Thursday, 31 May 2012

Question time - docs, greeks & U-turns edition

David Dimbleby chairs a debate on the big stories of the week from Rugby. 
Joining him on the panel are: Alan Duncan, minister for international.The Liberal Conservative. Once considered a possible PM..Not anymore. Stella Creasy; development; shadow Home Office minister, Another one from Labour who went to a grammar school. She was so  appalled at her special treatment she joined the young Fabians. Mark Oaten, former Liberal Democrat home affairs spokesman; Seems the liberals can't find a current siting MP to come on the show. Fraser Nelson, editor of the Spectator; Not much of a fan of Cameron and not much of a fan of the Euro. Should be fun. and broadcaster and columnist Victoria Coren. Guardianista, but a semi-realistic one. Maybe its her growing maturity? She is someone who usually does very well on QT.

 Week 3.
Mark Wadsworth - 7
Measured - 5
Bill Quango MP - 5
Timbo614 - 4
Malcolm Tucker - 4
Lilith - 4
Hopper - 4
 Nick Drew - 4
appointmetotheboard - 4
Dick the Prick - 3 
Sebastian Weetabix - 3
Hovis - 3
Miss S-J - 3
Philipa - 2
GSD - 2 
Budgie - 1
Miss CD - 0
Cityunslicker  - 0
Andrew - 0
James Higham - 0

Brittle BRIC's - India

The BRIC's are the saviour of the Western world. Since 2008 and the huge financial crash that has devastated the West, the new rapidly industrialising countries with big populations have taken up the slack.

Now though, in a worrying development for the World economy, even the BRIC's are getting into trouble. Today a brief look at India.

The news today is that India's growth rate has fallen to 5.3% - its lowest in a decade. Of course though, with 20x the population of the UK and an economy smaller, growth should be much easier to achieve.

The big problem in India is corruption, bribery is endemic across the economy as is nepotism and the racial divide of the caste system. Plus, like many countries there Government is struggling with balancing budgets.

India's sectors are a good mix, with IT and Outsourcing having been strong, but with weak Western markets these industries are having to fight harder for work, not forgetting the Satyam scandal.

Why is the growth rate declining? One big factor is inflation, at 10% a year it is a huge factor. Wage inflation is a big part of this, well educated Indians do not want to work for nothing. This means though that for industries like outsourcing, the wage gap with the West is fast declining. With the West also pushing austerity and real wage falls, the gap could even close in about 5 years. Where then for a Country focused on low cost services and manufacturing?

Another challenge is the need to upgrade infrastructure to cope with the vastly growing population, these projects for utility, transport and health require cast sums. To get some of this money the Government has recently been pursuing Vodafone for a $2 billion tax settlement - it has tried to retrospectively change the law to capture this money. As a result, Foreign Direct Investment has collapsed, again pushing down the growth rate. India too is a hard country to invest in, many complex local laws are designed to discourage foreign ownership and investment, but without great resources to export this leaves little capital for investment.

The final challenge for India is social. In the UK much of the current debate is about the haves and have nots. In India this is problem is of a different order. New rich billionaires live in $100 million compounds a mile from slums where whole families live for generations on a set of paving stones.

The story of India will always be one of challenge, a vast country with a huge population - but with many advantages of an industrious culture and widespread use of English. Keeping India up with China may prove difficult though and maintaining the current rates of growth and development do seem like a herculean task.

Wednesday, 30 May 2012

Ireland & the Wheelie-Bin of History

Oh dear.  Voting has commenced, starting with Craggy Island, and on Thursday the rest.  They've been told what to do and they'll probably do it.

After years seeking freedom from Britain, and more recently from the Church of Rome ...  and now this.  Recycle your hopes and ballots here.

Oh, and no rollerblading, Dougal !  Behave yourself.


photos (c) Nick Drew 2012

Tuesday, 29 May 2012

U-turns are healthy

I was walking down the street just yesterday lunchtime past a nice looking ice cream van. I went to queue up and then after a minute or too thought about my ever expanding waistline and decided to walk away.

