Sunday 30 November 2008

All Hail, The Economy is Saved ! That 2.5% In Full

Just another straw in the wind as 2.5%-off-VAT-day looms . . .

Mrs D and I occasionally patronise a well-known hotel chain. A day or so after the PBR, they wrote to us thus:

We will immediately be passing through the full 2.5% VAT reduction - book now !

Fair enough, very public-spirited of them; but wait, what's this ? Yesterday, they wrote to us again:

50% off all breaks - book now !

What will they be saying next week ? If we wait a bit, it will be cheaper to go and live there. Why would we book now ?


Saturday 29 November 2008

"Of course, they're all raving mad, you know!".

Some people have been looking for patriotic ways to go forth and multiply their credit card payments in order to help the UK through the recession. Among others Blue Eyes wants to know what Britain makes and Hatfield Girl is disappointed by a trip to London's West End.

This desire to back Britain is not new. Forty years ago 1968 the "I'm Backing Britain" campaign got going. Five secretaries volunteered to work an extra half an hour each day without pay in order to boost productivity, and urged others to do the same. Prime Minister Harold Wilson was delighted to seize the opportunity to endorse the campaign. Harold was an even better spinner than Gordon, and had that same feel for a popular story and the public mood as Tony. He needed a boost as the British economy was in difficulties. Despite tax increases announced in July 1966, the 1967 budget had seen the greatest deficit in post-war history of £1,000m.{2008 excluded} The government famously had to devalue the pound from $2.80 to $2.40. The only good news was the "opportunity" to increase exports.

Robert Maxwell waded in with his "Buy British" campaign and a very brief jingoistic period of late 20th century British Union Jack flag waving history began. Just a few weeks ago The Archbishop of York called on the Government to lead a campaign to encourage shoppers to buy British food

It is worth a quick read to see how these well meaning and well intentioned campaigns turned out.It was always going to be tough even with the advantages of limited globalisation and a stronger British manufacturing base. Calls on the public spirit couldn't hide the economic realities.. The best example being the thousands of T/Shirts with the "I'm Backing Britain" slogan, that had actually been manufactured in Portugal.. The marketing director explained that "we just cannot find a British T-shirt which will give us the same quality at a price which will compare"

At the conclusion of the film Carry on up the Khyber which opened in November 1968, the raising of a Union Flag with the "I'm Backing Britain" slogan is greeted by the evangelist Brother Belcher, fresh from his dinner under shellfire with His Excellency Sir Sidney Ruff-Diamond, turning to camera and saying..

"Of course, they're all raving mad, you know!"

Friday 28 November 2008

Damian Green vs 'Taking Liberties' Brown: Time to Pick Sides

In 2007 Gordon Brown delivered himself of a pompous lecture on Liberty. He was probably very proud of himself.

I want to talk today of liberty
(Just as I talk of courage, in the hope
That, by association. I’ll be thought
To be their perfect representative)

And how does this philosopher-king conduct affairs in the benighted country he rules ? By arresting opposition politicians.

Now five and fifty are the power we hold
To enter homes upon authorities’ whim

So we shall bring together all these powers,
For clarity, into a single code
(the better to coordinate our raids)

Damian Green is a measured, bright and diligent chap, whose contributions to public debate are well-regarded across the political spectrum. He has many friends (I count myself one), including a lot of journalists - he worked at the Beeb and Channel 4 for several years, and briefly on the Times; and his wife is a barrister, well regarded in the Inns of Court and amongst the City fathers. There will be outrage, nay fury, in many influential quarters.

It's outrageous. It's also quite a blunder.

To each new generation falls the task
Of redefining British liberty
(and you can safely leave this task to Me.
Yes, safely sleep, and leave this task to Me.)

'Liberty Brown': a sick joke.


Wednesday 26 November 2008

Woolworths and MFI into administration

Letters from a Tory asked us a few days ago if any company would collapse before Christmas. I thought a few would go into administration in January rather than down shutters and goodbye.
Woolworths was always the most likely to go as regular commentator Houdini replied "I don't know Bill, a few retailers are due to close before Christmas, ..I do see DSG pairing back a few names like PC World, along with maybe JJB, Homebase, Focus at a push, DFS ..

Well predicted Houdini and I replied "JJB sports/JD more likely to merge than collapse for example. But there is always a FarePack around. I guess one of the big furniture/kitchen suppliers {MFI is already at fingertips}"

Mr Sugar appears to have escaped from the disaster of our original story on Woolies as his share acquisition fell through. Lucky lucky man!

So some 35,000 jobs lost if you add in all the delivery contractors and suppliers to MFI, plus all those same suppliers getting 5p in the £ or whatever may well fold up a few more companies. Very bad news for all concerned, and Mr Brown.

And as Woolworths slip into administration the fear for other retailers is that their already heavily discounted, damaged margin, products will not be able to match the genuine 1/2 price stock clearance, "everything must go""final few days" sales that will come from the administrators. Clinton cards shares for example keep falling. 1024 stores, already 7.1% down, 21 store closures since August and about to be hit by the Woolworths "sell it for what you can get" card sale tsunami. Doesn't look good. Add in all the toy companies, kids clothing firms and confectioners, dvd/cd/video game shops who will be hit by a dying competitor at the worst possible time.

For shoppers its great,but it does rather show the pointlessness of 2.5% VAT reduction when if you're not 50% off then you're not even going to be in the game.

The end of Pic'n Mix; Woolies bows out?

The Pesto Wire has another flash - apparently Woolies will go into administration, the Stores part tonight. BBC worlwide, the capitalists armed with the licence fee, will buy another piece and the distribution business will carry on as a profitable venture.

Long negotiations with the banks have failed, as they always do unless a company genuinely truns around its cash flows and builds working capital. Peter Mandelson could not help, much like Darling could not help Northern Wreck raising rates on mortgages today - the government is howling into a gale. Perhaps these setbacks will encourage a little more sobriety and less shouty 'saving the world' mouthiness on their part.

