Steve Hemingway

The End of Buy-to-Let

2010-02-03T12:05:52Z

"Buy-to-let is absolutely dead and will never return" say the Wilsons in this article from the Guardian. The interesting thing is that the Wilsons are now making more profit and paying more tax than ever before, because they can borrow at 2% and receive a gross yield of 5% and a net yield of 3.75%. Their article is interesting because it gives some figures for yields (5%) and all-in maintenance costs (1.25%) which are based on fairly long-term experience, and not based on the fevered imagination of an agent trying to sell a new-build flat. There is a substantial industry of statisticians working on UK house prices, but there is an almost total absence of reliable statistics for gross and net yields, which, for buy-to-let investors, is the absolute key for profitable investment. The reason for the Wilson's pessimism is that although they are significantly cashflow positive now, they came close to bankruptcy when they almost could not re-finance their empire, which seems to be very highly-geared, and are concerned that if base rates rise to 'normal' levels - 3.5% their total cost of funding - about 2% above base - will destroy the economics of their investments. Obviously this assumes no appreciable capital appreciation, which does seem to be the prediction of derivatives markets, and most market commentators. But their track record is hardly spotless, is it? I'm not saying things are not bad, but it is not entirely clear that they are catastrophic. The Wilsons are not stupid. They avoided flats, they saw through the price rigging of 'gifted deposits' that most developers were playing, they avoided large family homes and preferred older tenants and they stuck to places around their base in Ashford in Kent. The most curious thing to emerge from the series of articles in the Guardian is that flat dwellers are much more likely to commit murder than those who live in houses. Even though only a small proportion of the Wilsons' portfolio in flats, all of the four murders that have been linked to tenants of theirs, all were in flats. Curious!

Unpromising Start to Stevenage New Town

2010-02-02T15:53:53Z

Google News Archive Search is a truly wonderful thing. I can't quite believe that so much archive newpaper material is available, free of charge, delivered magically to a computer near you.

I did a few searches and came across this article about the origins of Stevenage New Town. I knew that the local lord of the manor, Lord Lytton, was adamantly opposed to the development, because he had a large area of his estate forcibly taken from him by the process euphemistically known as a "compulsory purchase", and more accurately known as theft. It seems that he was not alone.

What I found slightly surprising was that it was necessary to come in a fleet of twenty four official cars. It was even more surprising that Lewis Silkin's car had had the air let out of its tyres to let him know what the ungrateful locals thought of his plans.

I always slightly struggled to understand why the 1945 government was not re-elected. It obviously had a huge support initially, supposedly stood up for the common man against the forces of reaction and was free of corruption and run by one of the outstanding prime ministers of the 20th Century - Clem Attlee. However, its collectivist mania caused at least one industry - sugar - to fight back hard against nationalization (e.g. here) which may have persuaded voters that with another five years of Labour, Britain would end up abolishing private property entirely.

At long last a cause worth donating to

2010-02-01T14:11:08Z

A former landlord who staged a "smoke in" protest at the grossly illiberal smoking ban which is a result of the 2006 Health Act has now gone to prison (as the result of a refusal to pay fines arising from allowing smoking on his premises). Old Holborn is running a campaign to pay Nick's fine and thereby release him from prison. If you go to this page on his site you can read all about it and contribute.

I occasionally went to a bar in Singapore. Its walls were heavily nicotine stained because people frequently smoked there. The interesting thing is that it was, and I have no doubt still is, to smoke indoors in a public place in Singapore. However, even with the draconian approach to enforcement for which Singapore is famous, the barman felt perfectly relaxed about allowing people to smoke because he knew that everyone who drank there was aware of what was going on and had a huge choice of bars nearby where they could drink in a smoke-free atmosphere. How sad it is that the UK health fascists cannot tolerate such an approach.

I actually think that in some ways the longer Nick stays in jail the better, because it will highlight how bad this act is, but I feel sorry for the guy, so perhaps you'd better cough up. I have done so. At least your money will do no harm, unlike the money raised by that useful idiot Bob Geldorf in Live Aid, which, like so much aid money and charity that is given to Africa, principally was used to buy guns.

Going to work on eggs

2010-01-31T09:44:22Z

On this day in 1968 this article appeared about how the Reorganisation Commission Marketing Board had decided that the Egg Marketing Board must go. It had been set up in 1957 and in fact clung on until 1971. The idea was to protect egg producers, and consumers, from instability in egg prices by regulating and controlling production of eggs. I don't think that many people now regret its demise. Certainly egg production in the UK has not been a model of good practice, but it seems to me that the eggs we buy are of good quality and reasonable price. There are concerns about how healthy they are, which didn't exist in 1968, so much so that it would be illegal to use the 'Go to Work on an Egg' slogan which, apart from the little lion stamped on the eggs, is the only thing that people remember about the Board. It's quite rare to see a story like this. Once a quango gets established it is very hard to get rid of it. The big losses experienced by the few (the employees) trump the tiny individual gains which would be experienced by the many (the consumers of eggs). However, in this case, somehow, the many prevailed. In a similar way the Milk Marketing Board went the same way. Interestingly this all happened when a Labour government was in power. Three cheers for Harold Wilson!

