Sunday 30 May 2021

Oil = the New Tobacco

I have never followed the tobacco industry: the sum total of my knowledge is:

  • that it features as a no-no on various "ethical" investment lists
  • it's accused of pushing fags to third-world kids
  • they smoke a lot in the Far East
  • Kenneth Clarke has, or had, some sort of non-exec involvement 

Just recently I read that tobacco consumption has hit an all time high!

So what do we make of this hypocritical charade?  I'm guessing that by dint of the first bullet above, the industry has to get along with a slightly higher cost of capital than might otherwise be the case (or maybe it's done with cheap Chinese money).  Well, provided all tobacco companies face the same situation, no competitive disadvantage follows.

Secondly, all the action is presumably out of sight to western eyes, so probably nobody much cares any more: the shareholder activists have won that particular battle and have all moved on to something else.

Summing up: there must be several companies - some of them 'western' - quietly making a great deal of money from this all-time record tobacco consumption.  Meanwhile, the woke caravan has moved on - it seems everyone's happy.

Given the rash of "adverse" headlines in the traditional oil sector, I think we may anticipate oil going the way of tobacco.

  • the activist shareholder lobby is all over it: indeed, it's where that self-same woke caravan has fetched up
  • there is no way on earth that global demand for oil will slump any time soon (though it's cyclical, like anything else) - the chances of EV production meeting overall motor demand in the next decade are nil: but even Greta would presumably like to get an ambulance ride if she should need one. etc etc
  • unlike coal, oil is essentially a western-dominated industry, with a vast amount of capital deployed that will not go down without a determined fight

In my day job I don't do a lot of oil stuff: it's too easy a commodity to deal with commercially (compared to gas and electricity) to need much specialist consultancy.  But I can tell you that in gas and electricity, the stuff that greens don't like (e.g. coal-fired and gas-fired power stations) has for several years now been quietly passing into the hands of private equity, asset by asset, SPV by SPV**.  The traditional players are hoping to run their businesses as green-approved specialists in future - made all the easier by the 2018-19 decisions that enshrine "climate-change adaptation" & "resilience" etc as Green.  

RWE is a superb and quite extreme case study (because they've got perhaps the biggest coal-&-lignite challenge), but Statoil (Equinor), Shell, BP, Total and several others are almost as striking - and are well on the way.  ├śrsted (formerly DONG++) has pretty much worked the oracle already.  Most of them stumble a bit, because they ain't so hot on the ultra-high-tech that's often involved (I've watched Shell making an arse of itself at close hand) - but they are big and capable and determined, and many of them will probably learn the new ropes.  (They made a much worse hash of it in the 1990s when they all piled into the electricity sector, stupidly thinking it couldn't be much different from gas.)

So watch out for the oil industry going the same way, headed for thick-skinned ownership that will seek to profit from strong, unending global demand while the woke-west averts its eyes (and still takes holidays abroad, uses mobile phones, plays online games etc etc etc).  If this doesn't work (and I think it will), well, China will clean up.  We offshore the world's manufacturing CO2 emissions to them, and maybe we'll outsource that nasty oil production as well.  (Russia stands a decent chance of muscling in on this one, too.)

As noted here before, Exxon is the standout progress-resister, desperately wondering if it can carve out a viable "last remaining dinosaur" niche.  It ain't gonna get away with that unnoticed.  But I'm not sure it knows anything else.  The elephant never did learn how to dance.  And the Darwinian race is to the adaptable.



** Incidentally, some of them are royally ballsing it up.  But there's so much $$$ out there!

++ How we miss dealing with a company called DONG !

Friday 28 May 2021

Cry forth economy but...

Here we go again, this time with a vaccine. The new Indian variant is spreading wildly in the Country. Due to the vaccines it won't kill as many or hospitalise as may as before, but given half the country has not been vaccinated we might expect a peak about half of what it was in the last wave in about oh, 3-4 months time. 

Of course for now the cry is to open up and relieve the economy. there is little personally that I can't do already so a lot this shouting is for really quite a small section of the economy. Air travel and holidays are beyond our ken, France has banned from-UK travel again today - other Governments will do as they feel they must. 

What we should look at is that the economy and jobs market are in fact bouncing back strongly, much more strongly than the OBR predicted at the last budget. Dishy Rishi will be able to splash some cash (no doubt in the NHS, sigh) later in the year, whether open up fully or not. 

Surely with this in mind the sensible thing to do is not open up the economy until everyone over 40 has had two jabs, that way we will win once and for all?

