Monday, 30 April 2012

Is hating the rich so much new or a reaction to recession?

Everything I read or see at the moment has people going on about hating rich people, even churchmen who should know better. In a capitalist economy this is to be expected to some extent as different outcomes are a feature of the system, but certainly things have accelerated in the past few years in the UK.

A few drivers I can see are:

1) Huge increase in state spending has left much of the populace dependent on state handouts, with recession and the huge debt run up, these must fall and to counter this the cry goes up of soak the rich to prevent this.

2) During a difficult recession many people are struggling and unsurprisingly become more envious of those who have more - also as jobs are more scarce the chances of someone improving their own fortunes becomes smaller, perhaps making them more bitter about those who have.

3) The opposition Labour party in the UK have no alternative political offer to the governing Coalition. As such they are the ultimate political opportunists. With no policy differentiation, they are instead going for ad hominem attacks and have stuck on calling the Government 'posh boys.' Ever since Tony Blair left office the Left Wing of the Labour Party has increased its class based rhetoric.

4) There is also a confusion bourne of immigration. The new Sunday Times rich list clearly shows that most of the very rich are foreigners who have come to live in London - not British people made good on the backs of the workers. It is a different form of immigration compared to that which has held down unskilled wages, but an impact of the choice made by the last Government to encourage rapid population change in the UK.

I think all of the above are the key factors - have I missed any? One is a macro state issue, the second a result of economic changes, the third political and the fourth a combination of political/government regulations. I can't really tell which is the dominant one, although 1) and 3) seem to drive the behaviour in the media.

It is worrying though, the constant whine about people who succeed will either make people not want to do it, or drive those who do to live elsewhere. The usual retort is that people don't leave and this is bluster, but one look at the migration statistics shows that 143,000 British citizens emigrated in 2011, a 12% increase on 2010 - the trend is up from a collapse in emigration during the financial crash. With only 1% of taxpayers contributing 25% of income tax, this is the equivalent to 260,000 people - so not many have to leave to make a real dent in the Government's income.

Where I am seeking more information is how different things feel now to say the 1980's or 1970's - I was only a child then and have no real feel for how much the rhetoric was for hating the rich. Certainly it feels to me as if things are headed back this way, but will this fad pass with the recession?

Saturday, 28 April 2012

Fighting Energy-Talk: Don't Mention The War ...

When German energy companies plot the map showing where their gas comes from, it must give them a frisson of atavistic horror. The great red arrows still arc from East to West with their origins in Russia.  The shades of Zhukov and Koniev are abroad.  

Decades of German foreign policy have been given over to appeasing Gazprom: they know what staves off hypothermia on those cold nights in Prussia and Bavaria.  So it comes to something when a senior executive at RWE can publicly state:

"Every producer but one has understood that structural change is required. If the one that hasn’t understood it so far doesn’t accept the facts, he will have to learn it the hard way. Nobody’s bigger than the market, not even the biggest supplier."   (Stefan Judisch, CEO RWE Trading, 'Flame' 17 April)

What's meant by this is that our old friends at 'the one that hasn't understood' (Gazprom, this means you) must stop insisting on oil-price indexation for their gas, and concede a lot more than the 15 or 20% spot-gas indexation they have yielded thus far in tortuous price re-negotiations.  

Implicitly, it is also clear from Judisch's outburst that RWE is so far up the creek, diplomatic niceties no longer matter. They are not alone: the other giants of Russian gas importing - E.on, GdF-Suez and ENI - are also slowly bleeding white from the effects of their huge, long-term, horribly out-of-the-money oil-indexed gas contracts, and other energy-sector issues of an intractable nature.

Why anyone at DECC ever imagined these guys will chip in for four or five UK nukes is beyond me. 


Friday, 27 April 2012


Using your BBC's Question Time knowledge, who would be the BBC's  choice for the members of the QT BBC World UN security panel.

There are 5 permanent members and 10 rotating members.

You need only do just the 5 perms

I offer

1. Caroline Lucas
2. Sarah Teather
3. Dianne Abbott
4. Janet Street Porter
5. Germaine Greer

And the 10 rotating members
  1. - Kelvin McKenzie
  2. - David Starkey
  3. - Owen Jones
  4. - Melanie Philips
  5. - Vince Cable
  6. - Yasmin Aliblah-blah
  7. -  Alastair Campbell
  8. - Baroness Warsi
  9. -  Will Self
  10. - Bonnie Greer

Barclays AGM

How do you know if they are the right bank for you, here are some criteria to help you judge if there is something amiss:

10. When you make a deposit, cashiers high-five each other.

9. After you get a free toaster, Chairman Marcus Agius shows up at your house begging for toast.

8. Your monthly statements are handwritten, in crayon.

7. When you want to make a withdrawal, clerks suddenly don't speak English.

6. You notice Lord Lucan is sleeping in the vault.

5. Your safety deposit box is a Spud-U-Like carton wrapped in tin foil.

4. The Chief Executives pay is more than the GDP of the Country you live in

3. Lobby is waist-deep in fresh Spanish Euros.

2.  Customer service hotline is hosted by Elena and starts 0898....

1. Four words: Chief Executive Bob Diamond

Thursday, 26 April 2012

Question Time: Hunt the email edition

David Dimbleby is in Romford, where he chairs a debate on the big stories of the week.
 Not very helpful BBC - do pull the finger out!
{Waiting for Jeremey Hunt to get back to them probably. Leave it lads, he's  not coming on.}

