Zug millionaires are non-practising

From time to time, journalists turn up in Zug tasked to write stories of affluence and privilege for the UK media.

They search fruitlessly for the spoors and watering holes of the rich, the exclusive bar, or shop or restaurant. They trudge the streets – and this doesn’t take very long in compact Zug – in pursuit of evidence of extravagant consumption and signifiers of affluent life. Invariably, the only icon to consumption they find is the single Ferrari dealer on Baarerstrasse. There they construct a story around the long waiting list for the most expensive model –dishonestly making no comparative reference to the long waiting lists common to all Ferrari dealers worldwide.
The really interesting story in Zug is that there are millionaires and billionaires living here, but they are non-practising.  Few of the icons of wealth are visible here. There is a marina on the Zugersee, and a waiting list of 200 for the mooring slots, but in the main, the boats are just practical cruising and sailing tubs, no Ferrari equivalents, Monaco it is not.

A cup of coffee costs much the same anywhere in the city. You cannot buy an expensive cup of coffee if you try. This is not a problem in London. But you can’t find a cheap cup of coffee in Zug either, and for me that sums it all up. There is a flattening up of differentials here. No special provision for the rich or the poor. It just isn’t possible to be poor in Zug the way it everywhere else. To be poor, you need to be provided for. The provision of inferior facilities and amenities is lacking here.

But also lacking are the private health clubs, exclusive bars and stretched limos, the private schools (the only ones are those set up by the ex-pats, and they offer inferior services compared to the Cantonal version). There is no special access via money to private medicine as in the UK, because all medicine is private and all citizens have equal access to it.

For example the public swimming pools here are of superior quality to the private clubs I used in London. Even if there were private pools, I wouldn’t need to use them. In London if you haven’t got enough money for a car or taxi, you must use expensive and unreliable public transport. In Zug, everyone (i.e. including billionaires) uses the public transport system in preference to the auto, because it is faster, more efficient, high quality as well as being inexpensive.

In London if you are poor you can find inferior accommodation, transport services, food, and clothes. In Zug there is a basic level below which there is simply no supply. You can’t be poor in Zug because there is no provision for it. The most inferior housing is still vastly better than the worst housing in London.

To be a practising millionaire you need places of worship, and they don’t exist in Zug

Inflation on its head?

People ask me about inflation in the 70s and 80s, usually because they want to position themselves advantageously for the inflation they now anticipate. “The only solution to all the debt is to have inflation” they say.

But the inflation of the 70’s felt like deflation. Although retail prices and incomes were rising fast, real and nominal prices of investment assets were falling.  Most residential and commercial property prices were (as they are now) determined by people’s capacity to borrow. As interest rates climbed, their ability to service a constant loan size declined faster than inflation lagging incomes and rents could boost their capacity to service it. The same pressures lowered equity valuations, earnings yields ratcheted upwards and prices plummeted.

However for residential property buyers actual net borrowing rates were generally lower than inflation. With the tax relief available to owner occupiers in the 1970s, it was possible to pay a net annual interest rate on your mortgage of less than the annual rate of inflation.

Trouble was, there was loan rationing everywhere, even from building societies, and the building societies were only lenders to owner-occupiers High street banks wouldn’t lend on property for investment at all, and rarely for occupation.  In 1976 I was offered a detached freehold house in Finchley (NW London) arranged as four flats yielding £4,500 per annum, for £16,500 .

It was desperately cheap but I couldn’t find finance, which was of course the main reason residential property investments were so cheap.  Residential investment property prices were falling because there was credit deflation.  In those days I had three credit cards maxed out up to my combined credit limit then, of £6,500, for the purpose of buying residential property investments.

London auctions were stacked with properties yielding 25% but no buyers. Most auction rooms had rows of empty seats in 1976.

But it was standing room only by 1979.

So my advice is counter intuitive. Liquidate everything for cash. In the coming inflation, market rates of interest will overwhelm central bank interest fixing (look at Italian bond yields last week for an example of markets setting yields against central bank diktat), and rise to levels which force holders of assets bought with borrowed money, to release them into a falling market.

And cash, ie real, folding money, will be king again for a while.

Phil and me

Phil Collins. I neither like nor dislike his music. I have never bought any of his recordings, been to any of his concerts, and if more people were like me, he would be unknown. If he had been born before there was broadcasting, microphones or electric guitars, he would be unknown.

I don’t know what Phil thinks about his career and success, but my guess is he, like his fans, see it as well deserved recognition for his talent. I doubt if he attributes it to randomness or serendipity or technology, but Phil is a good example of how success is derived from community resources, combined with the aggregation of a number of individually unimportant preferences into the fantasy that something new and great is made.

Does anyone really own their success? Don’t technology and other externalities determine it? What if Shakespeare had been a woman? Or Fred Astaire born in 1980? (Fred who?) Imagine Elvis before amplification and recordings. What use would we have for Lord Nelson in 2009?

