Friday 28 February 2014

Cameron's reform the EU strategy.

 "Some expect my speech to pave the way for a fundamental reform of the European architecture which will satisfy all kinds of alleged or actual British wishes. I am afraid they are in for a disappointment. "Others are expecting the exact opposite and they are hoping that I will deliver the clear and simple message here in London that the rest of Europe is not prepared to pay almost any price to keep Britain in the European Union. I am afraid these hopes will be dashed."'

Angela Merkel

Angela sat on the fence in a very stateswoman like way. No offence given and no promises made to anyone. A little promise of some future bargain, of an unspecified nature on yet to be thought about terms.

Give it up Dave! Its not working. The idea of promising the electorate a future referendum but first demanding the EU change had some merit. We would all be better off if the EU worked better. Wasn't so protectionist. So bureaucratic. So regulating on unnecessary details and so lax on the important ones. If we could be part of a less idiotic union we would be much better off. 
The agriculture policies and free labour movement being just two examples of areas desperate for reforms.

But it isn't going to happen. 

As Mrs Merkel said the EU has bigger fish to fry. The EU crisis hasn't gone away and it can't be fixed until monetary union and a central control of Eurozone's treasuries and financial decision making is hammered out.  The EU is still not growing and unemployment won't come down. The European Union has a lot of work to do.

And the plan was flawed anyway Mr Cameron. 
The idea that if the UK just threatened to think about leaving the European Union it would be enough to scare Strasbourg into submission was never very credible. Its the same argument with Scotland. Threaten to leave if you like. But you won't get far.  And anyway, when the push comes, not enough people will vote to leave anyway.
So it wasn't much more than a way of trying to appease the UKIP drifters even when the think tank SPADs dreamed it up.

And now, of course, 3 years later, its just never going to work.

Because you have made a future promise. No referendum until 2017.
Quite a clever idea initially. Make the eurosceptics stay onside until after the next election. Give Europe time to recover economically. Force Labour to say something about their policy on Europe, when the Miliband policy is to say absolubtely nothing about Europe. Make UKIP look like spoiled children leading the UK to exile over issues that the grown ups could easily resolve.

But, with the Tory poll ratings well below necessary, the other EU leaders have nothing to fear.
The chances of a Conservative majority are are almost non existent.  Even a coalition is only a remote possibility. And a coalition of Liberals wouldn't allow a referendum. Neither would a Labour majority. So why would any EU leader want to open up a Pandora's box of demands and changes when there really is no need?

So it's a non strategy. Not really keeping UKIPers from desertion or driving EU change.
And worse, the public don't buy it either. because of that whole Cast Iron promise thing.

That was technically not a breach of promise. But then, neither, technically, was the Lisbon Treaty.
But since Iraq political 'benefit of the doubt' has been rather lacking.

So give up this strategy. Just promise the public a referendum within 3 months of the next election. Demand the other leaders make the same commitment, in writing, on air, in manifestos or openly challenge them to what they are afraid of?  Eventually, Labour will have to agree, probably going along with the Liberals on a stay-in platform. . And that then might just be enough to retain some of those defectors.

At the very least, even a lost referendum would finally get the EU issue out of the way and prevent the Tory split party happening for a decade or two.

Thursday 27 February 2014

BBC Question Time : Angela Panzer edition

David Dimbleby presents Question Time from Newport in Wales.
On the panel are Conservative defence minister Anna Soubry MP,{erm...UNDER-secretary I think you'll find, BBC} Labour's shadow education minister Rushanara Ali MP, Plaid Cymru's Westminster leader Elfyn Llwyd MP, restaurant critic and novelist Jay Rayner and columnist Melanie Phillips.

Regular poster TAFF on home turf is expected to ace the questions. This might be hard. QT has been going through one of its Two Ronnies phase.  Asking Questions from the week before. Or even, as last week, asking questions of no interest to anyone.

BQ thinks
1. EU-kraine. Has to be .BBC ignored it for 2 weeks already? If we believed in conspiracy theories we could say they were worried about  the millions they paid to broadcast the Winter Olympics -Putin etc.
2. Another scardey cat lawyer story from the nation's broadcaster. This one more reasoned. Its not really a proper story at all. Hattie Harman and her pieces of PIE.
3. Flooding . I thought it might be over but Miliband asked all 6 questions on flooding at PMQ. His activists will be scribbling in the audience.And a provocative eco question for Mel
4. Angela's Nein! Should Cameron accept that the EU don't think he will be leader so feel no need to accommodate him and just switch to UKIP's plan of a plain old in/out referendum within 3 months of the next parliament?
5. Hyde Park bombing. Right to resign?

Hall of The Winners 


DTP - 3

Taff - 2 

Mark Wadsworth - 2 

Measured - 2

Bill Quango MP -1

Tuesday 25 February 2014

Ukraine: Who'd Be Putin?

It's hard not to feel some sympathy for our old friend Volodya.  Keen to be seen as a superpower.  Doesn't want to be just a muscle-bound commodity-producer economy, though.  Desperately envious of the Chinese, with their manufacturing prowess and Party-dictated politics.  Beset by ethnic tensions on all flanks.  Watching the price of oil teetering on the brink of three digits.  Watching, more or less as a spectator (with large bets on), as the fickle West plays tunes on its flexible foreign policy instruments over the cacophony of the Arab / ME turmoil.  So many problems ...

