Friday 30 July 2010

The NatWest 3: More Enron Ungagged

In case it rains as promised on Sunday, and/or the cricket turns for the worse, here's some more Enron Ungagged you might find interesting (first brought to you here).

They've added a lengthy batch of interviews with 2 of the NatWest Three
, telling how they were stitched up by US prosecutors, and very badly served by bloody Tony Blair's ridiculously one-sided extradition treaty. I hold no brief for these chaps but it's an interesting tale.

Devil ... long spoon ...


One pay to rule them all?

The FSA has grabbed the headlines today by extending the number of companies who will have their remuneration policies restricted. Something we were all expecting and really this is being done under EU law as per usual.

As the big banks have changed, now other financial institutions will do too.

As ever, there seems to be a big patch missing. The City is made up of Insurance, Banks and Investment Management in the main; but they are advised by Lawyers, Consultants and Accountants.

These are the people who also earn big money, easing into 6 figures in their late twenties, and signed off on the the rubbish that caused the credit crisis. Also they are paid volume and utilisation related bonus's just like the other Financial Services firms- but they escape censure still in this new world.

Thursday 29 July 2010

Cameron's India trip review

Today should be the highlight of the Government trip to India, with David Cameron meeting Manmohan Singh, Indian Prime Minister. By all accounts, the trip has been well received and no doubt there will be plenty of high fives on the plane on the way home.

In the corporate world this would be down as a business development trip. In my career this is something I have a good understanding of and in my own small way have done similar trips across the world. most of them have been a total waste of time. We meet people, all goes well, we agree that something will come out of it, but very little ever does once you are back in Blighty. After all, other countries are sending trade delegations too and the world moves on. Some the the CEO's going along would have gone anyway and no doubt appreciate taxpayer paid plane ticket and extra-fine dinners laid on for the politicians.

Plus there is the fear of compromise; which I mean in the Mittal sense of the word What deal is being done now that will come back and bite the Tories years down the line. I hope they are different because Labour had much form for this, the little that they tried to do.

Don't get me wrong, this is not a waste of time to try and help build British business, but to send the PM and Chancellor seems over-egging it. I wonder really if this is part of the coalition deal to give Clegg face time as the Leader?

Labour leadership debate. Needs more work.

Just listening to the Labour's leadership debate on five live.
Every time I reached for the off button, which was frequently, some gaffe appeared. Turned out to be quite compelling really..

Ed Balls - "I despise people who give anonymous off the record briefings against other people. They are Cowards..People who accuse me are always off the record.."
Victoria Derbyshire - "Well I have a list of ON the record quotes here.."

Diane Abbot - "I think we should come out of Afghanistan and hand it all over to the UN."
Ed Miliband - "It is run by the UN Diane. Its a UN mission."

Andy Burnham "I am endorsed by Jamie hero is David Moyes.I like football...BTW..did I mention I'm a scouser.." And then a long,long prepared rant about GP funding that ended with an almost hysterical shriek of Death tax! Death Tax! DEATH TAX!
Bit to confrencey for radio Andy. you sounded like Goebbels.

Ed Balls {how would you cut the deficit?} I wouldn't.. {Not at all?} No! I would grow the economy to reduce the debt..{laughter all round}

Ed Balls again { an audience member went into great detail about waste in the public sector}
"Well if you go to Lords you will see people drinking champagne and sitting in luxury"
Victoria - "What's that got to do with anything? "
Ed - "Its all waste. Everyone wastes money.." his point was lost on everyone.

Ed Miliband. "I think we need to look forward not backwards. That's why i would apologise for the Iraq war."

David Miliband "The idea that New Labour ran up huge debt is just a Tory/liberal spin. We paid down debt..
John Pienaar - Erm, well that's not quite true. In the early years labour kept a tight rein on finances, but in the second term huge amounts were spent on public services, as demanded by the public. but this spending only increased, it never reduced."

And my favourite..
Audience man. "I believe these candidates are just telling us what they think labour supporters want to hear. They aren't being realistic with us, just pandering to our natural instincts."
Victoria - " So who would you vote for?"
Man - "Ed Balls. He's absolubtely right on the debt. We don't need to pay it down,its fine."

{some errors, but it was from memory. You get the gist.}

Milibands were most convincing. About even. Balls ..well, was just Balls, but has appeal for some.
Burnham. Not as good as he can be. Abbott. I'm a mum..I'm a mum.. adds nothing, but adds it in a pleasant way.}

Wednesday 28 July 2010

No Double Dip?

The Pound has risen to a five month high against the Dollar, our derided ONS has published fantastic growth figures. All seems to be improving in the UK economy once again. Even the Prime Minister has remembered to go on a trip with business executives to try and help UK business.

This is all good news, in fact, good enough to say there will be no double dip this year. Now of course, I have been saying this all along, but with a caveat. I thought more QE would be needed to help the economy through, now it looks like this will not be needed again this year. Next year may be different as the cuts hit. but if the cuts continue to hit totally unproductive parts of the economy, like speed camera's, then maybe not.

