A party of 21 rugby players are coming to our pub for a slap-up, lunchtime feast today. A herd of cows have been slaughtered so that our burly chums can chow down on the finest rib eye. Meanwhile, a quieter but more interesting event will be taking place on the premises: the editor of What's Brewing? will be hosting a beer tasting session in the afternoon.

Earlier in the week, three major regional breweries couriered polypins of ale to us. The beers are Wells & Young's Burning Gold, Adnams East Green and Shepherd Neame Canterbury Jack. They're all ready for gravity dispense down in the cellar (pictured right), perched above the bottled mixers on a stainless steel shelf. That means I'm going to be up and down those stairs with a jug every time someone rocks up for a snifter.

Are we unfair to Greene King IPA? I imagine that few of you who read this website would have a kind word to say about it, but it's been named Champion Beer Bitter of Britain. That decision - at the 2004 Great British Beer Festival - might be the most controversial incident in CAMRA's history. A lot of people cried foul, saying that the result was less than legit.

Greene King is Britain's biggest producer of cask ale. The neo-national brewer has an unfortunate habit of buying up and closing down regionals, assimilating their brands into its own portfolio and producing them at the mothership in Bury St Edmunds. Hardy's & Hanson's, Morrells and Ridley's don't exist as breweries anymore, but you'll see them as fake guest beers in GK tied houses.

Someone I know is taking on the lease of a pub tied to Greene King in a few weeks. It's a great opportunity, and doubtless I'll visit fairly often. This led me to think about the brewery's beers. I can only name one I've enjoyed - a summer seasonal - but I'm now wondering whether or not I'm simply prejudiced against them, my mind poisoned by the bad feeling surrounding GK's acquisitive antics. Perhaps I need to try them again with an open mind.

As part of a general shit-stirring post last year, I asked you to name the beer you think is most overrated. Let's do the same for pubs in London - which places get the most undeserved praise?

I'll plump for The Bree Louise, the grim little alehouse I wrote about on Monday. Inexplicably, it's won plaudits from the folks at CAMRA, including a coveted Good Beer Guide entry and a local branch award.

Last year I wrote about the savage prices of bottled beers at Brew Wharf in Borough Market. Well, I was there again on Saturday night, and was amused to see that they've excelled themselves. A 500ml bottle of Bernard Dark - an admittedly excellent lager from the Czech Republic - costs £7.50. That's ludicrous even in the context of their otherwise overpriced list. I happen to know precisely what the wholesale price of the beer is, and can offer no explanation for their mark-up.

I think it's common sense that upmarket bars and restaurants will charge more for beer than backstreet boozers. However, no one in their right mind is going to pay £7.50 for less than a pint of lager - even if it's a very good one. The fact is, nobody does. Looking around, the boys and girls filling the tables were more interested in wines and spirits as they watched Russia unexpectedly trounce the Netherlands.

The Republic of South-East England? A low tax haven comprising of London and the surrounding counties? Any region with a public expenditure to GDP ratio of less than 40 percent can join.

Productivity down, unit labour costs up - the recipe for unemployment

Very worrying, that is the only way to describe first quarter labour market developments. Productivity fell dramatically, while unit labour costs surged.

The two indicators point to a future rise in unemployment. Slowing productivity suggests that output is sliding south, but the number of workers producing that output has remained largely unchanged. In other words, firms have too many workers.

There is only one thing firms can do; in order to reduce labour costs and increase output per worker, firms need to start shedding labour.

It is the complacency that I can't abide. Hardly anyone saves anymore. The spirit of the age is to spend everything that is earned; if that is not enough, then borrow, and above all, let the future take care of itself.

Where did this complacency originate? For some, there is a belief that accumulated home equity will suffice. When old age finally comes knocking, living standards will be protected by a quick downsize from the three bedroom semi to a two bedroom apartment. Others suffer from a more deluded idea; the state pension will be enough.

We will deal with the state pension in later posts. Suffice to say, we will dispose of any optimism about the value of pension in 10 years time.

Today, we will look at savings. Last week, the ONS published the savings rate for the first quarter of 2008. Only one percent of income generated in the first three months of this year ended up as savings. We spent the rest.

