Sunday, 31 January 2016

Friday, 29 January 2016

Inflammatory Weekend Discussion Points

"We thought contact with western capitalism would make honest businessmen of Russian oligarchs. The reverse appears to be the case"
Discuss.

"Since there is no vaccine against the Zika virus and no abortion rights in Brazil unless the mother's life is in danger, all Brazilian women of child-bearing age are at risk because of the social, cultural, religious or political situation in their country and have the right to claim asylum"
 Discuss!

Thursday, 28 January 2016

Our Friend George Osborne Looking Shaky

Shock of Heir
Even before this week's run on the Osborne (RBS, google-tax etc), the currency was looking a bit shaky.  You know how sometimes you find there's been a rash of MSM articles on the same subject and you know something's afoot?

Well over the past week or so there has been an otherwise inexplicable number of pieces musing over whether Osborne's blown it already / has whipped in enough craven careerist Tory MPs to get the Big Prize / will be brought down by his unattractive personal flaws / resembles Gordon Brown circa 2005 too much for his own good etc etc.

These 'coincidences' usually mean someone's been dining the journos intensively.  Is May on manoeuvres?  Boris been briefing?  A sneaky strategem from Camp Corbyn?   Has it been George himself calling in the layabouts of the Lobby for a cosy tea + crumpets, but it's all gone a bit wrong (which wouldn't be unknown)?  Things can turn, then turn about again very quickly in politics, and Osborne holds a lot of very powerful levers in his ambitious paws.  Then again, the pack loves a chase; and when the smell of blood's in the air ...  

Here at C@W we have an ambivalent outlook on the Boy Genius, admiring his tactical nous (in a student-politics kind of way) and willingness to think the game through: but pretty sceptical of his judgement on matters of substance (Hinkley - need I say more?).  There is just so much scope for 'events' between now and Dave's departure ... a short Osborne position looks to be a good bet just now.

ND

Wednesday, 27 January 2016

RBS: Government owned until 2020

RBS has another year of losses to add to its list. Eight straight years, it is hard to think of another business outside the Guardian newspaper that can sustain such a dire record.

And not just a small loss either, a £2.5 billion loss. Yes it can be argued that the main cause here is yet more fines and covering for litigation and fallout from the financial crisis, plus the need to plus a huge hole in its pension deficit. On this basis the core bank is making money, is still the largest SME lender and gearing back up in the mortgage market with Natwest soon to top best buy mortgage tables once more.

However, a loss is a loss. The share price is around half of where it needs to be to break even in a Government sale. 50% loss of £48 billion. At least, with a tier one ratio of 16% we can be assured that the bank could survive another recession.

Pity its shareholders though, every year is the promise of Jam tomorrow in terms of dividends and profits. Every year it does not happen, we are far closer to the next recession than the last too; will RBS make it out of Government control before 2020, I would not bet on it.

Tuesday, 26 January 2016

Sooner Or Later The Lights Are Going Out

It's been years since we started pointing out that no proper power stations are getting built.   From time to time a thin cry goes up from the MSM but it's not particularly near the top of the list for any prominent politician or commentator. 

There's a classic "report out today" from the Institute of Mechanical Engineers - probably to be soon dissmissed as special pleading, one imagines, though they get a bit of press coverage.  The numbers ought to be a bit sobering.
"the retirement of the majority of the UK’s ageing nuclear fleet by 2025 and growing electricity demand will leave the UK facing a 40-55% electricity supply gap"
They might not be right about the growing demand, as it happens, but that's a tiny factor compared to the closures, most of which are pretty much set in stone.  The Engineers are a bit confused as to how the problem they've identified is to be fixed:
"plans to plug the gap by building Combined Cycle Gas Turbine (CCGT) plants are unrealistic, as the UK would need to build about 30 new CCGT plants in less than 10 years ... the country has neither the resources nor enough people with the right skills to build this many power stations in time"
That's us f****d, then, because there is no other plausible solution.  The Engineers have a suggestion of their own: 
"Government needs to take urgent action to work with industry to create a clear pathway with timeframes and milestones for new electricity infrastructure to be built including fossil fuel plants, nuclear power, energy storage and combined heat and power. With CCS now out of the picture, new low carbon innovations must be supported over the course of the next 10 years"
But if we don't have the "resources nor people" for 30 CCGTs - pretty quick & straightforward compared to nukes, storage and "new low carbon innovations" - how does that help?  At least they are right about CCS ...
*  *  *  *  *  *

So - when does anyone get up off their arse?  Trouble is, the National Grid is just too good at applying the sticking plasters.  Really good at it - spraying our money around (and taking a % for themselves) on all manner of finger-in-the-dyke schemes and scams.  With a bit of luck (I almost said 'with a following wind ...') they can keep that trick going for, what, maybe a couple more winters?  Then people will start to notice.  At very least it will be a genuine issue at the next election.