Better news then for share prices. I resisted the urge to sell off in the July panic. Now it is quite likely that the FTSE below 5000 was the low for the year. In fact, it is quite possible the FTSE will re-test the high's of 5800 or even touch 6000 at some point this year. The death cross (where the green line cross the red line below) of July looks to have been negotiated and the uptrend can be resumed.

There are plenty of things to fret about and some events that could knock this newly germinated recovery off the rails; but confidence breeds confidence, so now is a time to be hopeful.

PS If you have never watched that Seinfeld 'Double-Dip' episode then you should, its very funny.

Tuesday 27 July 2010

Olympics: the Sham Continues

A year ago we looked at what the Olympics ever did for employment in the East End of London, given all the Brownite rhetoric about regeneration, providing local jobs etc etc. The answer was a resounding 'diddly-squat'.

It was pointed out, however, that construction was only just starting to ramp up, and that Things could only get, errr, Better.

So - 12 months on, back to the data.

Yup, Things have got Worse. We show here Newham and Tower Hamlets, the two bo
roughs closest to the action: the picture looks the same for Hackney and Barking / Dagenham. Male unemployment rose as steeply in these places as in London and the UK as a whole. Indeed in Newham where the main Olympic Park is actually situated, the rise in unemployment is steeper than anywhere else.

We can, of course, still blame this all squarely on Blair & Brown ... except that I reckon Boris has been in post long enough to have done something about it if he could be arsed.

Still, no-one seems to care. And Tessa Jowell marches on: appointed to the Olympics Board, and now, FFS, a Google-Maps Landmark ! Surrealism doesn't come richer than this.

Ah well. Now they are asking for thousands of volunteers, so that'll provide a bit of outdoor relief. Cynic ? Moi ?


Monday 26 July 2010

Back in The City

I am back from my hols today to see that the quality of the blog and its stats have done really well in my 3 week absence. On the one hand that is very pleasing, on the other it presents somewhat of a challenge to me to raise my blogging game to the level of Nick Drew and Bill Quango.

Still I feel many events are about to unfold that will make blogging exciting for the rest of the year.

Saturday 24 July 2010

Those Stress Tests. Technical View. Yawn

Well, they've laboured mightily and brought forth the expected mouse. For political reasons it wasn't possible for the Committee of European Banking Supervisors to run the only stress-test that counts right now, namely the shock to a bank of an actual sovereign default. So it's all as feeble as anticipated, though some good may come of there being a whole lot more numbers out in the open.

What they did instead was to impose 'haircuts' on the values of banks' bond-holdings. Another criticism that has been leveled at the process is that this only applied to trading accounts, not 'hold-to-maturity' assets. As it happens I don't necessarily agree with this line of attack: but the defence I could offer only serves to point out another weakness.

The reason why shocks should be used in stress-testing, rather than assumptions of (relatively) slow-time degradation of market / economic conditions - which is all a haircut represents - is because if an entity has a reasonable amount of time to defend itself, it (along with every other actor) will re-optimise its position as conditions evolve. It is impossible to model with any certainty what this would mean, but in most cases it will result in a much better outcome than passively taking the hit. That's how individuals, firms, sectors and whole economies adjust to, and mostly survive, tectonic shifts in conditions.

That could be given as a reason for omitting held-to-maturity assets from the haircut procedure.

But it simply highlights the need for proper shocks to be applied ! Amateurs ...


Friday 23 July 2010

GDP Up, Confusion Reigns

Just as a momentous Parliamentary session draws to a close, and with the silly season already in premature full swing, quarterly GDP figures of 1.1% are announced. Cue all manner of daft commentary.

The most you can say about a freak result like this, is that it might, just give Osborne a soup├žon more confidence as he goes about his intense summer assignment.

But I like the thought of it throwing the Labour higher-ups (we can't dignify them with the term 'leadership') into a state of confusion. Does this mean they didn't deserve to lose the election, or is it a flash in the pan ? Can all of them now go flat out with 'we wouldn't have made cuts' ? But what about 'here comes the double-dip' ? Are the Libs doomed - or have they hitched their wagon to the right team ?

In fact, I like the confusion that the Coalition creates on several fronts, domestic and overseas, friend and foe alike. Just so long as it gets the quiet nod from Mr Market which (looking around at Europe, the US or indeed just about anywhere else) seems pretty safe - for the time being.

It all lets Cameron get on with being his own man. He gets it, they don't. He creates it, they are left scrabbling to figure it out, mostly through outdated frames of political reference. He surprises them daily. He looks like just the man to leave them on their backsides for years to come - and to know what to make of this opportunity.

Hey, everything's changing ! Deal with it. And in the meantime, George and Danny soldier on with the real stuff. Mr Market's still watching.


Thursday 22 July 2010

David Dimbleby is joined in Hartlepool {lab stronghold}
by Damian Green,{Tory MP and mole farmer} Sadiq Khan {shadow transport and prolific letter writer,at public expense. Nigel Farage { UKIP very low flier}, Bob Crow {Successful Trade unionist and dinosaur} , Ruth Lea {no nonsense economist with all the compassion of a terminator}

Think of 5 questions likely to be asked tonight on BBC's Question time show.

