Thursday, 29 October 2015

Trade Agreements: A Very Pressing Concern

Somewhat to my surprise we have not written about the TTIP on C@W.  It's a front we need to open up:  should be a rattling good C@W topic; plus, trade agreements are becoming a hot issue.

The proximate reason for my mentioning this is the latest twist in the slow-burning EU referendum fuse.  Cameron declares there's nothing for us down the 'Norway' route, and some of the 'outers' agree.  The USA warns that we needn't think we'll get an easy trade deal with them, we'll languish out there on a par with Brazil, India & our new best friend China.  Of course, others think the Norway option - complete with trade agreements - is pretty good, at least as a staging-post

Everyone (I hope) knows how important trade agreements are: the anguished cry of most people of my generation (who voted 'yes' in 1975) is - I voted for a free trade area!

So supposing that the increasingly shrill (and a wee bit premature?) Project Fear is spent by 2017 and we vote to leave.  How will we find our terms of trade then?  There seems to be a view that come the day, since everyone really wants to trade and is nowadays a member of the WTO, we'll strike bilaterals easily enough, with blocs and individual nations.  Maybe Brazil, India and China aren't such bad company to be in.

Is this right?  Since the TTIP seems to be America's view of what constitutes a trade agreement: a piece of paper so outrageous that not even MPs or MEPs are allowed to see it without swearing to secrecy on their old Granny's grave (reminiscent of the South Sea Bubble venture: "a company for carrying out an undertaking of great advantage, but nobody to know what it is") - what sort of bilateral does a medium-sized country strike with the USA nowadays?  Doesn't sound a happy place to be.

Then we consider what would need to be done vis-a-vis the rest.  I heard an Indian cabinet minister speak recently, and he said: you may find me being described as uncooperative in WTO circles.  That's because my price for anything the rest of the world wants is 200 million work permits for unemployable Indian subsistence farmers.  China?  We've already seen George offer to sell the farm to be their best friends.  Brazil and the rest of Latin America?  You can say goodbye to the Falklands - and dealmaker George 'strategic' Osborne is just the man to do it.

Hmm, a knotty subject.  Perhaps that's why we've steered clear ...

ND

Wednesday, 28 October 2015

Your call is important to us ... but not that important.

Your call is important to us ... but not that important.

http://www.kidsperks.com/wp-content/uploads/2013/04/kids-with-cell-phones.jpg
preparation for living- lesson 4 - being on hold


I have found a feature of the rather ancient 1990s handset in my new office. It shows the 10 longest calls made that day. Or it might be the last 10 calls made like on a regular phone and these just happened to be in order. Shows how long I've been staring at this phone today though..too long..

Surprisingly the local council don't make the top slot for longest connection time. That must be in breach of their charter as a responsible local authority. It used to take days for them to answer from hold. But they picked up pretty quickly..though in fairness to them they haven't dealt with the problems they said they would.  And are two weeks overdue delivering the wheelie bins. And its usual to call the main line and be given another number to call. And they haven't sorted the issue they were going to "get right on!" four weeks ago either.

So they are only in at today's number 5. With a measly 22 minutes but haven't managed to solve any problems..so a brownie point for them.

Number 4 is the insurance company. This is because getting insurance on  the phone involves question after question after question.

 "In the event of a break in are there items that may injure a perpetrator or perpetrators?"

"Yes..I guess so..who cares?"

"Its all part of the questions for the policy, sir...Are these items likely to damage with light abrasions..or to injure with mild concussion..remove a limb or turn into mince..?"

"erm...I think...maybe...the Squisher might cause some...wait..what was the second one again?"
That comes in at 30 minutes.

Number 3 - was a supplier for equipment that they supply for free..and we receive a commission on sales. They wouldn't supply to the new business as I wouldn't sign the 48 month contract.
"I can't sign..I haven't agreed to fully take on this project yet. Its a temporary arrangement at present with options.."
"We must have a signed agreement..for 48 months.."
"What do you do if a firm goes bust..?"
"we take the equipment away.."
"Fine ..I'll sign something like that.."
"Well...it has to be for the full 48 months.."
"the equipment you supply is free to me?"
"yes"
"And you pay me a commission from sales?"
"yes"
"So what difference does it make? I never owe you anything at any time..You always owe me..and the equipment is always yours..So what's the problem..?"
"Its ..well..we need a 48 month term.."
"And if  I end early?"
"There is a penalty.."
"Of what?"
"I don't know exactly..its never happened.."
"Ohh ffs..!!"

35 minutes of total waste.. Annoying as I already have a contract with these
people. The other suppliers are just adding 'venture {2}' to existing invoices..Everyone is happy. 


Number 2 the broadband supplier . 48 minutes on hold. And better than that, cut off when connected. Should have got top spot for that alone. Reconnected after another 1/2 hour or so..to be told I need to have a new phone line { I don't}. So a massive amount of wasted time and  easily the worst response of the day.

But..the grand winner of the longest on hold, today, telephone time was...as to be expected ..winner of this award for the last 100 years running ..Her Majesty's Revenue and Customs.

"We are experiencing a high volume of calls..{you surprise me!} You are held in a queue and there may be a delay of up to 30 minutes,."

Ahh only 30. That was optimistic . Nope. HMRC outdid themselves.
 I, the hardened, sandwiches made, speaker phone on loud, coffee thermos to hand..tablet ready..radio on, fully prepared to out wait the Sphinx that is the Tax Office, I was ready to quit at 55 minutes. But held my nerve. Until 82 minutes..when I began to crack..

"What if there is no-one there? Its gone 4pm now. They might have all gone home? I could be here all night?" 

I persevered until 99 minutes when ..Colin answered. "How may I help you?"

This tax problem is a big one. Its an unusual matter that many at HMRC simply dismiss as something that can't be done until a new tax year. They are unfamiliar with the special sub provisions that apply to very specific cases. 
Colin knew all about it. He knew the reference code I gave him. He understood at once and promised to sort it out immediately and I would receive the paperwork and the tax refund within 14 days.
An impossibility for the tax office. They cannot move that fast. Maybe I had misheard and it was 140 days? Maybe 1400 days?
"No sir..14 days ..I'm authorising it right now..is there anything else?"
Colin's bit took less than 5 minutes. 

