Templeton’s Mark Mobius has high praise for Chile

12th April 2013

Mark Mobius, executive chairman of the Templeton Emerging Markets Group has given Chile a glowing assessment for its stable and investor-friendly economic framework.

One of the key factors has been the creation of private pensions. In a note issued today (12/04/13) Mobius writes: “Since the 1980s, Chile has been characterised by a stable and investor-friendly economic framework, regardless of the political party in power. Around that time, the country introduced an individual capital accounts pension system managed by private companies, a system that, as of 31 January 2013, had close to US$170 billion in assets or more than 60% of GDP. In addition, a fiscal rule requires that proceeds from above-potential GDP growth and above-average copper prices are put away in sovereign wealth funds, which held close to US$21 billion at the end of January 2013.”

Mobius notes that Chile joined the OECD in 2010 along with Mexico and it has trade agreements with the US, EU, China, Japan and India.

“It is interesting to note that over the past decade, exports to the US increased while those to Europe proportionally decreased. Even more notable is that, over the same period, China rose to take a greater share of Chile’s total exports (from 9% to 18%) while exports to Argentina dropped substantially (19% to 7%).”

He says that as the world’s largest producer of the metal, copper exports have increased substantially over the last decade, from 37% of total exports in 2003 to 54% at the end of 2012, mainly, though, as a result of higher copper prices. “Given consistently high copper prices, which we do not expect to correct significantly in the foreseeable future, copper will probably remain Chile’s main export product and continue to be a strong contributor to the country’s GDP.”

“Chile maintains leadership positions in several areas besides copper, including the production of pulp, salmon and specialty chemicals. Many Chilean companies have used their strong domestic position to expand regionally, for example, in industries such as retailing, beverages, IT services and pharmaceuticals”, he adds.

He adds that from an investor’s perspective, companies listed on the Chilean stock exchange have to pay an annual dividend of at least 30% of net income. “We have continued to find what we believe are interesting investments in Chile. For example, during our most recent visit to Santiago de Chile, we met with the management of a beverage maker that had operations in Chile as well as in other countries in the region. The company reported strong profitability, but it had also managed to maintain a very conservative financial profile. Over the last few years, the company had consistently paid a high dividend while simultaneously expanding its business. All these factors were signs, in our view, of a fundamentally solid business.”

There are some downsides as well.

“One of the main difficulties Chile has had to wrestle with is low energy resources. With very little oil and gas exploration and production capacity, the country has had to import nearly all of its fuel, mainly in the form of crude oil, diesel and liquefied natural gas. Another risk the country faces is natural disasters, particularly related to seismic activity. Chile has experienced some of the strongest earthquakes in recorded history: Valdivia (in 1960, measured 9.5 on the Richter scale), Algarrobo (1985, 8.0) and Concepcion (2010, 8.8).

2These risks, however, do not dampen our positive view of the investment climate in Chile overall. The country’s fundamental and fiscal strengths have meant that it has the highest sovereign rating in the region (Aa3 by Moody’s and A+ from S&P’s) and is a net creditor. Given its economic stability and investor-friendly climate, we intend to continue to explore opportunities in Chile.”

60 thoughts on “Templeton’s Mark Mobius has high praise for Chile”

  1. theyenguy says:

    The bond vigilantes in the submarine of debt deflation have released economic killing torpedoes.

    Liberalism was the paradigm that established the age of credit. Trust in the Banker Regime’s monetary policies, specifically the US Fed’s purchases of 30 Year US Government Bonds, EDV, Ten Year Notes, TLT, and Mortgage Backed Bonds, MBB, as well as the ECB’s purchase of Eurozone Debt, EU, increased the supply of money needed to provide investment liquidity, and to produce economic growth; more so in the US than in the Eurozone. Peak Wealth has been achieved via the US Fed’s purchase of US Government Debt. Peak Wealth established an awesome moral hazard based prosperity. Now, the investor’s risk appetite has turned to risk aversion, as investors fear that the Fed’s monetary policies have crossed the rubicon on sound monetary policy, and have made money good investments, such as the Chinese Financials, CHIX, and the US Small Caps, IWM, bad

    Please consider this concept: The age of credit no more. The failure of credit, seen in China, YAO, ECNS, CHIX, Russia, RSX, ERUS, Emerging Europe, ESR, the US Small Caps, IWM, IWC, Credit Providers, MA, V, DFS, AXP, and Commodities, DBC, trading lower, has commenced.

