Bankers say don’t mess with us – classic special interest pleading
Another day, another Mandy Rice-Davies moment. Our bankers seem to be getting their mates on the case of helping them avoid the consequences of their actions. The Item club is warning of all sorts of doom and destruction if we swap universal banking for investment banking and retail banking. Well, actually they say we’ll lose 0.3% of GDP.
Now I’m not so sure that’s a bad deal. We lost an awful lot of GDP when it all went titsup in 2008, so perhaps a little bit less in exchange for not having a near death experience might be okay. I think Vickers is tackling the wrong thing. Instead of creating a general form of the Glass-Steagall Act, howsabout making FSCS compensation conditional.
If a bank wants to offer an account protected under the FSCS then it has to operate as a retail bank and ringfenced. No compulsion, but then strip FSCS compensation from the likes of Barclays and the rest of the BSD brigade. And force them to print a health warning on all their ads in no less than 8pt type for a magazine ad to the effect of
This account is not protected by the FSCS. You may lose all your money if we screw up like we did in 2007/8
and print this on the bottom of every statement, email and other bank communication. Widows and orphans will go with the retail banks, and the sort of people that were attracted to Icesave will go with Barclays and their ilk.
Retail savers don’t need a universal FSCS protection scheme. We just need the option. I’m happy to save in a shares ISA, knowing that I could lose most of it in a market crash. However, I’d like to have somewhere I could park cash without the same feeling that it could all die quietly in the night. I don’t expect cash to give me a return, I’d just like to find it still there when I come back for it.
Others of a more racy disposition might want to take their chance with Barclays, and presumably be compensated with more interest. As long as their noses are continually rubbed into the fact they are giving BSDs the use of their money and they have a history of good returns combined with total annihilation then that’s fine. Consumer choice is what capitalism is meant to be good at, so if Barclays and their buddies want to gamble with their customers cash then let them – as long as the customers are easy with the risk.
UKAR gets on the dog-and-bone to chavs and tells them to pay mortgage before Sky
Sounds all right to me, what’s not to like? Deborah Orr of the Grauniad thought it patronising, but it really is a fair cop. UK Asset Resolution, which represents the taxpayers of this sceptred isle, are using credit checks and have identified 30,000 customers who are going to be in the brown stuff when interest rates rise. These checks will flag those who have rising unsecured debts. Not all of these will be chavs, of course, some will be people who have genuinely fallen on hard times since the heady days of Northern Rock’s 125% mortgages.
However, if you are the sort that prioritises the continued supply of sport on TV over keeping a roof over your head, then to be honest you shouldn’t really be in charge of a mortgage. Some financial vehicles need a modicum of training to drive…
It’s hard to argue with the appropriately named UKAR head honcho Richard Banks
“They need to think about what is their most important debt. It is not their credit card or renewing their Sky subscription, or going out for the latest mobile technology. It is their mortgage.”
Quite. If you haven’t jumped to that then there’s nothing patronising about it 
Apart from that I am generally with the cut of Deborah Orr’s argument. I’m not generally with the Graun’s view of Margaret Thatcher, who did sort out some pretty toxic stuff. However, Thatcher’s abuse of power in seizing control of some collectively owned assets and flogging them off to buy votes was a devastating stroke of evil genius, and council house sales started the ball rolling.
I recall from many decades ago genuinely mixed council housing which had aspirational blue collar families as well as a few of what we now know as chavs. There were some sink estates too, but council housing was generally far more mixed in family incomes that social housing appears to be now.
What Thatcher’s move did, as well as buying her three elections, was give free housing capital to an awful lot of people, which in itself wasn’t so bad, but it bottom-sliced what was to become social housing, concentrating people by the lack of income and wealth. She may not have meant to do that, but it seems to be what has all too often happened. And it forced upon us the current dysfunctional housing market which seems to make nobody particularly happy.
Most jobs in Britain don’t pay enough to be able to afford a house at 3.5 times income, and I would go further in asserting that the standard of financial education is such that there are a lot of people who had mortgages that didn’t understand what they were for. They appeared to be under the misapprehension that they were virtual ATMs which regularly doled out free money, to be used for holidays or Tarquin and Jemima’s school fees, rather than a way of buying a damned expensive consumer good called a house, secured upon the house.
This fact that most families didn’t earn enough to be able to buy a house was acknowledged in the council house system, where only the rich or the frugal owned their houses, but now it makes us hostage to working for The Man for 40 years, plus crazy asset bubbles.
So though I’m all for UKAR ringing up people to tell them to pay the mortgage before their Sky subscription, perhaps we do need to think about whether owner-occupation is such a great idea in a globalised world of unstable jobs. How the heck we row back from here I have no idea, but we do seem to have got ourselves into a hole. Thanks a lot, Thatch…
economy shares: cost cutting goldman sachs pot plans tokenism
by ermine
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Doom ahoy, Goldman Sachs is boracic lint
Crikey, it must be bad. Goldman Sachs is cutting back on the pot plants because they cost too much. It’ll be the lattes and the red braces (suspenders to our American friends) next.
