The (economic) winter of our discontent

[Twister_Ken]

Was talking the other day to a guy who has had his boat in a Hamble marina for the last ten years, at a very advantageous price.

The reason he gave is that ten years ago the economy was in a bad way, and many of the boats in the marina had been repossessed by the various marine mortgage outfits, and were chained to the pontoons.

The marina operator was desperate to generate revenue, and consequently was selling 10-year leases for fire sale prices.

Does anybody sense those times might be about to happen again?

A. Current boat sales figures very high
B. Current mooring rates very high
C. Stock markets in basement
D. Levels of commercial confidence dropping

 

[tcm]

Yes!!

Secretly, uk plc is having a fairly crap time. There is an argument that the "recovery" of only a few years ago was entirely driven by cheaper imports increasing house prices and an exploding stock market. Cannes boat show was reportedly not very good for most markets. Europe remains unable to countenance a Thatcher revolution, T blair is becoming increasingly enamoured of high-tax euroland ways of tax (but no results of spending) and UK trade unions see it as their place to hire decent consultants and strike for a double-digit wage rise for train drivers already on 30 grand for pressing the "go" button.

Sadly, the move to the centre ground by labour, then the press, andnow by the tories means that there is less likelihood rather than more that this will change in the short term: we have a slightly-tax-and-spend government that makes little obvious change, but has all the press on side to argue against "extremeists" at either end.

There remains over a million jobs available and almost that number of unemployed. The computer revolution seems to have done nothing for "effective government" which still charges the same rates (or more) as twenty years ago.

My solution would be to reduce the NHS to a fixup/roadscraping operation for taxpayers, allow anyone to enter the country for a charge of ten grand, leave VAT unchanged, reduce grant to scottish/welsh pariliament to zero, ditch foxhunting debates, ditch tax relief on pensions and housebuying, enforce high-value items like cars to be sold at an equivalent price as abroad, hold VAT, interest rates and corporate tax at same levels, reduce income tax to flat 20%, cancel death duties, announce impending termination of long-term dole by Jan 2004, fire 65% of civil servants at all levels and 80% at higher levels, and set a superstar tax committee to negotiate super-high earners, film stars etc to stay here for one-off annual payments, a new army-style police task force to randomly whack muggers etc whilst interogating them, elmiantion of stupid "regional" police forces, fixed term parliaments with max 2-term for PM, nationwide DNA identification program to be completed inside 2 years, sell most overblown local government offfice buildings, stop local councils collecting loot with too-expensive computer systems and add that to income tax, sell the BBC but regulate content to include mandaory PM speaks to nation every week so we get sick of them sooner, and consider buldozing some nice boulevardes through central which will be awful to start with but look fabulous in 20 years time when all fixed up.

 

[bedouin]

In a word - no.

All the economic indicators are pretty good so there is no reason to suppose that the current boom will come to an end. Several factors apply

(i) The same conditions that is fueling the house-price increases of recent years apply to the boat market as well. Increased house prices means greater confidence and I imagine people are using some of the equity generated by the gains to buy boats (and such like). Almost no one is prediciting a house price crash.

(ii) The generation who are now retiring are better off than any previous generations, and have the money to spend on boats for their retirement. As an aside - they are probably much better off than we will be when we get to their age (thanks Tony/Gordon for that one).

If unemployment starts to rise, and house prices start to fall then there will be an easing of pressure on the marina spaces in the Solent, but my guess is that enough of the boat owners are sufficiently financially independant (i.e. retired or just b****y rich [Sorry Kim ] ) that it will not have the major impact it did 10 years ago

 

[tcm]

Re: house price crash

well, there was at least one predicting a fall of around 10% - though not the same as ten yrs ago when 1st-timers were coralled into buying by impending removal of relief, and then interst rates doubled. Thsi time, the gentle fall will arise from unaffordability in cntral london rippling out to regions. But agreed low interest rates won't lead to mass reposessions this time.

 

[tony_brighton]

Cant see it myself. Demand still massively outstrips supply. You'll have to see significant vacancy rates to see a drop in prices. This by the way is the whole reason for the unreasonable prices - its certainly not a value based proposition regardless of what some operators might tell us.

