Inflation

[1nvest]

Gas prices are already below the pre Ukraine war and as inflation is a rate of change, then, as you say, it will level off in the coming months. Which is presumably the game that the government is playing with the striking workers.

viewtopic.php?p=558518#p558518

My guess/prediction is that end of May 2023 year-on-year inflation rate will see a massive decline compared to recent rate of change, to below BoE remit target 2% rate.

https://uk.finance.yahoo.com/news/gas-p ... 10150.html

Wholesale gas prices fell today to levels not seen since the run-up to Russia’s invasion of Ukraine, stoking hopes for a softer impact from energy bills on hard-pressed households and stretched government finances.

Driven lower by relatively mild winter weather in the UK and Europe, the price of the commodity was down by over 4% to 178p a therm. It was last under 180p on January 21, before rising steadily during the military build-up and hitting 329p on February 24, when tanks crossed the border. It peaked at over 875p a therm in August, on fears of supply interruptions in Europe into autumn and winter.

What is required IMO is a Bill to protect the UK under exceptional circumstances such that UK produced energy be sold into the UK at a fair price rather than at global commodity market prices. Had that already existed then UK inflation would not have spiked as it has, and all of the knock on effects that involves (strikes etc.). A defence of the realm act, that might also include protections against invasions via dinghies. Putin has repeatedly weaponised the likes of mass migrations - armed with 'just say that you're in fear for your life/health' type scripts. Much of Ukraine's issues are a consequence of Russian migrations into the East along with instructions that schools can only teach in Russian and Russian curriculum.

[1nvest]

https://uk.finance.yahoo.com/news/uk-su ... 43974.html

More than four-fifths of the UK-based economists surveyed expected Britain to lag behind its peers in 2023, saying the country was “suffering from ministers’ outright incompetence.”

[88V8]

More than four-fifths of the UK-based economists surveyed expected Britain to lag behind its peers in 2023, saying the country was “suffering from ministers’ outright incompetence.”

Well it's a bit mad, isn't it. Elected because of, what... charisma, oral competence, the right rosette?
If one were appointing people to run a company the size of most govt departments, the process hopefully would be more rigorous. Someone on't wireless described the NHS as the largest single enterprise in the world.
Perhaps it would be better if the Lords ran the country and the Commons could just make recommendations.

Fortunate that so many of the investable companies in the FTSE have decent overseas earnings.

V8

[1nvest]

More than four-fifths of the UK-based economists surveyed expected Britain to lag behind its peers in 2023, saying the country was “suffering from ministers’ outright incompetence.”

Well it's a bit mad, isn't it. Elected because of, what... charisma, oral competence, the right rosette?
If one were appointing people to run a company the size of most govt departments, the process hopefully would be more rigorous. Someone on't wireless described the NHS as the largest single enterprise in the world.
Perhaps it would be better if the Lords ran the country and the Commons could just make recommendations.

Fortunate that so many of the investable companies in the FTSE have decent overseas earnings.

V8

Between MP's inducing dis-incentives (higher taxation, students starting work with 40%+ tax rates) and Ministers incompetence, little wonder economists outlooks are so poor.

https://www.inkl.com/news/nearly-50-sho ... arch-shows

Nearly 50 shops closed down on average every day in UK last year, analysis by Centre for Retail Research shows

... just one element of a much broader picture.

The 70%+ of FT100 foreign earnings and 50%+ of FT250 foreign earnings look destined to increase further. Many I suspect may opt to just up and leave altogether, just too much uncertainty and regular changes (budgets/government incompetence) for any business to cope with.

Outbreak of a new potentially very deadly virus (Covid), government prepared plans ... none, just wing it and make it up as you go. Tories have all too clearly demonstrated they just can't manage the economy, or anything else come to that (6 months+ to re-elect a PM). The £12 billion Covid track-and-trace contract awarded to a mate for instance, that turned out to be a failure - as it was based on a 2002 Excel spreadsheet, that is limited to just 65,535 rows.

[scrumpyjack]

https://uk.finance.yahoo.com/news/uk-suffering-ministers-outright-incompetence-095443974.html

More than four-fifths of the UK-based economists surveyed expected Britain to lag behind its peers in 2023, saying the country was “suffering from ministers’ outright incompetence.”