However, if the opposition party were spinning against me as they are against the Government today it would look something like this:

 "A truly terrible decision, that has left one voter unhappy and without sustenance, whilst at the same time denying a critical retail sale, without which the Ice Cream van owner may very well soon to be out of business. As usual, a typically selfish and unreasonable decision and why-oh-why cannot a decision just be made and followed through for once - changing ones' mind all the time is a sign of abject weakness"

In another example which is current and slightly more important than the minutiae of hot fast food, the German government is not of U-turning on any part of its European fiscal and monetary policy. As things stand this is going to cause a major global economic catastrophe. That does not seem very good, but a U-turn won't look good for Merkel so she is not going to do it - an exhibition of Thatcher like qualities perhaps?

My point is that bad decisions need to be turned around and most often the best thing to do it act on it and no see it through in a pig-headed I am always right manner.

Much hay is made about u-turns, but I personally have always worked well with people who's minds are open to convincing rather than those who are stubborn. Stubborn is sometimes right when the person's idea is right, like, say Churchill. This though is rare in my experience, but this kind of thinking is happily picked up in the media as showing strength, with weakness attributed to any U-turn. Which is a shame, but there we are.

Anyway, its's a nice hot day today, so aI am off to buy an ice cream...

Monday, 28 May 2012

La gente esta muy loca

Spain, oh Spain!

Just as Greece moves towards the the pro-bailout group in terms of election polls, the Prime Minister of Spain is today digging bigger holes for the current set of EU Eurofudge.

Things are indeed crazy for Spain, their short-term debt rates are hitting 7%. Totally unsustainable in the long-term and for Ireland this was the trigger for a bailout.

If it was not so terrible for the Spanish it would be quite funny. After all, UK rates are at 1.8%. The UK has a worse structural deficit, a higher Debt to GDP ratio and far higher personal and total indebtedness; but we have the Pound and Quantitative Easing.

Spain is not Greece, the problems in Spain are centred around a huge property bubble, the likes of which we too had in the UK. This was driven by low rates across the EU. Now Spain is suffering a massive bust which again it does not really have to. This is a disastrous situation.

Spain cannot remain in the Euro in its current form. Neither the markets nor the politicians are going to stand for this forever. What Prime Minister Rajoy is calling for today is in fact common sense. If the Euro is to survive then it must change, there must be a last guarantor and debts must be shared in some form to give the weaker Countries access to cheap funding so that they can pursue austerity policies in a less charged atmosphere.

Of course Germany does not seem to trust that austerity will be followed through if Latin countries are allowed to borrow at cheaper rates. In this case, if Germany does not trust its own currency counter-parties then someone has to leave the party. As I have said before, it will be better for everyone if that is Germany, but somehow I doubt it will turn out this way.

Greece is a sideshow, as Greece itself sinned many times and deserves little sympathy for its own mess. Spain is different, Spain is a victim of the Euro - how Spain is treated will determine the fate of the Euro.

That Business About The Grown-Ups Again

Now I am as hostile to the Common Agricultural Policy as to wind-farm subsidies, and most probably you are, too.  So using it as a stick with which to beat the French is just fine by me.

But headlines like this don't smack of clever euro-bargaining: 

David Cameron to warn François Hollande against challenging EU rebate - PM to tell president: abide by deal struck with Nicolas Sarkozy or UK will demand major cuts in EU subsidies to French farmers

No, they smack of Schoolboy George Osborne playing to the gallery. 

By all means take Hollande quietly to one side and mark his card for him. But if you come across to the grown-ups as playing silly buggers when long faces are in order, you'll soon find they are cutting the important decisions in rooms to which you are never invited.


Saturday, 26 May 2012

Remind Me How We Got Into This Mess (2)

When you've had a property boom like they had in Ireland, boom-type thinking gets under your skin.  With headlines like this from the Irish Independent, will they ever learn ? 

It's a good time to buy house [sic], says report, even though prices could fall further 25pc. ... There is a huge excess supply [of housing] across the country - 68 months worth of excess supply.

