I am in the market for saving some money - a monthly saver. As usual, I shop around a bit, getting interest rates from a number of different places. I popped into Halifax on the off-chance they have a good rate (possibly trying to encourage savers, given their financial problems of late) and they suggested I could get a better rate if I chatted to one of their FA’s. And the guy was an idiot - or rather, the advice that he gave me was written by an idiot. Quite frankly, if anyone who does not think about finance very much acted on the advice given, then there would serious risk of mis-selling.

I told the guy that I simply wanted a safe place to save some cash for a rainy day. I currently have a range of investments, covering a wide spectrum of investment classes, including international and national shares, commodities, FX, property, bonds and cash equivalents. Luckily, I have not been hit by the current economic problems, as I chose fairly carefully. In fact, in the some of the shares that I own, I have made nearly 50% in the last 6 months and in other investments, I have not lost or gained very much at all. However, now I want to save some cash for reasons that I will not go into here. But it was explained to this chap. Another thing that I explained to him was that tax was not an issue, as it could be in my wife’s name who does not pay any at the moment, so ISA’s are not necessary.

What was his advice? I should invest in a stocks and shares ISA with the Halifax, which would be fine as I could tune my attitude to risk by choosing anything from “low-medium” to “high” risk. Um, did he not listen to what I said? However, the most ridiculous thing he said was related to the risk ratings of investments.

Apparently, funds of UK bonds are always low-medium risk, whereas individual bonds, individual UK equities and funds of international equities/bonds are medium-high risk and individual international equities are high risk. And that assessment is independent of market conditions at the time of purchase! When challenged on this, he simply repeated the mantra, explaining the Halifax Pyramid Of Investment Risk to me once again, saying that if anyone invested and it made a loss, all they needed to do was wait until the market recovered. He completely did not understand that timing is everything in this game and that if he had given this advice to someone more vulnerable at the wrong time, it would result in heart ache and misery.

The second thing he said to me was that because I was a monthly saver, it didn’t matter if the market went down, as the following month’s purchase would be cheaper as the market had gone down, explaining that I would still make a profit if the market went up again. Again, completely not appreciating the need for timing.

The dodgy advice about what is and isn’t risky was clearly from the Halifax itself - but is the not listening to what I asked for from the Halifax or just that particular adviser? Filling out an online questionnaire resulted in the following:

Q: Compared to other people, how would you describe your typical attitude when making important financial decisions?
A: Very Cautious

Q: I am looking for high investment growth. I am willing to accept the possibility of greater losses to achieve this.
A: I am uncertain

Q: I would prefer small certain gains to large uncertain ones.
A: I am uncertain

Q: I want my investment to be safe even if it means lower returns.
A: I am uncertain

RESULTS OF YOUR ATTITUDE TO RISK
Your answers indicate you have a MEDIUM attitude to risk.

You would be likely to accept moderate risk with your longer term investments for growth or income if this would give you the potential for higher returns. You would probably feel comfortable with an investment that includes a high level of Stock Market linked investments, including some overseas shares. You understand and accept that the value of your investment may go up and down and that on final encashment you could get back less than you have invested.

Um, I thought my attitude to risk was either very cautious or uncertain? So there appears to be at least some institutional bias for me to put my money into shares etc., but perhaps more importantly, the FA probably gets little or no bonus for selling me what I want - a cash savings account. After all, they get “unlimited” earnings if they perform well:

Bonus Scheme
The bonus scheme gives you unlimited earning potential and is made up of several elements that are directly influenced by your personal performance.

And what is worse is that it was explained to me that because he was a FA tied to a bank, he was salaried, and therefore his advice is less likely to be swayed towards the higher commission produce that an IFA might suggest.

So Halifax, this is what I did with your advice when I got home:

Faced with unbelievable rises in train fares - from £102.90 to £252.00 - sometimes I do wonder if officials are delusional. According to Michael Roberts, chief executive of the Association of Train Operating Companies:

commuting by rail was considerably less expensive than commuting by car – even allowing for falling petrol prices – and journey times are usually quicker too

Never have I known the situation that he describes.

