Friday, 30 January 2009

Something for the weekend

Friday fun

This week a simple word game..



TIE-KEN-DO: The ancient art of bringing back a heavyweight.

SHEERPRICE: The difference in a banking share's value between Monday and Friday.

Please provide the best definitions for any of the following words...


And the winners are

CAMEROON:Old South says.. Cameroon: A genetically engineered beast, derived from a camel and a baboon. Every time it appears in public and speaks, the stock market drops 5% within the hour (See 'Henry Paulson').
CASHSTRATION: Nick Drew says ..Surgical removal of 'crown jewels' via investment in Standard Life's Cash Fund. From 'cash' as in "wholly invested in cash - the most stable of investments" (© Standard Life 2005)
IGNORANUS:Caronte says... someone who cannot tell the difference between his anus and elbow
BOZONE: Prodicus says ..The city formerly known as London.
MERVOUS:Steven_L says.. Apprehensiveness associated with doubts about ones reputation as an after-dinner speaker.
INTAXICATED:Mithch says..A state of mind brought on when you realise what all your tax is used for.
EL GORDO:
{the Spanish lottery} Idle says .El Gordo: Miss Macpherson in her dotage, having eaten all the pies.
STRAWBURY: BQ says ..A report, usually critical of the justice department, which appears on a heavy news day.
GULLIBALLS:Nick Drew says- One day, Ed, all this will be yours.
- Gosh, thanks Gordon !

TRUSTCOTT:Hatfield Girl says...Trustcott - remittance man's villa in Kenya/ Spain/Algarve.

and a worthy "Please add 'Testiculate' to the list, as they all wander round, upwardly grasping at imaginary bollocks..." from Scrobs.

John Prescott's top fifty. {3}

Not many readers have praised too many policies so far. But it looks like minimum wage is considered a success.
Any more from this lot?

21. Child benefit up 25 per cent since 1997

{shame the 10p tax botch took some away. Still, take it as a victory.}

22. Created Sure Start to help children from low income households

{ And what a waste it has been. 3billion pounds in 4 years. The Guardian, hardly a hostile, paper said in 2006,"Today's Guardian offers the bleak assessment that Sure Start 'harms children who need it most". It is a typical well intentioned, and reasonably good idea, badly implemented, unmonitored and unrefined. Not enough success to earn a full credit.}

23. Introduced the Disability Rights Commission

{Its closed now. Not sure what real help it gave. Its certainly a massive cost for business.No credit}

24. £200 winter fuel payment to pensioners & extra £100 for over-80s

{and an extra £60 for the cold winter payments to over 65's too. Come on Prezza. Update the list ,its been around a while now, blindly copied onto the web pages of the faithful. Pensioners have benefited under NL. Except for the devastation wreaked upon them by care home costs, council tax and fuel/food price increases etc. Half a credit, as a lot of it is just sleight of hand}

25. On course to exceed Kyoto target to reduce greenhouse gas emissions by 2010

{Not really. Rises in carbon emissions Year on Year reported rises for 5 years out of eight And making the future 80% cuts is just as unlikely}

26. Negotiated the historic Good Friday Agreement in Northern Ireland {Yes. John Major got it started and Prime Minister Blair finished it. Its not the best deal ever made, and strongly resented by some, but it was always going to be really hard to bring about. But .. yes, full credit. At last something to call a legacy}

27. Over 30,000 more teachers in England schools.

{ In fact 110,000 odd new teachers by 2006 according to Hansard. How many left the profession was not disclosed. Still, there was a teacher shortage problem, less so now, so full credit}

28. All workers now have a right to 4 weeks’ paid holiday

{ erm ..4.8 weeks John. I know you cribbed the list that appeared on Mr Dale's a while back by Hazel Blears but you could at least update it. 5.6 weeks annual leave from April. If you employ 9 workers you would need a tenth, just to cover the holidays. Cost to government.Zero. Cost to business..massive. No credit here. No one was asking for more than 4 weeks. Its a union sop, that falls squarely onto business. Suspect it was a Euro alignment rule anyway. No Credit}

29. A million pensioners lifted out of relative poverty. {How so? More money given back but pension raids, stealth taxes, energy and food costs can't have lifted 1million out. Now with near zero savings rates those happy pensioners may not be so happy. Just statistics JP. No credit.}

30. 800,000 children lifted out of relative poverty { another completely meaningless figure, from a completely meaningless euro measure.."In August 2005 as research showed that the income gap between rich and poor has widened significantly under Labour" Nope. No credit.}

As Sven may have said..Some good..some not so good.

2 to go

Thursday, 29 January 2009

Joined-up Government in the Crisis


Nice to learn from briefings to all newspapers that the Cabinet tackles its tasks in a spirit of unity and brotherhood. The Grauniad informs us that the PM is

... being warned by advisers that he is at risk of becoming the "Minister for the Recession".

A problem indeed. And the remedy ? He has

ordered cabinet ministers to get more involved in the government's response ... Health secretary Alan Johnson has been singled out for his low profile and is due to meet the prime minister in the next few weeks.

This Baldwinesque sense of urgency is commendable: and it's good to know Johnson visits the headmaster's study from time to time ...