And in my life, how much of my success do I owe to absent competition for property, space, opportunities and women, due to circumstances outside of my control?

When I was 12 years old, after a two-year stay, I left hospital, leaving behind a much more able and clever close friend. He would certainly have added to the competition for available resources

But he had muscular dystrophy whereas I only had tuberculosis, and at sixteen he was dead.

Even tuberculosis can be a success if Streptomycin is already in the world.

As Heidi might have told Icarus – 2000 metres is often enough

Another grey day in Zug.  

Much as I love Zug, the lack of wind and the topographical eccentricities here mean that often three or four days can pass before Sammy Sun deigns to bless the heads of the hedgies, multi-corporistas, their floosies and their kids, as they stroll beside the Zugersee.

I used to get a sun fix by driving through the Gotthard -a 1.5 hour drove  to the next climate. After the Gotthard the probability of sun increases but it was necessary sometimes to drive still for a further five or six hours to the Cote – particularly in winter.

Then I discovered what property developers have known for some years – the answer is to travel up, not across.

Today I left cloudy and misty Zug at 09.30 and returned at 17.00 to a still cloudy city – but with sun burn!

I did this by looking at webcams on the nearest peaks this morning until I found the nearest point where the cam was looking down on cloud cover. Today this was Brunni, up from Engelberg.

Together with Mrs B and our kids, we have walked 5 km, including barefoot around Härzlisee(1,860 metres), played on rafts on a lake, had lunch, been on two kinds of cable lift, ridden a rodelbahn, all of this in brilliant warm sunshine.

The Swiss truly have it all, and also explains why I rarely see them in Antibes, they already have the Cote at 2000 metres!

Public sector workers to cut down on toys and clothes?

UK Budget 2010:

“Two year public sector pay freeze on staff earning more than £21,000”

Cassidy Brothers plc Chairman’s Statement:

“ Trading in 2011 is going to be difficult and will see prices rise significantly. Firstly because of the rise in V.A.T. but more importantly the impact of price rises in China and transportation and shipping costs from there to the U.K. These will affect all important price bands of £5.99 – £10.99 etc. that the consumer and trade has been accustomed to for the last ten years, most of which can no longer be maintained. The transition will take two or three years to filter through but it will happen, and any company who shuts their eyes to it will not survive. Companies have to expect negative responses from their customers and accept a decline in sales as a result. Casdon has experienced this many, many times over the past 65 years and will be prepared.”

Next plc trading statement:

“The combination of higher cotton prices, capacity tightening and a lower dollar costing rate mean that we will experience input cost price inflation in the first half of 2011. We aim to mitigate some of the effects of this with the development of new sources of supply and more rigorous negotiation. However, the combination of increasing cost prices and the January 2011 VAT rise mean that clothing retail prices are likely to rise in Spring 2011. We have yet to purchase the majority of our spring summer ranges, but we estimate that selling prices may rise between 5% and 8%.”

Is There a Cure for Masculinity?

 By Adam Jukes

 • Why is it so hard to get close to a man? • Why don’t men express emotions except big ones like anger and frustration?

 • Why is most perversion male; why is most pornography produced by men for men? Why is risk taking male and drinking, drug taking, gambling and infidelity are predominantly the preserve of men?

• Why is most criminal behavior perpetrated by men? Why is the vast majority of domestic abuse and violence perpetrated by men?

 • Why are men so concerned with the size of their penis and its symbolic substitutes – big, powerful cars, status, big houses, big money, and big muscles?

 • Why can’t men tolerate vulnerability?

 • Why do men lie, don’t listen, don’t do housework, parenting?

 The answers to these questions, is the aim of this book. The author asks what it means to be a man, and what part masculinity play in men’s identity. What is it like to have to spend so much time and energy in managing that identity?

Adam Jukes has spent most of his professional life working with troubled and disturbed men, and in 1984 he opened one of the world’s first treatment centers to address men’s abusive and violent behavior towards women, from verbal and emotional abuse through to stalking and murder. In the following decades that work developed into a clinical examination of masculinity and the author now shares his insights and conclusions with the reader.

 Juke’s conclusions about what constructs masculinity and how it develops may be unpalatable to some but it is also thought-provoking and intriguing to anyone who has an interest in these issues whether professional or personal, male or female, wife or lover, sister or brother, husband or father. £14.95/$34.50 September 2010 240 pp 9781853432095 pb

The Financial Crisis – 30 years in 300 words

Interest rates and inflation peaked in the UK and US in 1980. Over the following 29 years interest rates declined in the US and UK from 20% to 1% generating a long uplift in the value of equities and other assets.

 Japan became a global source of very cheap investment capital in the mid 90s as a consequence of ultra low-interest rates, the declining value of the Yen and the emergence of hedge funds meant that it became risk free to borrow Yen and invest in investment assets with much higher yields.

The Dow closed at under 1,000 in 1980; twenty-seven years later it reached nearly 14,000. The FTSE rose from 500 in 1980 to nearly 7,000 in 2007.