The first chart below illustrates total income by five income groups; starting with the lowest 20 percent and rising to the highest 20 percent of earners. It breaks income down into three categories; earned income (i.e. wages), benefits, and investment income. The data covers all households, including those who have already retired.

Investment income (the purple area in the chart) is the key number. As you can see, it only makes up a small component of total income. For the wealthier households it is a little higher, for the lower income groups it is lower. This investment income covers private pensions as well as regular investment income on shares, bonds and bank accounts.

For each of the five quintiles, the chart presents only averages. In each group, retirees will not typically receive any earnings. Instead, their income will derive from benefits as well as investment income.

The key point is that investment income is surprisingly low across all income categories. Moreover, the average disguises huge variations. A few people have a lot of savings; most have very little.

At this stage, you might ask "how do you know that most people save very little while others have a lot?"

Here we come to the shocker. According to the most recent family resources survey, 79 percent of households have savings less than ₤10,000, 56 percent of households have less that ₤1,500, and around a third have absolutely no savings at all. This sorry tale is illustrated in the chart below.

To put these numbers in context; average household income is about ₤30,000 a year. This means that 80 percent of the population have less than 4 months of average income saved up, while half the population have less than two weeks.

When people do get around to saving, why do they save? When asked, about 40 percent of people say they save for emergencies; while a slightly lower number say they are saving for some housing related reason. About 36 percent are saving for consumption related reasons; a holiday or a "special" occasion. Only 30 percent say they are saving for retirement.

Within about 10 years, 20 percent of the UK population will be over 65. The vast majority of these future retirees are depending on two things; a house sale and a generous state pension. Neither of these two things are likely to materialize.

The UK economy is facing many problems right now, but perhaps the biggest one is a massive explosion in old-age poverty. Within 10 years, the UK will be overflowing with grey haired penniless retirees, who have put nothing away for their old age.

Finally, everyone who reads this post should ask themselves a couple of simple questions; how much have I saved? How much do I expect to have by the time I retire? Have I diversified my investments? Am I depending on the sale of my house to carry me through retirement? If the answers to these questions are nothing, very little, no and yes, then you are in big trouble, and don't say you weren't warned.

The ONS had a little surprise for us this week. The first quarter UK external deficit was much lower than expected. It came in at just 2.4 percent; the lowest number since early 2006.

The first quarter number stood in stark contrast to last year's deficit. In 2007, the deficit was just horrible. The UK imported about 4.5 percent of GDP more than it exported. In fact, in terms of GDP, the 2007 deficit was the second largest in around 50 years.

Insofar as this improvement was noted in the press, it was put down to the huge sterling depreciation, particularly against the euro, that had taken place since last August. The UK was supposedly exporting more and importing less.

Unfortunately, a closer examination of the data reveals a very different story. The UK has continued to import. The current account improvement came from a sudden reduction in the amount of profits and investment income that UK firms are sending to their foreign shareholders and creditors.

For those unfamiliar with balance of payments accounting, the current account comprises of four components; a trade account, which includes physical goods, a services account, which covers non-physical goods such as insurance; an income account, that records what income we receive on investments and what we pay out to our foreign creditors and holders of UK equity. Finally, there is the current transfers account, which covers our "charitable giving"; humanitarian aid and other such things.

The chart below records the first two items of the current account; the goods and services balance. There is no major improvement here; the UK continues to import more than it exports in much the same way has it has done for years.

The income balance, on the other hand, shows a major improvement. In the middle of last year, the balance was more or less zero. In the first quarter of this year, it recorded a surplus of over 2 percent of GDP.

So what happened last quarter? In terms of investment income, the UK received about ₤1 billion less than the previous quarter. However, UK firms paid out around ₤3 billion less. Since the UK was paying out less on a net basis, the income balance improved.

Overall, the UK net investment income improved by over ₤2 billion. Between the last quarter of 2007 and the first quarter of this year, the current account deficit fell from ₤12 billion to ₤8 billion. In percentage terms, net investment payments covered 56 percent of the improvement.

