Saturday 29 June 2013

"It Was Just Resting In My Account" ... The Moneychangers In The Temple

What is it with bishops and banking ?

The Vatican has long been the seat of strange financial machinations, and they are at it again:
A senior Italian cleric has been arrested in connection with an inquiry into a Vatican bank scandal over allegations of corruption and fraud ... Monsignor Nunzio Scarano suspected of trying to move 20m euros illegally.
In the immortal words of Father Ted:  that money was just resting in my account...

And now the CoE has a CEO who is very interested in finance, too.  He sat on the Parliamentary Banking Standards Commission; has delivered himself of views on the need for regional banking in England; been interviewed on TV about the morals of bank executives; and this week
Church of England bids for RBS branches: the Church Commissioners, which manages a £5.5bn investment portfolio, has joined a consortium to buy the branches.
Hmm.  Render unto Caesar, etc etc.  Perhaps we really will get Welby to do us a guest-post.


Friday 28 June 2013

The Dichotomy of Modern Politics...

Seeing the reaction of the Left to the Coalition Budget review this week has prompted me to review how Opposition/Government politics is led by populist value-free statements in the absence of any real policy differences, thus:

When you take the Government takes a long time to decide, it's slow.

When Ed Miliband takes a long time, he's thorough.

When the Government won't do it, it's lazy and cold-hearted.

When Labour won't do it, they're caring of the poor.

When The Government make a mistake, they're incompetent idiots 

When Ed Balls makes a mistake at the red lights, he's only human.

When Government acts without mass consultation, it's overstepping its authority.

When your Labour do the same thing, that's initiative.

When The Government holds its position, they are being pig-headed.

When your Ed Milliband does it, he's being firm.


When they pass legislation that is popular, the Government is giving into base demagoguery.

When your Labour pleases the Unions, they being co-operative.

When Ministers out of the office, they are shirking at burger joints.

When your Ed Milliband is out of the office, he's on business.

When David Cameron takes a break, he's a lazy slacker.

When your Ed Milliband has a holiday, it's because he's overworked.

Thursday 27 June 2013

 David Dimbleby presents Question Time from Newcastle.
 With Universities and Science Minister David 'superdome' Willetts MP, 
Shadow Health Minister Liz 'she's not Andy Burnham? Not enough Maybeline' Kendall MP.
 Deputy Leader of the Liberal Democrats Simon 'Trusssssssstttt in Meeeee' Hughes MP,
 comedian {what! Another one!} and campaigner Mark 'commie -  but very funny' Steel and 
former Director of the Centre for Policy Studies{or THE EMPIRE if you're a lefty} Jill Kirby.
Interesting panel. Might be a bit dull after the Brand/Boris show.
BQ thinks
1. Spending review. Labour commit to reducing their commitments to not commit to anything.
2. Stephen Lawrence and the dodgy Met. Police should not investigate police
3. Some bollox about hamburgers
4. Was Gillard the victim of sexism? {no- she was just so bad she made Rudd look good.}
5. And just for Mr Drew. Ofgen warns of power shortages on the day 'sack fulls more shale found'
{a sackfull being the official unit of measure.}
Yes its been 
Week 22

DtP 158

Measured 146
 BQ(MP) 133
 Timbo614 131
GSD 125
  ND 117

 Hopper 109
 Budgie 102 
Malcolm Tucker 101
 kynon 85
Blue Eyes 76
 Botogol 65
CU 68
Taff -67

Idle 48

Sackerson - 15
 Andrew -13

James Higham - 7 
 Graeme - 6
EK -6
 Phil5 - 2
anon - 3

The Lies of UK Politicians

One graph to show you why real cuts after the election are going to be at least triple and possibly up to five times what has just been announced - whoever is in charge:

or we may have a sterling crisis, tax rates at well over 50% or pensions confiscated...we'll have to see what they dream of doing to us in due course.

Wednesday 26 June 2013

Give unto Caesar what is his.

What now for the larger than life former Prime Minister of Italy. After a terrible verdict on his sex party life style Silvio Berlusconi was found guilty of paying for sex with an under-age prostitute. Despite both her and his protestations that no sex ever took place he was sentenced to 7 years imprisonment and barred from public office for life. He was also found guilty of abusing the powers of his office by arranging for the police to set free the girl whilst she was under arrest. Many witnesses at the trial have been referred by the judge for possible perjury.{see HG}

So, that's the end of him.

Well, we doubt it. Silvio has survived worse than this. And the judgement is a lower court judgement. It can be successfully appealed almost indefinitely. And he is holding up one of the most rickety coalitions ever assembled in an Italian parliament. No one wants him to go today if it means elections tomorrow. Go later Silvio. In a few years time.

Much more serious for Berlusconi is the charge of tax evasion. Found guilty last year he was given a four {reduced to one} year jail sentence. Mr Berlusconi is on his last appeal.
He was also convicted of wire-tapping. In a case that makes Watergate look mild he was accused of having police who were tapping an opponents phone, release the tapes to the media. He was sentenced to a year in jail and his usual barring from public office.

And these are just the latest. The serious ones that involved Tessa Jowell's former {former? Wiki} } husband David Mills, over loans, bribes and perjury have expired under the statute of limitations.

Mr Berlusconi, as always, declares himself to be a victim of left wing forces seeking to discredit him. its a conspiracy.