BQ thinks - 
-Should Hunt resign for collusion or for incompetence?
- Does Marine Le Biro's rise mean a tenuous BNp/EDF question is coming?
- Madeline McCann - really? Again?
- Should paupers on 60K housing benefit equivalent be shipped out to Stoke? What has Stoke done to deserve this?
- was Mad Nads right when she said Cameron and Osborne were Millionaire Toff Bullingdon, rich boys. Eton lords and masters. Duke and duchess, better than the rest of us billionaires, millionaires, hundreds and thousandaires..super tax payers..landed gentry, horsey set, hunting with dogs..badminton..rowing club, cricket blazers, croquet hoopers, coming out balls. Silver spoon..high society, elitist, private prep school, champers swilling, porcelain plate, cucumber sandwich stuffing, foie gras eating, pate spreading, trust fund enjoying, better than you, Mansion house, family crest, Rolls Royce, duck house, moat cleaning, Chipping Norton, cream tea, Barbour coated, Hunter wellie wearing, stock owning, banker friending, footsie 100, private box, night at the opera, yacht possessing, smug bastards?
Current Leaders

Measured -88
Dick the Prick - 87
Bill Quango MP - 81
Timbo614 -80
Nick Drew - 79
Philipa - 77
Miss CD - 74
Miss S-J - 73
Budgie - 72

Malcolm Tucker - 69
- 69

appointmetotheboard - 65
Sebastian Weetabix - 63
Botogol - 59
Hopper - 59

GSD - 52
Andrew - 50
Jan - 48
Hovis - 42

lilith - 25
Mark Wadsworth -18
Amy 10

Anonymous - 7
Kynon - 4
James Higham - 5
Blue Eyes - 2
John in Cheshire - 2
EK -1
Dearieme - 1

Office of Numpties and Scaremongerers?

An an economist's job is a very difficult one indeed. You don't want to be the odd man out with your predictions, and yet predictions is your game - and indeed your paycheck.

So how to balance the needs of being right with being seen to be right? it is a common city conundrum that affects everyone from Hedge Funds Managers to Pension managers.

In the world of economists this means closely watching the relevant statistics as they come out, Purchasing Managers Index, Consumer Confidence, Business Confidence etc. The use your advanced excel skills to create a nicely complex model to spit out your opinion of, say, GDP growth.

Once you have this base material you can check it against what every other economist is predicting and move it up or down depending on your hunches and also just check that it is is near consensus, but hopefully not bang on.

Collect paycheck.

So yesterday was a bit of a shock, as GDP cam in 0.3% below consensus and nearly every City economist was wrong. of course, due to the herd behaviour described above, if there is a material difference then it is likely that many will be wrong when the numbers are a miss.

However, the first few months of this year were pretty good and the all the information available suggested pretty strong growth, certainly enough to lift the Country out of recession.

But the Office for National statistics just has not been the same since the move to Wales. As part of the last Government's strategy, the department was moved to Wales. Lot's of people left, not wanting to follow and the quality of its data has fallen. Construction in particular is very variable, out by 1-2% each time, which is huge - more than enough to turn yesterday's GDP positive if it proves to be wrong.

This is why the City analysts are all wrong and, as noted in the Telegraph today, why the Bank of England uses its own model (one has to ask, the cost of this, having two departments of Government do the modelling...).

It is quite a problem though as all these movements in statistics really matter today and when they are all changed to be more accurate in the future, people care less. A root and branch review is necessary of the ONS to try and get some better accuracy in the first place, or even a review on how soon data is released so as to allow them more data gathering time to allow a more accurate first cut.

Wednesday, 25 April 2012

'Friends of the Earth' no friends of the facts

The guv'nor is busy and suggests I fisk a new FoE press release. As ever I hasten to do CU's bidding.  It's like taking candy from a baby, but here goes - there are some interesting points arising.

"A new poll from Friends of the Earth reveals 85 per cent of Brits would like to see the Government increasing the use of clean British energy and reducing the use of overseas gas ... 

That's a naughty over-interpretation of what the poll results actually say (see below).  FoE aren't terribly keen to have you read the detailed poll (can you find it on their website ? I couldn't); but you can get it on YouGov.  Have a look, if you can be arsed.

FoE is calling on Cameron ... to shift the energy market away from just six big energy firms who rely on fossil fuels to power our homes – driving up prices for hard-pressed households – and help new clean British energy businesses to thrive.

This sounds suspiciously like a purely commercial pitch in favour of a smaller energy supplier.  Actually, fellahs, we all rely on fossil fuels. And it's 'green' subsidies that push up energy prices higher than they would otherwise be.

When people were asked which sources of energy they would most like to see providing more of their electricity in ten years’ time, 64 per cent backed wind, wave, solar or tidal power while just 2 per cent backed gas. 

A tad more honest as a reflection of the actual poll: but it doesn't necessarily mean what FoE infer at all.  Respondents might simply be reflecting that we have enough gas in the portfolio right now, and that they'd prefer renewables to replace coal plant as it retires. (But - who's to say that's feasible ?  Actually, it isn't !)

Deborah Meaden [sic] said: “Cameron needs to listen to the public and say ‘I’m in’ to clean British energy, opening up a multibillion pound opportunity for British businesses". ... 

A complete non sequitur - you stupid woman !  Oh - and do we detect commercial lobbying again ..?

Gas, coal and nuclear are the technologies of the past. 

