Friday 30 May 2008

The Power Cuts: It's Bad

Tuesday’s powercuts were very serious, and no-one is coughing the job.

Many acute blogging antennae (e.g. here and here, as well as CU below) were immediately attuned to this, but facts placed in the public domain have been few and unrevealing. It’s possible that the next National Grid monthly report may give us the low-down, but don’t bet on it because the industry is keeping very quiet.

Here’s some preliminary info.

Firstly, there is not a huge amount to be read into the two ‘trips’ that started the dominoes falling, albeit that BE will be very embarrassed about Sizewell which has failed at a rather critical commercial juncture for them. But hey, stuff happens.

However: system demand was low, the two initial incidents were comfortably within the capacity margin, and took place at opposite ends of the country. So why did seven other units ‘become unavailable’, wholesale prices reach their highest ever level within-day, and the Grid need to shed 5% of load, by interrupting large industrial users (who volunteered to switch off in return for a discount, no big deal) and simply cutting power to 500,000 small users ?

This is serious. It gets worse.

I’m no engineer: but basically the system has to be balanced in real-time in order to maintain not only supply of power itself, but the frequency of the electricity. If the frequency is at risk of falling too far, demand must be reduced – as happened on Tuesday. But it’s not a linear relationship: the first decrement of frequency requires (in this case) 5% of load to be shed: but the next decrement would have required a further reduction of considerably more than twice this. And, my sources tell me, we were on the very brink of this: indeed, a worst-case scenario was being considered that might have halved the supply to the system.

How might this have come about ? Have a look at this National Grid web-page to see just how difficult is the daily task of balancing the system. But they are very good at it – internationally reckoned as being among the best. And one of the tools at their disposal is to buy complex ‘Balancing Services’ from power generators. Some of these services involve the generators getting paid just for being there in a state of readiness.

But as with any insurance scheme, it’s rather important the policy pays out in time of need. Clearly, at least to some extent, this didn’t happen.

In the bad old days of the 1990’s ‘Pool’ system – when generators were forced to sell almost all their output to the Pool – there were ‘capacity payments’ available, and also ‘constrained-off’ payments, for power generators who claimed to be available if needed, but for various reasons were not called upon to generate. There was large-scale gaming of this system, so it was scrapped, to stop payments being made to companies who, had they been called, could not have come up with the goods. Could this be happening again with some of the Balancing Services ?

The industry is being extremely reticent, to put it mildly. Dark hints are being dropped that revealing the facts would be highly market-sensitive – which can only mean that things are worse than is generally realised. Initial enquiries by journalists were met with outright lies.

In the absence of proper information, speculation of this sort can only gather. We all knew the government had well-and-truly taken its eye off this vital ball. Ofgem (which is admittedly quite busy with several enquiries just now) needs to get off its butt and make it clear: it will get to the root of this – without fear or favour.

We all need electricity . . .


The Tory/Labour Dilemma

This post runs is also to be found at Political Betting:

Even as the rumours of an imminent challenge to our glorious Prime Minister fade, there is still a good chance of an election before May 2010; No doubt Tory central office is preparing for this and, hidden from view, may even be preparing a manifesto.

The mantra 'It's the Economy, Stupid' is going to hold firm for the next year or two as the UK economic situation worsens, recession or no recession.

But the real hard choice for the Conservatives is what to offer the electorate. The party faithful expect tax cuts and indeed with the burden of taxes at a historically high-level and growing public dissatisfaction with the Government spending splurge, they will think they have point.

However, remember 1979 and Margaret Thatcher, taxes had to go up in the first term. they did under the last 1992/7 Tory government too. A ruined economy needs sorting by whoever is in power.

The economic inheritance from Brown and Darling is likely to be a poisoned one. The official government PSBR is not too bad, but this is from a time of plenty. With tax income due to fall as profits disappear from banks and the services sector, this situation will get worse. The benefits claims will surely increase with higher unemployment. Stamp duty revenues will fall along with the slowing housing market. The huge PFI debt will also begin to weigh more heavily, as will over time the cost of gold-plated public sector pensions as more civil servants start to retire.

Overall, if anything taxes may need to rise unless we have massive spending cuts. Can the Tories campaign on this platform - the truth is they have no other choice, but will they say it? Also what can Labour do in the face of the same problem, promise a Tory-lite or ignore economic sense and retreat to a socialist utopia? And even the Lib Dems need to come up with some ideas?

How honest can politicians be and how much would electoral dishonesty hamstring the next Government to the point at which it became a one-term wonder?

Thursday 29 May 2008

Dr. Frasier Blame

"Welcome back. This is Dr Failure Blame...


"Well It's 4 am, so a big shout to all you Truckers out there. We were talking about insomnia. I too suffer from this. Often I don't sleep much at all. And when I awake, I feel pain. Your pain. This is caused by getting a great kick in the ... Ahh Roz, a caller on line 2.
Hello Dave from Burlington. I'm listening."

"Hello Dr Blame. I can't sleep either. Every day just gets better and better for me. My job is going really well at the moment and I've never been more popular. I've had some big successes at work recently and just can't believe my luck. This other guy just keeps messing up big time. He and his team might get fired any day now, so I'm likely to be up for promotion to CEO soon. Home is great too."

"That's great Dave. So what's the problem?"