And - in the middle of his precious Olympics - Ukraine.  (A rich irony here, given that he royally upset the Chinese during their games by invading Georgia.)  Hadn't he bribed them with enough cheap gas, soft loans and outright cash ?  Then, didn't he show the necessary pragmatism to get the parties around a table the West could also endorse ?  Wasn't there an agreement reached ?

And yet 24 hours later his man has disappeared up his own eastern fastness, the security forces have downed tools, and the rebels hold Kiev as their own.  What's a latter-day Tzar to do ?

This matters, of course, because he really is bound to do something.  Domestically he will shore up the anti-revolutionary measures he so carefully and strategically put in place after the various other soft revolutions around his southern and western flanks.  But he has to do something about Ukraine.  Close the borders ?  Turn off the gas ? (that much-loved standby policy.)   Hardly likely to put a stop to the EU-leaning tendency.  Troops (or proxies) on the ground ?  He can probably afford this in direct military and cash terms (though the Georgia experience wasn't exactly encouraging), knowing that in this case the West really can't, and really won't.  It might push up the price of oil - but equally, it might have other economic consequences that would be harder to bear.

Of course, all this invites us to think about what the West might do - large amounts of cash are the obvious, lazy default response; and no doubt the CIA has all manner of low-level mischief in mind.  But the EU is hardly going to be unanimously welcoming to a renewed accession request, notwithstanding the unbridled enthusiasm of the expansionist tendency in Brussels.  We will probably settle for a fairly arms-length approach that will annoy but not overly provoke Russia, fill the kleptocrats' pockets a bit more, but do little for the average Ukrainian.

It's all to do with the age-old questions of (a) the definition of 'Europe' and (b) introverted Russia's role in the world.  Raedwald writes well on aspects of all this, and it would be nice if Hatfield Girl would take up her pen again.  We shall be visiting the unhappy scene many times in the coming months.


Bitcoin goes pop

Hmmm. For the uninitiated Bitcoin is a computer-code based currency, beloved of geeks and drug-runners in equal measure. By some standards this should give it some staying power as the pure hard cash of the criminal world is allied to the computational nous of the geeks.

And to date this has been the case, even today Bitcoins trade at at $440 which is a massive increase on the $30 or so that they traded at last year

It's a classic bubble showing a typical ponzi-scheme type of return to early investors (which, annoyingly I cam very close to buying some at $30 but chickened out!). Today Mt Gox one of the most well know trading houses has closed its doors. It's banking licence has been suspended and whether those who store their coins there will ever get them out is doubtful.

Behind Bitcoin though is one of the biggest questions in the world; what is money? After all, even gold you cannot eat. Neither of course can you eat a Bitcoin, nor even really store it without electricity.

Yet today's Governments across the world have debased money in a way that has never happened outside a hyper-inflationary incident in history. Trillions of dollars and pounds have appeared on the balance sheets of the Fed and Bank of England - but who owns the Bank of England? Where is this money from? The reality is that it is a fiction - the complexity of which hides from everyday people the con-trick of fiat currency. You and I may struggle to earn a few hundred pounds a week - yet the Bank of England will create and spend that in a few millionths of a second.

Bitcoin, for all its faults (i.e. people hack computers, don't they, even NASA...), seeks like Gold to provide a currency that is not controlled by central banks and manipulated by Governments. In the long-term this type of currency, with set inflation linked to productivity growth only, is surely the answer to the world's monetary problems - its unlikely to be Bitcoin, but at some stage in the future a version will replace the dollar as the world's reserve currency.

Monday 24 February 2014

Most of their reservoir is depleted now

So who said this and about what? Well it was  Abdalla Salem El-Badri the Head of OPEC discussing the UK's oil reserves in October of last year.

On a quick facts basis here are some rather key ones too:

- UK production is expected to drop to 800,000 barrels a day this year, down from a production peak of 2.92 million in 1999. That is, umm, a 75% drop in production in just 15 years.

- With huge investment needed into getting North Sea production back on-line, it is unlikely this will go over one million barrels per day ever again.

- The decline is North Sea production is the fastest of any large system in the World over the past decade.

- The UK became a net importer of oil again in 2007.

- Newer North Sea companies, such as Xcite Energy (tipped here many a moon ago, but struggling still) are really struggling to find finance. This is because their cost of to pump the oil is at $80 barrels plus and the oil is much heavier than Brent - so less valuable. Taking this into account is huge as it means the margin available to tax is far slimmer. Even if these companies are successful and we have more successful drilling in the likes of the Bressay field and others, the tax revenues potential is far less than was the case with the Forties field.

So basically, Salmond and Cameron can discuss all they like in Aberdeen about UK offshore oil reserves, but this is yesterday's story in many ways. The future will be Fracked gas onshore in the UK - sadly for Scotland much of this is in England.

Friday 21 February 2014

Bishops and benefits

The Labour party at prayer are angry.
Following on from Vincent Nichols, the ­Catholic leader in England and Wales, who complained of the welfare cuts as a disgrace, 27 extra Bishops have been rounded up by the same newspaper, The Labour party in print, to convey a similar message.

I believe the Bishops are correct. 

Because once you read what they say, they are not just attacking welfare reform, but the implementation of welfare reform. 