Lead-time for just the construction of a serious power plant (> 400 MW) is 3 years - and that's if you have all your ducks in a row (ordered the turbines, got all the permits etc etc).  It's hard to imagine what nuke-and-frack-obsessive Osborne plans to do about it all, seeing that neither of those technologies will contribute a single extra kWh by winter 2019-20.  If he comes up with a new scheme this year to throw money at CCGT developers (I'm predicting he will), and it finds immediate uptake (rather less likely), he might just get two gas start-ups by then.  But I doubt it.

ND
__________________
UPDATE:  EDF running away from the decision on Hinkley - again.  Laughably, the Grauniad says
"The opening of Hinkley Point C has been delayed twice, from 2017 to 2025"
Twice?  It's been delayed twice a year, every year since they bought British Energy back in '08.  And to think they gave the Chief Frog an honorary knighthood.  Refund, I should say.

Monday, 25 January 2016

How to incentivise people?



I really like this article in the FT, no other paper could come close to looking at such a subject in a dispassionate way. Bankers after all, earn a lot of money, so for most of the media it is much easier to start with the shorthand; evil people.

That clarity lets them get on with whatever story it is they are hanging on evil people.

The thing is, although I am not a banker, I do work with them every day. And for seven years this has been very dispiriting. After the burst of the bubble bankers became (rightly so!) hated figures. Then their bosses looked at the losses and cut their pay.

The smart ones left and set up their own hedge funds, but this was the smart few, most hung on, changed jobs, spent sometime out of work and adjusted to new, less eye-watering income.

Plus bankers do the same as everyone else does; live slightly beyond your means to a greater or less extent. Earn more money, get a bigger mortgage, fly further for holidays, that kind of thing. Nobody thinks, ah yes, put it all away and save it for the rainy day. Who the hell wants to worry about rainy days (well, accountants do, but their not happy either...)?

Anyway,  I digress, this article suggests that financial incentives don't work - specifically the bonus. On this I would agree entirely, there is a whole cottage industry of angst and this is because the corporate impact and effect of a bonus is just wrong.

In a non-financial company, one that, er you own say, a big contract or win can make or break the company. Therefore you award yourself or the key staff well on the back of it. In a large organisation it is always a team effort, rewarding disproportionately one individual is never going to sit well. And as described above, they will fritter it anyway and not be happier.

Happiness is enjoying going to work and the people and things you do (caution; this is relative, some people working A&E). Being paid more or well is the benefit of a good job, not a feature.

So what should banks do? One thing I saw that worked well was in a US company, everybody earned around the same (and it was alot!), you got more in a good year than a bad year, but not too much - it was very meritocratic. Never seen anything like it in a UK company.

Another is to give people stability and a place to grow into in their roles, again, weirdly banks used to be good at this and are now terrible, when everyone thinks they are getting made redundant in a few weeks or months, today's paycheck counts for more.

I have had plenty of people in teams I manage leave over the years, but never for money, which I find instructive, capitalist that I am!

Friday, 22 January 2016

Mr Saigon


JEREMY CORBYN : THE MUSICAL
 
 Image result for CORBYN IMAGE
The ructions in his shadow cabinet have been compared to a soap opera.
Now someone's gone one better in depicting Jeremy Corbyn - they've written a musical about him.
Corbyn The Musical: The Motorcycle Diaries has its world premiere in a London theatre in April.
And Mr Corbyn probably won't like the plot.
The light-hearted skit will show him on the brink of nuclear war with Vladimir Putin as he decides whether or not to put Trident submarines into action.

As if that wasn't enough, the action will flit back and forth to Mr Corbyn's romantic motorcycle trip through East Germany in the 1970s with Diane Abbott .

Sounds like something from the Daily Mash. But apparently its true. Art imitating life.
Which prompts a weekend compo idea. 

Titles for Corbyn era musicals. 
And bonus points for the title of the main song in the musical.