Sounds good to me !  I'm sure the report has lots of sophistry to justify its conclusions.

BTW,  Remind Me How We Got Into This Mess (1) was this, from 4 years ago.  Memories are, as ever, short.


Friday, 25 May 2012

A Beecroft in his bonnet

The Beecroft report has come up a bit recently. Whilst I don't agree with his main point, that employees may be fired within two years without an explanation, there are some good bits. And a hell of a lot of spin. 
On the main point, what is proposed is a kind of mutual termination. Employment is ended and the employer must pay a redundancy to the the employed. This occurs in failing businesses or downsizing businesses all the time, so its not a bad idea. But the report does make clear that it is the employee that has the final decision. If I want you out, I just have to pay you off. 
the usual exceptions of religious, racial or sexual, and now age would still apply.
The reasons stated for the need for this doubling of the trial period are sound. Employees can lose motivation. They can be promoted, but be no good in their new role. They can suddenly have issues with a new boss or working practice. The workplace is always changing. As are the workforce themselves.It makes sense to not fix an employee in place early on.

However, I don't think its needed. Even though I have had plenty of cases of year 2 dismissals.
Then again, I've had year 10 dismissals. And a memorable year 20.
But there are far more in the first six months. 
I had a flatmate who was dismissed at 11 months, 2 weeks from his managers job with a very well known retailer. he wasn't alone. 40 of the 'trainee' managers were dismissed. The whole thing wa a scam. Trainee wages for management posts. The trainees only ever got a perm job IF the company had achieved its expansion plans. Its just unfair. And wrong.
Already many employers employ their staff on short contract, or zero hour contracts. If someone is crap..they get no more work. they aren't sacked. They are just in call until they get the message.

Where the report discusses tribunals it addresses some of the same issues, but better.
There is a real problem between small and large employers. A large firm will have a bucket full of Hr and training people. It will appreciate clearly defined rules and structures, so it can follow the letter of the law and never go wrong. It cares less how long the process takes. A small business has no Hr. No trainer. No one to attend counseling and training and court sessions.

Beecroft proposes making small businesses{undefined} exempt {possibly} from some of the employment rules and certainly from the disciplinary procedure.
I fully agree. 
I recall a relative telling me they had fired an employee after they found he had been buying equipment {without authority} and taking kickbacks and using his credit card for holidays and giving company car to his girlfriend and numerous other breaches. I'm staggered when a £60-£70k salary person does this, but its surprisingly common.
I was horrified when the relative told the tale as it sounded like an unfair dismissal.
Sure enough the ex employee sued for £50k. 1 years worth of legals and stress, and £35k in solicitors fees. 
The employer won, but still had to pay their own costs. This is where the system is a nightmare. The process is far more important the guilt or innocence. Not saying a few words at the right time invalidates the case. Saying 'get out' for instance, in the heat of the moment, to an employer caught with a hand in the till, makes them not guilty. Worse, it makes the employer guilty and liable to pay for unfair dismissal. Lawyers know this. That's why so many cases are settled out court with the employer paying £x thousands just to end a problem. That is just as unfair as a two year probation.

There are other issues in the report. Pensions and immigration laws {the current simple rules on employing someone from outside the UK run to 1300 pages. The 13 acts on immigration run to 10,000 pages. If an employer employs an illegal, the employer is liable. there is no excuse. Not even for Baroness Scotland, the attorney general..}
Fees to bring an unfair dismissal case {to reduce them}. Redundancy and equal pay audits.

But the most important, I would suggest, is the discrepancies in tribunals verdicts and the ridiculous processes that they require to get those verdicts.
That should be addressed as a priority. 
Let the politically sensitive two year employment go, Adrian.
Its really not that big a deal.