"Nothing really, I just wanted to tell someone. Bye"

"Thanks Dave.. Ok, after the news ...
Record levels of debt, Living beyond your means, Post office closures, War in Iraq, MP's expenses, New rates of Vehicle excise duty, 42 day detention orders, Teenage knife murders, Council Tax, The recent By Election, Over regulation, The failure of CCTV to deter crime, Binge drinking and hospital admissions, Polyclinics, Cherie Blair's book, Wind Farms, Proposed 2p fuel duty increase, The Lisbon treaty, Private pensions, Public sector borrowing, Northern Rock nationalisation, Record levels of taxation, Inflation, Nuclear Power decommissioning costs, Donations to political parties, Railway privatisation, Foot and Mouth leaked from a government laboratory, Police Pay settlement, missing data disks, The Olympics Budget, Trident, Cash for Honours, Uncertainty over the Future Lynx Helicopter program, Rubbish Bin collections, Fuel protesters, Defra, The 10p tax u-turn, Stamp duty and a party funding crisis are all Topics we WON'T be discussing.

I do know a lot about these topics but I may not an expert in all of them. If you are having concerns with any of these issues just remember.... This is Dr Failure Blame, and I'm listening."

Wednesday 28 May 2008

Energywatch - See the Future

Normally I leave the energy posts to Mr Drew, but he is otherwise engaged in the sordid business of earning filthy lucre.

We had a post a few weeks ago on the scorched earth tactics Labour could employ to leave a terrible inheritance for the next government. High on the list was a ruinous energy policy.

Well today we have had a glimpse of the future;

- Power cuts as too much energy was demanded from the System

- Poor results from British Energy because of inoperable Nuclear Plants (glad I dumped that stock last month)

- Gordon Brown demanding more North Sea oil production even though he was the one to limit it through huge tax levies on exploration in the area

- Record petrol prices for drivers

- A fuel protest by hauliers in London yesterday

- A front page evening standard article declaring domestic average gas bills could soon reach £1000 a year

- A clean up bill for our past Nuclear plants estimated at £73 billion; yet we need a whole new generation.

This is indeed a disturbing picture, our energy crisis could start in just a couple of years if more nuclear plants go offline due to problems with the ageing equipment. Yet we are poorly placed to build more and their economic justification is not clear - do they really compete with oil even at $125 oil?

The government has left energy strategy on the shelf for its entire 10 years in power. This is yet another disgrace and one that we are now paying for dearly when you look at the list above.

Monday 26 May 2008

Mayday Mayday

Re Gordon Brown's lack of a smile.

"But I tell you what, when you get on an aeroplane, you go and look in the cockpit, see if the pilot's smiling? Or you just hope there's a pilot there going to guide the plane, fly the plane and land successfully."

GB Air.."Hullo erm hullo.. this is Lima Alpha Bravo Oscar Romeo flight One nine nine seven. Hullo we are in very serious trouble.

JackStraw Tower "Roger Lima Alpha, state your difficulties"

GB Air..." Urm.. We are losing power.. repeat losing control. The usual control methods are not working. There has been a bit of panic on board. We also seem to have lost some of the core... hullo..Erm ... we are losing Power. Repeat losing Power and we are unlikely to be able to continue much longer. The Starboard engine has fallen completely away. The Port can't generate enough support on its own.. Please advise ..."

JackStraw Tower "Understand.. stand by for instructions.. hello Lima Alpha, we have a plan for this sort emergancy. Repeat after me..


The Slick Salesman

Recently Prime Minister Brown has been calling his opponent a 'Slick Salesman'.
This an easier soundbite than 'all style and no substance'.
But after some pretty poor recent results the Labour Party might wish to revisit it's own slick sales techniques, and get back to a few of the basics.

How to be an effective salesperson

Learn to listen
Sales people who do a lot of talking during a pitch only bore the prospect. Endless repetition of figures aren't going to convince anyone if they are asleep!
[Tractor production figures are rarely believed anyway]

Identify Needs
Tailor your pitch to identify with their needs; Don't try to change a client's needs to your pitch.
[If clients are concerned about Immigration then talk about border controls, economic prosperity created by immigration or even show the extra resources given to help deal with the problem. Don't take a product you want to sell, like 42 day detention, and push that as the answer to their problem. It probably isn't.]

Pitch to the people most likely to buy.
Your best prospects have a keen interest in your products or services already. They are the ones who will take it up most quickly. Keep these clients as happy as you possibly can. It is harder to convince someone who has never tried your product or even your brand before.
[look after your core voter. Whether it's 10p tax rates or Grammar Schools]
Go Door to Door.
Spending huge sums on print-media advertising or direct mail is an ineffective way to influence you client. There is no shortcut to the personal approach. Get your representatives one-on-one with your customer.
[ Cameron and Obama are clearly winning the feet on the street war]

Don't tell them what they want.
Let people tell you what they want. You tell them how you can deliver it.
[Nuclear power/42 day detention/Unlimited immigration/ MP's Expense claims/ Police Pay/ Road pricing etc . If you cannot overcome an objection then have a strong case for not doing so. Just saying' I can't do that' is not good enough. I can't do that because.. ... I will however be able to do this... is much better.]

Don’t tell me what you’ve done for me before.
Yesterday's deals are just that, yesterday's! Tell clients what you are going to do for them today.
100 years of sales history counts for nought if you are now the dearest, and offer the least support.

