PERSONAL, UNDILUTED VIEWS FROM TOM WINNIFRITH
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Today we learn the names of all BBC stars earning over £150,000 a year. It is only the existence of an overpaying state funded broadcaster that keeps presenter pay up at stratospheric levels. In the USA where there is a free market and no state subsidies the pay for doing an easy job (reading an autocue) is falling and not that high. This is the tip of the iceberg.
How many BBC staff you have never heard of are earning £100,000, 75,000 or whatever? Quite simply pay is out of control. And who is funding that?
But the media spin is of another narrative. It seems that there are two grossly overpaid male presenters for every one grossly overpaid female presenter. Something must be done. The BBC appears to have acknowledged this which presumably means more pay rises for more women, not pay cuts for the lads.
In the media world the scandal is of gender inequality. Outside that bubble for the other 99% of the population where the average household income is c£26,000, the scandal is that we poor folks are forced by threat of jail to pay a poll tax to fund obscene salaries at the state run broadcaster. That even rival corporations such as ITV cannot see that, show just how out of touch all of those in "the bubble" have become.
Or perhaps the overpaid luvvies at ITV realise that without the state funded BBC pushing up wages across the industry, in a real free market, their salaries too would come under downward pressure, Whatever the truth, the 99% will not be fuming today in anger that there are not more women earning £150,000+ at the beeb but at the wholesale greed of its staff which we are forced to pay for.
692 days ago
On June 9th the liberal media warned us that those bigoted DUP types from Ulster would want to roll back LGBT and women's rights in return for propping up pathetic Prime Minister May. We Thatcherites dared to dream that the DUP might demand some proper Tory policies like privatizing the BBC or slashing corporation tax as the price for keeping the wretched Conservatives in power. What nonsense. Ulster politics is all about posture and pork barrel and the latter is the more powerful of the two.
Thus the DUP will prop up the May creature in return for an additional £1 billion being poured into the Ulster pork trough during the next two years. The DUP are, it turns out, utterly unprincipled wastrels just like all the other folks at Westminster.
The predictable faux outrage and hypocrisy from the virtua signalling liberal establishment. was loud and instanteous. This is an insult to the LGBT community and sets back gay rights by years. Bollocks. It will make not a jot of difference.
Labour at once accused The Tories of offering a sordid bribe. The tone was almost of an evengelical Victorian preacher warning his flock of the power of Satan and evil. It soon emerged that in both 2010 and 2015 Labour had approached the DUP offering bribes, that is to say more cash for the Ulster pork barrel, in return for Westminster support.
So the attack changed and the fake news liberal press joined in, demanding to know how the wicked Tories could afford half a billion a year. How many nurses could that pay for they shrieked but sadly Diane Abbott was not around to provide the exact answer.
Of course this is all posturing. Thje deficit is more than £50 billion so that extra £500 million spunked on Ulster makes little difference. It is funded by the money tree but so too is £50 billion (100 times as much if Diane is struggling with that sum) of spending on nurses, policeman, hair removal ops for transexuals, foreign aid to fund Ethiopian girl bands and all the other vital ways HMG spends borrowed cash. So it was a sily point but how the politicos and journalists frothed and raged.
Meanwhile I tried to find a letter from the taxman about an overdue bill of a couple of hundred pounds from 2010. I had a couple of meetings about UK Investor Show 2018. I noted how Darren's new waitress at Wedge Issue is a total stunner so much so that when I observed as much to Darren's rather stern and PC Mrs, she actually agreed with me rather than - as would be her wont - giving me a severe frown. I wrote a few articles so delaying my journey back to Bristol, having discovered that the mother-in-law has graciously extended her stay by another night. I had a long chat with a new source to ensure I have a massive scoop on Tuesday which will help pay the bills for a few days. I wondered at the beauty of the English countryside as my train sped back to Bristol and considered some take-aways from my lunch with old friends from New York.
In other words I got on with life. So, I suspect, did you. And we will do the same tomorrow. And the next day. And, God willing, the day after that. For 99.9% of the population the sordid deals, utter hypocrisy and fake posturing of the political and media classes have no impact on our lives at all. We are too busy paying the bills, earning cash to pay our taxes - to support the overpaid scumbags at Westminster - and trying to get on with our nearest and dearest, to give a stuff about whether the DUP is in bed with the Tories or the terms of their coupling and the constitutional implications of all of this nonsense.