If he is true to his word, probably the best hour and three quarters of phone time I've ever had.
AND I managed my best ever Doodle Jump Score while waiting! 

Tomorrow - The NHS medical centre. If anyone can beat 99 minutes on hold, it will be them.



Tuesday, 27 October 2015

Overdue Assault on 'Safe Spaces'

I don't ordinarily have much time for Germaine Greer, but she certainly told Kirsty Wark where to get off, didn't she? (5:00 onwards - gets delightfully ripe).

As we watch with a mixture of horror and hilarity at the infantilising of educational establishments and the inanities of generation wuss, here's a welcome bit of barbed humour.

Yes, the sterling satirists of South Park have put the boot in to those oh-so-soft nether regions.  "There's a very select crowd in your Safe Space ...  bullet-proof windows, rainbows all around ..."  

What a vibrant place it must be indeed. 

ND

UPDATE: a excellent piece on l'affaire Greer and its moral ramifications here

Monday, 26 October 2015

'Osborne in Listening Mode'. I'll Bet he Is

So Genius George has decided to listen to, well, everybody.  Our esteemed RWendland should clearly have been one of his first ports of call.

All sorts of things we can overlook, but not rank incompetence.  "If he trips, he must be sustained. If he make mistakes, they must be covered. If he sleeps, he must not be wantonly disturbed. If he is no good, he must be pole-axed."

Churchill there, of course.

ND

Friday, 23 October 2015

A Whole New Field of Wicked Capitalism

Investing in lawsuits !  Here's a great piece in the NY Times on the subject:
This new form of lawsuit funding is called litigation finance. It lies at the crossroads of two Anglo-American tendencies. The first is our litigious side, in which we celebrate our equality before the law by dragging those who have wronged us before a judge. The second is our ingenious mercantilism, as demonstrated by our penchant for turning everything from church raffles to mortgages into marketable securities to be chopped up, bundled and resold. Like the celebrity bonds backed by royalties and popularized by David Bowie during the 1990s, litigation finance represents the expansion of securitization into hitherto virgin territory.
It caught my eye because a mate of mine, the excellent John Sherriff, was a pioneer in this field.  ('Was', because he died earlier this year, an untimely loss.  You can still get his fine book Lucky and Good, which covers this and many other entertaining, intelligent and useful things besides.)

OK, so relatively new, then; except that (apparently)
litigation finance actually has its roots in antiquity. According to Max Radin, a historian of ancient city-states, members of Athenian political clubs would back each other in lawsuits against their rivals. Apollodorus, a wealthy banker’s son, bought shares of lawsuits and hired professional orators — some of the earliest lawyers in Western history — to write his court speeches ... In medieval England, litigants could hire ‘‘champions’’ to represent them in ‘‘trial by battle.’’ By the late 13th century, these strongmen were being compared to prostitutes, and their prevalence hastened the movement of dispute resolution to the courtroom. During the Middle Ages, this concept of ‘‘champerty’’ — assisting another person’s lawsuit in exchange for a share of the proceeds — emerged as part of the larger ecclesiastical taboo against usury.
Yup, nothing new under the sun.

ND

Thursday, 22 October 2015

Nuclear: The Liars Have Fessed Up At Last

"Nuclear power will bring energy and financial benefits to the UK. The Government confirms that it is not continuing the ‘no public subsidy policy’ of the previous administration"

Department of Energy & Climate Change     First published: 21 October 2015

Well glory be - that second sentence, eh?   Either someone's conscience is pricking - yeah, OK, silly - or the submission to the EC competition authorities requires openness on this point.  All those years of sophistry ... 

But then they go and spoil it all with the first sentence!

ND 

Wednesday, 21 October 2015

The art of compromise



I thought it would be rude not to come out of hibernation to do a post on the China-UK strategic alliance. That, and I have been bullied by my Capitalist Masters to write something...

Lots of the debate I have seen and heard revolves around the question of "does engaging with a fairly brutal regime make it more or less likely that the regime will become less brutal?", linked with "can we afford not to engage with the Chinese?". These are interesting questions. When the Iran ball dropped and suddenly the possibility of selling stuff to the Iranians and getting a return on investment there arose, I read a newspaper article crowing that as usual the Brits were slow off the mark and that our French and German rivals were much more ready to benefit. I didn't read anyone slamming the French and Germans for getting into bed with a dodgy regime. We Brits seem to be damned if we do, and damned if we don't. The Germans have made a very big success out of selling cars to China. Does that make the Germans more or less human-rights-aware? 

Let's be brutally frank about this: Britain could use the investment and trade opportunities from pretty much anywhere. The UK economy is reasonably steady (perhaps even overheating in places) but that does not mean we have got over our longstanding problems. Without entering into a debate about whether the nuclear deal is worth the money, we do need someone to be building the next couple of decades' worth of electricity generators. There are plenty of opportunities for British investors to get involved in things, but there seems to be so much capital piled up in China, it would seem to make sense for us to get some of that to work here. 

We aren't simply a charity case here, though. The British and Britain are still held in high regard around the world, something which you would not guess from the self-flagellation in which we indulge ourselves so often here on the island itself. For the Chinese, perhaps in addition to the return on the capital they employ, and the businesses they develop, there are rewards in being shown to be a trusted partner. If the Chinese companies involved in the deals being outlined during the state visit screw up, it is Brand China that will suffer the most. Much of the rich world is shut off to Chinese investors, but maybe the Chinese hope that entrenched views on both sides of the Atlantic may soften if the British projects work out well. 

China is at an interesting stage of economic development. The huge investment-based export-reliant catch-up upswing appears to be ending. To get really rich, the Chinese will have to become good at innovation and fostering small businesses. Famously, when the Japanese decided to integrate themselves into the world economy, they transposed whole chunks of the German legal system into their own. Perhaps Chinese investors will learn what it is that makes us a good place to do business and take some of that back with them.  