It tickled me. These sort of spurious cutting back edicts from on high are commonplace in normal wage slavery. I’ve had senior managers throw hissy fits about the amount we were spending on paperclips, telephone conference calls, travel, coffee and biscuits at meetings, and claiming for sandwiches while on the road.
Some even try and get us to book cheap day returns to London for afternoon meetings. With those tickets you can’t return 4:30 to 7pm. I don’t mind hanging around till 7pm to come back, but only if the Firm pays for the beer. They just won’t do that, even though the difference in ticket price is £30 and I can’t drink £30 worth of beer in two hours. No beer, well, they can pay the £80 for the ticket then
That sort of penny pinching is just part of life normal business. It always pays to tart up your CV when they start rationing paperclips, however in the rarefied atmosphere of the City image is all. I didn’t think that the Great Vampire Squid would fall victim to cost-cutting tokenism. Surely they could do something slightly shady in some forgotten corner of the world and get funding for the next 100 years of pot plants? Is the spark of human ingenuity waning as GS? Suddenly you’ll turn round and there will be hobos in pinstripe suits in the City.
* why boracic lint for non-Londoners here
Heck, you need some gallows humour these days, and knowing that even Lloyd Blanfein’s ambition stops at putting foliage on evey GS desk is it for me. Bond markets are signalling a Japanese lost decade for the West, farmland is the new gold, and talking of the barbarous relic everybody’s buying. Oh and it looks like Mr Market is feeling depressed Meanwhile, over in Euroland there seems to be a deathwish of exploring every single bad idea under the sun. Apart from that everything’s shipshape…
And the vampire squid is feeling the squeeze. We’re done for…
For all that, there is something that made me think of this record
In many fields of human endeavour, when things are going wrong, people gradually surrender as the bad news keeps coming. This seems to be happening continually at the moment. There are very serious things wrong with Western capitalism, and every day seems to bring more of the litany of bad news. Too many of our structures have failed us under the loads we added to them.
However, as the lady says, the finest hour is the one that comes between the edge of night and the break of day. Humans are often indolent, and only when enough has fallen away will enough people recognise the fact. Most people live lives of quiet desperation, the actual movers and shakers of life are few and far between. So even more has to fall away before enough people are galvanised to change direction, and a turning point is caused.
There is still a long way to go to reach the low-water mark IMO, and Britain will be a much poorer place before that is reached. However, though I’ve taken the piss out of GS in this piece, there’s also something good about it. Some part of me wonders if this trivial example of Goldman Sach failing to keep up the image is the distant hoot of the owl signalling that there are forces starting to stir that may starting to arrest the fall, and curb some of the excesses that led us astray. It’s an ill wind…
End of recession for companies, Depression for the people?
It struck me once again as I was in Canary Wharf for a meeting, just how different the City of London is from anywhere else I’ve been in the UK.
Canary Wharf Tube Station in London's nouveau-riche financial district
Where the rest of the UK is mired in recession and the jobs outlook is going from dire to desperate, the animal spirits in the financial district seem to be even more on the up than they were last time. Which is pretty remarkable given the near death experience of last week on the stock markets. I even got out at London Bridge and walked through the original City of London where the old money lives just to make use that this wasn’t a Docklands thing.
Tower Bridge. A gratuitous quick blast of the tourist thang, just for the heck of it
Well, I couldn’t resist the tourist shot, though I should know better as an ex-Londoner. However, looking back south from London Bridge I spotted The Shard
The Shard going up south of the river
and as I entered Bank and St Mary’s Axe, home of the Gherkin’s monument to the essential masculinity of finance I get to see a shedload more cranes.
How you get to clean the windows of the Gherkin - looks like it's the hard way
It isn’t quite like watching the skyline of Berlin from the Intercontinental Hotel looking over what used to be East Berlin in the early to mid 1990s, but construction is doing very well in London, and that’s not counting the Olympics work.
Construction galore in front of the Nat West tower
and of course the serious looking guys on their mobiles
guys on mobiles - 1
guys on mobiles - 2
and a quick proprietorial hello to one of my new purchases, with that wonderful juxtaposition of the olde worlde and the new reflected in the glass.
Aviva HQ in the City of London
Ok, so it’s not like I’m Warren Buffett and my vast shareholding in AV. probably bought a stack of pens but there we go 
The overall feeling I got in the City of London is that things are going well. This is a small bubble – even on the train as I was leaving it’s easy to see that other parts of London have boarded up shops which can’t all be due to the recent rioting, and as I returned to Ipswich I saw the signs of severe economic distress all around – boarded up shops, abruptly stopped construction works from 2007 and the like.
There’s a split happening, where FTSE 100 companies seem to be doing okay just as the Great British Public is losing their jobs, and being exposed to serious inflation, rising fuel and travel costs to which there seems little end. Hence the title – firms seem to be doing okay despite the consumer heading towards ever-increasing straitened times, I’d go as far as saying running towards Depression times of multi-year decreasing economic experiences.