In Greece I might not have discovered news that I am told is hugely important for several days. Am I any better off having found about it as it happened? I cannot say that I am. I really don't care about any of it. Be honest. Do you?
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There is much commentary in the USA about the revulsion that so many folks feel for the three intertwined pillars of the status quo of the establishment: the political class, the big businessmen who fund/buy that class and the media pundits who take the political/business spin without question. I would perhaps add a fourth pillar, the banksters, but perhaps they are rolled into business fat cats. The massive distrust and resentment of these people seems to be evident across the West. That Americans may well vote for Donald Trump who is, shall we say, not exactly the new Abraham Lincoln, is a sign of this, Brexit was another as is the rise of the frightful Marine Le Pen in France.
And so we come to the coronation of Theresa May as Britain's new Prime Minister. And it was a coronation. There was not vote of party members she was picked as a result of Tory MPs voting. One might accept that she was the only sane choice as the other candidates were tainted by the stench of treachery (Gove), hypocrisy and jiggy wiggy issues (Crabb), plain stupidity and honesty issues (Loathsome) or just being seen as a perennial no hoper (Fox). But none the less her appointment is not a great day for democracy. It will be seen as another Westminster stitch up. And it was.
The media reported on high drama. with the selection of another Oxbridge financier as our new PM and then of a cabinet reshuffle with one public school educated Oxbridge person with zero real life experience swapping jobs with another from the same background. With one or two exceptions to this ( David Davis) nothing really changed. May's silly words about a new direction were either non-sensical or just plain old clap trap. But the media pundits loved it and spun it as a move this way or that.
This weekend in the more fashionable parts of London those same media pundits, the spinners and the political classes and their bankster pals will mingle at parties and will still be chatting about nothing other than the Westminster drama before returning to their seven figure valued residences. As they contemplate their secure six figure salaries they look forward to the Bank of England cutting rates again to keep the asset bubble going. Perhaps Theresa May really does think that a housing and bond/stockmarket bubble is the same as real Wealth creation and that somehow her magic wand can make the bubble be shared out in a way that helps those on the other side of the tracks, folks in the North or who don't own such assets? If she does she is kidding herself. The country is not fooled.
For all the media spin about how post Brexit this country has become racist hotbed where EU citizens are terrified to stay, the reality is that migrants continue to come to the UK every day notwithstanding all those vain pledges by the last Home Secretary, Mrs T May, to curtail the flow. It is hard to see her replacement, the posh dimwitted and poisonous Amber Rudd, promoted as a triumph of gender over inability, making the situation any better.
The pissed off folks of Britain who mistrust every word that class status quo says; who experience some of the downside issues of immigration such as wage pressure and reduced access to healthcare provision but none of the many upsides and, above all, who have not shared in the asset bubble view life in the Westminster bubble rather differently.
Outside the world of the status quo there may be some who will give Mrs May a chance, who buy into the media spin for now. But their patience will not take long to snap. Most of those who were angry on June 23rd are still angry and with good reason. They see that nothing has changed and nothing will.
The "insurgency" of those left out from the good times is a global phenomenon. Nothing has changed in the past week to suggest the UK has done anything to address this. When Laura Kuenssberg and her BBC colleagues talk of a divided nation their analysis is a simplistic one based on rich versus poor which does not look factor in asset bubbles, old fashioned left vs right as if those terms mean anything. The trouble is that the media pundits and mainstream outlets are in fact part of that divide, they sit firmly on one side of the barricades staring out at an angry mob they despise and fail to understand.
1040 days ago
1041 days ago
Jeepers this is confusing: listening and watching Theresa May yesterday I was told that she has just become leader of the Conservative Party and will be our next Tory Prime Minister. So why was she sounding like a socialist but also a peddler of bogus religion? If this is the best the Tories can offer then, to quote a real Tory Margaret Thatcher, There IS No Alternative. TINA says it is time to quit and emigrate.
It is not that Mrs May is already speaking weasel words on Brexit. She states Brexit means Brexit but then waffles on about how we may have to accept certain things to get free trade. Mrs May we voted for full on Brexit, not Brexit light.
It was not the quasi evangelical clap trap about how "we will bring this country together": Rich and Poor, North & South, Men & Women, Black & White, Welshman & Sheep, etc, etc etc. Well thank you very much Mrs Oxbridge Educated May with your millionaire husband. Men and women are not divided and the other divides you mention are largely creations of the media bubble.