Q1. Afghanistan withdrawl/non withdrawl
Q2. Obama/Cameron Libya BP
Q3. BA strike offer rejected
Q4. BNP Griffin to the palace
Q5. Yorkshire ripper

Bonus question:

Immediately after QT, Brillo's TW will feature his grilling of Li'l Ed Miliband. In previous interrogations of leadership candidates he has fixed on a single line of attack (for Abbbottt - your views on West Indian mums are racist; BananaBoy - you covered for torturers and are unfit to lead; Balls - you are a disloyal little git and unfit to lead): what will it be for Ed ?

Winner gets a vote in the leadership ballot.
Note, winner must pay own subscription to Labour Party


1940 . Horrid histories

A load of nonsense being spouted about David Cameron's gaffe . the one about UK being junior party to the Americans. The Miliband's calling it a slur. I guess they are getting revenge for 'Obama beach'

"Cameron has insulted every allied soldier who fought in WW2" { texts on R2.}
"What he said is unforgivable. He is not up to the job"
"The American's never wanted to help us..only Pearl harbour made them."
"David Cameron betrays the memory.."

Cameron was saying that in the current war we are in a partnership, we have our say, but it is not equal and would be silly to pretend it is. We contribute some 15% to Afghanistan, so he is right.

Clearly it was an error, not a slur. Mr Cameron may not know his history dates, and to suggest in 1940 that Britain was junior to anyone would be absurd.
But what Cameron meant was in the 1940's the Empire was a junior partner, which would be correct. At the war's end the Commonwealth had some 885 military vessels. That was near enough the equivalent of the rest of the world's navies put together, excluding the USA which had some 6,500.
Junior Partner is a suitable, if unflattering description.

I never know if people genuinely misunderstand, are just willing to take offence, or are maliciously misrepresenting views for their own advantage.
But whatever...

To suggest that a Prime minister of any political party would willingly talk down his nation's population, military and history is ridiculous.

Wednesday 21 July 2010

How Have Commodities Performed ?

So, if not AAA, tax-free, index-linked bonds, what do people do with their £££ ? Commodities have been the big story for several years now, what with oil hitting $147 in '08, and food prices also soaring that year: and then there's Mr 'Cocoa' Ward in the news.

At the end of last year, devotees of the 'V-shaped recession' theory r
eckoned that commodity prices, seen as a leading indicator, must surely go storming ahead. Well, the figures for 1st Half 2010 are now in, and they didn't. [source: Goldmans / Reuters]

Inevitably, most punters don't invest in physicals - where would they put it ? - but use commodity funds based on futures contracts. Gold & Silver aside, the only commodities to do well on this basis were coffee and cattle.

Everything else did badly or indeed very badly. One of the problems is the cost of 'rolling' ea
ch month, from the expiring futures contract to the next one. Wiki calls this the 'roll yield' and starts by explaining how it can make you money ... when the forward curve is in backwardation. But of course you lose money when it's in contango. And on average ? Since 2000, the Goldman Sachs Commodity Index has shown a negative roll return in all but 23 months, i.e. 80% of the time, losing on average around 1% per month; and it's been that way all this year so far.

That's a big disadvantage to carry into the game. What's a retail punter to do ?

Which brings us to, *ahem* ...


* for the avoidance of doubt, 'ahem' does not constitute advice

Tuesday 20 July 2010

Don't amount to a hill of beans

Hedge fund manager Anthony Ward has bought 241,000 tonnes of cocoa beans.

The purchase was enough to move the entire global cocoa market, sending the price to the highest level since 1977, and triggering rumours and intrigue in the City.

It was the largest single cocoa trade for 14 years. The £650m ($992m) investment buys Mr Ward enough cocoa to make more than five billion small chocolate bars, the reports say.

Cocoa prices have been rising and rising. Poor harvests in Ivory coast and Ghana have led to a supply shortage and rising prices for the bean. The BBC had the business news in 2008 that London cocoa futures have hit a 23-year-high as cocoa turned out to be the most lucrative commodity that year. It was trading at £1,820 per tonne. Yesterday it was down from 16 July {£2,317} on a falling market to £2,227.

Chocolate bars have been getting smaller . Mars and Snickers were 62.5g in 2008 : 58g in 2009. Helping to tackle obesity said the PR people. Rising costs said everyone else...Added to the general food inflation was the poor harvests and civil war in Ivory Coast

So is this a smart move? A Trading Places Pork Bellies opportunity to corner the market?

Director of finance online blog thinks possibly not.

1} Confectioners are used to the rising price over the last few years. They may cut the size or reduce cocoa content reducing demand.

2} The beans are actually being taken delivery off. Unusual behaviour for a hedge fund that now needs to pay to store them in European warehouses.

3} The market price is now falling so there will have to be a call whether to purchase further stocks to further limit supply or unwind the position. As he says 240,000 tonnes is an awful lot of beans to dump onto the market.

Just a few other points. The situation in Africa isn't improving much. only a modest yield increase coming up.

