is not all tied up in a pension.  Thank goodness.

My concern is to hang on to my assets and generate an income…that supplements my ability to work until I drop and thereby live pleasantly comfortably during my declining years.  The universe works against me.  Inflation.  Taxes.  Market lurches.

It is bad enough that investors lose their money.  They took risks and they did not work out.  Someone with a £30,000 pension fund will not be ‘short’ on Greek bonds.  Alas, their pension manager might be.  Risk and reward run along together.

If you park your money in a current account.  No interest.  Loss  because of inflation.  There should be zero risk.  Indeed up to £80,000 in this country there is no risk.  The recent beta-test of confiscating assets in Cyprus worked well.  Innocent bystanders swiped by a passing bus.  Do you remember that there was a short period of limiting the cash that could be withdrawn from Cypriot banks two months ago?  Still in place.

So if there is a reset (when) you need to have assets that are not easy to grab but can be easily traded.  Gold is an obvious answer, but not so easily traded.  Perhaps cigarettes as in WWII which were a currency in many places.  A bit like a good wine cellar: you can consume the asset in the worst case.  Perhaps a stronger drug is the way to go.  Of course you will have the new cost of protecting your asset instead of leaving it up to a fund manager or even a government.

Perhaps the biggest grab that will affect all in the UK will be the reduction in buying power of the state pension.  £110 a week is the state pension.  Can you live on that?  Even if you own your own house (in Croydon) £50 a week will go on council tax.  For some they can add in the £30 a week that the above average pension fund will give them.

It probably works  well.  Cut the pension spending with inflation and stick the price of drugs up.  One good cold winter and the Welfare budget will be reduced by a lot more than the £11.5bn that the Chancellor has in mind today.

It is obvious:  I do not know what to do: I need to do the patriotic thing and die.  Bu**ered if I will.

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Are you a student?

Posted by chrisrick13 on June 24, 2013

It is obvious: governments grind very slowly

I remember the first business computer I bought.  It cost £3,500 and I got a very good return from using it.  I remember it had a 40mb disk.  I doubled that with compression software after a while.  I think it had 250K of memory.  It is difficult to judge the cost in terms of inflation as it is so affected by manufacturing advances.  I nearly said technological but the technology had not advanced.  The production processes had.  This was done at around the time of the start of RPI so I know it would cost about £9,000 in today’s terms.  I would find it hard to spend that on a PC nowadays.

I remember at university I got a grant of £360 a year.  It was reduced because of my dad’s earnings and he made it back up to £360.  I worked all summer and at the end came out with more money than I went in with.  I also had acquired a car and a stereo.

Running inflation over that period is more tricky especially as it included the high inflation of the later Labour government years in the 70’s.  Multiply by 10 and it comes to £3,600.

Just 4 years ago my sons finished university.  I subsidised them but they still took out a student loan and as a result each owes about £10,000.  The amount they owe has interest added at the prevailing inflation rate.  Not sure which rate they use but I think it is CPI.  Even if it is RPI it is well below the true rate of inflation.

So student loans are about the same as student grants used to be when I was at university.  That grant was about a fifth of my first salary.  If I think back to when I last worked full-time and was not paid as much as I have been then that grant adjusted for inflation was about a 20th of my income.  Remember though that the student loan is called a loan but it is not.

(Do you remember ‘War Loan’?  Called Consols now.  The nation was encouraged to lend the government money to fight the war.  Interest was (is) paid at 3.5%.  The bonds had no end date and the government has not seen any reason to redeem them.  That 3.5% is on the face value.  The bonds trade at a value that reflects the current base rate and likely direction plus an allowance  (down) because they are not popular and not easy to trade.  At the moment I think you are getting about 4.5%.  If you are in for the very long-term then you have that return ‘locked in’.  The problem comes when/if you want to sell.  Pension funds like this kind of investment as they can match returns to outgoings over a long time period.)

There the similarity to the name ‘loan’ ends for student loans.  It starts to look a lot like a War Loan.  Martin Lewis however recently called it a tax on his tv show.  Indeed it looks very like one to me.  When you earn over a certain amount in a year (or pro-rata in a month) the government will take 9% of those earnings and offset it against your ‘loan’.  If you earn less nothing happens.  If you stop earning (retire) then the ‘loan’ is written off.