    It’s Global ZIRP no more. The bond vigilantes are in control of interest rates globally, and will be calling the Interest Rate on the US Ten Year Note, $TNX, higher from 2.6%, as well as steepening the 10 30 US Sovereign Debt Yield Curve, $TNX:$TYX, seen in the Steepner ETF, STPP, steepening.

    Successful investing in the Pursuit of Yield Investments, such as PHO, GRID, PSP, IST, DBU, DRW, PGF, PUI, and the High Yielding Debt Investments, such as JNK, and HYMB is history.

    Not only will the High Yield Debt Instruments, such as Junk Bonds, JNK, be trading lower, but the Zeroes, ZROS, the 30 Year US Government Bonds, EDV, and the 10 Year US Government Notes, TLT, as well. Yes all Credit Investments, together with Equity Investments, will be trading lower in a see saw destruction of fiat wealth.

    Once investors start aggressively disinvesting and derisking out of debt leveraged and currency carry trade leveraged investments, the much feared economic deflation, will commence; and what was in the age of credit, inflationism, becomes in the age of debt servitude, destructionism.

    Of note to those living in the UK, Barclays, BCS, traded higher, as The Guardian posts Barclays To Cut Up To 8,000 Investment Banking Jobs.
    With all those bankers going out of work, the London economy is going to “take a kicking”

    1. Anonymous says:

      I wonder. Bond purchasers want better yield but in pushing up rates they devalue their current stock.

      I agree the Barclays cuts must dent London salaries, that’s a lot of supply coming onto the market, can’t see it all being absorbed easily.

      1. Anonymous says:

        Hi Progrock and theyenguy

        I agree that the various job cuts in investment bankingof which Barclays is the current headliner should take a slice out of the London economy. Yet if you visit the City of London there are high rise towers and cranes everywhere! Plainly a mismatch (especially if we allow for Canary Wharf) but which way and how much?

        1. Anonymous says:

          And montreal has condos going up like mushrooms. They will all have one thing in common: late to the party. They will loose money but the builders and architects don’t care, they are getting paid.

    2. dutch says:

      ‘ and what was in the age of credit, inflationism, becomes in the age of debt servitude, destructionism.’

      Whilst I agree with your general theme,10 yr gilts + UST’s are still nowhere near the magical 3% mark let alone moving higher.

    3. forbin says:

      “The age of credit no more. ”

      Yes that does appear to be happening , it means that future wealth is going down – you borrow today from what you can pay back tomorrow.

      so theres an emphasis of spending your savings – minus interest rates will be a sign….

      because maybe the age of cheap energy , or more precise , oil, is over?

      since 2005 crude oil and condensate has barley moved upwards

      the price has remained stable high ( yr on yr ) .

      Boe has been added but theres problems with that – its not the same as crude – what ever people say – check with an oil man if you doubt..

      gas helps but not in the way you might think- shutting nukes and building more gas powered generation will keep price pressure on- yet alone Gasprom issue…

      Dune bekons us

      the future is bright if you can afford the payments


  2. Andy Zarse says:

    Hi Shaun, great article, yes it seems it’s full steam ahead to the general election and thence as Yazz would have it “the only way is up (baby)”; surely nothing can go wrong now!
    By the way, I wrote a long reply to your blog on the egregious and deeply offensive comments of Martin Wolf regarding small savers. Unfortunately – or fortunately given my intemperate choice of words – my computer rebooted before I’d clicked Send and it disappeared of to infinity and it’s to depressing to go over it again. Suffice to say, I was absolutely seething at his brass neck especially given that his membership of the (essentially) unfunded BoE DB pension scheme makes him one of the biggest rentiers in the country. In fact there’s a thoretical argument which states he’s not even to be dignified as a rentier but a barefaced thief since it’s highly unlikely that he makes a personal contribution towards scheme costs. If anyone needs wiping out it’s Wolf and his bloodsucking ilk. I hope he feels proud of himself.

