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The reason why food or any product in UK is overpriced is because of exorbitant taxes.
The restaurant owners are known to cut corners because there is very little left after paying for:
- Premise rent
- Business rates
- Licensing fees
Let's take another example how can a Laptop costing $999 in USA is priced at £999 in UK when
1 GBP = 1.2669 in dollar terms?
This all again comes back to House price inflation and we can keep talking about this until the cows come home. Increased Housing supply is not going to solve the problem if we do not address the demand aspect combined with the associated housing reforms requirements and tax changes.
The problem we have had is numerous people with academic / bookish knowledge in governance have taken incorrect decisions. There actions have been detrimental to the society with no repercussions on the individuals.
Just to name a few examples:
- Over the course of three years, a chancellor sold 401 tons of gold from the Treasury's total of 716 tons at an average price of $275 an ounce. Today's price is $1688 an ounce and no process followed at the point of making such a decision other than in the name of diversification.
- another Chancellor increased Stamp duty on investment homes stating it will cool the market. If there are no transactions how much more revenue has been collected by the additional 3% surcharge? Yes, I shall give 0.25% for cooling the market.
- In the name of Austerity lot of tax exemptions were removed and welfare benefits were cut.
- A PM called for a referendum without having a plan B and upon defeat decided to run away from the problem for someone else to take care of it. This not only created confusion and chaos but also undermined our character as a nation.
- Another PM whose heart was to remain in EU was asked to negotiate BREXIT. It was like somebody sitting in a Vegetarian only restaurant and ordering a Chicken dish for a meal. However, the person did not want to leave the restaurant because either was hungry or it was against their principles to walk out.
I remember somebody telling me once that a Government is always there to extract maximum out of people with minimum input to the welfare of the people. The Elite rich never pay more taxes as they can afford tax consultants who can legitimately reduce taxes. These very tax consultants are usually the policy advisors to the Government.It is the common man or the salaried person who ends up paying more taxes.
Kindly accept my apologies for any misunderstanding.
When I stated 'a privileged situation' what I meant was being in an advantageous situation. It was just a general opinion of many people that a person who has a roof over his head is at an advantageous situation.
'Most here will own their own homes'
It is always good to be in such a privileged situation.
The other side of the coin is that the not too good schemes such as Help to Buy or Shared equity. These schemes were mostly made to support the builders and were marketed as supporting the First time buyers.
Below is an extract of one of the schemes
' With a Help to Buy: Equity Loan the Government lends you up to 20% of the cost of your newly built home, so you’ll only need a 5% cash deposit and a 75% mortgage to make up the rest.'
Are we not putting the first time buyers into a vulnerable situation by allowing them to own a home? How many of these vulnerable buyers would survive a 15% prolonged correction (which is normal in any asset class) in housing ?
Is there a one good reason why people should be allowed to take more debt with so little equity? Should you allow somebody to start running even before they can start to walk?
This is just one example of distorting the asset pricing by siding with the elite class such as Builders. Land developers,etc.
Today we are in such a situation that we cannot allow either the Housing market nor the stock market to come down. The reason for this is all our pensions, ISA, Investments and Govt debts are so much dependent on these markets that just a sneeze puts jitters in our society.
This has led to global institutions busy in reinflating the assets at any cost.
'prior to Blair property never moved for 10 - 12yrs'
I slightly disagree as it was moving in relation to the economy.
Regrettably post 1997 we have had terrible Housing decisions made by subsequent chancellors.
The Key person (Teachers, Health and Fire Service) Housing assistance combined with relaxed immigration distorted the housing market. BTW how many of these Key person are still around in the same profession is questionable?
It was a toxic mix of above factor with 100% mortgages led to Housing sector being used as a cash point. This led to also an extensive increase in 2nd homes, Buy to let market with almost no limit lending.
Banks were willing to lend because the house values were being artificially increased by the above policies. Additionally the Banks never kept mortgages on their books by packaging and selling it to global audience under the disguise of derivatives.
Packaged derivatives was the major cause of 2008 crisis which the global Govt and Bankers mis-led people as 'Credit Crunch' and took us on the path of QE. Even today the packaged derivative mess is still lingering in the background as nobody exactly knows how much is in circulation. This mess has been kept under the blankets by huge amounts of QE which has stopped the bleeding but has not healed the wound.
Another well known example is the introduction of REITS which is another form of derivative. Even in the latest COVID 19 crisis the chancellor had to suspend the housing market transactions to stop REITS redemptions. The reason is simple if you can't value the underpinned instrument(Housing) of REITS you cannot arrive at a NAV or an exit price.
The above are just a tip of the iceberg and I can go on and on with numerous examples. The problem we have is that the Govt needs to take some tough decisions on Housing which will not be people friendly especially the elite class. However, I don't think anybody in governance will ever have the appetite to take tough decisions.
In my opinion our housing problem cannot be solved by:
- By building more housing ( we don't make land anymore so it is in limited supply)
- Converting Green belt ( will not assist unless businesses relocate)
- Converting houses into block of flats ( Vicious cycle as quality of life decreases and more pressure on essential and basic services)
- Leasehold reforms by capping management or Ground rent fees are required ( Cash generating machine with minimal investment)
- Immigration cap is essential to lower the demand for housing ( COVID 19 lock down has shown us that businesses can sustain even from a distance.