Don’t tell me about products and services that are not related to my company/field.
Do your research before you approach your clients.
[Talking about 'Toffs' may not be of much interest if your client has no concern about this at all]

Never make overinflated claims that can easily be found out.
A careful client may well check your claims themselves in trade magazines and online reviews.
[ If inflation is higher than 2% then stop saying its 2%. Uncheckable claims or unspecific are fine. We are the Party of the poor etc.]

And from every customer service manual I've ever read.

Smile. Smile again, then smile some more.

Sunday 25 May 2008

Sunday Business Round-Up May 25th 2008

The old City adage is sell in May and go away, so we if it holds true we should see a lowering of activity int he next couple of weeks and a downturn in exciting M&A stories. Instead the reporting season will come to the fore and executive pay packets will make the features headlines for the MSM.

Back in the real world, the summer is quite crucial for the UK economy, if inflation carries on rising and growth stalling the economy could go off a cliff like 1991 again by the end of the year. By no means is it certain this will happen, but it is a distinct possibility - more on this later this week.

Here are the 7 most interesting Stories in the business sections this week:

HSBC pay - First-up is the first pay story, HSBC execs (CEO Mike Geoghegan pictured above) have done well to cope with the credit crunch overall and grow the bank massively int eh far east. Too much to ask for them to be well paid then....

Union M&A - As numbers and willingness dwindle, the main unions are looking to merge. Perhaps it would be better if they acted for the interests of the new workers - where is the banking and accountants union....

Airline struggles - A useful piece on the way airline travel will change if oil prices stay this high. Will the budget airlines be grounded - some will for sure.

Schools credit crunch - This is the best news for a while, crazy government PFI schemes have been halted by the credit crunch. A good example of the law of unintended consequences.

YOU can do it!
- Retail investors cash in on oil and gold boom, where would they get these ideas?? However, just remember the time the herd moves is the time the smart ones get out.

Rights issue madness - The shareholders of major UK companies are being tapped for money, lets hope it is worth it.

Sweet music - Tate &Lyle is an interesting company, operating in such a regulated market that it makes some seemingly odd economic choices and often acts like a public entity. A strange world where markets and politics meet.

Saturday 24 May 2008

SocGen Shock: JK “May Have Had Accomplice”

So – little Jérôme Kerviel may not have been acting alone: and a couple of token middle-management heads are to roll at SocGen. We’re shocked !

Well no, actually, we’re not.

If you fancy a really scandalous weekend read, have a look at this exposé of dirty dealing in the City. The FSA isn’t just blind to the Northern Rocks of this world.


Friday 23 May 2008

After Hamburg (by way of Crewe)

Go straight in. He is expecting you Herr Speer. The guard motioned me down some more steps and into the Bunker Room, where the former Chancellor had recently taken to staying at all hours of the day or night.

"Well Herr Speer. You have visited the city?" he asked.
"Yes Sir. I have come from there directly"
"And.. it is as bad as those fleeing attest?"
I hesitated. But he had to be told.

"It is worse."

The great leader flinched. He balled his left fist. It was clearly shaking He held it behind his back.
"Tell me" he asked, his voice soft in the cold cement room.

"A swing of to the Conservatives. The majority is completely gone."

The leader never moved. Never made a sound.

I continued. " The Labour candidate has fallen. 7500 vote swing to the tory party. There is enormous shock in the constituency. Supporters are fleeing in their thousands. They fear that the Tories will come back"

"Hmm" he murmured "What was the turnout? Barely 55 %. We can improve it. You must have faith."

"Another six defeats like that and there will be no way to continue. All will be lost. They will come at us again. I cannot promise that we will be able to stop them."

Then he came forward, around the large desk, and took me by the arm. His face was troubled. A tick made his eyelid flicker and the corner of his mouth twitched badly. he looked ill and under grat stress.

But then he straightened himself up. A thin smile touched his lips.
"You will fix it Speer. You always have."
"Sir,"I began.. but he raised his hand to cut me off.
"You will fix it. I can count on you."

Then he took me by the arm again and we walked to another table. His favourite model displayed.
"Look Speer. You should forget this matter, and concentrate on this. Look what we can achieve."
We looked at the architectural models laid out on the display.

"Here, a road through our Capital. Taking the delegates to the Olympic Stadium. This giant structure.. a symbol of our power. here the swimming complex. Here, the balcony. I will be addressing the people..and all the people of the world from here. Build it for me Speer. You have whatever funds you may need."

I could not stand idle any longer.
"The price of materials is rising. There is no money! Even bread.. the price rises daily. Fuel ? Where am I to get fuel to run the trucks.. "

"You will do it Speer. I trust you. do not worry. We have new ideas. we launch these ideas every Monday into our opponent's camp. New ideas, new methods and policies. it will improve, you will see."

There was no point. he was not really listening. I tried another tack.

"There is a delegation here. They were in Crewe and Nantwich. They have worked tirelessly. They want to see you. They want you to visit the place. Will you meet them?"

"Let Ed see them. Don't worry about it Speer. You will fix it for me."

I walked to the door. As I laid my hand on the handle I said
"They will come for Henley next. We can't stop them at Henley with 'Toff talk'. even the Police are talking about leaving their posts. We need real policies and an economic miracle. Can't you at least do something about the Fuel duty? Its gone up 25% this year alone. A 20% reduction for hauliers and transport companies. It will help slow rising .." But he wasn't listening. Instead he rounded on me.