For years, the UK has run up huge external deficits. It has been able to do this because foreigners were willing to buy UK assets. These purchases generated an inflow that allowed UK residents to buy lots of imports. Foreign investors were happy to buy UK assets so long as they generated healthy returns. The sudden shift in the income balance threatens this happy arrangement.

Lower net investment receipts might improve the current account in the short run, it won't work in the long run. A large current account deficit needs to be financed. Foreigners will not buy our assets if investment returns continue to fall. It is just one more adjustment the UK economy must make in the new post-housing bubble reality.

Back in December 7, 2006, it was reported that the Vornado Realty Trust was to make headway with their new development in Harlem.

Construction on the joint venture project headed by Vornado Realty Trust is scheduled to begin in April. It involves a mixed-use Class A office and retail center in East Harlem. The Vornado real estate portfolio in New York City comprises 18.3 million square feet of office space in 42 office buildings.

Here is the before.




Now the after








As you can see, other then the site being secured, there is no developmental activity. There isn't even a port a potty. And we are already in late June.

I have four theories of why no action as been taken.

1. They are experiencing delays which is normal is for construction.

2. There is no money. With the credit markets imploding and lending standards tightening, it is probably very difficult for even a company like Vornado to secure funding for a project.

3. From fuel to raw materials, the costs of this project have probably skyrocketed. so right now Vornado's operating expenses consists of paying the property taxes while they wait to see the market settle.

4. Vornado might considering selling off the site to another party so they are not bothering in initiating any type of construction.

5. Or the most obvious reason, they still haven't resolved the zoning issue.

Regardless of what it maybe, I would be surprised to see anything done this year.

I stated how things are going in the ultra tony town of Scarsdale

In a previous entry I stated how things are going in the ultra tony town of Scarsdale. Well good people, I have more evidence supporting my thesis.

Take a look at this ad for this past week from the local newspaper.



One thing you do not normally see in a real estate ad is a raffle for free gas. From what I heard from the sources it was for 25 bucks, which at these prices barely fills half a tank.



In my opinion it appears that the Scarsdale market has gotten so hammered that realtors are trying to take advantage of the high gas prices by offering free gas to lure buyers. It used to be in a town like Scarsdale, the houses sold themselves. But this is just another indication that the Scarsdale brand is not strong enough to attract buyers.



Honestly, I think this gimmick was about as a effective as hiring the guy below as their pitchman. NSFW for graphic violence involving a boomerang and phalanges.



I have also heard some chatter that alot of people who live in this town are being directly affected by the Wall Street layoffs. Which should be no surprise to any of us.

One tragic story that has been going around involves former Bear Stearns employees who got shredded after the merger. Alot of these laid off workers basically put their eggs in one basket by having the majority of their money in Bear Stearns which at this point has gone up in smoke. Alot of these former employees live places like Scarsdale. Now these unfortunate soul are only left with their homes but like the safe with the lost combination, these individuals are left with equity that is locked up until a buyer comes in to unleash all that money. With the current state of the market that won't happen for awhile. And even if things kick up, it is highly unlikely they will get their asking price.

The UK is slipping towards outright recession. The first quarter GDP numbers had the UK growing at just 0.3 percent, which is a little over one percent at an annualized rate. Growth is down sharply and and if the deceleration continues, the economy will probably begin to shrink during the second half of this year.

Declining investment expenditure is the major reason behind the slowdown. The chart below breaks down the 0.3 percent q1 growth rate into its component parts; consumption, investment, government expenditure and net exports. The components made positive contributions to growth; consumption, government expenditure and net exports. However, declining investment knocked off 1.2 percentage points off GDP growth.

The investment decline was largely due to a firms reducing their inventories. Companies are bracing themselves for a slowdown and they are busy selling off unwanted stocks. It is a dangerous thing to go into a recession with a warehouse full of unwanted stock.

So far, the household sector has kept spending. However, the combined effects of higher prices and negative real wage wage growth forced consumers to reduce their savings, and where possible to build up credit card balances.

Deferring savings and accumulating debt can only delay the inevitable slowdown in consumption. Once the household sector capitulates and reduces consumption, the UK will slide into negative growth. The second quarter is going to be tough.