Wednesday 26 May 2021

Not sure this Cummings character has too much time for Boris?

 Seems a bit rum, guy gives you the top job to be the key adviser running the Country. Has your back when you make some screw ups, eventually boots you under pressure and now you act like the most petulant ex-partner ever revealing all the sordid details and likely making some up too. 

Not sure he would be someone I would employ, big brain yes, emotional intelligence, not so much. You just can't trust Dominic's these days!

Saturday 22 May 2021

Desert Storm (8) - the Halt on the Road to Baghdad

30 years ago, the Coalition had eventually launched its ground offensive to expel Saddam from Kuwait, having used the many months of planning-time well.  The huge and (in its better units) capable Iraqi army was well dug-in, and as ever, had devised some genuinely innovative defensive tactics.  Particularly creative and noteworthy was the digging of a system of forward trenches fed directly by Kuwaiti oil wells: at the opening of a valve, the trenches could be flooded with crude oil and set on fire, creating a genuine obstacle as well as a tremendous smokescreen, that staple of tactics since WW2.

But notwithstanding the solid core of battle-hardened units, stiffened by the highly committed Republican Guard, much of their army was bulked out by raw, ill-trained conscripts of low morale.  The whole force had been degraded by weeks of exceptionally vigorous air attack.  And everything out in the open was fully reconnoitred in detail, with nowhere to hide.  The Coalition had a plan for everything they saw in front of them.  In "the biggest tank battle since Kursk", wherever the front line Iraqi units were not swiftly and remorselessly crushed (in some cases, literally) by the well-planned ground offensive, they typically showed a willingness to fight only for an hour or so, then surrender.  The number of willing prisoners, and speed of overall enemy collapse, surprised the already confident Coalition forces, who nonetheless had the leadership and logistical wherewithal to capitalise on it and steam ahead.  You can can easily find plenty of fulsome further reading material online.

It's pretty well known that massacres happen during rout, when an army turns its back and flees.  This is exactly what occurred at the end.  The Iraqi rabble that evacuated its newly-annexed Kuwaiti territory and fled north to Basra was caught in the open and, for a few hours, mercilessly strafed.  The result was predictable carnage and I'm choosing not to rehash some of the truly gruesome "Highway of Death" photos that adorned newspaper front pages the next day.  (Wiki doesn't, either.)

We've discussed before the vulnerability to air attack of vehicle columns, not least in the context of equally famous photos of what the Israelis periodically used to inflict, particularly on the Syrians who must be unusually bad at convoy discipline.  To be fair, it's not easy at the best of times - and in the desert, pretty damned impossible.  The only thing to do is break the convoy into packets of 5-6 vehicles, which ain't gonna happen in a rout.  The Germans in WW2 were the acknowledged masters of vehicular discipline in conditions of zero air cover, particularly in Italy: but (a) Italy isn't quite such hopeless terrain for the job, and (b) which other army has ever had the discipline of the Germans?  (I was once leading a packet that was part of a gigantic RAF convoy on exercise in Germany, supposedly being conducted under wartime "tactical" conditions, and the whole thing was an hilarious farce - subject of a story for another day.)

A day later, President Bush (Snr) called a halt to the Coalition advance into Iraq, a long way short of Baghdad.  Some say the carnage played a part in his decision.  There was much hoo-hah about this:  why didn't he allow Schwarzkopf to finish the job?  Or at least spend another 24 hours degrading Saddam's military capabilities still further?   (Given that politically this hoo-hah may be said to have led to Bush Jnr's crazy essay at Gulf War 2 the following decade, it's a fair question, and an interesting, multi-dimensional strategic counterfactual to mull over.)  

But Schwarzkopf, true soldier-of-a-democracy that he was, obeyed the political instruction to halt without demur.  All credit - massive credit - to both men, I always say.  For months, Bush had stayed out of real-time military meddling, which many another president wouldn't have been able to resist.  (Hitler never could.)  But Bush was always on the ball: and at the end, he was crisply decisive.  The military respected the ultimate political authority.  That's the way the bargain should work in a democracy at war.

We'll look at what happened next in another episode.  


Wednesday 19 May 2021

lnflation doubles in a month and jobs impact this may have

 Continuing on from yesterday's excellent comments. Today we have seen inflation reportedly rise from 0.7% to 1.5% inside a month. None of this is unexpected, big drops from a year ago when commodity market crashed are coming out of the figures now as prices rose again quite quickly into April/May 2020 after the Feb/March dip. 

