Sprott Asset Management's chief investment strategist, John Embry, spelt it out back in November, in the investor newsletter voted the world's best: if the stimulus stops, the economy collapses; if it continues, first we get hyperinflation, and then a collapse. The price of gold is being held down to make it look as though all is well, but the manipulation can't hold out much longer (I've read elsewhere that for every ounce of real physical gold, there's 100 ounces in promises to deliver) - and then gold-you-can-touch will reach "a dramatic inflexion point." Silver, too.
These considerations, useful for the wealthy investor, will matter less to the ordinary person, who will be too busy coping with a suddenly unpredictable world of goods, services and employment.
Wednesday, April 14, 2010
A letter to UKIP
Dear Lord Pearson
Economic mismanagement of the UK by both Conservative and Labour governments
First, please accept my congratulations to yourself and your colleagues on your distinguished manifesto launch – clear policies, frank answers (“We’re skint” resonates) and vigorous rebuttals.
If your aim and hope is a hung (or “balanced”) Parliament, so that the voice of the people may briefly be heard at this critical juncture in our history, may I draw your attention to a point which may help deflate Conservative triumphalism? The Tories are now letting it be understood how well they managed the economy in the Nineties – you may have seen the egregious praise heaped on Ken Clarke by David Dimbleby in the 1st April edition of “Question Time”. Clarke himself damned George Osborne with perfunctory praise and clearly expects to be given a second run at the job sometime.
But I would argue that New Labour did not inherit a thriving economy in 1997; they inherited a booming economy. This led inevitably to the stockmarket bust starting January 2000, which was turned round from 2003 on by the same disastrous trick as was played under the Conservatives, namely an increase in the money supply at a rate generally far above the growth of GDP. For detail, please see the enclosed copy of a letter sent recently to the Guardian’s economics editor, Larry Elliott.
Finally, I note that you said UKIP would consider not standing against a LibDem candidate with proven Eurosceptic views. Would John Hemming MP (for Birmingham Yardley) qualify, as he was one of the signatories to Bob Spink’s EDM 20 (18.11.2009), which called for a referendum on the EU?
Best wishes
CC: Mr Nigel Farage, Mr David Campbell Bannerman
Economic mismanagement of the UK by both Conservative and Labour governments
First, please accept my congratulations to yourself and your colleagues on your distinguished manifesto launch – clear policies, frank answers (“We’re skint” resonates) and vigorous rebuttals.
If your aim and hope is a hung (or “balanced”) Parliament, so that the voice of the people may briefly be heard at this critical juncture in our history, may I draw your attention to a point which may help deflate Conservative triumphalism? The Tories are now letting it be understood how well they managed the economy in the Nineties – you may have seen the egregious praise heaped on Ken Clarke by David Dimbleby in the 1st April edition of “Question Time”. Clarke himself damned George Osborne with perfunctory praise and clearly expects to be given a second run at the job sometime.
But I would argue that New Labour did not inherit a thriving economy in 1997; they inherited a booming economy. This led inevitably to the stockmarket bust starting January 2000, which was turned round from 2003 on by the same disastrous trick as was played under the Conservatives, namely an increase in the money supply at a rate generally far above the growth of GDP. For detail, please see the enclosed copy of a letter sent recently to the Guardian’s economics editor, Larry Elliott.
Finally, I note that you said UKIP would consider not standing against a LibDem candidate with proven Eurosceptic views. Would John Hemming MP (for Birmingham Yardley) qualify, as he was one of the signatories to Bob Spink’s EDM 20 (18.11.2009), which called for a referendum on the EU?
Best wishes
CC: Mr Nigel Farage, Mr David Campbell Bannerman
Tuesday, April 13, 2010
Hoo-ha
David Cameron invites us to "join the government of Britain", promises to extend "power to the people" ... and proposes to cut MPs by 10%, i.e. increase the average electoral roll from 74,000 to 82,200.
And they're wondering why we're not "engaging" with the General Election campaign.
And they're wondering why we're not "engaging" with the General Election campaign.
Monday, April 12, 2010
Had enough of teaching (or other job)?