F**king Ego

2010-01-30T22:22:06Z

This is totally hilarious! Apologies for the language in the title. It is Taiwanese.

Not so much Robin Hood as Robbin' Blind

2010-01-29T19:07:29Z

A tax on FX (and possibly other) financial transactions is spectacularly bad. Generally all new taxes are bad, as at least the winners and losers from the old taxes have their gains and losses capitalised and stable. This article from the TPA is the most comprehensive demolition job I've come across, but generally every serious article that has been written about it has concluded that it is a unusually bonkers idea. I know that Milton Friedman made some comment about the fact that he'd never seen a tax cut that he didn't like, and that reducing taxes had the effect of 'starving the beast' (of big government). I don't think that even he would have argued for a government that didn't raise tax for defence and the administration and enforcement of the law. My personal view is that most transfer payments (which, strictly speaking, are not government spending at all) are justified, and these are going to be a big part of spending for a long time to come. We already have a tax on transactions: stamp duty. This is a disastrous tax, which John Major, when he was chancellor, promised to abolish. So much for promises made by politicians - from the Right or the Left. Sadly, I notice that some Tories are in favour of the tax. Once upon a time the Conservative Party wanted a smaller state.

Trust Busters

2010-01-28T12:34:02Z

Three white-collar convicts are chatting over their daily prison meal.
"What are you guys in for?" asks convict one.
"I set my prices too low and was convicted of predatory pricing" says convict two.
"Funny, my prices were higher then my competition and they hit me with monopoly pricing" says convict three.
"Ha! My prices were exactly the same as my competitors and they threw the book at me for collusion" says convict one in response.

This is a joke shamelessly stolen from the What the Hell do I Know? blog.

Basically, the argument is that there is no evidence that "competition authorities" have ever actually done any good in terms of levelling the playing field between producer and consumer. The reason is that cartels and monopolies naturally implode as economic rents attract the interest of firms in different industries, and different countries. Of course trade barriers in the form of tariffs slow down this process, and heavy regulation of the industry within a country also does. Clearly, in the case of services that Google provides, neither of these factors apply.

The political class of course is much more comfortable launching this kind of investigation than one into competition, say, in banking services, or utilities, or telecommunications services, fixed or mobile, or broadband provision, because the management of companies in these industries have taken great care to develop strong relationships with politicians. Did I really say that?

An Evening with George Hamiliton IV

2010-01-27T18:11:05Z

Mark 18th May in your diaries as George Hamilton IV is performing in Knebworth Village Hall for one night only. He will incorporate songs (his hits and familiar titles) alongside conversation. He is a great historian and will talk about some aspects of Americana. You can read more about George on his website. Like all the up-and-coming stars he also has a MySpace page. I will update this page with details of the event when I receive them. This event is promoted by Tony Byworth of Knebworth.

Sleepwalking into a database state

2010-01-26T12:23:04Z

John Naughton's excellent article explains why we don't want more of our data on government-run databases. Unfortunately the famous NHS Spine is now being populated. At huge expense everyone in this are is being sent a letter about what are now called 'Summary Care Records'. Basically these are the initial attributes to be populated in what is destined to be a comprehensive, centrally-held medical record. The system is appallingly designed, lacking even a mechanism to delete a wrong record. Predictably my PCT is making it as difficult as possible for patients to exercise their legal right to opt out of the system. They vaguely say that the form for opting out from the system can be downloaded from their website, but the search facility in the website itself, and google fails to locate any reference to any opt-out of the summary care record. I did find the relevant form on the Stock NHS PCT site (here). The form itself needs to be downloaded, printed out, filled in with a pen and posted to your local GP. An natural and elegant solution that you would expect to find in a state-of-the-art database system. Seriously, please at least think carefully whether you wish to express your passive support for one of the gleaming jewels in Tony Blair's legacy.

Join the Campaign to Reform Libel Law

2010-01-25T21:17:16Z

Nobody can be a reader of Private Eye for as long as I have and think that UK libel law is anything other than an abominatio. There is now an organised campaign to get it reformed. I urge you to sign now here. This post by the brilliant Charles Crawford says it all better than I can and has links to background info, if you are interested.