However, I have not yet entirely given upn on Woolies. Hilco was trying to buy the stores to sell some to Tesco and keep the profitable ones. It could buy the leases and warehouses out of administration, much like Barclays bought Lehman's having walked away when the company was alive.

At least Deloitte are the administrators, with a bit of luck it will be Lee Manning who is always very keen and good at keeping companies going.

Tuesday 25 November 2008

Connecting the dots

More bad news was bound to come out of the PBR today. Following on from yesterday, Guido has an excellent scoop on 18.5% VAT to come in 2 years time.

As I pointed out yesterday, there is more to this than meets the eye. For a long-time there has been a desire for tax harmonisation across the EU. Indeed, by raising taxes so much in the UK over the past 8 years, Labour has moved us to a position where this may even be beneficial to the majority in the UK due the the EU average having lower taxes than the UK.

Even if that seems far-fetched - VAT harmonisation has been on the table for a long-time. The EU will be looking to consolidate its power in a time of crisis; this is one of the first steps.

The Beeb: Interesting Comment from Dennis

Commenter Dennis posted this in the comments to the item below:

All the BBC cares about is its own survival, and in recent weeks that has been called into question. "Sachsgate" got the nominally right-wing press frothing at the mouth about the BBC's arrogance.

Both online and in the prints, readers wrote in to denounce the lowering of editorial standards and also the BBC's blatant pro-Left bias. Charles Moore declared that he would not renew his TV licence while Ross was employed by the BBC; this seemed to be a catalyst for a torrent of other pledges not to pay, from readers. The anti licence fee thing is gathering momentum at the Express, Mail, and Telegraph.

Now the only way the licence fee can be enforced is if the BBC's black propaganda is widely believed. Exposure is being given at last to the truth -- that the detector vans are just empty Transits, driven round council estates to make the feckless pay up; that the enforcement officers are nothing but doorstep salesmen, paid an £18 commission for every licence they can sell; that TVL is no longer the licensing authority and has no statutory right of entry; that the statistics quoted in their threatograms are so variable as to be laughable; etc.

A devastating weapon in the refuseniks' campaign is withdrawal of the Common Law implied right of access. This technique has now got out via the online comments appended to the newspaper articles I mentioned.

If WOIRA becomes widely understood, the licence fee is a dead duck. The BBC are consequently terrified. They fear a large-scale revolt like the one that ended the TV licensing scheme in New Zealand.

That, I think, is why they are moderating their tone. The change will be patchy, since it must be effected by word of mouth rather than memo.

It is unbelievably stupid of them not to have sacked Ross. When he returns in January, that will provide a focus for another BBC hate-in. By that time many more viewers will have been wised up; 2009 may well mark the beginning of the end of the licence fee.

The Penny, Dropped

In company with the greater part of the UK political blogsphere, I have been critical of the BBC's biased reporting in the past many weeks: never entirely beyond reproach, it struck me as having moved into new, partisan territory since the return of Mandelson, and (since it's all out there on the www to be seen) it wouldn't be too difficult to document it forensically, if anyone could be arsed.

On Friday of last week, however, a change was detectable: the usual suspects were mostly signalling a skeptical suspension of judgement on the heavily-leaked PBR. The change seemed to come in a single day.

Yesterday's and this morning's coverage reinforces my view. 'Gamble' is the predominant epithet and both Robinson and Peston (though Guido finds fault with the latter) were not slow to voice their doubts.
Newsnight lined up bucket after bucket of cold water. Only the Independent has a less-than-cautionary headline today, and even they offer plenty of critical commentary. Toynbee's plaintive delight at a socialist budget is drowned out by the responsible, worried murmurs of the grown-ups at the Grauniad.

What's happened ? Has someone taken Auntie and her friends to one side and pointed out the error of their ways ? Has Mandelson overstepped the mark in one of his endless, 'forceful' private briefings ? Or has the enormity of Brown's recklessness, the sheer impausibility of Darling's assumptions on recovery, finally dawned on these essentially intelligent commentators ? (and with it the ever greater likelihood of an end to this mendacious NuLab regime - even the Beeb must have one eye on that).

Who cares ? The salient points are out there. Brown has marched us up to our very nostrils into the mire. Darling has fixed the forecasts - so patently it insults the shell-shocked intelligence - so as to downplay the scale of the disaster: and even then, it's self-evidently monumental (Robinson understands what a trillion is, even if some of his viewers do not).

The penny - nay, the trillions of pennies - have dropped. What can possibly happen between now and whenever, to cast this in a more favourable light ? Nothing that I can imagine.

The flares hover above the field. Let battle commence, on properly-illuminated ground.


Monday 24 November 2008

Initial reaction to Darling PBR Speech

So, predictably, it starts with a reference per sentence to the Global economic situation. Yawn, if repreated enough do they think I will believe?

I see the BBC has Ian Watson doing the analysis - i.e. pure politics. All he concentrates on are Labour's moves to try and box in the Tories.

Perfect really, a screwed economy and all the Government want to do is cling to power and bash the opposition. Just what we need.

All with borrowing by the Government up to 8% of GDP - back to the days of the 3 day week for the UK. All we need now are the power cuts to match the 1970's.

The prediction of 0.75% to -1.5% GDP retraction next year is highly optimisitic. Looking at the trend line from this year Q1 could be -1% alone.

It has just occured to me too that there is much EU pressure to harmonise VAT at 19% or 20%. perhaps this cut is being taken so that when the tax is raised again in 2 or 3 years we can sign up to the EU tax harmonisation programme.

to be continued...

Gordon's Economic Rally

Gordon and Alistair have been in this race for sometime. The end destination is a massive pension pay-off and autobiography sales. All they have to do is drive the UK Plc car for a 3 year stage, but they seem to be struggling on the way....

