Off Topic The "Discuss Anything Else" Thread

The OECD claim that the UK will be worst of the G7. I wonder if the assumption is that Labour will be in power with a Chancellor that is a Bank of England stooge. Growth has hardly been spectacular the last few years, the debt to GDP ratio is bad and public spending is out of control. So I can see grounds for pessimism as Reeves says that she won’t increase debt and the unions won’t accept culling unproductive civil servants.

Which record did the FTSE100 set that I missed? The FTSE250 getting back to where it was a year ago is hardly grounds for celebrations. My own portfolio is still down nearly ten per cent since 2022, so this is just the media massaging the numbers.

I do not take the FTSE100 as any indication of the state of the British economy since it is driven mostly by large companies that make their money abroad. A few stellar international performers happen to be listed in London; otherwise many of the 100 have done moderately in recent times. It is like judging the USA based on the S&P500. It is driven by a small number of massively overpriced big names that have been pushed by savers piling into them because returns on their savings were poor. If Amazon, Apple, Alphabet (Google), Meta (Facebook), Microsoft, Tesla or Nvidia have a bad week, the S&P500 reflects this whilst most of its constituents have done only moderately.

 

Growth of 0.2% is better than a decline like they witnessed for consecutive quarters – a technical recession.

If Germany has any sense it will rebel against the Net Zero delusion as it will guarantee bankruptcy and the targets are physically unachievable. Here in the UK only the brainwashed youth still think the country’s one per cent contribution to global warming is grounds for a life of poverty by candle light.

When Germany’s auto industry has been decimated by China that record employment will be a distant memory. How much of that record employment is all those immigrants that Frau Merkel invited in?

Given that the choice for the electorate in the USA appears to be between the two worst Presidents ever in November, I fully expect the mainstream media to soon pick up on the magic bankruptcy number: 130. I have been reading about it for ages. When debt-to-GDP goes over that percentage it is virtually impossible to pay debt interest unless taxes are hiked or public spending is slashed: two politically toxic measures. Italy already passed that point and France is heading that way.

Usually I ignore the OECD as they are so inaccurate (like several of the other forecasters) but I will go and look at what sort of “growth” they are on about. There are a couple of types commonly used and they usually prefer to quote the most dramatic to get mainstream media coverage. When they prove to be wholly wrong, nobody mentions any apology.

 

I might have this wrong but it was my understanding that German ICE car manufacturers were being punished by the Net Zero zealots just like the ones in Britain. There is a sliding scale of fines for selling more ICE cars than EVs in Britain and each year the EV sales percentage is going up. So ICE manufacturers are having to simply produce fewer ICE cars to force people to buy EVs. People do not want the EVs because of their myriad of downsides so the market is imploding. This doom loop will force more and more people off the road until we get to a point where the people rebel against their moronic leaders at the ballot box.

The Chinese are far and away the biggest manufacturers of EVs and they also happen to be the biggest producers of the batteries and components that are required to build them. China is already in a position to flood the European market with cheap EVs that the incumbent producers cannot compete against. Last year more than a third of China’s EV exports (US$1bn) went to the EU. That might seem a drop in the ocean in a multibillion dollar industry but which country are Britain and Germany dependent upon for batteries and components? Trump put a 25% tariff on Chinese EVs to stop them undercutting US car producers (primarily Tesla).

The EU will not allow State subsidy of auto manufacturers whilst China can do as it pleases. China is also working on devaluing the Yuan to enable it to conquer the global EV market – if you find a chart of who is buying up the most gold (in order to get away from US treasuries), China is second to Turkey.

 

You perhaps read my post too literally. I agree that the OECD forecasts have been a joke and wouldn't mind betting they'll be wrong again. However I don't disagree with the reason they give for their forecast. I still believe that the BoE should have lowered rates by now.

I mentioned the FTSE figures not because it backed (or otherwise) the OECD forecast, but because it happened on the same day. The FTSE is, as you say, a poor representation of a country's economic strength. Considering that the FTSE 100 ( and yes it was a record yesterday and again today actually) went through 8,000 in early 2000 (and soon after went down the toilet) and that the FTSE 250 was 25,000 in 2018 you must wonder what happened to the UK over the last 24 years ( let alone 14) if you judged it on those figures. One thing I think it's safe to say is that both indices are undervalued given the relative strength of the UK companies represented in the indices. Normally I'd expect 'bad' news to spook the stock market but it didn't appear to.

 

EVs have been subsidised in the UK but the problem was that the “small, affordable model” does not exist. I drive an old ICE Skoda (with a VW Golf engine in it) and the EV equivalent small car costs three times as much. I could still get a decent ICE saloon car for that sort of money. If you gave me an EV I would look to offload it: there are still way too many reasons not to have one as they won’t save the planet this century.

