The great strategist?

In Apocalypse Now, when Marlon Brandon asks 'Are my methods unsound?' Martin Sheen replies rather haltingly, "I don't see any method at all"

Lots of workers are getting their monthly pay packets today. Most of the retail and hospitality industry are on monthly pay. Monthly LOW pay at that. Often single and without children so the last minute fudge fix isn't coming to rescue them from what many will experience for the first time.

A tax increase. A shrinking of wages for people who in no way consider themselves rich.
Many of these young people will be first time voters. First time voters who parties are desperate to court, for the same reason the banks like student accounts. Free railcard today for you, bank account for thirty years for me. Vote for me today and set that precedent.

So why on earth, on almost polling day, would you remind them all, as they queue up to dispute their wages with their managers, that the government has taken a bit from them.
Is this the great strategy that was being talked of not so long ago?

The form V5c [ the car tax reminder to the non bureaucratic] has been being sent out to every car owner who needs a new licence with the incorrect fee. This has happened for March and April and for anyone wanting a new licence in May.

The fee is some £5.00 - £ 10.00 higher than the printed one. So each person re-taxing their vehicle is reminded some 6 weeks AFTER the budget that taxes were put up. Doubly hurting as it wasn't widely reported that EXISTING car duty had risen, when the talk was all about an increased tax on new cars.
Most people relicence their car on.. yes that's right, the 1st of the month. What's the reminder car owners are going to have as they enter the polling booth.. I have less money / I pay more tax. Is any of this this a winning political strategy?

hmm .. I don't see ... Any method.. .. at all.

Golden churn

Shoppers are leaving their favoured supermarkets.

Customer defections have increased by some 38% between 2005 -2007.
This ‘Churn’ where consumers switch from one brand of supermarket to another was highest in Britain .

The Retail Bulletin points to; not being recognised as a valuable customer, unhelpful staff, and ineffective call centres as major reasons for customers leaving a favorite.

However another really useful indicator of Churn rates is Price. There is a downward migration in retail as budgets are squeezed and a lot more families will be discovering Primark and Morrison's. The rising share prices of the discounters will be in contrast to the shrinking disposable income of consumers.

2008 will almost certainly see an increase in this movement to the budget brands and possibly the first cracks in Tesco’s domination of the grocery market as customers really don’t have the cash to spare on anything that is non essential and move lower down the food chain, as it were. Shopping basket switching is actually a very successful way of saving money, unlike utility or transportation ’choice’

The other upside is a lot less television programs being made about buying or rearing “happy poultry”

We may well all become too poor for guilt.

BQ

Elliott and the Hollow Man

Larry Elliott, writing in today’s Grauniad, suggests a way “from the edge of the economic abyss” for Brown.

"... if he was really brave, he could say that the recent fall in the value of the pound and the impending drop in house prices are entirely welcome developments that will assist in the long overdue rebalancing of the economy. The productive side of the economy has suffered grievously from an over-valued exchange rate, which is why the trade deficit is so high. Rising house prices have encouraged over-consumption and resulted in a massive inter-generational transfer of wealth from young people to their parents."

There’s a flaw in this, Mr Elliott and it appears in your first five words ...

ND

Sunday Business Round Up - 27 April 2008

A short round-up this week, been busy with family etc today so not had my usual time to study the business world - here are my top five though:

HBOS rights issue? - Bank likely to follow RBS lead.

China to buy RBS Insurance - Bank of China one of the suitors for the stricken banks business.

UK growth slows - Bad news, as expected, but not nice reading in any event.

Starbucks out of favour - many aspects to this, but this is the best take on it.

Baker gets fit - Top ex manager of Boots is to join Virgin Active board.

First signs of recession in the office...

Dear Staff,

It is advised that you come to work dressed according to your salary. If we see you wearing Prada sneakers and carrying a Gucci bag we assume that you are doing well financially and therefore you do not need a raise. If you dress poorly, you need to learn to manage your money better, so that you may buy nicer clothes and therefore you do not need a raise. If you dress in-between, you are right where you need to be and therefore you do not need a raise.

