Saturday, May 28, 2011

NS&I Savings Certificates - the clock is ticking!

If you're considering buying an NS&I Savings Certificate, especially the (RPI-) index-linked version, you may need to decide quickly.

NS&I's site says they "expect [them] to be on sale for a sustained period of time", which gives them room for manoeuvre as to timing and could leave ditherers suddenly high and dry. They also say "we are currently experiencing high volumes of calls" and this could mean that they will reach their overall sales target well before the end of the financial year - which is why, reportedly, the Certificates were withdrawn from sale last July . It's also worth noting that there is no specific target for Savings Certificates - as I reported here last month, it is merely expected that NS&I will end the tax year managing £2 billion more than it did at the beginning - spread over all its products, including e.g. Premium Bonds.

Moreover, there is commercial pressure to withdraw the Certificates. I reported that they were back on 12 May, and a mere two weeks later the Nationwide Building Society began complaining of "unfair competition" from NS&I.

The Government is in a cleft stick: people should have a secure and inflation-proof haven for their cash, but it is also a priority to get banks and building societies lending again to stimulate the economy.

It has also been observed that since the financial sector has been allowed to dominate the economy, the Treasury has become semi-dependent on taxes on bankers' bonuses. I have to bite my tongue at this point!

Actually, the competition complained of is not as fearsome as it was. True, you can invest up to £15,000 for a 5-year period (and can also buy them for children aged seven or more); but the 2- and 3- year versions are no longer available for new purchases (existing ones can usually be rolled-over on maturity), so the maximum you can invest has been sharply reduced: in 2006 you could have committed up to £45,000 per person, by buying three different versions at the same time!

Further, although the Certificates are still RPI-linked and tax-free, the additional interest is now only 0.5% per year. As before, you can access the cash before the end of the 5-year term (I suspect this term was chosen as being the least attractive), but you lose a year's interest.

Having said that, I still think they are better than what you can get elsewhere. As this FT article says (see end), the commercial alternatives are either taxable or carry a degree of investment risk.

If you do want to get in (and remember, this is NOT a personalised recommendation!), do so before the market whinges the Government into submission. You can apply online here.

INVESTMENT DISCLOSURE: We're just considering buying some ourselves!

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Sunday, May 15, 2011

Letter to The Spectator: GM contrarianism

Sir;

Matt Ridley’s statement (Diary, 14 May) that “GM allows the organic dream of drastic cuts in pesticide use to come true without high cost” must surely be disingenuous coat-trailing, or at least an instance of grossly unbalanced journalism. Before he ripostes that this was only a passing comment in a desultory diary, I should like to suggest that the subject of how we are going to feed ourselves and our descendants deserves better than a contrarian throwaway line.

Mr Ridley makes no reference to research (e.g. as quoted by Friends of the Earth in 2008) that indicates increased use of pesticides in conjunction with GM crops. Is he also unaware of the common assertion that one of the purposes of GM in cereals is to develop crops that are resistant to the side-effects of herbicides and some pesticides, so helping to expand the market for the agrichemical industry? Does he further wish us to believe that he is ignorant of the debate about monoculture farming: how it allegedly increases liability to disease and pests, which in turn encourages the use of chemicals that harm wildlife and soil microorganisms and degrade the soil structure?

As a meat-eating, leather-shoe-wearing Westerner, I should like those who come long after me to have the same options; it is not only the plastic-sandaled devotees of Gaia who are concerned about sustainability, or the integrity of our environment.

Thursday, May 12, 2011

NS&I Savings Certificates return!

Five-year index-linked and fixed rate NS&I Certificates are now available again, according to a hotline email received here today.

Demand is likely to be high so if you want to get in, NS&I recommend applying online.


INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Tuesday, May 10, 2011

Quizlet

Who said this?

"The purpose of agriculture is not just to produce the maximum amount of food, at the cheapest direct cost, employing the least number of people. The true purpose should be to produce a diversity of food, of a quality which respects human health, in a way which cares for the environment and which aims at maintaining employment at a level that ensures social stability in rural communities."


1. Hugh Fearnley-Whittingstall
2. Tony Benn
3. David Miliband
4. Sir James Goldsmith
5. Ross Finnie
6. Barbara Ward and Rene Dubos
7. Nick Brown

Saturday, May 07, 2011

We need both AV and compulsory voting

It looks as though the Alternative Vote will be given a resounding raspberry.