ND

Telegraph City Diary falls for Socialist Propoganda

I read the business section of the Telegraph on the way in to work this morning, the only part of the paper still with good quality, and came across this piece, by Karl Marx in the City Diary:

"Owners of capital will stimulate working class to buy more and more of
expensive goods, houses and technology, pushing them to take more and more
expensive credits, until their debt becomes unbearable.
"The unpaid debt will lead to bankruptcy of banks, which will have to be nationalised, and State will have to take the road which will eventually lead to communism."

Apparently completed in 1867? The working class to buy more technology. i am don't think that was a word in 1867, neither was credit I doubt. This email has been going around this City for well over a week and was dismissed as a fraud by the end of last. Nice to see the city diaries so on top of things...

John Prescott's top fifty. {2}


Some more reasons to be thankful..


11. 85,000 more nurses

{With 100,000 more administrators in the NHS than in 1997. No go }

12. 32,000 more doctors
{
£1bn was being spent by the NHS on management consultants each year "without any clear benefit".Nowt }

13. Brought back matrons to hospital wards

{ I make the first announcement of this 1 April 2001 and the first matron to appear on a ward in Scotland October 2008. Partial credit.}

14. Devolved power to the Scottish Parliament

{? but the English have no assembly of their own.Damaged relations with Scotland. Even Tony had second thoughts.What good is it anyway? Nil}

15. Devolved power to Welsh Assembly

{Where prescription charges, student fees, hospital parking charges..etc. Divide and rule eh JP. No ball!}

16. Dads now get paternity leave of 2 weeks for the first time

{OK. Its not as if you have to pay for it though. Employers cost and admin cost.The first Paternity scheme was really rubbish too. Partial credit.}

17. NHS Direct offering free convenient patient advice

{ But closed surgeries and GP's on reduced hours on more pay for one of the biggest contract bungles ever negotiated in the history of the NHS. Instead of a doctor, go on-line, or phone a friend. Not worth it, not good enough. Nil}

18. Gift aid was worth £625 million to charities last year

{ And a lovely bit of pointless paper pushing it has been too. Could you not find a simpler way?1/2 point}

19. Restored city-wide government to London

{OK. Needed it.Full credit }

20. Record number of students in higher education { Edukashen surely? Not too many engineers or chemists or even language students in there though. A bit of a numbers game. A good attempt that is going to take 20 years more to produce anything close to your intentions. Nope} + on general education a report today says

An "unacceptably" high number of people in England cannot read, write and count properly, MPs have warned.

30 to go.

Any good ones yet folks?

Wednesday, 28 January 2009

John Prescott's top fifty. {1}


John Prescott has been re running the Labour top 50 achievements on his blog. I vaguely remembered it, but its suddenly popping up all over the place. Iain Dale did a link for him too. So, lets have a look at New Labour's claim to fame.

Its a long job, so well break it into bitesize chunks.

First 10.

1. Longest period of sustained low inflation since the 60s

{If you manipulate the figures,use CPI instead of RPI etc.. Plus the emergence of the Asian markets that kept prices low for a decade didn't hurt either. Low energy prices too. Hard to credit the Blair/Brown team with this so..No credit}

2 Low mortgage rates

{Oh dear.. look out the window, see where its led us. You might as well say "enjoyed an unsustainable housing boom" Score zip}

3. Introduced the National Minimum Wage and raised it to £5.35

{Good for some but not the great leap forward that is claimed. The success is at cost in employment, somewhat masked by the switch to more part time hours. Not enough space here to explain that a NATIONAL minimum wage completely ignored areas of high and low employment, relative costs of living in different parts of the country,the effect on small businesses of a constantly rising wages regardless of trading conditions etc. It is fair to say that minimum wage benefited Labour areas more than Tory ones. Nil point}

4. Record police numbers in England, Scotland and Wales.

{record numbers sure..but not on the street. The target led policing policies has done much to undermine law and order in the country. Zero pints, possibly even a minus point}

5. Cut overall crime by 35 per cent

{ But only selectively. Serious crime has risen. Violence has risen. Knife crime has risen, Drunkenness has risen.Shoplifting isn't even seriously measured . Car crime and burglary are well down. Any link to the cheap Chinese DVD player being worth £15.00 new in a box, where the Tories VHS was several hundred pounds? Ditto car manufacturers anti theft and secure audio systems? Crime is one of the areas where this government is viewed as at its weakest. Nought points}

6. Record levels of literacy and numeracy in schools

{you cannot be serious? Up to a third of 11 year-olds cannot read, write and add up properly when they leave Junior school.. Education is going to be the biggest failure of Labour's tax and throw era. Zero points}

7. Best-ever primary school results.

{ unsure how they are measured and against what, but generally people are satisfied with primary schools as learning centers and daycare facilities. and that is the real measure. Chalk up a success.What children have learnt at school is very variable. But at least a genuine effort was made to improve primary schools. Call it a credit}

8. Funding for every pupil in England to double by 2008

{Funding is an achievement? There have to be results surely? If its just employment creating then pay people to stay home. Funded by what to achieve what? Nearly 23,000 children left school without a single GCSE. Careful John, moving into PFI territory here too. Nothing given}