When Julius Caesar wanted to come back to Rome in triumph after the Gallic Wars he had a problem. He had exceeded his authority.
 Well, a bit more than that. He had raised armies without sanction. Declared war without instruction. Invaded foreign lands. Crossed the Rhine to attack the barbarians in Germany, nowhere near his official province which was just across the Alps.  He declared war on tribe after Gallic tribe. Bribed other tribes with the loot stolen from the first. Captured so many slaves he depressed the market. Invaded Britain. Attacked Roman 'friend and ally' chieftains, caused the formerly warring tribes of Gaul to unite in a war against Rome and waged a ruthless, genocidal war of astonishing military brilliance that made him famous, adored, feared, loved, despised and supremely rich.

He had run up debts that he could never have paid in a 100 lifetimes on his climb to the high offices of Rome. The governorship of Gaul was his way to conquer and pillage back that colossal sum of money he owed. He had bribed and bought senators, Tribunes and Consuls to get to the ultimate top place. First man in Rome. At the end of his 10 years as governor he wanted to go home.

The senate refused. Caesar must disband his illegal armies, give up his offices { which gave him immunity from prosecution} and return to Rome to face trial.
The Senate wasn't offering much to Julius . A trial with disgrace, loss of titles, loss of assets, loss of status and exile or death. And they were a bit foolish to threaten a man who's exploits had been read with excitement daily in the Forum for decades. And a man with 10 seasoned, battle-hardened legions, populated by soldiers who's entire fortunes and futures depended solely on their commander, when they had none of their own.

Caesar, ever the charmer and diplomat schemer made numerous offers and suggestions. He didn't really want a  great Triumph or the accolades of the Senate. He didn't want to retain his armies as his own private fighting force as other had previously. He just wanted to be allowed to escape prosecution for his many crimes.
 And he could spin it well. Hadn't he expanded the Republic like never before? Secured the troublesome northern frontier for ever. Seen off the wild northern savages? Brought wagon after wagon of riches to the capital for all to share? He'd brought order from chaos and all for the benefit of the Senate. Wasn't he the richest man in the world?  If they could just see to forgetting about how he came to be where he was now and just .. enjoy the fruits of it all, then everyone would be winners. There was enough land, slaves and gold for all.

After the senate rejected all of Caesar's demands and compromises, including a standing down of all armies by everyone, he decided on war. He marched on Rome, won, was declared Dictator and ended the Roman Republic for ever.

If his options become narrower and his prospects slimmer might he decide that the time for dealing is over? Why not go straight to the mob? The Italian people have already experienced 'nearly change' only recently. He could offer 'actual change'.  Become a populist rabble rousing politician, speaking directly to the masses without fear of consequences. Offering the unthinkable. An end to Parliaments. A new constitution. New people's assemblies. A new Lira. A cancellation of all domestic debts. A new start. New homes taken from the elites. Palaces turned into Hospitals and schools. No more taxes for the young or old.
It would be child's play for him to bring down the current government.  And by making deals with the Grillo's and assorted anarchy factions , deals they could accept because Silvio would no longer be trying to maintain the status quo, but to break it, he could light a fire.

Might it not just be better for the Italian government and judiciary to let the appeals drag on?
Like Caesar he doesn't want to bring down the very structures he has spent so long and so much on climbing up. But like Caesar, if the alternative is prosecution and banishment.. well then...?

Tuesday 25 June 2013

Even Question Time is not safe

That is right, a new front has opened up in the war on the BBC, this time from the Left. No other institution than the Queen of Primrose Hill, in the form of the Guardian, has attacked the sacred institution for being too, er, populist.

In a successful effort to prove that you can't ever satisfy a lefty, the article goes on to say how sad it is that there are some comedians (all lefties...they seem to ignore this bit!) that are invited on and not enough, um, scientists.

I mean what is the BBC thinking trying to make accessible, popular, political programming. What sort of world does it live in that it thinks QT ratings should not sink the the levels of the self-reverential Newsnight, chock full of Marxisms and anti-everything spin merchants?

The BBC can't win, yet the Lefties don't seem to think the problem could be resolved by Privatisation, somehow a state institution can be harangued but not really altered.

It's a funny old world.

Monday 24 June 2013

Labour's half turn to nowhere

It is amusing to see Ed Milliband and Ed Balls over the weekend try and say they will rein in their spending tendencies.

Labour are making exactly the same mistake that the Tories made in 2007 when they said they would look at ways of sharing the proceeds of growth the same as Gordon Brown. By matching spending plans to the opposition you remove any wiggle room.

Of course, I think they are wrong for the opposite reason to where most Lefties think they are wrong. Not that they are ruling out spending more, but that by giving the Tories a stamp of approval for the current austerity programme which is not delivering any real terms cut to either deficit or debt.

Perhaps they think the voters are going to be encouraged that Labour can supply Tory toughness on budgets with Labour's supposed extra caring for the working class? They may well be right today. But today it is 2013 and not 2015.

In 2015 we will be in a very different economic place. The world and UK will either be int he next recession or teetering on it. This recession will not be a low-interest rate recession unless things have gone so wrong in the economy that everything is being felt purely in terms of a rapidly collapsing Pound with no interest rate rises to offset the real terms loss of purchasing power. This would be suggestive of high inflation...its hard to see how this will work.