Kind Regards,

The Management.

Raining on the banks

It never rains but it pours; This news today that banks can b investigated for overdraft charges is yet another headache.

Banks have long run a system where even slightly steping out of line has heavy punishments for customers. This is their price for free banking. When I lived in the US, the price was heavy too and there was no free banking for current accounts either.

Many will welcome the OFT investigation and the enforced changes to bank behaviour that will result. Some things, like £30 letters etc are in need of change. However the principal of those that stay in credit benefiting most will be lost.

Free current account banking will end. High street banking in the UK is not a rip-off (samll business banking is a different matter!) and the profits are similar to other countries. Banks will move the charges elsewhere so there will be a lot of hot air but no much light generated in the next few months.

Could there be an oil crisis?

This report suggests that commercial consumers of fuel are already feeling the pinch from the strike at Grangemouth. With industry on this scale a single closure can always cause huge problems down the supply chain.

After 2000, the Government has built up some fuel stocks to try to help the country in a time of emergency and these may well be called upon. However, a rush for petrol by concerned consumers could well start a panic and in fact cause a petrol shortage of sorts.

This time the government could not blame the haulage industry, which paid a heavy price after the last fuel protests as the government stood back and let European operators hammer our domestic ones.

Instead no doubt the Scots in our cabinet will blame the Scots in their government's cabinet. A political solution will have to be found.

A longer-term key issue is at what price point oil causes a recession. Now the real price of oil is at $120, way above historic averages, we are at a time when a tipping point may be reached.

The Government has bailed out the banks, bailed out the 10p tax rate 'victims'...when will the bail out be for the motorists?

The Other Crunch: Let Them Eat - ... ?

When it comes to global commodity crises, real or imagined, until quite recently talk has been of energy, water and high-value metals: and it has been easy to take ones eye off the meat-ball, so to say. Hands up – food prices didn’t get a mention in our predictions for 2008: but it’s food that is the first true global commodity flashpoint of the new century.

In retrospect, how obvious this is and how parochial have been the concerns over energy and metals - the rich man’s ‘necessities’. But meagre incomes are spent predominantly on food, with pitifully little room for manoeuvre. We can take a tenfold rise in oil prices (since 1998!) more or less in our stride, and even become blasé about commodity prices (we may even have invested in them …) They cannot easily take a doubling in the price of wheat and rice.

Of course commodity prices are interlinked, and this we did foresee: that the lunacy which is EC biofuels policy would soon unravel. Biofuels for power generation may be primarily woodchips and chickenshit (and diseased carcasses): but biofuels for transportation compete directly and brutally with food production and rainforests. As we noted here last month, the grand EU enviro-energy plan entails that more than half the renewables we are ‘legally bound’ to use will come from biofuels.

It’s an ill wind … and some very powerful (and greedy) lobbies are limbering up for a big, big payday. The French and US farmers, the GM crop manufacturers: all will strangely find high prices insufficient motivation, and will demand ever more protection, promotion and subsidy for their ‘help’ in solving the food crisis.

A rethink by the EC on biofuels would be a start – we’ll return to this in future - but there are only rumblings at present. Heaven help those on a dollar or two per day.

ND

What was the alternative?

Many in the media and elsewhere are bashing the Bank of England for its U-turn on the Credit Crunch. Now the bank is to lend £50 billion, maybe even £100 billion more to the banks to try and end the crunch.

In return and taxpayers will guarantee the assets that the BOE is taking on, even though these can include some unsecured lending such as credit card debt.

All this seems a rum price to pay to the highest paid (celebrities not included) profession in the land. No hint of the bonus' being handed back and I note the share prices of the banks are rising. Shareholders may have taken a huge bath this past year, but if they hold on now they know all will be well within a couple of years.

I saw a BBC interview today with Simon Hills of the British Banker's Association, he blithely refused to answer any questions Declan Curry put to him and then condescendingly went on to note that the banks play such a key role that what else was there to too.