BQ offers - 

Spending in the Rain
 Three performers {Corbyn, Livingstone, McDonnell} Are caught in the transition from the silent era to the modern 'talkies'. With hilarious results.
{Hit songs - Make 'em laugh-and laugh and laugh, - You were meant for Mao.}

Le Miserable
A tormented soul seeks redemption. Set during the revolutionary turmoil of Thatcher's Islington in the late 20th century.
{hit song - what have I done?}

All that Jezz
Labour's backers have a deranged leader  on their hands. They must decide whether to replace him or just hope he dies..
{Hit song - Who's sorry now}

Bolivar ! 
 An orphan boy,{Owen Jones} hooks up with a group of ultra left, street gang union bosses, trained to be pickpockets by an elderly mentor.
{Hit songs - Please Sir - can I have some more...money?
Reviewing - the selection situation.}

Add your musical inspirations below.

Thursday, 21 January 2016

Wadda we want?

Soooo Davos is turning out to be more interesting than usual. 

The focus seems to be on keeping the EU from falling apart. The Netherlandish PM says that Schengen will fail if there is a surge in migrants as the weather warms up. Tsiparas says that he's not going to stop allowing migrants to pass through Greece to more prosperous nations. I think the French have a good word for situations like this: impasse.

Meanwhile, the sensible northern EU countries are pleading with Cameron and big business to push for Britain not to leave. Apparently (and this will come as a huge surprise to Eurosceptics) international investors might think that the EU is a busted flush if one of its most successful members quits.

Here's an idea for Valls et al.: give us some of what we want. So what do we want? Forget Cameron's empty shopping baskets. Here's what I think would make Europe a better continent for everyone. 

1. A single market for finance and services. The EU has been quite effective at removing barriers to trade in goods, but there are 28 sets of banking and financial regulation. Efforts to break down these barriers have been hampered, at least partly by the supposedly-free-market Germans. They know that some of their professions would be hammered if the plucky Brits were given a chance to compete. 

2. Genuine welfare portability. Despite what we keep hearing, it is really hard to move between EU countries to work while keeping your pension and healthcare accumulations going. If you move about, you end up paying the taxes but getting few of the services. A simple answer would be to level downwards, and encourage people across the EU to make their own arrangements. A single market in healthcare and pension products (see item 1 above) would help.

3. Push for a global trade deal. The EU has been ridiculously bad at signing trade deals. Stop pandering to Spanish shoemakers and open up European markets. Stop pandering to French and German farmers and scrap the food subsidies and remove the barriers to developing-country produce.

4. Bin the European Parliament. EU legislation should be approved or not by representatives from the member countries' parliaments. Perhaps by their relevant ministers on some kind of supermajority basis. It should be hard to legislate across the EU, and when it happens there should be a direct route from voter to decision.

5. Abolish the regional funds and structural grants. If Bucharest needs a metro, then let the Bucharesties make the case to investors.

6. Put in a specific assertion into the preamble that the EU is a trade organisation and that it is a union of sovereign nations. And make damned sure the Court of Justice knows it.

Then we can talk.

Wednesday, 20 January 2016

Is Sterling A Petro-Currency?


... or are we just a country dominated by a commodities-heavy stock market?  
Or something.  Insert your theory here:

Zero

And the results are out! On the government's preferred measure, prices were almost completely stable in 2015. The consumer price index rose over the year by a whopping 0.2%. If you average the monthly figures, they come out at 0.05%, although I am not sure quite how useful that is.

Mark Carney now says that interest rate rises are still some way off. I think most of us had worked that out already. I have seen people criticise Carney for promising rate rises many times before, only to backtrack. That is not fair or even right. He first suggested - when he was a very new broom - that rate rises would not even be considered until unemployment had fallen below 7%. The 7% came and went - we are now down to five-point-something - and Bank Rate stayed where it is. But the 7% figure was not a promise to raise rates, it was a promise not to raise rates at least until. Big difference.

Then, in the spring, he got everyone's fears up. There was a mad scramble of people fixing their mortgage rates. Was he in the pocket of the brokers? Because rates did not go up. Then he suggested that things might be a bit more obvious by the new year. Now he says things are much more obvious: rates are going nowhere, chaps.

When inflation is so low, keeping rates at 0.5% seems to make sense. They could go still lower as in other parts of Europe. Not all of the sluggish numbers are due to the collapse in commodity prices. There does seem to have been a domestic slowdown. Some of it is due to a global trade slump. We have had a very strong Pound. There is excess capacity in the world.

There is one thing we can be certain of: as soon as we start to assume that this state will become permanent, it will cease to be. So in the meantime, enjoy the low rates: do up your house or upgrade your car, get a smart TV and a comfier sofa. 

The members of the MPC ought to announce that they are taking a very long holiday: returning only when inflation hits the target. They deserve it, for it wasn't that long ago in the scale of things that Britain battled double-digit inflation and mass unemployment, and the big crash is starting to feel like it was some time ago.