It is most amusing politically to see Labour fall into the same trap as the Tories. If the Tories had stuck with their traditional messages of lower state spending then in 2010 they would have been a lot more credible. Similarly if Labour said nothing now and kept their powder dry for another year they would be in a much better position to decide what the policy for 2015-2020 needed to be. I can tell you its going to be an emergency period of quite distressing economic choices and impacts. Labour could say they will need to raise taxes and cut pensions (including early raising of the pension age) to defend welfare for all; but now they will have to do it from a position of weakness.

Saturday 22 June 2013

Life Imitates Art. "Shale Causes Economic Crisis"

Talking It's Hind Legs Off
A couple of days ago I wrote it can only be a matter of time before someone argues that production of shale gas will cause gas prices to rise.

This obviously wasn't a big enough challenge because in fact someone has taken it upon themselves to claim that shale gas could "create an economic crisis".

Yes, read all about it in the Grauniad from the pen of Dr Nafeez Ahmed, "executive director of the Institute for Policy Research & Development and author of A User's Guide to the Crisis of Civilisation: And How to Save It among other books".

Other books ... you mean there's more where this came from ??  While we all rush to Amazon to order his complete works, here's a weekend compo.  Devise the best argument you can, for why shale gas production in the UK will cause gas prices to rise.

Yes, I know it's lacking in scope and ambition, but see what you can do.


Friday 21 June 2013

The Beginning of the End of the UK

Sorry to end the week on such a rum note, but as long-term readers will know the blog rather prides itself on havign predicted both thre credit crunch and the bounce back in 2011. Even the use of QE was discussed months before it happened. Overall the track record is pretty strong, although the last two years have been very hard with the eurozone crisis being politically driven making economic predictions hard.

But now the dark times are to arrive. We have put it off, but the total failure to make austerity work (i.e. to actually do it) means there is no's why:

Bank of England Implied Inflation Curve

UK nominal forward curves graph
Bank of England Implied Gilts Yield curve

The problem shown above is thus; inflation is expected to rise over the next few years to towards 4% by the markets. In a normal environment this would mean interest rates at 6%. The second grpah shows the yield curve of UK bonds. Again these are expected to rise sharply over the next ten years and very fast over the next five years.

This means that the Government, whatever the Bank of England rate maybe, will have to pay more and more debt interest on its borrowing. And our borrowing are now over £1.1 trillion. Debt interest in the current was a mere £43 billion (for 2012) or 16.% of Government spending.

This year the debt will have gone up 10%, so that cost will be at least £4.3 billion higher. But instead, with the Yield curve increasing, payments will start to increase. Now Britain has a very long-term debt profile, the longest of any country. So a doubling of rates does not double the payments as it would with one's own mortgage. However, it will add 1% or so to bill for each 100 basis point rise as a rule of thumb. So next year, in addition to the extra cost of borrowing due to the debt being higher, we can expect another £5.05 billion to be added to the cost of the debt with a 50 basis point rise which is what is predicted.

That is £9 billion, the 2016 Budget cuts are looking at try to cut £16 billion off the following years spending...We are not in 2016 yet. The cuts in budgets to just pay for the extra debt costs - let alone actually reduce the deficit or the nirvana of the total debt - are going to be impossible.

Then of course we know that private debt int he UK is the highest in the OECD, as is corporate debts due to our large banks and the Government does not allow for the debt commitments like pensions which it pays for out of its own funds.

With private consumption hit by the cost of rising rates and inflation and also by public expenditure cuts, the economic outcome is very gloomy.

Suffice to say, I am very bearish now. We had a chance to recover from 2008 by now and we have blown it. The UK finance don't stack up. The answer will be painful. Over the coming months we will need to explore what the Government will try to do such nationalise pensions, currency restrictions and big tax increases are on the cards as we know from the eurozone crisis. Potentially they could monetise the QE debt or embark on a drastic devaluation of the Pound. 3

Thursday 20 June 2013

Question Time: Gagged edition

David Dimbleby presents Question Time from London. 
On the panel are Ed 'biomass' Davey MP, secretary of state for energy and climate change; 
Dame Tessa 'my husband deals with all the tricky money things..I never look at them' Jowell MP, Labour's former minister for the Olympics; 
Boris 'I..I..I..I...Claudius...Johnson, the Conservative mayor of London;
comedian {?} Russell ' not as clever as he thinks he is' Brand; and 
Daily Mail columnist 'Mad' Melanie Phillips.

1. NHS regulators-Bank regulators..What exactly are they regulating? The temperature of the building?
2. Fire brigade cuts. I don't know what the impact would be but London has the 4th largest fire service by number of personnel and vehicles and stations and is the 24th largest city by population or 18th by area.
And is a city largely without high rise..? Paris, has the 3rd largest fire brigade. And Paris is comparitively tiny. 
3. When did you stop strangling your wife? {I loathe this story..none of us know the facts. Saatchi's story is not credible. But to deduce systemic domestic violence from him trying to stop his missus 'making a scene' in a restaurant ? Speculation, guesses and waffle. }
4.Talk to the Taliban 'coz the Blank Hand ain't listening. {bonus point if anyone can remember their history and recall who the Black Hand were and why they are currently relevant.}
5. London rough sleepers rise by 13%..Which also looks like a highly dubious statistic. Labour blames cuts, recession , lack of housing...etc . no mention of alcohol, drugs, mental illness and people like Bill Quango MP who once misplaced his 2nd home after a long 'sitting' at the House and had to sleep in Soho Square. 

kynon has had 3 points added for persistence.
Dimbletie - purple and green.

