Tuesday, 29 September 2015

A meandering of thoughts

I have been travelling to places where the real world appears a million miles away, where legions of white shirted chino clad lackeys are testament to the trickle down effect of economics, as they are all ultimately supported by the whims of a few billionaire’s. We may prefer them to be working in hospitals, but those not smart enough to occupy frontline medical care posts have to earn a crust somewhere and why shouldn’t it be in flogging the finest toy, such as a submarine, for your superyacht? Interestingly I sat next to an explorer-cum-investigative journalist on the plane out there who has taken these incredible toys and is using them for global environmental projects. These projects are also funded by the rich and famous. So something good does come out of techno-plaything development. Much as our cars today have design features developed by Formula 1, our environmental changes are being monitored by technology spawned from fun money. Ok, I know you are thinking it, so lets jump to it - does that mean that emission test rigging software started in Formula 1? Errr... No idea. But I can tell you that if you are concerned about emissions then I bet the VW NOx emmisios are dwarfed by the output of the words shipping fleets. To put a bit of emmisions perspective on it -

With VW - The company admitted the device may have been fitted to 11m of its vehicles worldwide. If that proves correct, VW’s defective vehicles could be responsible for between 237,161 and 948,691 tonnes of NOx emissions each year, 10 to 40 times the pollution standard for new models in the US. Western Europe’s biggest power station, Drax in the UK, emits 39,000 tonnes of NOx each year. (The Guardian)

Meanwhile shipping around the EU’s coast alone -

In 2000, in the seas surrounding Europe (the Baltic Sea, the North Sea, the North-Eastern part of the Atlantic, the Mediterranean and the Black Sea), sulphur dioxide (SO2) emissions from international shipping were estimated at 2.3 million tonnes a year, nitrogen dioxide (NOx) ones at 3.3 million tonnes. (http://www.transportenvironment.org/what-we-do/shipping/air-pollution-ships)

NO2 is not pleasant but NO? No, you are having a laugh. They give it to birthing mothers so it can’t be that unsafe. Which also leads to my hypocrisy flag being raised from the touch lines when I see campaigners trying to ban the recreational use of the stuff because a few people have suffocated on it, yet still alcohol is tolerated by comparison.

Now here’s a thing I cant marry up. Read everything financial and you would believe that the world imploded in August and is is now in a very very dark place. But we are seeing divergence here. Not EM vs DM divergence which normally doesn’t last long, but in this case it’s with us financial lot and the rest of the working population. Now I know that Redcar in the UK has just seen a nasty set of job losses associated with the fall of commodity prices, but everyone else I talk to outside finance seems to be getting along just fine. Even the village I live in was a veritable ghost town/village this summer as surprising numbers had gone off on foreign holidays. These may have been booked back in happy January, but the mood on the street still seems pretty upbeat, with restuarants full and people still happy to pay £5 for a bowl of cereals (unless it contains traces of paint bomb). Folks are even still buying oil, as the price, despite the $20 calls and gloom ahead, still tracks sideways. Even the Chinese consumer is getting more confident.

So who does the Fed listen too? “ Well on the one hand… and on the other…" As usual the shouting is loudest from those who disagree with things and the Fed and central bankers are easy game as they rarely shout back. I, for one, am very happy with rates staying low as I have a base rate fixed mortgage and am willing to swallow my academic pride in reasoning for higher rates in return for the selfish payoff of lower monthly outgoings. I wouldn’t be surprised if we are seeing a ‘Tory polls' effect in interest rate forecasting either. Where the Tory vote was probably underrated as it was seen to be immoral to vote Tory, but the actual selfish vote pushed the tick in the box that way anyway, I will stand up with the economic intelligentsia and proclaim ‘INTEREST RATES SOULD RISE!” yet muttering under my breath “Keep 'em low, pleeeease keep 'em low”. Which is how I imagine many at the Labour party conference are feeling as they cheer on comrade Corbyn in a sign of career preserving gusto whilst really thinking ‘Please Lord, make the man see sense and not carry out half of what he is threatening’

Whilst we are on Corbynomics I was just reading the fact check on his speech here https://fullfact.org/factcheck/corbyn_speech_labour_conference-48468 And it brought up a fact that includes an assumption, or rather doesn't include a fact, that sorely twists the truth to the point that it may be clouding important data.