Mind you economists generally do not have a good track record and there are plenty of economist jokes to highlight that

eg
President Truman once said he wants an economic adviser who is one handed. Why? Because normally the economists giving him economic advice state, "On one hand and on the other…"

Ronald Reagan used to say that if trivial pursuit were designed by economists, it would have 100 questions and 3,000 answers.

[Urbandreamer]

What is required IMO is a Bill to protect the UK under exceptional circumstances such that UK produced energy be sold into the UK at a fair price rather than at global commodity market prices.

Ignoring for a moment what is "fair", isn't that what was achieved by the windfall tax upon wind farms, solar and nuclear energy. So I guess they already did what you wish.

We should possibly note that two nuclear plants are being shutdown by their owners because of this tax. Meanwhile, others who previously funded new wind farms to supply the UK with energy may think twice.

https://biz.crast.net/nuclear-plants-fa ... dfall-tax/

I wonder if we shall see the modular reactors currently seeking approval in the UK ever supply power here. GE's, Holtec's and RR's have submited applications.

Of course, they will only be built if there is a return on investment.

Price controls have been tried very many times in history. The results have never achieved what the intention was, and fairly universally had bad side effects.

[1nvest]

What is required IMO is a Bill to protect the UK under exceptional circumstances such that UK produced energy be sold into the UK at a fair price rather than at global commodity market prices.

Ignoring for a moment what is "fair", isn't that what was achieved by the windfall tax upon wind farms, solar and nuclear energy. So I guess they already did what you wish.

We should possibly note that two nuclear plants are being shutdown by their owners because of this tax. Meanwhile, others who previously funded new wind farms to supply the UK with energy may think twice.

https://biz.crast.net/nuclear-plants-fa ... dfall-tax/

I wonder if we shall see the modular reactors currently seeking approval in the UK ever supply power here. GE's, Holtec's and RR's have submitted applications.

Of course, they will only be built if there is a return on investment.

Price controls have been tried very many times in history. The results have never achieved what the intention was, and fairly universally had bad side effects.

The UK economy has been truly Sunak'ered. Flight of capital, disincentives, regular regulatory changes. Blew £460Bn when Chancellor (paid some to stay at home, not others, wasted), whilst Truss added another £167Bn cost to the UK with her budget. Even blew £12Bn on a track and trace system that turned out to be a Excel 2002 spreadsheet that was restricted to 65535 maximum rows. But at least they've got the excuse of Covid/Brexit/Ukraine to mask the massive Tory incompetence. Can't be trusted with the economy, or come to that pretty much anything else other than lining their mates pockets with taxpayers money.

We need more GP's ... so reduce retirement LTA - that induces more opting to retire early (after many opted to reduce to part time working after their pay was doubled).

We need more care workers, but many left due to mandatory Covid jabs requirements. Increased taxes suggested as being for Social Care were immediately directed towards the NHS instead of Social Care.

We need to increase GDP ... but graduates are taxed at 40% rates once they earn over the living wage, so little incentive to work overtime. Along with increased taxes/costs inducing many to simply shut up shop (50 shops/day closed in 2022), and for capital to flight the country (lose the 1% that pay a third of the total income tax take, and that leaves the remainder having to pay 50% more in taxes just to fill that hole alone).

Legislation that detailed 'exceptional circumstances' where UK generated energy was restricted to being sold into the UK, would at least permit businesses to plan around that accordingly. Not a taxation, just when exceptional circumstances arise continuing to sell UK produced energy at a fair price/profit domestically rather than a high demand high (profit) price as set by the global commodities markets.

Fix the root causes, high energy prices have massively broad knock on effects. Which can be governed, especially when you have the capacity for the UK to produce energy. A failing social care system is a bottleneck feedback loop, all the way back to ambulances having to wait outside A&E for hours because A&E are also dealing with what GP's might have dealt with, and because there are no NHS beds into which new patients can be dispatched because discharge of existing patients into social care is a bottleneck.

[csearle]

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[Urbandreamer]

Fix the root causes, high energy prices have massively broad knock on effects. Which can be governed, especially when you have the capacity for the UK to produce energy.

Do you have the capacity to "address the root causes"? How? Is the government to nationalize the wind farms, the oil and gas, the coal mines?