It was not so very long ago that people worried about the return of Hong Kong to Chinese sovereignty. Would an oasis of the rule-of-law and vigorous free-market capitalism survive when ruled by a bunch of Commies? The treaties between the UK and China demanded fifty years of effective independence, and a currency peg to the US Dollar. Yet, the great success story of the subsequent period has been how economic freedom (not complete, mind) has spread from that little corner to right across that huge country. I doubt anyone especially worries about a repeat of the Cultural Revolution.

So, my conclusion is: if you are keen to get the Chinese government to treat their own people better, it is probably better not to treat that government as a pariah, and let it fester in its own insanity a la Iran or North Korea or even Cuba; if you are keen for the UK economy to develop and thrive as a centre of excellence in trade and free markets, then you should welcome investment in almost any industry from almost anyone - it is up to us to make sure that we get what we need and don't overpay. 

Britain has been a successful country over the centuries not because it has stuck to a particular principle or ideology, not because we have fixed and immutable red lines, but because we have been able to adapt to ever-changing circumstances. We should change our name to the Pragmatic Kingdom.

Tax Credits Mini-Shambles: A Reader Writes

Our excellent (and numerate) oft-times energy commenter 'rwendland' has come up with the goods in the comments to answer yesterday's throw-away line on the tax credit cuts.  Deserves to be above the line, so here it is: 
The MSM seem to have covered the Tax Credit issue very poorly. For many families the reduction will be over £2k, and when the letter drops on the mat they will be very shocked. The formula to calculate the drop is very easy for people at work, and is a simple function of Joint Income, so why has no MSM seemingly printed the table of reductions: 
Joint_Income    Tax_Credit_Reduction 
£12,000                   £1,624 
£14,000                   £1,764 
£16,000                   £1,904 
£18,000                   £2,044 
£20,000                   £2,184 
£22,000                   £2,324 
£24,000                   £2,464 
Obviously the reduction is limited to the total amount of the Tax Credit the family gets, so not all working low-income families will see the full fall given in the table, but I think most 2+ families will see the fall given if their joint income (post pension contributions) is in the table above. NMW for 37.5 hours a week gives an annual pre-tax income of £13,065, less any pension contributions - so if a 5% pension contribution that is £12,411. The classic "hard-working parents" on near-NMW could easily earn a joint income of £20k from one full and one part time job, giving them a £2,184 tax credit cut. I think they will notice that. 
The explanation for the average £1,300 fall given in the MSM is that there are a large tail of higher income families where the withdrawal taper has reduced tax credits to a small amount - they will lose all the small amount, but they make the average reduction repeated in the MSM smaller. But lower income families will be hit much harder than that average suggests. The simple formula is: If a family's joint income is above £6420, the drop is roughly £1233 plus 7% of income over £6420 (obviously only up to the amount of the Tax Credit the family gets). Why hasn't the MSM told us that clearly? I wonder if all politicians actually know that formula, and have seen the implications? Did Osborne and his SPADs even understand it? 
The 7% is from the increase in withdrawal rate from 41% to 48%. The £1233 reduction is from the reduction of the deduction free threshold from £6420 to £3850 - 48% of that reduction is £1233. Letters hitting mats time will be a shock to many, and I guess many of those once voted Tory, but perhaps not next time.  - rwendland
How bad is this for Osborne?  No lesser *ahem* authority than Polly Toynbee doesn't think this is a Poll Tax moment.  But the back-benches are uneasy, and Boris is stirring.  Early days ... let's wait and see. 

ND

Tuesday, 20 October 2015

Energy Policy: You Can't Keep a Good Paradox Down

A lot of lobbying against government decisions just now, notably over the tax credit cuts.  Has Osborne screwed up?  Search me (- perhaps one of our expert commentators knows?)  It's the energy-related items that have caught my eye.

First up was the significant reduction (87% !) in subsidies for solar power, which is part of a general post-election thrust I welcomed when it first became apparent, and still do.  Not many friends of subsidies hereabouts.  But, set alongside news that DECC has been reduced to an administrative rump with all energy policy now emanating from the Treasury, I start to wonder whether in detailed terms it isn't part of a mini omni-shambles, perhaps brought about by the Treasury not actually being quite in a position to discharge this new responsibility.   Or it could just be that Amber Rudd is stupid, which to be fair is getting more empirically plausible as the weeks go by.

In terms of immediate job losses, the precipitous solar-industry collapse is set fair to beat anything boasted for the job creation potential of the would-be nuclear revival and/or shale gas revolution.  Since the nuke thing is (at best) every bit as much a Keynsian boondoggle as the solar thing, it's fair to put them side-by-side in that way.  And of course solar is cheaper! - per job created, much cheaper.  Much lobbying in evidence; and maybe a leedle U-turn just around the corner?

The other one is steelTimmy reckons no-one needs those old blast furnaces at all, but in any case the lobby is out again.  China is one of the bad guys this time - perhaps Corbyn will berate Xi for steel-dumping as well as human rights at the Buckingham Palace banquet - but the Grauniad fingers another issue
Another of the complaints is soaring, and uncompetitively high, energy costs, that are an important part of the strategy for greening the economy. Yet if they drive up the cost of the domestic product, only for it to be replaced by imported steel with a bigger carbon footprint, more is lost than gained.
Carbon leakage! - now there's a thing.  Who could have anticipated that?  Would the Guardian care to extrapolate that subtle conclusion to, errr, the whole European economy?

Probably not.