The EU insists on chocolate containing 25% {35% dark choc} cocoa solids so there is only so much bar to cut.

Anthony Ward was a Director and head trader for cocoa and coffee at Phibro and is the ex-Chairman of European Cocoa Association. So I guess he knows his onions too.

and ...

He's done it before.

In 2002, Mr Ward made millions when he pulled off a deal similar to his current gamble.City traders first dubbed him "Chocolate Finger" in August 2002 after he acquired 204,380 tonnes of cocoa beans. Mr Ward made £40m in two months after he watched the price of cocoa increase from £1,400 a tonne to £1,600 a tonne.

Place your bets.

I'm going with the Socialist Workers latest target for contempt to pull it off.

NS&I Axes Index-Linked Bonds: What Next ?

We've had occasion to remark several times that, for the average punter, NS&I's tax-free, RPI+1% bond (implicitly AAA-rated) was a remarkable offering, almost too good to be true (in our humble opinion); and that, personally, we were up to our gills in them.

Too good indeed: the plug was pulled at midnight.

Yesterday I wrote: "the private demand to replace public spending has not been identified: for the past 10 years most private investment has been in real estate": and perhaps I should have noted just how much £££ has latterly swung in behind these inflation-proof instruments.

So is the government conspiring to push private money into reviving the private sector ? And will it work ? Where will the money now go, that would have been invested in RPI+1 ?

The amounts involved are not insignificant: reportedly, £2 bn in 3 recent months, totally £17 bn in all. The bonds mature variously in 2, 3 & 5 years, so a decent chunk will be maturing each year, and many folk automatically roll them over. If (*sticks finger in air*) we say that perhaps £6 bn might be looking to roll over in a year, plus (4 x 2 = 8) at current run-rate: this might be £14 bn per annum, ballpark, currently looking for the benefits NS&I was offering - in 2008 it was £ 12.5 bn.

The building societies' 3%, taxed, not-secured- above-£50k, doesn't look quite the same (again, IMHO). In a later post we'll take a look at how commodities have fared this year.

So where will it all go ? Will this be the boost to private enterprise the government is pinning all our hopes upon ?


Monday 19 July 2010

Ireland Downgraded, Can UK Walk the Fine Line?

On the eve of the election, Moody's helpfully opined:

"If [the next UK Govt] were to tighten fiscal conditions too quickly, this could potentially choke off economic recovery. Alternatively, if the UK did not tighten fiscal conditions soon and credibly enough, ... market opinion may move against the UK"

This morning, Moody's have downgraded Ireland's government bonds. That's Ireland, amongst the first countries to go for austerity, neatly illustrating the dilemma all western politicians face:
damned if you do ... as we said at the time.

Osborne's decisions for the UK have been criticised for being too much, too quick - and not just by the massed ranks of the Labour leadership candidates. Here is a representative detailed critique, the key points of which are:

- there is little risk of a bond-investors' strike; and bond yields have disconnected from deficits & debts
- if the transition from public to private takes a while, default rates will increase in the interim
- the private demand to replace public spending has not been identified: for the past 10 years most private investment has been in real estate
- pro-cyclical fiscal policy (possibly inadvertent) was the problem, and can't be the solution.

It still ends up with the same tautology: too much and you'll get a double-dip, too little and the markets'll 'ave yer.

Which we all knew anyway. Helluva line to walk and it seems Ireland has missed its footing. Can Osborne do better ?


Sunday 18 July 2010

Leadership Hopefuls Emerging From Brillo's Pad

Only two more weeks of hustings to go in the Labour leadership election ! And for those whose window on this private grief is the Beeb's This Week programme, so far we have seen, in sequence (commencing 24 June), Andrew Neil's entertaining knife-jobs on:

- Diannne Abbottt, proving she can't stand the heat in Neil's kitchen any more than could, *ahem*, our friendly Devil
- Andy err, ... ? well anyway, someone called Andy
- BananaBoy Miliband, evidently prepped by Mandy, imperiously brazening out his role as cover for torturers worldwide
- Balls, gibbering. It is said he has recently discomfited Gove and is apparently attracting favourable notices in OldLab quarters for his willingness to deny everything relating to the economy, and general all-round aggression towards the Coalition. It is also said that Tory High Command fervently hopes he will win; and after his performance against Neil we are in no doubt as to why

So, still to enter Brillo's Pad on Thursday, we are left with ... Ed Miliband!

Ed it was who first attracted attention around here in March 2009 when he was tipped by a commenter as the improbable 'John Major' candidate, in a blog-poll where his name didn't even appear in the shortlist. Subsequently, we started watching more closely and took a shine to his executive realpolitik, tipping him in a post a month later.

15 months on, he would still seem to have a mountain to climb because Big Brother Banana-boy has a commanding lead in the money and grandee-nomination stakes. Nor is this particularly inspiring. But who can really see the long-term future in the brazen-lying, wooden, machine-politics apparatchik that is Miliband D? And, conversely, where is the glaring flaw onto which Neil can batten, to leave
Miliband E looking as ridiculous as the rest ?