"Do not doubt our ultimate victory. We have high flying policies. They won't catch those. We can launch 20 new initiatives a day. They will never match that kind of production. "Tory Toffs" was just the start. We can mass produce hundreds of attacks like that every week. And soundbites. I have them being made even now. We still have the finest PR in the world. Our propaganda is the best there has ever been.
Henley..Who cares about it. We can always drive south again. Rural areas. What use are they? Once we have regrouped we will come back and take what we want again.
Tomorrow I will begin a cull. I will sack those who failed me.
Then... A relaunch. A major campaign to be begun. I will target the environment again. Green issues. This will raise taxes too. Wind tax maybe? Some form of 'wasting energy' tax at any rate.
Enough. Go Now. It will all be alright tomorrow."

I left him.

But as I climbed the stairs to the outside world, a cold, hard world, I heard the sirens begin to wail all over the city.

Friday Cartoon

Ten answers to nail that tricky final interview question

"Why should we offer you the job"

1] My astrologer told me today would be my lucky day
2] Because I've really pulled myself together since ... THE INCIDENT
3] My mum says I have a lot of hidden talent.
4] Well, I had no aptitude for the law, so I thought I'd try this.
5] I've had 19 jobs in 2 years.There's nothing I haven't covered.
6] Are you kidding! Look at these puppies!
7] Gosh, well since I just found out I am pregnant I have been...
8] Well, since the wife left yesterday and took the kids, I have a lot more time to put into this post.
9] Ooh Tough question. I'll phone a friend please Chris.
10] Because as long as I am under constant supervision and have plenty of training and lots of time to learn,and there isn't too much pressure I'll almost never let you down.

And a personal favourite from the Hobbies and pastimes section of a CV.

"Giving Blood and I also have a keen interest in human organ donation."

Thursday 22 May 2008

Polyclinics: Poll Tax on Steroids

No surprises that NuLab’s Stalinist tendency has come up with Polyclinics as the latest in its plans for mass centralisation. One’s hostile instincts are reinforced by reading guff like Ignore GPs: Polyclinics are the future from David ‘former communist’ Aaronovitch; and a moment’s research into the ‘consultations’ that are being conducted will reveal (a) there is strong grass-roots opposition and (b) the government intends to go ahead anyway, with PCTs under enormous pressure to get GPs in line (and PCTs have many instruments of torture with which to threaten a GP).

The Conservative Party is officially skeptical. But one sometimes finds senior Tories ambivalent, often having being approached for support by the PCTs and GPs who have been got at already. There will be a lot of money involved, and Big Business is waiting in the wings …

As ever, the centralist argument is the classic one: efficiency through uniformity and scale. You’ll rarely read the true story because there is a deal of pussy-footing around on the issue: and there’s more than money at stake. One of the thrusts for Polyclinics is to extend NHS treatment to ‘increasingly transient populations’ – code for ‘people who don’t actually have the right’. Another is to be able better to enforce politically-set healthcare goals.

And the main losers will be a group known in NHS planning circles as the “White Well”. This means middle class white folk, who keep themselves in good shape by being fairly ready to seek prompt attention from an NHS GP they know well, but who would be very much less likely to attend a vast, impersonal Polyclinic in a timely fashion for this niggling pain here or that minor ailment there.

Any ‘efficiency’ gains from putting the squeeze thus on the White Well will be more than squandered, not only by reduced amounts of preventative medicine being carried out, but by a huge upsurge in time spent on another significant category – the malingerers, hypochondriacs and general timewasters. GPs, of course, know exactly who they are, and can handle them fairly efficiently. But as it’s illegal, apparently, to mark patients’ notes ‘timewaster, big clinics will be forced to go through the whole rigmarole every time - just as A&E departments are at present. (During public holidays and big football matches, Casualty units are populated almost entirely by these unfortunates, who enjoy the undivided attention they get.)

Opposition parties need to line up solidly with their supporters on this issue and ignore the siren voices of PCT and big-Pharma lobbyists. In frontline healthcare, small is beautiful. The Polyclinic could be the final nail in NuLab’s coffin.


Man U win Champions League, again (and again)

Many people watched the match last night and the office today is full of token fans of both teams who are happy or sad at the result.

What really matters though to the clubs is the money brought in. Man United is £660 million in debt and needed the £30 million from the Champions League win to help bolster the coffers further. In addition, entry to the World Club championship and European Super-Cup are also good money spinners. Last year Man United turnover was £210 million so winning this competition should boost revenues by at least 10% and perhaps as much as 25% when you add in all the other benefits. With debt repayments at £62 million a year, they should even have some money left over to invest in the team for next year.

Chelsea won't have made quite so much from this adventure, nonetheless it will add to the club's turnover and goal of trying to break even. Although how much this matters depends on the attitude of billionaire owner Roman Abramovich. Losing £100 million a year is about standard for them these past few years.

Alll this must make interesting reading for you Stoke fans out there. Recently promoted to the Premier League to take on in football combat the above two clubs. Their last company house results for May last year had them posting a turnover of £7.9 million and a £3 million loss. No doubt the £30 million boost from the Premier League is really going to help; but reality suggests their whole club would struggle to hire and pay the Man U captain, Rio Ferdinand.

I look forward to watching their efforts to compete with Man United next season. Any takers on them finishing above Man United in the league?

Wednesday 21 May 2008

Tuesday 20 May 2008

Leveraging the Casino: LSE

Some of you who read this are no doubt investors in stocks and shares. I read with interest yesterday about the latest wheeze by the LSE to boost their flagging AIM market.