ND

Monday, 19 October 2015

Our Chinese Future

So here comes President Xi and with him George Osborne's rather personal strategy for the future of the UK.  Almost exactly 2 years ago I wrote this:
Enter The Chinese Dragon - and the start of bonded servitude: In our semi-detatched euro-positioning, our vulnerability to having the City isolated by jealous continental and American financial authorities, and our commendable centuries-old willingness to roam the high seas, we will always be inclined to 'trade our way out of trouble'. 
There is a lot of worthy wailing and gnashing of teeth about the sell-out on human rights: having no wish to be callous, but given the complete imperviousness of China in 2015 to anyone's views on that subject that seems to me a rather incidental, superficial symptom.  (Did anyone raise the death penalty with Obama the last time he took tea with the Queen?  You gotta love the Chinese ambassador's comment: "I think the British people are very gentlemen, very smart. They know how to behave on occasions like this … You think the Labour party will raise human rights at a state banquet? I don’t think so.")

Demeaning?  Well let's rub it all the way in.
... Beijing would revel in the pomp and circumstance of this week’s visit. “They will be looking for horses and people in funny hats and meeting the Queen. That plays fantastically well back in China and they make big use of that to show how important the Chinese leadership is,” he said. “It also plays to the pitch that China is now being recognised on the world stage as a great power ...  Beijing would be glad to deal with an increasingly compliant Britain. “The Chinese have dealt with the British for a long time ... they are practised at the brilliant complexity of British hypocrisy, and I think they are very comfortable dealing with that. This works well for them.” 
They also like the way we run snooker tournaments: so ordered and gentlemanly.  Don't knock "brilliant gentlemanly hypocrisy" - hey, it's our USP!  Osborne is a born arse-licker, I believe there are photos from his Oxford days ...

So yes, this is an inevitable development and the French always knew it: perfidious bloody Albion, with no ideological hang-ups and altogether more nimble and businesslike, has stolen a march on everyone else in Europe for some potentially quite tangible gains.  And since the envisaged deals are materially in terms of infrastructure and the City, though they may fall over themselves trying to join us it's hard for other European countries to undercut us.  (And by the way, monsieur, that nice Mr Xi may be part-financing your wretched Hinkley nuclear project for you, so bite your lip this time eh?)

Am I really waving my Union Flag and cheering as President Xi passes by?  Not really: it's just inevitable.  And the Chinese really do seek to establish relationships.  And there's a lot we could do for them, if we think it through cleverly with sufficient eye to our own interests.  And the City thing looks good: but then again the Hinkley thing, in particular, is madness.  Back to that 2013 piece
... the first of the mega-bargains our desperate UK politicians will enter in order to engineer short- and medium-term relief from our woes. Faustian is just one way to describe it. Another would be the PFI-ing of the UK economy to China. Future generations will curse Camerosborne roundly, as they pay grotesque prices for electricity and probably a great deal more. And the prices may not only be measured in currency. Bonded servitude may be the term we are looking for.
Anything much changed from my views back then?  Only that now we see Osborne intends this to be, not so much 'short- and medium-term relief' - though there's probably a measure of that for us - but his major long-term strategy.  Maybe even his hedge against an 'out' vote in 2017.  "In a rare interview, Xi praised Britain’s 'visionary and strategic' decision to position itself as Beijing’s best friend in the west."  Wow.  Clever old George. 

As with the 20th century, it turns out the 21st didn't really get started for a decade and a half.  Here we go for the Age of China.  At least they appreciate gentlemen.

ND

Friday, 16 October 2015

Scary Scottish Politics

One of these horrors comes out in the run-up to Halloween, is round and orange, and alternates between beaming at children and radiating menace.  The other is a pumpkin. 


Politician                                               Pumpkin
ND

Thursday, 15 October 2015

We can really clean up!

BQ Industries have recently taken over one of our rivals. They put themselves up for sale in 2012. And we made a bid. Which they rejected. They went with someone else. 



But that someone else couldn't raise the funds they were promising. And the sale dragged on. Then off. Then on again. And finally the other party pulled out altogether this September and a week later our rival went bankrupt. So we stepped in and took it over. Kept most of the staff on temporary contracts.. reopened and got going again.. while we try and decide what to do with it.

This was a business about twice the size of ours back in 2010. The owner has not had any involvement with it directly since 2012. Just contact by email and phone to the manager.

 Walking around this new-old business a lot of little things caught my eye.
Firstly, Its filthy. Every surface has grime and dirt. The bins were overflowing. Cardboard piled up like a tower block. This is common among failing business. Bills stop being paid. So the cleaners don't come. The recycling collections stop ..etc etc. 

But what struck me was the sink, with the staff's own cups was dirty. Cups unwashed. Surfaces uncleaned.100 year old dishcloth.. These are the workers own belongings. 


- The warehouse workstations are knee deep in the sort of rubbish that accumulates from packing and picking. Buried in the rubbish were pens, and cutters. Parcel tape. Boxes of labels etc.

I counted fifteen packing tape rollers for 8 workstations. About 20 box cutters for the same - Not including those discovered that have simply fallen on the floor. Most workstations have a box of 36 x 6 clear-tape. Don't use that very much. That's enough for each station for 6 months.

This is the public-private debate in micro. Although this business was a private business, its manager was allowing it to be run like a public one. A 'take what you want' instead of 'take what you need' attitude to basic supplies.
Whether the company made a profit or not was important to the manager. Make a loss and the job is gone. But the degree of profit was completely immaterial.

The savings in this case are minimal. 20 box cutters or 200 isn't going to make a dent in the losses this business had. But, as it appears to my casual eye, that 20 box cutters example is going to be repeated all across the organisation in every area. Costs...are not properly monitored. They probably aren't even measured.

When a worker drops a marker pen and it rolls under a pallet - they go and get another one. Because its simpler than lying on the floor to hunt it out. Or they get another one when they can't find the one that was there yesterday. And eventually, they will have a box full.

The manager doesn't get anything for making more profit. The manager is on a salary. The manager's job is easier if all the employees have all the tools they need to hand. So that's what happens.

That, in my private, but public sector dealing world is what I see. Take what you want. Order what you want. And have as much as you want. Until the budget cuts. When you suddenly run short of the actual things you need but have an excess of things rarely required.

Because, although its simple to sort this particular supplies issue, its also, hard. 
Hard because it requires some discipline. Some proper management of people. Some change of attitudes and additional personal responsibilities that will produce a fair amount of grumbling but minimal tangible results. 

