It is Obvious

Chris Rick has got altogether too much to say

Archive for August, 2014

We don’t need no education…

Posted by chrisrick13 on August 29, 2014

It is obvious: you can fool most people

Just got back from the USA.  Door to door in 10 hours which included 2 hours hanging around in Logan Airport.

On the tube I picked up a copy of the Eenin Stannit.  There was an article in it by Liam Byrne.  He was talking of the failure of the student loan scheme and the introduction of an “earn to learn” idea where students get a relevant job to their degree that also helps them pay fees and live.

The idea that the cost of getting a degree is paid for over a lifetime is perhaps a good one.  The government puts the money up and the universities benefit from decent funding.  Students have a burden but one that is manageable over a lifetime.

It has not worked because the government set the repayment criteria based on straight line projections for earning made before the credit crunch.  With earnings dropping there are not many students crossing the threshold where they have to start to pay.  Given that the debts are being sold off at 30% of face value there has to be a negotiation here to offer to pay a small percentage of the debt now and have the rest written off.

That was not my interest in the article.  Liam Byrne was the secretary to the treasury who, 4 years ago, left the note to the incoming coalition government that said: sorry there is no money left, we’ve spent it all.  I well remember the last months of the Labour government where they went around like demented ferrets letting all sorts of ludicrous binding contracts to minimise the amount of slack for the incoming government to play with.  What a shame Mr Byrne didn’t think to fund a few universities at that time.

It is obvious: you can fool most people provided you leave a long enough gap between the inconsistencies

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Here we go again

Posted by chrisrick13 on August 15, 2014

It is obvious: I’m not stupid

I write this blog entry once a year – five times now.

I own the evidence.  I have all my school exercise books from the start of my O-level courses to the end of A-level.  I can make the comparison between what we were taught then and what was expected of us.  I cannot make a comparison of the intelligence of school children then and now.  I don’t have to.  It is the same.

If you are a mathematician ask an O-level student about differential equations and integration.  Ask them to prove Pythagoras and a bunch of other geometric theorems.  They can’t.  Not because they can’t but because they have not been taught.  They have not been taught because it makes no sense to teach something that is not examined.  I and my peers were examined on that though.

(I’ll add that at university in the 2nd year we noticed that we were getting tutorial sheets with a ‘3’ in the reference and the 1st year people were getting stuff at the end of the year that we got at the beginning of the 2nd year.  I wonder when (if) that turned around.)

This is another example of changing the baseline.  It is only in mathematics that you can make a good comparison.  Because even though there is still lots of new stuff so much of what you learn is fundamental stuff you need before you can move on.  It is constant and available for comparison over a long time.  1+1 was 2 then and it still is now…except when it is 10.

So A-level grades have gone up for 30 years without a drop.  Suddenly, after a public outcry, grades have gone down.  Just a little, but enough to deflect the media and the unthinking public.  But even that does not matter except to oldies like me who still feel far superior.

What matters is that people are paying £27,000 in fees and another £27,000 to live while getting a bit of paper that is worth just about what that bit of paper costs.  They are being giving skills, first principles and deep knowledge of b***er all.

It is obvious: I’m not stupid and I’m not dead yet either.

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You can run but you can’t hide.

Posted by chrisrick13 on August 12, 2014

It is obvious: a fool and his money are soon parted

Joe Lewis is attributed with the title of this blog.  He would relentlessly follow opponents round the ring until he could hit them.  Then he did.  Lots of KO wins.

I find myself with pension funds, state pension earned, SERPS, property, cash, shares, cash ISAs, shares ISAs, Premium Bonds, NS&I investments, foreign currency, but no gold.  Does not add up to a lot but it is a lot more than the average pension fund and more than most…but still not enough.  I might ask myself the serious question: what is enough?

I have shares that in this bull market I should unload.  I might miss the top but will thereby avoid the bottom.
I have more than one property which in this property bubble I ought to sell so I can buy back when it collapses.
I have pensions that I can no grab out of the hands of the insurance companies.