That's because we like our heat, light and electrical appliances.  They'll continue to deliver the same in the years to come - assuming we all still want them !  (With FoE you can't be sure.)
FoE’s Clean British Energy campaign would switch the UK to home-grown clean power – we can’t afford not to. Ministers have a once-in-a-generation chance to transform our electricity market to help smaller businesses, schools and communities plug into clean and affordable power. 

Exactly what 'help' do FoE have in mind, eh ? 'Green tariffs' are available already  ... the whiff of commercial lobbying grows ever stronger, and the 'support'-word can't be far behind.  Bloody subsidy-wallahs !

It’s time to wave goodbye to costly fossil fuels and develop affordable power for the future." 

And here's the interesting bit. Note that nowhere do FoE mention CO2 or renewables targets, global warming or anything else.  Just 'clean'. Oh, and 'affordable'.  Like I always say: when push comes to shove, GDP trumps GHG.  They know they have to address the fuel poverty issue, which will rapidly dominate the scene: and they are attempting to do so, brazenly.

Unfortunately for them, they are entirely on the wrong side of that one.  When you need massive subsidies every step of the way, which are going to be funded directly from energy users' pockets, this is an argument you can only bluster over.  It's game on: and they are going to bluster for all they are worth.


Tuesday, 24 April 2012

Miserable Pleaders

We have inveighed against the energy-market subsidy-wallahs many a time and oft; but it isn't just the wind farmers, dung burners and CCS merchants, who know no better.  Nor is it confined to hints and briefings by the big players (GDF most recently; and EDF & Centrica passim ad nauseam). 

This form of behaviour is becoming institutionalised to the point where proper companies are rattling the begging-bowl in banner headlines alongside their logos at the top of their web-pages. I give you Drax, owners of Europe's largest (and 'cleanest' !) coal-fired power station.

"Given an appropriate level of regulatory support".  Ah yes, 'support'.  And they do mean given !  They have no shame.

Away with them all.


Monday, 23 April 2012

The ones that got away

The lesson of the 2000's with investing is that buy and hold is dead. yes, you can hold for decent time periods, but volatility since he dotcom crash is such that buying low and selling high is more important than ever.

Worse news for me, is that all my shareholdings are event driven. Waiting for a takeover, drilling for oil or mine permitting. Such that I only plant o sell when the news I was waiting for arrives, good or bad.

Thus this year has seen me make a catastrophic miss on most of my portfolio, yes it is up over 20% but it was nearly 80% at one point when GKP spiked to over 400, as opposed to the 230 that it resides at now.

Ho Hum. As for the rest, well no real news this month so unsurprisingly the prices of them all have been a bit range bound. With so many delays to the key event news, I can't see me being too active for the rest of the year, maybe in the Autumn. I picked up a few Supergroup at 333 following their steep drop, but this is a short term trading position trying to get 10% back on the bounce up. Have to see how that works out.

Nick can update with his precious metals position later, my equities were soundly thrashed in 2011, this year maybe a bit closer.

Saturday, 21 April 2012

A Whole New Tool of Macro-Economic Policy

Many moons ago (1970, from memory), Harold Wilson defended a blip in the balance of payments - when such things mattered in British politics -  on the grounds that four Boeing 747s were imported that month.  The obvious riposte was: if things are on such a knife-edge that they can fall over with the merest gust of wind, all is not well.

Petrol panic and warm weather may have kept UK out of recession ... a 4.9pc surge in fuel buying due to the panic caused by the threat of a delivery drivers strike

And thus was the 1st Quarter of 2012 saved. Oh, George !  Doesn't that give you ideas ?  A whole new tool of macro-economic policy:  I reckon you can keep the can bouncing merrily along the road indefinitely, starting with:
  • Chief Scientist mentions that drought will mean all types of food will be in short supply from 1st July, hints that stocking up on canned food etc might be a good idea (takes care of 2Q) 
  • government minister hints that VAT on consumer durables will double on 1st October (sorts 3Q)
 But it's not just the recession that can be staved off.  How about:
  • rumour that postage stamp prices will rise by another 50% next year (solves PO pension problem, ask Michael Crick)
  • story that all tickets to the 100m sprint final at the Olympics will be allocated to people putting an extra £50 on their Oyster cards (sorts Crossrail funding)
  • 'leaked report' that C.Difficile in NHS is at pandemic levels (fixes hospital waiting lists)
 Any readers' nominations for further problem-solving scares ?


Friday, 20 April 2012


Somethings just never feel right. I rarely agree with Bryce Elder of FTAlphaville, but he has been a long-time critic of the Superdry brand. At the end of the day, they are just t-shirts and other very overpriced casual wear. yet the company has been in overdrive and its life as a listed company has been a gilded one.

This morning's news though is a classic in corporate governance. It turns out that SuperGroup (the owner)has been over-estimating its profits and growth by about 20%. No news yet of the Finance Director falling on his sword, but surely that will come in the next week or two. Six figure salaries and valuable share options should require a modicum of competence.

Sadly for SuperDry it has been a bad few months anyway as its stockmarket darling status has drained away.  Retails brands like this are always a difficult one, you can see it with the history of the likes of FCUK - they all seem to experience and Icarus moment. After this though, they trade sideways but quite nicely for years until snapped up by a larger player?

From a trading perspective too at 41% down and at 333p as opposed to 1400 it is a pretty strong base. As far as i can see it is priced at 3x next years earnings, compared to 9x for FCUk as an example - so I am tempted with a very small trade looking for a short term 20% upside.

Thursday, 19 April 2012

Question Time - What day is it edition?