    1. Anonymous says:

      Hello, Andy. I feel your pain, as Slick Willy Clinton would say. If it is anything but a short blog like this one, I usually put it in a separate Word file, which I save every minute or so, then I transfer my reply when complete. Sometimes it has to be reformatted because the lines get chopped up in weird ways, which is a bit of a pain, but on balance it saves me time and trouble. When I forget to do this, I often regret it. My computer reboots at the most inopportune times, too.

      1. Anonymous says:


        1. forbin says:




          Solaris? (yikes)


          1. Anonymous says:

            I don’t have a beard so cannot use solaris 😉

          2. forbin says:



          3. Anonymous says:

            Hi Guys

            I do “feel your pain” as Spock’s brother put it. One of my former employers had an “improvement” to its systems which involved wiping everybody’s work out if you were online for any length of time. Oh happy days!

          4. Noo 2 Economics says:

            cough linuxmint yay!

    2. Anonymous says:

      Have you calculated your defined contribution pension and thought it wasn’t enough? Feel you are worth more? Why not write some laws that the unborn have to keep you in the manner you merit?

      Defined contribution: enslaving the next generation because you are a psycho consumer without compassion.

      Brought to you by boomers+ productions. *All* rights reserved.

      1. dutch says:

        ‘Why not write some laws that the unborn have to keep you in the manner you merit?’

        The truth hurts.

        1. forbin says:

          that will be our unborn – not the top 0.1%

          ref: DUNE again…..

          or Home World

      2. forbin says:

        I disagree

        the fallacious arguement that its only me and my fellows who will support the babyboomers is proven wrong by the contributions spead in the tax system.

        its company contributions via the tax system that contribute more . Of course my own taxes dont and cannot support the pensions schemes

        same as they dont support current military spending or education.

        As the work force ( not CEO’s ) get more prodcutive then ,as they are NOT getting paid more but the company profits increase then its them who have to pay more.

        getting them to pay up is the problem …. time for world government

        (yikes! )


        1. Anonymous says:

          Hi – not sure I have followed the above 100%.

          As wages are held down below inflation index linked defined contribution schemes keep going up. These are paid out of today’s company profits, money that could be going to the workers. All the while as kids toil to backfill this chasm they are told they must do defined contribution with stagnating wages in real terms.

          For public pensions they’ve seen rises above wages which our taxes have to cover. All stashed away under the category “welfare” which most take (by design) to mean unemployment benefits.

          Defined contribution is just disgusting. How was this ever legal?

          Fixed income pensioners are being hit by QE for sure.

          1. Noo 2 Economics says:

            As asset prices move upwards so the value of Pension Funds will increase so the requirement for companies to make good shortfalls in Pension funds should diminish thereby releasing money for the workers. This process would have to continue for another 3 years before companies would no longer have to pay extra into their employee pension funds but I don’t see them whooping for joy and then diverting the excess money they find themselves left with back to the workers pockets.

            The question of whether asset prices should have risen so much in light of poor global GDP increases in recent years and the true drivers of those asset price rises is a topic for discussion all on it’s own.

          2. Anonymous says:

            I’m sure there are going to be many crises around defined benefit promises. No way are they sustainable. How can you work for 40 years max and then get 40% back on your final salary for 20 to 30 years? No way!

            If it were anywhere near sustainable how come they are all closing?

