Monday 31 May 2010

It's The Poor What Gets The Blame

So - while Baroness Scotland got off with a slap on the wrist, Loloahi gets banged up ! How we need some of that Freedom, Fairness and Responsibility ...

I got her from a bar down in old Soho
Where you don’t stay long
Or you catch a dose of Ebola
E-B-O-L-A Ebola

She walked up to me and she asked for a job
And I asked her name
And in a dark brown voice she said Loloahi
L-O-L-O Loloahi

Well she’d left Tonga just a week before
And I’d never ever hired illegals before
But Loloahi smiled and she looked the part
And said ‘OK lady, when do I start?’

Well I’m not the sharpest knife in the tray
But when she showed me her papers, they looked OK
They said ‘Loloahi’

I fired her today
I rushed to see Gord
I begged and implored
I got down on my knees
And he said I have his full support

Well I’m not the world’s most clever QC
But I know why Gordon appointed me …

The rules are the rules but it’s just a mistake
I got mixed up, muddled up in good faith
Over Loloahi ...

(apologies to Ray Davies)


Sunday 30 May 2010

Dead Tree Press Post Election Update

All change in the UK Media already. On Thursday the Daily Mail and General Trust announced a return to profit after a poor couple of years. Advertising has recovered a little, the expensive jaunt that was London Lite has been stopped and the website has lots of hits with its solid concentration on celebrity lite news. There were also 680 redundancies. Still, at least the future look stable.

Meanwhile the Guardian, so long the darling of the left, is in rather a lot of trouble. Not only are losses expected to be bad this year, but they backed the Liberal Democrats into the Government. Their repayment seems to be the Liberal acquiescing to the Tory plan of setting up an in-house Government jobs website. This will be catastrophic for the ad revenue of the Guardian as many of its ads are purely for Government work. And those that are not often publish Government advice and Quango self-justification adverts.

All in all, another victory for the Right wing over the Left. Shame in some ways, even as a right winger I know which paper I would rather read (if forced). Still, onward march market forces, at last.

Saturday 29 May 2010

Apple vs Microsoft: Short-Term Thinking ?

A common criticism of Wall Street is that it is fixated on short-term results. Well, most recently Microsoft has been, errr, twice as profitable as Apple in absolute terms. But somehow Apple has overtaken MS in terms of market cap.

The reason generally given is that Apple has the better long-term prospects !

Things are always a bit more complex than they are painted ... long gold**, me.


** no financial advice here, of course

Friday 28 May 2010

Capital Gains Tax up: Where are the cuts?

Now, I have read John Redwood's letter to the treasury on Capital Gains Tax and it makes a lot of sense, as per usual from John Redwood. His basic idea is that we up the rate for CGT, but not for investments then cut that for investments of a year or more.

However, when it comes to shareholding I don't think this makes the slightest bit of difference to FTSE companies. Whether you hold Aviva for a year or more does not help Aviva in our wild markets. They are far more dependent on bank finance which is another issue altogether. Similarly speculative punts on AIM shares are not made the better for sealing them in for the long-term. In fact, selling on bad news is crucial to preserving your wealth in this way.

Also, Vince Cable, wrong on so many issues and not long for the Government I imagine, has a point about people using Capital gains to shelter from income tax. All in all, it should be equalised, but indexed so that you don't pay tax on gains made only due to inflation.

There I said it. There is though a massive quid pro quo. CGT will raise about another £2 billion in tax. This means we need another £8 billion in spending cuts to keep the 80:20 ratio. The Budget needs to identify these cuts.

My biggest fear is that the Government will shy from large cuts and instead content itself with raising taxes. I can see £25-50 billion of tax rises and then another similar amount of cuts to achieve the deficit target.

Back to John Redwood, in the above environment you can forget an entrepreneurial led expansion of the UK Economy with that weight of tax burden on this.

A Good News Story From Jaguar Land Rover

. . . and an excellent lesson for subsidy-wallahs everywhere.

Jaguar Land Rover is owned by Tata of India - which, incidentally, doesn't bother us at C@W, despite the steam we see coming out of some people's ears.


Tata is apparently re-thinking its plans to shut one of the UK plants. Lo and behold, Jaguars and Land Rovers are selling well - it can be done ! - in those parts of the world that are coming out of recession the most strongly, or indeed were never in recession in the first place. Yes, it can be done - with the right products, management and sales-force.

And indeed the right attitude, for get this:

"It had been thought that any reprieve would be dependent on what government assistance could be secured. But Jaguar Land Rover has no plans to approach the new government knowing that in the current climate financial support is extremely unlikely"

It is earnestly to be hoped that this message sweeps the boardrooms of Britain like wildfire. Mandy and his wretched, atavistic pick-the-winners government are gone. So get stuck in.

