It is Obvious

Chris Rick has got altogether too much to say

Archive for April, 2015

The election is over!

Posted by chrisrick13 on April 25, 2015

It is obvious: run for the hills

10 days ago I removed myself from the election process.  I voted.  I don’t care now what any politician says.  I was sorely tempted to draw a ‘None of the above’ box on the paper but managed to resist temptation.  I voted for a least worst (by my judgement).  Haven’t placed a bet on the result yet.  I think that the odds for Conservatives being the biggest party are still quite attractive.

What I did not vote for was Labour or SNP.  Why?  In simple terms they have said that they are going to fix the economy by spending more.

They are socialists and have to spend money to lift the suffering off those people who for whatever reason are…suffering.  They do it by taking it from the people who aren’t suffering…and by borrowing if it is still not enough.  That handles today.  What about in 5 years time?  Then we are into a means-and-ends argument.  Not somewhere I can usefully go.

As I am not watching the election process I am not seeing too much of the rubbish being proposed that was on view early on.  The most amusing one that does ride through the noise to me is the proposal to get £10bn from ‘cracking down on tax avoiders’.  This is a gain for nothing as all the political parties would have it.  So why didn’t they do it last year?  Why not the year before?  Why not the year before that?  We could already be a couple of hundred billion better off.  Idiots.  Or idiots us for being taken in by it.  There is a good way to get rid of tax avoidance at little cost, and that is to simplify tax law.

While I’m at it I’ll have another go at employees National Insurance.  This is a tax that targets the low paid.  It only operates on the first few hundred pounds of income each month.  Get rid of it and increase the standard rate of tax.  Tax neutral with huge gains because there is no effort needed to collect it.  Then the low paid will get every single penny of the money they earn.  We would have targeted those with low incomes and spread the load to those with higher incomes.   Employers National Insurance is more tricky.  It is a tax that encourages companies to employ fewer people.  It encourages zero-hour contracts.  If you do take it away and increase, say, corporation tax then this will penalise companies that have fewer employees.  Well why not?

So when you next bump into a socialist ask him why they have still not got rid of NIC.  Ask her what they will do when interest rates go up and instead of paying twice for the NHS we have to pay seven times…and still just get one.

Finally a question, I have described here before, that I posed to someone.  You want to go on holiday and it costs £1000 that you do not have.  You have a good job so you think you can save £100 a month.  Can’t do it over Christmas so you can save £1100 a year.  You can borrow the £1000 and go tomorrow but will have to make 11 payments of £100 to pay off the loan.  An alternative is to save the £100 each month and go on holiday at the end of the year.  After 10 years with the first scheme you will have had 10 holidays.  With the second scheme you will also have had 10 holidays but you will also have over £2000 in the bank.  The surprise answer that I got was to go on holiday now because I might be dead in a month.  This is socialist thinking except that a socialist will go first class and pay £2000 for the holiday.

It is obvious: run for the hills then at least you will start going downhill from a higher place than everyone else


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Turn the light on

Posted by chrisrick13 on April 21, 2015

It is obvious: Leave it to the experts

What do you do when someone comes along and says that they want you to become an expert in the energy futures market?  You have to gain that ability over a couple of weeks.

So it is that my energy company has posed the deal to me.  Pay £X for my energy and it will vary depending on the market.  But that is not the open market because they have a whole department with 30-year experts in energy buying oil and gas futures trying to get the lowest price they can into the future.  My other options are £X+£Y fixed for a year into the future or £X+£Y+£Y fixed for two years into the future.

Actually they are offering me an insurance policy.  They are offering me a bet on energy prices.

Why can they not be forced to offer me the best price they can trade for plus (say) 5% profit.  Then they have got an insurance policy and I have the cheapest energy it is possible to get.

As a 64-year consumer of energy I can tell you energy is not going to get cheaper…oh dear.

It is obvious: Leave it to the experts and they will take your money

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Duck! Quack.

Posted by chrisrick13 on April 21, 2015

It is obvious:  Look at the emperor

I am a believer in triggers.  In economics they are small events that start major events.  Often the triggers are not related to what happens.  I think that they are the event that causes a lot of people to decide it is very dusty running along behind the rest of the herd.  They suddenly realise that tulip bulbs do not have a lot of value and they can turn left and beat the herd selling theirs into an asset that actually has value.