On the panel tonight, Conservative party co-chairman the so over promoted Sayeeda Warsi,who i quite like for some unfathomable reason. Shadow home secretary and spaghetti plotter and future leader of the Labour party, Yvette Cooper. New all inclusive Respect MP, seeker of truth, paragon of virtue George Galloway. President of the Liberal Democrats who seems to be in the wrong party, Tim Farron; and the Times columnist so-so David Aaronovitch.

*note last weeks non-compo was attended by a few people who all scored zero as there was no BBc competition. But the game says you get 1 point just for turning up. So everyone who entered the non game still gets a point. It might not be fair but as Theresa told MPs in the House today -"Listen - I don't make the rules."

Current Leaders
{two games to go - both London - both Mayor heavy}

Measured -81
Dick the Prick - 76
Bill Quango MP - 74
Nick Drew - 74

Timbo614 -70

Philipa - 69
Miss S-J - 69
Miss CD - 64
Malcolm Tucker - 63
- 63
Budgie - 61

appointmetotheboard - 59
Botogol - 59
Sebastian Weetabix - 57
Hopper - 52

GSD - 48
Jan - 42
Hovis - 41
Andrew - 41

lilith - 19
Mark Wadsworth -16
Amy 10

Anonymous - 7
Kynon - 4
James Higham - 5
Blue Eyes - 2
John in Cheshire - 2
EK -1
Dearieme - 1

Isn't the Euro crisis boring - will Sunday change it?

I mean really, it has been going on for 3 years now, the same events repeating over and over.

Country X has a hug deficit
Markets get jittery and bond prices rise to over 6%
Eurofudge meeting and some more magic money created to sooth tensions
Things get better temporarily whilst most people observing say this is not cure
More economic bad news comes out, Country X still has a huge deficit

Believe me it is hard to write about it time after time; I even feel sorry for financial journalists who have to re-write the same article day after day after day. They could probably get good jobs in North Korea now given their skills at repeating the same lines over and over.

Of course the solution is staring everyone on the face, break-up the euro, end the deficits, devalue the currencies, a bit of default and hey presto, competitiveness is back.

However, the Euro elite are not for turning. Or even discussing anything rationally. The ludicrous Oli Rhen said today he wants markets to stop being spooked by Spain - it's a real finger-in-the-dyke approach to the world.

Sunday though sees the French election and a very good chance of the end of Mr Sarkozy as French President. Without the Ozy for Angela' Merk we will have a new world. Sadly, Francois Hollande is a lumpen socialist in the mould of Ed Milliband. He does though not agree with the Euro consensus. This could mean that things will begin to change.

On the other hand, the brainwashing from Brussels is very effective on new leaders..but it will be interesting to see the Euro elites try and impose a technocratic Government on France if they fail.

Wednesday, 18 April 2012

every little helps

Overall, group pre-tax profits rose 5.3% to £3.8bn in the year to February.But profits at the UK operation fell 1% to £2.5bn compared with the year earlier. Tesco also said that UK sales fell by 1.2% in the second half of its financial year.

Woe is the world. Tesco Super conglomerate, the Microsoft of the food world, has not made as many billions as previously. All good things come to an end. Upward trajectory is impossible to maintain indefinitely.

But why did profits fall? People spending less? The internet? The departure of Terry Leahy? The backlash against evil billionaire corporations wanting to sack their workers and hire unpaid jobseekers? Farmer's markets?

Doubt it.

More likely is the rather honest answer from chief executive Philip Clarke "Tesco didn't put enough into the stores and maybe took a little out".

What he means is they have not carried out refurbishments of tired stores. Not employed enough staff to man the checkouts and fill the shelves. They haven't kept an eye on competitors who have been moving away from the bags of fresh produce, to loose. Bags of bananas and carrots fit the Tesco logistics well, being able to send them to any size store.
But customers don't necessarily want 10 carrots or 6 apples. They want 1 onion and a few spuds for a stew, and other supermarkets have been seeking out this higher profit margin customer.

Its good that Tesco realise that they need to do something. Often large chains just blame the recession. Or fashions. Or stock levels {as M&S claimed yesterday. Something that just doesn't ring 100% true.Winter stock sales have been very poor because of a very mild winter. I know of a firm that almost went bust this winter, purely because they sold only 1/4 the volume of heavy winter lines they sold last year.} Or rents or something.

When Tesco took the king of the supermarkets crown from Sainsbury's twenty years ago, Sainsburys did not react quick enough. It did not see the threat. It wasn't overly concerned. they had been king for decades themselves. They always would be. But one year their new hi-tech, just in time, replenishment failed and customers, unable to buy the milk they had gone in for in the first place, switched to Tesco and found them cheaper.
And bigger. And with more variety. They've been there ever since.

I'm not a Tesco shopper. The Morrisons cheaper fuel means they get my business. But I did go to Tesco recently. Mrs Q insists that Waitrose is no more expensive than similar products from Tesco. And she's ex -M&S foods so wont accept lower quality.
I very much doubted this. So off to Tesco I trekked. First thing was, it had far LESS variety than the same size Waitrose store. Little in the bakery. Less in the deli. Probably more frozen meals and such, but Mrs Q avoids them, so no chance to check.
Overall Tesco was the winner, but by a slim margin. Slim enough not to bother about unless your budget is very tight.

When I used Tesco, years ago, they were miles cheaper. Even with Mrs Q's M&S 15% discount it was still cheaper to get a pint of milk from the next door Tesco than off the M&S shelves. Either Tesco have overly increased their prices or their rivals have reduced theirs. I expect its a bit of both.