For far too long, far too many players in British 'industry' have operated under the slogan: why do a hard day's work when you can lobby for a hand-out instead ? Nowhere is this more pronounced than in the 'green energy' sector: don't invest now, there will be an even bigger subsidy coming along soon ! (And, I am sorry to say, if you read the bad bits in that lengthy Energy section of the Coalition Programme, you can see why they will be taking this view for a while to come.)

Good for Tata !


may have spoken too soon ...

Thursday 27 May 2010

Question time predictor.

David Dimbleby is joined in Gravesend{Gaysend on the website?}in Kent by Alastair Campbell, Piers Morgan, John Redwood, Max Hastings and Susan Kramer.

Guess the questions that the panel will be asked. Score bonus points for correct phrases and defence lines. Guessing the attack lines with Campbell in mind will be class based.

  1. 6 billion of almost insignificant cuts. Hitting the poorest families?
  2. Eu Levy on the banks. Tories won't implement protecting their toff mates.
  3. John Redwood and capital gains. Tory landowners won't pay their share of taxes
  4. Lisbon treaty to be renegotiated. Tories split over Europe.
  5. Schools and how the new proposals will only benefit rich toffs
  6. Alistair's 'real' diaries still seem a bit redacted?
This weeks prize is to get to design the coalition logo

Osborne is Right, EC Wrong on Use of Bank Levy

We don't expect always to agree with young George around here, but he's got this one right. If there is to be a Europe-wide special levy on banks, its application should be to general funds at the national level - by way of repayment for the bailout, if one likes to see it that way - rather than as a communal rescue fund for future bailouts. Even the Grauniad agrees on this one.

A year ago, the Turner Review mused on the idea that fully 'socializing' the ultimate risks of bank collapse might be "the optimal and only defence against system failure".

It isn't, and it couldn't be. As we said at the time:

Conventional risk management can do much better than this without recourse to ‘state insurance’ ... What ‘society’ should demand is not the dubious privilege of socializing ultimate risk, but the proper implementation of conventional risk management between the consenting adults involved"

This is basic conservative philosophy. If you absolve anyone of taking care of their own business, they will at very least tend to be more casual about their affairs. We require property owners to confront the risks of fire personally, to arrange their own fire prevention, on pain of burning to death. The fire brigade (funded from general funds) is primarily there to stop fire spreading. Likewise, we must require banks, and their stake- holders, to confront their own capital adequacy - and the cost thereof - on their own. That is how risk will be driven out.

Michel Barnier, the EC commissioner responsible, is using the wrong analogy. "I believe in 'the polluter pays' principle", says he - and thinks that the payment should be into a government-held reserve. He should remember how this works in the realm of environmental pollution: unless firms are forced to curb their emissions specifically, they evaluate whether the fine is cheaper than the clean-up, and often opt to pay the fine.

You will not be surprised to learn that in the long run M. Barnier, statist froggie that he is, wants the reserve funds to be held by the EU itself. There is nothing more important for Osborne to resist than EU-wide (or even worse, UN-wide) tax-gathering, for banking, environmental, or any other purpose.

Hang tough, George, and you'll win C@W round yet.


Wednesday 26 May 2010

Thorntons Easter eggs failed to hatch

Thorntons revealed last month that it suffered disappointing trade in the key Easter period, with like-for-like shop sales down 4.6% in the 14 weeks to April 17th, greater than the 2.4% decline seen in the previous six months.
It already reduced its pre-tax profits guidance for the year to £7.5 million in April, but today's news means expectations will come down even lower.

Thorntons said it had "continued to experience a tough trading environment", with like-for-like sales declines in its stores and higher than anticipated discount costs on clearing excess stocks.

Thorntons was in trouble last year as we posted here. They had been trying to discount their way out the recession. Reducing profits but increasing turnover. Unless there is a very, very high and fast turnover like on foods or newspapers then this strategy is always high risk. Sales shot up but at the end Thorntons seemed surprised they hadn't made any money.

This time its just lower overall sales and the necessity a perishable trader has of moving stock by discounting before its sell by.

Retail news has been reported fairly positively recently but the deeper data to pick a winner isn't very convincing. M+S were celebrating £630 million profit. But in 2008 it was over a billion. French Connection were up 1.9% which is marginal on their poor 2009 figs. Mothercare announced excellent sales figs up 21.4% but that includes over a hundreds new store openings. Like for like sales are up just a respectable 3%.

Nothing very exciting anywhere.

Ashes to Ashes: Mega Bear Markets and the Shape of 'Recovery'

As promised, a further contribution to the grim picture CU painted yesterday. 'V'-shaped recovery ? Get a sense of perspective. Quite hard to find even a decent 'W' here ...