There is no incentive to pay it off other than the psychology of it for you.  In the first 20 years after leaving university unless you are very lucky you are going to be borrowing money.  Whatever you borrow the interest will be at greater than inflation.  So keep the student loan and use that money or any earmarked for the loan to reduce other more expensive debts.

After that in 20 years the value of the ‘loan’ in terms of purchasing power might well be the same –  it won’t because this is one case where the government manipulating inflation rates on the low side helps us.  What has happened, hopefully, is that your income has gone up far more than inflation due to natural wage rises and promotion.  As a percentage of the money you have to dispose of it is much smaller.  You might be able to choose whether to go to Starbucks for a coffee or instead use the money to pay off the ‘loan’.

I suspect that at £1,000 a year for university fees it was worth while signing on for a degree and taking out the student loan.  Then after 3 years you have nearly £7,000 in the bank that you can spend at (now) 3% interest and not borrow £7,000 on a credit card at 25%.  At £9,000 for tuition fees that equation has gone away.  However if you were in your 60s and did it when the fees where £1,000 you are probably way ahead of the game.

It is obvious: governments grind very slowly.  If you have the energy you can keep ahead of the grindstone.

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Who cares

Posted by chrisrick13 on June 22, 2013

It is obvious: I should have been a sausage maker

They stuck the guy away for 5 1/2 years for under-age sex.  Not followed it.  I can find enough sadness in my life without going and looking in others.  She was only just under age so likely he won’t be in danger in prison and have to spend it all in solitary.  Good behaviour takes it down to two and a bit years.  Probably no threat and will end up in open prison.

The school issued a statement that it had robust procedures in place to deal with this sort of thing and the staff followed them to the letter.  Pity that the procedures didn’t actually work.  But it is OK whatever the outcome as long as a pre-defined set of procedures existed and they were followed by the staff.  Gone is any thought that a staff member might add something extra and improve on things.  Too much of a risk for all concerned.  Need a jolly good set of procedures to cover anything.  So much for encouraging people to ‘go the extra mile’.

The BBC was at pains to point out that the death of the premature babies in Morecambe Bay was not what the story was about.  It was the cover-up that was the problem.  So the death of the babies does not matter?  All 4 have been named.  One of the people involved had moved on and was immediately sacked from her new job.  There is talk of all 4 losing pension rights and other sanctions against them including possible criminal action.  Again, too sad a story for me to look at details.  It seems though that performance targets were what led to the people doing the cover-up.  That is all linked to them trying to protect their own interest.  Not something you can wholly criticise and not something that any of us don’t do.

So there are possibly 5 people going to be hounded by the system and possible suffer prison as well as financial ruin.

The LIBOR scandal seems to have disappeared from the news.  Lot of people involved but few names that I can connect the cheating and lying to.  Not one word yet of prosecution of those involved which must be a criminal offence in the area of fraud.

The PPI mis-selling has resulted in not one prosecution.  It took a long time to start getting money back from the banks.  Then when the courts were considering some cases the banks stopped paying for a year or more.  Now they are paying but it seems that a bunch of tricks are being tried to delay and reduce payments.

In all the cases I have mentioned I am content to let the lawmakers decide what the rules are.  What I really need to happen is that those rules are applied even-handedly to everyone.  The figure of justice sits on top of the law courts with scales in her hand.  She is blindfolded.

It is obvious: I should have been a sausage maker, my blood boils so much

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La la la la la

Posted by chrisrick13 on June 21, 2013

It is obvious:  it is not the end

Ben Bernanke caused chaos in – what is the collective noun?  In just about every financial market.  I think that does it.  Shares, bonds, commodities (gold and oil in particular).  It caused movements in currencies.  What it did not do was suddenly drop the price of houses.  Not such a volatile market but if a couple of thousand people in various stages of a house purchase from reading the local paper to about to sign the contract suddenly stopped then prices would quickly follow.

Everyone I read was saying that there was a good chance of him saying that he was ending QE yesterday.  A lot of entrails had been read.  So there was little surprise to this announcement.  The drops represented a lot of ‘bigger fool’ plays.  They represented a lot of won (and lost) bets.  I thought this was about markets?