The contrast between all that construction in the City, the sharp suits and pencil skirts, the purposeful mobile-phone working on the one hand and the slack-jawed chavs hanging around listlessly in the High Street in Ipswich was striking. I don’t normally see the town centre on a workday, and Ipswich isn’t particularly disadvantaged as a town. It doesn’t feel like the prognosis is good for many UK citizens on the economic and the jobs front…
The Market’s been like the Grand old Duke of York’s men this week
What a rough old week it’s been on the markets. Share prices just like the Duke’s men, when they were up they were up, when they were down they were down. Barmy. You couldn’t make head or tail of it, other than that people were having the bejeesus scared out of them as the mood swayed from total panic to near euphoria.
There have been days where nearly everything has been a sea of red on my screen, and today everything is on the up. I took the opportunity to hop in and buy TSCO, AV. and BA., which diversify me into two sectors I haven’t been in before. I’ve now only got about £3k space left in my ISA. Going forwards I’ve got space for about five more shares and then I have to follow SG in buying more of what I have got already.
Now obviously there are a lot of people that are nervous. What are their fears? And what makes me so different to them…
I share many of the fears. The slowdown in the West will probably turn to depression – we have used all our ammunition up fighting the banking crisis and there’s not much more left. All the tightening of government, corporate and household budgets will result in too much money chasing too little economic activity. We’re guaranteed a big hunk of inflation to craftily lose some of the wealth, and I expect in real terms the net worth represented in my shareholdings to fall, even if the nominal value stays the same. There’s a precedent for this – the FTSE100 in the last ten years hasn’t been a barnstorming success like it had been the previous decade.
I’m not sure I am looking for the same as other investors. This isn’t about winning or getting ahead to me. It is about attempting to lose less. The value of the currency is being destroyed, in an attempt to devalue existing commitments, and also to cover up the fact that in Britain and the West in general we have become decadent and lazy. In itself that wouldn’t be a problem. However, it means that we can’t afford the standard of living we are used to and have expectations of, because we can’t be arsed to put in the work, as a nation.
That’s shown analytically by Tullet Prebon’s Project Armageddon report (hat tip to Monevator for this gem). The strapline ‘thinking the unthinkable; might there be no way out for Britain’ sums the prognosis up pretty well. A larger and larger section of British citizens are content to live off the wealth created by fewer people. Author Tim Morgan is rabidly right-wing (to the extent he makes me look like a bleeding-heart liberal!) but it’s hard to disagree with his stark summary of the issues Britain faces, and the issue is one of attitude and habits, which are hard to change, possibly taking generations.
the gravest problem – the concept of entitlement
Despite the appalling mismanagement of the New Labour years, Britain remains the world’s eighth largest economy (though it has now fallen to 37th in terms of per-capita income).
Reflecting this, British citizens enjoy high quality health, education and welfare systems, combined with strong provision of other basic services.
The problem which has emerged over the last decade, and can in large part be traced to Labour’s doctrine of moral absolutism, is the widespread assumption that individuals and, by extension, Britain as a whole, have an entitlement to these advantages, when the reality, of course, is that they have to be earned on an ongoing basis.
It’s why we have to hire non-Britons to pick the fruit and veg in the fields of our green and pleasant land, and a little bit of this attitude is why we have had rioting in London’s streets for the right to have the right sort of footwear and a flat-screen TV, while elsewhere in the world people have been rioting to get rid of autocratic leaders. People sense the austerity to come, and try and hold on to what they have by any means possible. For the rich that means the numbered Swiss bank account and tax evasion on a grand scale, for the middle classes that means the skewing of government policy to try and keep house prices up and to hang on to their child benefit, for the working classes it means the cash in hand jobs, and for the kids it means a chance to nab a free TV and get some excitement at the same time. As the man from Tullet Prebon summed up, we got here via
Worse still, the legacy of moral absolutism and entitlement has created a political landscape of warring interest groups which gravely compromises Britain’s ability to find unified solutions to its problems.
The debasement of the currency will gradually make imports dearer and Britons poorer, to accommodate our reduced productivity, and governments will hope the change is gradual enough that people won’t pin it on them. Some of this malaise applies to the rest of the developed world, which of course hammers our chances of exporting our way out of this.
I am well into the last third of my working life. I have earned most of the money I will have, so the focus for me is to lose as little of it as possible. These macroeconomic problems will destroy some or perhaps much of my wealth, and is why I have diversified into non-financial assets and tried to screw down my cost base as much as I could.
The problems I fear are the large scale macro issues – peak oil and the like. The Tullet Prebon report was interesting, because I had not seen the scale of the nearer term malaise in Britain. My social circle is from a narrow section of society. I don’t personally know anybody who is unemployed. I know people who to me look underemployed, but they do this as an elective lifestyle choice to have more time, which is different. They are doing this at the early part of their careers in a similar way to my search for a way to be able to retire early at the end of my working life.
I will probably never be able to use the benefit system, because as long as the stock market doesn’t fall to 20% of its value my net worth will be over the capital assets threshold for getting JSA. I am happy enough with this, I don’t particularly expect other people to fund my lifestyle. However, it does somewhat hack me off that the general indolence will trash money as a store of value.
Equities are diversification for me – my non-financial assets are to hedge the downside, but equities are there to hedge this sort of world-view. I don’t share the view, but I can’t say it’s impossible that we might find leadership that will stiffen the British spine, and as a nation we pull the nose up before the ‘whatever’ crowd puts the economy in a tailspin.