Also, as touched on yesterday, we are seeing wage rises come back into play. The missing million of working age population who left post-Brexit and Coronaplague can't come back yet. So now businesses are looking forward, there is a big "war for talent" as the HR-types like to say when they are feeling pseudo-intellectual.

At the same time, there are plenty of people not very keen on going back to the office, especially senior quite well paid people who are likely more productive without commuting thrown into their days. What do companies do in the short and medium term? These people are paid London level salaries but could now live in Wales in theory. That surely won't last. Commuters who had to pay for season tickets just had a £4000 bonus last year. Equally, for more junior staff, they need the senior people to learn their skills from which does not happen so much over Zoom. 

My take on this is a hybrid model will out, where actually yes you might live further from London and only come in 2-3 days a weeks, but senior jobs will not really be allowed to be full remote in the longer term and if they are, they will be deemed specialist and not senior - thereby changing the pay over time for that role. So this will allow things to continue in a not dissimilar way to now. 

At the moment, companies have too much to deal with sorting out return to office, planning new office spaces, working in a newly busy market, trying to hire poeple etc, to really absorb any of the long-term lessons - which is why we see such divergence with HSBC saying most can work from home and Goldman's saying none. 

Of course, this is a very South-East centric post, in the rest of the Country people generally did not live 80+ miles from work and so this is less of an issue, plus there are of course most actual jobs, which did not cater for the WFH world anyway.

One thing that leaves me cold is that somehow, this will all lead to all jobs going to India etc. adn that flexibility is a path to hell. "People can work from anyway so why not hire them where they are cheapest" and so careful what you wish for. If this were true it would already have happened (indeed it did, hence China), the new element is only that companies have realised they can survive more flexibility now, not that they need a whole new cheap team. The conundrum remains how do you fairly reward/price flexibility as an offer to your staff given it has big upsides for them over the company - but to go back to my earlier theme, in a war for talent, flexibility may just end up a priced in benefit for now.

Tuesday 18 May 2021

UK unemployment down - how big will the bounce be?

So unemployment has fallen in the UK, very unexpectedly in the last quarter. Down only from 4.9% to 4.8%, but to fall during a lockdown is really quite something. 

Clearly later this year there is going to be some fallout from the end of furlough, where a couple of million people might well suddenly lose their jobs and almost double the unemployment rate. However, as the economy bounces back the idea everyone is going to lose their jobs sounds less credible. 

Also we lost 1 million people to the work force post-Brexit and Covid - a huge hit. It is why you can't sell a London property at the moment. This worker shortage is going to take up a lot of the Covid pressure. Meanwhile, high skilled labour is still in higher demand and short supply - all those data analysts and basically anyone who is an advanced computer use. 

So we many even see, against expectations, some wage increase pressure later in the year and the beginnings of a large inflationary wave. With the new India variant in circulation, things might go a bit sideways for a while, but it is hard to see 2021 as a bad year outside of airlines and hotels. 

This must all bode well for the markets and the economy as a whole for the near future. One day there is going to be a price to pay for the buoyancy we are seeing now sprayed around by the money printing and debt the Government has taken on. I think 2022 might be a much darker year than 2021 economy wise. 

Sunday 16 May 2021

Cup Final Special! - On Leadership

Well, that was quite satisfying, in several ways.  Seeing Lineker prancing around (not very satisfying) on the Beeb, it put me in mind of the famous 1991 final when Spurs beat Nottingham Forest in an incident-laden afternoon, one of which episodes has always struck me as being of lasting significance**. 

Another amusing incident - see footnote
The match (for younger readers) was tied 1-1 at full time and so extra time was played.  In the short interval, the old rogue Terry Venables gathered his Spurs team around him and was clearly dispensing Managerial Wisdom.  The sulky old git Brian Clough, by contrast, sat ostentatiously motionless, leaving his Forest team to their own devices.  (IIRC, their deputy coach tried a few words of encouragement.)   Spurs were clearly the better team in that final period, and prevailed.

Massive wasted opportunity from a man who was oddly but widely lauded as a master psychologist.  (Some say he was blind drunk at the time, which doesn't strike me as much of an excuse.)  But how effective are managerial harangues in the interval?