My wife said she was not remotely interested and could not understand why I was.  I know she has got a pension, we have shares and we are constantly turning money into dollars of two different kinds.  Wherever she goes there a hundred thousand go like her.  Don’t worry, your pension fund manager will protect your pension.

The problem for me is that much of the press said it was the end of QE.  To be accurate it was the end (or the coming end) of purchases in the QE programme.  The end of QE comes when the assets that were bought are sold.

The ‘Fed’ has several trillion dollars of these assets.  If they put them on the market what would you do?  I might offer them 10 cents of the dollar.  A lot of the ‘assets’ do need quotes around them as they are not of very good quality.  So $2tn could rapidly be turned into $200bn or even $20bn.  Along with that is the effect this has.  For example the BoE has said that were it not for QE then we would be in a very bad position economically speaking…even speaking economically.  So they have done something that did us a lot of good.  The corollary is that at some time in the future they will do something that is very bad.

That is the end of QE…and a lot more besides.

It is obvious:  it is not the end but the fat lady better come off her diet

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How much information do you need?

Posted by chrisrick13 on June 18, 2013

It is obvious: I could work in a sewage plant

Our postman used to love us.  In his sorting office they have a sweepstake on a regular basis for the postman who delivered to the private house with the most mail over a week.  He won with us every time.  We had a long run of getting mail every day.  The streak was broken last year.

Most of it was junk and went straight in the bin.  Except that I now have to take the trouble to shred all post with personal information on it.  That effort has encouraged me to start turning off all the junk.  I  used to keep a lot as it might be of use one day.  I operated the three-foot rule that I have operated at work for a long time.  All the paper that is not of immediate use, and is not obviously junk goes into a pile.  When that pile gets to three feet high I put the bottom 12 inches into the recycle bin.  That system worked very well for a long time.

My daughter lives in supported living.  She is a demon for Facebook and the internet in general.  I have arranged that I get copies of her incoming mail.  This is filtered to a folder so I don’t look at what she gets all the time.  However I occasionally look at the headings in the folder and spin round all the predators trying to lure her into spending money with them and unsubscribe her her.

My filters in my email are quite advanced.  This is after Virgin have filtered – without giving me the option.  A lot of stuff goes into junk and trash.  Here my three-foot rule is replicated with the 30 day rule.  Stuff disappears after 30 days if I don’t save it somewhere.

There is so much information coming at me that I have to make the decision only to see some of it.  Were I to try to look at all of it I would be totally ineffective (don’t say a word) spread so thin.

We now approach the matter of my coming divorce or double homicide.  (Saatchi is a pussy.)  I often surf the TV channels and end up at the 24 hour news as there is nothing to watch.  My wife insists that I turn it off when she sees it on.  She watches Coronation Street which I insist goes off.  I think the information content of both programmes is similar.  Trouble brewing every day.

But there is some useful information in the news that I see and read.  So how do I find what is useful and verify that it is correct?  I could just cut myself off from it.  I see only one flaw in that.  I want to take part in the democracy that is this country.  I vote every time.  There are other opportunities that I am anxious to take part in such as berating my MP and clicking into petitions.  I even found out about the Bee march and took part in that.  Also I want to be sat in my armchair watching when the financial Armageddon hits.  It is going to be so much fun.

I need some better filters.

It is obvious: I could work in a sewage plant as I do so much filtering

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Ha ha ha ha

Posted by chrisrick13 on June 17, 2013

It is obvious: in politics you don’t have to do anything


I don’t know the provenance but I read that the French Socialist party we’re complaining about the tight rules of the EU on GDP at the weekend.  It blamed Germany and, can you believe it, the UK for the imposition of these rules!

If you think back a little it was the UK that refused to allow a treaty with very tight rules to become an EU treaty change forcing the main protagonists, France and Germany, to lead 17 countries into a side agreement with the tight GDP rules.

Indeed France, in the guise of President Sarkozy, threatened vengeance on the UK because it would have none of this ridiculous agreement.

You might also remember that it was only last week that France, never having obeyed the GDP rules, were excused for 2 years from those rules.  Apply Rick’s Law and they will be away for 4 years.  That must take them beyond the horizon of a reset.

