585: The Control Society, the Shift to the Right and Seeking Opportunities
Control Society: Almost all politicians frankly continue to tell us a pack of lies their mission is to gain power then stay in power and in doing so, have to manipulate their way up the political ladder. Their environment is competitive dog-eat-dog. Their future paymasters are big business so they dont want to fall out with business otherwise this scuppers their chance of picking up cushy high paid non-executive roles, consultancy and speaker engagements when they jack in politics. The more control they achieve the more the mere mortals will be propping them up at the bottom of this grotesque hierarchy.
In the last century, there has been a dreadful trend towards:
Creating ever larger governments and publics sectors
Taxing at ever increasing levels
Printing money to generate inflation and the illusion of real wealth
Raking up ever higher levels of public and private debt
Stealing ever increasing amounts of money from private pensions, savings, property assets and citizens wealth
High Tax Society: Its rather sinister, dishonest and desperate. The only tax breaks we have seen seem to be for big businesses in the form of lower corporation taxes. Every increasing tax takes for employed individuals is the norm. The middle classes are being destroyed. The government have recently even destroyed the buy-to-let businesses by treating these hard working people providing a service like armchair investors through successive tax increases more than doubling their greedy tax take on a relatively small number of voters who have no big voice. Easy pickings. They are now attacking letting agencies. Ultimately it will lead to higher rents, less affordable housing and a worsening of the already chronic housing crises. Lower building levels. People would now prefer to let their properties as holiday lets via Airbnb than pay these huge draconian taxes into a bloated government.
Cashless Society: Another trend is towards a cashless society. The key reason for this is that the government want to control expenditure and destroy the informal cash economy by doing so they increase their tax take, increase control on people and record the imprint of transactions to catch, trace and track criminals. Ultimately in the event of a financial crisis they can steal our money declare a d bank holiday then give everyone a haircut if they wish. Reduce our savings to half at an electronic key stroke if they desire and/or get desperate. If we are not allowed to have cash, then there will be nowhere to hide in the event of a crisis like the one that occur in Cyprus a few years ago.
Printing Money: The Central Banks collude with each other a global alliance - and take their turns to print huge amounts of electronic currency. Each currency will take a turn to decline against their peer group. Every time an electronic pound, dollar, yen or euro is electronically printed out of thin air at a key stroke the rest of the currency is worth less. This creates the desired inflation that encourages people to go out and spend because tomorrow prices will he higher. Inflation also give the illusion of growth although it will normally lead to lower standards of living for the middle and low income people. Inflation along with low interest rates (below savings rates) steals off savers and gives to people who have many assets. It is particularly harsh on people with low incomes and having to buy food and fuel as a high proportion of their income. Invariably their wages will not keep pace with inflation and they will inevitably be left worse off. The left leaning socialist Keynesian economists always encourage the Central Banks to print money create debt spend - but invariably this always leads to higher food prices and more stress for the poorer people. Much of the printed money is wasted propping up inefficient businesses and public sector institutions zombie banks and business that should have collapsed and been acquired by a more efficient operator. The money printing boosts asset prices and increases the wealth of the rich.
Shift to the Right: The centralist ruling crony elite that have feathered their nests for years have started to collapse. These people who claim to be central-left leaning but instead create inflation that make their buddies wealthy are starting to be booted out of power. The first move in the UK was Gordon Brown who helped create the biggest UK financial crisis in a century and sold off the UK gold reserves at record low prices directly losing the UK £60 billion destroyed value. He was replaced by Cameron and Osborne who left under the cloud of Brexit as the country rejected the non-democratically elected Brussels Neocon elite. A lurch to the right. A protest vote against the Islington socio-liberal set and their Euro buddies. Then we had Trump elected. A protest vote against the Clinton clan and the years of waging wars in the Middle East along with the destruction of US manufacturing in NE USA the creation of the Rust Belt. We are likely to see further shifts in France, Germany and Holland in the next few years which could ultimately lead to the break-up of the European Union.
Investment Opportunities: Regrettably we are drying up with regards to ideas in this current environment. Its very difficult to make buy-to-let work as a sustainable cash generating business these days. The government treat it like a paper investment when it is a business service requiring hard work to deliver the service. The dont seem to like middle class people making serious money anymore it seems any quest to have earnings higher than the Prime Ministers at £150,000 a year is met with a barrage of taxes to put people back in their place in this control society we live in. For those with offspring in the age group 18-25, the best investment would be to buy each a property under their name four bedroom terrace houses and have three rooms let out separately to lodgers. The tax threshold for your kids would be around £11000 before they would need to pay a penny tax on the lodger income. The lodger income would be more than enough to pay for the mortgage and then asset prices should continue to rise. So you would be giving your offspring a kick-start in life and avoiding the tax man penalising you further.
Holiday Lets: The other angle is holiday lets either in popular all year round coastal areas or in London. Its hard work and you would need to be organised but holiday lets have a far lower taxation than normal residential lets now that the government are implementing their draconian taxes on residential lettings. This is of course pretty ridiculous but again the unintended consequence of a stupid tax hike on the long term residential letting sector it will worsen the housing crisis of course. More people will switch to holiday lets in London where the crisis is most acute.
Rich Richer: The overall economic trend continues to be the rich will get richer and the poor will get poorer as wages fail to keep pace with inflation, particularly now Sterling has declined 20% against the dollar and Euro. This should support asset prices in the UK in Sterling terms particularly in London- that will seem 20% cheaper for overseas investors. To prevent getting wiped out by inflation, one really needs to own physical assets as we have been advising for 11 years now. Longer term we see property continuing to rise in price as more money is printed, Sterling declines and the population expands. However, we are likely to see a further north south divide opening up particularly with the Tories in power with the expectation they will stay in power for many years since Labour are in such disarray.
Contrasting Areas: Lets take a look at two contrasting areas for some clues as to whether property prices will rise or not London versus Barrow-in-Furness in Cumbria:
Population booming by 100,000 or 1% a year
Young population of highly educated individuals
Global centre for financial services, business and high technology
Cultural centre, theatre, cafes, restaurants, tourist attractions
Best schools and Universities in the country within a 50 mile radius
Internationally diverse population
High fertility rate
Low building levels 25,000 per year compared to demand 75,000 per year
Relatively small public sector when compared to private sector
Highly efficient private sector per capita GDP very high
Large inward migration of well-educated motived international young people
Population declining by 1.5% a year depopulation
Old population of poorly educated individuals
No famous for any business declining manufacturing, fishing and docks
No cultural interest centre, no theatre, poor cafes, no good restaurants, no tourism
Some of the worst schools in the country no University close by
Non-diverse local population
Very low fertility rate
Adequate though very low building levels in view of depopulation
High public sector jobs percentage in terminal decline
Small inefficient private sector very low per capita GDP
Outward migration of well-educated motived local young people
Outlook: Even though London property prices are very high compared to Barrow-in-Furness, in a 5-20 year time frame, you should not bet on asset prices outperforming London property prices. Rental yields in Barrow might be high, but many will be on social security, and you would have all the problems of tenants who do not work, some might prefer to spend their social security money on booze (or food) than pay their rent to a Landlord and spend all day in the property increase its wear and tear. Many properties will stay empty because of depopulation and lack of employment.
Overall its always best to focus rental business in area with strong growing employment prospects, expanding population, housing shortages, low building levels and high demand. London ticks all of these boxes. Despite Brexit we see London growth remaining high for many decades barring either a massive financial crisis or war.
We hope this Special Report has given you some insights into the current business environment and trends that might help you select a good property investment. If you have any queries, please contact us on firstname.lastname@example.org