A shame, because we may soon see radical policies in Scotland on the "mandate" of a majority party that has won overt support from less than 25% of eligible voters.

Here, thanks to The Guardian's Datablog, are the results of the Scottish Assembly Elections, expressed as a percentage of the electorate, 49.64% of whom abstained:



This is hardly the basis on which Mr Salmond can feel justified in reversing the Highland Clearances, or whatever he plans to do with the systemically-distorted power he is set to wield.

The Celtic Twilight is perhaps better represented by the party I call (with apologies to Dylan Thomas) "Fforeggub" - which has just put in a storming performance in my own ward's local council election, garnering over two-thirds of the potential vote. This democratic failure has ousted the nice Lib Dem lady (I voted UKIP, on principle) in favour of the Labour bod, who got less than 16% of the franchise:



In an increasingly divided and crisis-beset country, I'd argue that we need not only the Alternative Vote but (as I said last month) mandatory voting.

For me, a spoiled ballot is spoilt behaviour, and an abstention is a moral abdication. It is not a worthy exercise of your liberty to surrender liberty itself. The blasé line "Don't vote, it only encourages them" is exactly wrong: the failure to vote empowers and emboldens those who squabble to grab the country out of each other's hands and play recklessly with it.

Thursday, May 05, 2011

The One Percenters

Just voted. I asked one of the returning officers, "Good turnout?"

"Still under 200." This is at gone half five. So my wife and I represent over 1% of votes cast so far, at that station.

I wanted my vote to count, but not this way.

Tuesday, May 03, 2011

Credit cards and consumer protection

As reported in the Daily Mail today, you get additional consumer protection if you make a purchase of an item worth £100 or more by using your credit card.

The Mail piece is based on details on page 16 in the latest issue of "Ombudsman News", a regular publication by the Financial Ombudsman Service (aka FOS -see link in sidebar under "Financial Regulators (UK)"). In the case cited, a student had bought what turned out to be a faulty computer and when she complained, the shop advised her to contact the manufacturer; but she didn't have time to do this, so she sought redress from the credit card issuer instead. When the issuer refused, the FOS ruled in the student's favour.

Section 75 of the Consumer Credit Act 1974 (current version) states:

"If the debtor under a debtor-creditor-supplier agreement falling within section 12(b) or (c) has, in relation to a transaction financed by the agreement, any claim against the supplier in respect of a misrepresentation or breach of contract, he shall have a like claim against the creditor, who, with the supplier, shall accordingly be jointly and severally liable to the debtor."

"Jointly and severally" means that the consumer does not have to deal with the shop or the manufacturer first, he/she can get the money back from the credit card company; but the supplier can also be dragged into the action, if the consumer so chooses.

This does not apply if the purchase is via a "non-commercial agreement", or if the item cost less than £100 or more than £30,000, or if the credit card terms have been breached (e.g. by exceeding the credit limit on the account).

In the definitions section of the Act, "“non-commercial agreement ” means a consumer credit agreement or a consumer hire agreement not made by the creditor or owner in the course of a business carried on by him" - in other words, loosely speaking, the transaction has to have been commercial rather than private.

Worth buying a car from a dealer this way, perhaps?

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.

DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Monday, May 02, 2011

AV explained beautifully



(htp: angry exile)

A letter to Douglas Carswell MP

Monday, 02 May 2011

Douglas Carswell MP
The House of Commons
London
SW1A 0AA


Dear Sir

Financial Services (Regulation of Deposits and Lending) Bill 2010-11

Congratulations on your speech introducing the above Bill, which I have just seen on YouTube. May I offer some counter-arguments so that you can rebut them when others raise them?

• Were your Bill to become law, the banks might simply offer no interest on “storage bank accounts” and a sufficient differential on “investment accounts” to draw money away from the former, even from cautious savers (but still not enough in the latter case to match inflation). In fact something like this is already happening with people investing in stocks who shouldn’t.

• British business might be at a disadvantage if we have this rule but other countries don’t. Look what the US has already bought from us with “candyfloss money” – the old Cadbury Quakers must be spinning in their graves.