So - Thursday night it is. Lights, camera, action.


Saturday 17 July 2010

The Now Show.

The Now Show this week remarked on political memoirs being given film titles. The Third Man was the butt of a few jokes.

"The advert for his book is like Roald Dahl in Tales from the Unexpected. But as we've heard what he has to say many times before the only
surprising thing would be if he turned to camera and said "I'm not even slightly gay"

For the weekend:
Political memoir film titles for
Peter Mandelson
Gordon Brown

Tony Blair

Margaret Thatcher

Zac Goldsmith
Michael Gove
Dianne Abbott
among others..

Punt and Dennis offered up
Gordon - Unforgiven or Apocalypse now.
Tony - Liar Liar

I offer,
Alistair Darling - Face Off
Tony Blair - Its a wonderful life.
Gordon Brown - Psycho
Peter Mandelson - The Dark Knight
Dianne Abbott - Tim Burton's Alice in Wonderland

Friday 16 July 2010

The Fall of Barack Obama

Obama offered Americans a free and easy pass to a better future: now they see it was an empty promise

Interesting piece on obama's woes on the First post here. Unusually for a U.S. President Obama has dissapeared from the radar here. I believe that's partly what this piece is alluding too. He set the bar too high and has now disappointed everyone. While I only agree with some of the post there are some comparisons about the different approaches the two new governments have taken getting to, and being in office.

Obama promised change. Change from the past. And hope. Hope for a better world. He didn't really say how he was going to do that, but then he didn't have to. He was left an even worse situation than Cameron's coalition. 10% unemployment, two seriously expensive wars, manufacturing shut downs and a housing and bank collapse, and all the other financial catastrophe that that brings.
When Gordon said it started in America he was right. The USA has been about six-nine months ahead of us in the credit crunch. So the Bluey-yellers should be watching what is going on there very carefully. US GDP +3.2% Q1, third solid growth 1/4 in a row, for example was bound to have influenced Osborne's optimistic treasury forecasts.

But, as the article says, Obama has not done the hope and change that people wanted. They wanted jobs. Jobs and credit. Not stimulus jobs, but real jobs. They haven't materialised.
The unemployment rate in the United States was 9.50 percent in June of 2010

Where I really do agree with the article is that the economy should have been the number one priority for his first term. That, and that alone, will win him a second term. You can't offer 'more change and more hope,' from yourself. You must deliver.

In contrast the Tories, almost alone, tried to discuss the recession and the debt. So when they sort of won, they already had set expectations of bounty at nought. They are mentally well placed to carry out necessary reforms to the state and spending. the public expects them to do it.

But they should focus on achieving growth FIRST.The credit crunch must be ended before the campaigning begins. If it isn't, then its all over.
Obama wanted health Care reform. It was necessary, it was fairer,possibly end up cheaper and it has been a Democratic platform for decades. But it was a big fight. Ideological as well as politically. As Alexander Cockburn wrote;

Obama had his window of opportunity last year, when he could have made jobs and financial reform his prime objectives.
That's what Americans hoped for. Mesmerised by economic advisers who were creatures of the banks, he instead plunged into the Sargasso sea of "health reform", wasted the better part of a year and ended up with something that pleases no one.

The lesson for the coalition is clear. Interesting as Vince's 'university fairly paid for by all' and Gove's very welcome new school schemes, they are distractions now. The schools policy, one I wholeheartedly support, is in particular a second term policy.

Economy and debt first. Because if it isn't fixed, there won't be a second term, no matter how many new schools are opened.

Thursday 15 July 2010

Question time again..

David Dimbleby is joined in Bexhill-on-Sea by Francis Maude, old school Tory MP and hunting with hounds vote avoider. Andy Burnham, Melvyn Hayes look-a- like and Labour leader hopeful. George Galloway, pussy impersonator, man without job, former irritant and loud one issue MP - a sort of human Vuvuzela. Sally Bercow, "journalist", but Twitterer would be much more accurate, and wife of Speaker John, and Nick Ferrari, LBC talk show presenter and a proper journalist.

Up to six guesses. Winner's prize is to choose a new job for gorgeous George, {who is normally pretty good on this prog.}

Q1: Moaty the new Robin Hood {if Robin had crossbowed maid Marion}
Q2. Tory reforms mean double dip.
Q3. Gove {again}
Q4. Health care GP responsible reforms
Q5. Graduate tax
Q6. Political diaries..should they/shouldn't they

Wednesday 14 July 2010

"Stress-Testing" the Banks ? Not Very Stressful

Since 2008, on both sides of the Atlantic, so-called stress-tests have been and are being conducted by financial regulators to establish their capital adequacy. So far as I am concerned, anything that intelligently bolsters the limited, formulaic 'day-to-day' CapAd assessments made by the banks themselves is worth entertaining: we know that pre-crisis bank capitalisation was culpably inadequate.

Except that what is being done should never be dignified with the name of Stress Test. All the talk is of modest 'haircuts' to represent the downside of potential sovereign default: but as we wrote in 2007 when bank default was the issue of the day, nothing short of testing for outright default is sufficient.