Tesco will address this rapidly. They'll be back with super profits again soon.

Supply, Demand, Manipulation ... Gas, Oil & Gold

Starting gun for the battle royal over UK shale gas seems to have been fired. Timmy, (who first picked up on this from C@W), lost no time in firing an inflammatory salvo - no smooth-talking PR man he, but his original battle-cry was the right one: "a political battle that we must win".

Yes, the supply fundamentals for gas are looking good. But oil ? Cnut Obama is at it again, asserting that it's all the work of the wicked speculators.

The US cannot afford to let speculators artificially drive up the price of oil, the US President said on Tuesday, revealing plans to boost supervision of the market and tackle manipulation. "Rising gas [petrol] prices means a rough ride for a lot of families," President Obama said. "It's like an additional tax that comes right out of your pocket." The measures from the White House include an "at least six-fold" increase in the number of staff who scrutinise the trading of oil futures contracts at US market watchdog the Commodity Futures Trading Commission (CFTC).

Well, we can't object to scrutiny, though it may prove an expensive waste of time. But hey, while they are in the CFTC, how about looking into the manipulation of precious metals ? You don't need to be a conspiracy-loon to raise your eyebrows over this kind of thing - latest in a very long series (almost weekly, in fact) of strange, strange goings-on.

It's "an additional tax" of another kind, Mr President. Go take a look at that one, eh ?


UPDATE - if anyone's interested, more on the bullion shenanigans of this week

Tuesday, 17 April 2012

The Imprint Of The Last Person To Sit On Him

The finance pages of the Telegraph often make me smile, you can always tell who's been giving them lunch, more so even than most newspapers' business coverage. In fact, it's in the Polly Toynbee league.

Energy stories of the last couple of days make the point nicely: first of all a(nother) piece on Aggreko, "a global provider of temporary power solutions in a world that is structurally short of power ... It provides generating capacity and air conditioning for world-class events". Yeah, yeah, we've got that, in fact we remember it verbatim from several other occasions, pass the brandy would you ?

Then there's "Buy-out frenzy predicted in oil recruitment ... Britain's oil and gas recruitment industry is poised for consolidation". Frenzy? Literally the only person who cares about this is the PR type that fed the guff to the DTel - mildly amusing to read the piece and guess who it was. Hope the claret was a good one.

Actually there is a decent, chunky energy story on the DTel's pages this week: "International Power agrees £6.4bn GDF Suez offer: GDF Suez, the French utility, has agreed to pay an improved £6.8bn [on top of to take full control, just 14 months after buying a 70pc stake".

Numerical discrepancy aside, this is a big deal. It's an interesting tale, too. Some C@W readers don't like johnny frog buying our companies; and this one seems to have a rather fruity tang to it. We shall be keeping a watch out.


Monday, 16 April 2012

Spreadbetting or ISA's or Trading

It's that time of year. Anyone who trades or invests will have been buying and selling recently to get the best tax treatment for their investments. And these days you can put £11,250 into and ISA each tax year too. So there will also be many people keen to top up their investment portfolio's.

Now this post is not really about choices for those portfolio's, but about your options. Increasingly in the past few years spreadbetting companies have been undergoing exponential growth - certainly in terms of numbers if not in terms of profits. It is easy to see why, spreadbetting has some big advantages over regular investing:

 - There is no tax to pay, yes ISA's maybe tax free, but normal trading exposes you to the £10k limit on profits per year before Capital Gains Tax. Not only that, but it is very complicated working out how much tax you actually owe, thanks to the many byzantine rules put in place by HMRC.
- You can use leverage too, no need to have £50k when you can you half that and leverage up - all the better for profits and leverage.

There are some disadvantages, such as there are fewer options for investment and the margin is often higher on the spreadbets than the market makers offer by some distance. All in all though, spreadbetting makes sense if you have plenty of money. This is why all the City traders I know do it, that and it helps them to avoid being done for insider trading when they have a little bit of news.

Personally, I think the leverage can kill you. This 'benefit' is responsible for Spreadbetting companies having 70% of their customers losing money. One bad position and you are finished, particularly if you have volatile shares or markets (an oxymoron these days, surely). So it is ISA's and a small trading account for me.

However, the imposition of spreadbetting is hurting these options. For the spread betting companies hedge their positions in the real market. That is, you buy 10 BP shares on a bet, they are looking to make only the margin, so they go long ten BP shares (or more likely some complex equivalent from a Delta One desk) to hedge their position. Great for them and sensible, they can't lose.

But, this is real trading, not gambling. Your £10 long has found its way into the market, affecting the actual shareprice (in this case, by only an infinitesimal amount, but a few thousand shares in an illiquid stock would be very different). When you gamble on the Grand National, you may affect the odds with your bet, but not the race.

This is a crucial difference, as once gambling is actually trading, which this is, then it should not be free from taxes. It is these days a different and tax free way of trading, albeit with more risk. Shareprices do go up and down due to people taking spreadbet positions. If it walks like a duck, quacks like a duck, then it is a duck.

Now of course, I am not going to argue purely for taxes to go on to spreadbetting, but tax equalisation whereby rates are equal for whichever form of investment you choose should be the right way forward, bu the same total percentage as today is collected.

Spreadbetting is influencing the market, it should be taxed as the trading that it is.