“.. as a society, face up to the fact that over half of people using foodbanks have been put in that situation by cut backs to and failures in the benefit system, whether it be payment delays or punitive sanctions."

This has been a problem since the changes began. What occurs in the benefits system seems to be a target culture of  sanctions. This target culture is denied by the DWP but confirmed by people on phone ins, claiming they work in Job Centre Plus and have to achieve a certain number of refusals. Further confirmed by hearing the tales of those seeking to claim and being turned away.
A very destructive culture seems to have emerged which may well uindermine the entire project.

A new claimant who misses a meeting, or completes a form incorrectly can face a total loss of benefits for a period of 4,6,8,12 weeks. Designed to stop the feckless abusing the system and wasting everybodys time, it has, judging by the rise of the food bank, gone badly wrong.
 Because half of food banks users have been sent there by the Department of Work and Pensions.!
Apparently a foodbank user cannot just turn up. But has to have been sent along by a government department.

To have introduced complete and complex benefit reform at a time of recession with rising claimants and greater numbers of unemployed was brave, bordering on foolhardy. But like the other coalition departments the desire to get stuck in after years on the backbenches of opposition and the instructions from the Treasury to slash budgets encouraged change.

The government can complain all it likes about the need for reform and the church not appreciating the need to end benefits traps, but the government is making these people head to the church and charity lunchbox.

I know of personally of plenty of respectable people , worked all their lives, made redundant and found themsleves unable to receive benefits because form XYZ was unsigned on page 9, or they missed job seekers 'looking for work assessment meeting.' 

{In one case they missed the assessment as they were at a job interview some 200 miles away.  And were sanctioned - loss of all benefits for 4 weeks. Took 18 weeks to appeal that decision. And during that time the job centre lost all the paperwork relating to the case and also missed their own meeting by getting the day mixed up. The appeal overturned the job centre's cessation of benefits}

The demand to make people behave responsibly and get to work is divined in the tough punishments. But the idiocy of a no strike policy is also revealed. Treating all claimants as if they have sat on their arse for a decade is wrong. Many have never claimed anything more than child benefit before. Many have never been unemployed before. A new bod turning up for work day 1, who makes a basic error isn't sacked. They are told how to do it correctly and warned not to do it again.

There is no problem sanctioning people. But it must be proportionate. A simple 2 strikes policy would do it, in lieu of anything more complex. Ian Duncan-Smith must be aware that the benefits offices have been refusing payments and stuffing the foodbanks for years, so giving  copy to his enemies. 
He really should do something about it.


Thursday 20 February 2014

Question Time : Spiritual edition

Question Time being very secretive today. Website has this.

What's occurring?
Ukraine - Is this what we could be like outside the EU? A divided, oppressed nation?
God - The Bishops are bashing. Is this the most evil Tory government since the last one?
Unemployment / economy news- The figures just keep getting better {except here at BQ Towers where its never been quieter. Not even in 2008/9.}
Tony Blair and Rebekah. - Not quite sure what the fuss is, but there is a minor fuss.
Floods probably. Paying the council tax. Well, its the least they could do. 

2 pt for a correct guess of the colour or pattern of Dimbleby's tie.{before 10pm} 2 pt for an accurate spot for each of the question asked 2 pt for being the sole entrant to correctly predict a question asked
1 arbitrary point for any partially correct questions, witty phrases, spotting the soundbite, joke, tweet or posting in the comments first.
And the league table will be winner = 1pt
Everyone else - Zero.

Twitter- its often better than the actual show. And its jammed full of  earnest political studies university students and their mickey taking History and English taking friends


Hall of The Winners 


DTP - 3

Taff - 2 

Mark Wadsworth - 2 

Measured - 1 

Bill Quango MP -1


Wednesday 19 February 2014

Brent Market : Another British Interest to Defend

It's familiar enough to see oil quoted in terms of the price per barrel of Brent oil.  Perhaps less well-known, the price of Brent - a declining North Sea field - sets crude oil prices for around two-thirds of the world's oil and is the cornerstone of global financial oil trading, the forwards / futures / options markets, whether for hedging or speculation, arbitrage or market-making.  And so London rules the roost in global oil trading, which is a seriously big deal.  (A significant amount is OTC trade, so there are no definitive figures on how big.  But it's Very Big.)

That's despite a number of factors one could imagine working against it:
  • the amount of actual Brent production is not very great any more
  • the logistics of physically settling a Brent contract (i.e. actually taking delivery of a cargo of Brent) are pretty complex - the preserve of relatively few specialist energy companies and traders
  • the financial aspects of Brent trade are unusually complex, too (relative to other paper-traded commodities)
  • the long-time US price-setter - WTI (West Texas Intermediate) has a very aggressive lobby promoting it as the 'world's crude-oil price marker'
  • several other countries around the world with strong prima facie cases believe they should be the home of important price-setting markets - hence Dubai Blend and Urals Blend etc.
source: wiki
All to no avail for the would-be usurpers: and as in so many areas of trade and finance, London rules supreme.  Despite its decades of preeminence the WTI is now a tub of guts, suffering over the last few years from even worse logistical problems than Brent.  With its congested inland delivery point, and although still much traded in N.America for essentially historical reasons (e.g. lots of long term contracts are indexed to it), the WTI index has become a parochial anachronism, reflective of not very much at all.  Local traders favour new Gulf Coast indices that are much more representative of world prices, but they don't yet have serious volume / liquidity.  And the rest of the world - well, the RoW don't really have what it takes to establish a global financial market.  Yet.

But it doesn't mean they won't keep trying, and weaknesses in the Brent set-up need to be addressed.  It has evolved successfully in several steps over the years, expanding the underlying physical base from just the Brent complex to Brent+Forties complex, then + Oseberg and + Ecofisk, all still broadly similar North Sea grades.  However they are all in deep decline; and there has to be at least some material physical base underpinning the settlement of derivatives (maybe not in theory, but certainly in practice).

So the legion commercial interests with a stake in the Brent market had better stay ahead of the curve when criticisms are once more leveled at the technical underpinnings.  Based on past successes in this regard they probably will, but complacency could be fatal.

The other weakness which needs addressing isn't technical, it's criminal.  Yes, Brent has been subject of index-rigging allegations: probably less serious than LIBOR, but infinitely more troubling than the UK gas index allegations.  Yet again I find myself advocating public castration for any proven perps.  

Yes folks, Brent is another of those vital markets which make London what it is.  We need it to stay that way.


Tuesday 18 February 2014

The most politically astute tax cut for Budget 2014: Employers NI

With an election coming up and a budget to plan for in a few weeks time, the Government is scratching around for candy to offer the masses in a desperate, if doomed, attempt to prevent a Labour Government coming to power next year.

Whilst the Liberal Democrats are all too keen on raising the tax free threshold to £12,500, there is precious little the Government can do in terms of the basic or higher rates of income tax. Changing these thresholds costs billions, as does raising the tax free threshold. Far more than any offset that will come through higher growth.

Plus tax cuts like these fail on some of the basics, they don't really encourage new jobs or investment. Whilst being a success for the very low paid - few of whom vote for either Tories or the Lib Dems if we are being honest - the benefits are very limited for those on average incomes. Worse, on higher incomes, all sorts of manoeuvres such as withdrawal of child tax benefit, removal of the free allowance at £100,000 anyway, conspire to push the tax ceiling to nearer 50% in any event.

The small return of cash to people is always welcome, however it is limited in its impact to help the 'cost of living crisis' as the vast sums returned are spread over so many millions that it ends up being a few pounds a week here or there. How this will turn into an election winning formula is unclear.

However, there is a saviour at hand in the form of removing another stealth tax. All employers pay this and it is a bewilderingly complicated formula to work out who should pay what. A classic example of the mess that our tax system has become with constant fiddling.

Nonetheless, companies pay around 12% on each employee they employ and this is a direct tax on employment. Not only that, it is a direct tax on salaries as companies staff costs are by default higher and they have a negative incentive to pay people more, as it has a double cost for them to give pay rise.

Cutting this rate by 2% would reduce companies costs of employment and potentially increase growth in the job market. Furthermore, with the right kind of 'nudge' messaging to the business community which is firmly behind the Government, it can also be used as a way to begin the process of increasing pay in a more sustainable way than has happened over the past couple of years. Companies would not be expected to pass on all of the saving, but sharing the benefit with employees would be a win-win compromise.

It's the only pro-growth cut that can please business and all employees at the same time.

Monday 17 February 2014

Triumph of Horlick Over Experience

One of the reasons this blog exists (aside from the opinionated proclivities of its scribes) is the lousy job the MSM business correspondents do, with only a very few honourable exceptions.  In particular, it's the uncritical way they swallow press-releases - and of course lunch - allied to the need to keep advertisers sweet.  And we would certainly never fall for that, dear me no.

Might we somehow expect the Grauniad also to be a bit different ?**  As we turn to the Saturday money pages to make an assessment, who is this smiling enigmatically out of a 1-foot square, full-colour photo-spread but Nicola Horlick!
Next month, City "superwoman" Nicola Horlick (right) will ... launch a peer-to-peer website called Money & Co. Like many of the new sites it will allow people to lend money to small and medium-sized enterprises and enjoy returns which she estimates could initially average 8% gross ... the mother of six, whose business ventures already encompass the worlds of investment, movies and restaurants, told Guardian Money that out of all the things she has done in her career, "this is one of the most exciting.  I would expect us to be one of the winners … Our system is built to be global." 
Ah yes.  This would be the same Horlick whose superwoman powers and all-round creative financial genius saw her entrusting previous clients' money to Bernie Madoff.   Not sure what that tells us about her 'estimates' and 'expectations' ...

Still, I expect the new press pack was beautifully presented, and she bought the hungry hacks some very nice lunch.


** only joking, of course - see this from 6 years ago

Friday 14 February 2014

Something missing in the coalition

Something has been very wrong with the coalition from early on. It isn't very good. At lots of things. But it isn't very good at politics. Which is odd because that is its job.