Using the train, it costs me £20 return to work with a monthly season ticket and a whopping £44 pounds if I get a day ticket. It costs me £12 in petrol per day if I drive, and I have a large petrol car. Ok I have to insure it, at a cost of £80 more per year than I would need anyway (the extra needed to commute). That would make commuting by train a whopping £1920 more expensive than driving. OK, some might argue that I need to buy the care. Fair enough - apart from that I need to buy one anyway, as quite frankly, public transport is a disaster - especially when transporting a family. So it will be the difference between the depreciation if I did and didn’t commute. Since the car only cost me £6000, it’s fairly clear that £2000 extra depreciation per year is a tall order - I fully expect the car to last at least three years even if I did the extra 120 miles per day commuting and it will be still worth something. For arguments sake, I reckon it would depreciate £1000 per year more if I commute with it. That still gives me a net gain of £920 per year, which is more than enough to pay for servicing and maintenance. In fact, I reckon I would be £500 per year better off if I commuted by car.

When will officials, and MP’s, realise that public transport in this country is not cheaper than driving? 

It reminds me of the conversation I had with Chris Grayling MP in 2006, who was then the Shadow Transport Secretary. After listening to a speech from him where he spouted nonsense about how trains were cheaper than cars, I put to him my particular example. For the particular journey I had done that day, it was cheaper by a factor of two to hire, insure and put petrol into a car than it was get the train (as that was how I got to this meeting). And it took much less time - by a factor of two. He did not listen to what I had to say - he replied stating that I had to buy, insure and maintain the car as it wasn’t only the petrol I had to take into account. He went on to inform me that because the trains went from city centre to city centre, it would take considerably less time. Um…. let me repeat…. to hire, insure and put petrol in a car was cheaper by a factor of 2! The hire company are making a profit from my hiring it, so it must be even cheaper still! And my journey did not start or stop anywhere near a city centre, adding a considerable time to my journey, as the public transport to/from the station (buses) are always much slower than the equivalent journey by car. All I can say is, God help Work and Pensions if he is still there in a year or two…

It drives me wild that politicians and officials are simply not willing to admit the truth - that travelling by train is too expensive in Britain today. 

But why do I get the train? Driving on roads (the A12) whose capacity is considerably smaller than the volume of traffic is much more unpleasant than being crammed into a train, whose capacity is considerably smaller than the volume of passengers. The stress of driving into and out of London is simply not worth saving £500, or even £1000, per year.

According to Cameron:

“To pay for Labour’s spending would mean substantial tax rises over and above those that the Chancellor actually told us about… If we are to avoid substantial tax rises in the future — tax rises that will hamper the recovery — we must slow the growth of government spending.”

What is wrong with this so-called opposition. It should not be about “slowing the growth of government spending” but accelerating the cuts in government spending. Using the terminology of “slowing the growth”  assumes that there will be growth. Why make that assumption? Government spending was £318bn in 1997 whereas in 2007 it was £549bn. Surely isn’t there room for contraction of government spending?

Why is the media so obsessed with Obama, when we have our very own election to worry about? Yes, the Glenrothes bi-election is today, which possibly will signal the end of the Brown premiership and bring about a general election, yet the Torygraph has a dozen “comment” articles about Obama yet only one (very short) article on Glenrothes.

With literally hundreds of BBC reporters in the USA, and I am sure Brown was aware of this many weeks ago, the bias in coverage is easily explained. What were the beeb thinking of? I even saw one interview with the great grand daughter of the first self made black American millionaire. Like she had actually done anything in her life that was interesting, or more importantly, had anything to contribute to the debate.

And as I said above - Brown must of known what aunty beeb (and others) were up to. And that is why he chose to have the election 2 days after the USA election. This debacle is yet another example of how Brown is perfectly willing to abuse his powers for party political gain. The sooner we have fixed term parliaments and the decision of when to hold bi-elections made by the Electoral Commission the better. The primary concern about when to hold elections should be to ensure the playing field is as level as possible with respect to external events.

But this attempt at a media blackout may backfire on Brown. It means the campaign agenda is no longer set by the national media, but by what happens on the ground. And the SNP are excellent at these kind of campaigns. Let’s not forget, if Brown looses that election, the media focus will have done a full circle and have its sights firmly aimed back at Brown.