• Savings need to be safe in terms not only of the return of capital, but the return of its real value. NS&I Index-Linked Savings Certificates fitted that bill, and were withdrawn in 2010 for the first time in 35 years. This is an indication of the Government’s priorities, surely. But even when available, money had to be locked up in those Certificates for years. And when first introduced, they were only available to pensioners.

• If you really want sound money for the protection of ordinary savers, then we should have index-linked (and linked to a properly fair index of consumer price inflation), instant-access (or short-notice access) cash ISAs, so that deferred consumption is at least not penalised, if not positively rewarded.

Very best wishes to you and for your Bill,

Rolf Norfolk

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.
DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Sir Fred Goodwin

Owing to a "super-injunction" still in force, I am unable to say any more than that Sir Fred Goodwin is a *anker and has been a prominent *anker for years.

Sunday, May 01, 2011

In the news: Gerry Adams and Libya

In the Daily Mail, Petronella Wyatt recalls how, aged 12, she was threatened by the IRA on account of her father's journalism; she describes Gerry Adams' smile as reminding her of "the glint of coffin handles".

Elsewhere in the news: one of Colonel Gaddafi's sons (and three grandchildren) reportedly killed by a missile on account of Western interests' quarrel with his father. This is not authorised by UN Resolution 1973 and the assassination of political leaders is against inernational law; when the inevitable reaction occurs, the Libyan ambassador is ordered to leave the UK.

It is said that at the Battle of Waterloo, Napoleon rode momentarily within range of a British musket, but Wellington forbade the shot.

In praise of rotten boroughs

Democracy is inconvenient and there are moves to tidy it away, one of them being to reduce the number of MPs from 650 t0 585, with the following result (using size of electorate as at 1 December 2010):


Imagine that the constituency in which you live is a vast coach, and the MP your driver. What chance is there that you will go to the destination of your choice? Especially when the front rows are filled with lobbyists, Whips and others with much louder voices than yours.

Whereas in the General Election of 1831, 152 out of 406 MPs were chosen by fewer than 100 voters. Gatton (Surrey) and Old Sarum (Wiltshire) each had only 7 electors and each sent 2 members to the House of Commons. At least you'd have got a drink out of them once every few years.

AV means the driver might just hear a little chorus from the back, above the commercial and cliquey hubbub roaring just behind him.

Tuesday, April 26, 2011

Andrew Marr comes clean

About time. I touched on this in 2008 and discussed his inconsistency in 2009. Yes, our interest is prurient - "we know-what-you've-been dooo-ing" - but he suddenly refused to be paid in his own coin. Now he should be in a stronger position to deal with oblique threats from deranged Campbell types.

Why didn't Ian Hislop blow the gaffe before? For all his moral judginess, Hislop was reportedly chosen as a safe pair of hands by those who had got to the age where they needed Private Eye to be their pension fund. In his heyday, Ingrams would have gone for the story and blow the consequences. By the way, how many people were interviewed for the PE editorship when Ingrams stood down? Can't wait for an in-depth on that story.

Still, prudence is the better part of valour. The former editor of Spiked magazine met with a fatal accident in Cyprus shortly after an edition of his publication that included explosive allegations about a then Tory cabinet minister's private activities in a North African hotel.

Mind how you go.

Banks still under pressure?

The banks are supposed to get lending again, and simultaneously rebuild their cash reserves. But Bank of England statistics show that reserves are actually falling, instead.

Figures for last month show that year-on-year, notes and coins in circulation increased by nearly 4%, but reserves held in bank accounts dropped by over 11%.

I reproduce the BoE's table below (interesting that they present it in a bashful pale grey on white - the visual equivalent of the civil servant's polite, embarrassed cough?) - click to enlarge.


INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.


DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Monday, April 25, 2011

In a nutshell

You can get a headache thinking about inflation and deflation - but either way you stand to end up broke. Either you'll be rolling in worthless money or you won't have any money.

James Kunstler

New site launch: Orphans of Liberty


A new site is starting today, run by a (mostly) right of centre blogging collective. Give it a go: Orphans of Liberty.

Sunday, April 24, 2011

Will the government really help us against inflation?

Inflation-proof, government-backed savings will soon be back on sale - or will they?