"Gordon we have to stop going left all the time."

"Darling its the only choice, right takes us down the dark path, it can't be the correct choice, you are reading your map wrong"

"Don't talk to me about map reading, when you gave me the map it was upside down and the route had to be crossed out and re-marked"

"That is not true Darling, the route was clear and there had been only minor historical revisions to re-order the effects poor statistical analysis"

"Mind that bump there or we will hit another credit crunch"

The car wheels left and nearly off the road.

"Make your mind up Darling, are we going to deal with that crunch or just keep avoiding it"

"I don't think the car can handle it Gordon, there is a long-route around, let's try that today"

"But we nationalised the Banks, lectured the world on fiscal prudence. We will go over that crunch without a bump. I am a genius driver, but just in case I am not what is the alternative?"

"Gordon, your the Boss the, next alternative turn is a hard right into the forest of fiscal stimulus"

"Hard right it is then, don't think I have ever done one before, but if we are going to get our rewards then we had better take some risks. After all tax cuts are what Socialism in the 21st Century is built upon."

"You have the knack now Gordon, you seem to have Tony's victorious twinkle in your eye now.It's OK Gordon, once we have done the first turn there are a myriad of small left's to tale in the future, higher taxes, government subsidies - a miasma of Big Government tinkering. It looks like a right now, but actually the end point is considerably Left of where we are as the crow flies"

"Let's get on with the job then"

"One Hard right to beat the opposition then Left all the way"


"Yes Darling"

"I love you. You arte taking me back to my dreamy university days of the 70's - oh the joy of my misspent youth in the library with mr Marx. We are going to go so far left and back in time that Michael J Fox won't be able to find us"

The wheels screetch as the car braces against the turn, but can the turn be made of does the car go off a cliff? To be continued at 3.30pm today...or not.

Sunday 23 November 2008

Radical Solutions; Suggestion 2; NewCo Bank

The other day I posted about using a monetary stimulus, printing £'s that is as a possoble solution. This had a mixed reception but I was glad to see the idea being discussed on Newsnight on Friday; so maybe not as barking as some would have you believe.
There are of course many problems with that idea (see comments to the article) but it is going to do more than cutting VAT by 15% for a year or so which is the Government plan plus a few small tax breaks for their client estate Labour voters.

The next proposal I have is more radical and is inspired a little by Anti-Citizen One's comment on my blog months ago.

Our banks are bust, they have far more toxic assets than they can cope with and are slowly going to die or be nationalised. All banks have the toxic virus as they all bought into the real estate bubble and structured finance con.

Yet businesses are crying out for loans, people need mortgages and car loans, the economy is stuck with a terrible monetary collapse - fiscal tax increases are not the answer (at least David Cameron get this as he said on Marr this morning in a very impressive interview).

What we need is a new bank or banks, one unemcumbered by the debt. Then the old ones can be wound down over time and the new ones take their place. So what is stopping this? Well a new bank needs a lot of capitalisation (hard cash), a branch network and lots of staff. Fortunately all these are avaiable for a song right now. The UK Government already owns the Norther Wreck and Bungle and Binglie networks and staff and could make better use of its assets.

Instead of a further investment into the likes of HBOS, we need new national champions - let the shareholders and bondholders in failed companies take the strain and not taxpayers.

Set up a new bank or two and then sell them to the private sector (most likley private equity coompany at first). They will have such a huge competitive advantage they will soon be able to clean up the monetary mess we have in the UK. Much of this work is already done, it just needs courage and some imaginantion to get it going.


Saturday 22 November 2008

What Jonathan Ross Tells Us About Banking Regulation

The following is an extract from the BBC Trust's report.

"The Producer wrote to Radio 2’s Head of Compliance … The problem comes when Jonathan says that Russell 'f*cked' Sachs' granddaughter ... I would say take it out, but it forms the crux of the call and is VERY funny … Let me know what you think. Russ and Jonathan both VERY keen for it to go out.

The Producer did not mention that Andrew Sachs had asked for the content to be toned down. He says he was extremely uncomfortable about the material but at the same time felt he owed it to Vanity Projects to make its arguments for inclusion with the BBC. That reflected the conflict of interest with which he found himself as an employee of the BBC while on loan to Russell Brand’s company.

The Head of Compliance emailed the Controller of Radio 2:
I think we should keep in and put a 'strong language' warning at the top of the hour. I think it's editorially justified in this context and certainly within audience expectations for Russell's show. Andrew Sachs is aware and is happy with the results. Are you happy with this as a plan of action?

The Controller sent a one word reply from her BlackBerry authorising inclusion of the material: Yes"
- - - - - - - - - - - - - - -

With just a very few changes, we can see how comprehensively the wider culture has been debased:

The Risk Manager wrote to the Bank’s Head of Compliance … The problem comes when Joe says that Russ 'has used slightly different contractual wording’ to that recommended by the Auditors ... I would say take it out, but it forms the crux of the deal and is VERY profitable … Let me know what you think. Russ and Joe both VERY keen for it to go ahead

The Risk Manager did not mention that the Auditor had asked for the unconditional financial guarantee to be removed. He says he was extremely uncomfortable about the guarantee but at the same time felt he owed it to the Private Equity division to make its arguments for inclusion with the Credit Committee. That reflected the conflict of interest with which he found himself as an employee of Risk Management while on assignment to the PE division.

The Head of Compliance emailed the Chairman of the Credit Committee.
I think we should keep in and put a 'risk factors' warning in the small print. I think it's commercially justified in this context and certainly within rating agency expectations for the sort of crap we regularly get them to sign off. Audit is aware and is happy with the results. Are you happy with this as a plan of action?

The Chairman sent a one word reply from her BlackBerry ...

- - - - - - - - - - - - -

And I think we know what she said.


Friday 21 November 2008

Friday Post

Spoke to my bank manager yesterday, he looked really stressed. We had a chat about all his problems and he said from now on I am going to stick to the big issues.