Tuesday, 19 January 2016

Renewables: the Bums are Squeaking

Dr Doug Parr, chief scientist and policy director at Greenpeace UK, said: “Wind and solar energy are at the point of becoming really competitive with fossil fuels, but failure to support them for another few years will result in huge losses of potential jobs.” 
Inde, Renewable Energy Industry Is About To Fall Off A Cliff (sic)
He has been eight years upon a project for extracting sunbeams out of cucumbers, which were to be put in phials hermetically sealed, and let out to warm the air in raw inclement summers. He told me, he did not doubt, that, in eight years more, he should be able to supply the governor's gardens with sunshine, at a reasonable rate: but he complained that his stock was low, and entreated me "to give him something as an encouragement to ingenuity, especially since this had been a very dear season for cucumbers."
Jonathan Swift, Gulliver's Travels

If only it had been as few as eight years with the renewables: but the windies, in particular, have been at it for decades, with pitiful results.  The onshore wind industry has had its bluff fairly well called (though existing windfarms continue to be featherbedded) but the government is still pouring our money into the offshore sector and the best you can say about it is, Keynes would presumably have approved if more of the jobs etc were British.  I take the opportunity to repeat my oft-made prediction that the maintenance of over-the-horizon arrays will turn out to be a seriously under-estimated problem / cost.

Ever Been in the North Sea in Winter?

Solar PV is better: the vast amount of research into ever-improving solar generation shows every sign of paying off (eventually).  Let some other idiot governments accelerate the process with a different bunch of taxpayers' money.  Universities and tech labs all over the world (including UK) really have momentum now, and solar can safely be left to reach the status of "really economic" all by itself.

Even with oil at $30 for a while.  Meantime, stand by for more disingenuous whining from Parr, Legett and the vested interests they represent because, despite lots of whistling the in the dark ("It's good because it means more oil will stay in the ground") $30 will do for them more surely than a big shale gas discovery in George Osborne's back garden.

ND

Monday, 18 January 2016

Iran: poorly timed gamble could be oil market bottom?

S
o President Obama, keen to look to his legacy, has agreed to the deal with Iran that sees it freed of nearly all sanctions and able to trade again.

That Obama's Foreign policy strategic ineptness is the biggest legacy of his Presidency, perhaps we should be worried...

Certainly timing wise this is a very bad moment for what has been years of negotiations to suddenly bear fruit.

From the perspective of Saudi Arabia, rapidly moving from key Western Ally to pariah state, it is a disaster. Saudi is spending lots of money fighting proxy wars with Iran across the region. The $100 billion stimulus to Iran is not welcome. Saudi and America are no longer friends and the tension between Saudi and Iran could get worse.

Furthermore, the oil price is under the worst pressure this century already. Iran is happy to pile in given it has been selling oil illicitly at huge discounts, not it can sell it openly with lesser discounts - so what about the price will be their feeling. Iran can add another 500,000 BOE per day easily in the next twelve months.

This last point has pushed the price of oil down to $28 today, marking a spectacular fall for 2016 already and we are only 2 weeks in. However, this downward pressure could be the last push to really crater the oil price. From here on in US Shale explorers are going to start going under, the Banks will have to foreclose on assets across the world and future investments will be stopped dead. All the while global demand for oil is still growing, even China imported 6% more oil last year.

At some point the market will call a bottom to the price, not that there will be an instant snap back, but always a  good time to buy. This bottom is now likely to be in Q1 2016 I think.

Another wider issue for the world, is how come it will be sensible for the rest of the world to close down production and leave the only production centre in the dangerous Middle East, how will renewables ever survive and finally, how does cheap oil fight the 'climate change' war. All these 3 points will be covered at Davos and all lead to a world where somewhat higher oil prices will be welcome.

Also, I would not rule out a Saudi/Iranian contretemps in the Gulf, even if it is limited, it will handily but a firm end to the ever falling price of the commodity both economies survive on.

Sunday, 17 January 2016

Retro Season



Channel 4 is currently showing an excellent period drama set in Berlin in 1983, called Deutschland 83. All good Capitalists are encouraged to watch it before it vanishes from the catch-up services. After last week's episode, Channel 4 ran a programme about how the 1980s changed Britain. Whether any decade can be said to be more or less significant than another is up for debate, but certainly a lot happened in the 1980s. Nuclear armageddon was avoided, and the Soviet Union collapsed under the weight of its inherent inefficiencies.