Here is what the Bank of International Settlements - essentially the highest authority on the subject - says in its 2009 guidelines on the matter, written with the benefit of very recent Crisis hindsight and insight:

"Stress tests should feature a range of severities, including events capable of generating the most damage whether through size of loss or through loss of reputation. A stress testing programme should also determine what scenarios could challenge the viability of the bank
(Principle 9, my emphasis)

Authorities please note: call a spade a spade, but don't call a haircut a Stress Test.


Tuesday 13 July 2010

UK Loses AAA Rating ...

... according to the Dagong Global Credit Rating Co, "China's first official credit rating agency", which has downrated us to AA- today. Cheeky buggers.

By contrast S&P continues to rate us AAA: Negative Outlook. George Osborne would probably have hoped for better, but they have doubts over growth projections and, frankly, everyone has their concerns.

Helpfully, Mr Pratley (sic) of the Grauniad tells George not to fret, seeing as how the rating agencies are rubbish. It's true, Nils, we've said so ourselves - but their usual sin is over-optimism, so I'm not sure this helps. The importance of the AAA is easy to forget, because we've enjoyed it for so long - but hard to overstate.

I once worked in the Treasury of an AAA-rated energy company (not Enron this time, needless to add). We agonised long and often over just how much it was really worth to us: perhaps we'd have done better loosening up a bit (e.g. by using project finance instead of funding everything ourselves). But we were highly cash-generative, and the odd point on the overnight overdraft wouldn't have mattered a hoot.

The UK is not in quite the same happy position. That Spending Review can't come quick enough and, as we've said before - no summer hols for Danny & George.


Monday 12 July 2010

Enron and the Corruption of the US Justice System

Long-suffering readers of C@W will know that I have *ahem* a special interest in Enron. I've been known to contrast the punitive treatment meted out to Jeff Skilling for his misleading of investors, with the lack of any sort of punishment for most of the banking reprobates, many of whom must have done far worse.

Here's a rather unusual new website which, in a very measured documentary fashion
(and with very high-quality production values), is dedicated to highlighting what it believes to be the fairly gross abuse of the US criminal justice system that was the Enron Task Force, which was seeking to have Lay and Skilling incarcerated by any means available.

I guess we all realise that plea-bargaining is potentially a pretty rum do, but see what Ken Lay's attorney Mike Ramsey has to say about it - if you have a bit of spare time, because this is not for those of short attention-span.


Sunday 11 July 2010

The Third Man

In special appreciation of the winner of the publishers wars.

The Third Man.
{Do you think Peter has ever actually seen the film?}

Fome the IMD reviews:
"..he has minimal screen time, though his dark presence and influence infiltrate proceedings like an insidious disease. .."

"The character of Harry S.Lime, alive or dead, on-screen or not, is one of cinema's most fascinating villains. Charming & deadly as any cobra, he attracts & repels at the same moment. "

".. A man who is supposed to be dead turns up alive, there are conspiracies, deceits, and double crosses… "

"we all remember that terrific scene where the cat meows, and suddenly he appears, an evil smirk on his face like a child who has gotten away with the cookie from the jar."

Our own tribute.

Sadly, due to the inherent oddities of multi format in WMV some scenes don't appear on youtube. Moving to a better video editing program soon.

Bank Lobbying Rumbles Into Action

The banks have been broadly on the defensive for a couple of years now but my capitalist media-antennae tell me they are drawing up the artillery in preparation for a struggle to get those pesky governments and regulators off their backs.

We'll be looking at some of this in detail shortly, but it's another nice day and so for now, here's just a reading list from the Sunday papers.

- From the Telegraph: HSBC doesn't want to be broken up

- Osborne is praised for rebuffing the EC on banking regulation (and quite right too)

- RBS doesn't want to be thought of as socially useless (and we certainly can't move for NatWest 'Helpful Banking' ads these days, can we ?)

- The Indy suggests that Osborne has already been nobbled

- From the Observer: PWC worries (on behalf of whom, we wonder ?) that if banks are made to hold more risk capital we'll all suffer (this is a really juicy issue we shall certainly be coming back to)

- And from the Scotsman, this time it's the Scottish wing of PWC worrying that, errr, Scotland will suffer (thus proving that it's part of a coordinated lobbying campaign)

What with the Bank Of Old Buffers limbering up on the horizon, the battlefield is getting crowded ...


Friday 9 July 2010

Ocado, the Silly Season, and Finance 1.01

A man who likes his food (and his £££), Mr Quango was onto the oddities of the Ocado flotation like a flash. Since then, our friends at Alphaville have been all over it like a rash. August may be the official Silly Season, but evidently we’ve started early this year and the investment commentariat in general has been letting us understand, more or less subtly, that Ocado is an IPO that won’t fly at its chosen altitude.