The Big Issue

2010-01-24T21:42:33Z

Mervyn King is telling us not to worry about inflation. The argument is that the economy is so shot that there's loads of spare capacity and that output can be increased without any increase in marginal costs. Capitalists@Work agree with Mervyn. It would be a foolish investor who bets against these economic forecasting heavyweights. On the other hand, I seem to remember that that another economic forecasting heavyweight, by the name of Dr Alan Greenspan, was forecasting, a few years before the financial crisis, that we'd entered a new paradigm in which we could experience a permanently plateau of high, non-inflationary growth. Wat Tyler has a bit of an idée fixe about this. He blogged about it again today, here. He is very convincing to me, but unfortunately not to the market. The gilt market barely reacted to the inflation figures. However, more and more people seem to be saying that a purging does of inflation is the least bad option facing the government. Personally I think there is a better than even chance that the coming five years will resemble the 70's more than the 90's.

From Turnip Taleban to Cutie Candidates

2010-01-23T11:04:32Z

There is clearly a lot of resentment about 'Dave' Cameron following closely in the footsteps of his hero, 'Tony' Blair. His 'A List' of candidates which are imposed on local constituency associations shows that his support for the idea that MPs should be representatives of the local constituencies is only skin deep. As ever, the Telegraph can be relied upon to dig the dirt. You can read all about it here. The Conservative Home article written by Cash defending AWS (all women shortlists) is here. It is a dismally weak argument, and unites Cash with Blair in an implicit assumption that meritocracy, a word invented by Michael Young, is a desirable thing. What is encouraging is that the mass of comments on this mediocre essay are strongly opposed to Ms Cash's view. It is ironic that she calls for meritocracy but, clearly, is a candidate only because her husband was a school friend of 'Dave'.

Isn't it time to call time on the Olympic Games?

2010-01-22T13:07:32Z

The Olympic movement has noble origins, and undoubtedly gives some good publicity to minor sports that otherwise would get very little. When else would we be glued to the TV to watch a curling event? However, the cost has been getting alarmingly out of control. The cost of the Beijing games is of course a state secret, but has been estimated at around $50 billion. This is a lot of money even for a country as rich as China, and translates into a lot of rice that could otherwise be eaten by starving peasants. Of course, nobody likes to be heard saying at the Olympic Games are rubbish. It's even as unacceptable as saying that the Paralympic Games are an embarrassment. The games are a perfect event for politicians, national and local, and media types, to get a free holiday at the taxpayers expense. Martin Lewis would definitely approve because, because of the extraordinary sums spent on preparations and security, the games are stage micro-managed to ensure that they produce only Good News. Politicians always argue that the games bring in extra revenue in the form of tourism, even though the evidence is that real tourists actively avoid going to a country at the time that the games are taking place. Certainly the games are a perfect excuse for hotels and airlines to hugely increase their prices, but their windfall must be largely offset by low numbers. I was actually in Beijing at the time of the last games and the cost of accommodation had indeed increased around tenfold compared to normal. What I found amazing though was that hotel occupancy in the city was, during the period of the games, less than forty percent of normal. I am confident that during the London games we'll see a similar exodus of normal tourists from the City, to be replaced by a smaller, but infinitely better funded, members of the political class. It is interesting to consider what long-term benefits accrued to Greece after its hosting of the Olympics in 2004. This article, written at the time, predicted that it would all end in tears: how prescient this now seems as we watch the collapse of the Greek economy brought about by its government's inability to get control of costs. One thing that is a racing certainty is that the London Olympics will cost many times more than the original budget, e.g. here. Don't forget that the original forecast cost to the public purse was a mere 3.4 billion pounds!

Save Stevenage Schools

2010-01-21T22:47:20Z

The experience of Sweden with free schools is positive, in spite of attempts by the BBC to claim the opposite. Stevenage has some rubbishy schools. The New Schools Network is a new charity which is being set up to take advantage of the Gove proposals. Maybe, just maybe, now is the time to establish a decent school for Knebworth kids, other than the appalling proposals put forward by Judith Pomeroy. This might happen, but clearly there are a lot of vested interests which will be opposed to it.

The hidden agenda of multi-culturalism

2010-01-20T21:55:50Z

This article is well worth careful reading. There are plenty of exegeses of this around, e.g. this one by Andrew Green of Migration Watch. I suppose the official line is that this is a nonsensical conspiracy theory. However, nobody has refuted it. It certainly seems plausible-enough to me, although even I am reluctant to accept the Green explanation at face value. This story is hardly covered in the MSM, and, when it is, is treated with kid gloves, as you'd expect this kind of topic to be treated. As opposed to this article which dives in with both feet.