One of the great things about the defeat of labour in May 2010 was the almost instant cessation of the babble of political non-news. A silence filled the airwaves. No one was in charge. So nothing much happened except hacks standing outside Number 10 watching a man hide behind a closed door.
For 13 years a constant stream of propaganda had poured out of the airwaves. Cabinet ministers had droned the exact same, word for word, media grid message as each other like boring Stepford wives. Non entity backbenchers would attend the opening of a door if a Spad could get them a photo in the local paper.  If there was a crisis a minister would appear on TV, explaining what had not just occurred and assuring everyone that it was all the fault of the opposition, and that X billion pound would be immediately spent and then list 10 other things that they would do or had done that had no relevance.
And if there was no crisis a minister would appear on television with a planted non-news story or just repeat the exact same thing they had said the week before but pretend it was new.

It was incredibly annoying. But for a very long time, very effective. The New labour spin machine usually held the political high ground for the first 8 years or so. That was because it was totally orchestrated, totally managed. It was a Godfather organisation that had the power to demand service and reward loyalty and whack those who didn't recognise an offer they shouldn't refuse.
And run by some incredibly talented,evil geniuses.

Cameron lost his Luca Brasi very early on. And took years to find another.
If he had had a 'Campbell' we could expect the bedroom tax to have never left the think tank. 
Its not a bad idea. It does , on paper, save money. And it does drive the personal responsibility narrative, make work pay ideals, of IDS.

 But its political death. It ticks every anti-liberal box. It can be viewed as falling exclusively on the poorest and most vulnerable. It can't be properly implemented as housing is not in sufficient supply.
It disproportionately affects the disabled.
Someone should have told Frank Pentangeli IDS it wasn't happening. He could have bellowed and threatened all he liked. But at the end of the day he would have been told to run with benefits cap and universal credit and not the spare bedroom subsidy.

"Its bad for business Ian. Its got Poll Tax stink. So leave the gun. Take the cannoli."

Foreign aid. Perfectly laudable. The appropriate thing for a first world nation to do. Provide medicine and education around the world.  Grease a few commerce wheels. Trade a few £mil favours. Maybe you can do something in return for us, someday? Hey! you like Jet fighters?" And in government terms its small change down the sofa. 
0.7% of spending. Imagine you had to shave 0.7% off your annual food bill.. Wouldn't be hard.
And the Guardian absolutely loved the idea of ring fencing foreign aid,

But foreign aid is toxic. Its toxic because the ordinary voter in the Starbucks hears £11 billion pounds and thinks that must be the size of the total NHS budget or the cost of defence.  And.. IT IS  a big number. 
Its a similar number as the temporary VAT increase from 17.5 to 20% that is never going to go away. We gave ourselves a tax rise to fund the Indian space program? 
Cameron should have said "in these difficult times and during this difficult period, the government is going to spend 2/3 of this parliament's 'foreign aid' in our own country!" and take the hit from the liberals.
 And if Cameron wanted to or had to pay out the overseas money, nick it from somewhere else and call it something difference. 'Don' Tony would have, without a second thought. 'Capo' Gordon would have suggested it to him.
"Peter? There is a problem I need you to take care of. "

The flooding. The initial response had been fine. Really it had. 40 homes in Somerset flooded. Well that's bad but not even unusual in February. What was bad was the crisis continued to grow. The land stayed flooded. And a response team took a very long time to form. No one was actually banging the government's drum until it was too late. 

The evil genius team would have seen the opportunity for some minister for agriculture to get down there and blow on about how many £million had been spent since 1997 and how much extra £x million was being spent and the local party mobilised to do soup kitchens and food aid and a £1k cheque written for the sea scouts as they floated to help. 
 Gordon Brown used to look for any excuse to call a Cobra meeting.

Why didn't team Cameron see this coming and get ready? Why weren't there any sandbags actually in place or in a likely place with clear instructions and advice being pumped out by the relevant agency 24/7 until the water was starting to float up towards Whitehall? Behind the curve. Behind events with an unsure response of reassurance, blame and panic. That's a very bad place to be.

New labour would not have remained behind events. 
Why, after almost four years, is the coalition?
Their business is politics. They don't HAVE to get it right all the time. But they do have to make us think they have or very soon will get it right. 

Obama has declared a state of emergency in some states in America yesterday due to snow. Looking very' Pres' as he does it. Listing all the agencies who are doing something or other. Its what he does. Its what his job is. He isn't going to be filmed shoveling snow off the roads. He's going to be filmed looking like someone who is damned well sure he's going to get some other people to shovel snow off the roads.

That's his job.

Thursday 13 February 2014

BBC Question Time: Genesis chapters 6, Noah edition.

 David Dimbleby presents the topical debate from Scunthorpe.
With a panel including Home Office minister Damian Green MP, shadow employment minister Chris Bryant MP, UKIP's Janice Atkinson, scientist and broadcaster Lord Winston and Daily Telegraph blogger Cristina Odone.

BQ Thinks.
1. Floods. Why isn't the government helping us? {said a woman on C4 yesterday. The reporter unhelpfully pointed out the EA and police moving animals and people into a boat in the house a few doors down: What she meant was why weren't they prepared to help a lot sooner.}
2. Possibly Nigel Farage, belatedly joining the rest of the British internet, demanding that the foreign aid budget is spent at home.Foreign aid is like the banker's bonus tax. We have already spent it 50 times over.
3. Bedroom Tax is a fiasco , according to some reports.
                             .... A little time out here... 
Three areas where the government looks bad. Really bad - And which the management of was severely lacking. I feel a post to follow.

