It is Obvious

Chris Rick has got altogether too much to say

Archive for June, 2014

Watch out for fly wings in Westminster – cliche day at the blog

Posted by chrisrick13 on June 24, 2014

It is obvious: I mean what I say

Jargon is essential.  In a complex environment you can communicate large amounts of information very quickly sure that the other practitioners will understand exactly what you mean.  As a doctor I can talk about an ECG or NFN and another doctor will know exactly what I am saying.

It is also essential, particularly in professions thin on complexity, to provide barriers to entry thus keeping the environment exclusive and expensive to hire.

The Treasury select committee pulled the wings off the governor of the BoE today.  (Jargon in there!)  What was noticeable was that he used more and more words in his answers that had no clear definition.  For example he used the word ‘momentum’ which I know is Mass*Velocity.  I cannot think where that might fit into economics without some very detailed description.  Indeed one of the factors is Velocity and not speed so even with a good analogy in place, a direction is required and he did not give a direction for his momentum, whatever he meant by it.

In short he had no legs to stand on and now no wings to fly with.  He was not given nearly a hard enough time though.  The simple follow-up is to ask what anyone means by a bit of jargon that they use and to keep asking on all the words that are fuzzy: what do you mean by…

The best was the short question on forward guidance where the MP nicely showed that the guidance was neither forward nor guidance.

It is obvious: I mean what I say and I’ll tell you what that is when I can make it fit what has happened

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Lucky escape

Posted by chrisrick13 on June 23, 2014

It is obvious: you know you are right

I saw a young muslim on tv broadcasting from Northern Iraq.  Heavily swathed in scarves he declared: you cannot worship freely in England.  He sounded as though he meant it.  If there is anywhere in the world where you can worship just what you want it is in England.  My family registered as Jedi as the last census and have had not religious persecution in the meantime.  I would ask that young Suni if it is possible to be a Shiite where he is.  Then tell me about freedom.

The trouble is he believes what he is fed.  It comes from people with a lot of conviction and an interpretation of the Koran that has many counter-interpretations all of which have just as good a case for claiming to be right.

The ISIS group which is the new bad-guy-on-the-block has roots in Syria.  This is the Syria where but for that nice Mr Putin we would have blasted Assad and given lots of just about anything to the freedom figthers…ISIS.

Thankyou Mr Putin

It is obvious: you know you are right after you have had a chance to write the history up

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England!

Posted by chrisrick13 on June 19, 2014

It is obvious: I’m English and support English teams through thick and thin

 

I missed putting my prediction for England’s performance (and others) in the World Cup in the public domain.  I predicted England would not get out of its group.  After Saturday I will refine that.  We won’t get any points.

I don’t see a good South American team.  Brazil will not win.  I think Mexico are better organised and with enough good players.  An all European final is a strong possibility even though that has never happened in a South American hosted World Cup before.  The winner to come from Germany, Holland, Italy, France.

I can’t see how we can compete with other countries as our level of acting is so poor.
If you want the dream…Italy are the outstanding, dominant team of this tournament.  To hold them to 2-1 was a remarkable performance.  Italy to win the competition without really trying.  England to get to the semi-finals.

 

It is obvious: I’m English and support English teams through thick and thin with very little of the thick observed

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I know it all

Posted by chrisrick13 on June 19, 2014

It is obvious: there’s nothing like a good dictator

Last week I watched President Obama saying on tv that all options were being considered.  His body language was a treat to watch.  I’ll offer him an option: don’t start from here.  I think Reagan is a good example of how to run things.  Admit you really have no idea.  Hire some good people.  Do what they say.

It seems that politicians and despots make decisions based on anything but the facts and spend the rest of their time trying to clear up the mess.  I say ‘seems’ because I don’t know what they know but in the information rich society that I live in there is not much that I don’t know should I care to look.  However the star creature living in the cellars of Downing Street acting through its avatars in the palace of Westminster has motives I cannot guess at.

Think about Libya, Egypt, Iran, Iraq, Syria, Afghanistan, Zimbabwe.  They run along in perfectly predictable lines.  Treat the population in appalling fashion, extract huge amounts of wealth from the country for yourself, pay lip-service to the international community.  Things rub along for many years.  The process of changing dictator is what causes the problem.

The democracies of this world have often tried to get involved in changing dictator and so far have a zero success rate.  The population of a country will make the decision.  They will make that decision very quickly or over a long time.  They will do it by action or inaction.  None of the methods tried so far by United Nations, Nato, USA, UK, and others have worked anywhere.

How do we influence change to reduce suffering during that process?  To an extent we have it right.  Help the country with aid and at the same time increase the information flows into that population.  It takes time but eventually aspiration to the lives seen lived in places like the UK will motivate people.

In the meantime that increase in information flows the other way and it is mighty difficult to stand and do nothing watching the images on tv.

It is obvious: there’s nothing like a good dictator – alas.

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Eat your heart out Cassandra

Posted by chrisrick13 on June 13, 2014

It is obvious: it does not matter if you are stupid

I wrote yesterday’s blog before the Mansion House speeches by the governor of the BoE and the Chancellor.  Osbourne was certainly being quoted even if he did not make a speech.