          3. Noo 2 Economics says:

            Hallo Progrock, please look at the following table of returns based on an averaged annual return of inflation plus 5% of annual contributions of £750.00. Assumptions are starting salary of £10000 pa with 7.5% of salary paid into a pension fund and salary and contributions are increased in line with inflation. Each annual return amount is rounded down to the nearest penny.

            I believe the return assumption to be reasonable. In my example inflation is zero but if you want to put inflation in you can – it will make no difference as the wages and contributions will retain their “real” value of £10000.00 and £750.00 respectively (assuming wages have increased with inflation).

            At the end of 40 years of contributions 40% (in your example) of £10000.00 is paid as pension representing £4000.00 pa. However, the majority of the fund is retained for investment in OEICS, UT’s and IT’s and assumptions are made that an average return of inflation plus 5% pa may be made over a 5 year period.

            Further assumptions are made about inflation of 3% pa meaning £21236.43 is put aside for pension payments over the next 5 years.

            Total value of fund is £88891.93 less £21236.43 = £67655.38 for investment.

            Following 5 years of investment the new value of the fund is £82235.51.

            From this has to be subtracted the next 5 years pension payments which by now will be £4637.09 pa but extra amounts are added for assumed inflation of 3% pa amounting to £24618.93.

            This amount to be subtracted from the remaining fund: £82235.51 less £24618.93 = £57616.58.

            At this rate it will take 25 – 30 years for the fund to exhaust so this is the way you can certainly get back 40% on final salary for 25 – 30 years.

            It’s not my/our fault that the Government requires Pension funds to invest heavily in low yielding gilts as the worker nears retirement and that it further requires the Pension Fund to invest solely in low yield gilts once the worker retires.

            Given the oppressive Government rules about Pension fund investment it was always blindingly obvious that defined benefit final salary pensions were unaffordable. Not only that but most pension schemes paid 50% of final salary and a lump sum (although 10 year gilts used to pay 5% pa 20 years ago) along with early retirement enhancements when retirement was forced by illness.

            So, whilst I agree that it was not sustainable, a system of 40% of final salary without a lump sum and early retirement on medical grounds enhancements was/is sustainable if you have fund managers who know what they’re doing and the Government ceased it’s oppressive behaviour re gilts investment.

            The detail of the calculation above appears below:

            1. 750 x 5% = 37.50

            2. 787.50 x 5% = 39.37

            3. 826.87 x 5% = 41.34

            4. 868.21 x 5% = 43.41

            5. 911.62 x 5% = 45.58

            6. 957.20 x 5% = 47.86

            7. 1005.06 x 5% = 50.25

            8. 1055.31 x 5% = 52.76

            9. 1108.07 x 5% = 55.40

            10. 1163.47 x 5% = 58.17

            11. 1221.64 x 5% = 61.08

            12. 1282.72 x 5% = 64.13

            13. 1346.85 x 5% = 67.34

            14. 1414.19 x 5% = 70.70

            15. 1484.89 x 5% = 72.44

            16. 1557.33 x 5% = 77.86

            17. 1635.19 x 5% = 1716.94

            18. 1802.78 x 5% = 90.13

            19. 1892.91 x 5% = 94.64

            20. 1987.55 x 5% = 99.37

            21. 2086.92 x 5% = 104.34

            22. 2191.26 x 5% = 109.56

            23. 2300.82 x 5% = 115.04

            24. 2415.86 x 5% = 120.79

            25. 2536.65 x 5% = 126.83

            26. 2663.48 x 5% = 133.17

            27. 2796.65 x 5% = 139.83

            28. 2936.48 x 5% = 146.82

            29. 3083.30 x 5% = 154.16

            30. 3237.46 x 5% = 161.87

            31. 3399.33 x 5% = 169.96

            32. 3569.29 x 5% = 178.46

            33. 3747.75 x 5% = 187.38

            34. 3935.13 x 5% = 196.75

            35. 4131.88 x 5% = 206.59

            36. 4338.47 x 5% = 216.92

            37. 4555.39 x 5% = 227.76

            38. 4783.15 x 5% = 239.15

            39. 5022.30 x 5% = 251.11

            40. 5273.41

            Total return is is the value of each
            individual year aggregated = 88891.93

