"Pirates' Britney fears"

From The Metro:

BRITNEY SPEARS is being used as a secret weapon... to scare off Somali pirates. Her hits are blasted out to deter kidnap attacks, merchant navy officer Rachel Evans revealed.

Second Officer Evans, who works on supertankers off the east coast of Africa, said:

"Her songs were chosen by the security team because they thought pirates would hate them most. These guys can't stand Western culture or music, making Britney's hits perfect."

... Steven Jones, of the Security Association for the Maritime Industry, said:

"Pirates will go to any lengths to avoid or try to overcome the music.

"Though I'd imagine using Justin Bieber would be against the Geneva Convention."

The ratio of exports to population, GDP and per capita income

A throwaway phrase which many people use is that "Great Britain is a great trading nation", but on closer inspection, how true is this any more?

I downloaded all available figures for populations and GDP from the CIA Factbook and exports-to-GDp ratios from the World Bank (that last one is hours of fun), bunged them into Excel and created some charts.

All horizontal axes are logarithmic. The coefficient of correlation for exports-to-GDP is negative 0.13 if you use absolute figures and positive 0.04 if you use logarithms, so to all intents and purposes, this is zero.

Unsurprisingly, there is a slight negative correlation between population size and exports - if you have a large population then there will be a much wider range of producers and consumers in the same country, but if you have a smaller population, you tend to specialise in fewer things, so if you are world leader in bananas or oil or anything else, you have to export most of your output to be able to buy stuff which other people produce cheaper or better than you.

Similarly, there is a fairly high positive correlation between per capita income and exports - the richest people/countries are those who specialise, which in turn drives exports; and people/countries who export more are probably richer (chicken and egg).

And how does the UK score?

It's only fair to compare like-with-like, so I sorted the data three ways, in terms of descending population; per capita income; and GDP, and then compared the UK's exports with the next three countries above and below it in the rankings. The UK scored distant fourth, distant fifth and distant second equal respectively. Which hardly makes us a "great trading nation" any more.

The figures for the six countries with exports-to-GDP ratios over 100% are misleading as they include a lot of purely paper exports which are matched by equal and opposite paper imports, i.e. trades are booked through those usually small countries for tax, regulatory or subsidy reasons (lack of the first two and/or lots of the last) without anything physically actually happening there, i.e. the factory in PR China ships the goods direct from mainland China to elsewhere in the world but the Hong Kong intermediaries book it as a purchase and sale. These six countries are Hong Kong 'Special Administrative Region', Singapore, Luxembourg, Macao 'Special Administrative Region', The Maldives and Republic of Ireland.

So now we know.

TomTato

The BBC wrote about somebody who had successfully grafted a tomato plant onto potatoes, so you can get two crops from one space.

Bit of a problem though:

"It has been very difficult to achieve because the tomato stem and the potato stem have to be the same thickness for the graft to work," he said...

The firm said the plants last for one season and by the time the tomatoes are ready for picking, the potatoes can be dug up.

Well a fat lot of good that is then, if they only last one season. The extra hassle of the trial and error grafting them is probably not worth those few extra potatoes/tomatoes.

But this reminds us that tomatoes and potatoes are from the same plant family and are native to Central/South America, so sooner or later, they'll be able to splice the DNA together and make plants which will grow again and again or from seeds. (You'd have to be careful which up you plant the seeds though, if you put them in the wrong way up, you'll get potato flowers growing on tomato roots, which is worse than useless.)

The list of useful plants in that family is very long:

Perhaps the most economically important genus of the family is Solanum, which contains the potato (Solanum tuberosum, in fact, another common name of the family is the "potato family"), the tomato (Solanum lycopersicum), and the aubergine or eggplant (Solanum melongena). Another important genus Capsicum produce both chilli peppers and bell peppers...

Nicotiana contains, among other species, the plant that produces tobacco.

So in a perfect world, you'd have a plant which produces potatoes under the ground and tomatoes above it, with leaves which you can dry and smoke. Result!

Other useful plants which are native to Central/South America, although not in the same family, are cocoa/chocolate and coca.

Which all makes me think that life in Europe must have been pretty grim until they started importing these plants/products a few hundred years ago.

Europe/the Middle East actually only has one major useful native plant, wheat (and rye, barley and so on), which you need to make beer and pizzas.

The other plant which make life worth living is from Ethiopia (coffee), which is a bit closer to home, but they didn't even work out how to make it until a few hundred years ago.

Market Towns

From the BBC

The places with highest levels of life satisfaction tend to be larger than a small town but smaller than a city.

The happiest places of all, it turns out, are larger rural or market towns.

The government analysis suggests some of the benefits of market town living be "designed into" other communities. Among the official advice to ministers is the delivery of public services in ways which meet people's needs for social contact - fewer call centres, more real people, perhaps - creating thriving high streets and promoting volunteering.

Above all, it seems, the secret of market towns' high well-being levels is their sense of distinct identity, community spirit and perfect size - small enough for people to feel included but large enough to remain private.

To which the simple answer to all of that is: correlation is not the same as causation.

