It is Obvious

Chris Rick has got altogether too much to say

Archive for February, 2015

I’ve got loadsa money

Posted by chrisrick13 on February 26, 2015

It is obvious: I’m not a bit interested

Still on the same track.  I have lots of assets in the form of houses and shares.  I would sell the lot at the top of a housing and share bubble today.  But what would I be left with?  It would be bits and bytes at the bank.  Lots of ones and zeroes and likely mostly zeroes.  Think I would rather have my assets.  At least at the end of a reset, which I think will happen and will be short, those assets will have the same relative value.

I have money in an ISA that went to a derisory interest rate after a year on a bonus interest rate.  I stood ready to rip it out and put it into another at year-end.  Trouble was that I could not find an ISA that had a sufficiently higher interest rate than my derisory one to make the change worth the effort.

Along with a reset I have concern about inflation.  Hyperinflation is the fear but even decent inflation at, say, 14% cut your money in half in 5 years.  At the moment though holding money or something that is close to money does not carry that big a penalty.  Risks are small.  If interest rates head off to infinity and beyond then the beauty of cash is that you can move fast to spend it.  Indeed having cash aplenty might mean that you can acquire devalued assets very cheaply.  If you have a Ferrari on your drive and no cash to feed yourself over the next month you might be receptive to some very silly offers.  Profiting from others’ misfortune?  Perhaps saving someone from starving from your forethought.

I am still worried about the bits and bytes that my money consists of.  However getting some part of my money liquid is something that is exercising my mind.  I have spoken about holding some cash (not on my property if you are thinking…).  If money is losing value because of inflation then there is another option: be short on lending and long on borrowing.  Get out there and borrow money where upping the interest rate will never keep pace with the inflation rate.  If the bank goes bust then the bits and bytes might head in the same direction as your savings bits and bytes and never be repaid.

But what is my point?  I think that the old models of thought will not serve you well over coming months and years.  “They’ve stopped making land”.  House prices always go up (sic).  Job for life.  Career.  Final salary pension.  Insurance companies and banks care about their customers.  Have a think about what it will cost you if the unthinkable happens.  Think what you will do if it happens now as you read this.  Think what it might cost you to nod in that direction and make some minimal preparations…and how much better you might sleep.

If you are into serious thinking then have a think about how long the current state of our economy will continue.  What will need to be done to enable the country to survive.  What if interest rates went up to (say) 5%?  On that one I can tell you that the interest payments on our debt are about the same as the NHS.  So at the moment we have one NHS but pay for two.  If interest rates go to 5% then as our debt rolls over, if indeed we can find entities to buy our debt, we will find ourselves paying for 7 of them.  I think I would rather pay for one or put twice as much money into the current one.  How about you?

It is obvious: I’m not a bit interested – sums it up nicely


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I wonder

Posted by chrisrick13 on February 24, 2015

It is obvious: cash is king

Just suppose that a reset happens.  Rubbish you might say but go and talk to the (Greek) Cypriots or the Greeks.  I don’t think it will last long before we come out the other side.  There will be a lot of winners and losers.  Most of us will lose some as the standard of living will drop.  It won’t drop by much though.  Perhaps it will if you need an operation, want to go to school/university, don’t want your house burgled, want to read a book at night and would prefer not to be mugged outside your house (wherever you live).

There might be a month or so where the cash machines don’t work.  Your bank will certainly have gone bust.  This means that you won’t be able to use a plastic card to pay for anything.  You will need notes and coins.  These might lose value quite quickly and be replaced by (say) cigarettes.  For a month though you will not be able to fill your car or buy food unless you can wave ten pound notes in the shopkeeper’s face.

How much cash will be enough to make a difference for the time of the reset?  A thousand?  Two thousand?

What, for savers, of all those bits and bytes, the binary digits that the bank is looking after for you?  How much is a binary digit worth?  You need to protect some of your wealth with a tradeable asset that you can hold that some thief will not easily be able to run off with.  Certainly a house is (should be) worth about 3 times a salary and over the reset it will stay at about that.  You will have to get it in your mind that a couple of zeroes will disappear off the right hand end of that number but it will buy after what it would have bought before in non-bubble periods.