So what was the other option? To let the credit crunch drag us all down into a depression. I would not want for that and nor would most rational people.

However, with Northern Rock as the precedent and also with the actions of the Sovereign Wealth funds, the Government should have demanded some shares from the banks. Not much, but a few percent to make sure the taxpayers benefit from any upside. At the moment the risk is nationalised, not the profits or upside.

A cannier Government would have spotted the opportunity to balance the equation.

hat-tip: Bill Quango

Sunday Roundup - Part 2

Hoping that CU is enjoying his weekend, here are a few articles that have caught my eye this weekend. Avoiding the obvious deluge of RBS stuff initially, we start with . . . a food’n’drink theme.

First, one you won’t want to read – trust me on this - John Prescott reveals his battle with bulimia (sic – or is that sick ?) in the Telegraph. No link – you’ll have to search it out for yourselves!

Seems that pubs are shutting down at record rates, as reported in the Observer and the Sunday Times. Perhaps another C@W ‘works outing’ would help them out ?

The Observer reckons that speculators are fuelling a bubble in global food costs. This is rubbish: as with oil and other commodities, it is fundamentals that drive price increases on that scale. We’ll be looking at this again at C@W in days to come.

Remember private equity ? The largest deal so far this year has been agreed: just a tenth of the size of the largest deal at this time last year – the Inde reports on how PE is conducting business in 2008.

Can’t entirely ignore the Big Story, so here are a few interesting angles. The Observer reports that Britain's utilities have racked up £30bn of debt and could be the next casualties of the credit crunch (I’ve been tracking this one meself and we may cover it here later). The Sunday Times raises fresh worries about B&B: and prints a piece by Anatole Kaletsky, reassuringly interpreting the Crunch as one of liquidity, not solvency. Phew !

ND

Sunday Business Round Up - 20th April

20th April, Hitler's birthday as I like to remind my two close friends who have today as their birthday! ( and also Carmen Electra's)

Not the most auspicious week in terms of the world of business. However, the politician's will be loving the banks going cap in hand to them and will no doubt be dreaming of the extra interference they will be able to generate in the future. Some other stories make the news too in places....the usual linkfest is below:

RBS writedowns - RBS is to write down £7 billion in assets, that is 3x what it has admitted to so far. As much as it gets the hit for this, the interesting numbers will be from its less cash generative brethren like HBOS for example.

Others to follow - Indeed the Observer has the other banks as needing £30 billion to shore up their balance sheets.

BoE to save the day - However, the consensus in the media is that the action of the BoE will finally end the credit crunch and save the economy from recession. No one seems to want to think about a 4th spike in the LIBOR.

Tax enough - Another story about firms having had enough of the UK's higher taxes. This is getting serious now - too much public spending needing too much funding will destroy the private sector like the 70's and 80's again.

Building trouble - A story from earlier in the week really, building firms have been accused of cartel behaviour by the OFT.

UK Coal - Company back in favour as times change.

London & Continental shuffle - Some Law Lords have spotted the Government's aims here; to make as much money now as possible!

Biofules powered on - Despite the power of logic, politically driven biofuels continue to gain financial backers.

Olympian funding - As expected, more cost increases.

and finally, The City - A lot of the City is made up of the tier two brokers, here is an interesting article describing how things are going for a number of them.

RBS: Be Careful What You Wish For . . .

At long last, RBS is bowing to the inevitable and looking for more equity. Lots of it. And as is so often the case, it’s not the deed itself that makes them look really stupid (why shouldn’t more equity be needed at a time like this ?), as the months of denial.

Back in the summer we covered their ‘successful’ out-bidding of Barclays for Dutch bank ABN-Amro, and wondered at the time whether they’d be pleased with what they’d done. Big take-overs can be really clever when done at the bottom of the market (e.g. BP taking Amoco and Arco when oil was $ 10 / barrel - only a decade ago !). But they look pretty crass when they are carried out on the very brink of a massive down-turn, which was clearly on the cards last September, if not a racing certainty.