On 19 July 2010, National Savings & Investments (NS&I) abruptly withdrew Index-Linked Savings Certificates from general offer to the public - for the first time ever. These plans were launched in 1975 and were originally available only to pensioners, at a time of high inflation (24.2% for that year).

Yet last July, inflation was only running at 3.1%, so why stop the offer at that time? The Bank of England base rate was at an historic low of 0.5%, therefore inflation was comparatively 6 times higher; but the difference in numerical terms was only 2.6%. In 1975, the BoE rate varied from 9.75% to 12%, with RPI running at more than double that and the rate difference was over 12%.

One reason for the NS&I hiatus will have been the emergency general review of Government borrowing requirements following the General Election. But another may be the kitten-weak condition of the banks, which are trying to fulfil two contrary directives, namely, to lend money again and also to rebuild their cash reserves. Perhaps they are to be spared too much competition. The anticipated rush for NS&I index-linked plans is such that they have set up an email alert system. When offered, the new certificates could sell embarrassingly fast and draw the public's attention to the Government's suspected inability to address worries about growing inflationary pressures.

But how much, exactly, are they going to offer, and when? Like many others, I misunderstood the Press (e.g. the Guardian) as saying that £2 billion would be on sale; but NS&I's release (23.03.2011) merely states that the target for the total funds they manage, spread over all their products, is an increase of £2 billion, which will "allow NS&I to plan the re-introduction of Index-linked Savings Certificates for general sale in due course. Subject to market conditions, NS&I expects to be bringing Savings Certificates back on general sale in 2011/12."

"... in due course", "... subject to market conditions"; one could hardly call that a blast on the post-horn.

Going back to the Government's own Budget plan as stated in the "Red Book" (Annex B, page 90), the guidance is merely that "National Savings and Investments (NS&I) is expected to make a contribution to net finance of £2 billion", without even a hint that any of this must be from inflation-linked plans.

By contrast, the same page sets a target of £38.4 billion of index-linked gilts. That sounds interesting, except most if not all of that may be taken up by institutions such as occupational pension funds in order to underpin their guarantees to retired members.

What about general savers? Few commercial outfits, if any, can offer guaranteed inflation-proofing and anything like 100% security, let alone exemption from income tax and CGT. This recent article from the Daily Mail details some options, but they are either taxable or risky.

So in some ways, even though inflation is still far from what it was in the mid-1970s, we may be worse off today. Theft by devaluation may have become official, if unstated policy.

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

Friday, April 22, 2011

Things I don't know about Libya

Who is the legitimate ruler, or what is the legitimate government, of Libya? Is is Gaddafi, or Zaid Hamid, or who?

Is there a legitimate government at all? If so, why has 40% of its ground forces been destroyed? If not, why has the situation not been resolved in 40 years?

How do we decide who should rule? Does any outsider have the right to decide?

Who(m) are we "helping"? In what way are they "better"? What will they do if they win?

At what point does the destruction of the "government's" forces constitute an attempt at "regime change"? Is this legitimate, or not (there seems to have been considerable wobbling about this in HM Government recently)?

Is this whole thing like Italy's (Mussolini's) campaign in Ethiopia in the 1930s?

Should the UK have declared war on Mussolini as soon as we perceived that he was a ruthless dictator?

What happens if we stop now?

What happens if we don't stop?

How do other African and Arab nations view our actions?

Is this going to imperil us at home?

How did these Arab rebellions really start? Did Western secret services have anything to do with it?

When will we get some in-depth, non-partisan discussion on the mainstream media about these issues?

When will I get my State Pension?

What with women's State Pension Age rising from 60 to 65 in stages, and proposed further deferments for both sexes, you may be confused about when you're actually going to get your State Pension.

Click here for the calculator from the Pensions Advisory Service and find the answer! They work in conjunction with the DWP so it should be right.

Please note that legislative changes may change the answer so check again when you hear further news on this topic.

I have also placed this link in the right-hand sidebar under "Other helpful sites".

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.

US credit wobbles; hold cash not bonds

The fuss about S&P's "AAA with negative outlook" for US credit is remarkable mainly for being so far behind the curve.

The Beijing-based Dagong credit rating company gave America a significantly lower "AA" with negative outlook, back in July 2010 (and the UK was one level worse than that). Remember that China is a business partner and needs a clear view of how commercial operations are proceeding; this is not about Oriental mischief-making.

