Tuesday, August 31, 2010
I'd like to suggest a quicker and easier test: identifying movie preferences.
Generally speaking, women love films about loss and self-sacrifice (Love Story, Casablanca) whereas men prefer stories of conflict and victory, especially where the hero easily destroys hosts of enemies (James Bond, Arnold Schwarzenegger). For women, tear-jerkers; for men, jerk-tearers.
But don't look down your noses at 007, ladies: Bond has much to teach us about the world. Last night I watched the remake of "Casino Royale", starring Daniel Craig. In this yarn, the superspy ruins his arch-enemy in a high-stakes poker game with a pot of $150 million. When the spoils are stolen, he recovers them in a shootout in Venice that involves sinking a whole building into the marshes.
It's prescient: a movie from 2006 about financial speculation ending in a housing collapse.
There's a further lesson. When you have won all the chips on the table, you don't give them back to your competitors; you stand up and walk away. So it is with investment: now that a tiny elite has cornered most of the income and capital, why on earth would they re-enter the market?
Monday, August 30, 2010
As a result, cirrhosis death rates for men dropped by two-thirds. Admissions to state mental hospitals for alcoholic psychosis halved. The homicide rate, which had soared between 1900 and 1910, did not increase significantly during Prohibition.
Prohibition was ended in order to raise taxes for the Federal Government. It was supported by labor unions and wealthy industrialists.
The 21st Amendment, which repealed the 18th Amendment, made unregulated imports of alcohol illegal.
During Prohibition, national alcohol consumption decreased by an estimated 30 - 50%. After repeal, it increased. In 1989, alcohol was implicated in over 50% of homicides (and drugs in 10 - 20% of them). Alcohol was then also believed to be the cause of over 23,000 motor vehicle deaths - more than twice the number of drink-related homicides.
Iceland banned beer for 73 years (1915 - 1988). But for the first thirty years of its existence, Pakistan allowed the free sale and consumption of alcohol; restrictions were only introduced in 1977.
Saturday, August 28, 2010
Half a century later and we're still giving them prejudice. Dirty thieves etc. France is moving them on; in Istanbul, they're knocking down and rebuilding houses as "transformation projects" and offering the romanies the chance to buy the new houses (which they can't afford) or fresh rentals 40 kilometres away. These people, ironically, had been among the first to abandon their ancient nomadic life.
Here's a couple of gypsy blogs: Pesha's blog and Clearwater Gypsies.
And for those who missed it, here's the recent Channel 4 programme "My Big Fat Gypsy Wedding". A community where even the tough guys fear God and the girls are chaste until they marry.
I've never been happier than when leaving somewhere.
From the same programme I heard Marko Markovitch's tremendously vibrant jazz band. You can't get it on iPlayer but here's a site with samples, and here's "Romany wedding" which would make even the lame dance.
BOBAN MARKOVIC-RROMANO BIJAV-LA BELLEVILLOISE
Uploaded by aceituna11. - Watch more music videos, in HD!
Friday, August 27, 2010
As Scott Adams says:
The greenest home is the one you don't build. If you really want to save the Earth, move in with another family and share a house that's already built. Better yet, live in the forest and eat whatever the squirrels don't want. Don't brag to me about riding your bicycle to work; a lot of energy went into building that bicycle. Stop being a hypocrite like me.
I prefer a more pragmatic definition of green. I think of it as living the life you want, with as much Earth-wise efficiency as your time and budget reasonably allow.
Is the well-heeled greenie not unlike Marie Antoinette, tending her washed (and "heavily perfumed") sheep in a sylvan fantasy?
I'm only jealous, of course. I can't wait to join the middle-class lotus eaters, as soon as my Lotto ticket pays out the Big One.
Saturday, August 21, 2010
Iceland's per capita income is 14 rungs higher than ours.
Norwegians earn 2/3rds more than we do.
I give below two charts that look at how gold has fared since President Nixon de-linked it from the dollar in 1971. In inflation terms (as measured by the US CPI-U), gold now worth is almost twice as much as its long-term average; but in turn, the Dow is still running very high against gold.
Friday, August 20, 2010
It appears that Goldman Sachs will simultaneously predict a rise in the value of gold, and a fall, depending on how valuable a client you are. Mind you, that could reflect the difference between the advice one gives to active traders as opposed to buy-and-holders, so it's not enough evidence to convict, I think.
I looked at gold's longer-term price history in February of last year, starting in 1971 when President Nixon finally severed the official link between the US dollar and the precious metal on which it used to be based. Since then, and adjusted for the American Consumer Price Index, gold has averaged 2.8 or 2.9 times its September 1971 price. I reproduce the graph below:
In September 1971, gold was trading at $42.02 per ounce, when the CPI index was at 40.8 . As I write, the New York spot price is $1,232.40 and July 2010's CPI figure is 218.011. So "in real terms" gold is now worth 5.49 times as much as in the autumn of 1971, i.e. nearly twice its long-term, inflation-adjusted trend.