He sold me one just this morning before I caught my train...

Improvements on this welcome in the comments.

Thursday 20 November 2008

Christmas bargains at Woolworths

Back in October we had a piece on Woolworths Well they have always been known for their value and now you can get the complete Woolworths box set of 800 stores for just £1! (we guessed Tesco to take them over and split up the company, keeping the distribution chain and warehousing,and the best sites for Tesco Metros. Still the most likely option but they may buy them from administration and not face the debt) We also gave a nod to the problems of DSG, the former Dixons chain, whose share price just can't find the lowest point. Can't see any good news for them in the new year either. BBC radio reporting today that "retail sales didn't fall very far for October,just 0.1%, so spend spend spend." More balanced outlook from their news pages but still the line Many retailers have opted to hold pre-Christmas sales in a bid to boost spending at what should be their busiest time of year, is not quite right. October is one of the slowest months for retailers wh0 await the rush from, well about now, until first week of January. October was pretty good, but November sales so far have been pretty poor. Expect a "retail sales fall" call in the next round of stats.

Potential Radical Solutions; Suggestion 1

Yesterday we disclosed how the BOE has lost control of monetary policy. They only have the interest rate to control and this is meaningless in the face of LIBOR and CDS and the Bond market.

On Monday, whatever Darling and the media report, the Government will outline the loss of control of fiscal policy. perhaps with debt ballooning to 50% above target for the year.

As a result of the above the pound has sunk, now trading at £1.48 to the US Dollar and £1.20 to the Euro; Osborne's little saga apart there has been little public reaction to this.

When we then consider the issues facing us; deflation of asset values in all classes, capital inadequate banks, low savings, consumer over-indebtedness - we are in quite a pickle. it is very Japan circa 1990-91. They had a 10 year recession and their stock market is now 85% below its peak (=FTSE100 at 800, rather than 4000 as today).

But perhaps the BOE do have an answer. Print money now, deflation is setting in for the moment as global deleverage occurs - so the inflationary effect will actually be countered in the short-term. Plus inflation would then allow the BOE to raise interest rates back to levels which may enourage saving. Asset prices would be reduced in real terms and there would be more money to spend to stimulate the real economy. Also with no need to issue gilts, the government will not need to get into such financial hole as is currently planned.

In the US, The Fed Chairman Ben Bernanke has hinted at the US going down this road to avoid depression. The time to do it is now, in the deflationary window. If we wait until the deflationary period is over we could set-off hyper-inflation.

Thus there is a strong argument for printed monetary stimulus today. Comments?

Wednesday 19 November 2008

John Sargeant makes the news

In the commons today David Cameron and Gordon Brown clashed over the latest viewing figures for Strictly Come Dancing.
David Cameron used all six of his questions at PMQ's to challenge the Prime Minister on the top news story of the decade.

He began by pointing out that a paid for state broadcaster, that invites members of the public to participate in voting, had decided to over turn those voters decisions. Mr Brown responded by saying that the voters wishes had been fully respected but in this instance a decision was taken on the grounds of national security.

"Isn't it true that under this government there has been a decline in the standard of dance steps by 40% and that the public have little choice but to accept Mr Sergeant due to a lack of professionally trained dance instructors"
The Prime minister again declined to answer and added "In these difficult times it is frankly quite staggering that the opposition should be playing party politics with this issue -"

At this point Mr Cameron became visibly enraged..
The speaker had to call for order several times

Mr Cameron
I tell you what is shameful, and that is trying to shout down someone who is asking reasonable questions about something that has gone wrong. Let us be honest: this is a story about a 64 year old man who had no idea how to dance. It is about a man who could not Tango and who could barely walk in his shoes, and it is about a television department that gets £900 million a year and cannot organise its top rated show properly. That is what this is about.
In the case of failing schools, we take them over. In this area in White city, one in four Latin dancing clubs are completely vacant. The BBC does nothing to help struggling local Rumba schools that are failing. I do not expect an answer now, because we never get one, but will the Prime Minister at least consider whether the time has come to take over this failing light entertainment department and put someone in charge who can run it properly?

The Prime Minister: I think that we are both agreed that this is a tragic and serious loss of a man who had captured the nations heart and that lessons can be learned. I think that the right hon. Gentleman would agree that appointing Sir Bruce Forsyth to go around the country and look at what is happening in each area so that we are assured about what is happening is the right thing to do.

The PM then went on to say that Mr Cameron should

"..stop all this defeatist talk and concentrate on the real issues. What plans do the Tories have on John Sergeant quitting Strictly Come Dancing? They have no plans for Hungarian folk dance, no plan for Jive, no plans for Modern Tap.Mr Cameron offers nothing but empty promises of two free Salsa lessons for every family. We have ended B-Bop and Bugg. We have steered the country through the difficult period of Grunge dancing and the equally difficult Alternative rock and Indy band shuffling in the corner into the current mania for Ballroom and we will continue to do so"

Mr Cameron replied "That's just Bollocks"

BOE: Lost and without paddle, boat leaking

The notes from the last BOE meeting are out today. They make grim reading. In short as I see it, they say they had little idea of what was going to happen to Lehman's or post Lehman's.

great - they have no foresight, by admission. Historically interest rate adjustments have been use to control the economy over the next 2 years. So a lack of foresight is rather a problem.

Then they go on to note that rates will come down further as inflation falls below target. This is all well and good for the next 6 months. then what?

I fail to see how inflation can remain low when all the deleverage has occured. The £ will be low and imports will cause inflation, the closing of factories will mean less suppliers. less suppliers eqauls infaltion in time as demand picks up again.

Given that commodities et al are markets I fully expect them to over-shoot on the downside. Hence we will have inflation, especially if the dollar tanks too as is likely at some point next year. G20 Global fiscal stimulus is inflationary too in the medium term.

