Thursday, 26 June 2014

Three Thursday Rants

Rant 1

UK BoE re housing - Though those concerned about UK house prices cite various reasons as to why current prices are terrible it is leverage that is always the ultimate killer of personal wealth so the capping of mortgage borrowing salary ratios makes absolute sense. But once done, there is still a cry that prices are still too high. If we assume that for those that want to buy or upsize this is the case then for those that wish to downsize it is the reverse. So why the bias? Probably because we have many more trying to upsize a bit bigger but we have fewer downsizing a lot (I'll wager the downsize ratio is always a lot more than the upsize) or liquidating completely on death. Which means that though the total housing market is a zero-sum game, the majority would like small incremental gains at the cost of the minority who would like to see big ones. The simplest solution to all of this is to build more houses where people don't want them. People only want them in already expensive areas (funny that) so best to change the demographic.

Which leads on to the most wanted area - London. However there are some simple solutions to iron out the huge regional disparity seen in London verses the rest of the country.
First let market forces do their work. The cost of living via housing should ultimately push up labour prices to the point that companies relocate to cheaper parts of the country.
Second, stop spending on London infrastructure (which is being done to make things easier for those living there) as it's a vicious circle and only attracts more in. Perhaps implement the reverse to make it less appealing to live in London. The debate over another London runway is a case in point. Don't bother, but expand Manchester instead.

Rant 2

The process of bank castration continues and Barclays, having thought it had already lost most of its testicular function, has found itself back in the rubber band shop over its dark pools. The principle is that these internal markets didn't own up to the fact that there were some sharks under the surface. The holiday brochure instead selling them as exotic tropical beaches. If this goes through then really every travel agent promoting Australian beach holidays should be done also. Once again its the principle of huge face value markets maybe being bent that upsets more than the actual real cost to end users. As we have seen with FX fixing and gold market fixing we only hear from those that may have suffered but not from those that benefitted from a price not being where it perhaps should have been by a zillionth of a percent. We don't know whether the dark pool service was still of net benefit to the client base relative to costs of going through the main exchanges with their associated costs, even after some scumbags where taking a fraction of it. It's basically resting on misselling even if there was no real cost. Either way go long of 'USbankfines'r'us Inc.' as their revenue continues to exceed expectations.

Rant 3

As we are looking at misselling let's tie that together with the current spate of rubbish UK sports performances (Cricket, Football, Rugby to name a few). In the past when these failures occur there is a cry that more must be done to boost the nation's sporting prowess with academies being set up at huge cost, coaching programs funded at every level and a massive drive to increase the intake to each sport. But why? Especially as there is such an outcry against inequality in pay and reward in every other field of life. Sport has to be the worst offender with zero hour contracts for 95+% of the participants. If we assume that there is normally only one winner in any sport then surely it is more efficient to have as few participants in any sport to maximise average earning throughout? The winner and a couple of runners up take nearly everything and the rest are a waste of any investment and of their own time surely? Setting up sport academies to train thousands of young into a sport for there only to be one winner like setting up super-academies to train people in how to fill in lottery tickets to become lottery professionals.

However, if it is the drive and competition that we admire so much then perhaps this could be harnessed more purposefully. Competing to just compete for personal gain should be classed as personal with associated costs born personally. Unlike a company which drives competition to drive ingenuity and production, rewarding the whole strata of employees from the overall income, hot housing thousands of kids in a sport with the hope of maybe winning is an inefficient use of resources and will end up with all but a handful of them as depressed jobless losers whose best hope of earning a living is coaching others selling on the same Ponzi style dream.

Oh hang on.. That's investment banking isn't it?

Finally tying together homes, banking and sport - If animals are so prescient in forecasting World Cup events then surely financial trading houses would be zoos in the real sense rather than the metaphorical.


abee crombie said...

In the commodities market, they say the solution to high/low prices is high/low prices via the supply demand function. But in housing, well I guess its a different ball game. I remember reading Schiller saying house prices in Amsterdam are roughly the same, adjusted for inflation over 500 years but I experience in London, NYC and other big cities looks to be much different. But good job on Carney, exiting from propping up Canada's bubble to now making it harder for first time and move up buyers to get something bigger than 50m2. With the internet and mobile capital at some point I would think ppl chose to escape the high costs of London and work/live in Spain or somewhere else where the sun shines for more than a few min a day. But I guess building that intangible a big city has isnt so easy either.

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