Thursday, 24 May 2012

BBC Question Time competition continues-

Joining David Dimbleby on Question Time from King's Lynn are former deputy prime minister John Prescott, {The man who overcame the Peter Principle to be promoted way,way beyond his capability.}Universities minister David Willetts,A rare Tory in favour of elected House of Lords.} Leader of the Green Party, Caroline Lucas,{ What a surprise...And what a clue!} comedian and actor Griff Rhys Jones {a likeable comedian, with a long history of TV and comedy} and Sunday Times columnist Minette Marrin.{don't know since its behind the paywall I never see the Times.- Rightwinger for sure.}
Score 1pt for each correct question you guess that is asked by someone in the BBC Question Time Audience. maximum of 5 questions.
Enter your guesses into the comments.

- 1vs1 scoring -
1st entry plays 2nd entry - 

So Malcolm is first up..
1. Iran and missile action
2. Poor maths tuition in UK.
3. Young people. They just aren't as employable as foreigners.
4.Employment law changes. Should there be a two year sacking period?
5. Banks - Charging for current accounts.

Twitter - ~ 

 Week 2.
Mark Wadsworth - 6
Measured - 4
Bill Quango MP - 4
Timbo614 - 3
Malcolm Tucker - 3
Sebastian Weetabix - 3
appointmetotheboard - 3
Dick the Prick - 3
Hovis - 3
Lilith - 3
Hopper - 3
 Nick Drew - 3
Philipa - 1
GSD - 1
Miss CD - 0
Cityunslicker  - 0
Andrew - 0
James Higham - 0

Budgie - big fat Grexit zero.

Static Electricity

There was a time when I would have read, analysed and digested a draft Energy Bill like this as a service to t' readership. But there's no point; it is a complete dog's breakfast.  Sorry.

Characteristically, Simon Jenkins has it right. This, from the Grauniad:

"So complex is the mathematics ...   that it rapidly dissolves into naked prejudice: irrational fear of nuclear, urban hatred of landscape, leftwing loathing for oil companies. Each has a quantity attached to it and each a fanatical lobby drooling for subsidies... Energy policy is a dark underworld populated by fanatics and necromancers. Read through the literature and you will learn that nuclear means tsunamis, terrorists and Frankenstein monsters, or is as harmless as a local radiology clinic. Biomass is the new dawn, or threatens half the world's forests. Wind turbines are free energy, or they tear up peat and exhaust Mongolian minerals. We face a "peak oil" crisis, or we do not. We face a nuclear winter, or not. We can live for ever on shale gas, or it causes earthquakes...

We feel our way through this miasma by relying on gut instinct or on those we blindly trust. The public sums allotted in grants and price enhancements to green energy – with 8 million people facing fuel poverty – are so enormous they have bred an army of lobbyists clamouring to protect every programme for every resource under, and including, the sun. They pounce hysterically on any opponent of their favoured watt or therm."

Nicely summarised; and it is as true of DECC's shameful output ("an institution befuddled and beset by lobbyists" - Jenkins) as of the more blatant subsidy-seeker's fare. It would take a minister of far higher calibre than any of the current rabble to see through the dense forest of nonsense and call it for what it is. There is almost no number out there that one can feel certain is not selectively generated by a deeply compromised vested interest. (Me ? I'm just a consumer!) 

For ample illustration, look no further than another Guardian offering, "Damian Carrington's Environment Blog", Busting the carbon and cost myths of Germany's nuclear exit. This piece purports to deliver facts and hard statistics from which, if you like the cut of his jib, you might derive great comfort. Except, it's garbage from beginning to end, numbers and all.

But, hey, you'll just have to take my word for it.  The debate is going nowhere and, more importantly, likewise investment in electricity generation.


Wednesday, 23 May 2012

Gold or Bunds?

Just in case we were not quite sure that the entire global financial markets are at present completely 'blue screen' borked, along comes a reminder. Germany has sold 2 year bunds at 0% yield. That's right you get your money back after 2 years. Even more bizarre, they offered 4.5 billion euros worth and had demand for 7.75 billion euro's worth.

All this reminds me of the traditional saying that decries gold bugs:

"Gold has no yield, it can't be an asset class."

So now German bunds are in fact Gold. Those pieces of paper that have been bought this morning have the same inherent value as gold. This is quite an achievement for the Government of Germany. Not only have they managed to get a weak euro but their borrowing rates are also at an all time low.