Yet the bank sees maybe 0% interest rates next year. maybe so, but I hope not for long. otherwise the doomsday scenario o f borrowers being killed by deflation and then savers by inflation will come to pass and we will all be immeasurably poorer for it.

New Baby Boy - Congrats to the Quangos !

Excellent news, Mr & Mrs Quango have a new baby boy !

As good Quangos should, they've also published the statistics - and it's 7.3 pounds.

Heartiest congratulations !

Tuesday 18 November 2008

Do As We Say Government

Our embattled government, currently being given a bizarre free ride in the media, continues to act in an authoritarian and cynical manner;

- At the weekened, the hystercial reaction to George Osborne was a sign of massive tension within the Government. The PM, Chancellor and several ministers were put out to slate the Tory statement of the obvious.

- Today, the Chancellor has dismissed the claims that HBOS could remain independent. He has unilaterally withdrawn any potential support for the Bank outside of the current Lloyds merger, as agreed by Gordon Brown. The show must go on as directed with no deviations allowed

- Next week, a Labour Government who have raised taxes for11 years are to announce tax cuts to stimulate the economy. This in itself it ideologically, morally and fiscally wrong. Labour know it, bu they have no clothes. No doubt they will attack the Tories for opposing them. This is real George Orwell Doublethink territory.

- Finally today and crucially the economic news is still very bad, inflation has fallen by 0.7% and the markets continue to tick down anyway. Worse, rents are falling as demand for housing dries up. House prices cannot find a new level with rents still falling - so expect a much further fall in house prices next year. Current predictions of 15% are laughable. it is quite possible top to bottom average fall will be nearly 50%; that is 30% more from here.

You won't here this from the housing minister. Next week the Government will announce more borrowing to spend our way out of a debt crisis. The insanity continues and I am at a loss as to why the media either cannot grasp this or are happy to see the current Government take little flak for its appalling economic mismanagement.

Monday 17 November 2008

Difficulties with Reality

Several contrasts of peoples' opinions have struck me recently, I thought they should be shared:

- Loving estate agents getting sacked; hating house price falls.

- Wanting an end to the recession; admiring our 'Strong' Government.

- Seeing bankers brought down a peg; not wanting the credit crunch to cost 'their own' job

- Wanting rid of George Osborne; disappointed to see Labour Revival (that is me, although have been v. impressed by his courage under fire the last few days)

- Superior pride of new found frugality; whining about lack of foreign holidays

- Pleased the Post offices have been saved; moaning about length of queues in post offices

- Working as a neutral BBC journalist; biased pro-Brown reporting

Any others worth sharing?

“everyone has a share.” The result of G20

Gordon Brown explains Milo Economics to the other leaders of the G20

Milo's M&M Enterpises syndicate is selling seven-cent Maltese eggs to the mess halls at a price of only five cents an egg while still making a profit.


Seven-cent Maltese eggs cost the sellers in Malta four and one-quarter cents each to procure. Milo is actually buying the eggs from himself in Malta, which means that as a seller there he is making two and three-quarter cents each egg. After he resells the seven-cent eggs to the mess halls for five cents each, he is still making a three-quarter cent profit per egg.

However, it turns out that Milo's Maltese eggs are actually one-cent Sicilian eggs which he has secretly shipped to Malta to drive up their value, yielding him another three and one-quarter cents profit per egg.

 "I make a profit of three and one-quarter cents apiece, and everybody comes out ahead."

"Do I have a share?"

"Everybody has a share."

"Does Orr have a share?"

"Everybody has a share."

"And Hungry Joe? He has a share too?"

"Everybody has a share."

"Well, I'll be damned."

"What's good for M&M enterprises is good for the country"

But Orr crashed into the sea and when the crew went to inflate their life jackets..
The life jackets failed to inflate because Milo had removed the twin carbon-dioxide cylinders from the inflating chambers to make the strawberry and crushed-pineapple ice-cream sodas he served in the officer's mess hall and had replaced them with mimeographed notes that read: "What's good the M & M Enterprises is good for the country."

Chaplin: Cheer up Yossarian. Milo's selling oranges and the syndicate is making so much money.
Yossarian: We won't see any of that money. We won't even see the oranges.

Sunday 16 November 2008

We started the fire

On reading the Times yesterday I cam across George Osborne's exact broadside against Brown over the currency devaluation. This has got Brown very hot under the collar, it is copied below:
Mr Osborne suggests that Mr Brown “doesn’t care” how much he borrows. “His view is he probably won’t win the next election. The Tories can clear this mess up after I’ve gone. That is deeply irresponsible. It’s a scorched-earth policy, which I think the history books will write up as a total disaster and which the public will see through between now and the election.”
Both Nick Drew and I started this theme of Scorched Earth a year ago. We even had unfunded tax cuts as a key policy idea for this. A bit of google history searching shows The Speccie linked to us and took on the idea and from there it went mainstream.

Glad to know we can indirectly get up the PM's nose when he is in such bombastic posture.

Saturday 15 November 2008

G20 - New Labour rules the World

This may seem like an odd title. but I belive it to be true.

With George Bush overseeing things rather than Barack Obama, there is not much the US can agree too. Further more some of the more outlandish ideas, like moving back to the Gold Standard need to be considered over a period of time.

So what we will be left with is an agreement that something needs to be done. This will be tax cuts for all, which have already been pre-announced, a reduction in interest rates, which also have already been done and an agreement for another meeting to discuss Global financial oversight for February 09 when Obama is in power.

So, in effect, we will have a New Labour meeting. No new news, just a re-hash of what has already been done and put on in a nice spinny manner for public consumption. Sadly, we all know now how ineffective a means of government this is.

I wonder if they will even get Madelson and Campbell to draft the final speeches?

Friday 14 November 2008

Typical I miss the party!