What brought this to mind today?  The Greeks and the re-branded Troika have kicked the can a bit further down the road.  The UK election will be done inside the can-kicking range.  President Putin has said that war is unlikely with Ukraine (what have we got now?).  There is a trigger out there somewhere and lots of candidates keep popping up.

It is obvious: cash is king but cigarettes might be

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Missed that one

Posted by chrisrick13 on February 23, 2015

It is obvious: I’m stupid

Nothing changes unless someone suffers pain.  You have to make it worthwhile for someone to move in the direction you desire or they will not move.  Pain is usually the only way but that pain can be financial loss (or gain  – a bribe?).  This means that it is difficult to make very large entities suffer pain and thus move in the direction you want.  Try sticking a pin into a rhinoceros.  It is one of the few remaining uses of media in that they can turn your pin into a six foot spear.

So why do politicians fiddle with tax laws?  Step forward Mr Laffer.  They can do what they like but there is a maximum amount that they can wring out of us.  What they are doing is not trying to up the tax-take but to change our behaviour.  This is why tax simplification will never occur.  Taxes are used to shape our behaviour and that tool is essential to a politician…because they know best (sic).

Actually I think I know best, at least for me.  I will only change that view when my current actions cause me pain.

It is obvious: I’m stupid – really.

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What was that?

Posted by chrisrick13 on February 23, 2015

It is obvious: I mean what I say

At last the UK media has become aware of the difference between debt and deficit and has made some progress towards educating the population.  Debt is what you owe and deficit is how much you are adding to the debt over a given time period.  There was a time that politicians could mix the terms up to bamboozle the electorate with impunity.  No more.

Another piece of education is taking place today.  A better understanding of the word ‘inflation’ is happening.  Inflation has a complex definition but the simple version we all have in our minds will do.  It is the rate at which the amount of cash needed to buy ‘things’ is increasing by.  I have to be careful with my words because the way inflation is calculated is under constant change.  If I express it in terms of movement then inflation is velocity.  Velocity is made up of speed and direction.  3% inflation means that the speed is 3 and the direction is up.  Just to confuse us the term deflation is used for downwards velocity.  When velocity changes (direction or speed) then acceleration is occurring.  Similarly to completely confuse we use acceleration when speed grows and deceleration when it shrinks.  (What do you call it when just direction is reversed?)  So when inflation decreases by an amount it is not deflation but accelerating inflation (decelerating).  It is still inflation until it reaches zero when we have a naming problem.  Then some acceleration in either direction gives us inflation or deflation.

Are you confused?  Most people are.  Just be aware of inflation and year-on-year (month-on-month) changes in it.

The next great education of recent weeks is the difference between tax avoidance and tax evasion.  The biggest offender is the Labour party.  While these two terms are not clearly defined in most people’s minds they are making publicity out of that fact that is difficult to support when examined.  No matter all the political parties are doing the same in areas of their choosing.

Tax avoidance is the duty of every citizen.  It happens where an entity (usually a person) organises their financial affairs to minimise the amount of tax they pay.  It is legal.  It deters but, alas does not stop, politicians from creating complex tax law that is expensive to enforce.  Suppose every person had to pay 30% tax on every bit of money they received over £15,000 each year and that was it.  (It is not the answer.)  Then there is not much that a person could do to avoid paying the tax.  A few might be able to delay taking the money or cause it to be given to someone else.  But tax would be paid.  Avoidance is difficult and not worth it.

Tax evasion is hiding money from the tax collectors so that no tax is paid.  It is illegal and is punished with fines and jail.  I think that the not so smart people caught should be fined and then returned to society so that they can again generate lots of money and be taxed.

Avoiding tax means that we will build up assets and use that to educate our children and look after ourselves when we get older.  I think that leaving money in the hands of the person is much more efficient than letting a government take it and spend it.  Look at the Irish pension fund.  It had real money in it unlike the UK one.  When the Irish economy collapsed they took the fund to support the banks and put an IOU into the pension fund.  The people with their own pension funds must have been very happy.