            Re investable amount – 88891.93 –
            21236.43 = £67655.38

            1. 67655.38 x 5% = 3382.76

            2. 71038.14 x 5% = 3551.90

            3. 74590.04 x 5% = 3729.50

            4. 78319.54 x 5% = 3915.97

            5. 82235.51

          4. Noo 2 Economics says:

            And by the way about living 25 – 30 years past retirement of say 65 check this out – http://www.ons.gov.uk/ons/rel/lifetables/period-and-cohort-life-expectancy-tables/2010-based/index.html

            In 2010 life expectancy was approximately 78.4 years for males and 82 years for females. I find it very very had to believe that lifeexpectancy has increased by 5 years for each cohort in ..er … 1 year!!

            If the explanation is that there was a mistake in the numbers then there could easily be a mistake the other way in the numbers too. Anecdotally, my mother is 89 and all her friends have died with th exception of 1. The majority of them died when aged 75 – 80.

            This has deep implications for exactly how long people have really been drawing occupational pensions for……

          5. Anonymous says:

            This I agree with. Every time a celeb turns their toes up recently I’ve said to the wife “there’s another barely past their pension age”. For the kids now retirement is a joke. They’ll be dead from the stress of raising a family, one pay-cheque from the street and both parents working all hours to pay off the housing debt. The young have seen the social contract broken but haven’t realised it.

          6. Noo 2 Economics says:

            Whole problem is the housing market. People should view a house as somewhere to live, not a piggy bank that earns more than they do. While ever they persist in this view houses will be over priced relative to wages and will continue to become more expensive in real terms. They bring these problems upon themselves because of their love affair with property.

          7. Anonymous says:

            The housing market is yet another great example of inter-generational wealth transfer.

          8. Noo 2 Economics says:

            Yes I agree but probably not as you think I do. Back in the 80’s I saw friends getting financial helping hands from their parents to buy a house – effectively gifts against their expected inheritance.

            I can see in the future that parents will try to pass their houses to their children to live in or sell and downsize as they retire handing over the excess to their children to help them buy a house or upgrade and so the death dance with the housing market goes on.

            I see polarisation of haves and havenots with the haves inheriting wealth from parents (inter-generational wealth transfer) whilst the havenots inherit nothing because their parents didn’t have much. Both the haves and the havenots will have worked all their lives but with very different material outcomes. This has always been the case but it is much more prevalent and intense now.

          9. Anonymous says:

            Yes I’d agree it exacerbates income inequality and crucially makes the UK (even less) meritocratic.

          10. Anonymous says:

            Christ that’s a long post! Can’t fault you for effort.

            This assumes a flat salary. Most final salary see the employee start on a low salary and then rise during their career so contributions for all but the last wage increment will be below the requisite amount using your calculations. There are now “career average” which is better than the disgusting final salary scheme.

            I’m also sure a hell of a lot of staff were not paying in 7.5% p/a, but that’s an aside compared to the prior point.

            Plus as you say that isn’t the deal for many, they get a payoff and >40%, plus the last few years are in low risk bonds.

          11. Noo 2 Economics says:

            Don’t know if you mean workers get promotions or rise up an incremental scale within their position but I take your point.

            However, I know that most employees paid at least 7.5% and some even more (with the exception of mainstream civil servants who paid 1.5% but had their salaries suppressed by 7.5% compared to local government/NHS workers – but then that really is a ponzi scheme I’m really talking about private sector final salary pensions here). I also forgot that employers have allegedly matched employees contributions into the scheme so you can double all the numbers in the previous post and that makes it entirely affordable even with workers receiving regular promotions based on my assumptions about returns.