So I share the fears that made the stock market dive. But since this part of my assets is there to hedge the rosy world-view then it is only logical to get in there and buy. So I did. I’m getting close to my ISA limit and will soon have to consider either converting my cash ISA or possibly venturing outside ISA territory with more growth-oriented stocks. Either way it would be rude to ignore the opportunity to pay less for more, which acknowledging that Mr Market may well be feeling in a much sicker mood and the harbingers of Depression start to become clearer. Which is why I haven’t loosed all my firepower at the market yet. I don’t know whether the Grand old Duke of York’s men are up at the top or down at the bottom of the hill at the moment
There are a lot of Bears in the camp these days…
I’m a macro-bear – I think that there are some pretty serious long-term hazards to economic growth, such as peak oil, environmental degradation and the like.
I’ve all of a sudden been joined by a whole shedload of Johnny-come-lately bears who are focused on the seriously short-term. Yes, we all know the Greeks are bankrupt and that the European politicians are trying to do a stealth bank-bailout of French and German banks. They’ll lose the fight sometime. The US is devaluing and seem to be in an epic internal fight of their own. The second dip of the double dip recession is hammering at the door.
It all reminds me of Ben Goldacre’s Twitter comment, on Rebekah Brooks
must feel amazing to work in an industry where when you f*** up, everyone else loses their job
only here its that everybody else gets to pay when the financial bank-wizards screwed up. There again, everybody was happy to take the liar loans, and we do so like to see really big numbers in house prices which loose lending is very happy to help with.
However, when it comes to looking at the stock market, it looks to me that companies are in a lot better shape than your average over-indebted Western consumer, and for that matter their over-indebted governments. At least the yield-paying sorts I am looking at are. Their debt levels seem lower and often profitability seems up (or costs are down).
I’m not sitting on anything that I’m currently unhappy with owning, as long as they keep on paying dividends. Obviously if this is the second dip on the way to down and out due to all that macro crap falling out of the sky then all bets are off, but I don’t feel that’s the case at the moment. This is the crap falling that was dodged the first time round. It’s still there, it still stinks, and it’s still out to get us, but I don’t feel that it’ll destroy steady companies that are making stuff that people need. As opposed to stuff they want, I’m not about to buy Thomas Cook even at a high yield, because it’ll be a long time before Brits are going on foreign holidays to the extent they were in 2007, particularly when interest rates go up on their over-leveraged homes.
So I have a list of companies that I’m interested in and would like to buy, and I’m keeping an eye on the price. This will probably be a drawn out slide, so I have to buy these companies is small amounts over several months. For instance, I’d like to buy Tesco, and I’d like to pay less that Mr Buffett did (about 380p in June last year), on the grounds that the yield at 3.6% is below my usual 4% minimum target and heck, I don’t have as much money as Buffett
I have a price alert on them of 380 and will start to look then. I’ll probably split my purchase in lumps spaced a couple of weeks apart as I can’t call where in the downswing I’ll find myself. I figure that I might as well ride with Buffett’s analysis, the financials are right for me, my shares based HYP is missing this sector and people probably aren’t going to give up eating any day soon.
I’ve got an eye on some others, I could do with another income IT, at a two digit discount, please. Discounts have narrowed a lot of late, what with everyone wanting income it seems, well, it’s time to shake the tree and see if people start selling again.
Valuations are improving on quite a few shares at the moment. I’m happy with the gains on my sharesave shares, so I am shorting a quarter of those to lock in the current price until I can get hold of them, as a bear market can hang around for a year or so.
It’s one of those sad things in life, that it’s easier to live with the stock market when you don’t need the money right now, it makes it easier to watch the gut-wrenching 50% loss in value that happened in the last bear market (2007-Mar 09 for the FTSE AS). This one could be a chance for me to fill in some of the missing slices in my asset allocation pie chart.
I’ll probably take the last bear market as a guide. Some firms such as Tesco took a reasonable hit to the share price but they’ve kept steady dividend growth through from 2005. Others such as ULVR have had a more ropey dividend performance. So I’ll take some hints from what happened last time, as it’s only a couple of years ago, and favour steady as she goes dividend performance where other parameters are comparable. Oh and I’ll pass on financials, having eaten a £200 loss on BARC (and having missed most of the recent slide I’m happy to say!). There’s still too many unknown unknowns for me there. I’ll stick with the one financial I do have, RSA.
So overall, all these bears jostling by my side need to start selling, but I’m not going to be one of them. I am a different sort of bear. I don’t think any of the firms I own shares in now will be destroyed by the forthcoming storm, and more than half steadily increased or maintained their dividends since 2005.
If they can keep doing that, I can eat a repeat of the 50% variation in share price some of them experienced in the last bear market. Unlike my previous forays where I chased growth, with the share price volatility making me nervous and jumpy, the stability of the income is a much more peaceful ride. As Monevator said
the companies chosen have steadily increased their dividends over the past five years, but during the same time their share prices have been all over the place.