9. Employment went to its highest level ever.

{Long term unemployed {5 years +..which is a hell of a long term definintion} only rose. Twenty times up from 1997 . 2.7 million on a conservative estimate claiming disabilty + the 1 miilion on job seekers etc.. Ten years of relatively good economic growth should have helped to reduce the state's bill's. Instead worker's were imported to fill the positions. And the unemployment figures for 3rd quarter 2009 will rival anything the Tories managed. No joy.}

10. Written off up to 100 per cent of debt owed by poorest countries

{Good news for them. We still lend to them though? So ..? Will we have to write it off again? UK government debt, before the credit crunch was high. National Debt as a % of GDP has increased from 30% in 2002 to 37 % in 2007. This was despite the long period of economic expansion. It is primarily due to the governments decision to increase spending on health and education. There has also been a marked rise in social security spending.. With the recession it will be astronomical.}


How are they doing so far? Getting your vote?

Pain for Utilities in 2009

As you know, we don’t do financial advice here, but we do take an interest! The first of CU’s predictions for 2009 was this:

Oil will be the investment opportunity, with never to be seen again low valuations in oil companies.

And later he had a look at what’s going on in the sector – which, as Alphaville also reports, includes some crazy happenings.

So what about gas and power utilities, then ? Aren’t they just middlemen, who make a healthy turn irrespective of whether energy prices are going up or down ?

Putting aside the fact that several of them have upstream assets as well as utility operations, we could say that in ‘normal’ times they can indeed insulate themselves from energy price risk, just taking a margin. But these are not normal times, and they are badly exposed to the huge downturn in industrial energy demand. This is because, perhaps surprisingly, even the very largest industrials mostly buy energy like you and I do – we may agree the price, but how much actual gas and leccy we are going to use is a matter of educated guesswork based on historical data, and the supplier takes the full risk that we don’t use the amount he expects us to.

Often, his concern is an unexpected peak in demand: but not in 2009! The utilities have bought gas and power forward, in amounts that reflect past consumption – and they are on the hook for these quantities. But most industrial buyers are not.

This is causing agonies for several of the big suppliers right now, and until the collapsing industrial demand (20% down by some estimates) works through the system, taking at least 6 – 12 months, they will have a very uncomfortable time of it.

It won’t be a happy sector in 2009 - particularly for any of them that haven't diversified into upstream assets.

ND

Tuesday, 27 January 2009

CU podcast


Did one for the excellent Charon QC on the Insite Law Blog today - it is here.

The peasants’ struggle against the landlords


Yesterday..

Threshers owner to close 400 stores

First Quench Retail, the owner of chains including Threshers, Wine Rack and The Local, is to close up to 400 stores in order to cut costs and improve profits.
A spokeswoman said: “We are in negotiation with the landlords of unprofitable stores. The number of stores that could close is dependent upon our capacity to reach suitable agreements with these landlords”.

High Street shoe shop chains Barratts and PriceLess have gone into administration, it has been announced.
Barratts and PriceLess are owned by a Bradford-based firm, Stylo. The parent company is not in administration, but its shares have been suspended."the board has concluded that current and projected sales cannot support the current cost base of the business, in particular the high rent obligations," Stylo's statement said.

And from MFI last month
"It is however disappointing that the landlords of the shops pulled the plug and did not give the management time to turn it around."

It has emerged that two more big names had asked their landlords for help with rents. Focus, the DIY chain, and Land of Leather, the furniture retailer, have asked for rent reductions and monthly payments across their portfolio to ease cashflow. {Focus pretty much succeeded too.But large firms have more clout}

The Daily Mail's 'Fair Deal for Small Firms' campaign announced it was seeking a move from quarterly to monthly rents for owners of three shops or less. Well.. that was October..
Last month The British Retail Consortium was still trying to get 3 months in advance rents reduced to a month in advance and has issued businesses with a template letter and draft contract. The BRC has been calling for this for a while, with some success, notably pension fund manager Hermes

A conservative MP has called for the government to provide more support to small businesses after learning that an award-winning and much-loved local bookshop has been forced to close. Yep, one of thousands by the end of the year..


A massive overhaul of retail renting is long overdue and would benefit all retailers and landlords too. To move to a monthly rental for the smallest would be pretty easy, with an administrative charge being added to the rent, and some changes to terms.
If the government really wanteds to help really small business it would have acted before the January quarterlies were due.Dealing with a crisis isn't easy, but Lord Mandelson has been supportive of this scheme . Time to move it up the agenda before many more firms go bust when the March quarterly arrives,which needs to be paid from the three weakest months trading, in the worst economic climate since 1991.

Oh, and the quarterly VAT bill is due same month.


Monday, 26 January 2009

All clear sounded, Barclays up 73%?


Well, my post on BARC yesterday proved to be right. Today was a day the markets decided that perhaps Barc and its muckers are not quite as screwed as we thought. Interesting to note that Barc's write-down loss was actually as much as RBS, sans ABN-Amro.

Even Lloyds perked up. As the US is steady tonight in terms of close I would not be surprised to see the rally continue a bit tomorrow before profit taking on Wednesday or later in the week.