            No. what killed final salary schemes was:

            1. Lazy Fund managers who didn’t know what they were doing and couldn’t be bothered – why bother making effort when you’ve got a contract to receive contributions from X hundred thousand workers each week and they don’t understand your level of failure.

            2. Government insisting on large gilt positions being held in these funds – basically “your going to fund our borrowing so we can further distort the gilt market” and people moan about QE of £375 billion – small beer compared to whats been going on over the last 40 or 50 years.

            This is not the baby boomers fault it’s Government’s and lazy complacent fund managers fault. Final salary pensions are entirely feasible if Government butts out and the funds are run along the lines I suggested in my earlier post, especially when you consider the “real” length of time a person will draw their occupational pension.

          12. Anonymous says:

            Sorry, I remain totally unconvinced. The fact that they retire on the *final* salary is a huge deal.

            Regarding doubling the amount. Private sector pensions nowadays do not match to anywhere near 7.5%. I’ve generally not heard of figures this high.

            If these schemes are affordable why not just have defined contribution? The simple answer is they did the maths, decided they wanted more and so made new rules based on the amount they wanted out, which bore little relation to the amount they put in. And disrespected any issues such as slowing of growth, longevity and support ratios.

            Extremely irresponsible concept that pushes the burden onto the next generation. You’d only have to read out loud the concept and anyone could pull it to pieces in seconds. And I’m sure they did at the time right before voting it through anyway. So many suppositions inherent in the concept that could and have blown up badly.

          13. Noo 2 Economics says:

            No need to apologise. I completely disagree. The final salary is no big deal, most people move jobs regularly – I moved 4 times in 24 years so no time to end up on a big final salary.

            Two of my friends – one works for a very small company whilst the other works for Johnson tiles pay 10% into their final salary schemes, this isn’t out of the way. The Johnson Tiles scheme ran into problems 3 years ago and the company is currently making extra payments into the scheme to shore it up but then again the scheme does pay 1/60th of final salary for each years service plus a lump sum. The other scheme of the very small company currently has no problems (at least that they’re admitting to) although that scheme pays 1/80th of final salary plus a lump sum – guess they must have good fund managers. My friends fathers used to pay 9% into a final salary scheme at a past big company called Imperial Chemical Industries (ICI) back in the 70’s and 80’s – it is these schemes that are allegedly unsupportable – which they are because of Government interference re compulsory gilt purchases and probably incompetent fund managers

            The final salary scheme is easily supportable as evidenced in my earlier post, remember, as you pick up a pay increase so you pay more into your pension fund as you are paying a percentage of your salary not a flat rate.

            Until I see a calculation demonstrating more accuracy than mine I too remain unconvinced only about the alleged unaffordability other than the fact that it’s unaffordable because of useless Fund managers and Government interference.

          14. Anonymous says:

            Don’t forget Brown’s pension tax heist in 1997

          15. Noo 2 Economics says:

            Yes, thank you Expat forgot that one – funny how you take a negative change as “normal” and forget about it after it’s been in place a few years, but imo it’s small beer compared to useless performance from lazy/incompetent fund managers combined with the “gilts” mandate.

          16. therrawbuzzin says:

            The idea that, if company money wasn’t going to pay pensions, it would instead be used to increase the remuneration of workers, is quaint.

          17. Anonymous says:

            Worst case scenario it goes into the profit figures and is available to shareholders. Defined benefit is just so wrong.

  3. Max says:

    I figure that we could run the country much better than these lot.
    My plan would be…

    1. find 10 fools from the street and call them the MPC of the BoE.
    2. Ban BTL mortgages or tax them at say 3%
    3. ban re-election so that nobody can rig the markets to get themselves re-elected.