Saturday, 14 April 2012

Trouble in Ireland: Send for Father Ted

So these days I am spending quite a bit of time in Ireland. It's quite dispiriting to see a whole country of people so crushed: though one can only admire the manful way they have decided to take their bitter fiscal medicine. There are some limited protests (Don't Pay The Septic Tank Charge !) [sic] but it's a world away from Greece or Spain.

In the midst of all this anguish, are people perhaps turning to religion ? No they are not: in droves. A recent survey of the Catholic laity reveals:

- 87pc believe Catholic priests should be allowed to get married
- 77pc support the ordination of women as priests
- 72pc believe that married men should be allowed to be ordained
- 46pc oppose the Catholic church's stance on homosexuality
- 75pc believe that the church's teachings on sexuality are irrelevant

In what sense are they Catholics, then ? In the grand old Irish tradition of Father Ted, that's what. In A Song For Europe, Ted hears Charles, an impresario, refer to the compere as his 'partner'.

Fr. Ted: Oh right, you run the production company together?
Charles: No, he’s my lover
Fr. Ted: ... he’s... he’s quite a catch! This is my partner, Father Dougal McGuire – not my sexual partner! I mean my partner that I do the song with
Charles: Yes, I guessed that
Fr. Ted: Of course you did – not that there’s anything wrong with that type of thing
Charles: I thought the Catholic Church thought 'that type of thing' was inherently wrong
Fr. Ted: Yes, it does. The whole ‘gay’ thing ... I suppose it’s a bit of a puzzle to us all. It must be fun though – not the… you know, but the night clubs and the whole, er, rough and tumble of homosexual activity. You know, having boyfriends when you’re a man! Anyway, don’t mind what the church thinks – it used to think the Earth was flat! You know, sometimes the Pope says things he doesn’t really mean. We all get things wrong – even the Pope
Charles: What about Papal infallibility?
Fr. Ted: Yes… er ... Is it for everything? The infallibility, do you know?
Charles: I don’t know
Fr. Ted: Right, anyhow, nothing to do with me ...

Roll that song ! My Lovely Horse ...


Antony in the comments points out that the scale of civil disobedience on the Septic Tank Charge exceeds the vehemence of the demos !

Friday, 13 April 2012

What Do We Want? Shale Gas! NOW !

The shale-driven price of natural gas in the USA has fallen below $2 / MMBTU. This is a good bit less than one quarter of the current price of gas in the UK and NW Europe (and perhaps an eighth of that in Tokyo) - the kind of structural disadvantage to our economies we can't tolerate.

Few expect $2 to last for long: it will drive a supply / demand readjustment. But this isn't a small differential, either. And 'experts' had been predicting shale couldn't be produced below $5 ... or was it $4 ? ...

Gotta get fracking.


Thursday, 12 April 2012

Question time - holiday special

UPDATE - NO QT today.

BBC QT website has had a great new makeover which means its previous deadly dull, boring, but informative page has been replaced one which is just a plug for iplayer.
So I don't even know where the show is coming from or who's on it.

But it does have an online application form for the QT audience.

3. How old are you?

8. During the series, we shall be visiting London and various cities and towns around the country.

9. If there were a General Election tomorrow, which political party would you be most likely to vote for?

11. Which of these groups do you consider yourself to belong to?

12. Do you consider yourself to have any disabilities?

13. If you are disabled, do you require wheelchair access?

14. Are you a member of a political party?

15. The audience for BBC Question Time is totally proactive and we wish to ensure that the opportunity to put forward questions and take part in the debates is given to those people wishing to participate. If chosen to attend you will be asked to put forward two questions, one by email and a further question on arrival at the venue, would you please confirm that you are keen to get involved and if selected will ask your question.

16. Add any more relevant information.

A eurosceptic question ? That's very interesting. Why would that be deemed more important than say, a privatise NHS one? Or a Scots independence? EU concern is supposed to be insignificant in polling data.

A reader informs that there is no Question Time tonight.
So, its either watching nothing, or

Who Do You Think You Are? USA

Series 2, Gwyneth Paltrow
  1. 7/8. Actress Gwyneth Paltrow traces the background of her parents.
The Story of the Turban
  1. Tracing the history of the turban and its crucial place in the Sikh faith.
Must say watching nothing does look rather more interesting.

BBC doing God's work, again

What a surprise to see the BBC take a story and run with it against the Government. Especially a story about Charities, nice and bleeding heart - and also a state funded sector in the main, like, er, the BBC.

However, even by the pathetic standards the BBC imposes on using any anything which is not of a left wing viewpoint, this is bad. Apparently, 9 out of 10 charities fear the Governments' tax changes on philanthropy could harm their income.

What sort of question is that? Do you fear that damage maybe caused to the Earth if it is hit by a large meteor? Do you fear for the impact on wooded areas due to a rise ursine defecation?

You can't seriously do polls asking 'fear' questions - well, let me clarify. You can't do any kind of balanced polling by asking a question about a potential fear - it's a pure nonsense.

So who did this poll that the BBC thinks is front page news..umm..the Charity Aid Foundation. Clearly, this organisation is not what you would call an uninterested observer to the proposed changes.

For a change in recent times, I don't really see how the change will impact charities. People can still give up to 25% of their income in Philanthropy every year - I can't believe many people ever fall into the category of doing more than that, although perhaps it could affect large one off donations, that instead may have to be staggered. Clearly too, the Government has seen that some people are donating all their money to offshore charities which perhaps they end up benefiting from (this though is surely a separate loophole that needs to be addressed).