I’ve been in the PE/VC game for a while, on both sides, and there are a number of cast-iron rules about financing pitches (or ‘decks’, as they are known, as in deck-of-ppt-slides):

- the total market they are attacking is always worth at least 1 billion (of whatever currency seems appropriate)
- “if we get even 1% of this market, that’s 10 million
- “we think we are unique”, etc etc

(The answer to this last assertion is of course: then you obviously don’t know how to use a search engine)

The killer is always the valuation. If you’ve ever watched Dragon’s Den, you’ll know that no budding entrepreneur ever values their leeedle company at less than 1 million (of whatever currency …). “I’m looking for £150,000, in return for 15% of the company”, it’s always the same. I have seen this myself so many times it is scarcely even droll any more.

Now Ocado is the baby of some ex Goldman’s types - the chutzpah is not in short supply. So they are going for full IPO; everything has been scaled up: and Lo! Ocado is worth £1 billion !

Or not. Do yer own DD … and be sure to read Alphaville. And Mr Q.


The most nostalgic post in the world, ever.

"Nostalgia is a seductive liar." ~George Wildman Ball.
"Nothing is more responsible for the good old days than a bad memory. ..."

The term nostalgia describes a yearning for the past, often in idealised form. - wiki

Nonsense. Nostalgia is a mix of the best, the naff, and the just plain embarrassing.

To prove it I ask all readers to add their reminisces to the comments. Then, when we have collectively amassed the entire culture of the late 20th, early 21st century, I'll add them to the main thread to create the most nostalgic post in the history of the internet. Google search page number 1.

Its not just idle weekend fun. Its making history.

Please add to :
Corona Lemonade from the milk float. Mens shorts that ended above the knee. Boil in the bag beef
bourguignon. Shoulder pads on t/shirts. Yasmine Bleeth."We hope its chips, its chips!" The Gay Liberation front. Old people who looked 80 at 50. "Watch out watch out there's a Humphry about." Choppers. Viscount chocolate bars.Our Price. Soap on a rope. Dial-up. Tizwaz. Top Trumps. Evil Knievel. The permanent wave. Escape from Colditz boardgame. TR7. Double Diamond, Going for Gold ...and..?

Thursday 8 July 2010

Question Time.

David Dimbleby is joined in Edinburgh by Lord Forsyth, Michael Moore MP, Douglas Alexander MP, Nicola Sturgeon MSP and Ed Byrne.

Usual rules.
Winner gets to choose James Corden's next comedy vehicle once his world cup show ends.

Q1. Gove schools apology.
Q2. Al Megrahi still alive
Q3. Raul Moat and the police response
Q4. Afghanistan troops 'withdrawl' not a retreat.
Q5. Graduates. 2:1 is the new 3rd.

Andy Murray if time...

Wednesday 7 July 2010

Standing room only.

Ryanair aims to cut cost of flight by making its passengers stand

Ryanair to make passengers stand. Somehow missed this story from last week. Its just the thing I like because it looks exactly like a provocative PR piece.

The low-cost airline would charge passengers less on "bar stools" with seat belts around their waists.

Michael O'Leary, the chief executive, has already held talks with US plane manufacturer Boeing about designing an aircraft with standing room.The Telegraph had the 'perches' priced at £4 a ticket, but the Metro had £5.

Seems incredibly unlikely. I fully confess to knowing nothing about aviation and aircraft design but Boeing would have to make the changes, which I can't see them rushing to do. The Civil Aviation Authority would have to change the rules on air seat belts. That ping and the little light that goes on to tell you to sit down and belt up isn't just to stop you bashing yourself. Its the law. How families would be able to travel with toddlers and infants isn't clear. The perches would need to be adjustable to allow small child use, or be different sizes, complicating what is currently a simple system.

And no eating trays I guess. Presently these fold down and cover the knees and extend to the chest. To have a tray would mean no saving in legroom,negating the point of the story which is to pack in more passengers. Maybe they'll be a buffet?

The overhead luggage racks would need to go too. Its not possible to fully stand underneath them at present. That causes a problem for the oxygen systems and lights and air con contained underneath them too. The under seat storage is lost too, including the lifejacket, but that might fit in a pouch on the seat in front.. The windows would now be at the wrong height too, as would the weight distribution with many more people in the tail. And the added increase of 50 passengers and their luggage increases the overall weight, so increases the thrust to weight ratio, which means burning more fuel, or changing the engines... might mean further luggage restrictions or something for Pratt and Whitney to work on. The £1 to use the toilet charge might also generate even more anger as two toilets need to be removed to create the extra vertical seat space.

Is this beginning to sound like some sort of spin story? A diversion?, who seem to think the stand up seats story is likely, also seem to have found the reason for its sudden announcement.

Welcome everybody, to Ryanair's summer baggage policy, complete with its July and August 33% checked baggage fee hikes.


The Guardian: Careless To The End

The Grauniad was not so called for nothing: before the advent of spell-checking it was a by-word for typos and misprints of all kinds, evidence of a complete lack of editorial care.

But computers can't sort everything, and before they pull this page down here's a screen-grab to make 'em squirm.

Guido reckons the Graun is doomed when the public sector jobs are no longer advertised there. They obviously intend to end their days as carelessly and casually as they lived them.


Vote for Mr Quango

To the hustings !