I went away for a couple of weeks and it seems you all had a huge party without me. When I left the UK on 28th October the Great British Pound was at 1.63 to the US$ and 1.25 to the Euro.

Then it seems Mr King had some sort of party at the Bank of England and decided to have a huge give-away...of our wealth. Looking at it now it appears in the two weeks I was away that we managed to wipe about £41 billion of UK GDP value in currency depreciation alone.

That is some party I missed, even the Millennium dome only cost 1/20th of that. Hope you al l enjoyed it. it seems the hangover is starting to affect some companies though....Perhaps the drugs are not working. In fact it is about the same as the highest estimates of the cost to China of the Beijing Olympic Games.

Anyway, some please tell me how good was this party, what did you all do in it?

Thursday 13 November 2008

U-Turn if you want to.. Post office card account

Another one for Mr Drew's U-turn list

Post Office have retained the benefits card and will surely cheer the 4.5 million users of the account. It will also cheer MPs who have been receiving around a 1000 letters each demanding that the POCA card stay where it is. As recently as this Monday 99% of people in the know expected the card to go to a rival bidder.
Quite why it didn't will probably remain shrouded in mist until a FOI can be obtained, but Mr Mandelson seems heavily involved. Who leaked the leaked letter I wonder?

The tender process {which Ireland simply said was unnecessary,went to the high court in the EU and then won their case} has been abandoned. Is this to do with compensation as no 'winner' was announced?

Anyway,the government has finally and after much much dithering done the right thing for small business, the rural economies and their own election prospects. Pitching some 5 million angry pensioners, and a further unknown quantity of outraged voters into the enemies camp is no way to prepare for election.

Expect the vote losing vehicle excise duty increase, announced last budget, to be U-Turned in the very near future too.

Wednesday 12 November 2008

"prices will plunge on the high street" says Daily Mail

Daily Mail yesterday predicted "prices will plunge on the high street". This is because of the 1% fall in factory gate prices for October, the biggest drop since 1986 and will mean cheaper goods.

The Mail also has the headline "Pound hits all time low against the Euro" The article goes on about how holidays will be more expensive now that a pound is fetching just 1.22 euros, down from 1.42 last year. The dollar also gets a mention as Holidaymakers travelling to America have also seen the pound fall from a $2 high in July to $1.57 now. Poor holidaymakers. Especially as that isn't even the tourist rate which is more like $1.48.

But the Daily Mail fails to join up the two stories even though

All your consumer white goods electricals, shoes, clothes, garden products,mobile phones, packaging, Plasmas etc are purchased in dollars. That's the basis for the Daily Mail's forecast of a record spending spree? A 1% fall in factory gate prices measured against a 25% loss in the value of the pound against the dollar. "Prices are being slashed by up to 70% by some stores with retailers promising the biggest bargains in 30 years" the article claims.

Maybe . If she'd looked a bit closer she would have seen they were in complete size scales and colour ratios meaning that they had only just gone on sale. These are "sale only" goods that have been purchased back when the $ was nice and high at $1.95 ish in the spring. All shops have them.M&S are doing a 3 for 2 on their Xmas decorations. But then they did that last year too. And the year before. And so do Boots. And Waterstones. And Republic. And... Retailers knew the downturn was coming and have shrunk inventories accordingly.

However sales figures alone {British retail consortium showing 2.2% fall} are bad enough to mean there will be some heavy discounting in December whatever the factory gate price or the dollar price may do.

Propping Up the 'Best-Placed Economy': Brown Goes to the Loan Sharks

Throughout 2008 our little SterlingWatch graphic has provided a running commentary on how the world sees Brown's performance. It will get several further airings, one suspects: see this salutary piece by Hatfield Girl.

The trouble is, Brown understands enough about finance to be dangerous - and certainly enough to know how to shore things up in the
short term. With the full fiscal and financial toolbox to hand, it's always possible to push problems out into the future: they'll come back amplified, for sure, but you can always get cash-in-hand for today by mortgaging tomorrow - see for example, his bailout of British Energy in 2002, and the whole PFI / PPP edifice.

Needless to say, Brown has an entirely short-term agenda: it may not even extend as far as 2010. In that short interval, all he wants to do is to maintain as much semblance of normality as can be bought, expensively, with a large chunk of our future prosperity.

But as even the most desperate must surely know, it's never right to turn to the loan shark. Matters must be confronted now: maintaining a semblance of normality in these conditions can only be delusionary.

Will the British electorate be fooled ? The world is not fooled, and it passes its verdict daily. "
Going down".


Tuesday 11 November 2008

Made It Ma ! Top-of-the-World Brown Fans the Flames

A year ago we started calling Brown's wretched scorched-earth policies: from aircraft carriers to polyclinics, through uncontrolled immigration and raising the school leaving age, the list is long and inglorious.

But now he's really decided to fan the flames, with tax cuts based on borrowing, as Tony McNulty kindly confirmed this afternoon.

With his hubristic proclamations and eerily fixed grin Brown reminds me of no-one so much as James Cagney in
the grim finale of White Heat, as he mounts the gas-tank, announces himself Top of the World, and opens fire.

We are not cinema-goers, however, but victims, and we will all feel the blast when this balloon goes up.


Monday 10 November 2008

The Laws of Supply and Demand Are Not Mocked

Here’s a powerful illustration of economic theory in action. On the back of strong demand and rising input costs, the steel industry worldwide has spent the first nine months of the year raising prices. See for example these press releases from thriving European steelmaker Corus: 17 of the 30 announcements between January and September heralded price increases. In August they recorded higher turnover, deliveries, earnings, profits and return on capital for the group.

Then, last week, came this.

In order to align its production levels with demand in the European market, Corus plans to reduce its production Oct-Dec by 1 million tonnes of crude steel, equivalent to 20% of its output. Corus has now decided to extend the production cuts beyond December. Corus expects to produce about 30% less crude steel than planned during the two quarters to the end of March 2009. Consequently Corus will temporarily idle one blast furnace at each of its Scunthorpe, IJmuiden and Port Talbot works …”

They are acting decisively in response to what they find in the market: and they are not alone.