I worry about what the government has in mind when it says it wants compulsory sex and relationship education in schools for all children, as young as five. It has nothing to do with children learning about their bodies, or about reproduction, or contraception. These are all facts. I do not want to stop or and I do not have a problem with teachers telling children the facts. And access to contraception at 13 has got to be better than being a mother at 14. Pragmatically, a certain and perhaps increasing number of young teenagers will have sex and it is better for our society, the teenagers and their parents to ensure that sex is safe from a pregnancy and disease.

The thing that I worry about is the relationship aspects to these plans, or rather the state’s definition of a relationship. Apparently, sex will be taught in the context of a loving and caring adult relationship. Laudable, I am sure. But, and there is always a but, 16 year olds in law are not adults. By all means, tell the teenagers that sex before the age of 16 is illegal. This is a fact. Don’t tell them that sex is “best” or “better” or any other opinion when it happens within an adult relationship. And why should it be loving, or caring? Why should one night stands be any less acceptable, from a factual basis, than a loving relationship? In telling children at school that sex is best when within an adult loving relationship, we are using the dogma and opinion of the establishment rather than fact to educate our children. And that worries me.

On a personal note, I happen to believe that sex within an adult and loving relationship is an ideal situation. From a pragmatic view, instilling this into our youth could reduce the teenage pregnancy and STD contraction, which has to be a good thing. And in a large number of parents, it is clear that they are either unable or unwilling to address sexual health and relationship issues successfully themselves. But what right does the state have to define a relationship? What right does the state have to indoctrinate our children with dogma? Why is it not the parents job, whether successfully or not, to teach their own children about the ways of the world?

For me, the breakdown of society as we knew it and the collapse of the church as a power in the community are inextricably linked. The sex education that the government is suggesting should happen in schools was indoctrinated in society by the church in years past. The question we must ask now, is that are we prepared for that void to be filled by the state or would we rather take our chances without it?

I wish I had not come back. I learned today that our incompetent Labour government, not happy with 100 or more separate tax increases, of plunging our economy into recession, of presiding over a massive banking crisis, of pissing billions of our money down the drain, of all the lies, backtracking and blaming the Tories for their own failures, they now want to plunge the country into economic ruin for decades to come.

I am utterly speechless. I cannot believe that the governing Labour Party are so vindictive and certain of their own demise that they are willing to sabotage the country so that the incoming Conservative government will be able to do nothing but increase taxes. Not happy with bankrupting their own party, they now wish to do so to the country they govern. They know they will never win the next election, but maybe if they force the Conservatives to increase taxes at the same time as reducing spending, they might win the one after. Never did I expect even Labour would go so low as to drill holes in the lifeboats so that no one would survive to bear witness to the crew’s failure.

Just look at this graph:

Apparently, the extra spending will come from borrowing because Labour has paid back the debt’s taken out by the Conservatives. But they only did it by following Conservative economic policies! Since they abandoned the prudence invented by their arch-rivals in their second term, they borrowed it all back again, and we are now at the point where we were in 1997! And these figures do not include the recent bank bail out, to the tune of £500bn! 

In the last decade I have grown to dislike and even detest Labour and all they stand for. I am now hold them in complete and utter contempt, disgusted by their lies, vitriol and incompetence. How dare they do this to the country! Do remember, it was only last week that Brown and his puppet Chancellor uttered the words “The age of irresponsibility must be ended”.

A few million here, a few tens of million there. The bonuses earned by our bankers are a King’s ransom for some, but chicken feed for the banks. Gordon Brown, as it is him that is behind this fiasco and its “rescue” (and not his Darling puppet), has insisted the banks should not pay “cash” bonuses this year to their executives. But the bonuses are chicken feed. They have not caused this problem in any way - the money that that the banks have lost is trillions, not hundreds of millions. Not even billions.

So what has actually caused this problem? Not enough regulation perhaps? Apparently, Brown has been calling for Worldwide regulations for years. Bullshit - as is shown in his Mansion House Speech where he calls for the exact opposite. Despite Brown’s talent for being economical with the truth, is more regulation the answer? 