All of the firms in my portfolio took a hit in the last recession, and none have reached their pre-recession heights. However, I had the good fortune to start in April 2009. There’s something to this buying when others are selling lark… I haven’t got the diversification right yet, because I targeted the higher yields first. Looks like the opportunity to fix that at a decent yield may be coming my way soon!
Greece – a long hard rain’s gonna fall
Well, that’s all right then. Looks like the Greeks have passed their vote on the austerity measures, so everybody gets to ignore the issue for another month or so. FTSE100 is up, everything is good and we’ll carry on as normal then. Both the Greek people and us as Europeans have been failed yet again by the dismal spinelessness and lack of leadership across the board.
Any fool can see the Greeks can’t live with the same currency as the Germans under the current rule of engagement. They only managed in the first place by fiddling the figures, and the poor foundations of Greece’s entry to the Euro are now giving way under the load of their lifestyle and lack of earning power. Greece either spends too much or doesn’t work hard enough. They can never make up the productivity difference with Germany, even if they wanted to. There are two possible responses to that, either drop them out of the Euro, preferably before the Army generals take over the country again and the EU has its first military dictatorship in the ranks, or treat them in the same way as the Americans treat Indian reservations, and simply accept that we have a group of people that will continually require Federal subsidy.
It’s not as outlandish as it sounds. We do that sort of thing in the UK already – we take the money that used to be earned by financial services in the City and Labour used that to cover up the increasing structural unemployment in the rest of the country, both explicitly in generous and uncapped benefits, and more perniciously as middle-class welfare by excessively expanding the public sector (ONS stats). Part of the hoo-hah from Yvette Cooper, Harriet Harperson et al that the cuts are going to disproportionately impact women and the poor is because that stands to reason – the primary beneficiaries of the largesse will take the greatest hit when it runs out.
Greece could be made to work with a permanent financial transfer from other countries, though it would be polite to ask both the donor countries and indeed the Greeks themselves if that is really what they wanted of a European Monetary Union. And perhaps get some more political accountability all round, so that politicians can’t let grand ideas run away without regularly testing them against the ideas of the poor sods that are going to have to pay for it all. It’s the old taxation and representation issue that caused a load of trouble in some obscure colonial outpost in 1776.
What isn’t working is to pretend that Greece can sort the problems out without continuous gifts from abroad. Even if they get the gifts they may not make it, so endless talk of bailouts and austerity is whistling in the dark. In the beginning, perhaps there was a case to be made for pretending it won’t all end up in a horrible mess, so enable the French and Germans to stabilise their banks. They’ve had long enough now.
It’s time to stiffen the spine of leadership and start taking action to deal with the place we find ourselves. Europe is still reasonably rich, and in some areas reasonably productive. We have some serious macro challenges. We are living beyond our means. We may have less oil available to us that we had in future. Some of us have created a monetary union without creating a fiscal union.
None of these issues are intractable, either in isolation, or together. But they are hard, and if we leave them to fester they will cause us very serious grief. We need leaders that will give it to us straight, and get us to roll up our sleeves, spit on our hands and get to work fixing some of these, to build us a better future, rather than lolling about resting on the fruits of the last twenty years.
Of course, what the Greek government says and what it does are two very different things. And yet another shedload of EU taxpayers’ and IMF money is going to be burned worthlessly on the pyre of this characteristically European failure to take decisive action. Guys, the mission is lost. There’s no way back from here. Either man up and buy Greece time, again and again forever, or let go.
The Greek public sector workers, and indeed ours here in a much lesser way, just haven’t accepted that in the fight between European living standards and global capitalism has been won. The living standards lost, to the rest of the world that generally gets by on less, and to the transnational corporations and the guys that own the capital wealth.
Defeat is inevitable, but if effective action is taken soon then a successful retreat may be possible. Living standards are going to fall across the West in general and Europe in particular, the question now is how quickly. And if we continue to ignore reality and go la-la-la-la all the time, then they’re going to fall pretty damn quick.
Greek public sector workers aren’t going to be retiring in their mid fifties in the coming years, unless they have been saving hard and been squirreling their savings abroad. If they’re lucky they’ll get to retire at all! This bomb is going to go up in the next year or so, as Labour’s Liam Byrne so succinctly put it ‘there’s no money left‘. At least in the UK we can create the money, effectively taxing holders of cash and all consumers to make up the difference.
The Greeks could do the same with the drachma. They have the advantage of a decent climate and a place people want to go on holiday to. If they want to kid themselves they are rich enough to retire at 53 then they have to get other people to fund it, and it’s more civilised to do it by continual devaluation making the country a cheap destination for tourists that blagging it from other people via the EU and IMF. Of course that will have the corollary that imported Stuff will continually get dearer, but Greece can probably feed itself, and hey, early retirement does have its price!
This one is going to cause the mother of all financial shitstorms when it finally comes off the rails. I’ve been holding off buying shares for the last couple of months, partially because I wanted to get into index-linked cash in a serious way, but now I am going to start saving towards a war chest to buy into that shitstorm when it turns up. I have a list of firms I like the look of, that do real stuff and have been doing for years, and get to pay a dividend. They’ve been getting too dear of late.