Demand up, costs up. Costs up, prices up. Prices up, demand down. The bust isn’t just in housing. When you've finished enjoying your moment of triumph, Gordon, perhaps you could tell us: did this ‘start in America’ too ?


Sunday 9 November 2008

Gillian Tett: Plainspeaking Pin-up

As a blog that strives constantly to meet the goals set for us by Hazel Blears, in today's effort to add value we are instituting a bit of glamour. I give you the FT's multi-talented Gillian Tett, one of the very few journos deserving of honourable mention when it comes to foreseeing our current economic woes.

Lovely Gillian
, IQ 168, speaks Russian and Tajik: and she's a plain speaker, too.

Does she approve of [Brown's] handling of the crisis, or deem him guilty of mismanagement during his years as chancellor?

"Gordon Brown, like every other western leader, was shockingly complacent and negligent in failing to understand what was driving the City. The British government was happy to enjoy the fruits of the boom, but it didn't ask the hard questions."

Bit of added value there, eh, Hazel ?


Saturday 8 November 2008

Banks still a problem

Peston is reporting that there is trouble at Mill re the HBOS merger. Many HBOS ex-employees with shareholdings are aghast at the terms of the Lloyds deal. Sir Peter Burt,left, has form for this too. Earlier this year he was saying we should suspend accounting standards to help his old bank.

Well, good luck to them. Brown backed LLoyds to merge with them and the Government, slowly getting back some form of grip on events, is not going to get taken down on this. HBOS was in a terrible financial position and would not exist as an organisation today were it not for taxpayer support. The same cannot be said of Lloyds.

For all this though, the banks are still a huge cause of pain in the economy. Not lending money as they should, recalling loans and raising rates where they can on customers.

The policy of reviewing their books by the treasury and ordering them to take taxypayer support has still not worked. Libor is going down but is still high. The market are still prone to huge falls on any given day on the slightest bad news (and bounces too, as in all bear markets).

So, the Treasury plan is not working, interest rate drops look desperate. The Government, BOE and Treasury (..and FSA?) are still all flailing; and now they have hung out their credibility.

Expect more bad news until a more coherent plan is put together. The traditional muddling through has only stopped us being engulfed in the quick-sand, we are not free yet.

PS still on hols, back at the end of next week.

Friday 7 November 2008

Boing Boing Brown wins in Glenrothes

Labour win Glenrothes. A very good result for the Prime Minister with a Labour vote of 19,946 to the SNP's 13,209. A 6737 hold.Pretty amazing.

SNP struggling to put a positive spin on the result after predicting a win here.
That Iceland quote has come back to haunt Mr Salmond. He suggested that Scotland could join Iceland, Ireland and Scandinavia in an "arc of prosperity". That provoked a scathing retort from the Scottish Secretary Jim Murphy who claimed that it would have been an "arc of insolvency". Well quite.
That and some scaremongering over care for the elderly seem to have done the SNP in.

Oh, and a 1.5% interest rate cut probably didn't hurt {as the Labour candidate mentioned in his victory speech}
So well done Sarah.

Odds shortening on Mr Drew's prediction for an early election?

Thursday 6 November 2008

Going Down

We have published a few cautionary posts on this blog over the years, but today's interest-rate cut speaks as eloquently as anything. We are in Big Trouble.

Industrial companies that had not really seen too much to worry them by mid year are now seeing an absolute bloodbath ahead. Watch for long shut-downs over the Christmas break, that extend to weeks and then longer.

A collapse in confidence may start as a matter of 'sentiment', but it rapidly becomes as tangible as can be.
This has clearly been communicated to the Committee, and 150 bps is what we see as a result.

For how much longer can Gordon Brown keep whistling his ridiculous 'we are best-placed' tune in the gathering dark ?


Wednesday 5 November 2008

Republican dreams gone with the wind

Above are the states results for Obama's comprehensive USA Presidential election victory.
Here is the 1860 election results. Note: Lincoln's republicans are modern day Democrats. Breckenridge's Democrats are the Republicans There is no West Virginia yet. Ignore the west, hardly anyone lives there. when Abe Lincoln won this there was a horribly bloody and protracted civil war that consumed the country and changed it forever.

And the 1861 breakaway rebel states of the new Confederacy. Virginia was a really big win for Obama, but in 1861 it only narrowly decided to side with the rebels. Florida was mostly swamp back then, and not the major win that it was for the modern Democrats. Maryland and Delaware were slave states but sided with the union in 1861 as war broke out between North and South.

So, this means war..? No.Of course not. But it shows how hard it is to change historical voting.
Factors that play well in one area may not in another.

President elect Obama had a clear campaign strategy and he won where he needed to win. He campaigned extensively in enemy territory and forced McCain to spend time and energy and money shoring up the core vote. He also proved that his message of "change" was stronger than McCain's of "experience". Seeing that he also used "Change" to triumph over Clinton's "experience" this is a tactic that has worked twice, and one Cameron has been using for a while.

The London mayoral victory and Crewe and Nantwich were very very significant wins, showing that the Tories can attack the weakened Labour heartlands. A bold strategy may well be to not just play the marginals but to campaign on a much broader front. A cash poor Labour can't be strong everywhere. If nothing comes from the heartlands attack strategy it doesn't much matter. Look at the map. FL and VA were the targets but the Republicans had to defend the whole South. the 40 electoral college votes for FL/VA wipe out Texas and Alabama for the Republicans.

Lots for Mr Cameron to look at over the next few weeks as he begins to focus his challenge.

Prophecy Fulfilled

Whisper it softly, but Mr Unslicker called this one quite a while ago.

On his return from hols, he will be ... his usual modest self, no doubt !