I would say, and so would a number of others, is that the problem was that banks have been lending to people who cannot service the debt. They have been lending to high risk individuals - according to the BBC this morning, even those without a job. Under whose bidding? Well, Gordon Brown’s, of course. In his pursuit of equal opportunities for all, whether it’s in the best interest of those that are given the opportunities or not, Gordon’s economic policy, far from allowing the practice of it, has been actively encouraging lending to high risk individuals. It’s everyone’s right to own a house - after all, one can extract more tax from the population if more of them own a house.

And guess what the other string of these new proposals to “help” the banks? Yep - in order to accept the government’s money, the banks have to increase lending to those without very much capital (i.e small businesses) and individuals who wish to purchase houses (in a market that is currently in freefall). The root cause of this crisis - a large and sustained increase in access to credit - is the very policy that Gordon is attempting to sell to the world as the fix!

And what about that regulation? Has there been a failing in regulation? Perhaps - if banks were not involved in the practice of buying and selling packaged up debts, then the good and bad debts would not have been mixed together and there would not be the same crisis in inter-bank lending. If the practice of consolidating debt was banned, those banks that did not purchase bad debts would be insulated. Whilst there would still be a crisis, as the lending in the first place would still have taken place, the banks that only traded in “good” debts might still be able to borrow money. Perhaps better regulation could have reduced some of the severity of the crash, or changed the nature of it, but regulation alone is not the answer.

The crux of the matter is that banks need to go back a few decades and reduce access to credit, so that those that can service the loans are the only ones that are lent to. But of course no politician - even those in the Conservative Party - has the balls to tell the poor that they can never own their own home. So I worry about the nationalisation of the banks - with such large shares of the banks, can ministers stomach the one thing that will stop a crisis like this ever happening again? Politician’s imply they want to punish the bank’s executives for taking too many risks, but the real risk of the last decade was lending to the poor.

Update 15.06:

It appears that my hunch of Government’s not understanding the route of the problem is correct. And it seems that I was also correct about ministers not wanting to leave well alone, content only if they can micromanage from the bank’s policy so that it meets their own agenda. You see, another condition of the money is for the bank’s to return to lending at the 2007 levels. Labour will not admit the fundamental problem was caused by lending to those that cannot afford it.

According to the BBC, Kent CC has around £50m in the failed banks of Iceland. According to the 2007-8 budget statement of Kent CC:

At 31 March 2008 the Council has earmarked and other capital reserves of £60.3m as shown on page 20. 

This does not look good. Has Kent CC really put all of their eggs in one basket? If so, are Kent CC breaking government guidelines, where capital should be spread around amongst institutions? 

And there was me thinking that Conservative Councils were supposed to be competent…. let’s hope Colchester or Essex isn’t in a similar position, although Colchester is currently run by a Lib-Lab coalition.

** Update

It seems that they have not put all of their eggs in one basket, but the following nonetheless does make for sorry reading:

 Investment Strategy  

 The main aspects of our investment strategy will be: 

 7.19 Diversification 

 Up to now all of the investments made have been in cash based investments.  To give the opportunity to add to returns last year we introduced new asset classes into the portfolio to give the potential for increased returns.  With the potential for increased returns there is inevitably an increase in the amount of risk which we will take.  We intend to control the risk by: 

  Diversifying the investments made to take a number of positions and seeking to make investments in uncorrelated asset classes; 

 Use of pooled funds rather than direct investments; 

 Comprehensive due diligence being undertaken on any new investments made; 

 Allocating only a small part of the total portfolio to higher return, higher risk products; and 

 Approval by Members. 

To date we have not used any non-cash investments but we need flexibility moving forward. 