So the question in the media will be, is this it? Did 'we' just win the high-noon shoot-out?

Sadly, I think not. There is another delay until the next leg of the crisis in a few weeks. I note Gold and Silver have spiked to over $900 and $12 respectively and are staying there. In the US another bank went down on Friday - there is a long-way to go yet. The UK Government's insurance plan is not a bad one, albeit very late in the day. However, if banks balance sheets deteriorate again there are no bullets left. Nationalisation will make us vulnerable as Iceland has been.

A good battle, but the war is not going well overall.

Weekly Outlook : Lots to Barc about

Another week, another crisis?

I hope not. However, I will be interested to see what happens to Barclay's this week. After last weeks share crash - down 66% in a week, there is a limit to how much more the shares can fall.

Normal city trading would suggest a strong rebound is due, but if it really is institutional investors selling out then the day-trading community will have its work cut out trying to find enough cash to engineer the re-bound.

In all of this in normal times you would fully expect the CEO and Chairman to resign, perhaps the finance director too. At least the new boys could then take over and tell the truth with some credibility. We do not live in normal times though. The City is credulous of Barclay's exec's after they tried so hard to win ABN Amro - had they achieved victory they would now all out of jobs like their ex-colleagues at RBS.

The week will be determined by Barc on Monday and Tuesday - if there is stability and a recovery then the next phase of the crisis may be postponed for a few weeks. Certainly RBS is trying to hog the headlines to get some positive press about itself....

Sunday, 25 January 2009

Saving Money


Normally I avoid too much personal finance on the blog. However, having been recognised by The Times as one of the top Personal Finance blogs, I guess I had better do something.

Then as it happens I see this in the Sunday Papers. HSBC writing to people to say overpay your mortgage as your rate drops and save yourself a fortune in the long-term.

Is this a good idea?

On the plus side, saving rates are low so that is wasted, also who wants over £50,000 in a bank account anymore?
Secondly, if you have not lost your job then by keeping mortgage payments the same as before you won't have really altered your monthly budget.
Thirdly, investing in wold markets is a good way to lose your money as the moment as I am proving strongly in the early weeks of this year.

On the other hand there are some rather large elephants lurking int he corner. Firstly, HSBC needs to improve its capital ratios, pulling in more money is clearly in its best interests- hence the advice.

Perhaps even bigger though is that all the money thrown into the system is going to cause some big inflation in years to come. The price of Gold spiked to all time highs in pounds last week. If there is inflation to come then the last thing you want to do is pay debt, as that will inflate away quite quickly (could be painful if interest rates shoot up though...).

On balance I would not take HSBC's advice myself. Much better for me to pay off overdrafts, personal loans and credit cards if you have money available rather than a stable long-term mortgage.

What would you do?

Friday, 23 January 2009

Sports personality of the year


Friday fun.

In the spirit of the Olympics today's competition is to match the personality to the sport.
Remember, there are no wrong answers. Except to "Do Nothing"








A}Dragon Boat Racing
B}Cricket
C}Golf
D}Soccer
E}Ballroom Dancing
F}Gymnastics
G}Sailing
H}Table Tennis
I}Skiing
J}Judo
K}Croquet
L}Shooting
M}NFL
N}Cycling


1] David Cameron
2] Nick Clegg
3] Arthur Scargill
4] George Osbourne
5] William Hague
6] Margaret Beckett
7] Peter Mandelson
8] John Prescott
9] Jacqui Smith
10] Gordon Brown
11] Boris Johnson
12] Ken Livingston
13] John Major
14] Ian Blair

Thursday, 22 January 2009

Somehow MP's will escape this one?


Can't see them giving up their final salary pensions without a revolution....or pigs fly/hold their seats...

The original Obama letter to Dawn Butler MP





Another letter surfaces. {Possibly the original?}

This story uncovered first by Mr Dale

Touching the Hem of The Messiah

9:23 AM Iain Dale


Gas Prices: the Dog Didn't Bark, the Slide Commences

The British Gas announcement of a 10% retail price reduction, welcome as it may be, is small beer. For 2009 we predicted a major decline in European wholesale gas prices, with big knock-on effects in the market.

It’s moving our way. Consider the graph of UK spot gas price, and recall that this is the period during which Russia turned off the taps. Responding as only a free market can, British suppliers commenced exporting into Europe – yes, even in mid-winter – and still UK prices barely moved. (In earlier situations of shortfall, UK spot prices have been known to spike to over 200 p/th.)

This speaks to a very comfortable supply situation: in fact, an over-supply, which will cause prices to slide significantly as we move out of winter. It also speaks to the superiority of open markets as a means of responding to problems, however large.

Both of these lessons point to big changes ahead. Russia must face up to a huge dent in its export revenues. European oligopolies are hooked on commitments to buy minimum quantities which, even at falling prices, look pretty sick against recession-battered industrial demand. Notwithstanding their strong hostility to spot markets they will perforce be dumping surplus supplies into the market and thereby adding greatly to liquidity. This will strengthen market mechanisms and competition - and weaken Russia’s position still further.

Recession, eh ? It’s an ill wind …

ND

CU trading Portfolio round-up

A poor week for the markets, but some signs of a crawl back today. Where is the bear market rally all the market makers were chatting about in December?