Week 21

DtP 154

Measured 144
 BQ(MP) 130
 Timbo614 129
GSD 120
  ND 113

 Hopper 103
 Budgie 102 
Malcolm Tucker 101
 kynon 84
Blue Eyes 70
 Botogol 65
CU 64
Taff -63

Idle 48

Sackerson - 15
 Andrew -13

James Higham - 7 
 Graeme - 6
EK -6
 Phil5 - 2
anon - 3

Women in Banking. Now I'm In Trouble ...

Here we go.  More women needed in the City - particularly in the Boardroom and the trading floor.  Because?  Well, a bank with women in charge is less likely to suffer a crisis. 
Christine Lagarde, managing director of the IMF, has suggested that if collapsed bank Lehman Brothers had been Lehman Sisters, the current economic crisis could look quite different. "I have joked that a 'male' culture of reckless financial risk taking was at the heart of the global crisis," she said. "Studies back this up." (DTel)
In other news ... these chaps, the CEO and Chair of the Care Quality Commission apparently had to leave somewhat precipitately last year.  Some sort of crisis on their watch, and a cover-up too ! - or so people say.

No, it's not Jo Brand
Now, back to the banks ...


UPDATE:  what can one say ?  It seems in bad taste to say anything, really. 
  • "Mr B" = ... Jo
  • "Mr D" = ... Amanda
  • "Mr E" = ... Cynthia
  • "Mr F" = ... Anna
  • "Mr G" = ... Jill
  • "Mr J" = ... Louise

Wednesday 19 June 2013

Shale and the Price of Gas

When push comes to shove, people really don't understand markets very well.  Perusing the increasingly lively meeja coverage of putative shale gas in the UK, we find people who say shale discoveries will bring down the price of gas, and seemingly even more who say it won't - including, remarkably enough, the shale gas lobby itself.  Wishing, I suppose, to be cautious in their claims, some of them say the effect will be minimal. 
At a meeting for concerned residents at a potential fracking site in West Sussex, a Cuadrilla representative was asked to comment on whether shale gas could drive down customers' energy bills. “We've done an analysis and it's a very small…at the most it's a very small percentage…basically insignificant,” said Mark Linder, a public relations executive at Bell Pottinger who is also responsible for Cuadrilla's corporate development.  (Inde)
Some PR he is, eh?  At least he didn't say prices would go up, though we may be sure that in due course someone will - the whole renewables policy is a massive bet on this.  The argument seems to be that under EU trading laws we'll be 'forced' to sell it to the wretched continentals, (read: they'll offer to buy it, and if the price is right we'll sell it !), thus neutralising any tendency to lower UK prices.  (Even Peter Lilley seems to be willing to concede this.)

Let's put some perspective on this.
  •  in 1994 a relatively small gas surplus in the UK brought down the price of (wholesale) gas by 60% in 8 months - and it stayed down for 5 years
  • it went up again when in 1999 the UK became connected for the first time to the gas networks of the continent, where gas prices were higher - set by oil-indexed gas contracts.  The quantities of gas being exported from the UK that effected this price-shifting arbitrage were relatively small (indeed, on a net year-round basis, extremely small, as UK gas was exported in summer, but there were imports from the continent in winter)
  • European gas importers still paying oil-indexed prices (to Gazprom, Sonatrach et al) have been seriously hurt as spot prices have once more fallen, based on another relatively small surplus stemming from the 2009 industrial downturn.  (In consequence they have forced Gazprom to reduce their prices.)
  • US gas prices have been absolutely trashed by substantial amounts of shale gas, and have stayed low despite warnings for several years that this can't go on.  Of course, as yet they are only able to export very small amounts of the net North American surplus (the US is still a net importer, from Canada).
So: gas prices like other prices, as any fule kno, are frequently set by marginal effects, and move in the predictable direction.  Surplus => down, just to be clear ...  If there is any economically recoverable shale gas lurking there, its directional impact on price is not in doubt.  

If and when it is produced in fair amounts (say, equivalent to 10-20% of UK demand - a lot less than some predict will flow) it will have the potential to impact on spot-gas prices not only in the UK but in Europe as a whole.

The absolute effect of this will hinge entirely on the detailed supply-demand dynamics of the time. This being a good few years into the future, we have no idea whatever what those will be.  

OK ?


UPDATE:  The Horizon programme on shale 'n fracking was fairly balanced and well done.  It's on again this evening, and here

Monday 17 June 2013

Energy Companies, Large & Small

Well, there's a thing.  Someone else reading C@W diligently.
Energy industry needs fewer, bigger players - MPs told: the best way to generate more competition in the gas and electricity industry is to have fewer, big players - a top consultant claims today.

Actually, retrenchment to a Big 4 is not the answer.  A realistic end-state is a big 10 or so of heterogeneously-profiled, properly capitalised players with none of them allowed to be fully vertically integrated.

My invoice is in the post.


Syria and the new Afghanistan

It's it difficult to believe the myopic view of UK politicians. After a quite disastrous foray into Iraq which ended with the UK being chased out of Basra and shia militia's taking over and a soon to be followed similar example in Helmand and Afghanistan.

Years of on the ground work and an initial invasion have yielded no real strategic success. In Iraq there is at least a vestige of democracy and maybe once Kurdistan separates the Country can begin to focus and move forward. It is an improvement on Saddam but with a very high blood price.