If you went back 30 or 40 years, market towns were often poorer than the big town nearby. People left them and crappy jobs to go and work in modern jobs in towns. In the early part of the 20th century, those that lacked a railway line were often very poor.

Then around the late 70s/early 80s, cars started getting cheap and reliable enough that many people started  buying houses in market towns, at first because they were cheap and then as they improved, because they were often more charming. New facilities like late-opening supermarkets and 24 hour garages meant that people could enjoy the benefits of the big towns while living in a rural setting.

So, that's where the rich often live now. In Ascot rather than Bracknell, in Alderley Edge rather than Manchester, in Warwick rather than Coventry.

Which is why you can't "design" market towns into main towns. Market towns don't have the unemployment problems or crime problems of large cities because the underclass can't get to live there. Someone in a house that loses their job for a long time will move somewhere cheaper.

As for "fewer call centres", what the hell? Call centres exist because they're efficient. Yes, it might not be as nice as walking into an insurance broker's office but people voted with their feet over that and chose the likes of Direct Line.

Private Property/Public Good. Discuss

I have been pondering the private property rights / public good argument, and I need your help.

Overall, a lot of things might be improved if private property rights were respected.  For example it would be reasonable for a houswife to take action against a nearby power station operator if his plant produced contaminants that dirtied her clean washing on the line. His pollution invades her private property and ruins her enjoyment of it, so she could reasonably request that he be made to cease and desist. This would apply whether she was an owner or a tenant.

But, in lots of cases the State pushes something through against local wishes on the basis of the 'public good', which is straightforward denial of property rights.  So HS2 for example would be a non-starter, even if it were privately financed. In other words private property rights could frustrate the ambitions of a major undertaking by the use of 'ransom strips' by some landowners.

Or would it? If we had universal LVT would it not be the case that once 99% of the land had been acquired for the track the last 1% would have a very high rental value that would exceed what could be earned by any other use than as a railway. The owner would be forced to sell by the unsustainable LVT imprests?   

In fact once the route was published all the landowners along the route would have the same LVT rating.  In other words LVT evens things out not only in favour of private property but also enables the construction of large national sized undertakings? The attempt to be the owner of the last ransom strip would not occur.  I am making the assumption that large undertakings like a railway are a Good Thing - if privately financed.

(In re an earlier posting, in passing I read somewhere recently that the bulk of the cost of nuclear power stations in the UK is regulation....?)

A Brief History Of Mallorca

From The Rough Guide to Mallorca and Menorca:

Southern Mallorca

Most of Southern Mallorca comprises the island's central plain, Es Pla, a fertile tract surrounded to the west by the mountainous Serra de Tramuntana and to the east by the hilly range that shadows the coast, the Serra de Llevant.

... although it may seem like a sleepy backwater, it was Es Pla that pretty much defined Mallorca until the twentieth century: the majority of the island's inhabitants lived here, it produced enough food to meet almost every domestic requirement, and Palma's gentry were reliant on Es Pla estates for their income...

This situation persisted until the 1960s, when the tourist boom stodd everything on its head and the developers simply bypassed Es Pla to focus on the picturesque coves of the east coast.

Inca and around

In medieval times, one of the few ways to escape the clutches of the island's landowners was to practise a craft and then join the appropriate guild. As early as the fifteenth century, Inca had attracted enough shoemakers to be become the centre of a flourishing shoemaking industry - and so it remains today with Camper's HQ and main factory-warehouse firmly ensconced here.

Muggers would like to know how much is in your wallet

Carol W emailed me this reader's letter from the FT back in May:

Sir, I read with interest the article “Retailers struggle to account for sales” (April 29), which focused on the continuing dilemma of how retailers report online and in store sales.

It is not only investors and analysts who need more transparency, however. Landlords also have a stake in better understanding where sales are transacted. Transparency benefits both landlords and tenants. If online activity is skewing the picture for like-for-like sales it is also impacting the value of rents...

We will get to the answers eventually. In the meantime, landlords could do worse than adopting a common approach in response to evolving new models of retailing. Ultimately, both retailers and landlords have a vested interest in ensuring that, between us, we maintain vibrant and successful retail destinations across the UK.

Ed Jenkins, Head of UK Retail, Real Estate Investments, Standard Life Investments, Edinburgh.

Munich

A line from "Highwire" by The Rolling Stones is "Another Munich we just can't afford, we're sending in the 82nd Airborne"

From the context, I assume they are referring to Munich's first claim to notoriety, The Munich Agreement of 1938, which "is widely regarded as a failed act of appeasement toward Germany."

The next claim is the Munich Air Disaster of 1958 in which seven Manchester United players and sixteen other people were killed.

Spielberg directed a film called Munich a few years ago, which is about The Munich Massacre, which was "an attack during the 1972 Summer Olympics in Munich, West Germany on 11 members of the Israeli Olympic team, who were taken hostage and eventually killed, along with a German police officer, by the Palestinian group Black September.

I'm not aware of anything nasty happening there since, but let's keep our fingers crossed.

Intergenerational risk and banking...