Tuesday 25 May 2010

is this capitulation?

The FTSE is down another 2.5% today? With all the bad news around like North Korea considering war with South Korea, and the Euro crisis, it fees like capitulation.

On the other hand red line on the chart on the right shows the bull/bear/bull market. We have only just fallen below the 200 day moving average - suggesting a prolonged period of falling FTSE or else a big bounce.

However, no bounce is very bad news as it could mean the end of the QE Bull market and either a long period of stagnation or another bear market being born. not good for the savers who piled out of 0.5% savings and into shares.

I have no insight to offer in such a volatile market. Suffice to say my 30% profits on the year are down to 5%!

BP = Beyond Parody: Mandy on Manoeuvres

When we read a carefully-planted newspaper story that Mandy is being considered as a replacement for Tony Hayward at BP, we may be fairly sure that he is (in the immortal words of William Hague) on manoeuvres.

Let's see if this self-serving little rumour bubbling up from the darkest depths does anything to halt the leakage in BP's market cap, which has lost $47 billion since the oil-spill became public knowledge.


A New Rating Agency from the Fearsome Kroll

The record of the 'traditional' rating agencies is deplorable. Go back 10 years and you will not find them having called time on Enron's 'asset-lite' business empire, nor on any of the dozen or so large Enron wannabees that had sprung up in emulation of that pioneering 'merchant energy' and which were all to go under in 2001-2002, basically for the same reason of gross under-capitalisation.

Cue for breast-beating, sack-cloth-n-ashes and, we were led to believe, soul-searching. Oh, how the agencies realised the error of their ways ! Oh, how they now saw the additional analysis that was required. Oh, how they would never let it happen again.

They told the energy market players that, unless they disclosed a great deal more, in particular about their proprietary trading and its inherent risks, they would be severely dealt with in the ratings department.
And indeed, for a brief but glorious period in 2002-2003, a window of transparency was established, through which to view the relevant details of the (remaining) energy merchants' activities. Disclosure was made on a scale never seen before.

Or, indeed, since: for guess what ? Gradually the window misted over, and the window-cleaners stayed away. Soon we were back to the minimalist disclosures of yore. And what's to be expected, when the agencies receive their fees from the firms whose debt they are rating ! Don't like a rating you've been given ? Then go rating-shopping.

So there was never much chance that the vastly bigger and more complex banking sector was going to get proper scrutiny. As late as 3 days before it collapsed, Bear Stearns was rated single-A by both Moody's and S&P ! Such failures can only have contributed to the crisis.

An interesting development then is the fearsome Jules Kroll's proposal to set up a new rating agency. One trusts his 'sceptical' approach is as rigorous - and successful - as his reputation from the world of corporate security would imply, and as the world of finance sorely needs. A new business-model required, since one can't see a great deal of traditional business migrating their way ? Yes: he plans to seek fees from investors - a form of outsourced due-diligence.

Good luck with that. It has to come.


Monday 24 May 2010

Some sad news

Robert Chambers

1964 - 2010

Sadly Mutleythedogsdayout author has passed away in his sleep at the age of 46.

Mutley the dog was quite a regular commenter at Capitalists@work, with his humorous observations and perceptive comments.
His own blog was a great joy to visit with its madcap events in a strangely surreal comedic fantasy land.
He will be sadly missed by his many followers.
Our sincere condolences to his family.

Goodbye Mutley the Dog.

Memorial page is here.

ND adds: very sad news indeed - a great talent and, clearly, a good-hearted man

I well remember when Mutley got started: as with many folk, in the comments on Guido, back in 2006. From nowhere, he grabbed instant attention with a burst of surreal invention to which our old friend Tuscan Tony, and the infamous "Peter Hitchens" immediately responded in kind, to memorable effect.

Will be missed. Adios, Mutt

Cityunslicker adds: Bugger. I can only add to the above, what a great blogger Robert was. His discussions on the work of radioactive howler monkeys will bring on tears of laughter in me forever.

The first cut should be the deepest

When the governments of Sweden and Canada in the mid-1990's needed to make huge budget cuts, they realised that this would perhaps not be the most popular move. So with good political instincts they made them deep and early in their administrations. Thereby winning time to have an election many years hence.

Today the new chancellor George Osborne is announcing a downpayment of £6 billion in cuts to Government spending. Really this does not even qualify as a rounding error (indeed the most recent published PSBR was more off target than £6 billion).

There is a budget next month to go for the real deal, but when £60 billion needs to be taken out of public sector and away from future taxpayers debt burden, speed is of the essence. I can only hope that the government realises that death by a thousand cuts is a form of torture and not a successful political strategy.