There’s some chance IMO that the storm will be such that it may take down the Western currencies, in which case all bets are off and money itself may no longer have any value, effectively we will have what happened to the Reichsmark. That kind of thing destroys things like pensions, savings and anything that isn’t stuff or land. It’s not impossible to imagine that happening, but it is probably not going to happen, and in that case the storm will offer opportunities. It will probably be ruthless in testeing for value, however – ‘goodwill’ has questionable value when all around you are losing their heads.
It’s also interesting that the old saw about the volatility of the capital value being higher than the volatility of the income is what I experience. Against that should be set the fact that I’ve only been tracking this for a short while, so it’s hardly like I have been seeing things over a couple of business cycles. I qualify yield in terms of income as a fraction of what I paid for a share rather than in terms of the current share price, which takes at least one volatile variable out of the equation. However, it does reflect how I intend to use my holdings, once I have retired.
I’m also surprised that there aren’t more PF writers getting ready to steer into the coming storm. Maybe I am just crazy, but I am up for it, though I need a bit more time to save up that war chest. So in some ways I’d rather the EU and the Greeks play a little more shadow boxing before the levee breaks and the shaky edifice assembled from the combination of cowardice and misplaced conviction crumbles in the tide, perhaps later this year or early next year.
For sure, I could end up doing the same as the EU politicians, and burning the whole stake as I buy into a moribund market if the financial system is destroyed, the sky turns to endless falling rain and the markets flame out. On the other hand, this is one crisis that is clearly going to happen, the only uncertainty is in when the deonouement will play out. It seems kindof rude not to at least consider whether I can make something of it… Yes, it is market timing. No, I can’t call the exact bottom, so I will have to wade in when I feel enough damage has been done and have to be prepared to see gut-wrenching losses if I call the low too early. That’s life – the meek do not inherit the earth, they get slaughtered in the crossfire. The main lesson I should take is from the pusillanimous European elites fixated on weak deferral of action. That lesson is “Be Not Them”. Yoda had it about right. “Do or Do Not. Do not Try”
I’m a glass half-empty sort of guy on the economy, but…
The Daily Fail seem to be in a particularly dark mood where they presented this graph of the June 2011 OECD composite leading indicators as desperate evidence that growth has dropped.
June 11 Composite Leading Indicators
Obviously there was a near-death experience in 2009, but given that some people thought that the first half of the 2000s was a non-inflationary constant expansion, it looks like we’re off to the races economically somewhere in the world…
I don’t know what they’re smoking, but it looks like these leading indicators are at their highest than at any point in the last ten years with the possible exception of 2007. There’s a country breakdown in the PDF which basically says get out of emerging markets and into the USA, Germany and the UK are okay-ish.
The Mail seem to have confused the economy as experienced by the proletariat with the economy as measured by company results (the CLI graph is not the same as company results FWIW). Jobs are haemorrhaging and wages are below inflation so the popular experience of the economy is pretty rough.This is particularly the case in the UK where we pay too much for our houses, and then often don’t get round to paying down the capital of the mortgage spending the nominal increase in value on cars and holidays.
However, companies seem to be in reasonably good shape as long as they aren’t exposed to the consumer and given the amount of lolly my modest ISA is paying in dividends they seem to be making money too. It is just that the spoils of war are increasingly going to people with money rather than people who are in debt, with the latter being most people in the UK.
Now whether that is a good thing or not is a perfectly reasonable thing to challenge, however, it seems the money is being made even in the bombed-out West. Indeed, the United States which comes across to me as an indebted basket case appears to be growing well, it’s just that people there don’t feel it either. Conversely, there appears to be fire in the engine-room of some emerging economies – it almost looks as if the West has managed to craftily outsource some of its recession, if the turning points of these composite leading indicators really do correlate with growth a little while later. I experience that too – my Brazilian ETF is quietly dying in a lost corner of my ISA, and it’s hardly like the pound is strengthening against the Real to make this happen.
So I’m a glass-half full sort of chap on this, unlike the Mail. Of course, it’s all damn lies and statistics, but it squares with what I am seeing when I look at the companies I own a trivial sliver of. Some of the buggers in my potential candidates watchlist have raced away from me before I could rustle up the wedge to buy – I have £7k of my ISA unused this year, but I’ve been concentrating on building cash reserves with NS&I of late. Hopefully the Greek denouement will bring things back down to earth a bit ready for me to take a second bite at the ISA cherry in the autumn, when I’ve saved some wedge.
These companies are making money. It’s what capitalism does, but capitalism doesn’t say it’s going to spread the money evenly across the populace like manna. Some of the horrible time we the people have been having is because we borrowed like drunken sailors during that apparently NICE era from 2001-2007, and it’s payback time. I’m not sure that capitalism is going to help us do that.