The Government is also no doubt worried about its tax base. If we all gave all our money to say Donkey Sanctuaries, then there would be no tax income for the Government - not that I agree with this, but I can understand why a large statist Government would be keen to prevent this 'nightmare.' I can also see how this angle stops the Labour party from getting too irate as they are an even more pro-State group than the Coalition.

Allegedly the BBC is supposed to be about balance reporting, I can't see any balance here as it defends its fellow travellers.

Wednesday, 11 April 2012

How government works -1. Making tough choices.

Just how did that 'Conservatories Tax' from the previous post suddenly become a live issue?

  1. Did it come from blue skies, original thinking?
  2. Pass through a think tank to check the idea for its pluses and minuses.
  3. Pass through a working group to examine the implications of the plan and the impact it would have on existing and future legislation ?
  4. Did the idea reach a costs and benefits stage?
  5. Did a feasibility study show up the practical implications of the scheme?
  6. Did the PR team focus group test the idea to check how it resonated with the voters?
  7. Were all the current UK legal and EU laws checked to ensure that this idea was not contradicting previous legislation?
  8. Was a trial run carried out to test the plans under battlefield conditions?
  9. Was all the feedback gathered from each stage, analysed, altered, reworked, rethought and re-engineered to create a precise, proven, practical law that would achieve, or even surpass its stated aims, whilst enriching and improving the lives of ordinary citizens?

For the first time BQ mp can reveal a snapshot of how big, tough, important decisions are taken by this government.

'Conservatories Tax': Opening a New Affront

The Daily Mail is all over this one, Booker leading the charge: a 'conservatories tax' requiring people wishing to improve their properties - e.g. replacing a boiler - to upgrade their insulation at the same time. Might even be forced to borrow money under the 'Green Deal' to do it, too. The Committee on Climate Change is ecstatic and wants it to be beefed up with 'effective enforcement'.

We know where the green zealots in government got the idea: building regs have long since required the owners of public buildings, shops, offices etc to retrofit disabled access measures whenever they are next doing any refurbishments. And since Green Deal loans are supposed to be self-financing through energy savings, I suppose the zealots can persuade themselves they are not imposing unduly on the ordinary citizens this new wheeze will apply to.

Even under their own lights they will have to confront the awkward fact that Green Deal is horribly flawed (repayments are based on estimated, rather than actual energy savings, leaving considerable scope for cowboy salesmen - and now Climate Change enforcers - to saddle people with uneconomic 'investments'). But that's to engage them on their own terms.

The more fundamental issue should be obvious: someone wants to replace their old boiler, with their own money. This will, of course, be an energy-saving measure in its own right. Where is the logic, let alone the morality, in saying: you can't carry out the energy saving investment of your own choice unless you do one I force on you too ?

Anything better designed to affront the middle classes is hard to imagine - though we can be sure there are people hard at work on this very task. The coalition is becoming a beleaguered government and it deserves it.


Tuesday, 10 April 2012

UK House prices are the only guide to Monetary policy

Headlines like this on the BBC today certainly make for puzzling reading. The gist of the story is that the UK house market is bumping along the bottom, with some signs of increases in house prices this year.

For a variety of reasons, the price of houses, Daily Mail obsession though it is is the absolute centre of the UK economic problems today:

a) The majority of personal savings art in the form of House Price equity
b) Mortgage interest payments and rent (other people' mortgages) are the largest single bills paid by everyone in the UK
c) A fast rising population is putting demands on housing at a time when new builds are at post-war lows. Fewer and fewer first time buyers can access the market.
d) Banks are saddled with hundreds of billions of mortgage debt, a small change in this profile for the negative and they are bust. Lloyds Bank for example has said publicly in its analyst presentations that it is highly geared to the UK mortgage market and would be in huge trouble if rates went up to fast as that would push people beyond their ability to rep-pay
e) The huge bank exposure to residential mortgages means that they are having to borrow money at higher rates and therefore lend at higher rates on other personal (credit cards) and business lending, also capital allocation means there is less money available for other types of lending.

All the above reasons are key to understanding why the Bank of England considers it its number one priority to support the Banks and property debt holders by keeping interest rates down at historic lows. By doing this repayments are less and so people have more disposable income and also the banks have less defaulting property and so have more money to lend elsewhere and don't go bust. The logic is good.

Except that it is a long-term disaster. By having low interest rates the price of houses remains high; but also there are a lack of buyers as prices are unaffordable. This is why the market today has only a 1/3rd of the transactions as pre-2008. Considering the depth of the recession, prices are barely below their long-term average increase (see graph from Nationwide statistics above). After the last House price crash it was more than a decade before recovery, this time it should be at least the same, so stories that they are recovering so soon are problematic.

Until points a) to e) are addressed, the UK monetary and fiscal policy will remain in thrall to the Property sector. There are some simple solutions, the first is to try, as the Government is through planning relaxation and tax breaks, to hugely increase the supply of houses - as ever, this extra supply will meet or exceed demand and reduce prices (you could try and shrink the population by controlling immigration too, but let's not go there today...). Higher interest rates would improve bank returns and also returns for savers in our economy, which would be a better way to go rather than rewarding debtors with low rates. However, rates are too constrained by the need to avoid a housing bust.

The key indicator for us to follow though is the price of houses as monetary policy will follow them exactly. if the market starts to recover price wise then rates will creep up, if not then rates will remain super low. At least the terrible situation outlined above can help us decide on our own debt needs for the next few years.

Monday, 9 April 2012

Mis-selling Derivatives ? Do Let's Grow Up

OK, first up there are laws about this stuff and no bank should be selling derivatives to any person or organisation deemed incapable of understanding them properly. Know your customer and all that. But an interest-rate collar to a commercial enterprise ? It's pretty simple stuff, despite Robert Peston's silly attempt to make it sound complicated.

An 'asymmetric cap and collar' ? Do us a favour, Pesto, it's a collar (or a cap and floor, same thing), and the asymmetry has nothing to do with the issue. The premium sounds ridiculously steep and it's that which raises the eyebrows, not the collar itself. But who knows what the credit-risk looked like for Barclays on the floor leg ? And how would a basic swap have been priced to the same customer at the same time ?

If Barclays have indeed screwed up on 'know your customer', the deal will be unenforceable anyway. So one presumes that technically speaking, they haven't.

Move along, nothing to see here.


Sunday, 8 April 2012

Turkey and the EU: Easter Essay

Having returned from a keenly anticipated 8-day trip to Istanbul, I am now qualified to be genuinely unsure as to whether Turkey should be allowed to join the EU.

I have long been an admirer of the Turks' sterling martial qualities that have made them major contributors to, inter alia, the UN cause in the Korean War and of course to NATO. Closer to home, an upstanding Turkish family operates five immaculate eateries in my neck of the woods, all differently themed and manifestly well run. Visiting Istanbul itself, a few first-hand observations -
including a very vivid and surprising encounter - have helped to fill out my impressions. Seasoned Turkey-goers can skip to the end of this gushing travelogue.

- a very masculine society. Almost no police in evidence on the streets, and accordingly the society is self-policing, issues being sorted face-to-face (e.g. the many road traffic acciden
ts on unbelievably chaotic streets). Men of all ages wander out together in groups, as do women. Seperately. But despite a fair amount of burqa-wearing (a relatively recent fashion, as in so many places) there are also loads of confident young women with plenty of attitude and evidently no intention of veiling up at all. Everyone seems to rub along.

- arrant disregard for regulations, enforcement of which is derisory (entirely consistent, of course, with the first point). Speed limits, red lights and one-way street signs are advisory only; no regard whatever for trade descriptions; health-and-safety a complete joke; extreme jay-walking on an heroic scale; and it is quite impossible to guess what their child labour laws must be (if any). Boys transitioning to manhood run proper errands for men in the same way they would in Britain in days of yore, rather than nefarious errands for a teenaged gang leader per recent UK trends.

- street after stre
et of squalor and chaos just yards from such modern and clean buildings as exist (the better hotels, museums and offices etc and of course the many very fine mosques). The Turks excuse this saying they are a nomadic people who just pitch their tents wherever and get on with things. (Even the Harem sector of the splendid Topkapi Palace is pretty ramshackle.) Feral cats and dogs everywhere (though a lot less menacing than the really vicious packs of curs that have roamed the suburbs of Athens for years).

- the European side of the city being a lot rougher than the Asian side across the Bosphorous. Seems paradoxical (to a European !) but it is a function of the latter being almost entirely a produc
t of the post-Ataturk, secular era.

One way and another, a fairly bracing Nietzschean set-up, all of which tends to increase my admiration. And of course Turkey is thriving economically, and pivotally placed geo-politically. So - welcome to the EU for the well-and-truly revived 'sick man' ? My reservations come under two headings.

1. Why would they want to join ? Their economy has been growing strongly for a decade and more. How much fun is it going to be when they have to adopt, and at least go through the motions on, all those reams of euro-r
egs ? Many will doubtless respond that the Mediterranean nations already flout them freely. But not on the Turkish scale.

In any event this is a small point compared with ...

2. Is Turkey compatible with European 'Christendom' ? Joking aside, this is where all our cultural
understanding and observations are put to the test. If I understand her correctly, the estimable Hatfield Girl holds that Christendom is coherent, desirable - and doesn't include the Turks. I am inclined to think that Turkey, certainly post-Ataturk, has at least as much relevant recent history with 'Western Europe' as do the Orthodox countries (for which I don't have a lot of time). There are very many Turks who fiercely carry the torch for Ataturk's memory and his modernising secularism.

But we have to confront the Islamic question. This takes two forms, one of which I knew about already, viz the current politico-Islamist tendency in Turkey which is pushing for de-secularisation in public life, perhaps most unnervingly in education. The current Turkish regime baldly asks: is the EU a Christian club or is it the address of a community of civilisations? - expecting to shame us into adopting the second definition. Here's the Economist's snapshot of the situation from October, which looks like a picture of impasse.

A further first-hand perspective on potential religious incompatibility derives from an entirely fortuitous encounter we had on our recent visit. Wishing to push out beyond the grand showcase mosques of Istanbul proper, we went to EyĆ¼p, north of the old city walls, where there is a famous and much venerated shrine / mosque / graveyard complex. Here we found Muslim pilgrims apparently worshipping, erm, a 400-year old tree (a bit pagan, I thought) ... and then a complete surprise: we saw a sheep being sacrificed.

We asked about this and there was a bit of embarrassment - you weren't meant to see that. But later we were told that wealthier people would sometimes sacrifice a camel ...

At this point, some folk will say
: the Spanish sacrifice bulls all the time, and a lot less cleanly too.

Others will say this really has nothing whatever to do with 21st Century Europe, and everyone should recognise it and go their separate ways.

Me ? I'm still undecided. I like the Turks. I don't like animal sacrifices. We should definitely be allies. Beyond that ... what do readers reckon ?

Happy Easter !


Photos © Nick Drew 2012