It is obvious: I mean what I say and I hope you assume what I mean

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Garbage Out

Posted by chrisrick13 on February 12, 2015

It is obvious: I don’t read the newspapers

My wife read me one of the headline story in the Times today which said that 25% of people who are obese can do nothing about it as it is in their genes.  Glory be!  Not only has cold fusion been rendered irrelevant a quarter of our population have mastered perpetual motion.

I have long said that losing weight is simple.  It is not easy.  Take in fewer calories than you put out and the result is weight loss.  Do not worry if you have no fat on you – your body will happily break down muscle for energy.  Every day you are late having breakfast it does it.  My father said to me before political correctness was invented: “no fat people walked out of Belsen”.

Any diet that you are on will only lose you weight if the calories in/out formula is obeyed.  The diet will not work unless it fits your life-style.  So a fad diet is OK…if it works for you.

Just eating a bit less and exercising a bit more will always work.  It might not be the most efficient way to lose weight but it will work…always.  It is possibly the easiest as you will not really notice a spoon less of food on every plate and you can put in a bit more exercise without hardly noticing.  I have some ankle weights that fit under my trousers so just walking takes a lot more effort and does not stress any joints.

My wife spotted another ‘fact’ in the article that 10% of children had the same problem with their genes.  Now I thought that your genes at the start of your life were with you for all of it?  So how did the 15% of adults manage to change their genes as they grew up?  Not only have they developed perpetual motion some of them also managed to manipulate their genes as they grew up.  GM crops eat your heart out.

My wife persisted and in the ‘Life’ section, 23 pages later, was an article on diets.  It said that if you wanted lose weight then take in fewer calories than you put out and that is all there is to it!

It is obvious: I don’t read the newspapers and I know why

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I hope I vote before I die (C. Rick)

Posted by chrisrick13 on February 4, 2015

It is obvious: sod’s law operates all the time

I have bleated about the lack of price drops in petrol matching the drop in oil price.  I note, with a smug smile, that petrol prices are close to matching the drop in the price of oil.  There was so much spin about the price increases that it was going to be obvious to a lot of people if the price did not drop.  My bleats made no difference but at least I know where prices should go for the future.

A lot of people have sat down and worked out the relationship: a $2 change in oil price creates a 1p change in the price of a litre of petrol.  That relationship for the price of a therm of gas or the price or a watt of electricity is badly obfuscated.  So far the price has not moved down nearly enough.  What has become obvious is that several small energy suppliers are delivering gas and electricity 20% cheaper than the big providers – today.  For the moment they are taking very good profits.  I don’t begrudge it.  They will survive and thrive.  Perhaps the major suppliers of energy will have to follow.

Also for the moment nobody is seeing much but good from the drop in oil price.  It bothers me that there will be a lot more consumed at the current price than at the price of 6 months ago.  However, now, it is just the opposite and the price is low because as a planet we are consuming less.  If this carries on then global warming will be nicely slowed so that the truly dire effects will be long after I am gone!

So where does the drop in oil price hurt?  It is obvious: oil exporting countries.  Can I think of one near England…hmm…Norway!  Yes indeed but they have built a sovereign fund and no longer even need oil revenues.  (Why didn’t we?)  Anywhere else…?  Ah!  Scotland!

I mentioned that from a poll of people I know that had the English been able to vote on independence then Scotland would be long gone.  I wonder how that new country standing on its own with very little oil revenue and oil companies sacking people at a ferocious rate and putting oil support companies out of business would be doing?

I am not happy to see Scottish people suffering…I would not be unhappy to see SNP leaders and supporters suffering.  What I am unhappy to see is that the errors in the claims of the SNP on how their country might fare after independence are not being exposed.

We all have short memories.  If there are 3 years of low prices I hope the Scots will appreciate the money that the rest of the UK will be putting into Scotland. I’ve not been round for a while now.  About £8,000 should do it I’ll pop round for the cheque later.  Remember that.

I hope we get to vote in the next independence referendum.

It is obvious: sod’s law operates all the time – the Scots might have a handle on it now.

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