Me, me, me ... I said it first ... the sequel
This is a simulcast
It's official, the quarter ending the end of September shows that the UK Economy has slowed by 0.5%. Not a massve slwing down of course and such official statistics are subject to major errors but here is my comment on what has then happened.
Both the BBC and Financial Times have said that because ONE QUARTER's results have shown a negative return, Britain is therefore entering a recession.
The BBC said: recession looms
The FT said: Data confirm UK on brink of recession
Firstly, since when does ONE RESULT consitute a trend?
Secondly, whenever I talk to anyone about statistical analysis and forecasting, I advise them to consider a minimum of fiver periods/quartrs/years before they get too excited about anything.
We ought to look at the trend rather than sitting smugly at the thought of having said, "Me, me, me ... I said it first." Take a look at where these estimates of GDP rates of change have come from:
http://www.statistics.gov.uk/cci/nugget.asp?id=192 You will see here the FULL picture of what is happening. Moreover, do take into account what the FT says, You should take the data on offer there and take a look at what is happening sector by sector. For example,they tell us that manufacturing has fallen by 1%: OK, that's serious; but since manufacturing accounts for only around 12% of the UK's GDP, that's not that serious overall is it?
The data released on Friday are the "flash estimate" of GDP, a number notoriously subject to revision. There was a grain of comfort in the fact that GDP for the second quarter was unrevised and showed zero, rather than declining, growth. (See http://www.ft.com/cms/s/0/7e9feb8a-a1a4-11dd-a32f-000077b07658.html?nclick_check=1)
These people have been desperate to drive house prices down for years, now they are desperate to build us all up for a year of a recession. The me, me, me brigade has, however, already started to doom monger their way to the front of the queue by talking about a slump for the UK. These people. In China, they get it right when they ask their journalists not to behave like this: scare mongering. I think the Chinese are right; and NO ONE is talking about censorship here either.
DW
Me, me, me ... I said it first
This is a simulcast.
The latest of our "experts" to "confirm" that the UK is already in recession blethered forth today. Ernst and Young did it today.
This nonsense replaces the dash to be first "confirm" the downturn in the housing market.
That's not to say E&Y haven't got it right, it's the littany of reports all making the same predictions that's getting on my nerves.
DW
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Marks & Spencer's Ordinary Man Again
The Financial Times is catching up with me at last. You know I have been spilling the beans on just how ordinary Stuart Rose at M&S really is. Well, in a recent article in the FT, I finally was vindicated> Read the article here:
Oh to be right so often is a heavy burden!
I remember 18 months or so ago someone I know said Rose was, "A class act". Clown!
Duncan Williamson
Financial Mess
I hesitate to use the term financial crisis for what really is a financial mess.
I know that many people want to talk about the regulation of the financial markets and the answers comes back that we must let the market mechanisms allow the market to work. That sort of thing. However, how can it be right that people are allowed to work inside a financial system and make large amounts of money out of other people by creating havoc, starting unfoudned rumours and telling lies in order to drive prices down?
What price the efficient markets hypothesis? Equality of information, the price reflects the value of all knowledge ... not working at the moment is it?
People like me have been saying for a long time that the situation in which 955 of all foreign currency transactions are speculative in nature surely cannot be allowed to persist. It has done for decades. Short selling is the latest in phrase, just described above; and it has been allowed, maybe even encouraged, for at least five years. The housing market has been abused for at least the last five years in the UK and probably the last ten. Easy mortgages, people granted loans who do not qualify for them ... the sub prime problem. People have been encouraged to withdraw the equity in their homes in order to pay for long haul holidays and new cars and extensions to their homes. All of this has to be paid for eventually but nobody realised that the day of reckoning had to come. Now there are many people facing repossession of their houses and the people who are bleating most about this situation are the people who encouraged it in the first place: the politicians and financiers of this world.
The people who are going to suffer now are the people who believed in the shangri la of what they thought was free money. I used to tell my missus that you can't spend your money twice. I say the same to everyone else, people have been encouraged to try to spend their money twice: they now know they can't. You might call these people foolish and I am sure some people are. However, when someone convinces you with powerful marketing campaigns that all you have to do is to take a drive to your bank and withdraw the tens of thousands of Pounds you need, how can we blame them? These people are not sophisticated: many of them will be gullible and some of them will be greedy. But the concept of thrift has been abandoned ... until now. Thrift is back!