On the other hand, the talk of US Treasury default is wild, and I quite understand how it makes pensions expert Leo Kolivakis decidedly impatient; after all, that "negative outlook" comment is screwed to the side of a continuing AAA rating. But I do rather doubt that current US bonds will be honored in the sense of preserving and slightly increasing your wealth.

Charles Hugh Smith's thesis, on which I commented a few days ago, is that the American plutocracy will consolidate its gains by forcing a bond strike; personally, I think it's unnecessary to postulate a conspiracy in order to agree with him about the consequences. With interest rates at an historic low in the Anglo-American sphere, there's really only one direction in which they can change. Why would you buy now? And more importantly, why would you hold, when a rate rise could savage the tradable value of your holding?

Those who need to keep exports flowing, such as China, may be prepared to pay the price of maintaining the status quo, making on profits what they're losing on bonds, but as I said in February ("Global Credit Warfare"), the language over there is getting rather anxious and aggressive. Dagong's report bluntly states that America is exporting inflation worldwide.

Having said that, inflation in prices is very uneven and unfair. Proportionally to income, the rising costs of food and energy are hitting the poorest worst: I can cut back on brandy and weekend leisure trips, but how does the underclass cut back on hamburger helper? And with a large wad of ready cash, the better-off are in a position to snap up residential property cheaply, and bargain hard for luxuries such as cars, computers and other shiny gewgaws. I should think this is a great time to go to bankruptcy auctions, especially since the taxman isn't much bothered about setting a reserve. So in many ways, inflation hasn't yet really reached the rich.

But invulnerability is an illusion. When the remains of Mayan civilization were discovered, no wealthy Mayans were found sipping mai tais among the half-finished stone carvings.

We're all in this together, and because it's global now, we're mutually involved in a way that hasn't happened before. As Adam Fergusson relates in his chilling book(recently reissued) "When Money Dies", during the 1923 Weimar hyperinflation and the period leading up to it, German export business did very well, so well that the jealous and punitively-minded French wondered who'd won the war. Speculators also prospered, until the currency was reorganised, at which point they "took off for Paris and went to work on the franc, their departure the first signal that stabilisation was a fact." For a long time, reports Fergusson, visitors to Germany would see apparent national prosperity, simply because the cafes and restaurants were full of the winners; they didn't see the middle class exchanging their pianos for a side of ham.

But now, with an increasingly integrated international economy, it's getting more difficult to evade the problems simply by moving to another country. Tensions are rising, and not just in the Arab street.Western governments are deferring the day of reckoning, consuming their own debt like the serpent Ouroboros but without the element of timelessness. The present state of affairs cannot continue indefinitely, as Karl Denninger has been saying since 2007.

What are the possible outcomes?

Outright default? Don't hold bonds.Bond strike, interest rate rise, savage economic retrenchment? Don't hold bonds.Total collapse of the currency? Don't hold bond. High inflation? Don't hold bonds.

The least nuclear of all the options is the last, so unless we have a collective death wish that seems the most likely. Jesse thinks the dollar won't go to zero, but have a few zeroes knocked off it, like the French franc in 1960 (not that that stopped the decline): "I think the reissue of the dollar with a few zeros gone is inevitable. It is the timing of that event that is problematic. It could be one year, or it could be fifty years. There is a big difference there for your investment strategy." Reminds me of the scene in an old Cheech and Chong movie where they offer a peasant dollars and he spits on the money, saying you haven't got Mexican? Except this time he'll want a chicken or a silver necklace, instead, because inflation now respects no national boundaries.

Whether the debt-accelerated system manages to slam on the brakes without hospitalizing the vehicle's occupants, or hits a tree (everyone got airbags?), or simply grinds to a rutted halt in a cornfield, buying into the bond market now without some ulterior motive looks like wanton self-sacrifice.

Don't take it from me; take it from Bill Gross, who "sees no value in U.S. government bonds at current interest rates" and has dumped them altogether.

Meanwhile, let's start a national debate about social cohesion. That or wait for the jungle to recolonise the abandoned temples.

INVESTMENT DISCLOSURE: None. Still in cash, and missing all those day-trading opportunities.DISCLAIMER: Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog.