Wednesday 29 February 2012

Do We Trust Vince Cable To Pick Winners?

Here we go again - a "proper industrial policy". Yes, Grandad Cable has decided he can pick the winners, and he's targeting ... the oil & gas industry !

Any government meddling in business is to be viewed with the utmost skepticism: but of all sectors to choose, oil & gas is the daftest. Here we have the richest, most capable companies on the planet, producing something that is rivalled only by food and water in terms of guaranteed demand - and unlike food & water, it can't be produced on a small scale, only by the energy companies in question. So what can Vince possibly offer ?

The answer, of course, is subsidy and general featherbedding, because even hard-bitten energy types will gleefully take a sucker for every penny. So the UK oil & gas lobby will duly raise a cheer, while trying manfully to suppress its collective grin.

But that's only a start: Vince has more plans in mind, oh yes. "Other industries to be targeted include aerospace, media, film and fashion."

The queues of lobbyists are already forming along Victoria Street. I gather the police have recently acquired some handy tents they could use, if the wait is protracted and the weather turns inclement.


Tuesday 28 February 2012

Farewell Occupy London

So, what did it achieve then?

I saw:
- Lots of hand-wringing from bankers who didn't like their brand of Capitalism exposed
- More bankers and City workers unmoved by the floatsam of student politics being camped outside St Pauls.
- Hysterical politicians seeing a bandwagon and jumping on it to create an anti-business mood; I have no insight as to whether this is popular, but they certainly thought it would be.
- The Churchmen come out as weak, limp-wristed, ideologically and morally confused - not much of a surprise there.
- A campsite for the bitter and the unengaged, no different to what you can find at Glastonbury each year - all with hopes and ideological zeal - none with a practical plan to do much about anything. But then, if you had one of those you wouldn't be living in a tent in London would you?
- Finally, hilariously, the rise of the part-time squatter, able to pitch a tent and make a noise but still get home to make the tea and watch Eastenders.

A very British revolution overall - restrained, confused, well-meaning and highly ineffective. So in that way a credit to our nation - after all who wants an Arab Spring in the UK.

Monday 27 February 2012

Oil at $150?

I am surprised that even the BBC now has a story carrying the likely plans on how Israel may try and attack Iran on its website today. So expected is this event that it seems barely worth a mention on the front pages these days. Yet such a war would have a global impact putting the Iraq and Afghanistan adventures in the shade.

Back home we can already feel the heat of this growing threat. Iran supplied UK diesel through a circuitous route and this can be seen in eye-watering pump prices of nearly £1.45 a litre - not long a this rate until it is £100 to fill up your car.

Reality will really hit home if this cold war turns hot. closing the straights of Hormuz will cause a massive speculative increase in the price of oil - yes, it may come down as speculators quickly look to book profits, but a Middle Eastern war is the last thing the Western, or indeed Global, economy needs.

In the past oil at over $100 has brought recession, look at the Reuters graph above, prices near $100 are highly correlated with recessions. Let alone $150 - let's think what this might mean for the UK and eurozone alone.

Firstly, straight back into real recession is nailed on - probably at least a full 1.0% off GDP which is already flat - maybe as much as too. Same for the Eurozone. As far as our debt dynamics are concerned, this means major misses to the fiscal consolidation programme - offset a little by the high inflation such a move will cause. A Classic stagflation scenariom, nasty. The Tories could certainly kiss goodbye to hopes of winning the next election.

On our already weak UK economy though, the blow is will be felt fairly badly. Let's face it nearly all consumer goods are either made of oil or packaged in it, some powerstations are oil fired - it will be messy across the board in terms of sector performace.

Worse, as an external shock there is nothing we can really do to prepare for it as a Country - except that with high oil taxes we are at least inured to high prices more than say the US or Spain, but not enough to offset much of the pain.

Politically the showdown with Iran has to come sooner or later, although an Arab Spring type event would be much more welcome. Economically, we just can't afford it in the next 3 years. I wonder how these trade-offs are playing out in Whitehall and Washington - we'll soon find out.

Saturday 25 February 2012

Always Pleased To Help

This gets my weekend off on the right footing. The Telegraph reports that "Athens has launched the biggest sovereign bond restructuring in history". Ah yes, part of the Euro rescue plan from which Cameron so rudely opted out, leaving the UK a pariah and dooming the City to irrelevance.

But wait, what's this a the foot of the article ?

"The bond swap will be run from London by Deutsche Bank and HSBC."

Too right! Because with the best will in the world they really don't understand these things in Brussels, Luxembourg, Paris or even Frankfurt. (I particularly enjoy the idea they will require that Euro-denominated derivatives must be settled in Euroland: do these people actually know what a derivative is ?)

Now for the rest of the weekend: let's see what the much-vaunted Welsh back line can manage at Twickers.


Friday 24 February 2012

Banks still an accounting muddle as losses continue

RBS and Lloyds Banking Group have now both reported their 2011 results. And how disappointing that 4 years after the crash, they are still losing £5 billion a year between them. Compare and contrast HSBC and Barclays, yet to post a loss and still making multi-billion profits. Another example in fact of how wrong it is to tar all bankers with the same brush.

At the heart of the losses for both Lloyds and RBS are the continuing losses on loans made in the run up to the credit crunch. Every 'Non Core' sale results in another hefty loss being taken, as the banks shrink, their losses increase. At some point soon, probably next year, the worm will turn. The core retail banks are profitable as are the corporate bank loans made since 2008. The day will come when profits from these outweigh the losses of the old loans - indeed most loans are 5 years at the very most, so one would think that 2013 would be the turning point.

What is odd overall though is the impact of IFRS accounting. With all these bad loans, the banks are able to massage their figures, taking losses when they can. It's a bizarre bit of accounting that ignores mark to market in reality and fully embraces the more fun, mark to make believe. banks too cheat by rolling over bad loans at poor rates in order to not take the hit of closing out at a loss - this latter point is why 2013 won't be the end, but the beginning of the end of the crisis.

Worse new though is the impact of events. Every year the banks are facing more headwinds. This year is what the PPI scandal - a mis-selling tale that started a very long time before any of the current management were in place. Plus, of course, Greece. The thing is every year there is some external crisis - Eurozone, Japan, abysmal markets. It's hard to see when the excuses will stop. it's quite likely the taxpayers will get their money back on a nominal basis - but at a distant point in the future, inflation will have had its way on the real investment.