For Germany today, truly it is a Goldilocks scenario.

Less so of course if you happen to be a citizen of virtually any other European country, but no matter.

So, what do we think, in 2 years time what asset will prove to have been better value:

100 euro of Gold or 100 euro of 0% German bunds.

Gold has been off recently and many are calling the end of the great bull market. On the other hand, the price of these bunds can only go one way in theory. Which would you opt for?

Tuesday, 22 May 2012

Germany: Never a borrower or a lender be

How exactly are we to deal with the Eurozone crisis? It's been going on a long, long time now. Without much sign of coming to a conclusion. The Euro leaders response has been poor. 

Initially,when the UK and USA bore the brunt of the credit crisis, their response was it was not really a Eurozone problem. It was contagion that was the worry. The Darling/Brown plan of bailouts reassured the planet, albeit at great expense, and the world began to look for ways of tackling recession. But as we know, the Eurozone had not dealt well with the credit crunch. In fact for almost 18 months the EU did not even acknowledge there was a problem. The can was kicked along the road by too small and too stringent bailouts. Ireland and Portugal and Italy and Greece and Spain were all in serious trouble and needed serious help.

But each time the euro countries came up with the same solution. Mostly nothing. Followed by a bit of silence. Then denial. Followed by severe market pressures, followed by near panic, limited bailout and a huge sigh of relief when it sort of worked. And back to nothing.

 Now, 4 years after the trouble began, the euro can has finally reached the end of the road and proper action is needed. At present this seems to be the usual mix of fingers crossed that the Greeks will accept the already agreed deal or a firewall to protect the rest of the EU if the Greeks inexplicably don't take the cash, the bitter medicine of the spending cuts and decide to go it alone.
The Greek elections will decide it. I strongly suspect a big dose of reality to emerge at the next election. A no vote to the bailout means an end to its EU safety net and hello to the world of Chinese and Russian cars at German prices. Mrs Merkel is probably counting on the same. Fear of a worse alternative narrowly averts the latest Greek exit.

 But there are no guarantees. And just because Greece stays in only means a worse problem need not be faced. The existing problem still remains. 

The EU says the Grexit firewall is ready. But It's not even properly agreed. And even if it was ready, it's too small. What is really needed is an end to the crisis. Not just words about how the euro is for ever and no one is quitting and everything is in hand. A real gesture is needed.  That has to come from Germany. And it's going to cost Germany. But that is the price for the Euro. 

Germany might resent having to bail out Europe. They've already rebuilt their country from two world wars. Reunified the inefficient, neglected communist half. Created a new Europe wide currency. Established a whole new Europe wide government and a brand new way of inter European trading. Helped make the backward club med countries modern democracies with modern infrastructures and financial systems and governments. And all the while maintained their position as number one on the league table of most successful European economy since 1961. 

But that is what it comes down to. Its plan for break up or fix the Euro. No one else will do it. Certainly not for for free. Sarkozy said the Euro nations could borrow from their own banks. "Each state can turn to its banks, which will have liquidity at their disposal." He pointed out that earning 6% on Italian bonds that could then be financed at 1% from central banks was a "no brainer".

 But that is causing a decade long recession. The interest on the debt is choking. Indebted countries need cheap credit. Really cheap. AAA cheap. They need even more than that. They need a write off. 

The Road to nowhere says The total debt of the PIIGS (Portugal, Ireland, Italy, Greece and Spain) plus Belgium is more than Euro 4 trillion. A writedown of around Euro 1 trillion in this debt is required to bring the debt levels down to sustainable levels (say 90% of GDP).

I expect even more is required. 
So, Germany needs to agree to finance sick Europe. Germany puts its industry behind its guarantees. 
Never mind the EU constitution and the regulations. Its crisis time everyone. Time to do what is needed.