4. When did giraffe's become an endangered species?

5. Currency union. Is the UK bullying Scotland? Why have the SNP, despite 40 years of preparation, only just thought about this issue? And isn't UKIP finding the same. Some important questions have pretty vague answers.

Dimbletie- Floodwater grey and brown

2 pt for a correct guess of the colour or pattern of Dimbleby's tie.{before 10pm} 2 pt for an accurate spot for each of the question asked 2 pt for being the sole entrant to correctly predict a question asked
1 arbitrary point for any partially correct questions, witty phrases, spotting the soundbite, joke, tweet or posting in the comments first.
And the league table will be winner = 1pt
Everyone else - Zero.

Twitter- its often better than the actual show. And its jammed full of  earnest political studies university students and their mickey taking History and English taking friends


Hall of The Winners 


DTP - 2

Measured - 1 

Bill Quango MP -1  

Taff -1  

Mark Wadsworth - 1 

Wednesday 12 February 2014

Bankers' Heads Should Roll, part 94

Channel 4 had an excellent scoop last night, a whistle-blower from the RBS 'Global Restructuring Group' who told how, in the wake of 2008 many of the bank's SME clients were transferred to the tender mercies of the GRG, which then systematically ramped up substantial and spurious fees to the point where - he alleges - not a few of them went under quite needlessly.  Then their assets were seized and sold at knock-down prices to an investment arm of RBS, he claims.  Needless to say, RBS protests its innocence.  

But Mr Whistleblower's story, replete with details and background 'colour', conveyed a strong whiff of plausibility.  Perhaps one of the several inquiries into Fred Goodwin's wretched monster will get to the bottom of it all.

Did I say 'whiff' ?  Stench would be more like it - the stench of decay.  'Global restructuring' used to be an honourable capitalist calling, and was (for example) in large measure responsible for accelerating recovery from the ghastly financial chaos in the Asian & Eastern markets back in 1997-98.  Likewise, in its heyday Enron's restructuring prowess was instrumental in digging many a floundering utility and large industrial energy user out of a hole.  The creative use of derivatives and various other financial tools and tricks of the trade is a wonderful thing to behold when used to assemble a win-win package that puts a company back on its feet.  

Of course there are rewards for the restructurer: a successful restructuring deal is as great a value-added proposition as can be imagined.  But - having done a few of these transactions myself - when you have a client who is almost in tears of gratitude for the service you've done them, you know the fees have been properly earned.

The official RBS response has been to claim that's pretty much what they still do.  But what Mr Whistleblower has described is a perversion of this noble art.  If he's right, then ways should be found to lock 'em all up. 


Tuesday 11 February 2014

It never rains, but it pours...

I do hope our regular commenter Timbo is not yet planing to spend Valentines day with his canoe. Struggling to work today on trains that don't work for the nth day in a row has not been much of a joy. Worse still for some close friends of mine who live on an island in the the River Thames at Shepperton - well, it used to be an Island; now it is just part of the River.

Business wise the unending storms are very bad for our economy, confidence and happiness are so important and with constant terrible Weather these things can be affected. It does not help with the politicians all playing the lets-point-at-one-another and pull silly faces game. Still, I guess that is what they pay them for.

So the bit question...just how wet is it? I am 38 and cannot remember a Winter like this, of course there have been far colder and such; but I don't remember one that is just so wet? Am I wrong and if so how bad can it get?

Monday 10 February 2014

"Picking Winners": We Shall All Lose

As we identified when the Energy Bill - now Energy Act 2013 - was first published, it was drafted by Sir Humphrey to give Whitehall total control of the electricity sector, investment by investment, decision by decision.  We already see some of the hilarious consequences, for example as the owners of coal-fired Eggborough power station now enlist the unions involved to lobby and wheedle for the same outrageously generous terms granted to Drax for conversion to wood-burning.  As usual, their PR advisers have told them to mention the magic words "potential Chinese investors", but to no avail.   Tough titty, fellahs - this is dirigisme in action, and Sir Humphrey the minister will decide.

Unless someone gets a grip and repeals the 2013 Act - dream on - we are set for years of this nonsense.  Shortly someone will notice that not a single private investment pound will be forthcoming unless it is guaranteed some ridiculously high rate of return, covenant to be written in the blood of the monarch etc etc.  (Suggestion to subsidy-seekers: why not ask for 'cashback' too?!)  The EC will then politely observe that this is illegal under EU low on State Aid, and nothing whatever will get done.

I had fondly hoped this game would be restricted to the electricity sector because gas, like oil, is too much of a global market to be interfered with.  Early signs that I was wrong came with Osborne giving tax breaks to the comfortably-financed and extremely eager shale-drilling industry (what a stupid little git he is).  Now Ed Davey has written a monstrous "letter to energy regulators" suggesting strongly to them that, inter alia, they may like to consider raising a hue and cry over the gas sector.
"As we discussed it is vital that your work is clearly independent and I want to reiterate that I want you to feel that you can recommend any one of a range of things ranging from no action to a full market investigation reference ... However I want to reiterate that there are areas which I am particularly keen you focus on ...  analysis of the profit margins of the energy companies shows that the average profit margin for gas is around three times that of electricity ... Clearly you will wish to consider whether this is prima facie evidence of an issue in the market and so whether it merits a market investigation reference with the whole gamut of potential remedies that could follow including a break up of any companies found to have monopoly power to the detriment of the consumer. Alternatively you may of course conclude that no action is needed or potentially some intermediate measure which can be taken by the sector regulator ... My officials would be happy to discuss any of these points further if you wish as you develop your analysis and thoughts."
We need be in no doubt what'll happen in the event they obligingly, 'independently' get his drift.  Sir Humphrey is wetting himself at the thought of the new powers he'll be introducing for his personal amusement in the years to come.  Who needs a socialist government when idiots like Davey and Osborne are at the wheel ?