So – not very popular with existing RBS shareholders, one might imagine. And there’s another group that may not be over the moon: the UK banking authorities (BoE ? Treasury ? FSA ? anyone know these days ?). Because now, in extremis, they will have the larger RBS+ABN entity to prop up. As we revealed exclusively on C@W way back last May, with ABN having flown the coop, the Dutch authorities have no intention of picking up the tab …

ND

PS - get well soon Mr CU !

501st post - sick

This is our 501st post. I don't go for stat porn etc, however, given I was inspired to start a blog one afternoon in August 2006 I am amazed to have kept it going this long - with due credit for assistance to Nick Drew and more recently, Bill Quango.

However, that is it for today. Back to bed for me. I have been ill twice in a month and now am a stone lighter than I used to be; the price of capitalism maybe catching up on me?

Poll Results: Outlook bleak

The poll we put up whilst away had a decent 33 votes.

The Question was when will we see the green shoots of recovery (a reference to a much derided term used during the recession of the early 1990's). The results were as below:

Before end of 2008	0 (0%)
Before 2009 Election	2 (6%)
Not until 2010	20 (60%)
Depression until the Olympics	8 (24%)
Whadyamean; all is well	3 (9%)

I am pleased to see we have some left-wing, labour voting readers for balance, as this must account for the 9% who said all is well.

The winner by a long way though was no real improvement until 2010, with not a vote for a turnaround this year. Economically, this is bad for us all if it comes to pass as it will mean, higher unemployment and higher costs of living.

Politically, this would eb even worse news for Gordon and Badger; no hope surely of winning and election after what would be 2 full years of economic hardship/decline. No blaming the Tories this time.

A significant vote went for no real improvement until 2012 - with my optimist hat on I think this is pushing the bear a abit far; but time will tell.

Capitalists at Leisure: Book Corner

Sex, Science and Profits: How People Evolved to Make Money
Terence Kealey / Heinemann

Back from hols suitably refreshed, and before anger overtakes me at what I'm reading in the papers of the last 10 days, here's something more constructive: a short review of a very good book.

Coherent arguments based squarely upon inconvenient and messy reality are to be prized above mere ivory-tower hypotheses: and biochemist Kealey genuinely understands the facts of life about us Capitalists. We seek to identify and monopolise market niches (just as successful species dominate niches in nature), to which end we will, inter alia, exert and employ all available ingenuity to advance proprietary technology - and sometimes pure science into the bargain.

Thus, contra Francis Bacon and hordes of vested interests ever since, science is not a public good but a complex private good. As such it should not be funded by the public purse. Throughout all history (which Kealey surveys magisterially, if erratically) science and more especially technology have thrived when allowed to respond to market forces, and have languished or even declined when insulated from markets, e.g. when subsidised by the state. And although the developments thus stimulated start out as proprietary (and are perhaps intended thus to remain), they rarely fail to enter the public domain shortly thereafter. To the benefit of all.

This book is sustained polemic, albeit from an academic operating mostly to high standards of reasoning. It is stylistically casual: “When [eugenicists] encountered the Hardy-Weinberg Principle, they did not cry ‘falsifier, pants on fire!’, they simply ignored it.” “Male chimps obtain the monkey meat. Now, what do female chimps possess that male chimps might fancy in exchange? Yup, you’ve got it.”

And the editing has been casual too: repetition and typos abound and, more seriously, there are a number of discontinuities and even non-sequiturs in the account. But it is unfailingly entertaining and illuminating: most unusually (for me) I found myself starting back at the beginning again as soon as I had read it through. Buy This Book, as they say: you will be enthralled by Kealey’s bravura and compelling account of one aspect of, err, Capitalism at Work.

ND

postscript: for longer reviews than space here permits, go here and here

Rain in Spain

The onset of the credit crunch has affected countries all around the world in different ways. The UK is in the process of suffering a mortgage credit crunch which may well cause a house price crash.

As well as this, Spain has the Euro as a currency, which some of our Prime Minister's advisers' are recommending as a solution to our probelms.