AIM was a great success story for many years and one of the key drivers that brought global finance to the UK and away from New York. With AIM the LSE was for a couple of years able to beat both NASDAQ and NYSE put together in terms of listings.

However, AIM is split into overseas mega-co's from China who are raising money in the West for the first time and then the UK very small co's who list to try and gain some backing.

As a result of the 1600 AIM companies, over 1000 have virtually no trading. So the LSE is to make analyst reporting on them available on the cheap. The last wheeze was to make them all have a website.

However, company sponsored analyst reports are not exactly a good way of understanding a company from an investor's point of view; they are inherently rose-tinted. As much as I applaud the LSE for trying to support their own business, they are really just encouraging gambling at the casino. No one knows whether many of these companies will make it and so investing is often a pure punt, no different to going into William Hill's.

Structurally though, I think this shows the limits of the LSE model for AIM. Small co's list and do well or blow up, this is not very confidence inspiring. This model worked well for times of global growth, perhaps the future will require a different model for giving access to capital (and sadly this may well involve Sovereign Wealth Funds rather than our City institutions)

As ever, Caveat emptor.

Monday 19 May 2008

Updated links

Did this today; did I miss any good ones?

Postcomm overstep their remit

On the Buzz from the latest Postcomm recommendation to privatise Royal Mail Billy Hayes, the General secretary of the Communications Workers Union, has indicated that Postcomm have overstepped their remit.

No friend of Postcomm Mr Hayes has said the option for a private equity group to take a giant slice of Royal Mail is 'their opinion' and that 'The review team and The Government' will decide.

Further the CWU are still in dispute about the pension cuts for members from last years strike.
CWU are in discussions with management MP's Trustees etc but this may well flare up again.

The disastrous strike last year led to problems for both Royal Mail and the Unions and I would have thought there was little desire for another strike by the CWU or its members again. But both Union and Management are entrenched with each offering a 'take it or leave it' proposal.

But the threat may be enough to get some government intervention or at least a firmer commitment to keep RM in public ownership.
Last summer Mr Brown refused to be drawn. But then he was riding high in the polls and fighting floods and had none of his present woes.

The CWU is a contributor to the Labour Party. But many of its members questioned the wisdom of supporting a party that wouldn't help them back.
Seeing that Mr Brown rather needs the money, and certainly doesn't need even more problems,
especially from Core Labour supporters, he may be more inclined to find something like the "necessary oomph for the economy" as Jaqui Smith remarked on the £2.7 billion tax giveaway the other day.

Sunday 18 May 2008

Sunday Business Round Up - 18 May

Back from a business trip to a very economically buoyant Germany, below is a round-up of the most interesting business stories from the Sunday Broadsheets.

Most interesting to hear the views in Germany that the current slow down will not be too bad. Exports of cars and other goods still exceed China, taxes have been cut and there is even some small reform to the job market. All completed by a left-wing government. Perhaps our own political parties could learn something from this....

To the weeks news then;

BA to retrench - Good results this week, but this story is interesting as it notes with oil over £120 there is no way for the company to make money.

Pension crisis - The law of unintended consequences strikes again, pension rules are forcing companies to bolster their pension schemes at the expense of the treasury. Hooray, but leaves sickly government finances in an even worse state.

Energy battle - A strange time ahead, with BE shareholders thinking they will get bids at 720p and above, the current share price is 660p and the bids will be in that region. The saga will run for a few weeks yet.

BOE loses key player - Rachel Lomax, the Deputy Governor is to leave after not getting the top job.

Losing your job in financial services - An interesting story about how things are being done on wall street in the New York Times.

PPI - This it eh worst kind of insurance, with 90% margins for those who offer it. At last the FSA is cracking down on the industry.

30% fall for commercial property - Even further to fall for a sector ravaged the last 2 years, when will it reach the bottom?

Virgin Money to sponsor Marathon - A hidden story here, a £400 million turnover business is to spend £17 million on sponsorship? I think Branson has some plans for this business....

Return of supersonic travel - An executive concorde jet is et to hit the market in 5 years.

Comment of the week - Liam Halligan destroys Brown's economic record.

Friday 16 May 2008

Friday Joke is back

CU to return later...

When I take a long time, I am slow.
When my boss takes a long time, he is thorough.

When I don't do it, I am lazy.
When my boss doesn't do it, he's too busy.

When I do it without being told, I'm trying to be smart.
When my boss does the same, that is initiative.

When I please my boss, that's brown-nosing.
When my boss pleases his boss, that's co-operating.

When I do good, my boss never remembers.
When I do wrong, he never forgets.

Thursday 15 May 2008

That Tax Cut: Some Arithmetic

Taking our cue from the Denninger piece cited below, we can do some simple sums.

22 million or so lowish and middle-earners have just been given a tax cut – up to £ 120 per person. Recall that in recent months a number of public-sector pay rises were held back by around half a percent – for example, the police were awarded 1.9% instead of the 2.5% recommended by the review body – because to pay the full amount would be inflationary, according to Brown and Darling.

If we take £ 24 k as a representative salary for many of these workers, 0.5% x 24 k is £ 120, so the amounts are commensurate.

OK, so we know this week’s tax rebate is inflationary, and the government has acknowledged it will borrow to fund it. What impact might that have on interest rates ? Well, at very least it must make another of those quarter-percent reductions much less likely. Take a middle-income family with a mortgage of £100,000: 0.25% on an interest-only basis is £ 250 more interest to pay. Per annum.