Thursday 23 February 2012

Question Time

Tunbridge Wells which is a blue heartland with much lib support too. A true coalition seat?
David Dimbleby is joined in Tunbridge Wells by Ed Vaizey, Emily Thornberry, Paul Nuttall, Cristina Odone and Simon Schama.

BQ thinks..
1 - NHS. Should ministers be forced to listen to old women explaining their health problems.
2 - Syria. Now someone from the media has been killed is it time to finally mention this story on QT?
3 - Workfare. Its completely dead now, through the power of negative publicity. Will the government admit it though?
4 - Calls for tax cuts. The coalition can't be brave enough to tackle 50% rate. But could they look at N.I.?
5. Abortions. illegal or practical?

Measured -42
Cityunslicker - 41
Dick the Prick - 40

Timbo614 -39
Nick Drew 38

Miss S-J - 35
Philipa - 34
Bill Quango MP - 34
appointmetotheboard - 33
Sebastian Weetabix - 31

Botogol - 29
Malcolm Tucker - 28
Hopper - 28
Miss CD - 28
Budgie - 27
Hovis - 26
Andrew - 24
Jan - 21
GSD - 19

Amy 10
lilith - 8

Anonymous - 7
Blue Eyes - 2
James Higham - 2
John in Cheshire - 2
Mark Wadsworth -1
Dearieme - 1

Eagle eyed players might have noticed that new pole position measured has had two scores all season. After careful checks it has been established that the higher score was the correct one. {Damn!}

Wednesday 22 February 2012

More Danegeld Wanted: Dorothy Seeks 'Moderate Uplift'

An occasional series on demands for Danegeld: and rather monotonous it is too. We've seen requests for increasing the subsidies on: nukes; gas storage; anaerobic digestion; solar power; gas-fired power stations; CCS ...

Now it's Drax that fancies just a leedle bit more subsidy ('moderate uplift' to be precise),
this time for burning biomass.

"the company said investing a further £450m to convert Drax to run mostly on biomass was 'dependent on appropriate support' ... Dorothy Thompson, CEO said: 'With a moderate uplift in the proposed support level we could, over time, maximise the potential for producing this low-cost renewable electricity'."

Low cost, eh ? Yes yes, Dorothy, we understand. And - love the euphemisms !

Shell to buy Cove oil

A bid for 200p odd for Cove from Shell today. Interesting to see the revived interest in North Sea Assets, I hold Xcite Energy, Ithaca and Xtract in my current portfolio. Last year these shares were smashed to pieces as their funding routes for expensive drilling and production dried up. Cove is not a North Sea exploorer but sahres the same profile of being a small Aim company that has been successful in exploring for oil, in their case off Mozambique.

In this year's early bubble, confidence is back and also the major oil producers have not been so successful themselves with their own drilling. Indeed, a pharma-type industry model is rapidly developing where exploration is done by small companies and then the big guns arrive to develop the actual production.

Of course, this has always happened to some extent, but with oil resources rapidly depleting (until shale oil really gets going in a few years), the SuperMajors have struggled with their own exploration - and this is despite huge improvement in seismic scanning and other technologies that de-risk so called 'wild cat' drilling.

Another noted impact is that the AIM companies are back in favour, despite the lack of change in bank funding which caused them to collapase int eh first place. A high price for oil, now above $100 a barrel for an extended period of time, seems to have improved confidence that economic production can take place.

Last year saw the takeover of Encore, now Cove too. Ithaca is subject to a bid. It is a busy year for North Sea M&A and I need to develop a bigger watch list as this period of consolidation is likely to go on for some time.

Monday 20 February 2012

Slaves cost more than you think

I was reading Stumbling and Mumbling's A case for workfare.
Over there its believed that SOME form of compulsory work for the long term unemployed might be a good idea. Perhaps not the shelf stacking as envisaged by the government. More a sort of New Deal with community projects in mind.
The evidence apparently points to happier people when employed.

Guido Fawkes had a post In Praise of Workfare at the weekend that generated 650+ comments. His argument was that any work is better than none and in the days before mollycoddling and high benefits people had to get jobs and if they were crappy jobs they just got two or three of them to get by.

The response was a bit lunatic as expected. Ranging from the 'cut all benefits after 6 months' from the right, to the student claiming breach of human rights if she must do two weeks in Poundland on the left. There was a fair amount of attacks made on the employers. Small business claiming larger business were getting free labour that would undercut a small business even more that they do already. Tesco came in for a barrel full of abuse for seeking to exploit workers for no pay and lay off staff to take on 'these slaves.'

Only a leftie with no experience of business could think of that last one. What the articles missed was that its incredibly expensive to take on a free worker.

1. The registration of employees and unpaid workers is a nightmare with potential {and very often prosecuted} immigration law breaches costing £20,000 an employee. Any company of any size that fails to do its immigration checks properly is looking at a big bill. As Baroness Scotland found out in a beautiful piece of schadenfreude when she employed an illegal domestic cleaner.
It must be assumed that if the government is sending the person along from the DSS, and they are working for free, then immigration checks at least are unnecessary. But still an employer needs to have all the details of who it is allowing onto its private premises. The usual checks for a new history are going to look a little thin for a long term unemployed person.

2. Companies don't have a labour shortage as they did 5-10 years ago. When you read of Landrover having 20,000 applications for 1,000 jobs and A Tesco mini mart having 1,000 applications for 80 shelf stacking jobs its pretty clear that companies aren't desperate for workers.

3. No business wants to take on unskilled labour. Even for an unskilled job. Shelf stacking may look like a brain dead job but any employee would take someone who already knows how to do it over someone who doesn't. Primark would much rather take on someone who knows what 3442 x 4/3 x 3L means than someone who doesn't. {No..I'm not going to tell you. Not as easy as you thought this filling up is it? Answers in the comments. Lets see who's done retail.} Its a simple code but some employees never, ever master it because their basic maths isn't strong enough.

4. Any company can take on free workers but only the largest will do so. This is because its an administration and red tape nightmare. Ask any chain how long before a new employee actually starts doing any work, even watching someone else work, and they'll tell you its 16 hours minimum. Maybe 40 hours of admin for a very large chain. That's an entire week of just listening to lectures and filling in forms. A quick look at BQ Industries latest H+S compliance form for the local council {there are different ones for company/insurance/ H+S departments} lists:
H+S policy
Information and instruction training
Management of Health and Safety regs 1999
General workplace safety
Working at height {anything not on the floor is considered at height. A footstool is at height.}
Manual handling
First aid and first aid training and regulations {+ pages on legal medical equipment}
Conditions in the workplace
rest periods
Transport and traffic routes
Accident reporting and investigation {everyone has to know about it, even if they won't deal with it}
Maintenance of equipment and reporting of faulty equipment
Violence and aggression {many companies also have their own separate regulations to fit their own policies}
Computers and display screen - rest periods and electrical safety.
Action {unspecified other junk.}

The H+S manual in the picture costs £100 and is the most basic there is. There are another 10 differentones to work through too. - This is just H+S. It doesn't cover fire safety and equipment/evacuation/drill or equality in the workplace and sexual and religious discrimination. these are lengthy sessions as there is unlimited compensation available to those who sue and win.
Then if there is food involved there's the whole Hygiene and Health and food preparation booklets to add. + much more care about temperatures and storage. Obviously supermarkets are going to have this. They are also working with sharp objects and in areas with vehicles. With slippery or cold surfaces. Or unsupervised. All these areas need covering.

5. On top of that will be the companies own standards and expectations to drill home. More so if they are going to be putting unwilling workers into a uniform. The public won't know that the bloke who just told them 'dunno where the fish is luv- Don't care neither' was just a 30 day wonder.
Large companies have training and recruitment departments to deal with all this. Small ones don't. Any decent sized shop, say a normal Primark @ 10,000 sq/ft will be used to recruiting every single week. I doubt there are many McDonald's that don't hire at least 1 new worker each week. The last store I personally managed had 100+ staff and we recruited every week of my 104 weeks there except one.

6. No one wants to swap experienced for inexperienced. All these long term unemployed, even assuming that they want to be there and are the brightest and best available, still won't know anything. They will have to be monitored and evaluated and trained on every aspect of everything from what 'face up' means to where to put their mobile phone when working. Its a long process and the people screaming that the 'big corporations' will sack skilled for unskilled labour, every 5-6 weeks , have no idea of what that means. Its a soundbite. I've never known it.
Not in any company for even the meanest boss.
No one wants to make their life harder and taking on new people makes your life very hard. They are slow. Have no initiative. Have no idea of workload. Waste time. Can't prioritise. Its all new to them.

7. These are free workers coerced by the state to turn up for their benefits. The same people who, in some cases, threaten to put a chair through a Job Center Plus worker's head if their benefits are late.
They aren't even students looking for a temporary summer job. They have no interest in learning a job if they aren't seriously thinking about going to work. At best they can coast to a tick box finish. At worst they'll be sullen, angry, disruptive & potentially criminal.

3/10 school work-experience kids don't finish a two week placement. 2 of the remaining 7 will be dismissed from a FREE job.

Of the half who manage to get through the two weeks maybe 1 or 2 would be considered for even the most basic of Saturday job roles.
And these are kids. 14-15 years old who are used to being told what to do by teachers and parents. Used to getting up and getting a bus in the morning. Have a vague notion of time of day and have accepted a job in the first place. I expect non working adults would have far worse statistics than that. Mainly because, like these kids, they just aren't used to work for long hours.

8 . Think of the paperwork workfare is going to bring. The government forms and assessments and target monitoring and supervision that the state is going to want to be able to report what a great success the scheme has been. All the overseeing by the committees to make sure no exploitation is taking place. Someone will have to deal with all that and liaise with the DWP and report outcomes and provide concrete reasons for any failures.

After all benefit payments will be at stake. Court cases for 'unfair assessments' a possibility. So great care and mentoring and retraining and counseling
with full record keeping undertaken to ensure that fairness has been demonstrated at all times. Exactly as a company would do with its own paid employees.

BQ Industries is not currently looking for any of these free workers. We couldn't possibly afford them.

That Anglo-French 'Nuclear Deal' In Full

Readers may recall that Centrica foolishly bought into British Energy after EDF acquired it a few years ago, and likewise into EDF's supposed plans to build 4 new nukes in the UK, part of the fleet of 10 (sic) that Huhne wanted to see built. The Telegraph reports that 'Centrica faces big questions' arising from the rather insubstantial Cameron-Sarkozy nuclear deal last week, and they suggest a few:

- what happens if Sarkozy loses to the (anti-nuke) Socialists ?
- does EDF have the necessary credit rating (being essentially an arm of the down-rated French state) ?
- new nukes depend on subsidies; and Huhne's plan was to give 'em a guaranteed inflated electricity price via a combination of feed-in tariffs and contracts-for-difference, but at an as-yet unknown strike price. When is the UK government going to show the dog the rabbit ?

Centrica management, the Telegraph says, "might need to reassure the City that its nuclear ambitions remain on track to create expected returns".

Let's throw in a few more questions, which may be of interest to more than just Centrica and its investors.

- what design is EDF going to settle on, given the nightmares its initial choice (the EPR) is suffering; and when ? If they are going to change the design there will be a lengthy new approval process
- when will EDF be able to say how much guaranteed £££ will be enough to satisfy its endlessly escalating needs ?
- who specifically is going to be the contracting party to these goldmine CFDs etc: the 'Big 6' ? - anyone looked at their balance sheets recently ? The Government ? - illegal (and why would the rest of the EU, now firmly nuke-skeptic or positively anti-nuke, wish to humour France ?)
- why didn't China make a single new nuke project-start in 2011 ?
- just what is going on at Fukushima ?
- how long before it becomes obvious that UK plc just has to get on and build something else to prevent blackouts ?

One could keep this going all night. Seems to me Centrica needs to "reassure the City" that it will be having serious second thoughts.


Markets fully loaded in 6 weeks of 2012

I find myself thinking all the time that this year is going to be a repeat of last year.

After all, 2010 had been good, economies in the West and East had bounced back after the huge fiscal stimulus for 2009. Markets had come back and although everyone knew there were deep underlying problems, the sentiment was that there was time to sort everything out - yes growth rates would be slow, but there was growth.

So at the beginning of 2011 there was a big 'risk-on' phase continuing where 2010 left off. However, events undermined it all. Oil spiked as the Arab Spring began. Then slowly the realisation hit that the Euro area was really in trouble and another catastrophe could hit. Some of the fiscal stimulus started to wear off too.

In the end 2011, ended a terrible year with Western Countries slipping into recession, much discussion of Euro break-up and the US recovery in doubt.

Just 6 weeks into 2012 and we are back to Jan 2011 in terms of markets and sentiment. Greece and the Euro area are being stabilised, number suggest growth is returning and the East has not missed a heart beat.

Yet, Iran threatens the oil supply and just like last year the price has spiked. Oil at $120 is probably not compatible with any real economic growth, so central is it to the world economy. Greece too is still likely to collapse at some point this year as successive bailouts fail to fix the underlying problems.

The markets seem to be discounting this with the FTSE100 bubbling up to near 6000 today, is this a case of deja vu all over again though?

Friday 17 February 2012

Greek austerity debate is a dangerous chimera

Ambrose Evans-Pritchard, one of my favourite business journalists along with Jeff Randall and Alistair Heath, writes a interesting piece in the Telegraph today.

It sticks to the theme of this week and is about the growing war of words between Germany and Greece and how the austerity measures really are very high impact and yet are being discounted by the EU.

Thinking about this along with the Moody's warning on the UK AAA rating this week and US growth stories though leads to me to two conclusions:

1) Lots of the focus on the Greeks is on their non-performance since 2010 to get their budget under control and now a sense of disbelief they they will ever manage to get a grip on it. This leads to much criticisms that the austerity is too much to bear and that Austrian style economics is to blame when they need a Keynesian boost.

Neither position is correct. What has happened is that the Greeks borrowed too much before 2010 - since then it has been like watching a car crash with the final end inevitable. More or Less austerity is not going to stop the rot when the debts are too high and a default is the only answer.

2) The UK is on the precipice itself. When looking at Greece the Labour party and BBC seem to be in unison in saying the cuts here are too fast. In reality it is not the cuts now, but the past spending. A fiscal stimulus now will boost the economy, but not as fast as the debt pile - so creating a future car crash like Greece.

Yet the US has pulled out some growth and has been more stimulative in its approach than the UK. This though is a red herring - the US debt position was not as bad as ours, they have deleveraged their economy more quickly and even so, their debt is increasing at $32 billion a day (the UK is doing that a month by comparison). What the long-term damage of QE is to the US and UK is not yet known either.

The debate 'too far, too fast' etc has become far too simplified and also as the months and years go by the real reason for the collapse - the huge bubble of debt still needing to be lanced - is being forgotten in the discussions.

Thursday 16 February 2012

Question Time

David Dimbleby is joined in Nottingham by
Ken Clarke
,sleepy justice minister & the most liberal democrat in the cabinet. Getting on a bit but still good value.
John Prescott, passionately opposed to the House of Lords and elected police commissioners. Lord Prescott {note* BBC don't mention that here} is standing for police commissioner of Hull to add to his other titles that include most shameless hypocrite ,UK champion.
Baroness Kramer
, former banker. Orange book Liberal democrat and party semi-favourite.
Julie Meyer
millionaire economist, entrepreneur, journalist and Dragon's Den online {never heard of it?} Dragon. And
Owen Jones
. Author and cretin. Someone who I expect by the end of the show, if not much sooner, you will want to punch his face in. I can't think of any redeeming features to his smug, sanctimonious, deluded personality. I'd take hippo-idiot-cryt Prezza over Jones any day.

Malcolm Tucker says:
UK credit rating warning
Abu Qatada {again}
Families in poverty
Elected police commissioners
Whitney Houston - drug care.

Cityunslicker - 35
Dick the Prick - 35
Nick Drew 34

Miss S-J - 31
Measured -30
Bill Quango MP - 30
Timbo614 -29
Philipa - 28
Sebastian Weetabix - 27
Malcolm Tucker - 26
appointmetotheboard - 25
Hopper - 23
Botogol - 23
Hovis - 22
Budgie - 21
Miss CD - 20

Andrew - 18
Measured -17
GSD - 16
Jan - 16
Amy 10

Anonymous - 7

Mark Wadsworth -1
Dearieme - 1

Wednesday 15 February 2012

Crocodile Tears or Just Plain Stupid?

The Association for Conservation of Energy are worthy fellows, and have just published a detailed and devastating exposé of DECC's blatant manipulation of data to advance the case for building new nuclear power plants.

They are outraged ! "A corruption of governance", they fume. "The figures have been fiddled ... the Coalition Government’s decision to continue supporting new nuclear power was not based on its own evidence ... Why has the Government wasted time, effort and money on its deliberative discussion on the various pathways to 2050, when in fact the decision to use nuclear power has already been made?"

So much, so Huhne. Why, then, do the worthy ACE then prostrate themselves at the feet of this corrupter of governance thus ?

"This Association deeply regrets the resignation of the Rt Hon Chris Huhne. We pay tribute to the quite remarkable leadership he has shown during his 20 months in office. We are confident that his successor will seek to build upon the remarkable legacy he has left, and will seek to work equally closely with him towards achieving the goals for which Chris Huhne was striving"

Is this what we call cognitive dissonance ? Grow up, ACE, the man's a complete **** !


Tuesday 14 February 2012

UK Inflation - A stopped clock is right twice a day

Now for years, the Bank of England has been telling us that we are in a deflationary period where we need low interest rates and ultra easy monetary policy. This has been the case since at least 2008 - so getting on for four full years now.

During that time inflation in the UK has on average been 200 basis points above where the bank has consistently targeted. Even its celebrated fan charts have only just about had a wide enough arc to keep track of where inflation really has been.

Of course, there is much back-slapping today amongst the deflationistas. Indeed, with inflation falling to a mere 3.6% today (only 50% is over target), it maybe that finally in 2012 the Bank get to hit their target.

On the deflationistas side is that they have poured £350 billion of Quantitative Easing into the public sector to sustain the economy and inflation above zero over the past 2 years.

However, the abject failure of the Bank to do its job for 4 years should not go unremarked. Moreover, the fall in inflation may prove temporary if there is a recovery in commodity and oil prices which have fallen sharply - with a war with Iran on the cards and Baltic index rising rapidly it suggest the soft patch for commodity prices may not last long.

Worse for them is the pain inflicted on the real economy. Zero rates and QE have created a zombie economy with house prices held up, the stock market held up and saving and investment decimated. Even bank lending is down in part because the returns are too low to make it worth doing - instead corporates have stored up vast cash to avoid the financial markets altogether.

It's not an economy to be proud of nor a record to be proud of and yet no one has seriously pointed a finger at the Bank of England  - our Central Bank has let us down badly the past decade and yet not a single head has rolled or major change been made.

Monday 13 February 2012

GKP hits 400p and rising

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And continuing the story of this wild share, today it has topped new highs. Can't say whether it will end up here today but at time of posting it is 402p.

Now,  in the middle of last year you could have bought these shares for a pound; the rise has been stunning.

Yet, the newsflow has been quite poor, well the official newsflow. The 6 drills which are ongoing all seem to be doing OK - except Arki Bijeel which maybe not producing the size of finds that GKP has managed at Shaikan. Others are all progressing well to confirm the huge finds - with maybe 3 billion barrels or more of recoverable oil at Shaikan and the other sites.

In the last year there has been no progress at all on the Iraqi government passing an oil law that would once and for all validate GKP's Kurdish licences. This consitutes a huge political risk that has held back the share in the past.

Instead, today the price is driven by wild market rumours of takeover's at £6-£8 by either Exxon or Total. Many in the city and I note particularly the journalists who write up the City market reports every day are very down on GKP. They have been since it was a tiddler 3 years ago (cough, tipped to buy it at 25p here and did so myself). And with some reason as there are a lot of downsides and risks in this business - now big enough on market cap to easily be in the FTSE100.

Analysts too tent o have their buy price at around £2.50 on average - so at £4 it is looking pretty toppy to them. Of course, the analysts have not built in the takeover premium.

So where next, what is interesting is that volumes are now high, with £10's of millions traded every day. The days of a couple of hedge funds starting a retail panic (the share has a very large retail following, myself included) and making a killing through shorts may well be gone - the capital needed to kick this off being too high compared to even a few months ago.

Several well connected people assure me there is some foundation in the rumours and it will come to a takeover in a few months. Even that still does not leave me thinking that I know what to do - am putting a trailing stop loss on at 20% in case of a sudden bear raid or negative news event.

Saturday 11 February 2012

NHS - there may be a way out of this

Miliband told the chamber "Another area he is in a complete mess is his health plans."
"We all remember the PM touring round the country promising no more top-down reorganisation of the NHS… I'll tell him why he made promises that he broke: because he is completely shameless and he will say anything. However much he says he loves the NHS… the truth is that he's got the wrong values... He's been found out. We know all we need to know about this prime minister from the NHS, he's reckless... He's proved the oldest truth in politics... You can't trust the Tories with the NHS."

And that was PMQs from a year ago. David Cameron spent years and years trying to reassure the public that the horrid Tories didn't really hate the NHS. They loved it. If there was one area not to have even spoken about in public, this was it. Because the trust was a fragile as a newborn.

Very early on I said that no good could possibly come from a reorganisation of the NHS. Its such a vote loser. I urged the government to drop the bill. Readers here were pretty scathing of my suggestion. Demanding waste, inefficiency, bloated bureaucracy, self interest, huge costs and poor performance be tackled at once by the government

My arguments that the government had already too much on its plate, what with tackling a £35 billion defence black hole. A justice reorganisation. Tuition fees. Welfare and benefits caps. A completely new proposal for schools. Fundamental changes to the tax system. A localism bill. Public sector pensions. Private sector pensions. Union membership at taxpayers expense. A boundary election review. An Av referendum. The so far untackled, but pre election bombshell of provision for the elderly. The privatisation of a crumbling mails service. Council tax capping and many , many more.. any one of which could be a central plank for a reforming government.

And all this planned during the worst recession for 80 years. Without the money to ease change or buy out the vested interests. With minimum 5% cuts across all departments. With rising taxes and rising inflation. Rising borrowing and rising unemployment. Whilst students protest in the streets and looters smash up shops. With the Arab world breaking apart. And the Euro in almost terminal crisis.
And the usual terrorism and violence continuing on. While politicians are not forgiven for their expenses crimes. And phone hacking neuters a normally friendly press. And recession makes the country grow ever more socialist, demanding that all must have everything or all must have nothing. With an ongoing, unresolved world financial banking crisis in play.

All this.. and yet the government thought tackling the world's 7th biggest employer, {- just behind McDonald's who operate in 119 countries not just the one} in which almost every household knows someone or has someone working for the NHS {McDonalds has some 67,000 employees in the UK compared to the NHS' 1.4 million. or 1 in 25 of the population.}

Tackle the NHS ? Whilst in a liberal coalition? With no majority? During an Olympic year?
Are you stark staring raving mad?

No government should attempt a top down reorganisation without a lot of time, a lot of money and a large majority. And not in the first year either as its going to need people used to government office and media to even begin to move the behemoth.

I knew it couldn't just be me thinking this. And so its proved with even some Tory cabinet ministers demanding the government put a stop to it, for purely political reasons. They are acutely aware that they are handing the floundering Milibandwagon its next government kicking opportunity. Miliband has even got a slogan out. "Ban the Bill." Quite catchy. it'll be a ringtone next.

Naturally I agree with those rebel ministers.

Politics is the art of promoting the possible and avoiding showing the unpalatable in public.
This Bill will only become more toxic. I confess I don't know anymore of the details than can be read in the telegraph. Its not the details that matter. Its the politics. As Tim Montgomerie's explosive call for the Bill's end perfectly demonstrated. He calls Mr Cameron to choose two paths - The watering down one. Or the pushing on into the minefield one. Already Conservatives have turned on Tim and are manning the barricades against any stop to the bill. This is just politicians unable to face a very tricky 'retreat whilst in engagement with the enemy,' dreaded by Generals and Prime Ministers because of the inevitable casualties and morale loss such a manoeuvre brings.
The government has got itself into a mess. Possibly a fatal one.

But there is a clear strategy out of this. One that might even strengthen the PM, rather than weaken him, after the initial pain.

1. Agree to a second look at SOME of the proposals, as Mr Montgomerie suggests. Especially bringing in Liberal Peer Shirley Williams and possibly Lord Ashdown and others who feel a sense of having collaborated too much with the enemy. Make sure Clegg has some role too.

2. Agree that more cross party talks are necessary and invite Labour to share in those most likely to pass the Lords.Make Labour a part of it. If they won't join, great. Ask for their non existent solutions each time they criticise.

3. Lansley has to go. Quietly if possible. Bloodily if not possible. Now who to replace him with?
A lib dem would have my fellow conservative backbenches screaming in rage. But its such a smart move.
A liberal tackling health reform takes the Tory Toxicity charge away immediately. It reassures the public. It allows the doctor's and nurses medical boards and unions and government to begin again. Clean sheet. Who it actually is is the hard part. I propose..

Vince Cable!

Jim Hacker would have spotted the master stoke this really is. The most undeserved promotion in history. "But merited;thoroughly merited, my dear chap."
It removes a poor business secretary to a high profile place where the outcomes have already been decided and the political losses written off. It makes room for David Laws to come back in a role that may well suit him at business.

4. The reforms will have to be watered down. There is no alternative. But that doesn't matter. Pick the red lines. Two years of parliamentary time's worth, and sacrifice the rest under a rearguard of amendments and negotiations.

5. Whatever the outcome the Liberals will have had a major success. One that they can genuinely put on their leaflets. "We saved the NHS." It allows the Tories weak, Italian style allies, to get a victory and a purpose inside the coalition. It will gladden the activists hearts.

6. The conservatives gain too. "Listening" Dave is back. He can claim to just be doing what the public and professionals want. "Tough choices have to be made, and will be made! Let there be no illusions. But in light of some recent discussion with hardworkingdoctors'an'nurses and with the help of a cross party/ coalition group i feel we've really got something that will make the NHS even better than ..blah blah blah." You know the shtick. Sleeves rolled up. Tie and jacket off in a health centre somewhere. . no notes. He does it very well. Caring conservatives are back to help take the focus of all the other uncaring policies that have to be put into place.

7. The success of the NHS may just save the Liberals who have made so many stupid 'no top down reform' type pledges of their own over the years they don't deserve saving. But in practical, reality land, a coalition again is a very likely possibility.
If the Liberals feel they have genuinely achieved something. Have genuinely influenced Tory policy. Are a 'force for good' within the evil Tory galactic empire, then so much the better.

Labour are going to claim the reforms are a failure whatever happens to them anyway. Labour are irrelevant.

Let the baby have its bottle. Vince Cable for the mediating Health Secretary!

Meanwhile the government can get on in peace with its brimming over plate of other, even more difficult issues.

That shiny new 1960's hospital in the picture at the top is from Carry on Doctor. Its actually Maidstone Town Hall.

"Health Bill proposes turning hospitals into tax buildings!"

That's the sort of made-up headline Mr Miliband's people are just waiting to write, Dave.

For the next two years - one a day. Fed to the Guardian and BBC and injected into the nations psyche.

Can't say you haven't been warned.

Friday 10 February 2012

What did Business do to make the Tories hate it so?

It's Friday so time for a Why oh Why piece....

What was Cameron doing in Sweden yesterday discussing old people working and a 'Golden Skirt' policy to get women in the Boardroom. How is this helping the economy and the Country?

What was he doing copying Ed Milliband in the ill-thought out attack on Stephen hester's bonus...allowing a traditional media witch-hunt to grow out of control?

What happened to the plans for growth and credit easing?

What are there apparently advanced discussions (don't ask for source citiation on this one, confidential) on some kind of Mansion/Council tax deal on big houses in return for an earlier move to a higher tax free allowance?

The attacks on business are legion. You would think were you a foreigner coming to Britain in the last few weeks that a die hard socialist Government was in charge desperate to please its constiuents by making vainglorious attacks on evil capitalism.

But no, allegedly we have Coalition government of Orange Book Liberals and Tories. This is not how they are acting though. Personally, I think Cameron has chosen the Blair strategy of ignoring the right entirely not on idoelogical grounds, but purely becuase it plays to the 'centre.' Which tells me the internal polls at no10 are saying a defeat in the next General election is likely and i would agree with that for different reasons. So now we have sham policies attacking the wealthy and perceived social injustices in the workplace - all good for getting left leaning votes. Clearly, as with Blair Cameron  thinks that Tunbridge Wells is going to vote Blue no matter what he does, so he may as well focus on his appeal the Streatham omnibus folk.

There is of course a small hole in this strategy, as Blair found, the core can move and can be eroded - to the point where it is too small to campaign or support or care. Business too, the backers of the Tories, have little incentive to back this populist nonsense; where will the donations come from?

And of course, with no economic recovery there can be no election win.Full Stop. The desperation to focus on anything-but-the-economy has to be the wrong strategy.

It's interesting though and cuts to the hear tof why I started writing this blog in 2006 - which triumphs, Politics or Economis?

Now That Huhne Is Gone ...

... it is earnestly to be hoped that his replacement Davey's opening gambit ("no change in direction or ambition") is just the conventional piety, and that he'll pull his green finger out right away.

Because otherwise the lights are going out. In a little-noticed announcement DECC has coughed the job:

"we face significant risks to security of electricity supply ... multiple voltage reductions in a typical year, and potentially more serious consequences, for example, power cuts affecting millions of homes, creating significant costs to the economy ... highly volatile prices in wholesale markets which would be likely to impact on consumer bills ... plausibly in the 2nd half of this decade".

Huhne's solution to this was to talk about introducing 'capacity charges' (prompted, interestingly, by Oliver Letwin, who has had an obsession with this approach since before electricity privatisation), which are payable to power plants offering reliable generating capacity, as opposed to electricity itself. This supposedly provides the necessary incentive for back-up capacity to be built. It is fair to say that it works quite well in New England, though it hasn't been operating for long. It has one tremendous and very desirable advantage - the 'demand-side' (large industrial users etc) can offer 'capacity' in the form of being willing to switch off on demand.

DECC can only think of one other example where they have capacity payments, namely Columbia - which they admit bears no resemblance to the UK market. C
uriously DECC doesn't mention Russia, where it has been an expensive and complex fiasco. But let that pass.

DECC envisages the scheme would be an auction between companies vying to provide capacity, followed by a 4-year lead-time for the new capacity itself to be built by the winning bidders. You will be pleased to learn that (a) details of the scheme haven't been devised yet, and (b) the earliest this scheme could be in place is 2015. 2015 + 4 = ...

2019 ... blackouts plausibly in the second half of this decade ... that's Huhne for you. Message to Davey: cut the crap & get moving. You won't be in power 'in the second half of this decade'; but we will still need electricity.

Keep warm this weekend ! - ND

Thursday 9 February 2012

Question Time Night - Foreigner's out edition

David Dimbleby is joined in London by Philip Hammond, {Defence sec. trying to plug the inexcusable £38bn hole in the budget. With likely future conflicts in mid east and South Atlantic, whilst we've invested loads in slow moving, armoured boxes, instead of helicopters. Good luck with that. Alastair Campbell, Shouty 'breakdown'Al..well, he knows his football. Shirley Williams,Only Lucas gets more turns in the chair. She bores me to her if you must. One wrong decision after another for fifty years. Steve Coogan -I won't compromise my principles -kerching!
Ann Leslie -Daily Wail.

BQ say going to be hard. lots of possibilities.
1. Capello. What a relief to have got shot of the most suceful England manager since 1966. He was foreign you know? And no bonus for the new man. Its his job to win the Euro cup not a bonus.
2. Apu Coathanger. The USA want him. Forget about Jordan. Send the beardy foreigner to Yankland instead of our hacker, Gary McKinnon.
3.NHS reforms. If all those foreigners weren't coming for free treatment would we even need reform?
4. Syria. Johnny foreigner kicking off blowing up his own people again. A few bombers on Cyprus?
It worked in Libya.
5. The right to die. Why do we still have to see a foreign doctor just to top ourselves?

That's about 8 questions squeezed in there. hedged enough bets I think.
I will self moderate .. politician's promise!

Cityunslicker - 30
Nick Drew 29

Miss S-J - 28
Dick the Prick - 28

Sebastian Weetabix - 25

Bill Quango MP - 24
Malcolm Tucker - 23
Measured -23
Philipa - 23

Botogol - 23
Timbo614 -22
appointmetotheboard - 20

Hopper - 19
Miss CD - 18
Measured -17
Hovis - 16
Budgie - 14
Andrew - 12
GSD - 11
Jan - 11
Amy 10

Anonymous - 6

Mark Wadsworth -1
Dearieme - 1

It's Thurdsday - QE day - or time for something else?

That's right folks, those kindly people at the Bank of England are lining up today to hand out another £50 billion of freshly minted electronic notes to had over to holds of UK Gilts - that will be our banks.

It's true, our poor banks desperately need to deleverage to try and get them back to health, without it they are not going to help the economy get back on its feet.

Today though I find myself in total agreement with Jeremy Warner of the Telegraph - which is rarely the case. But he is on the money today. The Big Issue in the UK is debt - Government debt, private debt and banking debt. We are awash with debt and the only solution is to reduce it.

Now government austerity to help get the debts down and we have tax rises too and the banks are deleveraging. The net effect of this is to push us into recession. This is going to last for years, at least another three but probably another five.

The Bank of England think they can speed up the process by offering 'free' money to help the banks deleverage quicker. However at some point the issue of free money to the banks is going to create a new bubble. When financing costs are so low for such a long time some terrible investment decisions are going to be made. Worse, when we try to normalise interest rates, lots of people and companies are going to go bust - creating a new recessionary wave. This is known as the Japan experience.

The US is doing a little better, because people on the whole have handed back the keys and walked away from their debts - this means the deleveraging has happened faster. Our policy is not having the same effect, deleveraging is going slowly because house prices and other debt laden assets are not falling in value and banks are not foreclosing - this helps to keep the economy limp along, but not to have the blow out which could lead to recovery.

The answer is not a Labour style government spending splurge - more debt is the last thing we need. If people won't walk away from their debts, then on a national scale we have to force it. We need to devalue the pound by 25%  - not to hard to do, let's just monetise the QE we have already done.

Devaluation is harsh but has the fairness of affecting everyone equally so it is pseudo democratic - except savers but they are losing anyway with negative interest rates. Inflation will spike, but at last we will be able to raise rates to fight it.

It's the tough love solution for a hardcore debt addicted Country.

Wednesday 8 February 2012

Gas, Gazprom, Putin and China

Mr Wendland, a valued visitor to C@W and expert on all things nuclear, drew our attention to a slew of Gazprom news items (11th comment on that post) and sought my views. Here we go then, starting with a collage of quotes.

1. Gazprom defaulting, just as it gets cold ?

Gas supplies from Gazprom "have been reduced to Poland, Slovakia, Austria, Hungary, Bulgaria, Romania, Greece and Italy, [an] EC spokeswoman told reporters" ... "Deliveries were 20 percent lower than what Russia was supposed to deliver under long-term contracts" said French importer GdF. "Gazprom isn’t currently able to meet the additional gas volumes requested by our partners in western Europe" said a Gazprom spokesman. "The state-run company reduced deliveries to Europe by 10 percent for several days because of cold weather and is now fully delivering contracted volumes" a Russian news agency reported ... "Gazprom's main priority is to supply gas to the domestic market", Russian Prime Minister Vladimir Putin said.

No-one disagrees that Gazprom is delivering less than requested by European buyers. Now, under the big gas purchase contracts, buyers can ask for amounts in excess of contractual obligations on a 'reasonable endeavours' basis: ultra-cold weather at home would be enough to excuse the supplier from meeting such requests. But the GdF comment (lower than supposed to deliver) suggests it has been worse than that; and "is now fully delivering" from a Russian source suggests that at least for a while they were indeed in default, and that this is now rectified.

Russia has historically bust a gut to maintain its well-deserved reputation for reliability as a supplier to (hard currency) buyers, except when needing to teach the Ukraine a lesson. I'd guess the reasonable endeavours requests are going unmet, though. We'll return to the truculent Putin later.

2. What are the consequences ?

As regards European gas users, it will probably be OK. Natural-gas storage facilities across the EU are full and the situation doesn’t qualify as a “state of emergency” because the affected countries have been able to use natural gas from elsewhere (EC spokeswoman).

This happy situation exists because prior to the cold snap we have been awash with gas for at least 3 years now ! (LNG, shale, recession)

For Gazprom, to the extent they have 'under-delivered' (to use the industry euphemism) against firm contractual obligations, there will in due course be a penalty, which can take several forms including a proportionate reduction to the minimum annual contractual bill, and some scale of liquidated damages which will be deducted from the monthly invoice amount. They may counter-claim force majeure on some or all of these penalties, which will lead to an interminable dispute, probably to be settled in the same smoke-filled rooms where lengthy price re-negotiations are already in progress
(see 'awash with gas' above) under the daft contractual 're-opener clauses' that Civil Code countries go in for.

3. Gazprom gas for China ?

Gazprom expects a “renewed proposal” from China soon, after failing to sign a contract last year. “We are waiting for a renewed proposal from our Chinese partners, which we feel will be in the nearest future,” Pavel Oderov, head of Gazprom’s department for foreign business, said today. Most commercial terms, except price, have been agreed on ...

Another long-running saga. China certainly aspires to use more gas - but not at any price. In round one, the Russians insisted they bought gas in a package together with Russian manufactured goods, 50:50 by value. The Chinese, naturally enough, told them they could stuff their useless trucks, which caused a bit of a setback. The package idea has been dropped: but Gazprom still insists the gas be priced on an oil-indexed basis, an historical practice now utterly discredited (see 'awash with gas' ...), given that there are satisfactory gas price indices now available.

Mr Oderov's hopes and feelings may not be fully gratified.

4. What's with Putin ?

The usual - he enjoys sounding off. Here's another of his encouraging cold-weather comments.