It is worth reading an article such as this therefore. It makes for a very sobering tale. Spain suffered an even bigger asset boom than we did due to entering the Euro and immidiately reducing interest rates by 2%.

A crazed government also passed tax laws allowing foreign acquisitions (e.g. BAA) by large companies to avoid tax. the net result was a huge growth in debt and over-investment in reall estate and corporate take-overs.

Where has this taken them now? Well house prices are down 20% and falling, the banks are hiding as much of the debt as they can, but the economy as a whole is in a nasty recession. The Government can try and spend its way out as it has a relatively good debt level in comparison to ours; but overall the prognosis is pretty bad.

You would not want to be holding property in Marbella right now. What makes the situation worse, is that there is no end in sight. interest rates cannot rise, so effectively Germany and others are exporting their inflation to the likes of Spain. Meanwhile a strong Euro hampers Spain's exports just when it needs to re-balance the economy.

If the UK was in the Euro we would be in a very similar position, our house prices would be even more crazy than they are now and economy would be suffering the huge distorotions that are affecting Spain.

Sunday Business Round Up - 13 April

CU is back and a little refreshed from a short break. Glad to see Mr BQ kept a very good set of posts up here in my abscence.

Back to work tomorrow so makes sense to catch-up on what glories I have missed being away. My rare access to BBC World whilst abroad afforded me too much information on domestic politics in Zimbabwe and some eco-warbling on a gigantic scale!

Here are the best 10 stories in the papers today:

L&G joins Rock legal action - The long-running saga about orthern Rock continues, as shareholders seek some redress from the Government nationalisation.

Brown to save the day - Illustrious PM Gordon Brown is to meet with bank leaders to resolve all their issues. Time fir taxpayers to hide...

Swedes to get in on British Energy - With our government gauranteeing all the clean up costs, unsurprisingly everyone else wants in on the act...

..but Centrica frozen out - RWe and EDF not set to include them in any bid for British Energy.

G7 falis to make agreement - Global finace ministers fail to reach any useful agreement to cure the credit crunch. Given that non one knows the answers that are cost-free, this is not all that surprising..

Citigroup and others face balance sheet woes - Banks still have a lot of bad debt to won up to.

GE profits slide - US bellweather suffers in finance and healthcare, even as its industrials group powers ahead.

BT stomps feet over new network - Market leader does not want to support its customers when it moves to build a new work. Csutomers service has never really been in its mantra has it!

Soros advice to prospective new US presidents - A thoughtful piece of commentary.

Can interest rate cuts help - Following on from Schadenfreude and others comment this week, a longer article on the subject in the Indy.

Another busy day..

Another Rina Piccolo cartoon.
I'm a spider solitaire player myself.
As I was waiting for a meeting with a client the receptionist [who looked perfectly respectable] was looking at 'piercing and tattooing' weekly or something similar online. When I was talking with her she revealed she had all sorts of secret body piercings and branding and tattoos and she showed me similar ones on her screen.
For some reason I couldn't concentrate later on at that meeting.

At a company I used to work for all the administration people were allowed to sleep at their desks on their lunch hour. The corridor to the room where you might take clients led past the windows of all these crashed out people.
Then go and try talking about 'dynamism' and watch the look of sceptiscism cross over the clients face.

BQ.

Tomorrow and Tomorrow and Tomorrow..

How brave will the Bank be?

The Bank of England is facing that tough decision time again. How much to cut the Interest rates.
5.25% now, and judging by the caution shown over the last 6 months another 1/4 % seems likely.

But it is enough? Should Mr Brown use his 'influence' over Mr King at the BOE to cut the rate further.

Inflation, the big worry, is being held by the absence of credit and higher mortgage payments anyway isn't it?

The Times and The Telegraph are not convinced any cut is on the cards at all. Most other papers are going for an Evens bet on a cut.

Politically a full 0.5% would boost a Prime minister who really needs to look more decisive and in command, and heal some of the latest backbench anger at the 10p rise hitting low income earners.But is it wise?