That would leave me with cash to spend or invest.  What might I invest it in?

While you think about that, think about the insurance companies.  Their share prices have been cut a lot and their profits are much reduced.  Why?  It is because people are no longer buying annuities.  Why are people no longer buying annuities?  Because not matter what my problems are with what to do with my money, putting it into annuity is not even being considered.  So why have the insurance companies’ profits and share prices come down?  The answer is that they were ripping off people who were forced to buy annuities at their retirement.

A nasty little scam of the UK population has been ended.  Did the insurance companies stop paying their protection money to government?

Back to me and should I become liquid?  Or maybe I should become liquid and move everything I can to cash  I have to find enough banks to spread my money so that it is all covered by the government protection scheme.  Then what?  I can watch it earn 1% (and be taxed) while inflation rattles along at near 5%.  What happens if inflation moves along.  Even if it moves to the long-term average?  I wonder if the BoE will put up interest rates and even if banks will raise rates for savers?

So holding cash has some big risks.  Otherwise I am faced with timing investments.  Spot the property or share bottom?  Move to another currency that has safe banks and will go up against the GBP?  Easy-peasy.  I could buy an annuity and get a guaranteed return…of b***er all.  Provided I am confident that the insurance company is smart enough to invest my money and stay in business.  Provided also that with a return of 6% we don’t get a couple of years of, say, just 10%+ inflation which has happened a couple or more times in my lifetime.

So I have no good alternative to my current investments even if I simply want safety.  The Cyprus crash shows that governments are happy just to take depositors’ money when they can’t do it by stealth.

The serious drug habit and a Ferrari are looking ever more alluring.

It is obvious: a fool and his money are soon parted as happens to most of the rest of the population

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Memories are made of this

Posted by chrisrick13 on August 12, 2014

It is obvious: some of the people forget all the time

Do you remember the time when there was just ITV and BBC for television viewing?  I had to stop watching ITV on Boxing day and for the few weeks after.  Why?  Because, suddenly, all the ads were for package holidays in the Mediterranean.  Perhaps it was OK for the first couple of times.  But soon I knew all the inane words and could watch no more.  I don’t remember when they stopped doing it.  Have you seen a holiday ad on tv recently?

I used to have a similar problem in February/March and even a little into April.  It was PEP or ISA time.  Every ad-break had one or another company urging you to use last year’s allowance with them and commit next year’s to them.  Plenty of inducements but done in a sneaky way: 2% bonus for the first year and then when you aren’t looking we’ll take your interest rate down to next to nothing.

Didn’t see any ads this year and none the year before.  I looked at several offering this year and even old ISAs with the bonus removed were close enough to new ones that a change was not worth it.

Why are the banks not scrambling after our money?  The answer is that due to the low bank rate the banks can get all they want at 0.5% every efficiently in the bond market.  They can then lend it at, in the case of Wonga, at 2,793%.  They don’t need to run around get the odd £10,000 here and there off you and me.

National savings were not much of a deal…except the index linked savings that they very quickly withdrew.  Which tells you all you need to know about inflation and government policy.  Now as everything on offer is so low there is not much differential to the government offering.  It actually looks attractive with the safety added in…until they convert the savings into war bonds.

So thank you Mr Brown, Mr Darling, Mr Osborne, Mr King, Mr Carney.  With inflation at 5% I’m losing money almost faster than I can make it.  Certainly faster than I can save it.

It is obvious: some of the people forget all the time and so do the rest of them.

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Lets twist again

Posted by chrisrick13 on August 7, 2014

It is obvious: you can fool practically everyone most of the time

As has been proved by the BoE, relying on the numbers leads to poor forecasting.  It is pleasing to see the BoE performing so badly because it is using the numbers that it has…fiddled.