In Afghanistan the Taliban look poised to re-take the Country in next few years. The blood and treasure expended will be for nothing.

Now we have Syria, with a terrible civil war stretching into its 3rd years with the Country bitterly divided. Most of the Arab world supports the rebels and with Iran and Hezbollah, as well as Russia on the other side. Qatar and other arab states have provided plenty of arms to the rebels.

Why on earth should the UK get involved? We have not real way to end the war and no appetite for a ground war. Even the air campaign in Libya which seemed so successful has left a bitter country to be ruled by various militia's of one kind or another.

We all bemoan defence cuts, but at a time when our defence spending is falling and our ability to effectively use hard power can be questioned with the Islamic region in the Middle East, why on earth are our ministers and leaders so keen to gets us involved. I have no answer, it is bewildering to me for people who should know better and have expended enough of our soldiers lives in recent times to learn all the answers they need for this question.

Saturday 15 June 2013

Capitalism Works - Well Of Course! Up To A Point ...

Some good weekend reading here, from the DTel's Jeremy Warner.
This crisis has proved that capitalism works. The G8 protesters have little support – there’s no public appetite to blame the free market... on the whole they don’t seem to be fulminating about the free market system as such. It’s financial excess that is blamed for our travails, not market failure.

Discuss, as the exam rubric goes.  I'll chuck in a couple of thoughts.  First of all, I strongly agree with Warner's pivotal statement: "Capitalism is nothing if not supremely adaptable" - which trumps all your leftists and euro-dirigistes every time.  But actually, it isn't really just capitalism: it's the whole ruthless 'Anglo-Saxon' policy-making complex that au fond has a stronger grip on how markets actually work, and what the tools and levers are - and isn't afraid to use them.  (Bailing out banks isn't intrinsically capitalist at all).  Again, these are advantages often not shared by your lefties and dirigistas (although that Mario Draghi seems to know a thing or two).

Secondly, he has some sensible things to say about Anglo-Saxon labour-market flexibility - particularly his observation that this has virtually nothing to do with government intervention. At least, not direct intervention in the crisis: there were certainly interventions in the 1980's to diminish the powers of UK unions, for example.

The final point though, surely, is that it's not over yet - despite the recent rash of upbeat pronouncements, which seem to me to be premature in the extreme.  As Warner says, bailing out banks and printing money  "are creating massive distortions that may be piling up problems for the future." Oh yes indeed. 


Friday 14 June 2013

A call to arms

The SA-80 main small arms of British forces. A bit of a chequered history. Poor start. Early teething problems. Political meddling. European/US arguments over ammunition calibre and standardisation. One main failure that required re-tooling and revision. Huge cost over-runs ... 

Well, that's not too bad. Many small arms take a long time to become refined enough to become world beaters. The US M14/16 series had quite a troubled infancy. Numerous refits and redesigns there too. But the original 1960's design is now on its M16A4 model and it has been produced in the millions.

The M1911 colt .45 pistol, the one seen in WW2 films, was a success almost from the start. Stopping power and simplicity were required. And that's what it delivered. from 1911 until the 1990's it was the side arm of US military and police forces. In 2012 12,000 more were ordered for US special forces. 

The Colt was also the standard small arms of US forces 50 years before the Colt.45 when the Colt Navy 1851 was produced. Easy to carry on a belt holster. Easy to use and great short range accuracy, it was soon the finest revolver in the world. Production ended some 25 years later after the Colt Navy had sold some 250,000 units. 40,000 to the British Empire.

A weapon doesn't have to be the best in its class to be a winner. The famous post WW2 1948 AK-47 assault rifle has had more than 80 million units produced. Its not very accurate. Has only average range. But its reliability means it operates in any terrain, at any temperature, with only the most basic of training required. The guerilla weapon of choice. {The Chinese type 56 is a direct copy- That has also sold in the millions.}

Not just Superpowers create the best small arms. Israel's UZI sub machinegun family {another 1948 weapon} has sold over 10 million units to the military and police and security forces of over 70 countries who liked its size, firepower, and concealment statistics.

West-Germany's 1966 Heckler And Koch MP5 range of Machine Pistols was/is sold to over 100 countries in huge numbers.

The UK's SA-80 family is almost 25 years old now and the L98A2 rifles are sold to Bolivia and Jamaica. 
{And Jamaica isn't buying any more.}

Lets face it. When it comes to arms we are like the Swedes. We make modern, exciting, highly capable, problematic, innovative, quite specific military equipment that costs maybe four times as much as our competitors so no one else but the host countries ever buys it.

Thursday 13 June 2013

Question Time: Twilight edition.

David Dimbleby presents Question Time from Edinburgh, with an audience of 16 and 17-year-olds. The 2014 referendum on Scottish independence will be the first time anyone under 18 has had a vote in the UK.

Well, that should be interesting. A north of the border youth only, single issue show.
I can't help feeling uneasy when the Beeb do these semi-breakthrough events. The all female question time panel. What was the point of it? Did it prove women are just as capable of  telling  half truths backed up by dodgy statistics as men?  If its about minorities being heard should the BBc have an all Jewish panel? I doubt they would. But I bet an all disabled panel has been discussed many times. Doing something because it can be done isn't really groundbreaking is it?Avatar was simultaneously groundbreaking and a complete waste of time.
Anyway ..on with the show.

And points deducted if any of you try and type in a 'down with the kids' manner. Innit,loud deadbear rha!