The governor has been working hard to reach the levels of incompetence achieved by Mervyn King and pretty well got there yesterday.  He had introduced forward guidance intended to bring stability to markets so that people could take a long-term view and invest, essentially, without risk over that long term.  It is laudable to try to create that environment.  It is also impossible to do.

The governor showed how impossible it is because he had barely set out criteria for an interest rate increase to occur in 2015 at the earliest when circumstances changed and his criteria were met, now, 2 months ago.  He had to change his criteria to something much more fuzzy and removed the ‘forward’ part of his guidance.  Perhaps it should be called backward guidance.

Last night he shortened his guidance period.  Interest rate rises are coming to a place near you…soon.  They are coming because most people on fixed rate loans have expired their term and been forced on to SVR.  This a rate where the banks think of a number, double it and use that for your interest rate, changing it when they feel like it.

Even though banks can borrow money at 0.5% there are not many entities that can borrow from a bank at, say, a 100% markup on that which is 1%.  If you borrow on a credit card it is 18% or more.  My bank offers secured loans at 10%.  So I am not sure what a base rate rise would do to the money that people and businesses in this country pay.  If someone said to me that they would sell me something I wanted for £1 each and I could sell it on for £20 I would a) buy as much as I could b) consider carefully the fate of the geese if I passed on any price rises.  My price rise strategy on a doubling of the price to £2 could be to move from £20 to £21 or £40.  Keeping prices as they are does not come into consideration.

Given how much profit there is inf bank lending with the base rate at 0.5% for over 5 years have you ever thought about just who has paid for the banks to recover?

So today a few people will add to the trickle as they now realise that whatever mortgage they take out today it is going to cost more before the end of the year.  A few of those tricklers will also realise that inflation of around 2% (the number massaged lower than it actually is) and wage inflation at 1% means that they will not be doing many of the things they like doing now at the end of the year.

If you are sitting there smugly with no mortgage and no loans think about who is going to pay for all the people who default on their loans.  If the government is short of money there is no point rounding up all the beggars on the streets of London and tipping them upside down for the coins in their pockets (actually that would bring in a lot more than you would imagine).  Much easier to grab ‘money’ out of bank accounts.  Cyprus was the beta-test for that and the bugs have all been worked out of that process.

I had thought the smart people running the country, and they are smart, had timed it for a win at the next election before a collapse but maybe they have got the timing wrong and the collapse will occur before then.

It is obvious: it does not matter if you are stupid as long as you can find someone more stupid

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No more Mr Nice Guy

Posted by chrisrick13 on June 12, 2014

It is obvious: I’m not stupid

It is too limiting if I only talk about happy stuff.  I’ll just promise to talk about happy smiley things as often as I see them.

In the 1960s smoking did not cause cancer and still the tobacco companies are fighting a rear-guard action making lots of profits.

I know people who are certain that the Americans did not land on the moon.

There is no such thing as global warming and the scientists who talk about it are idiots at best or have some other dark intent.

So it is that there is not a housing bubble in the UK.  You need to mortgage beyond the hilt to get into this market or you will forever be unable to afford your own home.  Bricks and mortar are a safe investment.  After all, thank you Mark Twain, they have stopped building land.

How is the price of your house arrived at?  I return to the prostitute’s question but apply it in reverse.  It is worth the price at which someone says to themselves that the risk has dropped below the reward.  For my house at £5 there are probably 60 million people while at £1m there is nobody.  I’ll guess that at £400,000 I would have a couple of thousand people keen to write me a cheque.

So who is writing the cheque.  Either someone who wants to live in it, someone who sees an opportunity to own it for a short while and then sell at a profit or someone who sees the income from renting as a better proposition than having money in the bank at 0.1% interest or some such.  All of those result in someone living in it and paying the market rate to do so.

For someone to buy my house and live in it somebody else somewhere has to step in and buy a house for the first time.  They have to get a mortgage for a large multiple of their salary and promise to service that loan and pay it off over 25 years or more.  They have to get a loan with the base rate at 0.5%.  The long-term average is closer to 4.5% and was at 12% for some of the time of my mortgage.  They have to think about what it might cost to keep the house but aren’t at the moment.  They have to have a job where they can advance their salary as average wages are increasing at much less than inflation of any stripe.  If not then to keep the house they have to stop doing something that they did before – eat?

The bubble goes on longer than you think it ever can.  Tulip bulbs in Holland cost as much as a person earns in a lifetime to buy and changed hands at that rate on the day before they crashed to zero value.  When does the bubble burst?  It goes when those first time buyers realise that there are better options than a life of servitude to a mortgage on a house that they never really liked anyway.

When do these lemmings realise that?  Difficult.  A trigger event was my favourite for a long time.  They are unpredictable .  I am more in favour of the trickle theory now.  Someone in the pub says to his/her mates that they have stopped looking for a house.  They are going to rent or live with parents or stay in the council house.  Not a lot of discussion but people are thinking.  Then he/she stands up to get a round in and the ones with mortgages realise they can’t afford to do that unless they cancel the Sky subscription/get rid of the smart-phone/keep the car another year/don’t eat next week.  The word spreads…slowly at first.

The trickle turns into a flood in a very short time but does run as a trickle for longer than you might think possible.  If you want to gain from this it is all about timing unless you can wait until the flood has subsided…and a lot of people can.

It is obvious: I’m not stupid if you compare me to the right group of people

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