Saturday 22 May 2010

Synthetic Life: What We Reallly Want is Blood

This synthetic life stuff is all very clever, but what the bio-chemical geniuses of the planet should really be working on, night and day, without respite, is synthetic blood.

How, for pity's sake, has this breakthrough eluded us for so long ??

Blood ... and treasure


Friday 21 May 2010

Picture Quiz

Picture Quiz

All of these images have been used to describe various political people in the news this week. Admittedly the people have been described as these characters mostly by posters on Guido but still...

Who are they supposed to represent.

Mostly done on looks.

Dr Doolittle - Vince Cable
Ant & Dec - Dave & Nick
Imelda Marcos - Theresa May
Ming the Merciless - Ming Campbell
Melvyn Hayes - Andy Burnham
Curtis & Moore - Osborne & Laws
Brewster Chuggington - Ed Balls
{ I admit I started that one}
Big Bird - Dianne Abbott
Bert and Ernie - Dave & Ed Miliband

‘No Subsidy’ vs ‘Floor Price for Carbon’

Among its 30 energy policy bullets, the Con-Lib prospectus includes: (a) encouragement for new nukes (with a let-out for conchie Libs), provided they receive no subsidy; and (b) setting a floor price for carbon.

Now the price of carbon goes more-or-less directly onto the wholesale price of electricity, because price-setting power plants will generally be either coal-fired or gas-fired, both of which need CO2 permits. Cui bono ? Any power generator not using CO2-emitting methods.

This means our old bugbears, nukes and wind farms.

And what a floor-price they want ! €50 sounds like a nice round number and that’s what they’re asking for – nearly four times the price of recent times. Exactly how that would work through to residential electricity prices is open to detailed debate, but in round numbers it would be 10% - 15% on average UK electricity bills.

But of course, €50 would only be the start. When, after a couple of years, the government notices that no new nukes have been started, and that the preposterous targets for new wind farms are not being met, they will solemnly be told by the subsidy-wallahs that the floor is not high enough.

Meanwhile, all these rogues have existing nukes and wind farms in operation, and will have been busily hoovering up the windfall of the higher electricity prices.

The best approach to carbon-pricing lies in another of the Coalition policies – persuade the EC to require that all CO2 allowances be auctioned.

Say after me: a floor price is a subsidy. Stick with the original instinct, chaps, and go with the virtuous slogan: No Subsidy !


BA losses in a spin

I really don't get the City reaction to the BA results today. Sometime analysts are just like journalists, they want a story and make the facts fit it.

In short, BA posted its worst ever losses today on the back of all the troubles last year, a £531million pound loss. A very rough calculation is putting this at over £10,000 loss per flight taking off!

The City is focusing on the fact that the company led it to believe it would lose £600 million. Therefore this number is a beat for them and the shares are marked up!

However, all these figures are pre the next set of strikes which could cost £150 million and the cost of the Ash cloud - which of course could well be a recurring theme.

Not only this but BA's pension deficit is still a disaster zone, with the deficit being worth triple the company's value and the planned merger with Iberia will stick BA with another loss making airline - it may not even be a UK domiciled company for much longer.

BA is said to have £1.7 billion of cash on the balance sheet. Therefore the company can stand these conditions a while longer. What the analysts are missing is that BA is not replacing its fleet. Look at how old its planes are here: compare it to say Virgin or Easyjet.  These aircraft that need replacing cost $70 - $200 million each. OK BA gets 50% discount, but it is still over £2 billion of replacement costs needed very shortly.

I have always said BA have good management, despite the sniping in the press, Willie Walsh, Keith Williams both do a terrific job, but it is a Sisyphean task.. But the Unions and weather are conspiring to ruin the brand once and for all. Perhaps with the merger they will try a re-brand?

All this and the share at at 190p - in current parlance - get real.

Thursday 20 May 2010

Question Time

David Dimbleby is joined in Richmond, Surrey by Theresa May, Caroline Flint, Ming Campbell, Shami Chakrabarti and Douglas Murray few answers.
I should like to recommend Mark Reckons blog which do a live chat on Question Time each week at 10.30pm. They are liberal democrats but we are all friends now. Just so long as we remember that they play the French role amongst this Entente Cordiale.

Q1. The Conlibs manifesto
Q2. Does scrapping HIPS signify the end of pointless legislation
Q3. Dianne Abbott and the race for leader. Is she using the Boris tactic?
Q4. 1922 committee decision
Q5. Are the courts right to be so picky over union legislation?

Winner gets to choose the name of the two currencies that will replace the Euro.