Of course there are simple full-blown disasters that will trigger events but in themselves they are a deal larger than my definition of a trigger.  Of a late Lehmans was a good example of a trigger that was much more.  Same effect though.

Sitting here today I see two events that are of the full-blown type on the horizon.  One is the UK election and the other is the Greek exit from the Euro.  Both are inevitable.

The problem is that, more than ever, there are a lot of dominos standing around very close to each other.

Add to this that these kind of events take a lot longer in coming than you can possibly believe they will.  It must happen tomorrow/next week/within the month but takes a year before it does.  I think we have gone through that period.

As we go through the constitutional, dare I say it, crisis, in the UK our minds will not be elsewhere.  (Just voted and I cannot imagine a more useless bunch of options.  There must be a case for a ‘none of the above’ option.  I had three centre parties (Conservative, Liberals and Labour), one right-wing (UKIP) and a bunch of left-wing parties of one extreme or another.)  I am more and more convinced that Conservatives will be the largest party but have no viable options to build a majority.  Cameron will run a minority government for a short while to another election in the hope of winning that.  A House of Commons that can’t pass any bills sounds like a good option to me!  Are any of them any good for this country:  “Meet the new boss, same as the old boss’.

Like some bystanders at an accident the UK will be focussed on the carnage of our politics when the pantechnicon that is the EU will jack-knife under braking and side swipe us.

Have some thought about short-term survival and long-term protection of assets.  Take a strongly held belief (you can’t go wrong with bricks and mortar (sic)) and work out what happens if you are wrong.

It is obvious:  Look at the emperor – he’s the only one with clothes on

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Posted by chrisrick13 on April 16, 2015

It is obvious: I wish I was a poor man

The housing market is a market but one that is heavily interfered with by government.  ‘Market forces’ simply do not apply or at best are corrupted.  There are huge lurches as all the interference does not dampen and stabilise but runs positive feedback and creates chaos.  Who cares?  A house is where you live and whatever the cost now is irrelevant because you are in it.  The problem comes if you have to sell and the ‘market’ has moved against you or your circumstances change and you can no longer afford to own it.  The other problem is if you don’t own one!

If the price oscillates it is difficult to see if there is a trend in house price movements but you can work out what ‘forces’ might apply to influence the trend.  It is not important to home owners as they are in their home.  However it is important to people who are retiring and have hopes that some of the value of their house can be accessed to provide income in their retirement…and those without a home.

A word of warning.  All the house price numbers need to be considered either as absolute numbers or inflation adjusted.  That makes it tricky as there are so many inflation numbers many of which are dodgy at best.  I wonder if that is deliberate by government?  The average price of a house according to Halifax in mid-2007 was about £200,000 and in 2012 dropped to about £160,000.  That is a fall of about 20%.  Over that period inflation was about 20%.  So in 2007 terms that average house was worth only about £130,000.  This is a drop of about 35%.  From that low it has gone to about £190,000 which is about…£130,000 in 2007 terms.  Not good from an investment perspective but given the negative interest rates on bonds is actually not bad for the last couple of years!

Assume that there will be some large dislocations in the economics of this country what will be the trend for house prices?  Bear in mind that one of these dislocation might be exchange rates of the GBP.  So you have to stand in this country.

Another 20 million houses are needed over the next 20 years to hold the increase in population needed to get GDP growth that will enable the country to service its debts.  Yeah.  The likely projection of UK population growth against the current rate of building sees this country short of 3 million houses over the next 10 years.  Provided there is not a breakdown and collapse of this society it means that demand will be much more than supply.  Prices will go up but might not go up in real terms.

It means that the people who drive the market will less and less be able to enter the market at the bottom.  Indeed they will not want to.  This implies that large rich entities will buy these houses and rent them.  This is akin to feudal lords owning everything and letting peasants live in houses on their land if they work for the lord 24/7 – i.e. pay rent.  Will our society stand for that return to the middle ages?  There is a good chance that average house prices will drift along just out of the reach of average house buyers.