Easy, because the answer to the workstation issue is simply to ensure the floor is properly swept.  
A clean environment and a box to put away all the equipment the employee needs is all that's required. And a manager that will say "what did you do with the last one?"

Its far easier said than done.
And I don't think this particular new manager of mine - who put down on their time sheet the 10 minutes before they began work and the 10 minutes after they are due to go, is going to be able to do it.

Gazprom: On The Back Foot (Again)

It's been a while since our last Gazprom update.  Here's one for afficianados:
Gazprom is preparing to offer to sell more gas to Europe at spot prices
As opposed to, priced on an oil-based index.  Well, like I said, it's a matter of specialist interest: but for the generalists, stick with it - there's a punchline.  

For years and years, oil indexation had been a religion with Gazprom (check the Gazprom label-link below for back-catalogue on this). They had imposed it effortlessly during the years of strength, and in the bad times post the 2008-9 meltdown in European gas demand had been willing to die in the last ditch to retain it.  During the recent rounds of price re-opener negotiations they gave almost everything else - relief on minimum annual payments (effectively surrendering market share), even cash rebates -  so long as they were allowed to preserve oil indexation.  They didn't even mind telling people that cash rebates were on offer as a quid pro quo: and boasted about how they'd held the line on the oil index against all the odds (unlike their main rivals, the Norwegians, who used to have the same policy but rolled over quickly from 2009 onwards - and retained market share without too much difficulty, mainly at Gazprom's expense).  This was indeed a hallowed principle for the Russians, however irrational.

One might imagine they are jumping horses from oil to gas just now because the oil price is so low.  But unless they see it falling still further, you'd think they'd be even more keen to sell at an oil-indexed price, because the upside is that much greater ..?  Certainly, gas prices look like being soft - or even softer - for a long time to come.

No, that's altogether the wrong line of reasoning.  Signalling spot-gas indexation for continental* European buyers is an out-and-out white flag, a gesture unmistakeable in the gas world.  And a concession as big as that would never have been made without sanction from the very top.  As CU said yesterday, they aren't feeling too comfortable right now.

ND
_______________ 
* They'd already conceded it for smallish volumes sold to Centrica in the UK, because (a) otherwise Centrica would readily have gone elsewhere, not an easy option for several continental players; and (b) it was for delivery in the UK, i.e. a wholesale deal, not a mainstream Russian export-pipeline gas sale

Wednesday, 14 October 2015

Putin goes for agricultural investment

Is this the first sign of Mr P.'s rather desperate gamble coming off the rails?

Russia is to re-focus investment away from Oil and Gas. Which on an economic strategy level is pure common sense. Having 90% of your economy of the same level of tax levels from one industry does mean you are a little exposed when said sector has a major international crash.

More interesting though is Rosneft CEO, Putin's best buddy Mr Igor Sechin, merrily saying that this is crazy plan and a fall off in investments will mean a long-term decline for the industry. This is not normally allowed in Russia, or to be more accurate, normally contemplated as a strategy by those wishing to remain free of tax investigations.

Perhaps Mr S. is so close that he gets free rain to criticise. Alternatively, perhaps the power of Mr P. is in slight decline. Certainly his Syria gamble which will fail (only because all interventions there will fail, given the complexity of the situation and the issue that all outcomes there are bad), has the feel of desperation. No doubt he is looking to trade his Syria intervention cards for a Ukraine acceptance card with the West.

This may work or not, the West collectively not really being that bright at realpolitik at the moment they may miss the hints....

Anyway, not many Russians I have met recently who live in Russia are best pleased with the 50% depreciation in currency and collapse of imports.

Tuesday, 13 October 2015

300 Lawyers

300 'senior lawyers' wish us to know that the government's policy for a programme of 20,000 Syrians over 5 years is too little.  Even the Grauniad reckons this lot have overstepped the mark, and John Humphreys didn't take too kindly, either, not to mention the Telegraph and Mail.

Not sure how much comfort we take from this high-minded journalistic disapproval.  The legal profession - judges in particular, of course - have it in their power to create severe practical difficulties for a policy they don't like, especially when it needs to be implemented case-by-case in the thousands, as will be inevitable when individual migrants are involved.  Long ago, when myself involved in a commercial litigation, it was explained to me in chambers that our case ran counter to a current strand of activist legal position-taking and that we would be in trouble if we ran into 'the South African tendency'.  

The what?  Apparently, during the apartheid era the liberal South African legal fraternity took it upon itself to interpret the law in such a way as to work consistently against government intentions - as expressed in the law - and carefully built up precedents etc to get their way, which was to thwart apartheid whenever they could.  Interestingly, significant numbers of these activist legal luminaries didn't subsequently choose to pursue their careers in Mr Mandela's wonderland, I wonder why, but came to London instead where some of them rose to positions of great prominence, numbering amongst the Law Lords.

Well, I keep away from the courts wherever possible and only know what I'm told.  And what I guess is that hundreds of activist lawyers and judges with what we might call a common purpose, could spell trouble for the government going way beyond silly letters to the Times.  Corbyn's newly radicalised front bench will be stirring it, too (oh how quickly the 'new reality' takes hold).  This one will run and run.

ND

Monday, 12 October 2015

Stuart Rose is a poor choice for Remain leader, as Business people normally are for political roles

It is a strange fact of life that business people make for awful politicians and often vice versa.

I met a long time ago Archie Norman - a fantastic businessman who was responsible for building the UK arm of Wal-Mart (ASDA). He really knew how to stick it to Tesco and Sainsbury's as well as building a really good team and office around him. ASDA by all accounts was even quite a good place to work and still is.

So when he became a Tory MP there were high hopes. But they were dashed, shadowing the Government was of little interest and he soon returned to Industry and is now Chairman of ITV plc.