And no, I haven’t changed the medium term view that resource crunches are going to be bad news, particularly for general stock market index growth. However, I note that companies made money before the gift of ancient sunlight allowed us to run year-on-year growth. They just didn’t make so much of it… This is short term noise compared to that backdrop. Anyway, Peak Oil is a timebomb, and I’ve been reliably assured that timebombs don’t go off. I hope the man’s right about our healthy future
Time for a contrarian buy of HSBC N America S&P500 tracker, maybe. I still can’t see the United States as anything but a hopelessly indebted bombed out shell with very serious medium and long-term problems. But on the principle that the darkest hour is before the dawn, and that I have hardly any exposure to the US, I may sport some of my remaining ISA allowance there later this year, or even trickle it in up to 3k if I can convince myself I really don’t pay any per-transaction dealing fees on this with iii. Though I have reservations on the way index tracking works on top-slicing markets like the FTSE with the FTSE100, the US market is huge – the HSBC tracker holds 500 stocks, and seems to provide damn good sector diversification. No sector is > 15% by value, compared to the 1/5th of the FTSE100 in financials and 17% oilies.
Guess there has to be the standard disclaimer – this is not suggesting anyone buy the S&P500 unless you already want to. The US is an oil-dependent empire in Spenglerian decline, though it has a gutsy and enterprising population so if anybody can run on empty they’ll find a way. Don’t do it to yourself I am mad, but in the end if I trash £3k on the US then it won’t kill me – it’s a mistake I can afford to make.
What’s happened to the High Street and why do we need Money Shops?
I haven’t been into town for a while, well, you don’t need to go there if you aren’t going to buy anything. It’s a lovely day, so I took a detour via the cemetery and the park, to be treated to the lovely sight of a couple of jays flying over the railway line.
So I get into town and there it is, WHAM – what the heck has sprung up in the last year or so?
A Money Shop
What the hell is a money shop? What’s the current rate of £1 – well it ought to be £1, natch. But no, here we have an outfit that is going to sell you money, for money. Howzat work then? I took a butcher’s at The Money Shop website to find out how it all works.
At the Money Shop we believe that you should get your hands on cash when you need it. So why wait?
Why wait? Because you don’t have any frickin’ money and will have even less after getting out of The Money Shop! Just what is so hard to understand about that?
Not only can you give yourself the right royal shaft but you can get incentivised to stiff your similarly hard-up mates. So what is the current price on money? Well, say you need £100 and you’ve just been paid, but all your pay went on the last payday loan. Well, heck, so you write out a cheque to The Money shop for £100. The kicker is they only give you £83.01 but the Money Shop will cash your £100 cheque after 30 days. That’s truly awesome.
Let’s assume you are the typical punter. you spend more than you earn, which is why you are coming to the Money Shop. Let’s say you want to buy Shanice some trinkets for Christmas and you need £100. Nobody else will advance this to you, so hello Money Shop. You need to borrow £100 from them, plus the amount they will charge you on top (£16.99)
Say this carries on for a year. You obviously have to borrow more and more since you need to borrow to cover the cost of the charges. How much are you borrowing at the end?
| month | borrowed | charge |
| January | £100 | £16.99 |
| February | £117 | £19.88 |
| March | £137 | £23.25 |
| April | £160 | £27.20 |
| May | £187 | £31.83 |
| June | £219 | £37.23 |
| July | £256 | £43.56 |
| August | £300 | £50.96 |
| September | £351 | £59.62 |
| October | £411 | £69.75 |
| November | £480 | £81.60 |
| December | £562 | £95.46 |
Yikes. Just. Say. No. Wilkins Micawber had it taped when he said that if you spend more than you earn the result is misery. The advantage of the Money Shop is it helps you get to the misery faster than the competition. I vote for Mr Money Mustache‘s approach:
when you come in and actually ask for a loan, I PUNCH YOU IN THE FACE AND TELL YOU TO WISE [...] UP AND GO SELL SOME OF YOUR SHIT INSTEAD OF BORROWING MORE MONEY!
Say what you like about MMM, but you can’t deny his dedication to excellence in customer service. Sometimes the customer is just so wrong, and needs to know the truth. Straight between the eyes…
Flabbergasted by this, I carried on, looking for places where fools could be parted from their money. The opportunities are legion -
economy peak oil personal finance: complainypants peak car petrol prices SAHM traffic drop
by ermine
2 comments
One of the great things about high petrol prices is that it prices other people off the road, apparently it’s Squeezing the Middle
There seems to be a constituency of consumers out there who are calling themselves the Squeezed Middle. And they’re mightily p*ssed off, so much so they want to vent. I got some choice words for them later on. However, I had a surprisingly pleasant experience yesterday.
I hauled my carcass into the car to drive to London to visit my parents, guess it’s a 75-mile trip each way. I’m mortgage free and I have no intention of taking out the small mortgage I’d need to buy a rail ticket. I’m going to London tomorrow by train for work and it costs my company £78 of their Great British Pounds to do it. I hope I can add that much value to the meeting compared to a phone conference, but heck, it’s their call as it’s on their coin.
So I fill up the car flexing the credit card for £62-odd. It’s been a couple of months since I bought petrol, as the trusty bicycle doesn’t touch the stuff. I note that it’s probably the highest about I’ve ever spent on a tank of petrol, and then I set myself on my journey down to The Smoke.
I launch myself onto the A12 from Ipswich, and I think to myself blimey, where have all the people gone? Is there a football match or a Royal Wedding on? Okay, so it’s a Sunday late morning, but I know what the traffic should be, I’ve done this journey often enough. So I settle in and try and maintain an even speed of about 60 to optimise my fuel consumption of my 12 year old car that has already seen more than 100,000 miles of road, and it’s dead easy. I’m not streetfighting the trucks and I can let all the folks who have more money than me hare along in the outside lane, but even they aren’t streaking past me at about 40-50mph above my speed as they used to.