 

7.20 Types of Investments 

The available asset types at our disposal will be:  

Cash deposits – less than 365 day deposits with banks and building societies;  

Callable deposits – less than 365 day deposits with banks and building societies.  As at 31 December 2007 these stood at £117 million; 

Callable range accruals – over 365 day deposits with banks where the rate of interest paid depends upon LIBOR staying within a pre-arranged range.  We have undertaken two such investments worth £10 million; 

Money Market Funds – with Butlers support the JP Morgan Liquidity Fund is the preferred vehicle, but we have never used it as rates have not been competitive and fees are payable.  We also monitor the Goldman Sachs Liquid Reserve Fund and the Fidelity International Cash Fund; 

 Fixed Income and Corporate Bonds – a number of pooled funds exist and these would be considered with advice from Butlers; 

 Property – through the Superannuation Fund we have considerable experience now of indirect property investment via pooled funds.  These are also suitable for treasury funds.  Included in this category would be investment in infrastructure funds; and 

 Absolute return products – many leading investment managers now offer products targeting an absolute return, such as say RPI +3/4/5%.  To achieve such returns the fund manager invests in a range of underlying assets.  Again this type of investment is available via pooled funds with relatively small investments being permitted. 

I am surrounded by 10 people, all of whom are asleep. It’s 5.20pm.
And that says it all about commuting. Faced with a reality of loosing 2+ hours per day travelling, most people prefer to sleep for 2 hours less than is needed and “catch up” on the train. This cannot be healthy, and as since this whole business is new to me, it is surprising.

I can certainly think of better things to be doing with my time, but loosing sleep is not my idea of fun. There has to be a better way….

In the last 10 years, we have reduced the public sector debt, from 44% GDP to 37%.

Gordon Brown, 9.50am Sunday 21st September, BBC1 Andrew Marr Interview.

Taken from the Office for National Statistics. Isn’t it interesting that the only time that public sector debt has gone down in the last 10 years has been when Gordon Brown was following Conservative economic policy. From 2001 onwards, it has soared to beyond the starting point.

Gordon Brown, you are a liar, coward and fraudster.

I am listening to Brown talking about the financial crisis on the Andrew Marr Show this morning. Apparently, Brown was right all along but no one would listen. If only those pesky Americans had listened, he could have steered the world away from the current financial crisis. Apparently, it’s all America’s fault and it is a global problem. Oh, and it was much worse when the Tory last ran the country.

But isn’t it strange that this is the first time that he has mentioned the American’s not listening.

But more importantly, strange that he did not try to stem the levels of debt, both public and private, in the good years. Strange that he increased stealth taxes over his 10 years of tenure in no 11 by the equivalent of an increase in income tax of 10p in the pound. Strange that he was more than happy to ride on the “end of boom and bust” mantra, that it was “the longest period of expansion in the 20th century” or the longest period “on a quarterly basis” for 100 years, and then for “250 years” (even though that these claims are not true) . Strange that if the situation is so perilous, after all that increase in taxes and borrowing, he can commit us to a £1bn scheme to fund nursery places for all 2 year olds (when the current commitments for all 3 year olds cannot be met). All of these things, and more, he does and did have direct control over.

This current line of America not listening: what utter crap.

Brown you are a liar, a coward and a fraudster. You deserve everything you get.

Apparently, Brown will/has promised free universal nursery care for all 2 year olds. When my wife recently called the local nurseries to enquire about a place for our 3 year old - who already is supposed to have a free place according to the government - she was laughed off the phone. You see, to get a free place, you need to have been registered for at least 1 year. For the popular nurseries, that increases to 2. It seems that the waiting lists are at least three times the size of the number of places, indicating a dramatic and systemic shortage of spaces.

Such commitments then, for free nursery care for all 2 year olds, are false. Everyone who has a child, or knows someone who has a child, is fully aware that such commitments will never come to pass. If politicians, Brown and his party included, hope to renew the public’s faith in politicians, then they need to understand making headline-grabbing policy announcements is not how one should run a country if the existing policies cannot be delivered.

I am suspicious of Brown’s personal intervention - where clear rules on competition will be bent in order to gain some short-term political advantage. Indeed, Brown’s spin doctors were very keen to associate him with the “no loose” situation. But no one has asked how will a bank the size of Lloyds-TSB-HBOS will work in some more stable future. But I digress - the interesting thing here is the politics of the situation.

A bank with a large Scottish work force on the doorstep of Brown’s constituency, and more importantly, the constituency where there will be a by-election in a few weeks. It seems perfectly understandable for Brown to want to associate himself with a rescue of one of Scotland’s largest private sector employers, especially when large numbers of the employees live in the commutable town of Glenrothes, which is exactly where the by-election will be. It appears that there are plenty of assurances that jobs won’t go in Scotland - indeed a clause has been “inserted” to protect Scottish jobs:

The enlarged group will continue to use the Mound (its Edinburgh HQ) as its Scottish headquarters, will continue to hold its annual general meeting in Scotland and will continue to print Bank of Scotland bank notes. In addition the management focus is to keep jobs in Scotland.