The thing is, in business when you are the boss people do what they are paid to do. bad ideas, good ideas, all are acted upon as directed. In politics, the media, the civil service, your pesky voters; all get to comment endlessly but also, with Unions, have a direct impact on what you can do. After all the Civil Service is the delivery platform but ministers cannot easily sack civil servants.

So a common mistake made by politicians entering into politics is that the energy and insight they bring will serve them well. Stuart Rose will be a case in point. Firstly, he now leads an in-campaign when he used to be fa more equivocal about Europe (you would be as M&S CEO, always a mess there for them...).

Then they will try to order around people and the 'convicing' element is somewhat lacking. After all in the office, you need people onside but they are going to do what they are told overall. This lack of ability to connect and actually persuade people is a hard skill; few politicians are good at it. CEO's mistake their workers for voters at their peril.

Finally, in business you have a good team, especially if you have worked your way to the top of a big and successful company. Those around you are talented and money is not a worry. Again, a political campaign like this EU Referendum one will be challenging and the friendly-fire level will be high.

As a Leave voter I am very pleased a Businessman has been chosen to campaign for stay; let's just  hope the Leave campaigns make some better choices.

Sunday, 11 October 2015

More Weekend Reading, or: Malthus shrugged

How much effect does domestic policy really have? Some would argue: quite a lot. Governments and regulators can certainly influence inflation, productivity, how much is spent on public services vs left in our pockets to consume, and so on. Duncan Weldon discusses the bigger picture.

The working-age share [of the population] rose strongly for the 40 years to 2012 and the fact it is now falling (a fall driven by both rising longevity and the past impact of a falling birth rate) could have a major impact on the shape of the global economy.
In the long run, demographics matter hugely to the economy and that long run may arrive quicker than we think it will.
The 1970s and 1980s saw the advanced economies enter what demographers have called a "sweet spot" as the post-war baby boomers entered the workforce and declining fertility rate reduced the number of dependent children. The working-age share of the population rose strongly.
That trend was then turbo-charged by the entry of China and the former Soviet bloc into the world economy. The global workforce available to firms roughly doubled in two decades.
In other words, for roughly four decades (and especially so in the last two) "labour" has been in broad supply. But if the global glut of workers is set to end - driven by both slowing population growth and a falling working-age share - then that could have major impact on global economics.

In January this year, the final report of the Commission on Inclusive Prosperity (ran by the Center for American Progress and chaired by Ed Balls and Larry Summers) found that low and middle-income workers in countries has diverse as Australia, Canada, France, Japan, Sweden, the UK and the US had all seen a multi-decade wage growth slowdown.
These are countries with vastly different tax laws, vastly different financial industries (in terms of their size and structures) and radically different trade unions (in terms of laws, coverage and raw size).
All have seen the same broad trend and that perhaps is a clue that something bigger has been going on in the background.

Do read the whole thing. 

Saturday, 10 October 2015

Weekend Reading: Some Serious Political Strategising

By way of a less tongue-in-cheek approach to Osborne's politics than Wednesday's, and knowing there are several C@W readers who enjoy serious political strategy-stuff (Gramsci long march etc):  have a read of this -
The Osborne Supremacy: Why progressives have to develop a hegemonic politics for the 21st century
 By someone who takes Boy-Genius George a lot more seriously than, errr, some of us do.

ND

Thursday, 8 October 2015

Farage maybe annoyed President Hollande a just little bit

"We've been going through this for years. If we don't want to strengthen Europe, then there's only one road."

"I heard what Mr Farage say that the only road is for those who are not convinced of Europe is to leave Europe," Mr Hollande said.

“There is no other way. It's a horrible path, but it's a logical path. Leave Europe, leave Schengen and leave democracy. Do you really want to participate in a common state? That's the question."




After all the smugness of the Tory conference after the shambolic Labour affair, perhaps the above exchange (provoked by Mr Farage on particularly garrulous form), serves as a reminder that come the EU Referendum (should there be one, manifesto commitments and events have a interesting history...) the Leave side has all the tanks on its side currently.

As always, events can change and 'cling to nurse for fear of worse' is often a winner on its own merit, but currently the poor leadership in Europe, Ukraine, Syria and refugee crisis shows Europe at its most ineffective and threatening making the case for Leave is easy right now.

However, pushing the referendum to 2017 means it clashes with a French election that will make it headline news as Le Pen promises to ape the British and Hollande the opposite.

Interesting times indeed.

Wednesday, 7 October 2015

Glencore / Commodities Update: It's Serious

Source:  FT
The Glencore story is developing fast and there's spin aplenty in the air.  The company, and others of the commodities fraternity like Trafigura, wish it to be known that (a) they are nicely diversified and (b) there's no great Systemic Risk here:  "here are some arguments as to why commodities trading firms do not pose systemic risks".  Move along, everyone.

Well (c) Glencore may be diversified but the market sees it as a natural physical long position, and is treating it thus; and (d) whatever else, some of the firms we know about (i.e. the publicly held ones) look pretty under-capitalised - don't they ?!  Actually, very under-capitalised.

The oldest problem.  And that takes us back to Enron

Now look at the percentage of the FTSE that is represented by commodities firms of one sort or another (and see Stephen L's comment on pensions in the earlier post linked above).  Systemic risk?  O-oh yes.

ND

A Political Golden Age. OK, Golden Moment

What a time to be George Osborne!
  • plenty of vigour and ambition left in the tank 
  • enough of a student of strategy & tactics & political initiative to come up with A Few Ideas
  • 90% of Tory MPs not at all inclined to piss off the leadership candidate in pole position 
  • Conservative Party basically non-ideological, won't raise any principled objections to crazy ideas provided they don't fall squarely into a couple of well-recognised no-go areas
  • Labour Party the object of polite curiosity + outright derision, steaming determinedly backwards into shallow and rocky waters
  • economy ostensibly OK-ish ...
  • ... well, enough for a bit of elbow-room to try out A Few Ideas
Master of all he surveys!   Well, there will always be Events - Scotty and euro-type events, most likely - but in the meantime, full steam ahead into waters of his own choosing.  No surprise that Mandelson chooses to befriend him (as we are told): Mandy knows a political do-er (or must we say builder?) when he sees one.  Osborne, in return, doubtless values input from one with so fine a grasp of how to use the levers of power creatively.
It is George Osborne who is thinking hardest about ways to consolidate the Tory hold on power, and his approach is now steelier than anything dreamed up in the fluffy clouds of early-stage Cameroon modernisation. The chancellor wants to revive the idea that Conservatives can do activist government
So says the Grauniad's Rafeal Behr and it seems about right.