By 2000, monetary policy was being used to avert possible recessions, rather than as had been the practice, to stimulate the way out of one. This policy created additional credit, at a time when credit was already cheap and plentiful The super liquid conditions stimulated the securitization of loans by banks and the creation of many new financial derivatives outside of the control of central banks .

Inflationary consequences of the asset boom on consumer prices were absent probably because of the unprecedented productivity enhancement effects of computerization and the internet reinforced by the availability of ultra-cheap manufactured goods from China.

The point was reached where no more financial air could be blown into the bubble and it began to contract. Interest rates have now been declining for nearly thirty years, In the case of the UK and US they cannot go any lower.

The last upward cycle in interest rates began in 1950 and lasted thirty years and coincided with an era of great prosperity and growth, although the Dow ‘only’ increased 275% in those thirty years.

 Here’s to the next thirty years…..

Heidi spricht kein Deutsch

One of the things freshers have prominently in their ‘to do” lists, when they arrive in Zug is to enrol in a German language course.  Breathless with enthusiasm to be part of the scene and fit in with local life, they excitedly anticipate that learning “the language” will lead to being accepted, loved, making friends, and enjoying the native culture.

However, in three years I have yet to hear of an ex-pat who has learned the local language well enough to hold a fifteen minute conversation with a local.  In fact, the better your command of Standard German, the more frustrated you will be as you find yourself failing to amuse and engage the local populace in the kind of chit-chat you enjoyed at home.

I am not referring to the kind of basic German which any idiot can pick up in a few weeks. Or the equivalent level of English an au pair will command after a few months immersion in the UK. 

Many times you will have proudly requested “ Können Sie mir bitte  helfen?” to be served in a Zug shop, only to be met invariably with the reply  “ Of course, what are you looking for?”, from the sales assistant, who probably also wished you “have a  nice day” as you left.

The reason for this is that Heidi communicates in Schweizerdeutsch , and after three months of lessons (the average most endure before giving up the struggle) all you will learn at the German class you have enrolled in is lots of German grammar and enough vocab to order a taxi.

If you stick it out for a year or so, you may well have enough German to understand what’s going on around you in a German city, but the language spoken in Zug will continue to be as mysterious as Chinese.

When we originally arrived from London, we took the precaution of bringing our German au pair with us.  We thought it would be very useful having  someone with the language as her mother tongue, on tap for the first month so that we could quickly negotiate the inevitable transactions where fluent German was needed and our limited German inadequate.

However, after a couple of days she admitted defeat.  Although she was born and lived in Munich all her life she could barely understand a word.

Frankly, unless you are immersed at work every day  in the 100% company of  Schweizerdeutsch speaking, Swiss born co-workers, you might as well save the effort and stick to English, because nearly everyone under 40 speaks it fluently here.

Snow, but not as Heidi know’s it

I have just returned from UK-lite, having got snowed in, in Kent on day two, then snowed out of the my eurostar return on day three, then snowed away from my London City airport escape flight the next day.

Finally arrived in Zug to find it had also been snowing,  the right kind of snow apparently – it was all cleared away and things were running normally.

My theory is its the cholesterol in the UK snow that causes it to be such a problem.

Heidi is more reliable than Elizabeth

In the UK the train was usually my last and reluctant choice, though the UK performance isn’t too bad, after all, 90% of British trains arrive on time.

In Switzerland the equivalent is 98% of trains.

But that 8% difference !

Considering a trip from Lindenpark, Zug, to Basel?

 The journey time by train is one hour and thirty-six minutes.  Although this is eighteen minutes longer than the average Zug/Basel journey by car, me and Heidi would always take the train.

Bahnhof/Haltestelle	Datum	Zeit	Gleis	Reise mit	Bemerkungen
Baar Lindenpark Zug	Mo, 07.12.09	ab 10:17 an 10:19	1        4	S1 22141	S-Bahn Linie 1
Zug Luzern		ab 10:29 an 10:49	4        6	IR 2325	InterRegio ,
Luzern Basel SBB		ab 10:54 an 11:53	7        7	IR 2170	InterRegio ,    R

 

Check out the risky connection intervals.

There are only 10 minutes between the arrival of the Zug train at 10.19, and the departure of the Luzern connection 10.29.

…and  just 5 minutes between the arrival of the 10.49 Luzern train and the departure of the Basel train. Yikes!

But even gaps of 2 0r 3 minutes are comfy to the Swiss. You may not be able to set your watch to the trains in Heidiland anymore, but that’s only because the electronic watches are now more accurate than the traditional spring driven instruments 

In the UK this margin would rule out rail travel as an option compared with the car. You would have to build so much safety margin of into the schedule (at least 45 minutes between scheduled  arrivals and scheduled departures), that  the car would be a better bet.

Provided your journey didn’t include the M25, or the M1, or it was on a Sunday morning before 7 am perhaps…..