This reminds me of how Britain’s roads were when I learned to drive, in 1984, you didn’t have the frenetic and tiresome jockeying for position then that has become the norm on our crowded highways.
So I say hooray for high petrol prices – it prices all those other buggers off the road that were getting in my way. I arrived at my parents’ place more relaxed than usual, heck, I’d pay more to get the balance shifted even further. Which is kinda just as well, as I’m sure it will go that way, for all sorts of reasons, like peak oil, the increasing debasement of Britain’s currency, the general decline of the Western world relative to the East in competing for natural resources etc.
According to the New Statesman we are into ‘peak car’ where people really are being priced off the road (hat tip to Alex for the heads up). About time too, the ever increasing volume of traffic on Britain’s roads, particularly the huge number of trucks doing the old truck race blocking both lanes of a two-lane road, was beginning to make inter-city driving in the UK really draining. On-cue the Grauniad delivers us this heart-wrenching tale of the Blanchards, a couple comprising of a chap and a SAHM who are part of the Squeezed Middle. Let’s take a look at the ways they seek to design oil dependency into their lifestyle.
So they had to get rid of one car, so the remaining vehicle naturally gets driven by the wage earner to get to work. What, then, is the nature of the complaint? It appears the lady (a SAHM I observe) has to take the 16-month old out of nursery ‘cos she no longer has a car to take him there, and now considers herself imprisoned in her home, to wit:
It means I can’t get anywhere now, including nursery.
Well, err, colour me a cynical son of a gun, but lady, you are a SAHM, so what’s with this nursery lark then? One of the upsides of living in a purty li’l village is you get to enjoy the birdsong and the smell of the countryside in its rich variety, one of the downsides is you are miles from anywhere – well, 10 miles from Cambridge. Apparently the bus fare for those 10 miles is now £5.40 return. Count yourself lucky, lady, the bus fare for me to get to work and back is that much and it’s only 6.5 miles each way, which is why I get on my bike.
These Squeezed Middlers have built themselves an unsustainable lifestyle, though at the moment the solution is easy – SAHM actually has to be a SAHM and SAH to be a M, the clue’s in the acronym. Tesco or Ocado are going to have to deliver… Then we have the coup de grace
Our children are missing out and the government needs to lower the price of petrol much closer to £1 to help families out.
It’s the classic please won’t you think of the children? line. Why does the government need to use my taxes to subsidise your lifestyle? I’m not being a child-hating fascist here, when I was a kid my family didn’t even have a car till I was in secondary school! Schools, yes, health, yes, excess driving for SAHMs to live out in the country yet have access to the facilities of the town like the nursery, let’s just hold on a moment. It is possible to survive without a car, y’know. The choice has been one that people took for years before oil – you store or save your needs for about a month if you live in the country, and make a monthly trip into town, or you live in a more modest abode in town with easy access to the facilities around you and shop every day.
In the coming decades transport will become ever more expensive. We will move ourselves are our supplies about less. We will manage stores better, as the fragile just-in-time supply chins that gorged on cheap oil fracture and fail in service. We will reimplement some of the systems that were used in the past, or more evenly distributed and graduated local, city, regional, county and country stores. We will probably still have modern communications and data processing, so we will manage our stock far more efficiently than we used to. And country dwellers will make infrequent trips into town. £5.40 return is a killer if you do it every day, but it is not outrageous if you do it once a week. My Mum shopped one a week to the shopping centre for durables and ISTR twice a week if not more often for fresh veg from greengrocers and market stalls.
We are going to have to think differently about how we live and how we supply ourselves. At least in Europe we still have a physical geography that reflects a time when supplies were distributed before cheap oil. I don’t know how Americans are going to be able to keep the suburbs and exurbs supplied in future, but they are a resourceful bunch so I am sure there’s a way.
Oh, and before I take some stick for being some hyper-rich Toad of Toad Hall, I spent a total of £319 on petrol last year, so I am not Mr Toad, and it is why I can afford it if petrol doubles in price, indeed I could cope if it went up 10x, though I would probably cut my mileage even more and bike in the rain. I’m not rich as Croesus either, my household income puts the household into the nominal Squeezed Middle, though having no mortgage probably puts me at the upper end of it in terms of disposable income. I haven’t designed a long commute into my lifestyle, that was a choice I made decades ago. My London commute was 15 miles and 1.5 hours each way, and I resolved that one of the things I was going to fix was making sure I didn’t have that experience again. I was lucky in having that bad experience, but in general we are increasingly going to have to design our lives to involve less driving. Moaning that the government should subsidise fuel to allow SAHMs to drive their kids to nursery isn’t the right answer…
In the meantime, I look forward to increasingly empty roads. I hadn’t noticed this drop in traffic going to work because my bike ride doesn’t go via too many main roads, and indeed it seemed to be the inter-city part of the journey that had less traffic, I can’t say I noticed any big reduction in town or in London.