 

[ParaHandy]

More than likely........ so long as house prices keep rising, people see personal debt being offset against the increase in value of their home. Credit card debt is at an all time high. However, in the USA vacancy rates (percentage of time a rented property is vacant) are rising steadily and beginning to weaken house price inflation. If that bubble (in the USA) was to burst - and they have similar year on year increases - the financial loss is measured in $ trillions. Longterm interest rates, if anything, indicate another drop here in the UK therefore high interest rates are unlikely to trigger the collapse of the domestic property bubble, but, the presumption that the buy-to-let bubble is a uniquely London problem may not be true and with a relatively inelastic property market in the UK, it wouldn't take much to trigger something quite nasty.

The characteristics of economies in the west are changing and the old truths may not apply in the future.

Deflation is a bigger danger and few have any experience of that. Look at Wim Duisenberg (if you can, thro' fug of fagsmoke) and the ECB. They are totally focused on inflation - rather like the Capt of Titanic looking 20miles and ignoring the more immediate dangers.

 

[bedouin]

Re: house price crash

But only one!

And all a "crash" of 10% would do would be to reduce the annual rate of increase from the current 21% down to 11% - not enough to spark serious problems.

I have an uneasy feeling that things are going too well for the UK economy - but it is difficult to explain why. It would only take a modest rise in unemployment to trigger a vicious cycle, as we saw in the late 80s/early 90s but there is no sign of that at present

 

[Twister_Ken]

Re: house price boom

Ah yes, 20% pa house price inflation. That's what I thought for my home patch, and was astonished when the local website reported that Land Registry figures showed a twopointsomething percent rise over the last 12 months. It seems that what journos and estate agents have been telling us may not be true!

 

[bedouin]

Re: house price boom

IIRC you are Chiswick based?

The bit about it on TV this morning made the point that in fact the London hotspots were slowing down (Chiswick was certainly one of those) but that the rest of the country was still forging ahead.

Doesn't surprise me too much either - in spite of the generally bouyant economy the City is still very sluggish - that must be having a major impact on the top end of the market in London and surrounding areas.

 

[Guest]

I agree with you. UK PLC is just about F****d. BOOM,,, WHAT BOOM. As a self employed person working in the cardboard boxmaking machinery market, I can say without fear of favour that the UK economy is (has) been just about ruined by this lot, and before anyone jumps up and down let me explain. Just about everything you buy comes in a box at some stage. 3 years ago there were approx. 750 boxmaking companies in the UK/Eire now there are less than 500, wev'e lost 132 in the last 15 months thats a hell of a lot of boxes not being used and the reason why is because manufacturing is bleeding out of this country so fast no one can stop it. Our industry has been losing about 3.7% per month on production over last year.
As a self employed person every piece of paper I receive through the post from Inland Rev / Customs (VAT), National Statistics Office comes complete with a health warning i.e "if I dont supply the correct info on time" I will be either fined or prosecuted. Under this Gov my paperwork (red tape) has increased beyond all reasonable bounds. I've seen my pension disappear down the plughole so much so that I couldn't buy a 10 foot dinghy with seagull outboard let alone a cruiser. My tax (both direct and indirect) has rocketed through the roof. I spend more time doing paperwork for this lot than I spend out with my customers. If I fall sick I get no benefits although I pay for them and yet I can watch "illegals" landing at Dover and being given my tax money in handouts.
I have vowed not to vote again (because they are all the same) until someone puts on a voting slip NON OF THE ABOVE. By voting we only encourge the politicians into believing that we agree with what they are doing, whereas most people believe that they are all crap and that they have lost contact with the "average" person in the street.
There maybe a house price boom. but please dont tell me that the whole of the UK is in good fettle because IT AIN'T
signed
P***ed off boatman and self employed person

 

[halcyon]

Re: house price boom

Do not move to our bit of Cornwall,

Little development next to were I'm building (cannot afford to buy a finished one), 2 years ago they were sold new at £70/80K today, £155/180K, ex council houses, 2 years ago £50/60K, today 2 were sold in a day at £125/130K.