Place your bets now

Post Offices Again

On March the 19th The Conservatives used one of it's opposition day debates to call a vote on suspending the current Network Change [i.e. To close 2500 offices].
The vote failed by 288 to 268 with 20 Labour MPs rebelling.

The Tories were largely mischief making, aiming to highlight the hypocricy of around 90 Labour MPs who campaigned against closure of offices in their constituencies while actually supporting the Government on the network closure plans. They were mostly successful in this aim.

The reality is The Government, Post Office ltd, Royal mail, many Sub-postmaster and the NFSP [ the post office union] are all happy with the reduction in the number of offices. It is said that this will allow Royal Mail to reduce current losses by £45 million and also let 'breadline' post offices close with adequate compensation.

The real issue though is the Post Office Card Account [POCA]. This is the card used by pensioners, claimants etc to collect their money from the post office. Having tried desperately to scrap this card since its introduction in 2003, and having failed, the government agreed to extend its life until 2010 when a successor card will be introduced.

Post Office ltd has submitted a tender for the new account along with several other strong competitors. The deadline for bids was 31st March 2008.

Seeing as the POCA generates some £200 million for the company and accounts for 10 - 15% of individual post office revenues, a failure to win the bid would be catastrophic for the entire network. The further level of closures that would ensue would be equal to or greater than the current program; perhaps another 3000 - 4000 offices.

Even retaining the card is no guarantee of viability but to lose it... unthinkable for Post Office Limited.

If MPs wanted to do more than posture and pay lip service to their local people, then this is the issue they should be addressing.

BQ

Meetings..The alternative to work

Thursday was one of these for me.
No reason to be there, and very busy with other things.
It was not my department and I have no ability or even a desire to input or even influence the project in any way. I had a mild interest in what was discussed from a purely outside point of view similar to Heather McCartney stories. I read about her because it was printed and with a similar level of engagement to the content of this meeting.
e.g 'I really couldn't care less'

However I was once on a project team which met every Friday at 2pm. As one of the main contributing divisions was way behind on the project there was very little do or say or report on and it was a case of 'Same time next week for developments?' and all off home at 3pm.

Even better the meeting venue was just minutes from my house.

BQ.

Brilliant News

Both ND and myself are going on hols from today. This gives a rather special buzz to that Friday feeling.

Speaking for myself it is a year since I had a proper break so I am very in need of this!

There will still be some posts next week as we can't resist and also our regular contributor, Bill Quango will be overseeing things from his lofty position.

No Sunday round-up likley though as Mrs Slicker highly likley to baulk at the request for a time-out on our first day abroad.....

Open Skies; European Airline Subsidy War

Al Italia today is in the news again. The long discussed tie-up with Air France-KLM seems to have finally collapsed. The Chairman has resigned and the Italian government itself suggests administration is in the offing.

'Twas ever thus in the world of national airline carriers. Countries have highly unionised companies with a proud national brand. But this is not enough anymore, unless you are in the US where the government wants to throw $15 billion at you to keep you afloat.

Interestingly if you read this link, the talks failed because the Unions thought they could play at the table, when in fact Al Italia had no chips at all; the airline was less than worthless due to all its debt and loss-making operations.

Also this week we have had the introduction of Open Skies in Europe, allowing in theory much more competition between the domestic EU carriers. This is only going to lead to more Al Italia type collapses and hurt national pride. Even the US can't really support 4 major international carriers and Europe has more like 12.

Much wailing and knashing of teeth from politicians to come on this subject, perhaps even here in the UK...

Northern Rock to be investigated by EU

We raised in a here post some time ago that it was inevitable that the EU would launch a big investigation into the legality of the Government's approach to Northern Rock.

Not only does the EU have a point, but also it never misses a chance to skewer Perfidious Albion when the opportunity occurs.

Indeed the support for this move comes from some odd places. Of all the banks to complain about Northern Rock's unfair current market advantage is the relatively obscure Danish Bank community.

Would it be going to far to say there may be a conspiracy here to push the Government into a corner? What a shame, especially after the recent NR results, unaudited of course, gave some hope that taxpayers would be paid back within 5 years...