    4. Make a law limiting mortgage debt to 3x salary for highest earner in household. Lenders are liable for failure to comply and what’s more brokers themselves are liable.
    5. Make a law limiting credit card interest rates to Base Rate + 5%
    6. All non-resident property purchases to pay Stamp duty of 10% up to 10 million. 20% above 10million.
    7. Council tax on empty properties owned by foreign nationals taxed at approximately 1% of value

    1. Anonymous says:

      You sell them short. They are no fools. They understand the UK is in managed decline and that to pull the rug from under housing would be to bring to a premature end the beginning of the end.

      You also assume they are acting for the greater good. If you haven’t been disabused of this notion by the last 15 years I’m not sure what will shake this misapprehension.

      Debt is how you farm the proles. The UK is the home of the rentier, elitism and all things establishment. Relinquishing their grip would be akin to a fate worse than death. How can you negotiate with people who would rather die than give up their “destiny”? You can’t. You simply have to overwhelm them with force and then dispose of them.

      The only people cheer-leading change through democratic accountability are the establishment. Because it’s never coming.

      1. Max says:

        Hi Progrock,
        It’s possible that you might be right, however, I’ve worked in enough different offices over the last 20 years to have serious doubts about thinking they (or almost anybody) know what they are doing.

        The reason I say this is that usually, those promoted, or promoting themselves, to any kind of level of responsibility, have no idea how to do their own job nor how to manage those beneath them. Mostly things work out in spite of them rather than because of them.

        Either way, I think we can agree that they are screwing things up nicely. 🙂


        1. Anonymous says:

          It’s called “The Peter Principle”. In fact I have the book on a shelf behind me now (but haven’t had time to read it yet).

          Certainly they are making a mess of it. It’s like the most boring video of all time. I want to fast-forward to when rates go up as I believe I know how the film will end.

          1. Max says:

            I think that It will end with catch 22. which we have already possibly reached.

            1. if i put up rates everyone is bankrupt.
            2. if I don’t put up rates I won’t be able to later and stocks and housing will spiral out of control.

          2. Anonymous says:

            Exactly. Painted into a corner. Carney is presently lifting up his little toe to paint under that as the establishment look on and applaud.

            This is why Carney is talking tough on rates. He wants to keep low rates but discourage new entrants. Sorry – won’t work!

          3. Anonymous says:

            Hi Max

            I note that the Daily Telegraph is ploughing this furrow for them today.


            I note this which I began blogging about in December 2009…

            “Although Bank Rate has remained unchanged for five years, the rates paid by borrowers relative to Bank Rate has grown.”


  4. dutch says:

    ‘What was missing from the SMMT report was its usual reference to credit
    conditions helping. So let me point out that growth here was likely to
    have been supported by factors such as the payouts from payment
    protection insurance misselling claims.’
    I saw a chart on HPC of car sales versus PPI pay outs and it was very eerily ‘coincidental’

    1. Anonymous says:

      Hi Dutch

      Of course correlation does not prove causation as we have to also ask what else might be in play? When we do though we find ourselves returning to the original line of thought in this instance.

  5. Anonymous says:

    Shaun, “Damn the torpedoes, full speed ahead!” weren’t
    Admiral Farragut’s actual words, but “Damn the torpedoes” was a wonderful album, and I am glad that you remember that unforgettable song “Even the Losers”, one of the neglected contributions to the Heartbreakers’ canon.

    You mentioned that you had tried without success to convince
    Chris Giles of FT of the folly of his backing putting imputed rents in the CPIH series. It’s a pity that you weren’t more persuasive, but I’m sure it’s not your fault. You may be aware that Mr. Giles’ former colleague at FT, Samuel Brittan, was a member of the Retail Prices Index Advisory Committee (RPIAC) on owner-occupied housing (OOH) costs that
    recommended adding housing deprecation to the RPI. Mr. Brittan wrote a minority report, “Shooting ourself in the foot once more”, arguing that rather than tweaking its existing OOH index, the ONS should replace it with one based on, brace yourself, imputed rents. Sir Samuel acknowledges the help of Ralph Turvey with his report, but here the ritual disclaimer that the person thanked isn’t responsible for the views expressed has much more pertinence than it often does. I’m sure Ralph had absolutely no use for the rental equivalence approach to OOH either for upratings, where he favoured a payments approach, or for an inflation indicator, where he favoured net acquisitions.