They are no longer advertising houses with a price, at best a price guide, but normally phone agent, unless a very bog standard house in town when you get a price.

Brian

 

[halcyon]

As self employed I totally agree, everyone I talk to in manufacturing is looking for there next order. Since Tony arrived every budget I pay more tax, now refuse to go over VAT threshold, avoids paper work.

We seem a Nation living on our savings, not earnings.

Brian

 

[david_e]

thanks for this, i now understand why every time i try to flog something to the box making folk they never buy it!

 

[tcm]

Deflation, depression and the Wizard of Oz

I read that the wizard of oz is an allegorical tale relating american woes around the turn of the century. The scarecrow is a farmer, the lion an investor, the tin man a manufacturer. They walk along the road to "Oz" (weights of gold, silver) to the emerald (greenback) city to find that the wizard (president) can do no tricks but makes them jointly realise that their woes can be overcome. Can't say that the current plight of uk in general compares with previous turn of century USA woes...except of course if one sees the nastiness spead by Edwina Currie has a parallel with the Wicked Witch of the West Midlands?

 

[ParaHandy]

Re: Wizard of Ounce

Baum's tale followed the 19th century bubbles in the railroads.

Not quite true - the President was corrupt. In the end, all the good American citizens had to do was expose the wizard and his witches for the frauds they were, and all would be well in the bimetal monetary world of silver and gold. In the process, the farmer Scarecrow found out how intelligent he was, the lion found his courage, and the working Tin Man received a new source of strength in a bimetallic tool--a golden ax with a blade of silver--and he would never rust again as long as he had his silver oil can encrusted with gold and jewels.

 

[david_e]

Re: party manifesto

I believe that the weather is quite pleasant in Blackpool at present, could get quite an audience No mention of taxes on booze or fags, in your mini manifesto - down and up for me respectively, apart from alcopops which should be trebbled.

 

[tcm]

Re: party manifesto

Obviously, smoking is a bit rubbish so I am considering a proposasl to make UK-produced duty-paid fags to be yellow gold-coloured and high-strength and £1 each, whereas cheapy imported ones will remain white. Smokers will therefore be detered from the habit by looking like a cheap git and not at all "cool" if smoking imported ones.

No mileage to be gained from changing booze rates. Alcopops will be summarily banned towards the end of our time in office, and lead to a change in government as the press swings against us after a honeymoon period lasting at least 3 weeks, although not before trade unions have been forced to change thier names to things like "stupid deductions from salary" and have new constitutions enforced which demands 51% of membership votes for any strike, and all the prisons have been changed to assemble dirt-cheap cars and vans for police vehicles or gardening the central reservations of motorwayts to makem look nice like in Europe.

 

[ParaHandy]

Re: Edwina & the winkies

The Wicked *itch (substitute w or b as circs dictated) knows who her friends are eg the fragrant Mary Archer of whom her erstwhile colleagues on the board of Anglia TV might well have passed the same comment about her as she remarked about Edwina Currie.

 

[FlyingSpud]

I am self employed and have, so far - and touch wood- , come through three booms and three recesions. From this I deduce
1. The younger folk always say this time is diferent
2. If things are good now, they are going to get worse, so contract
3. If things are bad now, they are going to get better, so expand
Simple really

 

[Guest]

I believe a lot of the money going into the boat market has been generated by profits from the stockmarket, city bonuses and even commissions to sales people. All these have substantially dried up and I have not noticed that many people cashing in some of their property equity to buy boats.

The pensioners who have just retired are the best off they have ever been but those about to retire are most unlikely to have the same pensions. The lump sum that traditionally was available on retirement has been reduced by some pension schemes. Another of the sources of funds for retirement boat goes with it.

Finally many people used funds generated by endowment policies or the residue after the mortgage was paid to buy bots. These have crashed dramatically in the past year.

The house market is also a two edged sword effectively removing many younger sailors from the boat market as they struggle to afford a mortgage.