Today Germany can borrow at 1.6%. It borrows as much as it can. Say 2 trillion Euros, backed up by..well Germany. If Germany's borrowing costs goes up, so be it. If the Euro devalues, so much the better. The Euro needs to devalue. 
Germany loans that money to the PIGS at 0.2%- 0.5% more than it borrowed,  for 10 years. No country need go to the markets at 5-6% when they can get cash for 2%., fixed, for 10 years.
Further, about half of the loan is over a 50 year period.  Fixed at an absurdly low rate. The repayments are more than manageable.

After can come all the agreements on Eurobonds and different risk spreads across the different nations. But if the crisis is going to end something has to end it. Germany has gained  out of the Euro. The Euro trades at $1.30. If the Mark was back in place would it be so low? When it was last in circulation it was around $2.00. If Germany really wants to keep the Greeks in the club its going to have to swallow its frustration with them and bail them out. Properly.

Afterwards, when recovery is on the way, they can reorganise the EU to be on a more realistic financial footing with proper financial institutions, and conditional Eurobonds and a joint pooling of liabilities , mutualised debts among members, and federal banks and so on.. But they've waited far too long, doing far too little and just hoping the problem would somehow sort itself out. 
If they can get the French to come in on the deal, so much the better. But if not, they will have to do it alone. 

Enough is enough. The G8 is saying Europe needs to mutualise its debts. Essentially Germany taking on a share of the burden. A German loan or indeed a German 'foreign aid' program is quicker. 
Mrs Merkel knows that German taxpayers won't stand for it any more than UK ones would. Why should hard working Hans bail out his feckless, chav neighbours?
But  Germany is the fourth largest economy, world’s second-largest exporter... its largest markets are its European neighbours.  Germany has avoided recession so far. But for how much longer?
So now Germany must pony up and take on the role of the real lender.

Well, that's my fantasy entry for save the Euro.
Germany doesn't even have the appetite for Euro bonds. Never mind actually taking on the debt.
No doubt Chancellor M has a proper plan B. Just in case the Greeks do inexplicably vote themselves out of the Euro.
The fear is its another do the minimum possible to quell the panic and so the problems of Spain and Portugal and Ireland and Belgium and France and UK continue bumping along.
Until the next crisis. And the whole panic, rinse, repeat cycle kicks in again.

Monday, 21 May 2012

2020tax is a politically naive failure

I know you can't do everything at once, but this high profile launch today is destined to be an abject failure. Of course many of the arguments are very sensible indeed. Going for a flat 30% rate of tax and getting rid of the absurd loopholes we have (such as some owners paying 10% of income as tax through using dividends and some contractors earning nearly 50% more than the full time people they sit next to doing the same job!) is clearly an idea that we, as a Country should address.

The madness of the bureaucratic structure of National Insurance and Income tax no doubt employs a few people at HMRC - but I doubt they meet any criteria on being gainfully employed.

So why do I decry it as inept. Well, much of the document seems to be a theoretical argument for a smaller state - one which I would agree with on a level. However, to reduce public spending to 33% of tax income over the next 7 years would be an almighty squeeze. Especially as it is at over 50% now - its equivalent to a 40% cut in Spending.

Plus of course, 14% and rising of this spending is just the interest on our accrued debt - so REAL spending would have to fall to something like 23% of GDP - so in real terms a 50% cut in Government spending (its £200 billion in today's money, net of debt interest).

How realistic is that? More importantly - where are the votes in it?  Scrap schools and Hospitals has never been a vote winning strategy. However, with this budgeting you would literally have to do more. Of course a huge chunk - nearly 20% of Government spending is on Pensions. We have seen through all the strikes recently that even relatively minor changes here will not be accepted by public sector unions without a fight. How these commitments could be reduced by 50% without serious civil disturbance is beyond me.

I have much sympathy with the idea that the modern welfare state as we have constructed it in the UK and much of Europe is not sustainable financially. We can see from the huge deficits, even with all out North Sea Oil revenues over the past 25 years, that Government spending is too much and will have to come down.

Very few people are going to vote for that, just as there are by definition no votes in tax cuts for other people - as the Government has just cruelly learned.