I know someone that has a Tesla and he paid through the nose for a status symbol – there is virtually nowhere to charge it (the necessary infrastructure would cost tens of billions and is years away) other than his own garage as he lives out in the sticks. If he drives a couple of hundred miles he had better book a hotel room as it takes hours to recharge compared to an ICE car that can be refuelled in minutes.

Concentrating on SUVs makes financial sense if they can make an EV that costs not much more than the ICE equivalent (and assuming there are plenty of charging points in Germany).

The Chinese small car benefits from massive State subsidy and they surely do not pay the price for batteries that foreigners importing them pay in other countries.

In Blighty presently, the EV manufacturers are dropping prices to try and clear vast stocks of them that nobody wants to buy and the used EV market is in freefall.

 

Since the Bank of England’s remit is inflation I think that Andrew Bailey has painted himself into a corner. Inflation has not been quelled as they have just fiddled the measurement to give the impression it is falling. Also the interest payments on the National Debt are not helped by high interest rates and none of our political class dare tackle the issue. Someone has to pay for fifteen years of QE since Gordon Brown got caught with his pants down and it looks like it will be Labour blaming the Tories next year when they get the poisoned chalice.

Cutting interest rates will result in runaway inflation, which they would try to fix with more funny money. So at the moment they are trying to juggle interest rates versus spending and tax receipts. You can find the same mess across The Pond.

 

Yippee, interest rates stay at 5.25%, so I can continue to get high interest on my savings, whereas I think today's decision not to reduce interest rates is a disaster.

Of the 9 members of the Money Policy Committee 7 voted to keep rates stable and two voted to reduce them by 0.25% (that's one more than last time). The MPC has the horrible appearance of the stagnant '60s/'70s economic orthodoxy that created the problems we had then.

In 2020 a paper was written that predicted we were heading for extreme inflation if we did not stop QE and started raising interest rates. This came from members of the shadow MPC that meets at the same time as the MPC and gives their decision on financial policy at exactly the same time the MPC gives theirs. Today the majority of members of this shadow group called for a 0.5% reduction, while one member actually called for a 1% reduction. At the same time they stated that holding the rates would lead to deflation and damage to the UK economy. Furthermore they called for the BoE to restart QE (what the BoE does not broadcast is that they have been carrying out Quantitive Tightening (QT) since 2022 and do not give this as an element in reducing inflation).
The shadow MPC thinks we are heading for recession (because of lack of investment due to too high interest rates) and deflation (due to a too violent swing in money supply), while the MPC seems to think we will smoothly reduce to the target 2% inflation and grow.

They are as far apart as they were 4 years ago and over the rest of this year we'll see who turns out to be right. All very interesting but the stakes are too high for the UK and the BoE seems to be stridently dithering as much now as they did 4 years ago.

 

Well done on getting high interest rates on your savings. The best of mine is less than 3.5%, so real inflation means that I am not getting any better off at all as my savings are eroded; hence, I am living off my savings while they still have some value and have no intention of going back to paying taxes for big government to squander. One of my Venture Capital Trusts made a net return of -12.4% last year, better than the -22.5% in 2022, so something is improving but growth is nonexistent.

I do not even bother with anything coming out of the Bank of England these days as they are all incompetent. They created the problem, they have their stooge in position to become the next Chancellor and Labour have been telling the same lie about the Tories’ fourteen years of economic decline for long enough that the brain dead British public actually believe it.

I do not expect any interest rate cut in June or July, so Rishi Sunak will dither even longer over when the Election will be held that kicks him out and forces him and his billionaire wife to move to California.

There is only one game in town: high inflation. The debt pile is out of control. High interest rates mean that a huge chunk of tax revenues is being used to pay interest on debt not fund public services. Labour have a fantasy plan (no details ever given) that is going to produce growth without slashing the incredibly unproductive public sector (where their union paymasters still rule the roost).

Even at current interest rate levels, the USA will soon reach a point where it will no longer be able to finance its Social Security fund as its costs exceed its income. In 2023 it paid out $1.39 trillion from income of $1.35 trillion: most of the income comes from Treasury bonds. The only way that the Fed can see to tackle the debt pile is more inflation. It cannot do anything about the unwillingness of politicians to cut Big State spending, especially with 67 million pensioners having votes.

So the BoE will end up returning to funny money, which will make the rich richer and the poor poorer. Over the funny money years that started in 2009, it was the rich that took the free money and bought up all the assets. Inflation continues to make those assets more valuable whilst at the same time robbing future generations’ blind.

