Monday 24 August 2020

A Blizzard of Straws in the Wind

A month ago I wrote, rather unoriginally, that Recession is a-Coming, and mused on the prospects for property prices.  Lots of people pitched in BTL: well, it's a subject that affects most of us, one way or the other (or both).  Some even wondered if property might be counter-cyclical ...

Yesterday I met with an old friend, a solicitor who's semi retired.  His staple line of business these days is advising employees on settlement agreements (formerly 'compromise agreements') which when you think about it is a nice speciality:  you get paid for by the firm that is making your client redundant, so credit risk is almost zero.  And I rather imagine the content of said agreements and the issues they address are fairly standard, too.

Anyhow, for quite a while now his average throughput has been a congenial 2 or 3 agreements a week.

Last week he was sent 82 (eighty two) ...  I believe this is what is called a leading indicator.

Oh shit.



decnine said...

82 different firms; or one biggie having a cull?

Anonymous said...

We've had at least a decade of progression happen in three months, the increase in WFH was slowly happening as businesses were forced into being flexible for their best workers, and now it happened almost overnight, along with a jump in online shopping.

The high street, already fading, got knocked for six.

Chain restaurants, struggling against (usually)better quality indies, got better skewered than their hanging kebab offerings.

With the time to adapt removed a lot of places are going to get slaughtered.

We were always going to have to live with a lot less Frankie and Bennies and Bella Italias at some point, and I think most of us with a passing familiarity with quality Italian food can live with that.

Pointless, meddling and micromanagerial middle management were always going to find their need come into sharp relief at some point, and other than some mid-range Audi and BMW dealers weeping into their cheap suits, we'll all be the better for it. Maybe they'll find time to discover what an indicator is, and why it's handy when driving, now.

It's going to be horrible in the short term - early 80's horrible - but we'll get through it.

It'll be easier, shorter, and less painful if the government gets it act together, but I'm not expecting that as the entire political spectrum is light on quality.

I'm expecting bailouts of deadwood, councils deciding that the best way to tackle all those empty shops in the existing shopping centres is to build a shiny new one and the slow rebuilding of Labour's Red Wall as London-centric government hasn't the first fucking clue about anywhere 50 miles past Westminster as the crow flies, and so opposition will reap the rewards despite having the exact same lack of clue.

Debenhams looks like it's the next company to go fully belly-up, so be interesting to see what happens there.

david morris said...

And yet, Timmy says

I am able to give you a cast iron guarantee that the UK economy, as measured by GDP, will bounce substantially this autumn. In fact, I can even tell you that it’s going to do so in September. Note that this is a guarantee, not a reading of the economic tealeaves. I’ll also lay very good odds that near all of the British press will get this wrong. Those parts of it that don’t read this piece that is. The reason is simple"

DJK said...

Tim Worstall's V-shaped recovery is not incompatible with large job losses. The job losses are because, as Anon noted, the economy is changing, and Covid-19 accelerated the change. So, fewer casual dining restaurants and sandwich shops, more home deliveries and web-based stuff. Fewer foreign holidays but more staycations. People will still be spending money, just spending it on different stuff.

How this affects house prices I really do not know (nor does anyone else). But the world is still awash with money, asset prices are being propped up, interest rates are near zero. So I would expect house prices everywhere to stay frothy.

Bill Quango said...

In the last fourteen days, I have saved fifteen homes on my rightmove search.
Fourteen have now sold STC.

Three of them sold before an agent could even arrange to take us to view.
House sales are booming. I can’t remember it like this since before 2010.

Nick Drew said...

decnine - several batches, the largest of which was 15

Anonymous said...

Quite right DJK, the market(s) seem to be unrelated to the economy now.

dearieme said...

I am told that a good trick to avoid redundancy is to announce in a timely way that you are pregnant.

Now that we can all identify as nubile wenches if we want to, how widely might this trick be tried?

Nick Drew said...

David, DJK - Timmy is a really great bloke and writes some tremendous stuff


he is very much an a priori thinker. Some things he gets right. Others, he's way off beam, completely lacking empirical traction.

I don't know a good way to tell which pronouncements are which (in advance, that is ...)

Anonymous said...

Doesn't Tim W still live in Portugal, or was that a decade ago?

A good egg, but IMHO he used to be a bit of a true believer in "the market" - I remember he wasn't too fussed about Longbridge vanishing, because the car workers could then be liberated to do higher value added things, LOL. No Far Eastern economist would countenance that.

What DJK said re house prices, they bear no relation to wages any more, probably because zero interest rates plus a lot of people with spare cash buying up, and can you blame them?

"There are four other people living in two more bedrooms in the converted garage. Their rent comes to approximately £1,900 a month. The landlord also rents the ground-floor flat of the house to a further six people. Safer Renting estimates the property is generating £5,300 a month in total. The victims of criminal landlords are often migrants and from ethnic minority backgrounds. "

So are the landlords, I imagine. When my son paid the rent on his student house he was told to make the cheque out to "Mr Mohamed". That's an easy individual to trace!

CityUnslicker said...

Property market is flying at the moment. Pent up demand from 3 months of no movement, crazy amount of capital available due to low interest rates, fewer purchases of homes in say Spain. Lots of keen Hong Kongers looking at London. Lots of Londoners happy to sell to them to move to semi-ruralshire.