As I've said before, we're now not looking at gold as a "good buy" because it's undervalued, which it isn't (it was, 10 years ago). Instead, it's assuming its role as a form of insurance against economic breakdown. I've noted recently, as doubtless you have too, how shops and internet sites have been springing up, offering to buy your gold. There must be a reason - though remember that these purchasers often don't give you the full melt-down value of your jewelry, so there's a profit margin for them already.
It may be a sign of the times, but that also means that it's a temporary phenomenon. Unless you're willing to keep a sharp eye out for price movements and can sell fairly quickly when you have made a gain, perhaps you should keep out of this speculative market.
Unless you believe the future is rather more catastrophic. In that case, as some are now advising, you may wish to build up your personal holding of the imperishable element. But consider the ancient buried hoards that have been discovered over the last few years by people with metal detectors: presumably those ancients thought they'd come back for their goods, but were overtaken by events. If you really have the disaster-movie outlook, maybe there are other, more useful things you should be doing to ensure that you survive and thrive.
Thursday, August 19, 2010
UK investors who are concerned about the threat of inflation have recently (19 July) lost access to an ideal solution, the NS&I Index-Linked Savings Certificate. Now a building society is offering something to fill that gap in the market.
National Counties are marketing an index-linked cash ISA. This is not quite the same as NS&I's product, because the investment is for a fixed amount (the maximum cash ISA allowance, i.e. £5,100) and no withdrawals are permitted within the 5-year term of the plan. As with NS&I, the return is linked to the Retail Price Index (RPI), plus 1% p.a. For further comment by Citywire, see here.
A lot depends on what you think may happen in terms of inflation, which brings us to the great inflation-deflation debate. Some commentators are saying that Western economies are so indebted that we have reached a turning point and people will spend less and save more (or pay down debt, which amounts to the same thing). Governments are going to have to follow suit, and the UK government is currently busy trying to demonstrate its commitment to do so, fearing that bond markets may lose confidence in our financial management and will then charge higher interest, which would really put us in a pickle.
So demand is reducing. We see this in the recent bankruptcies of UK holiday companies and the pages of cut-price cruise adverts in the middle-class press. If this is the pattern generally, then holders of cash will benefit as prices reduce - the pound in your pocket will grow more valuable, quite safely. Even better, this type of deflationary gain is not taxed, at least not until the government nerves itself up to simply confiscate your savings.
But that's not the whole picture. While demand for luxuries is lessening, there are other things that we still have to buy, especially food and energy. Here, prices are rising. And if interest rates do rise, that will also increase RPI, which unlike the Consumer Price Index (CPI) includes housing costs. So it is quite possible that inflation as measured by RPI could be high, even as the economy slows down. It's worth noting that the government has recently changed rules on private sector occupational pensions so that their benefits will increase in line with CPI instead of RPI, which suggests that our rulers believe that one way or another, RPI will rise faster than CPI in years to come.
The BBC appears to have bought the official line that we should ignore food and energy costs, referring to CPI as "core" inflation and noting that it's now a mere 3.1%, as opposed to RPI which is running at 4.8%. However, unlike the mandarins at Broadcasting House, the rest of us need to eat and keep warm; or, to be a little fairer, food and energy is a more significant part of most people's budgets than it is for the upper echelon of the mediaocrities.
An RPI-linked cash product is a good each-way bet: if prices do reduce, then your money becomes more valuable; if prices increase, the value of your savings is preserved; and either way, you benefit from that extra 1% p.a. sweetener.
Reasons not to? You may find you need access to cash within the 5 year term; and if you're a gambler, you may be looking at investments that could outpace inflation (think of the current fever for commodities such as gold, silver, oil and agricultural products). But you shouldn't put all your eggs in one basket, and most ordinary people aren't gamblers when it comes to their nest-eggs, so this product is worth a look.
Tuesday, August 17, 2010
One indication of our plight is the balance of ownership between ouselves and foreigners - who owns more (including official debt) of whom? The Econbrowser blog reproduces the following graph from a study of the US position:
And I give below a graph I've constructed from official figures, showing what's happened here in the UK:
For those inclined to blame solely New Labour for the economic disaster, this should be an eye-opener - look where we were in 1997.
Sunday, August 15, 2010
Friday, August 06, 2010
Tuesday, August 03, 2010
A release from the Office for National Statistics, widely reported in the papers today, says that the UK's net worth is £6,669 billion. Of this, 61% (£4,048 billion) is tied up in housing.
According to Credit Action in April 2010, 11.1 million households have mortgages, at an average of £111, 612 per mortgage. The total of personal debt in the UK (including mortgages) is £1,464 billion; UK GDP in 2009 was an estimated £1,396 billion.
Much of the value of housing depends on the inflationary effect of lending. According to a release by the Council of Mortgage Lenders, in May 2010 the average loan to value for first-time buyers was 75%, and for house movers it was not much less (67%).
Housing has become a far more important element in our economy, over the last 50 years. Here is Table 1 of a press release by the Halifax in May 2010:
Since 1959, total net household wealth has increased 5 times in real terms. But houses have gone up in value 11 times, and mortages are 23 times bigger. Consumer credit is also 13 times greater.
I don't think we can really run a successful economy on the basis of inflating the value of our huts by getting into hock with moneylenders. Sooner or later, we have to get out there and hunt something.