Much as the Labour Party is enjoying itself spitting at folk and all, they really do run the risk of waking up a few months from now after their Cor-binge with a ghastly hangover, to discover the whole playing-field has been moved, never mind the goal posts.  Maggie Maggie Maggie, oh, wait a minute ...

ND

Isn't politics weird in 2015?

When Nigel Farage said the roads were filling up becuase of immigratns he was ridiculed. When he said the UK had too high a level of immigration o sustain then he was called a racist.

By the Tories.

With the election safely out of the way, Teresa May the home secretary seems a late convert to the UKIP view of immigration.

In the Labour party, Liz Kendall was called a treachrous Tory sympathiser for saying the a future Labour Government would need to reduce and eliminate the deficit. When John McDonnell said the smae thing in his party conference speech, he was cheered to the rafters.

George Osborne has stolen huge parts of his policy from Ed Milliband including his much trumpeted Infrastructure commission to which he has appointed Andrew Adonis.

No wonder politicians are held in such low esteem when they lie so brazenly and atttack their rivals bitterly for holding the same views as themselves.  I fully expect Cameron today to begin by stealing some lines from Jeremy Corbyn, probably about supporting the poorest etc.

Monday, 5 October 2015

The world's 20 strongest militaries

Italian Carriers

RANKED: The world's 20 strongest militaries

Credit Suisse have ranked the world's military. In order of strength. 
Size and budget doesn't matter much here. Its the power to project that is important in the strength rating. The scores for military might are as follows.

 The factors under consideration for military strength and their total weights are: number of active personnel (5% of total score), tanks (10%), attack helicopters (15%), aircraft (20%), aircraft carriers (25%), and submarines (25%). 

So the CV, CVE and SS, SSN types are accounting for 50% of the score.Which might explain why Italy in eighth place, ranks above the UK in 9th. Despite the Italians spending about half the UK does on its total defence budget.

The Italians have the Cavour class light aircraft carrier. And a mighty fine mid-sized carrier it is.

  Typical air group is a mix of 20-24 V/STOL aircraft and helicopters. This aircraft carrier operates Boeing AV-8B Harrier II Plus V/STOL aircraft. In the future these will be replaced with the Lockheed Martin F-35B as soon as it becomes available. This aircraft carrier will also operate utility, anti-submarine and airborne surveillance helicopters including EH-101, NH-90 and SH-3D. The Cavour can also accommodate heavy transport helicopters.

 Credit Suisse make no secret of the fact they take no account of training. Experience. Quality of equipment. Availability of reserves. Combat history. Logistics support. Officer training. Morale or any other factors. Its a pure percentage base, X, assets result.

The UK is usually 5th or 6th in world strength rankings. 9th is a bit of a come down. Our 10 submarines help. But the lack of any aircraft carriers is seen as a huge disadvantage to our strength. 

Moving up from 9th in the world rankings and into our old sphere to 4th is Japan. They have 16 submarines and four "Destroyer Aircraft carriers"

Yeah...Destroyers..Ok....right...that's what they are...no really...just destroyers..

The Japanese were sort of forbidden, Versailles style, from having aircraft carriers. The victorious WW2 Americans not fancying another Pearl Harbour. The Peace Constitution limits Japan to defensive forces only.
So this flat top with 9 helicopters, the potential for 14, and the absolubte possibility of basing the next generation of vertical or very short take off fixed wing aircraft on them is a mini carrier.Its just called a destroyer.
These destroyer carriers are very very advanced. And cost about $1bn each. 
The new UK carriers will come in at somewhere between £3.5 & £5 billion each. But with considerably greater aircraft complement.

There was considerable argument at the time of the announcement of the desire to build new UK carriers, about whether smaller, ships carriers  should be built instead of the two huge CVs. The UK put contracts out for the construction of our two in 2007. And they should..well..possibly..could be ready for service by 2017.

The Izumos were planned in 2010. And the first launched in 2013.

We discussed the merits back here in 2008. And again in 2010 here.

But either way, right now, without even that 2% commitment defence being missed, according to this one measure, UK military strength is fading. Its a navy heavy weighting, to be sure. But we are a maritime power. We are an island. So..we should naturally do better than the landlocked, small coastline nations.
But it could be worse. We could be Germany - Down from 8 to 18

World 20
Ranked by strength factors - 
{X} = more traditional world ranking.

  1. USA {1}
  2. Russia {2}
  3. China {3}
  4. Japan {9}
  5. India {4}
  6. France {6}
  7. South Korea {7}
  8. Italy {16}
  9. UK {5}
  10. Turkey {10}
  11. Pakistan {17}
  12. Egypt {18}
  13. Taiwan {15}
  14. Israel {11}
  15. Australia {13}
  16. Thailand {20}
  17. Poland {19}
  18. Germany {8}
  19. Indonesia {12}
  20. Canada {14}


Themes for a Grey Monday Morning

Damp and grey in London here today, and the news is varied: sublime, ridiculous ... and probably quite significant.  In reverse order:

Ukraine

Did anyone notice a massive event on Friday?  Putin, Merkel and Hollande convened in Paris, complete with dragoons in shiny armour, to solve Ukraine ...  except that there was no communique afterwards - search the web as you will.  That, friends, is not a trivial matter.

We are left to speculate.  Did they make so much progress that they are minded to keep schtumm and keep at it?  Did Putin come in waving his Syrian-bombing willy in the expectation M + H would immediately remove sanctions?  Prior to the meeting, the WSJ quoted Merkel thus:  “We don’t associate the question of Syria with Minsk, these questions are not linked.”  She was obviously asked about it afterwards but the French press seem to think the issue was marginal at the meeting.  What about Ukraine then, eh?  Putin must be so hoping to have sanctions lifted.