Yet the merger would certainly result in redundancies. It does make sense - where is the saving if you employ the same number of people? The Halifax win of HBOS, of course. The Labour MP for the region, Mrs Riordan, is right on the ball - thousands, if not 10’s of thousands, of job losses in a town the size of Halifax will have a drastic effect indeed. However, I heard her today on the Radio 4 evening news ask for a similar commitment of no job losses. Hard luck dear - there is no by-election in the area and it is not in the Prime Minster’s or Chancellors doorstep.

So what are the long-term effects of this less-than-little deal that Brown and Darling have been so desperate to associate themselves with? Well for a start, there will be 10’s of thousands of job cuts, in Labour’s heartlands. Remember what happened last time a government pushed through such a level of redundancy in the industrial north? And we mustn’t ignore the anger that will appear in the backbenchers eyes when they wake up and realise Brown has shafted them to keep his own backyard in order.

Remember - it is no coincidence that Brown has associated himself with a deal that will temporarily boost the prospects of one of the major employers in a region where there will soon be a by-election, especially as he is from the neighbouring constituency. Short-term gain and long-term pain - as is usual with Brown. This time the pain will mostly be for Brown and Labour, although I do have a word of advice for Halifax staff: start searching for a job…

Stuck in traffic. Drove 20m in 20 mins. The last thing you want to see is people driving on the wrong side of the road in order to jump the queue…

Well Mr Vauxhall driver - caught on camera. And if you think you were trying to persuade everyone you were turning right instead of left, does anyone else see the same care in the photo below?

According to Channel 4 News, tomorrow the Government will announce their new policy on energy efficiency. Sorry for being stupid, but if they are announcing it tomorrow, why was it covered on the news today?

Perhaps my stupidity has something to do with not being in PR?

A rather abrasive title for a post, perhaps, but it comes from a conversation that I had with someone on the train this morning. An individual who works for a FE college in Essex (both shall remain anonymous) was telling me of some courses that he teaches in. Or rather, talking about the students who are studying for qualifications in the department in which he teaches - performing arts.

Apparently, most of the students are unable to perform and have little commitment to any eventual career in the performing arts. Only a few go on to study performing arts at university, fewer still at the well renowned ones. Those who do not go on to study to a higher level, yet stick with a career in performing arts, invariably end up in Butlins or on a cruise ship. A significant number of the students end up selling insurance, working in sales or admin, factories or agriculture - jobs where a qualification in the arts would at best offer no advantage, and at worse hinder the chances of employment. 

Many of the students arrive thinking they will be famous, most via shows such as X-Factor. The tutors, teachers and course managers know that the students are arriving with this false hope. They know that the vast majority of students will leave with a “vocational qualification” that will make them no more employable than one in strawberry picking. They know that the majority of the students are wasting their time. Yet the FE colleges are funded by the government to offer these courses. The college managers are perfectly happy to accept the country’s hard-earned cash in exchange for a qualification that offers very few tangible benefits. How the teaching staff keep motivated, given the person that I spoke to was so up-front about the shortcomings of the course, is beyond me.

But, after this conversation, I have some questions.

How many other courses are funded by the government, all in the name of keeping people off the official unemployment statistics? How much money is being wasted on training our teenagers in skills they will never use in their adult lives? How many schools are feeding teenagers with false hopes when they advise them to start these “vocational” courses? How much intrinsic bias is there in the education system, whereby education of any description is better than a job, regardless of the consequences? Would it not make more economical sense to have vocational qualifications that are taught ‘on the job’, perhaps by day release to FE colleges, rather than ones based solely at FE colleges?

As someone with the greatest respect for education, I believe in educating oneself for the sole purpose of personal development. But I have to question the effectiveness of the government’s policy on vocational education.

As a family, we are safely installed into deepest darkest Essex and we now have an internet connection again! More later on life in the UK - guests will arrive soon.