Anyway - progress update on my own portfolio as I have not done one for ages:

British Airways - 154, had a nice run up to 180 where the shorters got in and took the price down again. Long-term I like BA now, cheap oil does wonders for its profits, competition is less, good management too. Possible upsides with merger speculation. Lots of short selling in it though. I am in at £2 per share.

Tullow Oil - yeah Baby! best stock in the FTSE 100 recently. Massive finds of oil in Uganda and Ghana, beyond the managements dreams. Low oil has kicked the share price but it is still 40% up in 2 months. Either way, current price of 625 even after today's £400 million palcing. A takeover approach is likely from one of the big boys like Exxon. Still lots of short positions in it make rises hard to sustain.

RBS - Played a blinder, by chasing losses I have managed to lose even more than I originally would have lost. 94% down today....

First Group - Not helped by downgrades, a long-term hold. but I would say that having bought a share for £5 that is now worth £3. Very much regretting the oversight of a stop-loss on that buy. Hopefully low oil prices (subject ot pound not collapsing) will help what should be a defensive stock.

Sibir Energy - Averaged into this at £2 compared to £1.27 today, which is still a whopping way up from the current price. However, this is a very solid company which I fully expect to climb back when oil recovers - another one to hold for a year or two then....

Minerva plc - Small punt on this waiting for a proposed takeover, price has droped 20% since the stake building by KIFIN stopped at 29%. Hopefully patience will pay off.

China Fund - Still down 25%, much better than it was a year ago. Long-term hold

Brazil Fund - Down 40%, quite surprised as I expect Brazil to be the least hit out of the major economies overall. Long-term hold.

Gold & Silver ETF's- Not strctly stocks but have done well out of buying in and out of ETF's. Keeps making up for the losses on everything else recently. Plus funded some terrible punts on Urals Energy which were disastrous.

Corporate Bond Fund - Up 20% and has 15% yield. Shame I did not have the resources at the time to put more into it late last year when it was bottoming out.

Overall, still nearly 30% off the highs despite some good trading recently. Not a pleasing situation for me. Have got much better over the past year so I'' take it as a crash course learning module. Sticking to Gold, Oil and Bonds will hopefully see a much improved return in 2009.

Wednesday, 21 January 2009

Brown Has Reduced Us to Junk - The Markets Speak

We've looked at RBS preference shares before as an indicator of how the UK is viewed. Yesterday they provided another salutory perspective.

On Monday, the Government effectively took over RBS, swapping the 12% prefs it took
in October for ordinary shares. It's UK plc that stands behind RBS obligations now, and nothing else. RBS ordinary shares tanked, of course, but it was a holiday in the USA, so no trading there.

When markets re-opened, RBS regular dollar prefs (nominal 6.6% issue) fell more than 57%
, and now yield 35.7% ! That's a measure of international confidence in our ability to service our debt.

The Man who Sold the Gold has reduced us to the merest junk.

ND


The Raven


The Raven by Edgar Allen Poe

Once upon a midnight dreary, while I pondered weak and weary,
Over many a quaint and curious volume of forgotten Banking lore,
While I nodded, nearly napping, suddenly there came a tapping,
As of some one gently rapping, rapping at the Chamber door.
`'Tis some visitor,' I muttered, `tapping at the Chamber door -
Only this, and nothing more.'

Ah, distinctly I remember, it was in the bleak Recession,
And each separate dying lesson, wrought its ghost upon the floor.
Eagerly upon the morrow; - vainly I had sought to borrow
From the Bank surcease of sorrow - sorrow for the lost Labour -
For the ideology laden party, whom the media named New Labour -
Nameless here for evermore.

Then this 'man' approached a waving, throwing bundles into Darkness,
For his post was insecure and his party was a wavering
While economy shrinks in turmoil as the policy of taking,
from the workers left the cupboard bare of saving,
And he hopped upon the stair and quoth this Craven,
"Borrow More"

"Borrow more?" - "When the country is a failing,
and citizens are sailing, to a distant shore?"
"Never mind. Borrow more!"said the Craven,
from his perch above the Door, where economists were unsure;
"the tax rises needn't fall, till past election, trust my lore."
"Borrow More!"

How could toxins in the ledgers, that as yet had had no measures,
to discover if their treasure could be counted as secure,
or some alchemic process that had turned them into stone,
be reversed by this Wizard, to make them gold once more
and not to noose the neck of taxpayers to become a weight for,
Evermore.

"I will balance all the ledgers, whence sometime this nations treasures,
are greater than before. We will make the banks so wealthy
And our five-a-day for finance, will make the land so healthy.
Our seized shares will enhance - our capacity for making
promises just for breaking, so we can keep on taking"
"Borrow More"

"Another Hundred Billion is a trifling, to relieve the banks from stifling
The guilds of all the merchants- The industry of motors,
supplying all the voters who depend upon our credit
and cannot last and will be aching for the package we must edit
from October last, when we said the banks would
"Not Need More"

"Be that so, you crazy Craven," as you knock upon my door
As all the stocks are falling, all falling through the floor.
Leave no black plume as a token of that lie thy soul hath spoken!
Leave my loneliness unbroken! -You will make us all so poor!
Take thy beak from out my heart, Exit thy form we do abhor!"
Quoth the Craven, `Fine. We'll Just Print More.'