The real gap in this country is between the establishment, those in the political, media and big business elite with their pals the banksters and the rest of us. That is a gap Theresa cannot mention explicitly as she and her fellow Tory MPs are almost entirely on one side of that divide. At least Andrea Loathsome made a pretence of recognising this division.
Of course there is a comfortable middle class, mostly on a bloated state payroll. The value of their houses has gone up so they don't care but the rest of us are screwed. In yesterday's woeful analysis, May talked about how going forward she wanted to see increasing wealth and prosperity more equally divided. But she thinks mistakenly that there has been an increase in wealth since 2008. There has been an asset bubble which has benefitted the rich establishment big time and the middle class to a lesser extent but has left out vast swathes of society. And while public sector professionals have got decent pay rises - or bumper rewards for the greedy junior doctors - the working classes and lower classes have been screwed as there has not been any real wealth created by the private sector and what wealth has been created has not trickled down. May seems incapable of distinguishing between real wealth creation ( businesses making profits, hiring more, paying more out of profits not from borrowings) and asset bubbles.
And her solution? A new Government Industrial policy. In the old days Conservatives believed that the private sector created jobs and wealth but Theresa May seems to think the Government needs to meddle so we will now have workers on boards, restrictions on CEO pay, etc. It sounds just like Hollande's France and look how well that is working out for the Froggies.
Mrs May, here is a real Conservative:
Of course the loathsome bunch of overpaid parasites that are the Conservative Parliamentary Party lapped it up. Very few of them actually have real world experience and none of them live outside that bubble of the Westminster establishment. They all own property, assisted by taxpayer subsidy, so the asset bubble has been good news for them.
Mrs May's analysis was woeful and she offers no hope for Britain just platitudes. Its David Cameron with a skirt on. On the basis of yesterday's claptrap, the anger towards the establishment and figures such as Theresa May felt my large swathes of Britain who feel left out and cheated will only continue to grow.
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This week's video postcard looks at how the peasantry (you and me) are revolting using new media against the political and media bubble dwellers, the establishment. Matthew Parris does not like it but I loves it as you can see on the video.
Over on ShareProphets on the matter of oil stocks our writers are divided. Ben Turney sees the recent OPEC meeting as disastrous for AIM listed oil shares (HERE). On the other hand Chris Oil (HERE) and Paul Curtis (HERE) argue that the bad news is more than discounted and are buyers of the sector. I started my career as an oil analyst and so what do think? You can find out HERE
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This went out on onefreesharetip.com a few weeks ago but perhaps meriots a wider audience I stand by my view expressed here:
It is part of the British DNA that we believe that house prices must always go up. That is not the case. Be warned. Falls of 30% or more are inevitable within the next few years.
Of course inflation (the erosion of the purchasing power of the pound) has made house prices a one way bet since the early 1970s. I will not bother serving up a chart just imagine climbing a ski slope. But this is an inflation given gain. It simply reflects, to misquote Harold Wilson that the pound in your pocket is worth far less than it was. You might note that in 1971 you could buy an ounce of gold for £14. Today that will cost you more than £1000. The destruction in the purchasing power of Sterling during the past 42 years has meant that all physical assets look, in headline terms, like smart bets, housing included. You cannot live in a bar of gold but it has actually been a better bet than UK house prices. So as it happens has been am 1870 Wisden cricket annual, but again you cannot live in it.
House prices have not, as anyone who bought in 1987 will remember, moved in a straight line. There are periods when they fall sharply. That happens because a) they get overheated and b) because there is one of two external shocks: either a sharp rise in unemployment or a sharp rise in interest rates and either of those two triggers mean that large numbers of people with mortgages cannot pay, default and become forced sellers.
For the feature of housing as an investment as opposed to, say shares or gold, is that the market is very illiquid. If Kylie Minogue moves into your street and there is a sudden demand from dirty old men to buy housing there too, prices will rise very sharply as there will be far more demand than supply and each transaction will set a new benchmark price for the whole street. But Kylie can live in only one place at a time.
If you suddenly face a few forced sellers in your street and there is no rush of buyers each will compete to shift their property as quickly as possible and each time one sale goes through that sets a new benchmark – a lower one. And that is what will happen at some stage soon. At this point I bring to your attention a chart which shows average UK house price to average income ratios over time.