Coalition Agreement - It's Grown

So now we have the full Coalition prospectus, launched by Dave today.

(Incidentally, he launched it with praise for draughtsmen Oliver Letwin and Danny Alexander and,
though no-one likes a smart-arse, you read that here first. We've been getting a bit of credit for our recent political calls at this discerning blog.)

The new document is double the length of the hastily-written Agreement, but at first reading seems essentially the same. One notable feature of the earlier doc was that energy, bizarrely, was the longest section. Now NHS and Political Reform are longer; and Business, and Communities of equal length. We now have an additional 7 energy policies - making a grand total of 30 ! The more important of the new ones cover security of energy supply, a notable gap in the first draft: we'll be looking at them later, natch...


Wednesday 19 May 2010

Phone shopping

The trend for online shopping continues.

Marks & Spencer has launched a new version of designed specifically for use on mobile phones and mobile devices – the first mobile site from a major UK high street retailer.

Customers on the move can now shop on a site that has been developed specifically to enable them to search, browse and buy easily from any web-enabled mobile phone or device. The site will always be in sync with the main M&S website so that customers can log into their regular web-account and manage their shopping basket from their mobile. There is no need to download an app or any software.

The web site designed for use with a mobile. I don't know what % of people shop by mobile at the present. Online data on internet shopper numbers is misleading and not quantified.

"The popularity of online shopping is continuing to grow rapidly, with the majority of the British population aged 15+ shopping online., according to new research." ???

But it must be a good bet that the average commuter train contains a lot more phone users than Laptop users. The number of smart phones sales are around 25% of all new mobiles sold. Online shopping, still in its early years, keeps making itself more accessible. In the coming battle for the few remaining consumer pounds, ease of use from a mobile platform could become quite a factor.

Germany kills the Bull market; OBR next?

OK, so we all knew that the Bull market in shares was going to come to an end. An over 50% gain in the FTSE just seemed unrealistic.

However, the panic in Germany that has allowed them to ban short selling of bonds is the act of a Country that has strong elements of the Lehman Crisis.

With hindsight the worse thing about the Lehman crisis, as with all financial panics, is that the lack of information led to a frenzy which worked itself into a stock market collapse. The European debt issue seems to have now entered the same phase, with a real panic by Governments about what to do.

What is worrying is that it is Germany that is panicking. Germany has not debt issue of its own and German government bonds are probably the safest in the developed world. That this has happened has seriously spooked markets that were looking for a reason to fall.

Hard to see the FTSE now being able to stay above 5000 in the Short term, which will equate to a 10% drop for the year so far. Long-term, a consistent fall is going to see the end of the Bull market which started in March '09. A bull market which can only last just over a year is rather depressing...

Also work has interrupted the flow from me of late, but generally I support the Tory idea of an Office for Budget responsibility. It should be able to stop any future repeat of the new Labour spending disaster...but right now, in the deep end of an economic crisis, a bunch of bad sounding figures emerging is not going to help anything. People won't see that that £2 trillion debt has a 50-year time horizon (i.e. £40billion a year) when considering pensions etc. They will only hear the bad news in the current market panic.

George Osborne should set the office up, but if it takes a year to find the right staff and get going then that will be no bad thing.

Pay Up, Pay Up, and Pay Again ! (Vitaï Lamenta)

"what does the middle class feel about becoming the milch cow for a Tory government ?" (Jeremy Paxman, Newsnight 18 May)

We feel the Hand of History on our gonads, squeezing very hard" (Tory MP)

Vitaï Lamenta

There’s a breathless hush, twas a close-fought fight

No.10 gained in a famous win.

A bumpy economy, money tight -

Bad; but at last our man is in.

And it’s not coalition that sticks in the throat

Or the selfish hope of avoiding pain

But History’s Hand on the tax-payer’s scrote -

'Pay up! pay up! and pay again!'

The exchequer’s books are sodden red,
Red with the ink of a bank that’s broke;
And Darling's out; New Labour dead;
And Mandelson gone in a puff of smoke.

The river of debt has wrecked the banks,

As Brown skulks off with blackened name

And the tax-payer hears, as Sterling tanks-

'Pay up! pay up! and pay again!'

These are the words that year by year,

Whenever a Chancellor’s plans are set,

Everyone who pays tax must hear,

And none that hears it can forget.

This they must all – yes, each man must

Bear through life like a ball and chain,

And cursing Brown for his boom and bust

'Pay up! pay up! and pay again!'

(apologies to Henry Newbolt)


photo (c) N.Drew 2010

Tuesday 18 May 2010

That Con - Lib Agreement (2): Energy

Bizarrely, the great Agreement has more on Energy than any other single topic - 23 policy bullets !! It's mostly OK, and there probably isn't any money for the daft stuff, so we may be alright.