Friday 7 February 2014

Its not just the money

Two children run a race. They start in the same place, but one of the children has the inside lane, and as they circle the track, that advantage opens up a telling gap. Half way round, the child in the lead picks up a straw hat without breaking stride, and puts it on. He crosses the finishing line far ahead of his opponent. The next day’s sports pages are full of analysis of the contest. The advice to the loser, the columnists opine, is obvious: for the next race, he should be sure to get hold of a boater.

And there is much agreement that a lot of children's willingness to learn comes from their parents and that's what makes a good school. Committed parents who , I guess, back what the school does and how it operates. Something we all know already.
The Indy understands this. The piece explains all this . Although, as a lefty paper, it manages to draw the completely wrong conclusions from the evidence it has unearthed. 
Rather than make the state schools behave like the private schools, which is what evil Mr Gove intends,  make the private schools put their children into the state ones.

Lot of work ahead to do Mr Gove. Lot of work.

Thursday 6 February 2014

BBC Question Time - Starkey-Galloway hissy edition

David Dimbleby presents Question Time from Gillingham in Kent.
 On the panel are skills and enterprise minister Matthew Hancock 'not the gropey one - the other one.' MP, 
former culture secretary Tessa 'what's a mortgage?' Jowell MP
DisRespect MP George ' Putin is a liberal' Galloway,
 historian David ' Tudor' Starkey and this week's 'who?'
economist Professor Alison Wolf of King's College London.

Plenty in the news this week.
Go with -
1. 10 hour days for schools. Gove wants to end the NUT's Berlin wall by thermonuclear methods
2. Women on the bench. How many 'token' women in a donut picture is enough? More than 1, obviously.
3. Did Gove boot out the Quango super trougher because she was - A} A Woman, or- B} A Labour woman, or C} Not doing what he wanted?
4. Are the Russian winter olympics the gayest olympics ever? - Over to George..
5. Last week Ed Miliband pointed out it was raining. This week ..its still raining! Should the PM resign?

Dimbletie - Blue jigsaw shapes

2 pt for a correct guess of the colour or pattern of Dimbleby's tie.{before 10pm} 2 pt for an accurate spot for each of the question asked 2 pt for being the sole entrant to correctly predict a question asked
1 arbitrary point for any partially correct questions, witty phrases, spotting the soundbite, joke, tweet or posting in the comments first.
And the league table will be winner = 1pt
Everyone else - Zero.

Twitter- its often better than the actual show. And its jammed full of  earnest political studies university students and their mickey taking History and English taking friends


Hall of The Winners 


DTP - 2

Measured - 1 

Bill Quango MP -1  

Taff -1  


Wednesday 5 February 2014

That Superb EC Hinkley Opinion

A week that started with the release of the EC's excellent Hinkley document went from strength to strength with Tim Yeo's deselection.  Huhne, McShane, Yeo, Hinkley - the gods really are sweeping up.  Even the loss to France in Paris on Sunday doesn't take the shine off this.

So - to business.  As noted before, the EC's 70-pager on the State Aid aspects of the intended Hinkley nuclear power contract was sent in mid December, meaning that they were absolutely poised for the task when they received HMG's notification at the end of October.  Indeed, they must almost certainly have got their thinking in order beforehand, given the depth and quality of the argumentation, and the inclusion of specially-commissioned modelling by Imperial College  (no hope of EDF sponsoring any fellowships for them!)  Nobody dashes this stuff off in a month.

So - the first point for HMG and L'√©quipe de France du nucl√©aire is that this is no pro forma exercise as Michael Fallon, whistling frantically in the dark, has tried to portray it.  Any hopes that it will end in a cheery verdict of "oh, all right then" have been dashed on the rocks of the hard-as-granite reasoning that characterises the entire opinion.  I am no lawyer, but I know a piece of knock-down logic when I read it.

No, the authors of this work will not be talked out of their positions,  which leads to the second conclusion:  only a political fix will get a ruling HMG and EDF can live with.  Not that this is out of the question - hey, this is the EC we're talking about - but Cameron and 'Helmet' Hollande will need to cash in a mighty stack of political chips to get it.  Now Cameron has indeed scored one significant energy goal in the corridors of Brussels this year - the overturning of the 'let's-regulate-shale-out-of-existence' bandwagon - but I can't see Hinkley being quite so easy.