Green Grauniad

Flushed with the success of its campaign for divestment of fossil fuel stocks, the Grauniad is launching Phase II of its mighty climate-change campaign!  Keeps them occupied, I suppose.  Come December, we shall all be occupied - perhaps physically - by climate protestors, with yet another Hollande vanity-extravaganza in Paris to come in Nov-Dec, of course.  And there really will be a communique after that one! - however empty and *disappointing* it may be (and it will).  Both Hollande and Obama want it to be their legacies, Heaven help us.  Must write about that soon.

Pesto to leave Beeb!

We all remember Pesto's dominance of the airwaves and BBC website back in '08-09, when the banking crisis was in full swing.  Then, somehow, everything started to go a bit flat, and it was unkindly rumoured his scoops had dried up because a Prominent Treasury Figure was no longer briefing him in real-time.   (Here at C@W we could calibrate this: in 2008, a link from the Pesto blog was worth a massive number of hits, even more than Guido or Worstall.   Couple of years later and the effect of a Pesto-link couldn't even be detected.)

Still: Peston on the ITV ... didn't work for Morecambe & Wise, did it?

ND
  

Friday, 2 October 2015

RWC: the Dogs that Didn't Bark at England

The media dogs didn't really bark after Wales deservedly beat England last weekend.  All too nervous of rocking the boat when everything can still be rescued with a good win over Australia and a couple of other quite plausible things going England's way -  the first of which was Fiji depriving Wales of a bonus point yesterday.  So let's start by rounding out the optimistic side of the picture: the Aussies - like the French - are not a team that England have ever really feared (which in large measure explains 2003 and 2007).    They've lost to them many a time, of course, and can do so again: but they haven't mentally given them seven points before the first whistle, unlike their feelings about the AB's and SA.

Consensus amongst the punditry is that the England-Wales result is explained by (a) odd selection; (b) even odder subsitutions; (c) poor decision-making and/or lame execution at the critical late penalty / line-out.  This last is a given, and very troubling; but par for the course with Robshaw.  The (unforced) late introduction of Ford was indeed daft in this particular game: but if (a) is code for *Burgess*, I disagree.  Who better in the squad to be lining up Jamie Roberts?  - and look what he did to Roberts face-to-face when they collided: exactly what he was there for.   When the welshman first hit the international scene (and I do mean 'hit'), England selected a blindside flanker - Joe Worsley - to cover the inside-centre channel, with good effect:  and that was viewed as tactically brilliant.

It's other selectoral choices that are bad: but so deeply hard-wired in the Lancaster set-up, there's little point in bemoaning them now.  Robshaw.  Not much more to be said, really - particularly because barring injury we are stuck with him for as much of the RWC as England are still on the pitch.

Secondly, however - and eminently fixable - is the liability that is Farrell (Owen).  He kicks his kicks, OK?  But otherwise he is wooden, hot-headed, petulant; and, I suggest, he is (d) as much responsible for the Wales result as (b) and (c).  Why?  Because at a critical stage in the second half, with England squarely ahead and in an excellent position to finish the game off, up he comes into the Wales 22, with England's lineout ball just to come, and puts in a grotesque  - obviously premeditated - late tackle, right under the ref's nose.  Position reversed, penalty Wales, and they are set up to mount their splendid revival. 

(Why does he do this?  Same reason as always, I suppose, to prove what a hard bastard he is.  IIRC he has never seen yellow or red for this in an international but it must be a matter of sublime good luck and he shouldn't reckon on that continuing.  In fact, he should never get the gig in the first place.  I have been boring my rugby drinking buds for three years predicting that, at a crucial moment in the RWC, England will be down to 14 with Farrell cooling his heels in the bin.  For all intents and purposes we may have seen it already.)

You can google the incident I am referring to and not find any critical mention of it with Farrell named.  Some of the "as it happened" reports record the late tackle with no names mentioned: one links it with Farrell but doesn't make any comment; and one calls the tackle 'needless' but doesn't mention his name.  See what I mean about the dogs not barking?

But it seems we must start with Farrell in possession again.  Ho, hum.  Your own selections for England at 10, 12 and 13 - to face Australia - in the comments, please:  (i) from the current RWC squad, (ii) selecting freely from qualified England players.  And a great weekend to all concerned.

ND

________________
UPDATE

at a crucial moment in the RWC ...

Well, the dogs will certainly be barking now.  I shall be particularly interested to see how the Grauniad's seven pundits, all of whom forecast an England victory, will handle themselves  

Thursday, 1 October 2015

A nasty end game


Map of Saudi Arabia

The House of Saud, for all the wrong reasons a bedrock of Western support down the years, has some major internal splits that are showing publicly.

The new King had to usurp others to gain his place and then put in line his son to take over, so pushing aside other parts of the clan. (The House founder had 43 sons! it makes medieval dynastic troubles in Europe look like tic-tac-toe in comparison).

Also the new King, Salman, has had to deal with wars in Yemen and Syria, the struggle of how to fight ISIS whilst also fighting Iran and of course the collapse in the Oil price. Last week Saudi Arabia tapped the bond market for the first time in years and has repatriated $73 billion.

Domestic expenses of the wars and policy to retain oil share through low pricing are terrible for the State finances. Plus the new King is very conservative, further pushing the Wahhabi's position in the Country where it is in reality a very destabilising force as it is everywhere else in the world.

Recent events in Mecca, sad as they are, do not further inspire confidence in the soundness of the Saudi state.

However, a dynastic dispute and fight would be a very bad thing, as much as the House of Saud is not a very nice regime at all, what would replace it would be similar in nature to Isis and other countries that have experienced power change since the 'Arab Spring' have fared very badly.

Saudi Arabia though, money aside, does seem like a failed state in waiting and what a mess that would be for the rest of the world to come to term