“1 in 7 of the labour force now work for themselves… They learn less than other workers. On average just £11,000 a year.”
This is right, according to the Office for National Statistics. Its latest figures show that just over 31 million people are employed, of which 4.5 million are self-employed. That’s around 14.5% of all workers, or one in seven (measuring over May-July 2015). Its figures show median income from self-employment was £207 a week in 2012/13—which would be £10,800 for the whole year. It hasn’t published a more recent update to this analysis.

There is a magical figure in being self-employed within a one man Ltd company and that is £8,040 per year. This is the maximum that one can earn without paying additional National Insurance contributions but receive NI benefits and whilst staying below income tax thresholds. A self employed person has various means of taking income out of his or her company and taking a salary is probably the least efficient. Though the tax man frowns on it, self-employed folks have a bias to maximise their dividend payments as tax on dividends is zero, the only payment is the 20% corporation tax on the pre-dividend profit. This is lower than the NI and income tax associated with taking it as salary. This may change next year with the government raising the tax on dividends to 7% - a cunning wheeze to stop such loopholes being exploited which will cause many to move to regular salaries thus pushing up the earnings data and 'wage inflation' data next year despite income actually falling due to the tax increase. But the question is where does the statistics office derive their 'earnings' figure from? I have a strong suspicion it doesn't include dividends and, if not, all earnings figures are being skewed downwards, especially as more and more people are becoming self employed and substitute salary for dividends. Corbyn has used this skew in his favour with this fact. Earnings do not equate to income.

But now let's meander back to credit markets and interest rates. The attack on credit by the markets has already started as thoughts of slowing growth and Fed tightening (err does that tally?) identify leveraged slowing companies as the weak point. The weak point near the hinge of the oyster where you jam in the knife hoping to pry it open to reveal the gloopy mess inside (few have pearls). But as with most oyster openings, fingers will be lost. I find it interesting that so far, it isn't the Fed taking away the punch bowls but the markets. In effect the market is acting like a Fed hit-man; removing credit and killing weak companies without the Fed having to do anything. Like a Mafiosa boss, the Fed just has to hint at what it would like to happen and Mr Markets and the boys go and do the dirty work getting rid of the weak. "Wasn’t me officer, I didnt raise rates. I was miles away when they suffered a credit squeeze and I can prove it - Just read the minutes”.

But back to markets. Despite whatever I have thought and do think, equities have played out a classic fall-wedge-fall pattern and I am hurting in the FTSE department. I have been to the doctors and they say it’s due to me being an out of touch with the "new now" and apologise for not having the medical specialism to remove the red hot poker I am currently entertaining in the nether regions. I will continue to bear the pain and though Dr. Market sees no hope in my recovery, I will take some comfort from the fact that markets appear to be at an ebola stage. There have been deaths and will be some more but this downturn isn't going to wipe everyone out despite current prognostications.

Whilst I wait I'll do what most people do when they are suffering and that is to make it fashionable. Just as they have with living in tiny shoeboxes, not having any possessions, wearing over-tight trousers (I also wear over-tight trousers but they weren’t when I bought them) and having itchy facial furniture. The battle of Shoreditch was therefore all the more entertaining to observe as it was fought between two tribes, one who pretend they don’t have anything and want to keep it that way, and the other who don’t have anything apart from i-products and want to keep it that way by forming an inefficient cornflakes and gin based economy.

So let it be known that the most fashionable position in the market is therefore to be long and wrong. But not morally wrong, No! For morally it is only right to support our industries and the hard working who strive to lead better lives. Morally it is better to be wrong in the eyes of the evil market .. Oh bugger it - I can’t keep this politico-moral stuff up. I’m off to buy a pair of skinny salmon colored jeans and by a bowl of cereals, if only I could afford them. but before I do here is some light amusement courtesy of Mitchell and Webb with their take on the introduction of new technology. I assume we can read stone as 'pie 'n' mash' and bronze as 'cereal and gin'

And thank you @kentindell for bringing that to my attention.


Anonymous said...

http://www.thetimes.co.uk/tto/news/uk/article4570644.ece Not sure it was the have nots in the riot geez...

Polemic said...

A bunch of academics? In which case I'll rebrand them as the 'pretend to have nots'