1. When asked "Should Scotland be an independent country?" – the same question to be put to voters next year – 62% of the 2500 students who voted said no. .. is that job done?

2. Is it right teens are given the vote even though the majority are a massive drain on societies finances?

3. Would an independent Scotland be able to join the Euro?

4. How could the BBC collect revenue from an independent Scotland? 

5. What time do members of the panel think is too late to be going out?

Dimbytie - Angry Birds App tie.

Week 20

DtP 147

Measured 137
 Timbo614 128
 BQ(MP) 127
GSD 116
  ND 112
 Budgie 102 
 Hopper 99

Malcolm Tucker 96
Blue Eyes 70
 kynon 78
 Botogol 65

Taff -59
CU 57
Idle 48

Sackerson - 15
 Andrew -13

James Higham - 7 
 Graeme - 6
EK -6
anon - 3
 Phil5 - 2

Wednesday 12 June 2013

Small Electricity Suppliers Have No Right To An Easy Life

Ofgem, whose uselessness over the past decade is a disgrace to the excellent work done by its predecessors Ofgas and Offer in the 1990's, is at it again. 
Britain's big six energy companies will face fines unless they open up the electricity market to competition from smaller rivals, under proposals by the regulator designed to "break the stranglehold" of the biggest suppliers.  (DTel)
The details of this are less dramatic than one might imagine: they intend to 'force' the biggest 8 generators (not just the 'Big 6') to become market makers in the forward market out to 2 years.  Since liquidity in the 2-year energy forwards is pretty unsatisfactory - and since that, in turn, is pretty damaging - no one can be happy with the status quo.  Ofgem have been farting around worrying aimlessly about energy liquidity for 8 years now and the only positive development has been the advent of hedge fund and PE money since around 2006 - mostly in the gas sector because electricity trading is fiendishly difficult.  On the downside, banks have been progressively scaling back their commodities trading altogether.

Of course, the real issue is that in the '00s, Ofgem and the competition authorities (against their better judgement but under instruction from Gordon Brown) allowed dumb vertical integration to take hold once more in the electricity market, after the successful efforts of 15 years to break it up.  EDF being allowed to buy BE was the final straw in the structural undermining of liquidity, a point we made at the time. The European authorities, who ought to be a back-stop against this kind of thing, were equally supine.

What I don't understand is why anyone thinks small, under-capitalised electricity suppliers have a God-given right to thrive.  This is the most capital-intensive of industries - whether or not a player intends to back ts energy positions with physical assets (power plants, gas production or storage facilities etc).  Even if they intend to operate on a 'merchant' model - just buying wholesale to meet retail demand - huge quantities of risk capital are required to back the big, long-term deals that are required for that business model.  That is the lesson of 'asset-lite' Enron:  it's a game for big boys with a credit rating of at least A, preferably higher.

What's needed is real competition between ten or so properly-capitalised players. Boutique energy marketing outfits with no credit won't be able to transact 2-year hedges anyway - unless the new 'rules' force the Big 8 to take the credit risk, the merest featherbedding.  Along with the free ride that is currently given to windfarms in terms of not being charged the full cost of their intermittency, plus a heap of social obligations as regards 'poor' retail customers, and even more nonsense contained in the Energy Bill, the burdens being heaped on the big players will one day make some of them decide it's not worth the candle.  Obvious candidates for giving up in disgust are cash-strapped RWE of Germany (nPower) and Spanish Ibderdrola (Scottish Power).  It's not too much of a stretch to see E.ON having second thoughts as well.

See how we like it when Big 6 becomes Big 3, eh?  No amount of flaky, subsidised suppliers called 'Nice Clean Energy' or 'Friendly Power' will help us then.


Tuesday 11 June 2013

End of the Apple Bubble?

Of the few technology concerns that I have, one is the competing issues in the household between apple products and android products. Apple's insistence on no interoperability has made it a fortune, but it is very annoying to be a consumer of devices and equipment that make you waste money; buying the same app twice for similar devices etc.

For all its irritation though, the fact that Apple managed to re-invent both the Music and Phone industries after having been so mediocre at computers is quite something and a piece of history that cannot be undone. Then the Ipad too has done a huge amount to define the tablet industry too.

The future is less certain, it is said to be working on TV but has been saying that for a long time without much success. Plenty of people wonder if the well of creativity is a bit drier. The latest release of the Ios7 is one such example. it's just an upgrade, and a free one at that, to an already successful system. Microsoft even manages to get people to pay for software upgrades!

Anyhow, the Apple shareprice has tailed off from its once great momentum...I wonder if it will ever quite get back its previous allure if this is all there is to offer?

Monday 10 June 2013

RBS/Lloyds need a simpler solution

More and more the Government seems to be moving towards trying to raise some much needed cash from RBS and Lloyds by selling its stake as soon as possible. There are also other reasons, such as the about to be broken EU State Aid ruling which means the said banks should be broken up a bit, which has not happened. Best if the Government was not in line for the fine on this....

However, the real issue has centred for a long-time around the shareprice. I was all in favour last year of the concept of giving away the shares to the public and a think tank has come out today with the same idea. The idea still has much merit in that it is after all our money the Government has used. it is a good counter-point to the socialists who use our money for their gain, for the Conservatives to present back to the public their own investment - at a loss incurred by the socialists too.

there is though a better idea. The Government does not need to make a loss at all. All they need to do is instruct the bank, soon to be making profits once more, to engage in share buyback processes. This way, by cancelling shares, the price of the shares will rise. At some point in the not too far future they will be above the strike price and every further purchase will be a profit for the taxpayer or alternatively a real Sovereign Wealth Fund buyer can be found.