A very interesting piece in the DTel recently carried some genuine analysis (paywall).   It contrasts the second-half performances of Premiership sides, with their performances before the interval team talk.  They draw one stand-out conclusion, which is that Solskjaer is a great manager - because Man U would be ranked a mere 13th on first-half scores, but a very clear first based on second half scores.  There might, of course, be other factors besides his inspirational half-time addresses - perhaps Man U relies on truly superior 90-minute stamina, or fiendishly clever late substitutions - but it's a very revealing statistic.  (Incidentally, the standout bad actor against this metric is none other than the Chosen One - which doesn't surprise me in the least - did you ever see, post Clough, a surlier git than Mourinho?) 

I recall a BTL comment here, several years ago, that the captain of a rugby club contributes not much more than being responsible for organising the orange slices at half time.  Can't agree.  Leadership is leadership.  Ask the Labour Party.



** Here's another: from Wiki:    This game also saw the first appearance of the much longer 'baggy' style of shorts, sported as part of Tottenham Hotspur's new Umbro kit, which Terry Venables helped design. Though attracting some ridicule at first, the style swiftly became popular, being adopted during the early 1990s throughout English and world football by every team at every level (with no team anywhere having reverted to the 'short shorts' worn ubiquitously for some decades up to this match). 

And another: that hand-holding episode in the photo above was lovingly recounted by the deeply unwoke Venables on TV many years later.  Haha!

Friday 14 May 2021

And your point is ..?



You often hear people in the meejah saying "Nobody voted for this!"

Well ...


Thursday 13 May 2021

Tesla the bellweather falls along with frothy US markets

Sell in May and go away is the old adage and for another year it seems likely to come true!

Elon Musk's Tesla has long been a favourite in the US markets. beating the competition with technology and Musk's appeal as a real superhero character complete with many flaws.

In January Tesla hit an all time intraday high of $900 per share, today it is heading down to $600 and rapidly, taking the shine of the US tech stocks as the recovery takes hold. 

But of course there is more to it than that, Musk promoted Dogecoin and Bitcoin and has also announced he won't be taking bitcoin as payment for cars anymore due to environmental concerns. This has pegged Bitcoin 10%+ too and taken the steam out of the crypto bubble. 

In China, Trump had slapped on a 25% tax on Chinese electric imports. Forced to sell more cheaply in their home market, Chinese EV cars have started to take huge bites out of Tesla sales, down as much as 67% this quarter.

This could be the start of a big-rework in the US and world markets. As the vaccinated world returns to something like normality, out of favour leisure, travel and hospitality stocks will see a resurgence as will say office space. The stay at home robinhood investors will return to the real world - they may buy real world assets for a change or drop out of their gambling habit. 

With recovery not yet baked in, I don't see a recession any time soon, but that does not mean the markets can't fall as the great reset into Value takes place? Tesla won't be coming back up to its all time highs if this comes to pass. 

Tuesday 11 May 2021

The Ambitions of Mayors

We all know that every soldier has a field marshal's baton in his knapsack, and that every MP wants to be PM.  Theoretically.  If it were to be handed to them on a plate.

But there are degrees of ambition; and not every MP has the kind of relentless Julius-Caesar ambition that stops at nothing.  Those that do, while they do, think of little else, every waking moment.  Asleep, they dream about it.  To the extent you can identify those ones (steam issuing from the ears is usually a sign), whenever something big goes down it's always fun to watch and to speculate how they see it; how the event impacts on them; how they try to turn it to their advantage.  

It's pretty clear that the advent of elected mayors in the UK provided a form of outdoor relief for the Truly Ambitious to essay the Caesar-in-Gaul trick.  First out of the blocks was Ken Livingstone, a man of boundless self-confidence and chutzpah - but the timing didn't work for him: he never stood a chance of nipping in ahead of Gordon Brown.  By the time of the 2010 Labour leadership vacancy, he was pretty vacant himself, a busted flush shouting at people in the street.

Boris, by contrast, worked it all to his advantage and a couple of lucky breaks later, here we all are.

Which brings us to the current difficulties of Sir K.Starmer.  Who'll be figuring out the next phase of their strategies now?  

By some accounts, none other than Angela Rayner (41) works permanently and purposefully to advance her own cause.  She certainly showed infinitely more fight in her own crisis than Rebecca Long Bailey in either of hers (x divided by 0 being infinity), with a gaggle of outriders in the field to cover her flanks with the meeja.  (RLB had an army ready to do her bidding: but she never blew on the horn.)

But Exhibit A is Sadiq Khan.  I probably don't need to convince you that he is firmly set on the Top Job.  Those mayoral roles, of course, come with the perils of fixed-term schedules, but Boris finessed that by re-entering the Commons a year before his London term ended.  We may confidently assume Khan expected to do the same, probably in 2023.  But will he now feel that's too late?   Starmer looks like he might implode before that; and in any event, Boris may pull the GE trigger before then, too.  Can Khan be sure Starmer's successor will be equally short-lived in post?  He's 50 now; how strong a challenge could he mount at 60, say?   Logically, he has to be in Parliament no later than at the time of the next GE.