The Rt Hon John Redwood MP has been busy "considering the house price conundrum", explaining "why we have to live with high house prices", and even lecturing us "let's avoid a battle of the generations".  For today's thought experiment, we can conflate all three posts as follows:

For every new buyer suffering from the high price, there is a seller who may be trading down, taking a profit or benefitting from an inheritance, who should have more money to spend.  We need to see more housing transactions. They generate income for those involved, and usually lead on to work for builders, decorators, home improvers, furniture suppliers and the like.  [The baby bulgers] children ... will come to inherit the wealth their parents have built up.  They are already giving them money for deposits on homes.

Background

Let us consider two couples.  Couple A are 65 years old, retired, live in a 3 bed house the estate agent values at £100,000 and have paid off their mortgage.  Couple B, their son and daughter-in-law, are 30, and working and living with couple A.  They've scraped together £10k in savings when the Chancellor Help to Buy comes along.  Couple B decide to take the plunge and buy their home from couple A, who will continue to live in it whilst using the £100k to help provide an income in their retirement.  Couple B will put £5k down and spend £5k on professional fees and decorating.

Balance sheets before

Couple A
Assets: £100,000 house
Liabilities: None

Couple B
Assets: £10,000
Liabilities: None

Balance sheets after

Couple A
Assets: £100,000 cash
Liabilities: None

Couple B
 Assets: £100,000 house
Liabilities: £95,000 mortgage

Income statements before and after

Let us assume the banks are paying 3% per annum interest and lending at 5%.  Couple A's income has increased by £3,000 a year.  Couple B's income has decreased by £4,450 a year.  The banks earnings have increased by £1,550 and that's assuming the £5k spent on fees and decorating just circulates as cash.

What's the overall effect?

Apart from the obvious, Couple A are long sterling and sterling interest rates and sterling, while couple B are short the same trade.  Talk about generational conflict!  Provided couple B can keep paying couple A, through a banking system creaming off 2% per annum, they can all keep living in their home!!!

What would be a more sensible thing to do?

Drawing up a legally binding mortgage contract, secured on a property, is actually quite simple.  In our simple example, all sorts of intergenerational conflict (and care home fees and taxes) could be avoided by Couple A selling to Couple B on a 25 year fixed rate.  Of course most transactions aren't kept in the family and UK consumers pay the banking system to intermediate that risk, and when it goes wrong UK taxpayers prop it up.

And the point is?

The September MPC Minutes stated:

Since the spring, and after several years of stasis, activity in the housing market had been picking up and, on the basis of recent indicators, gaining momentum. Although still well below pre-crisis norms, monthly mortgage approvals had increased by almost a third over the past year ...  Increased housing market activity had the potential to support dwellings investment and spending on associated services, thereby boosting growth overall. And some rise in prices might provide a modest fillip to consumer spending and investment if, for example, the increase in collateral values helped to relax households’ and small businesses’ credit constraints.

This all gives use some insight into how the establishment thinks.  The more debt we all take out against their our houses the better.  The more house prices go up, the more equity we will have to borrow against, the more we will spend to keep things ticking and the more of our incomes we can all pay in rent to the bankers.  The more intergenerational interest rate risk we can all take on while we're at it.

But I'd be very surprised if the likes of MP's and MPC folk and other members of the governing classes had missed the trick of buying and selling direct to each other.  I mean, Peter Mandleson didn't did he?

Land banking

According to the Local Government Association, the total number of plots of land with residential planning permission is 400,000.

The land bankers (i.e. the large house building companies) bleat that they need to have a couple of years' supply in hand because it is so difficult to get planning permission. At current rates of 100,000 new homes per year that's enough for four years and I do wonder whether they also buy up four years' worth of bricks, timber and pipes.

But in their accounts they tell a different story, from Taylor Woodrow (link below) page 7:

Our landbank is an investment portfolio which is critical to our success and underpins the future performance of our business. We have continued to enhance the quality of our short term landbank by actively managing our portfolio: taking advantage of the attractive opportunities we are currently seeing at this point in the cycle and continuously adding value to our existing landbank.

But land with planning is only part of it. Let's take the top five house builders from here and look at how much land they own on which they hope to get planning permission aka "strategic land".

They publish the following figures in their annual accounts with varying degrees of fine detail:

Barratts
18,536 plots with planning, value £1,047m
11,400 acres strategic land = 59,800 plots, value £1,080m
Sales 13,663

Taylor Wimpey
65,409 plots with planning
Strategic land = 100,340 plots
Total value £2,051m
Sales 10,886

Persimmon
Landbank 68,200 plots, which they say is "6.9 years of output at current levels of supply"
Total value £1,496m
Sales 9,903

Berkeley
25,685 plots with planning, value £861m.
Strategic land = 10,000 plots, value £310m
Sales 3,712

Bellway
17,636 plots with detailed planning,
13,500 plots "in the pipeline" i.e. will get planning very soon.
Long term land holdings 2,800 acres
Total value £853m
Sales 5,226

That means that these five builders have got enough land for 400,000 homes and the total cost/value of that is £7,000 million.

In their last accounts year, they sold 43,390 homes, so overall, that looks like nine years' worth of land to me.

So yes, they are land banking and they make no secret about it in their accounts.