This way too the shareholders, mainly pension funds and retail investors, will see some return for their investment. RBS is currently valued at £37 billion, if it can clear £2 billion a year profits, which is entirely possible for this year, then that is 6% of equity bought back. The price will go up considerably over time and at little cost and with no expensive IPO or share hand-out process. Lloyds would be largely in the same bracket.

Share buybacks - the simple solution to a difficult problem. There is still the idea of break-up, but this is just silly and I will come back to later in the week.

Sunday 9 June 2013

Go Yeo! A Vintage Year

All our favourites:  Huhne, Bercow - and now the ghastly Yeo.  Yes, 2013 is turning out very nicely.

Perhaps Gummer to round off the first half ?


UPDATE:  Guardian reports - Tim Yeo denies claims he offered to advise solar energy lobbyists for cash.  So we must watch and wait.  Curiously, Yeo has been pressing Gummer on his various vested interests.  Boy, this gets complicated !   

Friday 7 June 2013

Can you be too open?

Often on this blog you will read of our firm commitment to Ricardian trade principles. In effect, all trade is good and the more open the borders the better for you, with little truck for protectionism. The immortal phrase was put well by the economist Bastiat:

that others throw rocks in their harbours is no reason for us to throw rocks in our own

However, a long history of trade can show this to be an imperfect view of the world. There are many ways to manipulate trade beyond pure trade barriers of old. The one that has me and most of the spooks in the US worried of late is the emergence of cybertheft. China is the undoubted king of this, with it being allegedly officially sanctioned and backed the the People's Army.

President Xi Ping is meeting with President Obama in California today (so they are not Bildebergers eh!) and this is one of the top concerns of the US, the pure theft of IP and the huge amount of cyber attacks on US firms. Given that Western Countries are increasingly relying on service industries that generate IP over physical manufacturing this theft is critical.

Yet in the UK we are remarkably unmoved by the new cyber threat. The case in point has hit the news again today in the case of Huawei. This is a Chinese telecoms firm which again the US bans from working in the Country due to its strong ties to cyberwarfare. Whereas in the UK, we have allowed Huawei to deal with BT and expand as a major telecoms provider.

Of course, the arguments trotted out are that we should be open to business from China. but there is business and there is spying and the line for Huawei is compromised. Huawei has grown to become the second largest telecoms firm in the world and its integration into our key national infrastructure is now too late to reverse. But really at the time it should have been crossed off the tender list, it is no as if there are not a myriad of other suppliers that could have been used. Huwawei offered good prices, offers of jobs etc, clearly buying its way to the work; questions should have been raised.

It's a challenge which I can see the UK and Europe failing in, which is a shame as we are trying so hard to build an IP based economy. And you just thought we were bad a bank regulation!

Thursday 6 June 2013

Question time : Caan parents give their kids a job edition

David Dimbleby presents Question Time from Blackburn. On the panel are Margot James, Conservative MP for Stourbridge, Douglas Alexander MP, Labour's shadow foreign secretary, Lord Oakeshott, Liberal Democrat peer, writer AN Wilson and Salma Yaqoob, the former Leader of Respect.
AN Wilson's books bore me to tears. For a historian of huge social and intellectual standing he doesn't half talk a lot of balls. Anyway...

BQ says:
1. Is it right to be a bleedin' hypocrite on your first day at the Quangocracy?
2. Labour will vigorously cut spending with a pair of kindergarten safety scissors that have had the blades removed. Can we trust the empty Ed's on the economy?
3. Do immigrants work harder Mr Bercow ? :- Yes. 90% of employers say so. I say so. But then they are motivated by earning 3 times what the British worker would earn. Could we be more motivated if we earned £30k picking cabbages in Poland?
4. Syria. Does anyone want to arm the Syria rebels? Why can't our rebels be the good ones. Like in Star Wars.  And isn't this all Israel's doing? Respect will think it is.
5. Racist attacks and Mosque burnings and slogan daubing. Is the terror backlash starting?

Red with a bit of green Dimbletie.

Timbo 614
Week 19

DtP 143

Measured 132
 Timbo614 122
 BQ(MP) 121
GSD 111
  ND 106
 Budgie 98 
 Hopper 93

Malcolm Tucker 89
Blue Eyes 70
 kynon 66
 Botogol 65

Taff -56
CU 50
Idle 48

Sackerson - 11
 Andrew -13

James Higham - 7 
EK -6
anon - 3
 Phil5 - 2

A Chinese Cracker - Gotta Love Their Sense of Humour

Good game!
So the Chinese are miffed about an EU tariff on their cut-price solar panels and are looking for a riposte.  They know it's the protectionist wing of the EC behind the tariff, not the free-traders: so how to react ?  A retaliatory wine import duty !   A more finely-calibrated response could not be devised.