Tough talk - people that work in restaurants and pubs dont own homes. People that own homes has a huge cross-over with people who can work from home. These people are quite optimistic. Evictions may saw and still wont affect house prices.

We are not going to see the 2008 crash again. Just not, more like 2003 on steroids - a few sectors utterly mullered and quite a lot untouched or doing well. Much more divisive than 2008 which affected even the rich bankers as we know.

dearieme said...

I've been struck by the houses that have been selling recently, and promptly, at Auchencairn (my own indicator, I admit).

This sort of thing:

Nick Drew said...

OK, so I repeat my earlier qn: what abt commercial property?

Becoz so many local authorities are utterly stuffed if that goes pear-shaped

BTW, Much more divisive than 2008 (CU above) must be right, when you see how many sectors and niches are doing brilliantly in amongst the carnage, we've all met'em: whatever the overall position, a massive Darwinian *reset* is going on

maybe the fabled UK (English?) commercial flexibility and lack of emotional attachment is ideal for emerging fastest out of all this: the French and Germans are so inertia-bound, they take a decade longer to adapt to so many things

(a bit of summertime optimism creeping back here ... after my miserable original post)

Bill Quango said...

Bill Quango said...
In the last fourteen days, I have saved fifteen homes on my rightmove search.
Fourteen have now sold STC.

Now fifteen out of fifteen.

APL said...

Everyone is talking about 'working from home', what does that do to the commercial property market. Coupled with the transition from high street shopping to online shopping, and there goes the commercial property portfolios.

And along with 'em, pensions.


E-K said...

My plan B is to revert my mortgage to interest only, minimise outgoings and live off my early pension, walk the dog and the odd pint... Ooops ! (APL)

I'm just glad my kids are grown up and off my hands.

Graeme said...

Having retired after a "compromise agreement", it is easy money, money for old rope but at least I didn't have to pay for it, yeah I know, the amortised costs are factored into the payouts

Graeme said...

Note that ONS factored big declines in education and health spending. If teachers and doctors go back to work, that's an instant 20% boost to GDP

Graeme said...

Hey guys, check the differences between the way different euro countries put government spend into GDP. The base assumption is that 100 is 100 out. UK tries to improve on that by looking at productivity measures. Some countries, such as Spain, spent more on health and achieved lots more GDP. The UK admitted that about 30% of education spending was unproductive.. So a v shaped rise would not be surprising

Graeme said...

He was right, wasn't he? Do you have a problem with someone who says, if you can't afford a house, you need a better job or train up and educate yourself?

Graeme said...

How did Mr Mohamed get to own the property?

Canon said...

Can confirm that I've been laid off (IT, investment bank).

Was looking at buying a house before that happened. Now not. Can't be the only one in this boat. Be interesting to see how many of those 15 SSTCs actually complete.

E-K said...

Sorry to hear it, Canon.

I have been most concerned for people like you rather than this disease which (though nasty) is well over blown.

Those people who had their foreign trips cut short... do they get the figures on infection/death rates for all their troubles ?


Silence from the Government on that.

You'd think those figures would be to hand by now and people deprived of so much should be entitled to see them.

APL said...

No masks in the Operating theatre contributed to a 50% decline in post operative infections.

dearieme said...

Bloody hell, APL, what a find!

That was in 1981: anything since?

dearieme said...

@APL: a notion occurs. OK, so infected wounds on patients were down. How about infections of the operating theatre staff? I suppose that would be impossible to untangle from the infections they'd pick up elsewhere.

Canon said...

Thanks E-K.

Unfortunately, your concern for people who lose their jobs due to Covid isn't that common. It's just "the economy" isn't it? Just a bunch of numbers. If sacking a thousand people with families to feed will give another year of life to just one morbidly obese diabetic who's never done a day's work in their lives, well it's worth it isn't it?

I see that we are now bouncing around between single figures and teens on daily deaths "with" Covid. That's not far off how many people die on the roads. We haven't reduced the speed limit to 10 mph though, have we?

I've never felt as much despair about the state of our nation as I do today.

BlokeInBrum said...

As we have found out, the Government never did a cost/benefit analysis of their response to the Covid outbreak.

They have now gone so far down this path that it is impossible for them to deviate from their course of action without casuing themselves massive political damage.

Unfortunately this means that Canon and thousands like him will be sacrificed, just so the politicians can avoid admitting that they have handled this crisis catastrophically badly.

I hope Canon, and the others like him bounce back from this, and though it may seem grim at the moment, I reckon that the New Year will bring all sorts of interesting challenges for those with the will and the energy to confront them.

As they say, the darkest hour is just before the dawn.

Matt said...

Came across this today:

which states:

"A separate document detailing the financial terms of the deal has not been made public as it deemed to be commercially sensitive."

Yep, commercially sensitive but also handy to keep the council taxpayer from seeing what crap deal their council has struck. But don't worry because:

"and renewal deal will, once agreed, be signed off by expert advisors/consultants, acting for the council"

So absolutely no conflict of interest on the consultants who would definitely get more paid work from Sheffield City Council if they came out and said it was a bad deal.