The bleat does not make a lot of sense.  So looking for the logic there are two points to note.  The bleat/rant/outburst was not intended for our ears but it didn’t matter if it reached them.  If anything the French elite treats its population with more contempt than ours by a considerable margin.

At the weekend I saw bits of Ghostbusters.  The scene where Bill Murray is persuading the Mayor to let them do something sits in my mind.  He says something like: and don’t forget you will be seen saving the lives of thousand of registered voters.
It is obvious: in politics you don’t have to do anything just look like you are

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What is missing?

Posted by chrisrick13 on June 16, 2013

It is obvious: if you laid all the worms in your garden end to end…

I’m glad that Saddam is dead.  The war was done well.  The peace was botched.  However (past performance is not a guide to the future (sic)) but on his kill rate there are more people alive today  than there would be were he still alive, and in power.  What it more, a higher percentage of those were ‘bad guys’.  Though on the scheme of things if God were looking to move on I would not be putting Bush and Blair high on my interview list to replace him/her.

What puzzles me is that it seems he did not have any weapons of mass destruction.  That being the case I would have had as many weapons inspectors in Iraq as it was possible to fit in.  He obviously had nothing to hide so he could have kept the invasion away simply by letting a few foreigners on his soil and really pushing the boat out for them.

So why didn’t he do that?  The answer is another one of my themes.  If you cannot put a plausible and logical set of reasons together for certain actions then you are missing information.  No big surprise there as we all, that means you, hide information to our own ends.  Indeed one of the key points in negotiating is never to volunteer information.  So even if you have no ulterior motive, hanging on to information is a good strategy for the future.

So we bump again.  Assad has used chemical weapons in Syria.  At least that is what the US is saying and they have at least offered proof for inspection.  Russia and China have blocked the UN from intervening in Syria so that 90,000 people can die and many, many more suffer so that they can keep influence and sell weapons.  The UN (read US in this instance) need a reason to intervene and Assad has given it to them.  Would it not have been a better strategy to keep the UN out of it simply by not firing a few shells of chemicals?

It is complex in Syria and I have not followed it.  What is obvious though is that there is missing information.

David Cameron is on a mission.  He is organising the rest of the world to tax companies’ profits so that they cannot squirrel them round the world to places that will tax them lightly.  This is going to be a tough ask.  Eire, The Caymans, Bermuda, Luxembourg, Cyprus, Isle of Man, The Scilly Isles, Liberia, and Panama all exist on the different tax rates.  Will they fall in line?  Eire in particular dropped its tax rates and had companies moving their in huge numbers.  It was almost like England being an unsinkable aircraft carrier in World War II.  Eire was a cheap tax base from which to attack Europe.

Will he manage to stop tax havens attracting money from the UK?  No chance.  Perhaps a better approach Mr Cameron, given that you are not bound tightly by the EU, would be to lower UK corporate tax rates?  You, and I mean countries in general, set the tax regime.  Should you wonder that the companies play to the rules to their best advantage?  The ones that didn’t don’t exist any more.  Don’t forget that it only takes one and the whole idea falls apart.

Given that it is so obviously going to fail why is he doing it?  The answer is that we are missing information.

It is obvious: if you laid all the worms in your garden end to end…one of them would wiggle and spoil it.

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Too close for comfort

Posted by chrisrick13 on June 14, 2013

It is obvious: I’m old

One of my nephews has fallen on hard times.  He is far from out on the street but he recently was out with his wife and children and could not buy them an ice-cream as between them they had only 86p.

He is on a zero-hour contract.  This means that he has a contract with a company who might give him no work during a week or as many hours as he can stay awake for.  I don’t know how he got to where he is and I don’t think he does either.  He is one of 8 children I know of who are being supported by their parents.  None of mine are – serves them right for living so far away.

I am playing a game that I have often criticised.  Unless companies compete they will die.  Appropriate response to external stimuli.  How many times have I said that.  A zero-hour contract reduces the costs a company incurs in employing someone.  It reduces the internal overhead and government imposition (NIC and others).  It also reduces the money it pays to the employee.  The company is responding and becoming more efficient. 