Apologies to Edgar Allen Poe

Tuesday, 20 January 2009

Ken Clarke - Land Some Punches, Quick


The world is falling around our ears, but somehow no-one lays a fist on Gordon Brown. At C@W we have often bemoaned the ineffectiveness of the Boy Osborne: but if he’s been big enough to recognise it and bring Clarke into the tent, then credit to him.

It’s equally appropriate that Alan Duncan has given way, because he’s made no impact on the returning Mandelson in the Industry (sorry, BERR) brief.

There’s a back-story here. In the mid 90’s, when Duncan and Mandelson were newly-minted backb
ench MPs, they were noted for their frequent playful Parliamentary exchanges, and clearly had high regard for each other. This relationship seems to have made Duncan unable to muster the necessary verve in attack.

In case anyone imagines I am suggesting anything untoward, let me also remark that Tony Benn and Margaret Thatcher have a similar mutual regard (dating from the days when they jointly campaigned for the admission of women to membership of the Oxford Union), and they, too, could never bring themselves to take off the gloves.

No time for niceties, Ken, this is urgent. Brown is leading with his ample chin. Get in there and do some damage.

ND

Obama day - no way up from here



After the share price crash yesterday today will be the turn of an Obama rally. Perhaps, however if there was a market in Obama shares now would be the time to sell.

After all, the City mantra goes 'Buy the rumour, sell the news.'

Obama is being feted everywhere in the world in all media, full stop. I have read nothing for days that is not positive. I wish him well, but by pure logic alone, this must be the high point. How could he get more popular?

He has a truly dreadful situation to inherit which is not going to be fixed with a fine speech and a wand. The US is also entangled in expensive long-term wars abroad which it can no longer afford.

Obama has appointed a select bunch of team Bush and team Clinton. This suggests continuity not revolution. So more of the same we have had until now.

There are many comparisons to Tony Blair here I feel - also elected on a wave of spin generated euphoria.

To end, the political mantra: All political careers end in failure.

UPDATE: Well the speech sets him up nicely. Lots of fine words while studiously avoiding subsance. Not even a tiny micro-bounce in the DOW or S&P.

Monday, 19 January 2009

RBS share price down 70%: We said this would happen..what now?


Ending the short-selling ban has not worked, as predicted. Bailing-out the banks without suspending the shares has not worked, again.


The government has repeated the same mistakes it made in October.


Ideas to move forward are desperately needed, feel free to discuss in the comments...

Bank Bailout: Out of Ammo

There are a raft of initiatives out this morning from HM Government. We looked yesterday at the Insurance idea. Pondering further overnight I see this as a great opportunity for the bankers to take the taxpayers to the cleaners. the premiums will be too low and the losses more than expected.

In effect, the Government will become like AIG and the monoline insurers - see here for a good, if technical, description. That worked well as a business model....

However, converting preference shares into ordinary shares was a good idea for Lloyd's and RBS - but not if they end up in Government hands anyway. RBS is down to 13p a share right now so that is looking very likely as of now.

The other measures are all good ideas to get lending going again and a good fist at trying to stop a depression resulting from the credit crunch. If only they had been done a year ago...

UPDATE The key measure from now on in is printing money. The UK can not really bailout the banks as their assets are too big for us to handle. This leaves interest rates and inflation as the only way out. We paid our money, took our chance and now the wheel has stopped...

Sunday, 18 January 2009

Tony Hart, R.I.P.


Now that's television.

Hart (together with Harris) showed that drawing is for everyone.

ND

UK Government insurance scheme for Banks


OK the bit that will surprise people. Brown is right to say the Banks need to tell him all the bad debt that they have.

A solution can only be found when the problem is fully known. However, we were assured back in October that such a hard case had been made to the Banks that they could not possibly need to come back for more cash...ah, well. Plan fails at first test of battle (Shorting of banks was removed on Friday, Barclay's, RBS and LLoyd's near collapse within a couple of hours).

So, we have a new plan, to offer insurance to the Banks for their bad debt. Seems quite sensible, could allow credit to flow freely again. More sensible than printing money....

However, hang on, no one knows how much the toxic assets are worth - that is the entirety of the credit crisis problem. How is the Government going to be able to value them for Insurance purposes. Better to recapitalise the Banks again by far than try this plan. I see no insurance experts in Government able to pull this off - who are they going to ask, the rating agencies?

Given the last attempt in October the track record is pretty poor. I see much more taxpayer money going down the swanny. Worse, at this rate the Country will run out of money in 2009 and be forced to go the the IMF.

The UK perhaps is the Bad country after all.

Friday, 16 January 2009

Top Tips to help those working from home


Friday Fun

As the recession bites many of the recently redundant look at their pay off and decide that now is the time to set up that business that they have been thinking of creating, but never quite had the courage. Some lucky enough to still be employed will be working at home to save travel costs or possibly a salary cut and a four day week so...


Here is the Capitalists At Work top 10 guide of things to avoid when working from home.