You will see that the long run average is c4. Of course the ratio is very rarely exactly 4 it tends to get ahead of itself and then correct below mean and then bounce above mean. Right now we are at a level ( above mean) seen only twice before in living memory. The first time was in 1987 when Chancellor Lawson engineered a housing bubble with the announcement that in 1988 he would abolish double MIRAS. Folks rushed to buy in 1987 and the ratio headed just above 5. Look what happened next? Er..oh – the value of your house just halved.
The second time was in 2007 when Gordon Brown pumped money into the UK system with his vast ( unsustainable deficits) and when credit was easy and base rates low. Then came the 2008 global crisis and the ratio crashed again. But not back to 4. And over the past couple of years that ratio has pushed higher and we are once again at 5+ and the amber warning lights are flashing.
You might ask why has the ratio climbed once again? It is not that average incomes are falling but the reason – as ever – is political. The Coalition reckons that rising house prices wins votes. It is probably correct. And so taxpayers cash is being blown in a myriad of ways to push prices up – we are being bribed with our own dosh. Banks have been given cheap money to lend which is passed on via cheap mortgages. There are numerous schemes to help first time buyers onto the property ladder. That they need assistance at all is down to a benefits system which underwrites sometimes exorbitant rent bills for those who have never worked ( see today's latest installment of the increasingly vomit inducing tale of Heather Frost here). Landlords know that housing benefit picks up the tab and can thus afford to charge more so pushing up both rental and purchase prices for those who do actually work.
The whole system is not sustainable and is pretty ludicrous to boot and at some stage the realities of the UK Government deficit will force an overhaul which will inevitably lead to a total de-rating of house prices. That is probably a good way off (at least until well after the next Election). But interest rate rises are not so far off. The UK lost its AAA credit rating last week. That should mean that the Government has to pay more to issue bonds to fund its gaping deficit which will push up interest rates generally. Moreover there are clear inflationary pressures in the system. At some stage base rates will have to increase and – assuming that the banks do not take a margin hit, a safe enough bet – that means sharply higher mortgage costs.
If you currently have a mortgage paying 2.5% - one fifth of that (0.5%) is base rate the rest is bank margin. If base rates increase by even 0.5% your monthly payments on an interest only loan jump by 20% (2.5% to 3%). An increase of 1% sees you seeing a 40% hike. There are an awful lot of folks out there who have overborrowed and a 40% increase in monthly payments will be hard to bear. But base rates of 1.5% could be just the start. Young people may not remember this but even in my mortgage lifetime paying 10% on your mortgage over a sustained period was a reality of life. At some stage that will happen again.
And that is why house prices just have to correct. It will be interest rates that kill the market. Even if house prices simply return to “norm” that implies a fall of 27% in the average house price. But the reality will be far worse. House prices will over-react on the downside just as they did on the upside and so brace yourselves for falls of 40% or more.
It is when, not if. The Government ( whoever is in power) will Canute like try to resist market forces by pissing away taxpayers cash for as long as it can but, like Canute with the tide, in the end it will fail. So how do you profit from this?
1. If you are thinking of buying a first house or a bigger house ...there’s no rush.
2. If you are thinking of downsizing your house in the next few years do not hang around – start the ball rolling now.
3. If you simply have a mortgage you might take advantage of low base rates while you can and pay it off even if only by a little. And you should then keep your monthly repayments the same so that you are then in effect repaying a tiny extra bit of capital each month. If you are paying 3% on your montage you are effectively getting a 3% tax free return – that is better than you get in the bank.
4. Consider going short of housebuilding stocks. They have had a phenomenal run and several now trade on growth stock ratings. That might be credibly if we were at the bottom of a cyclical slowdown and earnings were set to race ahead over the next three years. But we are not. This is a cyclical industry and while we are not at the top of the cycle we are pretty close. I provided a detailed analysis of the bear case for three household names last week.
I am not calling the top of the housing market for tomorrow. I cannot predict X-Day. But UK house prices are now a clear bubble and it is a bubble that this Government is fuelling. Bubbles by their nature expand even when folks start to realise that they are bubbles. And then one day they go pop. This bubble will be no different.
Brace yourselves. Start to prepare now.
2266 days ago
The answer to the 1998 financial crisis was to slash borrowing costs across the globe so that we all over-leverages and misallocated our capital. On that occasion it was junk dotcom investments and property. In 2008 another crises and the same solution. The fact is that the world has been misallocating capital for decades, led by Governments freed from prudence by the abandonment of the gold standard in 1971.