May not be much of a bargain, this one-off tax cut.


Wednesday 14 May 2008

Inflation, all the way. (Thanks a bunch, Darling)

This excellent video**, from the irascible Karl Denninger, offers a salutory perspective on tax give-aways funded by borrowing at times like this. And to think we once wondered whether it was to be inflation or deflation.

(On the subject of individual portfolios, BTW, the Drew household is up to the eyeballs in NS&I inflation-plus bonds. This is not financial advice, just a personal note.)



** as ever, sourced via Sackers'
excellent blog.

Tuesday 13 May 2008

Ten things to think about

Another list
[just for a moment you thought you'd accidently come to Iain Dale's]

1] Like-for-like sales fell 1.5% in April compared with the same month of 2007.

2] UK house prices could fall "at best" by 5-10% this year, accidentally revealed by a housing minister.

3] A&L announces a £192m write-down

4] Food company could cut 730 jobs.

5] Output prices for sales of manufactured products rose at a rate of 7.5% in the year to April.

6] Oil prices have hit a record just shy of $127 a barrel..

7] The UK economy grew 0.4% in the first three months of the year but down from 0.6% in the last three months of 2007.

8] The number of UK surveyors reporting falls in property prices has risen for the ninth month in a row.

9]Manufacturers are raising prices as they face the strongest cost pressures in over 20 years, a Confederation of British Industry (CBI) survey shows.

10]Mortgage lending to home buyers has hit its lowest level for 33 years .

Ten stories what's the common theme?

They were all lifted from BBC business page. Oh, and all 10 were stories TODAY 13/05/2008.

A tax bribe, however welcome, isn't really an economic strategy. And it isn't going to stop the pain. £2.7 billion pounds spent on an election struggle will only cause many more problems for the future.
Is there any long term plan for dealing with a worsening economic situation?
Anyone know? Or are we just winging it.

Is It Just Me ... ?

... or are these people nuts ?

"The banking crisis definitely does seem to be easing. Lots of people have said it over the last two weeks, from the Bank of England to Hank Paulson, the US Treasury Secretary, and Alan Greenspan, former chairman of the Federal Reserve. Everyone seems to agree that the worst is over, with the nadir marked by the near-collapse of Bear Stearns in March.

We all have too much at stake to take any pleasure from the thought that these guys are just whistling in the dark. But seriously, people !


Monday 12 May 2008

Sunny Delight

Retail Sales are slipping confirmed a survey by the Confederation of British Industry’s (CBI) Distributive Trades Survey.

Lots of talk about poor April weather and an early damp Easter are factors being blamed.
In retail, holidays and weather are major major factors to shifting goods. April 2007 was a surprise heatwave which boosted sales. But the current trend is still down with any product related to the housing market seemingly worst affected. Some stores are ordering less from their suppliers because they believe that the longer term might be very tight. The long term news for economic growth.. not that good.

But I would expect to see for Summer 2008 a revival and decent growth beginning in June across most retail sectors, that Mr Brown and the Mr Darling will use to suggest interest rate policy is working as predicted. It is controlling inflation but not hindering economic growth. They may be right, but that won't be why.

The real reason will be the awful rain and terrible flooding of Northern Ireland and much of the Midlands and South West last June. May-June 2007 was the wettest since records began. Average rainfall across England was 140mm , more than double the June average. July was little better and bought yet more flooding. Year on Year figures will almost inevitably rise.

Retailers still sitting on all that unsold patio furniture, paddling pools, and sunglasses from last year will have bought in less this year but will be very keen to make hay while the sun shines. Expect heavy discounts if consumers look like not spending due to tight budgets, or to clear old stock if this current great weather begins to look like fading away over a long period.
Supermarkets all missed out on the BBQ and Beer and Ice-cream sales etc of last year are itching to make it up this year. Plus the low value of the pound to Euros and the lack of a holiday loan or a credit card to put it on will keep many of last years escapers at home.

Messrs Brown and Darling can claim the usual credit for
an increase in consumer spending while the heat is on AND/OR to a fall in consumer prices, and so to a fall in inflation, if the rain comes back. The very best of both worlds.

Even better they haven't got to actually do anything.. except enjoy the sunshine with the rest of us.

Sunday 11 May 2008

Sunday Business Roud-Up - GutenMorgen England

A short business round up this week as I am due to fly out on a business trip for a week in a few hours and have much to get done.

Overall I note recently that although there is a lot of ill-informed discussion of the macro-economy, there it little attention paid by the media to the real business news. Nick's post below is a great example of real stories that are going under the radar whilst the media try and hound Gordon Brown into resignation.

As it happens, things are exciting as ever in the world of business - here are five links to the more interesting stories below:

Vodafone goes splurging - Once the UK's biggest company and back on the acquisition trail for MTN this time. A true British success story.

But HSBC can't escape the sub-prime mess - Will this acquisition of a US mortgage company be compared to Marconi's insanity acquisitions which destroyed that company one day in the near future?

Sensible ideas discredited - This leaked memo about energy policy is great, note that the sense finally dawning on UK ministers is pilloried in favour of fairyland thinking!

US criticises APD - Even foreign governments are sick of Brown's stealth taxes!

Diageo saves St James' brewery - Company makes investment to save spiritual home of Guinness. Note to Blue Eyes as to my choice of tipple for our drinks on 22nd May.