The C4 programme shows how politics, economics and a huge outpouring of creativity interacted in the 80s. It really is worth a watch, despite Ken Livingstone featuring as a talking head.


Friday, 15 January 2016

Good Times, Bad Times for 'Older Men' ...

Those Hatton Garden Robbers, eh?  - and the youngest of 'em 60 !  There's hope for all of us *ahem* senior citizens yet.  I could still squeeze through that hole in the concrete meself ...

Has to be said, though, other news isn't so great as the reaper sweeps up the talented 69-year olds.

Bowie                                       Rickman
Carpe diem all round, hmm?  They certainly seized the diamonds.  Or tempus fugit - time to get outta here.  Or sic transit ...  I think it was a Transit they used.

ND

Thursday, 14 January 2016

Are you afraid?



Normally I read through a BBC business article and tut because their analysis so often does not quite scratch the surface. Usually, an article sets out some main headings but then fails to get to grips with the actual issues. This article made for a welcome change. 

The article discusses various issues around the number of households likely to be affected by a rise in interest rates, especially concentrating on mortgage rates. It sets out some interesting stats about the proportion of homes owned outright vs on a mortgage, and then drills down into how many of those mortgages are on fixed vs variable rates.

Do read the whole article. At the end, though, I thought an especially interesting point was raised: that of real interest rates. Could the current apparent slowdown which people are talking about be linked to the rise in real interest rates compared with a couple of years ago? 
No, you didn't miss it. As inflation has fallen to the floor (and sometimes below it), the real cost of money - real interest rates, shot up. From 2011 to 2014, because inflation was higher than interest rates, official interest rates were negative in real terms - a big incentive to encourage people and companies to borrow and banks to lend to stimulate the economy. Now they are positive.
And the economy has been slowing down - growing by 2.1% in the year to September 2015 compared with 2.9% in the same period a year before. Unemployment may have dropped to 5.2%. But far from showing signs of taking off, inflation, currently 0.1%, has been bumping along the floor.
A good question. Might the current neutral Bank Rate actually be negative? Might the next move by the Bank actually be to cut rates or do some more QE? 

Tuesday, 12 January 2016

Oil Price Forecasters Ahoy!

Remember this little table of tripe we scoffed at back in November?  (Click to enlarge, Elby.)
Well they are at it again.  Here's how the highly-remunerated eejits at the investment banks' analyst departments see the price of US crude oil (usually lower than the Brent price, though not much so just now) for 1Q and 2Q 2016.  Yup, that's this quarter and next.
                   1Q          2Q
Barclays       29           33    (go Barclays!  - you stand half a chance ...)

SocGen        32           38
JPMorgan     33           49
ING              35           40
BoA              36           42
Morgan S      38           43
Citi              40           44
Std Chrt       44           53
Goldmans     45           50
Deutsche      45           50
Cr.Suisse       47          56
UBS              50          50   (also 4Q last year - what is it with UBS and 50 ??)
Yes, all of them see steady rises through the year (except the rather quirky UBS, who perhaps don't keep changing their numbers  - because they believe in their methodology, maybe ...  nah, silly).  Then again, all of them forecast prices to rise steadily through 2015, and none of them was even close, really.  

If any of these people are right, it will only be on the stopped-clock principle.  I have their numbers for 3Q and 4Q, too - and who knows, we may return to them later in the year.  Now, remind me: how are things panning out just at the minute ..?

ND

NHS strike - why do this?

I find both sides stance on the NHS doctor's strike hard to fathom. For the Doctors' there is a big risk, that is that they get seen as greedy and get exposed for it.

This has happened in the past, generally nurses, paramedics and firefighters re all everyday heroes beyond reproach. Yet the firefighters managed to strike and lose against a Government in recent times, mainly because their actual hours and pay was exposed in the media; as a result they had to cave into the Government.

This perhaps it is different, although the leaders of the BMA, are hard lefties who think Corbyn is a moderate uncle. As such, their judgement on how far to go has to be questioned.

On the other side, the Government's base case is a 30% effective pay cut due to increased hours alongside a real 11% pay rise. Nobody is going to be happy when presented with that and young doctors are much put upon. Those I know work hard and are paid relatively little; of course in later years this dilemma is reversed.

Which makes me wonder what Jeremy Hunt is doing, the doctor's pay issue lies with another group and there are other ways to create a 7 Day NHS - which in itself should be a very popular policy. As always on health, any reform is met with fierce resistance and any Government has a tough time. Why this fight this fight though with such a weak case. I have seen hardly any justification in the media for the Government position, which generally means they don't have any decent facts to stand their case up and the civil service have left them swinging.