With each crisis that crops up, the solution is simply to print more money and to get folks to take on even more debt. You owe too much – heck borrow some more. And so capital is misallocated and bubbles grow ever bigger. But at some stage the party ends. It will. The current set up is simply unsustainable.
And so what will be the black swan event that causes the mother of all reality checks? If offer four runners and riders. Inevitably if one occurs it will trigger the others. And it will probably be a fifth black swan that no-one has thought much about that starts the party. But here goes.
1. The Chinese property bubble. I have written before on numerous occassions about just how mammoth this is and how it really can knock the Chinese (and thus the worlds) economy for six. The answer of the authorities to the slowdown in the PRC in 2012 was to pump more hot air into this bubble. It has to be my top black swan bet. Read this piece out yesterday on Zero Hedge if you doubt me.
My major work from September 2012 on China, the misallocation, fraud an inevitably of a crash is HERE
2. A market refusal to buy US T Bonds in an auction. The US Government is three years away from having a balance sheet like that of Greece just before the crisis. An economically illiterate President and, to show balance, a spineless Republican party in Congress just cannot get to grips with what is happening. The US today is like sick Britain at the end of WW1. But it will take the US far less time than we took to see its currency tank. At some stage folks will refuse to stump up cash for a debt that yields sod all and is clearly unrepayable and unsupportable.
3. Sovereign default across Europe accompanied by widespread Civil unrest. The only folks buying Spanish debt right now are the Spanish state pension funds. Oooh lucky Spanish state pensioners. But those funds are tapped out. Spain is bust and its economy is enjoying an EU austerity driven spanking session which Max Mosley could only dream of. It is not just Spain. Italy, Greece, Portugal are in the same mess. The Irish economy and society has been beaten to a pulp in the name of fiscal responsibility and yet could still collapse. France is heading the wrong way fast as is the UK. The collapse of the Euro as we know it has to be an odds on bet it is a matter of how it occurs.
4. The Arab spring moving to Saudi Arabia. A regime with no legitimacy is kleptocratic, autocratic and barbaric. It bribes the people with a fraction of the nation’s wealth and panders to radical Islam in a most unhealthy sort of way but it is unloved. One day it will fall. Revolution in the world’s largest oil producer could perhaps trigger unforeseen events elsewhere.
Hey, maybe we can all carry on spending beyond our means, leveraging up as individuals and as States for a good while yet. We have been kicking this can down the road for decades so maybe we can carry on for another few decades. Or maybe not. One day something will happen and we will find our noses against the wall at the end of the Cul-de-sac. That day may be sooner than we think.
For more thoughts from Tom Winnifrith follow him on twitter @tomwinnifrith
2296 days ago
Two years ago the EU ceased to subsidise tobacco growers in Greece, Poland and Bulgaria – folks who received £260 million a year as recently as three years ago. The problem is that their tobacco is a) not very good and b) costs far more to produce than tobacco from the third world so they need subsidies to stay in business. Now the EU wishes to restart subsidies. This is patent nonsense on three levels.
1. This is the same EU that is spending £27 million a yet trying to stop folks smoking. It claims that its campaigns are helping hundreds of thousands of people quit the habit. That is 100% unprovable and I would argue that this money is also being pissed away. But if they want to stamp out the habit why subsidise producers?
2. Subsidising high cost farmers (of anything) in Europe merely makes life tougher for low cost farmers in places like Africa. They are thus less able to export cash crops. Which means they are poorer so demand more aid (most of which their leaders steal). Which body is the biggest donor of aid? Er…the EU. Go figure.
3. The farmers milking the subsidies in Greece, Poland and Bulgaria could farm something else. If that meant that there were more carrots or broad beans produces that would mean cheaper food costs for European consumers. Which is probably not a bad thing.
And so here we have a proposal that the Evil Empire spends money on something that will make folks in Africa poorer, consumers in Europe poorer and clearly has a negative health impact for all concerned. And the UK will be chipping in 12% of the cost of the scheme.
The EU will also have created an agri-bubble. No-one actually wants or needs low grade Greek tobacco and the industry is only viable with subsidy. But if the taxpayers of the EU write a blank cheque folks will be produced into producing more and more of something no-one actually needs or wants. This is capital and land misallocation – a bubble EU style. And you pay…
Is this the sort of thing Call Me Dave reckons he can get the UK out of before his 2018 referendum? Like hell he can.