We can categorise the policies thus:

Full auctioning of ETS permits; Euro-Parliament to have only one seat, in Brussels - good luck with those, guys !

Scrapping HIPS; smart grid; home energy improvements; cancellation of extra runways at Heathrow, Gatwick & Stansted; per-flight duty; replacement nukes to receive no public subsidy (& so, there won’t be any replacement nukes)

If you must:
Green investment bank; feed-in tariffs – keep ’em low enough to be competitive, not so high as to represent a windfall; recharging network for electric vehicles – keep it strictly commercial; green spaces, wildlife corridors, biodiverstity - yadda yadda

Have you really got the £££ ?
CCS test plants; marine energy; high-speed rail network – all 3 parties promised this, but see George Monbiot.

WTF ??
Anaerobic disgestion (sic); illegal timber a criminal offence (sic) - did you really have nothing better to talk about in those negotiations ?

- Banded ROCs – the crazier the technology, the bigger the subsidy
- Emissions performance standards - can of worms
- Floor price for carbon – bonkers, or worse: do you realise the folk lobbying for this (EDF) want a four-fold rise in the current price ?? and that it will go straight on the price of electricity ?? Don't see this happening, somehow
- Reduce central govt carbon emissions by 10% in 12 months – try it and you’ll learn a lesson or two !

Increase the target for energy from renewable sources. Guys, target whatever you like, but it can’t be done ! So please don’t throw money at it as though it could.

But then – you don’t have any money, do you ? Say after me: GDP trumps GHG.

Needless to say, none of this addresses the key issues, viz (a) - how to keep the lights on ? and (b) - what happens when oil goes to $200 ? These are for the grown-ups and can be resolved in due course ...


Bercow Back in the Pooh Corner

Well, he's crossed Dave. And the entire Tory party. We shall find out just how many friends he does have ...

They're changing guard at Westminster Palace
Speaker Martin went down with Malice

Malice is threatening Bercow too

”His Tory friends are terribly few”

Says Malice

They're changing guard at Westminster Palace

Bercow’s taken the poisoned chalice

The bumptious git had better beware

“If he crosses Dave, he hasn’t a prayer”

Says Malice


ah, well

Monday 17 May 2010

That Con - Lib Agreement (1): Trident

And so, as promised, we turn to that oh-so-cunning Agreement that has even Polly Toynbee (sic) and Billy Bragg (sic) swooning. Seriously, it is a clever piece of work, given the circumstances, though we may be sure that some parts will stand the test of time better than others.

We'll look at Energy later (incidentally, Energy is the biggest single section in the whole doc ! - one of several reasons why I identify the Hand of Letwin on the pen). For now, Trident's the thing.

It may be recalled that when, a full 3 weeks before it was published, we predicted in detail the feasibility of such an Agreement, Trident was one of the things I reckoned Cameron could give to Clegg by way of a symbolic concession: apparently of great magnitude but in practice of no consequence. How so ? Because Trident is not an independent deterrent. It is also formidably expensive.

So what does the Agreement say ?

"The Government will be committed to the maintenance of Britain’s nuclear deterrent, and have agreed that the renewal of Trident should be scrutinised to ensure value for money."

OK, all things to all men etc; but
I think we can read between these lines. As with nuclear power, (of which more anon) by what measure could Trident be viewed as value for money ??

An easy target. Scrap. Soon. And turn BAe loose - under a very tight contract, natch - to develop us a truly independent cruise-missile platform.

What do you think ?


Government retreats from Banking reform

Who has led this? Read this article in the Telegraph. It says that there has been more or less a u-turn on the approach to banking within the first week of Government. In many ways it is a return to a more sensible policy, with reform but without prejudice.

Splitting the Investment and Retail banks, although a good idea, is simply not possible unless it is done on a global level and that was never going to happen.

Poor St. Vince has also seen his role on the banking committee reduced as that forum is no expected to be heavyweight and give and high-powered recommendations.

All in all the banks must be please and their share prices will react this week to this news. My hunch is that there is a good working relationship between ex-Investment banker David Laws and George Osborne - they have quickly decided there are other fish to fry than the banks.

Sunday 16 May 2010

Who would have thought it?

The Times have a story about the outgoing government rushing through legislation and signing up to impossible contracts.

Vince Cable, the business secretary, said: “I fear that a lot of bad news about the public finances has been hidden and stored up for the new government. The skeletons are starting to fall out of the cupboard.”

John Pienaar is discussing it now on R5. His guest says this is all spin. That the Tories are preparing us all for big cuts by saying 'Oh no..look what we've found.' That is probably true but I wonder if there isn't a lot more to it.