Have you noticed, by the way, that many of the world's biggest buildings are owned and/or occupied by financial services companies? funny that. Have you also noticed over the last few days how many people have been working in the financial services industry? There is talk of 100,000 of them in the UK alone losing their jobs now. If so many are losing their job, how many are left? 500,000? 1 million? I don't know but it's obviously a large number. My nephew was unfortunately caught up in the Lehman collapse and now he is looking for a new job.
We have swapped an industrial base for an ethereal industry: you might think that is a good thing, I don't.
I have just watched a snippet of an interview on Sky News between some Sky News "Experts" and Gordon Brown. One of these experts asked Brown if he thought the financial crisis in the UK was his fault. Clever question or stupid? Answer: stupid. If you believe the Prime Minister as Chancellor of the Exchequer was responsible for some or all of the mess, the technique to use is to challenge the man with specific questions of where he might have gone wrong. A simple, are you to blame question is easily, very easily, side stepped.
Watch this crisis carefully and critically: the gamekeeper and not the poacher is going to have to carry the can yet again!
Duncan Williamson
Woolworths
Just a thought to get your calculator juices flowing.
In an article on Woolworths in the FT today (Woolworths plans job cuts to reduce costs by Tom Braithwaite and Lucy Killgren) I noticed the sentence in which they told us about the costs of interest the company is facing. They said that last year Woolworths paid £8.8 million in interest on borrowings of £243 million. This year they have spent £18.6 million on interest on borrowings of £286 million.
The questions are
1 What is the average rate of interest the company paid last year?
2 What is the average rate of interest the company paid this year?
3 What is the company’s marginal rate of interest?
4 What is the link between interest rates and risk evident in this information, remembering that Woolworth is a company in trouble?
Fascinating stuff!!
If you want to check your answers with me, just let me knkow!!
Duncan Williamson
Oil Prices Again
This is a Simulcast
They are at it again: those people trying to convince us that the financial markets are working efficiently and fairly and have nothing to do with speculation.
So there was a financial “expert” blethering away on BBC World yesterday: he was EXPLAINING why the Dollar has surged and why the Pound is falling in value. He didn’t mention speculation in this context and yet we all know that 95% of all deals in foreign currency are to do with speculation.
Then this Expert said that because of the “... collapse of the oil price ...”. I must repeat a post I made a couple of weeks ago when I talked about the language of the oil price. Why do they say the price has collapsed? By using the word collapsed they are suggesting that the high prices reached up until about two months ago were normal or expected or acceptable. When the oil price was surging from $90 a barrel to almost $150 a barrel, they said the price was unsustainable ... because of speculation ... because of the disequilibrium of supply and demand. All nonsense of course: it was all because of ill informed speculation.
I proved with the example of the cutting of production by the UAE for annual maintenance having no effect on prices that supply and demand had nothing to do with the oil price.
So this expert did his best and he mentioned a number of possible factors: interest rates in Australia, the need for changing interest rates in the UK, collapsing oil prices, the threat of recession in the UK. All laudable words and much of it pure drivel. I keep meaning to make notes of the names of these experts so that I can name and shame but I think I am always just overawed at their bare faced effrontery. One thing you should notice is that the BBC doesn’t use the same non BBC expert very often. Wonder why?
DW
More on Oil Prices
A simulcast
I have been getting no responses to my questioning of the rises in oil prices over the last year or so. I have been questioning the sentiments behind the price rises for almost the whole of the year: not just a bandwagon. Here are extracts from an article in the FT from 4th August. I think it is telling for two reasons:
- language used
- the reasoning and its acceptance
The language used in the article reflects my concerns in my previous Blog entry on this subject: that is, the journalist is worried about falling prices; oil prices plunging and falling prices amid concerns over the global economy and its performance. Where is the hysteria that accompanied the stratospheric rises that the world suffered from as speculation fed the rise in crude oil prices? Nowhere!
Probably more importantly comes the reasoning behind the price rises: take a look.
This is what they say in the article, included here verbatim:
- Other factors pushing down oil prices included higher supplies from Opec, which mainly reflected Saudi Arabia's decision to boost its oil production to the highest level in more than 25 years.
- Some traders also expressed doubts about the strength of Chinese consumption, saying it had been artificially boosted by stockpiling ahead of the Olympics.
- However, traders warned against calling the end of the oil rally, since prices have oscillated between $130 and $120 for the past 10 days without a clear trend emerging.
These speculators who have probably traded misery over food prices and billions of dollars over the last year as they raped the world are now hiding behind falling prices but no one is pointing the finger at them. Except me of course.
From Oil falls as fears for growth intensify
Duncan Williamson