Saturday 10 May 2008

The Glorious Ninth: Open Season on British Energy

Raised yesterday in comments by our Hon Member Mr BQ, EDF has opened the bidding on British Energy.

This is all highly political, and difficult to read in detail: but by way of marking the spectators’ cards we can list several solid principles:

· BE’s main value is as a collection of sites where it would be easiest to build new nucs

· Otherwise it is a gigantic liability

· EDF is an even bigger liability, but Sarkozy is playing double-or-quits with the whole EU

· People will always need electricity

· There isn’t much that can’t be done with (a) a guaranteed income stream and (b) an indemnity on decommissioning in your back pocket

This last statement is rather based on the easy financing conditions of recent years. I am continually probing utilities and other energy co’s on whether the Credit Crunch has bitten them yet, and they all say ‘no’. But I really wonder if this can remain the case indefinitely.

If it doesn’t, the lights will go out some time in the middle of the next decade.


Friday 9 May 2008

Statement of Investments/ Poll Results

Despite my efforts, I have a small amount of investments as MRs CU gets her hands on cash long before I am able to remove it to safer places.

Clearly I do not give financial advice nor want too. However I thought the readers would be interested in my current portfolio which I change very few months on average - I have replaced the poll this week to make space.

The Poll on interest rates was not all that exciting, with the overall prediction that rates would end the year about 1/2% lower than they are now. Quite likely to happen, although this will let the inflation genie out of the bottle!

Hope the weather holds and we all get a nice weekend.

Thursday 8 May 2008

Snail Mail shake up

Well, we have already said here that it wouldn't work.

The Independant Review Panel has pretty much decided that there is little or no benefit of mail privatisation to UK households or small businesses. In fact all it has really done is damage the universal service that everyone benefited from. Without the subsidy from the business customers the universal service cannot survive.

Royal Mail has lost or is losing its most profitable customers while being forced to keep its most unprofitable and loss making ones. Regulators already ruled out posting zones, the abolition of 2nd class and reduced collection and delivery times some while ago, but you can be sure they will all resurface soon.

Recently La Poste, France's national postal carrier has bought a controlling stake worth around £20 mil in BTB Mailflight, a British company that handles international business mail. La Poste already operates La Poste UK and this deal is an expansion to allow collection and sorting operations.

And here is the problem. La Poste has has a monopoly in France. It faces no competition in it's domestic market and is also allowed to operate in the liberalised UK mail market. It can pick the best bits from the business market here and ignore the less profitable. Meanwhile Royal Mail must take the less profitable and cannot pick up any business from France at all.

There are currently 19 licensed mail carriers in the UK, and that will only increase as there are almost no restrictions to entry and a license cost just £50.

Why did we allow this situation to develop..? erm, wasn't it to allow greater CHOICE for the consumer, cheaper postage rates and an improved service.
It wasn't a sneaky way of dumping Royal Mail,Parcel Force and Post Office Limited onto the private sector was it? Well now that the RM requires a "fundamental reform" then come on Mr Darling, you can tell us, we can keep a secret..

Wednesday 7 May 2008

Scorched Earth UK

Things are getting out of control for the Government at the moment and the media and blogs are full of febrile ideas; how to get rid of Gordon being the main one.
However, as we all know deep down, Labour are unlikely to find courage in amongst their lack of convictions and we will be stuck with Brown until 2010.
As the momentum shifts away there will be a damage limitation strategy – damage to the Labour Party that is. Instead the Government will turn to the idea of wrecking things for the incoming Conservative administration.
Private Eye likes to caricature Brown as Stalin and he could copy the ogre in this regard.
Here are my 5 thoughts for upcoming policies which could cause huge long-term damage to the next government and so potentially place Labour well for a renewed grasp at power in 2014/15;
  1. Spending – Keep doing it, perhaps even with some tax cuts. The public finances will then be in such a mess, with PFI, public sector pensions to be taken into account too, that the Tories will have no room for manoeuvre and will be castigated by the OECD, EU etc for the poor financial state of the economy. A financial straight jacket will have been created.
  1. Move inflation measure to from CPI to RPIX – This would overnight change the mandate of the Bank of England, pushing inflation statistics 2% higher. Interest rates would have to rise, causing pain in the economy. Look for this to be done at the end of 2009 for maximum effect on the new government
  1. Proportional Representation for Elections – The Left could try this one, to deny a Tory government ever getting into power. It would please the Lib Dems too. Seems crazy, but when men get desperate…could this keep Brown in No. 10?
  1. Deliberate inaction on Energy Policy – With no new Nuclear build or coal stations built, the Country could face a serious energy crisis by the middle of the next decade. Although labour’s fault, it would be deep into a Tory government and what government could survive the lights going out…
  1. Further Nationalisations? – A huge cost (see point one) and would leave a nightmare of complexity. They could do private schools or the railways – re-assuring the core Labour vote for opposition and leaving a dog’s dinner for the Tories.
I am sure there are plenty of other more subtle or clever ways they could perform a scorched earth strategy. Answers in the comments and I will do a follow-up post to analyse.

Tuesday 6 May 2008

Those Policy Initiatives: errr ... yes, Minister ...

Liam Byrne, the immigration minister, will attempt to outflank the Tories by saying that British jobseekers will "get the first crack of the whip"

A palpable vote-winner, I think, appealing to Capitalists everywhere and just the policy to set Brown back on the road to victory.