All in all a bugger's muddle, the result of which is if you are reading this try not to get run over by a bus today.

Monday, 11 January 2016

Creativity, Thy Name Was Bowie

Look out my window, what do I see?  A crack in the sky ...  

What a man.

And as well as being a creative force nonpareil  he was, as we are now about to find, in that strange, hallowed category of people who generate an outpouring, nay tsunami of utterly wholehearted tribute when they're gone (I think of the rather less global examples of Peter Cook and Paul Foot), as it turns out everyone really, unreservedly thought the world of them. 


ND


UPDATE:  and how could I forget his pioneering Bowie-bonds?!   First person to securitise himself (so to speak) - a fine Capitalist! 

Saturday, 9 January 2016

Oil Price: More Than Just a Glut

Even as a consumer (with an augmented short-oil position), I find it hard to be insouciant about oil prices as low as this.  Something's gonna give.   Politically, economically, socially, all three ...   Saudi, Russia, Nigeria, all three ...

Then there's Shell and its BG gambit.  Trying to emulate John Browne's BP (1998) by cleverly buying assets at the bottom?  A hopelessly mis-timed play.

(Incidentally, in moving on gas-heavy BG they were doubling-up on their already humungous mistake of pouring $$$ into Qatar LNG, which Shell insiders swear they never would have done if they'd seen this coming ...)

Then, there are the legions of very nasty people who've made their 'livings' from quietly skimming off oil profits (which ain't too difficult @ $120, but altogether harder just now).  A bit like when drug dealers can't deal drugs any more, they will be looking for the next source of ill-gotten $$$: and what, do we think, might that be?  We won't enjoy it, whatever it is - because it's our money either way.

'Interesting times' doesn't get close.

ND

Friday, 8 January 2016

Last one out - turn off the lights


BQi closed its satellite operation today. Everyone was laid off with a weeks notice and sent on their way. The landlord is putting the premises up for auction. I have pick of of the fixtures, which is not of much real interest or value to me, and then that will be that.



Regulars may recall I took over an ailing competitor back in September. After a few weeks it looked like it was going to be a lot of hard work and {worse!} hard cash, to make it right.

In the end it never performed to the levels required. Although each month had a better set of figures, any retail focused business heading to December ought  to have an improving set of figures.
Too much business had been lost in the time this one closed and BQi took over. Clients need their stuff. And in the very small interim period they went elsewhere. And people hate, just hate, constantly changing suppliers. So a loss is often a permanent one.

The inherited staff could not get on with BQi appointees. Bickering and bitchiness was the order of the day, almost every day. Errors and SNAFUs were commonplace. Service was mediocre to poor.
Discussions with the landlord for purchase of the freehold, which can transform a small business from small to large profits, fell through on the amount of restoration work required to make good the premises.

At the end of the day, after everyone was paid, bills paid, expenses, utilities taxes and the rest, it was going to net to me about 10% of what it was costing to run.

That's a return that you can get just by putting your money into a buy to let. Or a landlord of a leasehold retail. 5-10% is about right. And for that , you need do almost nothing at all.
Where as I was looking at a quad paracetamol headache every morning.
 I found the whole experience wearisome.

However, 10% isn't to be ignored in these difficult times. It was heading the right direction. I could have let go of the troublemakers. Could have done much more to attract new business. I have done these things many times before. That 10% could, quite probably have been 15-25%. And that's worth doing.

But two things caused the plug to be pulled.

One was an almighty and costly  F*up that meant the profit for the key December trading is now close to zero. That is depressing. And worrying in that I wasn't convinced it couldn't occur again.

But number two was the real camel strawback

CU said he had "A bad feeling about this 2016..."
But for the employer, its a definite bad year...its nailed on.

Changes to pensions means employers must pay a % of a pension to all workers. That's quite a cost. Even in its embryonic form. It still adds about 2% to costs. 
Wages Are on the rise. George Osborne has decided he isn't going to pay for tax credits anymore. Employers must pay for them instead. This will increase wages by another 7% - 10% for 2016.
On top of the 3-5% increase we had in 2015. And with a further set of rises that will increase wages another 20-30% by 2020.
And the changes to business rates don't look very beneficial. They give powers to local authorities to raise or lower rates. Which will they chose , I wonder?

So ...That 10% profit is going to be around 1% in just 4 years time. 