Below is an article I wrote for the Times Educational Supplement in 1997. The Teachers' Pension Scheme has altered significantly since then, but I think many of the general points are still valid.
_____________________________________
Can you really afford to quit?
Article Published in The TES on 21 November, 1997 By: Rolf Norfolk
First work out the cost. The job might not seem so bad after all - or there may turn out to be other solutions, says Rolf Norfolk
Are you fed up and dreaming of the days when early retirement was much easier to obtain? If so, first you have to decide whether you really have a problem with your job or if it is just a grumble. If you do have a serious worry, it may help to review the following options and consider whether you are prepared to meet the cost of changing your situation.
1. If your promoted post has become too much for you, ask for a demotion. Think twice about this, as it involves a pay cut and it is hardly a recommendation for re-promotion later. Regardless of current regulatory proposals, a step-down is already provided for in your pension scheme so long as it is in the interest of the efficient running of the school and your new post is with the same employer.
You have two options: first, you can split the pension account, so that service in the higher-paid post is preserved (and increased in line with inflation), and then there is a separate calculation for the new job, based on the lower salary and the remaining period served. At retirement, the two figures are added together. Alternatively, you can carry on paying pension contributions as though the demotion hadn't happened, and have all your service relate to your old salary. The potential drawback is that the notional salary is fixed, not inflation-linked. Such considerations need not worry those close to retirement, since a teacher's pension relates to the best year's income in the final three years; in the past some heads have therefore returned to teaching at the age of 58.
2. If the classroom demands are too much, try teaching part-time. This does not wreck your accrued pension because although your pension depends on not only the exact time you have served but your salary at retirement, if you work part-time the notional salary on which your pension is based is what you would be earning if you were a full-timer. But obviously from then, as a part-timer, you will be adding years and days of service more slowly. New regulations are, however, now going through Parliament to improve pension calculations for part-timers.
3. If your face does not fit, move to another school. Life is too short to put up with managers who don't like you. Or you could retrain for a different sector of the education service.
4. Sell your big house and move down. Or sell your investments. Or remortgage. Use your assets to pay for a very long holiday (or to subsidise part-time or lower-paid employment) before you take your pension as of right at 60. If you can, but aren't willing, you've just found out exactly how bad the problem isn't.
5. Apply for ill-health early retirement. Occupational disability doesn't imply being half-dead. But it's not a dodge, either. You have to pass (or, more accurately, fail) medical tests, and the Government has changed the rules to make this harder. For those who get it, the really tough bit is the financial impact. With the Teachers' Superannuation Scheme, ill-health pensions relate only to actual service (plus possibly a bit extra), so even with 20 years' service you would lose at least two-thirds of your income. While you still can, you should therefore consider permanent health insurance, which pays an extra, tax-free income during incapacity. Alternatively, some critical illness insurances include a lump sum pay-out if you are diagnosed as occupationally unfit.
In recent years one in four teacher retirements has been through illness, but although this is more than in previous decades it is still only about the same as for the general population. Often the root cause is unrelated to working conditions (one client of mine is going deaf); but if you are over-stressed, you should try to solve your problem, not have a chronic illness because of it.
6. For young teachers: create your own early retirement account. If you invest the same as your pension contribution (6 per cent) from ages 22 to 55, you will have enough to sustain you for five years on about 40 per cent of salary, until your pension at 60 (additional voluntary contributions are not likely to be appropriate for this, since they can't be deliberately exhausted in five years). Those anticipating unwaged child-rearing years should save more (say 7 per cent) when they can.
7. Resign half-way through your career. This is drastic. Very few teachers can do this and earn the same money elsewhere. Besides, your job is not threatened by Third World competition or the microchip - not many others can say that. And thinking of retirement, only a minority of the public can hope to retire as early (60 is still relatively young) and as securely-provided for as a teacher.
Are you giving up to do something better, or running away from a problem you have failed to address? If the latter, turn and defeat the monster.
As H G Wells's Mr Polly discovered, if you don't like your life, you can change it.
Rolf Norfolk is an independent financial adviser working in the Midlands. He is a former secondary teacher.