Click here to vote in the Total Politics Best Blogs Poll 2010

In the run-up to the 1952 election, Eisenhower was berated by his aides for not exhibiting sufficient showmanship on the stump. "If the price of victory is that I must shake both hands above my head" he replied, "it is a price I am not willing to pay".

By contrast, we'll do (almost) anything.

Vote, vote, vote for Bill Quango !

(That's Capitalists@Work,

*stands on head and shakes both legs in the air*

Tuesday 6 July 2010

Transfer Payments To Wealthy Kleptocrats

If anyone needed more evidence - and readers of C@W probably don't - that international transfer payments are a nonsense, this sorry story of gross abuse of the UN's REDD scheme for preventing deforestation pretty much sums it all up. CAP-style corruption writ large: don't they ever learn ?

Accepting that the pass has long since been sold as regards many aspects of the EC, a basic principle of future policy must be - no levies to be paid to supra-national bodies.

The environment is a major area in which such things are being proposed all the time - the EC is perennially discussing a carbon tax, and someone always suggests it should be levied and dispensed centrally. Likewise, the shifty eyes of the Commission are on the proceeds of nationally-raised Bank Levies - although M.Barnier seems to have been put back in his box for the time being ("we are not proposing any single federal fund" - which is not what he was hoping for a few months ago). And of course the fatuous (and doomed) Robin Hood Tax is wanted for ill-specified international application:

Q: How would you [sic] spend the Robin Hood Tax ? A: "We [sic] want to see half the proceeds earmarked for spending internationally"

Like the poor, the woolly-minded are always with us; but we can demand better of policy-makers. The price of the extraordinary privilege of ring-fencing that is being enjoyed by overseas aid ( and who on earth nobbled Cameron on that one ?) must indeed be "ruthless" scrutiny.


Monday 5 July 2010

Twenty Twenty

Reading the comments on a Dale post about How much are BBC managers worth I was reminded of a Socialist Worker type pledge.
Paul Halsall, a genial left winger, commented about the twenty times salary. The higest paid in a corporation cannot earn more than twenty times the lowest.

I don't believe any executive in a public corporation should be allowed to earn more then 20x the lowest paid.
But I also believe this should be applied to the private sector as well.

Predictably the comments remarked on self employed, risk taking, business owners, the end of capitalism and so on. For my part I remarked, I don't agree with it, naturally, but its not quite the fantasy it first seems. We pretty much have it now except at the very highest levels.

Heart surgeon paid 20 times what a cleaner is. £5.80 = £12,064
Surgeon gets 20 x £241,280

Forklift is about £8 ph.= £16,640
Sales director of Sony UK £160 ph.= £332,800

Puts a cap on salary of around £350k, unless minimum wages rise, which would cut the profits.

Except, I just read Adam Croziers final years pay for Royal Mail.
£2.5 million. That's about 160 times a postman's salary.
Kevin Lygo, the director of programmes at Channel 4, earned £1.136m last year
. So only about 80 x salary.

Where I'm suddenly a bit more in line with Paul { not 20x anything, but capping salary for public sector} is that Royal Mail, like Railtrack, has to make a profit, so needs top people.
But if these top people fail then...taxpayers bail them out. Adam Crozier's job was as safe as safe.
Fred Goodwin's wasn't. If he didn't make money he was out.
{There is a whole sub argument about how this attitude destroyed the financial world, but lets try and just stick with salaries.}

So..should public sector or private sector bosses have capped, or multiplier salaries?

25% Cuts ? 40% Cuts ? Game On

Back in 1986 the price of oil collapsed, hitting the E&P (exploration and production) activities of oil companies hard. Major downsizing was the order of the day - the city of Aberdeen nearly went under - and all manner of cost-cutting programmes were instituted.

Shell Expro, the E&P division of Shell UK, had one such scheme, and it bore strong resemblance to the Coalition's current plan for its own Spending Review. In both cases, each department gets told to draw up plans to cut 25% and 40% of its expenditures. Obviously, then as now, the purpose of the 40% requirement is to winkle out any really creative radical ideas. (They all use the same management consultants, you know.)

In Shell's 1986 episode, the staff were told that all the 25% cuts would be implemented, and some of the 40% ideas too. Just to add to the gaiety of the exercise, this planning process was called SEARCH: the S-E stood, naturally enough, for Shell Expro but no-one recalls the rest because, such was the disruption it caused, it immediately and memorably became known as Stop Everything And (w)Reak Complete Havoc.

One old lag of my acquaintance, a manager in his late 50s, had a high-profile role which required him to make a weekly pre
sentation to the Shell Expro board. His department's "25%" plan had him being pensioned off in the first wave and, confident he would soon be waving farewell, his weekly offerings became more and more flippant, nay insubordinate, as SEARCH rumbled on.

Highly entertaining for spectators, but you can guess the rest. When the results were in, the board didn't like any of the suggestions, and did something quite different to make the necessary savings. This did not include making a fairly costly redundancy payment to our flippant friend, who was left looking, err, rather uncomfortable.

Get stuck in, Alexander and Osborne. Remember, no summer hols for you.