 

All I know is that the UK’s future is dire.
The forthcoming General Election poses an impossible choice between a bungling Tory soap opera and a bunch of Coronation Street-like characters from a party that historically ruins the economy.
What a choice! It’s a pity that Screamin’ Lord David Sutch has passed away. He’d probably get my protest vote.

 

Smaller parties who don’t win seats are impacted. However you might say that is a positive if you aren’t a fan of the Green Party or Reform for instance.

 

The Left favour PR because the Left is always fragmented minorities and they know that under PR they would always have power in some form or other as the only real party of the Right is the Conservatives. Look what a disaster PR is in places like Italy, where elections are like buses – there will be another one along shortly. The last election in 2022 was after the collapse of the Draghi government elected in 2019. There have been six elections this century with only two governments lasting the five year term of office.

The theory is that each constituency should have approximately the same population. The Boundary Commission has just revised a number of constituencies before this election. Here in Hull, the size of two of the city’s Labour constituencies have been increased by adding in areas from the two neighbouring Conservative constituencies. That should have the effect of watering down the Labour majority in Hull East and Hull West & Hessle but the reality is that the Conservative voters simply won’t turn out to vote. Several other constituencies in East Yorkshire have had their boundaries changed as well but as most of them are Conservative, it does not seem likely that will have much impact. Some of them may go Liberal Democrat or Labour if Conservative voters stay home or vote Reform.

There were supposed to be changes to constituency sizes before the 2019 election but they were not enacted, perhaps because the changes looked like making several Conservative seats marginals.

Several of those seats in the north that voted Tory in 2019 are likely to revert back to Labour. They voted for Boris because he promised to “Get Brexit Done”, which of course he then failed to do properly; and the alternative was Corbyn.

 

Peole who earn more pay a larger % of their gross salary in tax. Maybe base the NI on a flat % for everyone of their salary net of tax?

 

Jeremy Hunt cut N.I. twice, lowering the rate from 12 to 10 per cent this January and from 10 to 8 per cent this April for employees; and self -employed rates were cut to 6 per cent in April. However, frozen tax thresholds mean that many people will pay more income tax so the only people that will actually gain are those whose income has not risen enough to push them into a higher tax band.

The problem is that N.I. still exists as the mythical tax that pays for State pensions and the NHS. It does not come close to paying for either and there has been talk of just scrapping it and then the rates of taxation will mean the richest pay more (they already do anyway). Simplifying the tax system has plenty going for it. Health spending is becoming a larger part of public sector spending every year as our population ages so eventually it will be impossible to make the numbers add up. With the ‘triple lock’, the State pension is toast by 2035.

The perpetual myth that the NHS is underfunded always comes up at election time. It is not true. We spend as much per capita on healthcare as countries like Germany and France. The reason the level of service and patient outcomes are so poor is because we waste billions on management and bureaucracy as our behemoth was founded by a Communist who ignored Beveridge’s model of a public/private partnership on ideological grounds. The NHS is in terminal decline but no politicians dare tell the brain dead electorate the truth. Page 1 of Labour’s manifesto (if they ever publish it) will be the usual commitment to throw more money into the bottomless pit than the Conservatives.

 

I am sure that you are familiar with the acronym FOMO. It means Fear Of Missing Out. On equity markets it often sees investors piling into some stock that is going up sharply. The investors have not bothered to do their research but they jump on the rollercoaster thinking that it will not get to the top for ages yet and they won’t come crashing down before they sell up and pocket the profit.

On the New York Stock Exchange, the market capitalisations of the three largest companies (Apple, Microsoft and Nvidia) add up to more than the GDP of every country in the world bar two (China and the USA).

People that own Apple shares or Microsoft shares quite probably own some of their products and have a basic understanding of what the companies do. If they own an iPhone or an iPad or a computer/laptop that comprises 80 per cent of the market then they have some idea about the underlying business. Their dividend payouts are pathetic: Apple yields less than half a percent and Microsoft less than three quarters of a percent.

But what about those that own Nvidia shares? The company is now worth nearly $3 trillion. The people riding that rollercoaster probably do not own anything with a GPU in it but they have heard about that Artificial Intelligence thing that is the latest craze so all is good. When they announced their latest results the other day, the numbers were big.

There is the problem. The numbers were big and income came in at $43 billion. That is not that great. The company’s dividend yield is 0.01 per cent. That is crap. How long is it going to take to get income up to $200 billion so that they can actually pay investors a decent dividend that will even keep pace with inflation? And by the time they have quadrupled the profits, how much will the share price have gone up, reducing the dividend percentage?

The FOMO crowd should start looking to take their profits and run before this Ponzi scheme reaches the peak.