That's without factoring in any of the other real costs. Utilities, transport, interest rates, employment law changes. New codes or restrictions. Paternity and maternity payments. Health and Safety demands. Insurance cost rises ..internet online competition...That pension cost which as we can all see is going to rise from 2% to 10% of wages like N.I. did or even 'the bloody weather' which has done for all our winter hats and gloves sales so far this year. {Currently running at a feeble 25% of usual volumes. And that's on much lower margins to shift the stuff.}

Osborne said that the Office for Budget Responsibility (OBR) claimed the national living wage would have only a “fractional” effect on jobs. The OBR said that by 2020 there will be 60,000 fewer jobs as a result of the national living wage, but almost one million more in total.

My former employees have joined the 'fractional' effect today. That's the reality. If someone can make much more money, much more easily,  by investing in a holiday home; why on earth would they bother running a company?

Thursday, 7 January 2016

I believe the term is "pwned"



Armchair Marxist Owen Jones has had a good run recently. He was one of the early-birds of Corbynmania, realising that there is always a niche for people who say what lots of people want to hear, and don't care too much about the hows and the how muches.

Nice to see The Economist pick up on some of his illiteracy. However, it isn't just the Boy Owen who says we are drowning in debt. It is a constant refrain on Left and Right.

I do encourage all good Capitalists to read the article in full, but for me two main points stand out. First is that we should always challenge the stats which are put in front of us. As the article points out, there is absolutely no value in telling us that prices have gone up this year. It kinda happens a lot. Second, that we should always think about not just how big a number "it" is, but how it compares to other relevant numbers.

Take household debt, which is the subject especially raised by the Economist article. According to one stat, I owe NatWest three times my salary. Holy Moly! But that ignores the other side of the equation. I have about four times my salary in assets, even after you take off what I owe the bank. Granted, they are not liquid assets, and to pay off the bank in one swoop I would have to make myself homeless, but the point stands. To service that three-times-my-salary I have to spend 10% of my net monthly salary. Hardly expensive. The point is that the overall level of debt either on a personal level or at the national level is far less relevant than the affordability of that debt.

Shrill commentators on both extremes of the political spectrum keep telling us that George Osborne has "doubled the national debt", as if that is a useful statistic. It is meaningless. What has happened is that the deficit remained high throughout the last parliament, and is still very high, so the state kept running up debts. But what also happened is that the economy grew a bit, and borrowing costs collapsed. So the straits are not nearly so dire as the headline might seem to protest. "Only" 3% of national income goes in servicing the national debt, and the debt to GDP ratio is about to peak - even though the deficit has definitely not been closed.

That is not to say we should throw caution to the wind, but please let's have a level-headed debate without too much BS on either side. That would be a nice New Year's Resolution, wouldn't it?

Thank you to @make_trouble for the Economist link.

Wednesday, 6 January 2016

North Korea: Told You It Was Kicking Off!

Yup, first the diplomatic outrage of the all-girl Moranbong Band ... and now a hydrogen bomb!  The 'H-bomb of justice', no less.  They'll be producing food next.

Gotta love the official announcement which, as part of our usual service to readers, I have strained my eyes (and other faculties) to read.  Highlights:
  • "The H-bomb test conducted in a safe and perfect manner had no adverse impact on the ecological environment ... the most perfect manner to be specially recorded in history". (That's nice.  In fact, I  think it was one of their undertakings at the Paris climate conference last month.  Shows they know their audience, anyway)
  • "Since the appearance of the word hostility in the world there has been no precedent of such deep-rooted, harsh and persistent policy as the hostile policy the U.S. has pursued towards the DPRK.  The U.S. is a gang of cruel robbers ... not content with having imposed the thrice-cursed and unheard of political isolation"
  • "Nothing is more foolish than dropping a hunting gun before herds of ferocious wolves".  (Hard to dispute, that one.  Maybe 'hordes', though ..?)
  • "Genuine peace and security cannot be achieved through humiliating solicitation or compromise at the negotiating table"
D.Cameron, please note that final pearl of oriental wisdom. Nukes. It's the only language the EU understands.

ND

Tuesday, 5 January 2016

Corbyn-Watching: Him and Whose Army?

Seriously?
A fine spectator-sport is old Corbyn and his marxist motley, trying to fashion the revolution out of twitter and twatter.  His upcoming purge should be fun - please let Diane Abbbottt be shadow foreign sec! - but what is Corbyn's army really made of?

Someone wrote recently that where most insurgents try to turn an incoherent mass movement into an effective political party, beardy and his boys (oh yes, it's all boys in the boiler-room) are essaying the opposite.  That really would be a novel form of politics, or maybe even a species of anarchy.