This article is not intended as personal advice. Anyone interested in the points raised should consult a financial adviser.
_____________________________________
Can you really afford to quit?
Article Published in The TES on 21 November, 1997 By: Rolf Norfolk
First work out the cost. The job might not seem so bad after all - or there may turn out to be other solutions, says Rolf Norfolk
Are you fed up and dreaming of the days when early retirement was much easier to obtain? If so, first you have to decide whether you really have a problem with your job or if it is just a grumble. If you do have a serious worry, it may help to review the following options and consider whether you are prepared to meet the cost of changing your situation.
1. If your promoted post has become too much for you, ask for a demotion. Think twice about this, as it involves a pay cut and it is hardly a recommendation for re-promotion later. Regardless of current regulatory proposals, a step-down is already provided for in your pension scheme so long as it is in the interest of the efficient running of the school and your new post is with the same employer.
You have two options: first, you can split the pension account, so that service in the higher-paid post is preserved (and increased in line with inflation), and then there is a separate calculation for the new job, based on the lower salary and the remaining period served. At retirement, the two figures are added together. Alternatively, you can carry on paying pension contributions as though the demotion hadn't happened, and have all your service relate to your old salary. The potential drawback is that the notional salary is fixed, not inflation-linked. Such considerations need not worry those close to retirement, since a teacher's pension relates to the best year's income in the final three years; in the past some heads have therefore returned to teaching at the age of 58.
2. If the classroom demands are too much, try teaching part-time. This does not wreck your accrued pension because although your pension depends on not only the exact time you have served but your salary at retirement, if you work part-time the notional salary on which your pension is based is what you would be earning if you were a full-timer. But obviously from then, as a part-timer, you will be adding years and days of service more slowly. New regulations are, however, now going through Parliament to improve pension calculations for part-timers.
3. If your face does not fit, move to another school. Life is too short to put up with managers who don't like you. Or you could retrain for a different sector of the education service.
4. Sell your big house and move down. Or sell your investments. Or remortgage. Use your assets to pay for a very long holiday (or to subsidise part-time or lower-paid employment) before you take your pension as of right at 60. If you can, but aren't willing, you've just found out exactly how bad the problem isn't.
5. Apply for ill-health early retirement. Occupational disability doesn't imply being half-dead. But it's not a dodge, either. You have to pass (or, more accurately, fail) medical tests, and the Government has changed the rules to make this harder. For those who get it, the really tough bit is the financial impact. With the Teachers' Superannuation Scheme, ill-health pensions relate only to actual service (plus possibly a bit extra), so even with 20 years' service you would lose at least two-thirds of your income. While you still can, you should therefore consider permanent health insurance, which pays an extra, tax-free income during incapacity. Alternatively, some critical illness insurances include a lump sum pay-out if you are diagnosed as occupationally unfit.
In recent years one in four teacher retirements has been through illness, but although this is more than in previous decades it is still only about the same as for the general population. Often the root cause is unrelated to working conditions (one client of mine is going deaf); but if you are over-stressed, you should try to solve your problem, not have a chronic illness because of it.
6. For young teachers: create your own early retirement account. If you invest the same as your pension contribution (6 per cent) from ages 22 to 55, you will have enough to sustain you for five years on about 40 per cent of salary, until your pension at 60 (additional voluntary contributions are not likely to be appropriate for this, since they can't be deliberately exhausted in five years). Those anticipating unwaged child-rearing years should save more (say 7 per cent) when they can.
7. Resign half-way through your career. This is drastic. Very few teachers can do this and earn the same money elsewhere. Besides, your job is not threatened by Third World competition or the microchip - not many others can say that. And thinking of retirement, only a minority of the public can hope to retire as early (60 is still relatively young) and as securely-provided for as a teacher.
Are you giving up to do something better, or running away from a problem you have failed to address? If the latter, turn and defeat the monster.
As H G Wells's Mr Polly discovered, if you don't like your life, you can change it.
Rolf Norfolk is an independent financial adviser working in the Midlands. He is a former secondary teacher.