As someone who DID invest in the UK energy infrastructure over decades, I no longer shall. Why? Well, didn't you argue that companies that I invested in should not benefit from fixing the problem? Didn't the UK government decide that you were right, before your post?

Of course, as you have said, the government is keen to listen to those who think it unfair that anyone should benefit from work or attempts to address an issue,

As for "inflation", well some would argue that the true usage of the term is the increase in the money supply. What they might call "debasement". We seem to have had a lot of that recently.

Will it lead to a increase in the value of bread, houses, or cabbages? Well to be fair, if we imported grain the war might make bread less available, hence more valuable. But we don't! The increase in price is significantly debasement.

As has been said (by you and others), the issue is the increase in the price of "energy". So an economist would argue that markets should look for alternative sources of what they need. Ok, so we are back to your price control, regulation and preventing people supplying those alternatives aren't we?

Let me repeat the obvious, you were arguing that UK returns on energy supply should have a "fair" constraint. If the world stops being "fair" then we should not treat UK producers/generators equitably. OK, so "fair" only counts for those who buy energy? Well guess what? There will be less or no sellers. Or at last that is what history teaches us of price controls.

"Let them eat cake". Well enjoy yours, I'll suffer alongside, but know it's not something that I called for.

[1nvest]

Let me repeat the obvious, you were arguing that UK returns on energy supply should have a "fair" constraint. If the world stops being "fair" then we should not treat UK producers/generators equitably. OK, so "fair" only counts for those who buy energy? Well guess what? There will be less or no sellers. Or at last that is what history teaches us of price controls.

Controls, only under exceptional circumstances. When a few are making exceptionally great gains whilst many endure exceptional hardship, such as selling gas extracted out of UK shores to UK customers one day for five (whatever) times higher prices than the prior day due to exceptional circumstances (shortages elsewhere for those that don't have their own domestic gas supplies), then it should be in UK government contract/licence to operate that better balances that out. That's not a disincentive to invest, rather just a clause that caps potential exceptional profits under exceptional circumstances.

Same for migration. Same for virus outbreaks. Government should have contracts and procedures pre-prepared for such events, not be dealing with them on a ad-hoc make it up as you go basis. There are enough MP's and ministers to have pre-prepared procedures for all kinds of wild exceptions. It was shameful how when a deadly virus did outbreak how the government managed procedures. Clearly not correctly prioritising its number one remit - defence of the realm.

Sadly parliament doesn't care about the population, predominately serves businesses. For example policies instated under anti-laundering are clearly just to track/trace the population, don't actually address laundering that finds easy alternatives such as via bitcoin. They lose personal data, don't protect personal data (such as HMRC letters that more often contain personal data valuable to identity thieves, being posted in brown envelopes with bold HMRC lettering). My most recent HMRC letter came already opened cellotaped closed again. Enquiries to HMRC about such being directed to the Post Office, who in turn suggested they'd investigate but more likely wont yield anything. So someone somewhere could now have my name, address, DoB, NI number, amount of taxation ....etc. details.

[dealtn]

Any chance, on this board, discussion could focus on the "economy" or even "economics" rather than other areas such as politics and government?

[scrumpyjack]

Any chance, on this board, discussion could focus on the "economy" or even "economics" rather than other areas such as politics and government?

That would be sensible, but dream on!

[Urbandreamer]

Any chance, on this board, discussion could focus on the "economy" or even "economics" rather than other areas such as politics and government?

Thanks for that reminder. You escaped my rather long response about how government actions affect private investment. Possibly, given that it WAS a response, you might have regarded it as outside the remit of the board.

Two years ago, the government was encouraging investment in UK wind energy. The investment trust that I have been funding was investing, but a month ago announced that they had increased the percentage invested in GERMAN wind farms. Possibly not a surprise given UK government actions.

The government does, and try's to, affect the economy. Not just by money printing.

Price controls and subsides are intended to move economic levers. Likewise, taxation changes may encourage people not to work, just as 1nvest has pointed out. Personally, I am convinced that the recent energy windfall tax will make things worse. What SOME would describe as an "unintended consequence". I dislike the term because unintended implies that the results are unexpected, rather than expected and accepted.

I've been investing in UK energy for decades, but won't continue to do so. Will the likes of 1nvest, who calls for disincentives? Will anyone?