One former adviser to the schools department said there was a deliberate policy of “scorched earth”. “The atmosphere was ‘pull up all the railways, burn the grain stores, leave nothing for the Tories’,” he added.

I read about it first, here, in November 2007
when Nick Drew wrote about it. CU has posts too {that I can't locate at the moment.}

I admit to initially being sceptical. Gordon had only become PM in June!
Labour were incompetent, reckless and misleading but to actually set out to damage the next administration? That would be Treason wouldn't it?

Saturday 15 May 2010

The Euro: Gute Nacht!

This is a graph of the Euro-Dollar exchange rate during Friday of this week. It does not make good reading if you are long Euro's. In fact the FTSE's 3.5% fall was not exactly a barrel of laughs either. To think the index is down on the year despite relatively good economic performance against last year.

Still, the Euro is in very deep trouble. The problem it has is existential. it is not as if people have not been saying that it won't work for a long time. Look at this article and comments I wrote more than 2 years ago, as soon as the financial crisis hit it was a big flashing red for the survival of the Euro. OK, along with many people I thought it would be Spain or Italy to go down first, but the point is that many people have been expecting a Euro flop. Now it is here many traders are short the Euro. It is the Markets Vs Germany.

Place your bets!

Friday 14 May 2010

Thursday 13 May 2010

Question Time quiz

No news about the show. Guess the BBC lawyers are still agonising over how to create a balanced panel. Kevin Mcguire is going to look like a team captain if he has to appear every week.

Q1. Is this a new era in British politics
Q2. Did the Tories give too much.
Q3. Ed Miliband to be labour leader.
Q4. cuts..cuts..cuts..vat 21%..cuts Capital Gains..Olympics..cuts
Q5. Is this the end of the Liberal Democrats as grass roots desert them.
Q6. An Ant and Dec type comedy line.

prize is to pick the new leader of the labour party.

Oliver Letwin Has A Purpose After All

Oliver Letwin, a major-league 1980’s leftover, has been banished to the back room ever since he was identified beyond contradiction as a major-league political liability whenever allowed out in public.

Now he is redeemed, big-time. Because the careful and crafty ‘Agreements’ document emerging from the successful Con-Lib negotiations is clearly his work: it has his thumb-prints all over it. Well thought-through, well-drafted (in the time available): I am guessing that it contrasted dramatically with the paucity of Labour’s response when the LibDems shopped the deal – not a bad argument when it came to decision-time for Cleggy and his crew.

An investment banker, Letwin has negotiated a few big commercial deals in his time, and the business-like tenor of the Agreements document shows this well. Business and politics, eh ? Capitalists at Work !


PS - we shall of course be picking over said document with relish in the days to come …

So what is St Vince going to do with is power?

Readers will know that we at Capitalists@Work do not hold a high opinion of St Vince Cable. In fact, one of the highlights of the election was seeing him get torn to shreds by Andrew Neil.

Of all the Lib Dems in Government, St Vince is the worst. A die hard old socialist who has the added spice of massive over-confidence in himself. As business secretary David Cameron has wisely kept him away from the treasury and put him in a department which, lets face it, is going to some big hits when the spending review is done.

More worryingly, Mr. Cable has been put on a new committee to review the UK banks. Now here are a few links, take a look at what Mr. Cable thinks of banking. Of course, he worked at Shell in his career as an economist. Shell being one of the most profitable company in the world has little time for banks, it even has its own prop desk for trading FX and commodities.

Also of course Mr Cable was the socialist most demanding the banks be nationalised, including the total financial disaster that has been Northern Rock. Cable thinks of course this is a good thing, state ownership being better because precious profits go to him and his politician colleagues to hand out to grateful plebeians.
If you doubt this, see here where last year he calls for the guillotine for bankers who get paid bonuses.

So Mr Cable will recommend some nasty medicine for the banks, a profits tax (silly), a separation of investment and retail banking (great idea in theory, hard to do in practice), a control on bonuses (illiberal) and the closure of tax haven units.

The danger is that Mr. Cable decides he can have a private war on the banks, half of whom we need to nurse back to health to try and get our money back, the other half who have a major say in whether the UK remains credit worthy and contribute huge tax revenues already. Of course, the Tories, who two want reform, will get antagonised by this. Clever then to put ex-Banker David Laws, into the Treasury with George Osborne.

No idea what St Vince will do with his business portfolio, as an economist he is singularly unqualified to make real business decisions; great money to be found on him being the first minister sacked in the Government overall (Nick Clegg has no love of his rival either).

Wednesday 12 May 2010

Final election thoughts

Final thoughts on the election.
The most important thing being the victory.