1} YouTube, Facebook, Guido, Myspace etc and any adult sites with the word FREE in the title.
The temptation to find out what "Simpkins, from Marketing is doing now" can end up wasting an awful lot of the day.

2} Try not to look in the fridge.
Walking into the kitchen every few hours and absently opening the big white door may lead to food experimentation once you have scoffed all the yoghurt. "Hmmm , Chicken slices and Mince and Salad Cream sandwich" There is also a temtation to buy strange new products. Aztec coffee beans, Inca's hot chocolate with a hint of pine. Tinned cheese. Avoid them all.

3} Fallout 3, World of Warcraft, Fifa 2009, Solitaire etc.
If you turn to the PS3/Xbox/Gaming PC even for a second, the day is gone and all you will have to show for it is some dead elves.

4} Visiting the bathroom.
Bladder relief on the hour, every hour, whether required or not. Soon followed by a sudden desire to investigate your partners various potions, fragrances and creams. A very slippery slope that is best avoided..+ Mirror gazing. Grey hair monitoring, nostril checking and "new hairstyle" attempts are largely unnecessary

5} QVC and bid-up TV. Before long that combined Ipod and juice carrier sombrero looks quite attractive. " I need to go to the shops later. I could listen to my music and keep dry. And if I work up a thirst..? Only 40 left. Better write that number down."

6} Mr Angry.
The postman hasn't shut the gate! Normally you wouldn't even notice, but now...
"Dear Alan Leighton, why oh why must your ill educated lout of a delivery boy walk on my lawn when I have installed a path at great expense to myself. Further, I have been monitoring the times of my daily mail deliveries and I can report that there is considerable variance. I enclose a spread sheet. If you refer to section 1.a part B5 you will notice..."
Leave it, it isn't worth it.

7} Online newspapers and articles.
The daily global output is greater than your ability to read it all. Even if you are doing overtime. + it leads to {6} above. Blogging.See {6}, only more so as you will get feedback.

8} Google
It will only delay you. "What was the name of the referee in the '66 final? A quick Wikipedia and.."

9} Never turn on the television news or listen to anything on the radio.
Remember there is a minimum of one new government initiative or announcement every day. And you have time to ponder them. And disassemble the packaging a little. And give them some consideration. And before you know it you are doing the "Hang on a minute. That makes no sense at all. We had 10,000 troops in Iraq, but now another 4,000 are coming home. On top of the.. what was it 12,000 already announced.. as coming home... that can't be right." See {8} Wikipedia.

10} The partner's list.
If you have clearly failed to adopt any of the warnings above then the signs become obvious to your loved one: Unwashed Cheerio bowls, console games scattered on the sofa, Post-it notes with 'Goretex Aztec motoring gloves £19.95+pp' written on them. An increase in letters from the council, a feud with the bin men. Strange new snacks like "Cranberry flavor crisps" in the cupboard. A printed out article on home Botox treatments. Junk mail opened and read and pinned to a peg board instead of being thrown away; "become a snowboarding instructor in your spare time. Big cash rewards,"
A jammed shredder with various non paper products emanating from it after a "wonder if it can do tinfoil?" moment. etc etc.

Soon, little partner notes appear.
If you are not too busy please get cat food.Please pick up Henry from playgroup at 11am.

And as time goes on, the notes get longer.
Take this jumper back to Next for me. Do the shopping, list enclosed..don't buy anything not on the list! Throw out half pack of Cranberry crisps, clear out the junk mail, tidy up the sofa and hoover up those crumbs. Post those motoring gloves back to the shopping network and pick up the mail that the postman won't deliver. Fix shredder. Take the rubbish to the tip until the council start collecting again. Spare room still needs painting, lawn needs mowing. I will email you later to see how you are getting on.. love you XX.

Anymore advice or tips would be welcomed in the comments.

Thursday, 15 January 2009

Spinning the Record - Bowie's to Blame ?!


Writing in that fount of financial wisdom, the Daily Mirror, Evan Davis playfully suggests that David Bowie might have kicked off the credit crunch with his celebrated issue of Bowie Bonds - an entertaining but hardly epoch-making example of securitisation.

Evan, it's so much simpler, as I'm sure you know when you're not spinning the record. Certainly,
the person responsible for our woes is a washed-up player who had his heyday in the 1970's. Who's ambivalent about his, err, dealings with men and women. Who dyes his hair. Who re-launches himself constantly. Who's under pressure, and a genuine oddity.

And the name is indeed five letters, beginning with B.


Who knows ? What, me ?
I never had control
You're face to face

With t
he man who sold the gold !


ND


BAA & Airlines get bailout; Greens get knotted


I have mixed views on the Government's approval of this. Having grown up near Heathrow I know the pollution and noise is really very bad; at the same time we need to increase capacity as we all travel abroad more in the future. As an Island nation, getting away from it all is an issue for us...

The real difficulty is in the long term economic analysis. Looking 10 years hence is nearly impossible. You can get some things roughly right like population growth. But from today could you estimate GDP growth for the UK for 2010-2020? Could you extrapolate airline growth after the age of Ryanair and Easyjet; how likely is that to continue?