Monday 5 May 2008

England Expects

An accepted leader has only to be sure of what it is best to do. If he trips, he must be sustained. If he makes mistakes, they must be covered. If he sleeps, he must not be wantonly disturbed. If he is no good, he must be poleaxed.

- Winston Churchill

OK you Labour MPs out there, you know it’s true, you’ve got 6 weeks, what are you going to do about it ?


Sunday 4 May 2008

Sunday Business Round Up

Quite hard to focus on the business sections today when the Tories in the UK have won a set of elections by landslide for the first time in my adult life. Still, the business news continues to be varied and interesting in these times. Even Gordon Brown in various interviews this morning admitted that the economic situation would make or break his premiership; things are not looking good for him then, are they?

Yahoo/Micrsoft off - Deal of the centruy no more. Perhaps they read about AOL/Time Warner?

Tax Fisticuffs - Company executives are serious about their opposition to Government tax changes.

UK Mortgage Woe - Building societies struggle to find money to lend...

Barclays under the spotlight - Bank asked to explain why it is so different to HBOS and RBS that it does not need to raise any more capital.

Bottom for the banks? - A report that hedge funds are closing their short positions. Perhaps though this is becuase of the difficulty of reflecting prices pre and post rights issues.

Jarvis to be sold - This time for only £100 million.

Emirates saws above BA - The UAE airlines shows the benefit of being backed by Sovereign Wealth funds.

New Order - The Telegraph 20 will show us the real UK economy, more so than the FTSE100. Not such I bad idea..

BAE A OK - BAE to be cleared in investigation into business practices.

Olympic costs - Set to rise even more, will this never end!!

Friday 2 May 2008

Friday Fun: British at work

Enough now of the local elections, Guido, Dale et al can keep you all as updated as you want to be.

Over recent there has been much talk of change in the British nature, weeping openly at Diana's funeral, youth getting drunk etc.

But I want to focus on some core values us British still hold. Nowhere can better demonstrate this than the office. I work in a very open plan area these days and it shows all our best/worst qualities.

Only the other day a manager was tearing strips off someone of the phone, very loudly and effectively with about 20 people listening. The advantage is that in this day and age of 'hot desking' we have no idea who the manager or employee was. Everyone sits stoically listening whilst trying to establish via the intranet who is being harangued.

Equally quite a senior manager was effectively made redundant the other day too; true to form, everyone kept their own counsel and proceeded to ignore the poor chap and carry on as normal whilst he sat there contemplating what to do. No one must mention the unmentionable, even to someone they have worked with for years and years.

Finally, nothing gets the office going like the coffee/tea machine being broken or a lift. Sod the credit crunch and its career limiting influences, all hell breaks loose if people are denied a cuppa; indeed the only time many pliant employees will dare darken the companies esteemed name.

So for all the talk of change, I think many British qualities are still to be found in our places of work....

Thursday 1 May 2008

The Big London mistake

How Ken Livingstone and even the Labour party must have smiled back in September 2007 when they saw the opposition's choices for London Mayor. A likable celebrity buffoon, prone to horrendous gaffes, Boris Johnson was likely to demonstrate just how little the Conservatives considered their chances of winning London.
Pick a joke candidate, sincere, intelligent, but hopeless, and have fun taunting the mayor on buses or parking or budgets until Ken is re-elected.
Brian Paddick. A homosexual policeman. What could be better if you consider Ken needs the ethnic and immigrant votes. Plus his stance on legalising drugs will drive some family middle class the Mayor's way. No matter if he is sound and has sensible things to say, like Boris Johnson, the political damage is done as soon as he stands for office.

If Ken was allowed to choose his opponents himself he would have chosen Brian and Boris.

So, rather like Gordon Brown, Ken must be wondering what has happened to his fortunes. and how they turned so swiftly. Well, the reasons are similar.

Large Tax rises..
Big claims made for improvements..
Failure of delivery..
Bereft of new ideas...

8 years of making promises that have yet to be seen to be delivered on is a hard task.But Mr Livingstone is a very shrewd political operator, and it shouldn't have been beyond him.

One of the things Mr Livingstone must reflect on while waiting for the votes to come in, will surely be his lack of care with the London Media.
The Evening Standard, circulation of some 250,000 is a widely read daily paper.Making an enemy of Andrew Gilligan over the paper's investigation into improper use of public funds by the Mayor's office, was surely one of the greatest miscalculations the Mayor has made.
The original response to the Lee Jasper stories was that Mr Gilligans evidence cannot be relied upon [re Hutton] and insinuated he was politically motivated and racist.
That, plus a refusal to even consider that there was any wrong doing on his part caused great damage later on when Lee Jasper resigned rather quickly. The investigation into corruption continues.

With an election on the horizon why didn't the mayor at least try to keep the media onside. The London Media too! Where do the journalists live Ken? Had you forgotten?
By just agreeing to the proverbial 'review of policy and tougher safeguards in the future' it would surely have eased his predicament. Maybe even persuaded some that he was a decisive leader, quick to act and would have no hesitation in tackling corruption from any source.

It sort of worked for Gordon Brown over the David Abrahams donation scandal. Few really blamed him directly for it and others fell while he remained.The Labour party rather than the leader took the hit. Livingstone could have tried the same tack.

For some reason, maybe a dislike of the Standard and a liking for Lee Jasper, the mayor's political instinct seemed to desert him and he made an enemy of London's leading newspaper.
Mr Brown would rather hug Vince Cable than upset The Sun.

However it turns out on election day he must rue on the fact that it could have gone a lot easier.