(So we are spending time pandering to noise making boundary layer dwellers.  Trouble is it is my family.  As you might expect the EU has an for this.  The Working Time Directive is being used to stop zero-hour contracts.  A nice bit of recursion as here is an example of another dinosaur with an inappropriate response.)

Employees are also becoming more intensive workers.  Any manager, also trying to keep his job, is going to call in the best performers.  Slackers will find themselves on the wrong end of a zero-hour contract.  I must admit that time passes a lot quicker at work when I am fully absorbed in something that takes all my efforts.  Doing easy stuff or stuff where I cannot find the information to move on is dire.  Being busy at work is not a punishment!

There is not as much wealth around as there was.  As a nation we have to find ways to be more efficient and share the wealth around equably.  Luckily not my problem though I have little confidence in the people I helped choose to solve it.

I find myself returned to two more mantras.  Invest in yourself.  Make sure you are someone who companies are keen to employ fully.  Second, don’t start from here.  If you have not invested then you need to get on with it!

The other bit of information, and I hope it was, I heard today was that more old people are working.  Here is a dilemma for the government.  They are reducing savings income with their interest rate policies.  This is forcing pensioners out to work to make up the reduction in the investment income they are living off.  They are extending the pension age which encourages if not forces old people to work longer.

These old people are competing for a job with…young people.  The old people have a work ethic and long experience.  The company that employs them does not need to concern itself with NIC.  The old people are grateful for a job and generally don’t need much extra money.  Indeed they often want to stop working when they have earnt enough for the week/month/year.  The only puzzle to me is that any young person can get any job.

It is obvious: I’m old but not old enough to get a job yet.

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Good morning Vietnam

Posted by chrisrick13 on June 14, 2013

It is obvious: I hope I die before…

I bumped into a 20 something on the train.  Six foot plus, earings, tattoos, shaved head.  Looked sinister and smelled.  Dressed in paint and plaster stained jeans and a ragged t-shirt.  I was in 3 layers and a jacket.  He was carrying a bag of tools heavy and casually.  He was reading The Times.  He had something plugged into his ears that was playing music loud enough I could hear it.

I got petrol yesterday.  At the till the guy smiled at me.  “Is that your wife over there?”  I owned up.  “She’s just got a latte.”  (She was across the shop.)  “Pump 1?”  I nodded.  Proffered my Shell card (for air miles) and the second of 6 tokens they sent me to get bonus air miles.  “Here sir I’ll take all those.  They can’t check whether you bought the petrol or not.”  He instructed me through the payment process.  “Safe journey home.”  (We were in Dorset.)

It will take two people on average wages to pay my pension for the next (hope) 30 years.  I’ll have those two.

It is obvious: I hope I die before…they do.

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The last hope

Posted by chrisrick13 on June 13, 2013

It is obvious: spend your money

As a committed Armageddonist (Armageddonner?) I am amazed each day that it has not happened yet.  There are a lot of clever people with a lot of power working hard to stop Armageddon and they are holding it off.  But that is all that they are doing.  They are not fixing any of the problems.  My view is that the only fix is a reset, suffer pain of some sort and start again in a new reality.

I cannot predict the date of the reset.  I believe that it will be a trigger event.  So it will look like it is random.  However as central banks and governments gradually lose control the number of candidate triggers increases.  I have a feeling that a lot of people have sold in May and gone away.  After the Northern summer the trigger might click.  I think September, late September will be the start event.  I will pick my birthday, the 29th.

I am going to wait until mid August and then I will consider a shuffling of the small amounts of assets that I have.  Just need to decide what goes where.

I am certainly not going to convert any pensions to annuities.  They may well be wiped out but taking a 5% annuity in a 0.5% base rate world is lunacy.  The money is stuck in the funds so it might as well stay in for the ride.  If I had something good to put money into then I would take them now and extract the tax-free cash.  But I have nowhere good to put that cash.  That 25% cash will probably greatly exceed the value of the funds in a year but with high interest rates coming the cash will disappear as well.

Of course I can agglomerate and get as much of my assets as possible into cash and then spend it.   Trouble is that there is not much that I am desperate to acquire.  Wonder if I could go privately and get a second head or a third arm?

It is obvious: spend your money – that’s what they want you to do anyway

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