If you have property beyond your home then probably hang on to it.  If you think that you know somewhere good to put your money then get out now.  You will be able to make a lot of money telling others the place you have found.

Back to one of my themes.  Invest in yourself (health and skills).  Keep some decent cash for emergencies.  Enjoy yourself and spend everything else while that wealth has value and you can physically get around to spend it.

It is obvious: I wish I was a poor man then I would really have no  money worries


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I’m in rehab

Posted by chrisrick13 on April 13, 2015

It is obvious: soon be May

I’m cured.  I used to surf channels on the tv and arrive at 24-hour news where I would stick.  The election coverage has cured me of that.  I’m still subject to odd snippets of news, and do sometimes watch the news on one channel or another.  On CNBC the guy running the morning programme is brutally honest about stuff – he is now my default location and I save a lot of effort by starting there.  Now though, I often do not even put the tv on.  I sit and sulk in silence.

I did hear that nice Mr Balls, one of the architects of the economic mess we are now in, saying that he would cut the deficit when he could.  I’ll pose the question: we need inflation high to get rid of our debt if we can’t earn our way out of it, suppose he gets it up to (say) 5% what happens then?  Inflation at 5% is way beyond the 2% remit of the MPC you might say…if you have forgotten that they left it at 5% for a long time without doing anything.  Perhaps interest rates will be stuck up to cure inflation (this time).  Suppose there is a run on the pound and we need to put interest rates up to protect it (sic)?

The answer is that the interest on over a quarter of our debt suddenly costs 4 times more.  The rest of the debt follows as short and then longer and longer bonds roll over.  At some point people refuse to buy or we go into default.  We rapidly go from paying for two NHSs to paying for 6 NHSs…but still only have one.

Spiral your way out of that Mr Balls.

I have heard just as much drivel from the Conservatives and Liberal Democrats it is just that they don’t have the conceited grin on their faces when they say it as Mr Balls does.

Part of the problem is that any political party that starts even to talk about austerity is blamed for it.  The population in general are unable to see that austerity is a consequence of previous actions and not of the people enacting it.

The point is that it is not a matter of doing when we can.  We have to do it before others do it for us.

Just heard a Labour shadow minister saying how she was going to fund something from the mansion tax.  This is the estimated £2.5bn that was going to fill the £90bn hole in their spending plans.  The interviewer then reeled off several other spending plans that will be funded off the mansion tax and asked which one was now being dropped.  They are well trained – the minister just ignored that and kept talking.  They know that time will run out so just keep talking until the interviewer has to cut away.

We are getting close to one of the major trigger points – the election.

It is obvious: soon be May – sell before your money goes away

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My home is…where I live

Posted by chrisrick13 on April 2, 2015

It is obvious: watch out for rocks

The people I know are in two groups: the smug ones like me with no mortgage and the poor b@st@rds with one.  Of those with a mortgage many of them have no slack in their budget.  I have moaned much but it has happened: although not enough, mortgage interest rates have come down.  Be very sure that if interest rates go up then so will mortgage interest rates.  There are a lot of fixed rates in place but not for that long.

So if interest rates go up just a point then a lot of people will lose their houses.  A lot of misery that I don’t want to see visited on these people.

What will be the other effect?  Either banks will have a lot of bad loans and will go bust (sic) or we (you and me) will rescue them again.  Actually: no.  I don’t think it will be that way as the banks are only lending to people who can put up a large percentage of the value of the house.  So they can chop the price and sell the house without loss when they repossess.  Thus crashing the house market.

There are still a lot of people trapped in negative equity or close to it.  Disposing of those houses will cause losses to the banks.  You and I have deep pockets though.  Couple of thousand should do it – I’ll be round for the cheque later.

Why would we want to put interest rates up?

1.  The GBP is plunging in value.
2.  Inflation is rising.
3.  We are such a risk as a nation that nobody will lend to us at other than high rates of interest.

So we are OK for the moment.  But at any point we could be forced to raise interest rates to save the economy which will of course crash the economy.

So why do I never hear this discussed in the media?

It is obvious: watch out for rocks…and hard places too

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