Some Tories are clearly angry at what seems a lost election for the blues. Lots of criticism about the big society and the leaders debates.
I'm not so sure these were avoidable though..

Cameron had pushed for the debates from the first days of the Brown government. When Gordon was still Stalin and not Mr Bean and had all the TV presence of a potato. I don't recall anyone saying back then to refuse a debate. How could Cameron, having called for them, then refuse to take part in them?
I expect Cameron never seriously expected the clunky Mr Brown to agree to them. It was only the polling collapse of Labour that did it.
In the end Clegg was the winner. Yet it netted him -5 seats. So the TV debates didn't really change anything anyway.

The 'big society' was clearly a plan 'B'. The talks of austerity and savage cuts and need for strong fiscal government is what caused the sharp drop in the polls. Check the polls directly after that conference for the slide.
Labour capitalised on its voters fears of Thatcher style cuts and bought back the wavering into the fold. Once the 'big cuts today' message, an honesty message, failed, the Tories needed another one. To me the 'big society' looks like a mid term narrative to win a second term in office after all the cuts and pain. I doubt it was supposed to be the main message.

It wasn't a good campaign, but Labour's was worse.
But where Mr Cameron let his supporters down was in not being ready enough for what was coming.

In October 2008 Mr Drew posted a strong argument for a Labour snap election and it was a real possibility. We warned at the time that the Tories needed to be aware that labour was not defeated and were regrouping after some terrible defeats. They suddenly started dumping unpopular legislation and plans. In this reference to the peacetime, between the wars, navy we warned ..

".. the Tories need to stop sitting around in the beautiful teak lawn chairs, on the aft deck sipping gin and tonics and prepare to go to action stations. Dump any clutter, dead weight, ballast, hazardous items or unnecessary policies or people over the side and get their "A" team on the bridge right now.

Because a big and bloody battle is coming, And Admiral Gordon is taking no prisoners.

Cameron did this in the end in the Liberal negotiations.He was determined to win power and so the red lines were few and the offers many. It was a success. But he might want to be better prepared next time.

Gunnery practice first..gin second in future, alright captain Cameron?

That 'Green Economy': GDP Still Trumps GHG

Back to business. While we were otherwise engaged, the EC delayed implementation of the new round of combustion emissions regulations that would otherwise have precipitated early closure of many coal-fired power plants, possibly including the mighty Drax in Yorkshire, Europe’s largest.

This new round is targeting NOx - not itself a major-league greenhouse gas: but forcing early closure of such plants would tend to reduce CO2 as a side-effect. (The longstanding Large Combustion Plants Directive, which targets SO2, is not affected: owners of coal plants have already decided whether they will be complying with this - Drax will - or closing after a set number of operating hours.)

As we’ve said before, economic considerations generally trump environmental when the chips are down – GDP beats GHG. The much-trumpeted Con-Lib enthusiasm for the ‘Green Economy’ will need to be tempered by this very basic consideration – what can we afford ?


Why Have The Right Sat Tight ?

Fraser Nelson was quick out of the blocks vowing to fight a Con-Lib arrangement. Ah, the perils of 24-hour meeja: he quickly shut up, and has subsequently been a model of restraint, concerned mainly that Michael Gove's school reforms will survive in a coalition deal.

Methinks more than one person had a little word with him. Guido was probably the first - "don't do it, my friend" (no nihilist he!) - and we may imagine that one or two people wearing suits were also making similar points. Somebody has also had a little word with Heffer, too.

Excellent. The Tories' discipline since 6 May has been a pleasure to behold (e.g. Redwood, here). They've rediscovered their power-focus. This bodes well, for the difficult months that lie ahead before a re-run of the GE. And it's certainly what the grassroots want, whatever the ultras like to imagine, and whatever a mischievous media would prefer. "This is the election to lose" is oppositionist thinking associated with posturing purists, more usually leftists. No credit to Heffer for wondering thus: "The most difficult point to grasp is why anybody wants to govern this country". Difficult only for a backwoods sniper, matey: practical people seize the reins when they are flapping loose.

There are other simple reasons, in addition to a proper, pragmatic enthusiasm for power. Natural Conservative self-discipline and decency, of course ! But IMHO the main reason is that the Right is properly keen to see the mega-deficit sorted, and knows what a mega-task this is. Here is Nelson again:

"Clegg will take PMQs in Cameron’s absence, and will defend all those nasty cuts (sharing the blame for these cuts is the main rationale for coalition)"

This is a legitimate rightist motivation, and coupled with Red Lines on immigration and Europe (and Trident - but why ?) should be enough to keep the Right in line, provided the first Budget seems sound.

Any other views on why Tory discipline is holding so well in the face of a disappointing result ?