Do we imagine that British solar panel manufacturers will suddenly spring into mass production ? There's a little lesson here for all the greens and Yeos who keep banging on about how renewables herald an economic boom for British industry.  In practice, apart from several thousand relatively low-value installation jobs, the 'boom' translates into imports of wind turbines, solar panels, and wood-chips + palm oil for 'biomass' burning.  As Liberum Capital's recent report stated: 
overseas markets have failed to materialise as expected, and Asian (especially Chinese) manufacturers have aggressively entered the market, often brutally under-cutting EU suppliers. Virtually the entire German solar manufacturing base has been wiped out by this competition. Vestas, the EU’s leading wind turbine manufacturer has seen its share price crumble from a high of over 700 Krona to only circa 46 Krona today. From this it is hard to discern that EU citizens are getting much of a benefit from reviving their industrial base with the €30bn per annum subsidy that renewables are costing

Wednesday 5 June 2013

Forever Blowing Bubbles

Who said Quantitative Easing would help to improve the real economy then?

A cursory glance at the main three assets markets for this year in the UK:

iShares FTSE UK All Stocks Gilt (GBP)
          IGLTGilts are still at all time highs, see below and ETF Gilt tracker which is a great procy for the combined market. Even this year things re steady at near all time highs. Not surprising with interest rates still at historic lows after 4 years.


Then we have the UK FTSE 100 - having a very strong year thus far (now actually I think this is more grounded in reality, its still below highs seen 14 years ago and is really hovering along its long term average)

And finally, House Prices, this chart from Zero Hedge helpfully pointing out a still historic 30% over-valuation...

So there we are 3 huge bubbles in the main asset classes and we have not even got into the Debt side yet. All the while the real economy slowly gathers pace for very modest recovery.

What could possibly go wrong with this picture? My main concern is that we tend to have recessions every 8-10 years. The last one started in 2008, so we are now on the climb to the top of the economic cycle. In 2015 we will likely reach the peak, juiced on stimulus - will this peak even be as high as 2007/8 in terms of overall GDP - probably not.

All the while, we are stealing from the future to pay for today's stimulus.

Drinks tomorrow..

Kaputas Beach

Drew and I at Wesminster Arms from 6.30 should anyone be around. Bill Quango is allledgedly in Turkey on a urgent peace mission fact finder thingy to Kalkan with Patrick Mercer and Eric Joye; and so is unable to attend..

Tuesday 4 June 2013

Scraping The Green Barrel

Tim Yeo - he of the multifarious vested interests in promoting investment in 'renewable' energy sources - is going against the Coalition line and advancing a new, ultra-low, 'legally binding' fantasy-target for CO2 emissions.  It will be interesting to see how the voting pans out when he moves his amendment to the Energy Bill, because of course if Labour goes for it, not many breakaway Tories & LibDems are needed.

He really is pulling out all the stops.  For starters, he is honest enough to mention his primary consideration:
"It’s an important amendment because it will reassure investors"
Then, we read him claiming that the lights will go out unless his target is introduced ! 
"There will be a hiatus among investors", said Mr Yeo. "The result of that in the short term is to make the risk of power cuts much greater"
We could amuse ourselves trying to rationalise this sophistry; but one gets quickly distracted by loud barrel-scraping sounds as he dredges up still more fatuous arguments - like this:
"If parliament fails to set the electricity system on a low carbon pathway by 2030 ... the anticipated carbon benefits of HS2 would evaporate"
Not to mention HS2 grinding to a halt when the power-cuts hit !  What other cherished coalition policies will also fail if he doesn't get his windfall amendment?  Let us help Mr Yeo by spelling out a few more of the disastrous consequences:  
  • It will cause the lights to flicker in the offices of bankers around the country, placing more obstacles in the way of SMEs seeking loans
  • Ditto in the offices of MI5 and GCHQ, making it harder for Teresa May to snoop on terrorists using Facebook for evil purposes (that's evil terrorists of course, not evil Teresa) 
  • It will be yet another injustice to gays, who only want to use the same electricity as the rest of us  
I'm bound to have missed something out here, but the point is made.  Support Yeo's amendment - or we're all going to hell in a hand-basket !


UPDATE: Bid to include target to decarbonise the UK's electricity generation by 2030 is voted down by 290 votes to 267.  Go Yeo !

Monday 3 June 2013

Labour Party plan to ape Tory "austerity-lite"

By the standards of June, when nothing much can tends to happen as people start to enjoy the weather in the UK and stop thinking of ways to upset everyone else, there is a small political bomb being planted today.

Led by the combustible Ed, a speech is being made now at Reuters that suggests an incoming Labour administration in 2015 will be an austerity government. With a pitch that seems to clash badly with previous positions, Labour are to note that there won't be any money left and most departmental spending will have to continue to come down.

Furthermore there are gimmicky ideas on tax raising such as reducing winter fuel payments for elderly relatives and also increasing the whole bankers bonus tax. These two idea raise in the grand scheme of things next to nothing in real revenues, but help to position Labour firmly on one side of the class war they are so intent on continuing.

It is far from certain that Mr Balls will ever get any economic credibility. It is a strange world in that both Osborne and Balls are in dire need of replacement by their party leaders, yet neither one has the courage or political capital to act.

In the longer term, this is quite a shrewd move by Labour. For on most other policy fronts they lead the Tories by a healthy margin. If they can get some ground back by promising Tory economic policy only from them, just as they did in 1997, then this could prove to be a turning point in their fortunes.

The Tories though will be able to point to their flip-flopping (whilst carefully ignoring their own implementation of plan B rather than A). Interestingly the truth is that both leading parties have almost the same ideas on the economy now, both seeking an austerity-lite package. The opportunity for the Liberals and UKIP to offer a different package is their for them to seize.