    By the way, I checked the 1974 RPIAC report that recommended
    the use of imputed rents in the RPI be discontinued. There was no direct
    reference in it to the abject failure of the imputed rents series to signal the
    1973 housing bubble, but the table on p. 31 of the report is so damning that none was really needed. Housing prices in Britain increased by 13% in 1971, 32% in 1972 and 34% in 1973, while imputed rents were up by 8%, 9% and 13%. Next time you see Chris Giles, perhaps you can tell him about that. Andrew Baldwin

    1. Anonymous says:

      Hi Andrew

      As I mentioned in the article I am off to the RSS next week for the discussion on the initial findings of the Paul Johnson review. If you have any thoughts on it please let me know.

      For newer readers this is the review.

      “The UK Statistics Authority asked Paul Johnson, Director of the Institute for Fiscal Studies, to lead a Review of Price Statistics in May last year. The review is considering what changes are needed to the range of consumer price statistics produced for the UK to best meet current and future user needs, and is nearing the end of a programme of work drawing on the views of technical experts and the user community ahead of reporting back to the Authority later this year.”

      As to the FT it just confirms what I have thought for some time. If I think through an economic situation and come to a viewpoint then I am much happier if the FT editorials etc. disagree with me! Their record on the big issues is very poor.It seems it was ever thus…

      The changes to the deflator in the UK imputed rents series make it is my opinion to be a joke except one in very bad taste.

  6. AnneD says:

    Within the first quarter of 2014 and with all the news that the economy is on the turn, liquidations in England and Wales rose by 53.1% compared to Q4 2013. The statistics which were released by the insolvency service earlier this week show that there were 1,072 compulsory liquidations in Q1 2014 compared to just 700 in Q4 2013. Since Q1 2013 total liquidations saw a rise of 10%. In numbers the figures revealed that in the first quarter of 2014 there were 2,649 Creditor’s Voluntary Liquidations (CVL), 537 Administrations, 205 Receiverships and 142 Company Voluntary Arrangements (CVA) . The total number of companies entering into an insolvency procedure was 1 in 167. Industries that are suffering include the usual suspects of construction, retail and manufacturing. The construction industry had the highest levels of insolvency in 2013 totaling 2,665, it does seem to be on a downward trend decreasing by 5.5% since 2012; the retail industry was not far behind totaling 2,114 (an increase of 0.6% compared to 2012). Following on from these sectors administration services, manufacturing, accommodation and restaurants rounded off the top five all with over 1,000 insolvencies within their industries.
    The reasoning behind the jump from Q4 to Q1 2014 may well be because of suffering Christmas sales or because many people are unwilling to accept their financial position during the festive period.

    1. Anonymous says:

      Hi AnneD

      Thanks for the numbers which I had not spotted. I cannot help but wonder if there has been some bank “can-kicking” here. Keeping firms afloat in the difficult times and now putting the squeeze on them as the economy improves and more to the point the banks have better figures themselves and can afford the write-offs.

  7. therrawbuzzin says:

    Shaun, can I just say that, in terms of future wealth, oil is a mere bagatell to Scotland.
    Check the economics of WATER, not just personal consumption, but industrial and agricultural, and know that there is more fresh water in Loch Ness than in every lake in England, Wales and N Ireland combined.
    Since UK has to increase its population in order to raise GDP, where’s the water coming from if Scotland does vote to leave the UK?

  8. Mark Rahner says:

    Curio Investment – Online Investing – 2600% after 12 hours
    Curio Investment is here to assist investors with either short-term profit goals or long-term preservation strategies.
    Invest Nowg
    Investment Insurance

Leave a Reply

Your email address will not be published. Required fields are marked *