- Tax loopholes need to be plugged
- Interest only Mortgages should be banned
- Long dated Mortgage terms (5/10/20 years) are required to stabilize the price escalation
Increased Housing supply is not going to solve the problem if we do not address the demand aspect and the associated housing reforms requirements.
Only one word for all this is 'Shambles'.
I thought Brexit was enough but now a big laundry list:
- Payment holiday scam
- Buy to let scam
- BREXIT negotiations
- Unlimited QE
Wondering why is FTSE at 6484 unless there is an anticipation of a sterling devaluation?
'Keeping it simple, buy low, sell high, question anything which seems to make you want to do otherwise.'
Fully agree with the above - always book profits and keep some powder dry to accumulate at lower levels.
We should always remember that the markets take Stairs while going up but take elevators whilst coming down.
Congrats to those who made money in the latest leg up.
In my opinion the worst is still not behind us in terms of economy, unemployment or even bailouts. The only reason I see this coming up this much is due to the Central bank guarantees, QE or a potential takeover bid which we are unaware of. The QE does not heal the wound but only stops the bleeding to ensure less fatalities.
The bottom line is
'Banks don't make money by holding them but only by distributing in the wider economy and earning a return on it.'
Similarly asset valuation means very little if you do not have an ROI and a reasonable velocity of money. It's like sitting in your car idling without putting the car in drive mode.
Being asset rich and cash poor can not bring economic growth to support these share prices.
I totally agree with the Lloyds operations being a mess. The IT consultancy companies are milking it for years without improving the operational efficiency. Lloyds do have some obsolete assets of Halifax, BOS,etc which nobody knows the correct value.
It's similar to NHS wasting £400 million on an IT platform which never took off.
Stock market is all about patience.
What goes up comes down and vice versa what comes down does go up.
There is a big resistance for Lloyds at 31.93 and a gap fill to be be completed around 27p.
The current market is a trader's market and not an investor market. In a trader's market you need to get in and out quickly.
I would be a very rich man if I knew what is round the corner in terms of markets.
Good luck with your investing.
In my opinion LLoyds is better around 27 ish.
Lloyds is more diversified and so better to mitigate economic shocks. Post BREXIT Lloyds is a ripe candidate for takeover.
Your initial input cost is higher for Aviva(250p) and the near term margin squeeze would be there due to economic downtrend.
If dividend is the only criteria than Aviva might be better for the next 2 years.
'The real value of money has increased - fiat currency has decreased and purchasing power with it - around 40% diff over 20 years. '
Interesting to note that the purchasing power has decreased by 40%.
In comparison to 2000 we are in a very bad shape today. However, the FTSE was around 6400 in June 2000 and is currently at 6076 which is only 6.25% decrease. Should we say a good work done in putting wool over the common man in the name of index re-balancing, QE and numerous bailouts?
I totally agree with your point of consumers not spending much.
Historically west has always consumed and east has always produced.
Now east has been still producing and reaping the benefits of selling it to the west. However, this has led to higher input cost leading to reduction of margins in the east.
Now for east to continue growth either of these things need to continue:
- Increase sales price thereby profitability
- Increase sales volume which would offset the reduction in profitability
In my opinion neither of the above is possible in the western world due to below mentioned reasons:
- Surplus funds are at record low levels due to higher debt levels
- Higher debt levels have become new norm due to low interest rates and more accessible credit
For better understanding let's look into the period from 2000 to 2020:
- Wages has increased
- House prices have increased
- Living cost (Food, transport, Groceries) has increased
- Debts have increased
- Savings have decreased
- Real value of money has decreased
In my opinion we had more surplus funds and a better standard of living in 2000 rather than in 2020 in-spite of having higher salaries.
Spot on that QE has never solved any problems other than giving a bit of a lifeline.
We are now in a new world of QE wherein Furlong and direct checks to individuals is being tried.
If a business does not have at least 6 months of their normal expenses in cash reserves than they are going to fold down irrespective of how much business loans or Furlong schemes is provided for survival.
Therefore, it's a cache 22 situation should the govt support businesses which will not survive or allow them to scale down or close down?
Austerity was too little and too late. We need to reform our welfare system as it is too easy to access and too many loopholes for people to manipulate.
A few years ago a reputed professor was stating how he lost his 25 year old daughter once she went into the DWP to claim an Income support. The daughter was told in the DWP offices how she could obtain various benefits including a house without working. This led to her being a couch potato and not wanting to work at all as the benefits amount was quiet higher than any potential employment income.
'You won't get anywhere with monetary policy - the only way to change the economy for the better is to shift a few million people from the cities into more rural areas where they can become productive again, quarrying, making things, and generally working a 35 hour weeks and enjoying their free-time to the fullest extent.'
I fully agree with the above that we should stop London Centric infrastructure developments and give incentives to businesses to relocate.
It's also high time a Land reforms Act is passed especially towards Lease agreements which is a proxy to being a cash cow for the rich people.
We are not going to solve housing issue by converting green belts or by building new block of flats. What we need is adjust demand & supply by relocating businesses.
Thought for the day if I may is that 'We don't make land anymore'.