I don't think we should be surprised if he seeks a "dual mandate" (as it's known) at the first opportunity: a nice, diverse Zone 2 parliamentary seat.  He's sufficiently transactional, he might even force that opportunity by getting someone to resign for him; though I'm not sure Labour Party rules would give him any certainty of being put on a by-election ballot paper, whatever the locals might want, if the Starmer machine retains executive power ...  Decisions, decisions.  One thing's certain: he'll be on manoeuvres at all times, and (for anyone even vaguely amused by this stuff) his public utterances should be monitored with interest.  As a minimum, watch him claim titular championship of the supposed new Labour bedrock of metro-bedsits and diversities.

This all tends to make us look in the direction of Manchester to that other mayoral paragon, lovable little Andy Burnham (51).  In principle, all the same structural considerations apply to him.  But ... does he strike us as in the same league, ambition-wise?  My best guess is that he wouldn't force the pace proactively, and is more in the "if it fell in my lap ..." category.

Any other foaming-at-the-mouth candidates we can spot in the ranks of the People's Party?  And what will they be up to next?


Monday 10 May 2021

One more week

 The fretting of the media over the insignificant local election results has gotten very boring now, the whole narrative about labour doing so badly is not even really true. The Governments who managed Covid were all rewarded - so much for the anti-lockdownistas and covid denial mobs - the people have spoken. 

In better, news all major economic forecasters continue to uprate the UK's growth rates for this year as the vaccine roll-out continues to go well and the landmark ending of many lockdown measures from next Monday on track and only 5 weeks until Covid freedom! At least until October/November and the onset of any variants if we are unlucky.

Shame the rest of Europe has not got its act together enough on this issue and they remain lagging. 

This time next week, you never know, it may even be a bit warmer. Certainly a good start to the week to be writing this after all these long months. 

Friday 7 May 2021

Dazzling: Naval Camouflage Comeback!

 Hey, who'd have guessed this?


Yes, WW1-vintage 'dazzle' camouflage is back in the Royal Navy, just in time for war with the Traditional Enemy.

Dazzle dates from when artists were enlisted to assist with camouflage of big targets - starting with naval vessels but extending to many strategic onshore facilities in WW2, including factories and airfield runways.  The Navy is currently crediting Norman Wilkinson (as does Wiki), but there were several more individuals involved, most particularly the Futurist painters Nevinson and Wadsworth, whom some credit with the original ideas.   And not just here: the Italians were quite big on it, too.  Amusingly, the Italian Futurist movement made a cult of it, issuing one of their overblown "Manifestos" entitled Plastic Illusionism of War (FFS!)   I can bore for England on this stuff.

Not only did artists design the camouflage schemes, they painted them as well - illustration-wise, that is.  Here's a couple from the IWM's fine and extensive collection: you can see many more there.  The first is of a young lady experimenting with a model aircraft carrier in a water tank at the Directorate of Camouflage, painted by James Junge-Bateman.  (© IWM Art.IWM ART LD 2759)


And here's a power station cooling tower, artist Colin William Moss.  (© IWM Art.IWM ART LD 3025)




Hint to Admiralty from an old pongo: all yer dazzle paint won't do anything to keep those modern aircraft carriers afloat in the South China Sea ...


Tuesday 4 May 2021

A Culture-War Manifesto

Online "lists" - 10 things you ought to know about ... - are generally just so much clickbait cack.  

But here's one you'll want to read 25 Things Everyone Used to Understand.  Sample: 

[2] Who and what you are is only partly self-determined. And it’s not the larger part.

[3] How you are characterized, spoken about, and identified by others is not generally up to you.

[15] Offense, insult, and hurt feelings are not particularly important, other than to oneself and to one’s intimates. This does not mean that you should go out of your way to offend others but rather that if you are offended, you shouldn’t be surprised if those outside your friends-and-family circle aren’t inclined to make a federal case out of it.

[16] You don’t accost random strangers on the street and unload your personal meshugas on them, because it’s not their business and they don’t give a damn. Nothing about these reasons fails to apply when you replace ‘street’ with ‘internet’.

[17] Scores of millions of people, most of whom neither know nor live near one another, cannot constitute a “community.”

Good stuff, huh?