And who are his elite shock-troops? A strand that interests me greatly was started by one of our sage Anons, à propos of the 2011 riots, who warned that we ain't seen nothing yet: the next round would be organised by a fearsome new 'officer class' of disaffected, unemployed graduates.  I half-wondered whether this had started when the well-organised troublemakers of the 'No Dash For Gas' movement burst into action in 2012 - but it has fizzled out, at least for the time being.  Perhaps Corbyn's cause is sufficiently grandiose to encourage more of them out from their putrid pits and onto the streets.

Paul Mason (another marxist) also thinks along similar lines:  this from his "Why It's Kicking Off Everywhere" -
At the heart of it all is a new sociological type: the graduate with no future ... one of the historians of the French Revolution wrote that it was not the product of poor people but of poor lawyers.  You can have political/economic setups that dissapoint the poor for several generations - but if lawyers, teachers and doctors are sitting in their garrets freezing and starving, you get revolution.  Now in their garrets they have a laptop and broadband connection
So - is that what lurks behind the deeply unconvincing Corbyn?  Are the garret-graduates strapping him El-Cid style to his horse, behind which to surge out from their bed-sits and conquer the world?  It could be worrisome, but somehow it doesn't much look like that yet.  Even if he makes Chuka Umunna and the Eagle Sisters nervous, the rest of the world isn't trembling with fear, just mirth.

Still, C@W readers guessed heavily in favour (21 - 2) of him still being in the saddle by the end of the year.  Presumably that's all that matters to the heavy-duty Livingstonistas who really call the shots.  Purge first, reselect next, and take the field in 2020 with a genuinely Leninist party.  Perhaps it sounds plausible when you say it like that to your bed-sit buddies.  Osborne and Sturgeon must be enjoying it all hugely.

ND

Monday, 4 January 2016

New Year, New Crisis

So a stock market fall in the first week of the new year, is a very common occurrence.

In December, Fund Managers and Hedge funds load up on stock with their spare cash, this drives up equity market and helkps them to hit their targets for their bonus's for the year; hence the term, Santa Rally.

At the end of 2015, this was more muted, as world events meant that shocks aplenty abound and even manager desperate for bonus' don't want to be loaded with stocks that fall in value.

The flip side fo Santa rally is that Fund managers sell in the first week of January ever year, book some losses and then take on cash which they can play with for a whole year - the losses they have some time to make up and their all important bonus' are paid in Feb on last years results.

However, could it be different this year? The markets are very wobbly in China, where a real terms recession is underway in many industries while the property market bubbles away agin, and also macro problems in the Middle East (as per the whole of recorded human history, 'tis true) are not going away. Hence a rather sharp 2.5% sell off on the FTSE this morning.

That is much more of a crash than usual and sets the index up for a tough year already, off the back of what was a losing year last year. With US interest rates rising and weakness continuing in commodity markets, there will be a lot of downside risk on the FTSE in the first quarter at least.

It is not a very happy share buying environment unless you want to try high risk pharma companies that seem to have replaced E&P oil companies as the high risk, high reward AIM bets.

It will be an interesting year.

Sunday, 3 January 2016

A spot of light reading on a Sunday

Esteemed readers may be interested in this essay from Paul Graham, on the fall of corporations and the inevitable rise of inequality. I found it fascinating.

Hat tip: @mikedarley

Friday, 1 January 2016

North Korea: It's Kicking Off Again!

Readers of a certain vintage will remember the good Croydonian and his fine public service blog that monitored, well, all sorts of mad stuff but North Korea featured strongly: a rich seam indeed.  Deprived of his bulletins, we do our best: but we're a couple of weeks behind the times on this one.  Fat Boy, it seems, has done it again; he's pissed off China by cancelling a friendship tour by the all-girl Moranbong Band!


Now those girls are hot.  YouTube has no end of film of the slavering L'il Kim and serried ranks of uniformed goons getting their rocks off in unison as the Moranbong laydeez strut their stuff.  Western stuff, too:  they've all been on the course!


We may be pretty sure the Chinese will take this badly, what with having no other form of entertainment available to them on the weekend once the Saturday morning public execution is over - sometimes as soon as 09:05 these days.  The time when the Gazprom choral society or the Sea of Blood opera company could satisfy their cultural needs is over, oh yes. What they want is North Korean talent imitating Western totty with short skirts, electric violins and a bit of close harmony.  Deprive them of that, and they'll be off building new islands in the South China Sea, the only practical outlet for their repressed libidos.  

And then where will we be?  2016 has hardly begun, and this kicks off.  Another fine mess for Hilary Clinton to sort out, she can't get started soon enough. 

ND