This report misses that rather important fact. As such, it is going to get portrayed across most media as a tax cut for the rich, which is currently the prevailing zeitgeist. All the good bits about reforming the tax system in a positive way will be lost in haze of scrapping inheritance tax and other taxes seen as only benefiting the rich. Worse in an ageing society this precise form of taxation would be very bad for, um, pensioners - you the ones who actually vote in election?

A lot of hard work has gone it to this work for it to be a one day wonder, but I fear its political naivety will ensure that is its place in history.

Might as well still be Huhne

...  because instead of taking the opportunity for a clean break, Huhne's successor Ed Davey appears set to carry on with the Huhnite delusion. The chances of there being any pleasant surprises when he publishes the Electricity Market 'Reforms' later this week are slender: we pretty much know what we are getting.

In particular we shall find out that new nukes are to be paid for via a 'contract for difference', i.e. a vast 2-way swap with very high strike price.  Recently there have been mutterings from the only plausible beneficiary of this (the French) that it will be of no use to them unless the counterparty is HMG (well of course: think of the credit risk on a derivative that is designedly so far out of the money !); and counter-mutterings that this would constitute state aid and is therefore not possible under EU regs.  A nice dilemma ! and yet another reductio ad absurdum which ought to be understood for what it is: proof that only governments can do nukes.

I wouldn't normally quote industry participants on such matters because they are all in the queue for subsidies of one sort or another and just talking their own book.  However, with RWE having withdrawn from the new-nukes game, Volker Beckers (their UK CEO) may be viewed as slightly more neutral than most.  This from the Sunday Telegraph:

'He questioned the Government’s approach to energy sector reform, which includes separate overhauls of retail markets and networks as well as the various elements of the Energy Bill. “Pulling so many levers at once in such a complex area risks losing sight of your original objectives”'.

Yes, as well as being fatuous, the 'reforms' could very well completely bugger the workings of the UK electricity market.  Although the government continues to talk of 'market solutions', there is the strong possibility of the reintroduction by confusion and stealth of a command-and-control, CEGB-style electricity sector.  The lights will start to flicker anyway.  

And in all events, astronomical costs are being needlessly foisted on electricity consumers.  An astonishing tale of half a decade of bungling. 


Friday, 18 May 2012

Friday - What will the weekend bring?

Above is the YTD FTSE graph, poor reading it makes. This month has bee an unmitigated disaster though in particular. After an OK start to the year it has all gone pear shaped. In an exact re run of 2011, oddly enough - albeit for different reasons.

With the endless euro-mess there has been a move out of equities into safe haven bonds - quite irrational when you think those bonds are of UK and Germany in part both of whom will get wiped out in a major euro collapse as their Banks fail. Hey ho.

What intrigues me at the moment is the euro-denouement re Greece is approaching. Probably it won't be this weekend. However, it will be a weekend as it always is. the markets are closed and Governments can conspire against us (or maybe even for us?) freely.

Then one Monday in the next 6 weeks Greece will be in or out of the euro and a huge liquidity stream from the Central banks will be with us. It's quite likely there will be a strong equity rally after this for some time, until again people realise the problem is not fixed but has been kicked down the road again.

In the meantime, my equity portfolio is destroyed, again.

Bono: Capitalist@Work !

Congrats from C@W to Bono, who will be tipped into billionairedom when Facebook floats today.

At a certain point, I just felt, you know, God is not looking for alms, God is looking for action.”  That was one of his.

Just think of the Good Works he will be able to do now !  Fair play to the lad.


Thursday, 17 May 2012

Question Time - new quiz game.

David Dimbleby chairs a debate on the big stories of the week from Cardiff, with a panel including Queen guitarist and astrophysicist Brian May,John O'Farrell, {amusing comedy writer and Guardian columnist, but sooooo Über Blairite he couldn't bring himself to write any jokes about New Labour in his modern, comedy history book} 
Shadow Welsh secretary Peter Hain,{former shadow welsh secretary surely? Standing down to lobby for a big barrier. Has anyone done the background checks on Hain & family, company boardrooms, shares etc. He's not exactly been the whitest of ministers.- Sorry offence.}
Minister for disabled people Maria Miller,{can't even recall her. Another of the Cameron babes.}
 leader of Plaid Cymru Leanne Wood { a contender for most ludicrous, expensive and unrealsitic growth initiatives award}  and Daily Mail columnist, and former editor of the Sun, Kelvin MacKenzie {Good old Kelvin- tell us exactly how Rebekkakkah got the job as editor. One minute she's working in the post minute she's in charge of a global corporation...? Tell us know you want to.}

New season
Score 1pt for each correct question you guess that is asked by someone in the BBC Question Time Audience. maximum of 5 questions.
Enter your guesses into the comments.