As for inflation, I can't see the causes going away. Especially if deliberate actions are likely to increase the problems.

[SalvorHardin]

Any chance, on this board, discussion could focus on the "economy" or even "economics" rather than other areas such as politics and government?

Unfortunately too many posters think that TLF is a politics forum. They aren't interested in investment. Just look at the never ending complaints by some people about how Brexit has disadvantaged Britain compared to the EU. Then look at the non-existent posts from the same people about investing in the EU (which, given their complaints, has to be a better thing to do from their point of view).

Anyway, inflation is falling in America (which is where I and several others on TLF primarily invest nowadays). Goldman Sachs recently put out a forecast for American inflation falling to 2.9% by December 2023 (compared to 7.7% in November 2022). The consensus for UK inflation at the end of 2023 is around 6%. Now whilst economic forecasting has a deservedly bad reputation, IMHO inflation forecasting tends to be more reliable than say GDP forecasts.

The prospect of a sharp fall in American inflation, and thus interest rates by the end of 2023, got me to load up heavily on American REITs, a sector which was hammered in 2022 (I've bought some that are 70% off their peak) due to concerns about rising interest rates, recession fears and falling demand for office space due to working from home (a fear which I think is overblown in America, but not in Britain where it has become a skivers' charter in the civil service).

[CliffEdge]

"skivers' charter" etc. is an investment comment, how exactly?

[XFool]

"skivers' charter" etc. is an investment comment, how exactly?

Ah, well... Perhaps it depends on who is making the comments. Or something like that.

[88V8]

"skivers' charter" etc. is an investment comment, how exactly?

Imho WFH has a deleterious effect, but it's not a visible aspect of company performance where an investor has any oversight.
Perhaps it belongs in the same box of imponderables as Dod's 'culture'.

V8

[Tedx]

Eurozone inflation 'slows sharply' according to Bloomberg and others on falling energy prices

[servodude]

Any chance, on this board, discussion could focus on the "economy" or even "economics" rather than other areas such as politics and government?

Unfortunately too many posters think that TLF is a politics forum. They aren't interested in investment. Just look at the never ending complaints by some people about how Brexit has disadvantaged Britain compared to the EU. Then look at the non-existent posts from the same people about investing in the EU (which, given their complaints, has to be a better thing to do from their point of view).

Anyway, inflation is falling in America (which is where I and several others on TLF primarily invest nowadays). Goldman Sachs recently put out a forecast for American inflation falling to 2.9% by December 2023 (compared to 7.7% in November 2022). The consensus for UK inflation at the end of 2023 is around 6%. Now whilst economic forecasting has a deservedly bad reputation, IMHO inflation forecasting tends to be more reliable than say GDP forecasts.

The prospect of a sharp fall in American inflation, and thus interest rates by the end of 2023, got me to load up heavily on American REITs, a sector which was hammered in 2022 (I've bought some that are 70% off their peak) due to concerns about rising interest rates, recession fears and falling demand for office space due to working from home (a fear which I think is overblown in America, but not in Britain where it has become a skivers' charter in the civil service).

Great points, both of you!

There's a bit of an inevitable overlap with politics in this kind of discussion though given how power is supplied and the costs regulated (or not) and the fact that it is pretty inelastic in it's consumption by (most of) any given economy.

There are certainly sectors showing opportunity for growth (and I agree from speaking to septic colleagues that the US hasn't embraced WFH in the way it has here in Aus - I'd have moved "bush" myself if my kids weren't in high school).
But I do think that "inflation" as is being seen currently is so coupled to energy cost, and hence the policy of securing such, that it's really difficult, in discussion, to squeeze a piece of paper between that itself and the politics that determine how that is charged. (and the weird inefficient way that the prices are set)

[funduffer]

I find Richard Murphy an intriguing economist, one who is definitely unorthodox.

Here he argues that inflation will fall irrespective of what the government does, and so increasing interest rates is unnecessary, as are austerity fiscal policies. We will even be seeing deflation by 2024-25, so says the OBR. All these policies will do is deepen the recession and prolong the period before recovery.

https://www.taxresearch.org.uk/Blog/202 ... or-action/.

He may well be right, but would the orthodox markets buy into a reversal of policy?

FD