I’m restricting myself to economics here.  When a statistic is produced then a lot of care is taken to get it right (sic).  At least that was the case.  Nearly all the numbers like GDP, Inflation, unemployment have huge problems in their production.  Indeed many are rushed out so that those in charge can make timely use of them.  This then requires revisions when more data comes in.

However it is seldom the number itself that is important.  It is the progression that matters.  The rate of change.  The increment since last time.  The direction of travel.  So what is important is to have the same thing measured over a long time.  Then absolute errors can be ignored: it is always too high, it always dips 3 months to soon, and others.

What matters is that these numbers over a long time will act in similar ways in similar situations and act as predictors of each other and what the economy will really do.  They will enable better and better predictions of the future allowing central banks and governments to act early in the way that is appropriate.

By changing the basis of the numbers so often the opportunity to sail serenely through storm is lost.

The latest number to be fiddled with is GDP.  They have changed the treatment of research and added in  the underground economy and illegal activities.  Not that the last two can be measured.  They can only be guessed at.  Our economic policy over coming years will depend on someone guessing how many prostitutes there are in the country and what their average earnings are.

But it does not end there.  To return to a familiar theme of mine and an old friend:  The GDP of the UK needs to be 3% per annum or more.  This is because without 3% GDP growth there will not be the growth of tax receipts that will allow the government to pay interest on the money it has borrowed on our behalf and continue with its profligate ways.

3 years ago I pointed out that with 3% growth we will double our economy in 23 years.  So by 2034 we will need another London, another Birmingham, another Manchester…  It is not happening now, has not happened over the last 3 years and will not happen over the next 20.  A reset is inevitable.

But with the increased in GDP created by adding in the black economy and others we will see GDP nicely increased.  The trouble is that this new GDP number implies a lower tax take.  So the old 3% was good enough but now we need a new 4% GDP growth as so little of it produces tax revenue.

So who will point this out and why did we need to add the new ‘data’ in?  Why not have a GDP for the black economy and a figure for research and development?

It is obvious: you can fool practically everyone most of the time and yourself all the time.

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It will all be over by Christmas

Posted by chrisrick13 on August 1, 2014

It is obvious: sell in May

I got my heading from the start of the first world war.  They all thought they would be back home for Christmas.

I am lucky.  My grandfather was a despatch rider at the front.  Sat on his motorbike engine running waiting for a satchel to deliver when his unit had a gas attack.  He grabbed his mate and rode out.  He managed 50 years on just one lung and they were the only two survivors.

We have had a period of nothing but good news.

First there is a housing bubble that nobody seems to realise is one.

Next the GDP of the country has risen to the level it was before it fell so badly.  Only there are more of us so it needs to be a lot higher to allow for that.  I’ll also add that we need 2% growth a year to have any chance of paying off our debts and so 7 years on we have yet to make a positive step on a ladder where we need to be at least 16 steps up.  By now we should have a second Birmingham built yet new houses have barely replaced old ones knocked down.  Much of the increase in GDP is because underground economy and illegal activities are now in the calculation.  As these generate little in the way of tax the increased level of growth to give us the required level of tax income for our debts is a lot higher.

The stock market is on a record-breaking bull run.  Clearly this will continue for ever…just like the housing market.

Banks are still either handing out bad news or being caught out in more illegal acts.  So far the count of those prosecuted has failed to trouble the scorers.

We’ve won a lot of medals in the Commonwealth Games and at least we got out of the World Cup before we met a good team and got thrashed like the Brazilians were.

Trigger events have bothered me in the past but there is nothing to be done about them.  They happen and trigger…stuff.  I am more concerned about planned stuff now.  Clearly the current plan is for the ‘boom’ to see us through to the election.  I thought that the MPC was there to prevent manipulation of the economy for political ends?

We have an economic boom so what can go wrong?  Obviously there are countries with other plans and different agendas.

It could well all be over by Christmas.

It is obvious: sell in May and don’t come back

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