- 1vs1 scoring - all revealed later on.

Twitter - ~ 

Miss CD has provided her questions.
1.      Greek banks
2.      Rebecca Brooks
3.      Spanish Banks
4.      Statins
5.      Kidney Donation
 Week 1.

Measured - 3
Timbo614 - 3
Malcolm Tucker - 3
Sebastian Weetabix - 3
appointmetotheboard - 3
Mark Wadsworth - 3
hovis - 3
lilith - 3
Bill Quango MP - 1
Philipa - 1
Dick the Prick - 0 
 Hopper - 0
Miss CD - 0
Nick Drew - 0
Cityunslicker  - 0
GSD - 0
Andrew - 0
James Higham - 0


Wednesday, 16 May 2012

Is now the time to buy a House in London or is Oslo property the new gold?

Table 1 – Global real house price % performance, 2001 Q3 – 2011 Q3 Country
Real house price changes % 1 yr
Real house price changes % 10 yr
Real house price changes % 10 yr pa
South Africa
Hong Kong
New Zealand
Euro area average
United States
Continuing a conversation from the comments of a previous post and indeed, to continue a conversation I was having with a very wealthy investor last week, I post above courtesy of Lloyds, a summary to the end of last year of key housing market trends.
Firstly there is the 10 year trend, and then there is the movements over the past year. Best of all, this is adjusted for inflation - however not for currency and so I will come to that later.
Clearly, from the chart above we can forget about some major countries, Germany, Japan, Ireland. In fact let's look at beating the UK.  Given London is a much better performing place than the UK and we don't want Eurozone because of um..political risk, I am only going to focus on those Countries that are better than the UK performance, preferably double with FX performance tied in.
Of these though, you can't as a foreigner buy a place in India. In South Africa you need a 50% deposit as a foreigner so I don't fancy either of these two. Russia's house prices are collapsing so perhaps the volatility there won't be for everyone and having been to Moscow in winter I can think of better places.
This leaves Hong Kong, Lithuania, Norway, New Zealand and Australia.
Lithuania -  interesting; prices are cheap, it's close to the UK, the currency is though depreciating versus the pound, but the Lithuanian economy has recovered well since 2008 - better than the UK. Long-term, this could be OK. Property prices are still falling, but this is tailing off.
Norway - here the deal is on the currency, with the NOK being  safe haven and in a 4 year uptrend against the Pound where it has gained 25%, together with strong house price growth this has to be a leading contender. Taxes are not too bad, although rental tax is 28%.
Hong Kong - HK prices rebounded quickly from the low of  2009 and the HKD is stable versus the Pound.  With many similarities to London this could be good. However, its a long way for an investment and if the China property bubble bursts, will their be spill over?
Australia - Prices are falling in Aus nearly as fast as the UK, certainly not slightly rising as in London. However, the Aussie dollar is 40% up on the pound in 10 years and the trend continues, wiping out any worries about making a loss. A good place for a currency/property hedge if you can hack the distance?
New Zealand - See Australia above!
London - As the global property safe haven, what could go wrong? Well the currency risk is the main issue, along with increasing property taxes and a weak London economy. Prices will seemingly always hold up and rise, perhaps more in a crisis - but that currency risk with the UK prone to quantitative easing does stop London from being an easy winner.
My overall assessment would be:
On a budget and - Look to Lithuania
For real safety close to home - look to Oslo - perhaps Oslo property is the new gold?
Long term - Aus/NZ is the better bet than London
Medium term - London