Tuesday 4 November 2008

Royal Mail Chairman has had enough

Hellmail had a very good article here about the very strong likelihood of the Pensions Service card account {POCA} being transfered to the supermarkets.

As they say the likely date for an announcement, along with many many many other u-turns,bad results, borrowing figures etc is tomorrow. With news of the USA election and Glenrothes it will be another "Good day to bury bad news"

What prompts me to believe that Hellmail is right about the Post Office losing its core business is the resignation of the Chairman of Royal Mail, Allan Leighton, who steps down in March 09. He was charged with brining the Royal Mail group into profit by 2011 and has controversially, but partially, succeeded,with results for 2008 showing operating profits of £177 million and is at least mostly on target half way through the program.

However with some 20% of revenue being wiped off the Post Office if the Card account goes elsewhere this task would be almost impossible.

{the government apparently begged him to stay until a successor could be found but their overtures to potential replacements, reportedly including Phillip Hammond of Sainsburys have so far been unsuccessful.}
More on the politics and the seemingly faulty data that HMG has been using when the announcement is made

Monday 3 November 2008

Is Centrica Running the Northern Rock Risk ?

Northern Rock, it will be recalled, foundered on the egregious strategy of not attempting to balance its lending with savers’ deposits, but rather with borrowing in the interbank markets. When liquidity in the latter dried up, the business model - otherwise potentially viable - imploded. To use jargon familiar in other industries, they were not ‘vertically integrated’ and accordingly were heavily exposed to wholesale market conditions.

Which brings us to the gas and electricity sectors. Since privatization, the development of wholesale markets, and the introduction by Enron of the ‘merchant’ model, energy companies do not need to be vertically integrated. In other words, they don’t need to produce from their own fields all the gas they sell, nor generate all the electricity in their own power plants. Conversely, if they produce gas or generate electricity, they do not need to find end-user customers for it all. Either way, they can rely on liquidity in the wholesale markets to balance their energy positions. In good times, it’s arguably more efficient than forcing an artificial energy balance on, say, a specialist North Sea gas producer or a specialist energy retailer.

That is, until liquidity starts to look shaky. And, as we reported earlier, this is starting to happen, as the banks and other financial shops, who since Enron have been amongst the biggest players and indeed market-makers in the gas and electricity sectors, are experiencing credit-crunched reductions in risk capital available for any trading activity.

So – who is running the Northern Rock strategy in the UK energy markets ? Answer: well, several of the big players are not at all closely integrated, but some are more so than others, as this handy Ofgem report reveals (fig 2.4)

In electricity, E.on and Scottish Power are nearest to balanced, with Centrica the biggest short position and British Energy a big long. Uniquely, Centrica cannot even meet its residential-sector sales from its own generation: and EDF can barely meet its residential + SME demand.

This changes, of course, with EDF’s acquisition of BE, balancing them off rather nicely. Centrica’s balance improves a bit too – if they use the £££ from their rights issue for a quarter-slice of BE, as planned. But they will still be running a significant short - a situation they have recognised for years.

In gas, the picture is quite different: of the big retailers, only Centrica has any substantial gas production of its own: but it still covers a mere 29% of its sales to small customers.

So – any prospect of a Northern Rock outcome here ? Bankruptcies are implausible. And, of course, it is argued that conditions in the energy retail sector are not truly competitive: if this is even partly true, there may be a degree of undeserved cushioning available to the exposed retailer.

But margins must surely be at risk, if liquidity in the wholesale markets continues to suffer from the crunch. Centrica will be glad it got its rights issue away, to at least ameliorate its exposed electricity position with a slice of BE.


Sunday 2 November 2008

Obama is still coming

Pretty likely that Obama is going to be the next President of the United States of America.
And a lot of conservatives don't like it.

They point out that he has a somewhat chequered history, is not immune to the lure of giving and receiving "financial favours." Has shifted his position on issues that he has publicly endorsed. Has deeply religious convictions, is inexperienced, mouths empty platitudes about 'change' and 'welfare' and 'A new way of government' and on and on.

In fact it appears that many are worried about
Education Education Education
tough on crime , tough on the causes of crime
The Third Way
Cool Britannia
bringing the mechanisms of government into the 21st century.
End to Boom and Bust

and all the other Blairite slogans that came to mean

SATS tests and a massive spending program that delivered little education improvement
Student tuition fees
3000 new imprisonable offences but no new prisions.CCTV and Special constables but no police
Unlimited immigration, worship of celebrity culture , Spin any story, abandonment of personal responsibility unimaginable regulation of britain except where it was necessary.
Pointless Wars, selling peerages and taking cash for exemptions
Stealth taxes, impossible borrowing and debt, unfunded spending, off balance sheet accounting
and as many other examples as you wish to point too.

So I admit it looks bad.
But missing from all this new BLAIR talk is the fact that Anthony Charles Lynton "Tony" Blair was elected THREE times. Three times the public rejected the other parties and voted for a Prime Minister that offered a change. In 1997 you could say it was all new and so people were fooled. In 2001 we already had minimum wage, had had the Ecclestone affair, Fox hunting fuel protests and licensing laws on the cards, a mental transport policy of neither building nor repairing roads etc
2005 you had the big war, education, health, spending, tax, foot and/in mouth Sleaze and corruption and yet...

The Americans are facing their own version of the evil Tories. They want to believe in someone who will change the way USA pork barrel politics and unaccountable Washington Politicians behave. They want to no longer be the War mongers and, most importantly, they want their economy back.

Obama may or may not be able to achieve some of these. To stick with McCain would make as much sense as sticking with Brown. More of the failed policies that got the UK into the mess is the best way out?

So let the Americans vote in Obama and become ecstatic with hope for a new era.
Just learn the UK's lesson that if he doesn't deliver he is booted out, however smiley and friendly and "you know, Pretty straight kinda guy" he appears.