As to the text, if you're interested there is no substitute for reading it.  The DTel had a worthy crack at summarising some key points on the day it was published - hats off to them, but overall the commentary has, as ever, been thin.  (70 heavyweight pages is, after all, a bit longer than the press releases which is all journos seem to be able to digest these days.)   Our friend Mr Wendland dug out one prize truffle (in the comments here) and I'll offer a couple more. 
"the Commission understands that the EPR technology power plants in Flamanville and Olkiluoto have been undertaken without any support. The Commission cannot at this stage explain why the [Hinkley] project should be fundamentally different from the two EPR plants currently being constructed."
"it would appear to be impossible to determine at this stage whether [EDF / the project] will be overcompensated or not. The terms of the Investment Contract communicated to the Commission do not contain a correction mechanism that would take account of the effect of developments after the end of the CfD in order to ensure that no overcompensation has taken place overall."
"[the contract] does not appear to be aimed at compensating a provider for the obligation to incur higher costs than it would otherwise incur. To the contrary, the measure appears to be aimed at providing incentives for the provider to invest in the project"
Failing a political fix, the most comfort the Hinkley crew can take is that the EC has pointed out what changes to the contract would be needed to have a chance of satisfying the law.   Funnily enough, I'd say EDF could afford to takes those hits and carry on with the project, sadder, wiser and less cosseted.  That's what it should do  Whether it would, I cannot guess.


Tuesday 4 February 2014

Still no party for AIM?

Chart Showing Financial Data

Back in the early 2000's there was a really fun and rewarding game to be played by investing in the AIM stock exchange. Small companies would list and either do well or fail. By getting in early plenty of investors could make or lose small fortunes. Thanks to the financial bubble and a willing list of foreign large companies ready to list (many of them in oil and gas or mining, with even more leverage built into their own business models), there was a lot of money to be made.

Then came 2008 and the party was well and truly over. AIM lost 75% of its overall value, compared to a FTSE100 down 40%. The flight from high risk companies was massive. if you timed it right there was a nice bounce through 2009-11 in which it was possible to recover losses or make even more.

However, the number of companies listing has declined and the days of large oil and gas explorers choosing AIM is over. A few make it and don't last long, like Bridge Energy, tipped here last year, as they are taken over by better funded competitors.

AIM has really suffered from the lack of capital available from banks for new businesses. It used to have a nice steady flow. Now there is none. So with it the chances of success fall and the prices of many AIM shares languish far below their pre-crisis levels, even as the FTSE100 is back to where it started.

Last year saw a decent-ish recovery, but risk stocks are still not popular. Despite this, the Government has made it possible to put  AIM share's in an ISA. They could not have timed that worse really, just as the mania is over and the index is suffering.

It feels hard to ever envisage a big recovery too with more downsides ahead. ASOS plc is a huge constituent at £5 billion valuation. If ASOS pls moves to the main index and FTSE100 then there is a big wipe-down of valuation to AIM. GKP is in a similar position, albeit smaller and is close to moving to the main index.

Longer-term though, illiquidity is the real issue. In an age of high-frequency trading and even small time traders going short an illiquid AIM stock can easily be manipulated to create sharp changes in share price. This volatility and unforgiving exposure has resulted in AIM companies perhaps being more fairly valued, but it means the upside is always vulnerable - making a buy and hold strategy pointless.

All this is a shame, as AIM is great innovation admired across the world (the US regulators hate it, a sure sign of envy) to get money into capital markets. These days it is crowded out by Private Equity and Sovereign Wealth Funds - which is a shame as these are hardly engines of wider wealth creation for the general populace.

Monday 3 February 2014

PPI - everyone has bashed a banker

LLoyds have announced some interesting full year results today. Firstly they have added another £1.8 billion to the PPI provsion, which brings the total allocated to just shy of £10 billion.

£10 billion - that was a big rip off. I still can't believe that banks ever meant to do this in any coherent way. Yes to ripping off their customers, but no to doing so illegally. The nature of the FCA changing the rules post-hoc is worrying. In this case there is a lot upside - people get money back from Banks who they hate and the economy gets a small boost from the spending. Even management consultants get big contracts from banks to help distribute this and a large army of people have been gainfully employed in this industry.

At home, it has even made me stop ever using my landline as it is bombarded by those annoying PPI calls about 15 times a day. I am now ready for wireless 4G!

However, what about the next crisis. You see interest rates are about to go up and I worry that not only won't people be able to pay, but they are going to blame the banks for lending to them. Now that the State has stepped in to say 'mis-selling' this possibly has no end. Smart people might even complain the rates were set by Libor....

Lloyds is the largest lending of residential mortgages too - how big will the provision in the accounts have to be for the next 'scandal'; especially if Red Ed the populist is in charge next year.

Saturday 1 February 2014

Saved by the European Commission ? Looks Like It !

A few weeks ago we opined that it may be necessary to look to the EC for our salvation in the matter of the government's enthusiasm for lining EDF's palm with gold for 35 years via its intended exorbitantly-priced electricity contract for the planned Hinkley C nuclear power station.

And lo!  the EC has laboured - extremely quickly (although only released on Friday it's dated mid December) - and brought forth a devastating 70-page masterpiece, damning the dirty deed as illicit state aid.  Only a preliminary opinion mind - but what an opinion !  Too late to offer a summary now, so more next week.

After the years of reading the desperate, mindless pulp and sophistry issuing from DECC and its predecessors every since Miliband's 2008 Energy Act, it is a true pleasure to read such cogent reasoning and plain-speaking.  Here - have a read yourself

And a good weekend !  This has started mine brilliantly:   the radioactive turd that is EDF ushered closer to the WC.  And there's another French team to be roughed up this afternoon  ...  Swing Lo !