This article is not intended as personal advice. Anyone interested in the points raised should consult a financial adviser.
Survivalism goes mainstream
If you listen out for them, you'll hear them: voices telling you to prepare for disruption to normal civil life.
Years ago, it'd be American gun nuts - the type that quotes Ruby Ridge and Waco as revealing the soul of government. They'd be researching the continental US to find rural areas safe from floods, earthquakes and tornadoes; they'd be building houses quickly and cheaply from straw bales (it works very well, apparently). Pioneering without the Apache has a superficial romantic attraction.
But there is a new Apache: your fellow man. In northeastern Ohio, a sheriff's department has suffered such severe budget cuts that it now has only one police car to cover an area twice the size of the British West Midlands. A judge has advised residents to arm themselves, to be careful and vigilant and make connections with their neighbours. (htp: John Lott)
In Australia, an investor education website has turned from advising us how to build a balanced portfolio, to considering what happens when complex societies collapse:
Marc Faber is recommending that investors have half of their investments exposed to Asia. That is a very useful advice for very high net worth people who have the money and connections to resettle. But for the rest, it is very important to have your own plan B if something happens in your local area...
Your entire country will not be likely to collapse overnight. But if you are unlucky, your local region can be the one that descend into chaos first. The hard question to ask is: do you trust that your government [...] will have the resources, and competence to cope with large-scale crisis? We are not talking about small-scale crisis that affects small communities- we are talking about a scale large enough to affect at least hundreds of thousands of people.
If you are going to plan for Plan B, then you will have to increase the margins in your life and acquire skills outside the area of your specialisation.
Here in the UK, the Fleet Street Letter (an investor publication established in 1938 and edited by Lord Rees-Mogg, formerly editor of the Times) is striking a dramatic note with its headline "The Great Financial Deception of 2010". The thesis of the latest edition is that:
Our handkerchief of an urban lawn won't grow enough to support us, and I'm still debating what to do for the best if the worst looks like happening. But one thing is clear: forming and strengthening community links will be a vital part of our survival plan.
Years ago, it'd be American gun nuts - the type that quotes Ruby Ridge and Waco as revealing the soul of government. They'd be researching the continental US to find rural areas safe from floods, earthquakes and tornadoes; they'd be building houses quickly and cheaply from straw bales (it works very well, apparently). Pioneering without the Apache has a superficial romantic attraction.
But there is a new Apache: your fellow man. In northeastern Ohio, a sheriff's department has suffered such severe budget cuts that it now has only one police car to cover an area twice the size of the British West Midlands. A judge has advised residents to arm themselves, to be careful and vigilant and make connections with their neighbours. (htp: John Lott)
In Australia, an investor education website has turned from advising us how to build a balanced portfolio, to considering what happens when complex societies collapse:
Marc Faber is recommending that investors have half of their investments exposed to Asia. That is a very useful advice for very high net worth people who have the money and connections to resettle. But for the rest, it is very important to have your own plan B if something happens in your local area...
Your entire country will not be likely to collapse overnight. But if you are unlucky, your local region can be the one that descend into chaos first. The hard question to ask is: do you trust that your government [...] will have the resources, and competence to cope with large-scale crisis? We are not talking about small-scale crisis that affects small communities- we are talking about a scale large enough to affect at least hundreds of thousands of people.
If you are going to plan for Plan B, then you will have to increase the margins in your life and acquire skills outside the area of your specialisation.
Here in the UK, the Fleet Street Letter (an investor publication established in 1938 and edited by Lord Rees-Mogg, formerly editor of the Times) is striking a dramatic note with its headline "The Great Financial Deception of 2010". The thesis of the latest edition is that:
- British government credit will be downgraded (leading to a very damaging rise in interest rates)
- The FTSE will halve within the next three months
- A consumer sea-change from reckless spending to saving/paying off debt will tip Britain into deep and prolonged recession
- Residential and commercial property will halve in value within the next 10 years
Our handkerchief of an urban lawn won't grow enough to support us, and I'm still debating what to do for the best if the worst looks like happening. But one thing is clear: forming and strengthening community links will be a vital part of our survival plan.
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