Most of all is the price of oil. Last year when oil went over $100 a barrel lots and lots of airlines went bust. Remember XL?
So what will the price of oil be in ten years? Blimey, the futures markets are struggling at the moment to guess a few months.

Hence this decision is an entirely political one at heart. Business has trumped Green issues here. BAA and the airlines get their futures more secure and lots of construction jobs are assured for the best part of a decade. The Unions will be pleased - I will be interested to see their spin on this later today.

Politically too I think this is a nice play for the Tories who can say we would not have done it, when they probably would have done if they were in Government.

Hopefully my BA shares will rise a bit today; took a pasting today along with everything else.

Wednesday, 14 January 2009

New Brown plan; too little, too late


Now he comes, bestriding the country as a Colossus amongst men. Prime Minister Brown has a new plan, known as plan z1.1 or something.

Anyway, it is copied from the Tories with a hint of Vince Cable; well kind of, it is a sort of lukewarm re-hash. Less than half the money and more conditions.

Don't get me wrong, helping small businesses who can't get access to cash from banks is a 'good idea.' It does actually address the credit crunch rather than just throwing money about a la the VAT cut.

But it really has taken 18 months to get this far, several bank failures and the future enslavement to debt repayment for us all as taxpayers. And now we get some credible solutions and even they are nicked.

That is how bad they are at economic policy, even with all their boffins' and hedge fund manager advisers - all they can do it copy the Opposition and make a bad fist of it.

Time to go Gordon.

UPDATE: Have read this morning that the Government will do debt for equity swaps in small businesses. This is a very bad idea. Small businesses are not too big to fail or core to the financial system in the way large banks are. They are by definition easy to set up and shut down. The possibility of huge levels of fraud is immense, as will be the monitotring cost to prevent this.

Although if the Government wants an equity stake in Mrs Slicker's pet behaviour clinic I may change my mind....

Tuesday, 13 January 2009

Dillow defends QE

I read virtually everything Chris Dillow writes. his blog is excellent and I find it very useful to see the marxist view of the world laid out so well, even though I disagree with most of it and comment to that effect from time to time.

However, today's' post is worthy of a reply:

It starts "I fear that a hatred for the government has clouded the minds of some of its critics. Guido and the Devil’s Kitchen are upset by the proposal in the Banking Bill to abolish the obligation upon the Bank of England to produce a weekly balance sheet."
Well, both have a history of being against this QE thing for a few weeks now. In fact no one even thought this an idea of any merit to even be discussed until the Government ran out of policy options very recently.

Then the main refutations of anti-QE position:

1. The idea that “printing money” is something sinister associated with banana republics is just gibber. As Willem Buiter says, printing money is what all central banks do.
Um, I think it is the amount of money printed that matters and whether it is unsterilised or not. This is OK as far a being pedantic goes, but is not really a defence.
2. The Bank couldn’t print money in secret even if it wanted. Quantitative easing (QE) works by the Bank buying assets from commercial banks - and giving them money in exchange. It must, therefore, announce its intentions to do so to banks, and therefore the rest of us.
Without controls on what they do, the Bank can do anything. In fact it could buy assets, reduce their value to zero and make them disappear along with the loan created to buy them(in a very roundabout way I happen to think this WILL actually happen). Without control, we are powerless to see what is going on inside. Also the Treasury will have a lot more power and we all know that really is opaque - our view of the BOE is a crucial window in the coming months. If there is no problem wit this, then why are they making this change to the banking bill now? (The only reasonable explanation could be the costs of producing the data are considered excessive or that the data is actually not very accurate - the first is remote given how much statistical crunching power the Bank has, the second is just scary).

3. There’s little point doing QE in private. The point of QE is to prevent severe deflation. This is best done by raising inflation expectations, which in turn is best achieved by making as much of a song and dance about printing money as possible. Indeed, in theory it’s possible that the announcement of QE alone would be sufficient to raise inflation.
QE is to prevent severe deflation. Well, then all is fine, we are only predicted to have -1% inflation by Q3 2009. No need for QE then. However, QE could also be used to bail out the banks and get them lending, I don't see why this would have to be public if it worked, especially if the said banks are nationalised when it occurs.

4. Even if there’s no weekly balance sheet released, it’s quite likely that the data contained in it will be released elsewhere, as it is now - for example, table B1.1.1 of Bankstats.
So why not just release it every week. Why change this in an act of Parliament? I hope all the data is published.
5. The notion that the weekly data is a “major control” over the Bank is pish. The current data show that the Bank’s balance sheet has more than doubled in size since late September. I’d be happy to be corrected here, but I don‘t recall this arousing critical comment and analysis from Guido and DK.
Can't speak for Guido or DK, But C@W have warned that the Bank has lost control some time ago, of interest rates and monetary policy in general. Hence my fears about their ability to deliver QE.

There can be an economic case for QE, as I wrote here some months ago. However, with Politicians in charge it is never going to work in reality. They won't know when to end it and will want to manipulate it for electoral purposes. It has given Japan 170% GDP debt ratio and still sclerotic growth. All the more reason to have some oversight of the BOE and some published statistics for clever economists such as Chris Dillow to review its progress.