ultranomics

Companies…….

The classic Atari videogame: Breakout

Do you remember that old Atari videogame called Breakout, where the ball would bounce around the screen smashing any brick that it touched? That reminds me of the toxic debt originating in the US subprime debacle, the effects of which are still ping-ponging around the globe smashing companies and financial institutions in their wake.

After knocking out Iceland (the country, not the UK frozen food retailer which probably is worth more) and giving the worlds largest bank, Citigroup a hefty thwack, the latest UK bricks to be smashed last week were two household names in retail – I am referring of course to Woolworths and MFI. Who would have thought that good old ‘Woolies’, founded in 1909, having survived the Great Depression, two world wars and several recessions would meet its demise in the crash of ‘08? We are wondering where that wrecking ball is on its way to next? The world it seems is smaller than we ever thought and remarkably its all interlinked through the subprime debt network. John Lewis, Marks & Spencer – batten down your hatches. Ford, General Motors, Chrysler – run for cover now!

Houses…….

Well you would hardly be surprised to know that UK house prices fell again in November, albeit by only 0.4%, a much more moderate slowdown compared to the 1.3% fall of October. This is according to the statistics from Nationwide, UK’s largest building society.

Prices are down from a year ago by an average of 13.9%. Mind you you’re still doing OK as long as you bought more than a couple of years ago. Average prices are still £25,000 higher than they were in 2003. Those who bought more recently will need to ride out the storm – but if you do need to sell try to avoid those ‘buy and rent back’ profiteers. There may be some genuine companies out there but there’s plenty of sharks roaming the waters right now.

As for where we are headed in 2009 with house prices, its anybody’s guess – including ours. We do dabble in property so we have a gut feeling you see. Mine says that falling interest rates are going to tempt professional landlords into the market in a sustained way from here on in, although that won’t be enough to revive the market. Thus there will be no recovery in 2009 although a bottom may well be reached during the middle of the year.

How we go from there will depend on other factors such as bank lending improving, recession abating, unemployment steadying etc. The other main factor will be human psyche. We will as a nation need time to forget the panic of 2008 and the fear instilled by the subprime meltdown. Once we forget we will then start dippping our toe back in. At the moment though fear and worry are still the order of the day. That’s all my gut has to say on the matter for now, apart from some gurgling.

Jobs……..
The chancellor Alistair Darling was on BBC Radio 4 last Tuesday (25th Nov) insisting that Labour had reduced unemployment so significantly since coming into power and that most of the jobs created by Labour had been in private sector. I mean “Wow” – the art of propaganda and misdirection is obviously very much alive and kicking.

It is true that between 1998 and 2006 there seems to have been around 2.2 million new jobs added. Unfortunately 1.3 million of these have been public sector, inc admin, health, teaching, social work. As for new jobs for women, a whacking 90% all job growth for women was in the public sector, i.e. funded by the taxpayer! The West midlands actually saw a drop in private sector jobs of 2% while public jobs increased 25%!!

Why is this important – after all isn’t a job still a job, regardless of public or private sector? Well true at an individual level its great for those getting the job. Yet by creating all these government jobs they do not directly benefit the nation’s economy. Instead we all as taxpayers have to pay these public wages.

Of course we don’t mind the teachers, doctors, nurses – give us more. But its the pointless pen-pushing jobs in City halls up and down the country that we object to, each with attractive salaries, bonuses, generous final salary and index linked pensions. These public workers spend more days on strike and are 25% more likely to take sickies than those working for private companies. There are 818 workers in town halls earning more than £100k, paid for by me and you. Yet as a nation if we want to prosper we need industry, and people employed in industry. Thats the only way to turn a profit – by making products and offering services and exporting them to other countries. Paying each other to potter about organising this and that does not create wealth.

And…guess what? Its going to get worse! The Centre for Economic and Business Research (CEBR) reckons the state will be hiring another 50,000 workers while at the same time private jobs will continue to slide as the economy falters. The old soviet communists would be proud. What a warm feeling, being in the embrace of the all-knowing nanny state. Yes Gordon, take our taxes and spend them as you see fit. You are wiser and cleverer. Give us our daily bread, and our jobs. Since you employ us, we will of course return the favour and vote for you. After all, those nasty Tories might take away our cushy jobs. Lets not call it buying votes though – lets just call it mutual back scratching!