"Today it wouldn’t be out of place to recall the people who hampered our construction of Nord Stream [pipeline]. If they hadn’t interfered, there would already be a second branch and it would be loaded."

This is the merest knock-about debating stuff. He really does enjoy himself, though - have a read of this performance last year, on shale gas and much else.

What a card. His re-election is assured. One way or the other.


Tuesday 7 February 2012

Greek Tradegy edges towards the worst solution

Have the Germans and International Troika have woken up the the Greek menace and have decided to play hardball?

Their policy of debt forgiveness with enforced price changes through massive deflation in Greece has long been their desired prescription. Now is not the time to be starting to worry about whether imposing a further 5 year recession is sensible, now is the time to impose whilst the bargaingin position is percevied as strong.

However, the Greek Government can sense that its unions and people are not at one with this idea of an externally imposed, high level of austerity - much easier to forget who ran the debt up and adjusted lifestyles to Northern European levels with Southern European productivity and complain about perfidious foreigners.

Thus now a stand-off has been reached - The Euro Countries wanting to see real action on austerity and not just words, the Greeks not happy to have been found out about their casual lying to achieve what they want; but still not politically able to take the foul medicien prescribed.

Of course, this may lead to the worst overall outcome for Greece. There is no desire to leave the euro and no way for the Greeks to be kicked out. Indeed, with debts in euro's and a currency in drachma a huge swathe of Greek business would be bust in days, even after the Sovereign default - a bad outcome for Greece but it would be a lesson to others. So, now we have the concept of a default inside the Eurozone as a real possibility.

Say Greece halves its debt to 80% via a default and stays in the Euro.Euro area banks in France are ruined and the ECB may also be insolvent, so now we have a renewed Eurozone banking crisis. In Greece, the economic collapse continues as the currency is still too strong to build an economy - those tourists still can't afford their holidays in Euro prices. Plus of course with no way of getting external debt, Greece will be dependent on the ECB for funding - so the austerity strings will not be detached and the economy will be ground down to its smaller more productive state that the Germans so desperately want.

The reason this is the worst result is that we get a nice Eurozone banking crisis and Greece continues as a basket case....with another default in 2/3 years quite likely as debts outgrow a recessionary economy. Also Portugal will watch and see that it may as well default anyway as the benefits of not defaulting are Eurozone imposed austerity which is the price of defaulting too - so they may as well get on with it.

The logic of the above is compelling and shows how removed from logic politicians become when dealing with events - there seems to be no grasp of this by either side in the negotiations, all is instead lost in the moment. Hopefully it won't come to this.

Monday 6 February 2012

Syria: And the UN

Thinking about the previous post.

President George W.Bush never had much time for the UN. He didn't think much of its power, its history or its purpose.

"Are Security Council resolutions to be honoured and enforced or cast aside without consequence? Will the United Nations serve the purpose of its founding or will it be irrelevant?"
George Bush asked the council, in 2002.

This was his speech before the UN that later resulted in the adaptation of the now infamous resolution 1441. We forget that George won that resolution to send in much more powerful weapons inspectors and all the rest, unanimously. All 15 members of the UN security council voted in favour. And Syria was on that security council.

George W. Bush, incredibly, may have been right. The UN was, and is, a self interest club, where the top dogs jealously guard their power. China's place as a member of the 5 permanent members of the UN security council, albeit deserved today, was just an accident. Or at least an anomaly.
China was granted a place at the victors of WW2 table by President Roosevelt because the USA had long had a love affair with China. They were always hoping to have a powerful ally on the far side of the pacific.
The other permanent members disagreed. Britain especially so. China was weak, military insignificant and fighting a civil war. But the USA argued that so was France, and they were getting a seat. Anyway, who else was there? Germany and Japan were the two most likely to have got on if they hadn't just been completely destroyed in the recent war. India was still {just} a part of the British empire, not even an independent nation. Canada/Australia/New Zealand had small economies and tiny military compared to the superpowers. So China it was.

All the fuss about Tony Blair and the second resolution for war. Who was he really asking permission from? Those democratic bastions of enlightenment China? Russia? Zimbabwe? Nigeria? Libya? Saudi Arabia? Saint Kitts and Nevis? Blair needed the decision from the UN to legitimise his own push for war.
Bush didn't really care. He'd got an agreement that Iraq was not following instructions and that was good enough for him. He didn't need anything more from the UN. Some memoirs say he didn't seek any more either. It was all Tony's idea to try for that second, failed, resolution.
George was content to have a few allies sending in medical teams or marching bands. The US was going in whatever the UN said. Because to President Bush and his team the UN was a waste of time. Just something for the newspapers to get all worked up about.

The recent decision of the security council to veto even the very mild 'asking President Bashar Assad to stand down and allow a coalition government to begin talks' shows the UN in a very bad light.
If nations cannot agree to even ask the question, not apply sanctions, note, or threaten invasion, just to begin looking for a way to end the violence, then what hope is there of the UN doing anything about anything?

In George Bush's last speech to the UN in 2008 he "Called on the UN to enforce sanctions against Iran and North Korea over their nuclear programmes...A few nations — regimes like Syria and Iran — continue to sponsor terror. Yet their numbers are growing fewer, and they’re growing more isolated from the world."

Its beyond ridiculous that the latest UN Security veto has made one of the least popular, least correct on any issue, people in the western world, George Bush jnr, appear to possibly have had a point.

Syria: Marxists Should Know Better

I'm constantly amazed at how bad China is at playing international power politics, when it is the economically-weakened West that is - or logically should be - on the back foot. Russia is as bad, though less surprising. The current BBC2 Putin series is replete with examples; and I've commented before how feebly China reacted to events in Libya, where they had invested (and then lost) a great deal.

Now they are busily putting themselves on the wrong side of history over Syria. Funnily enough, as Marxists (if only by long boyhood training) they should have a better grasp of how real can be the impact of popular revolutions. Didn't they used to be 'progressive' ?

In practice, all they can think about is: we really don't like the idea that regimes can change, at which point, maintaining the status quo is everything. This puts them on a par with the geriatric, paranoid House of Saud and is even feebler than the old American cry of we'll support anyone who can keep the Commies out. At least there was a modicum of flexibility to US realpolitik: if someone even better-placed to keep the Commies out happened along, they were willing to switch horses.

It's atavistic with the Russians, they are incorrigible; but one understands the Chinese are determined to learn - and deploy - the techniques of soft power. They've a way to go, and we should be glad of that.