2025 Predictions Compo: results!

This one was probably inviting too many qualitative answers for easy adjudication, but here goes.  First, the factual aspects:

1. Name of first sitting MP defecting to Reform   Ans:  Danny Kruger

2. Date of Starmer's first Cabinet reshuffle, as defined. One bonus point for each correctly-named departure or clear-cut demotion. Two bonus points for any complete change precisely identified (named outgoer and named replacement) 

Ans:  there hasn't been one according to the definition, which excluded shuffles forced by resignation.  There was one of that type on 5 Sept (Angela Rayner).  It's arguable, surely, that the lack of a reshuffle is yet another signifier of Starmer's political weakness.

 3. Anything you care to predict about the German Fed elections    Ans:  the vanilla results may be found here.

 4. Composition of German government coalition by year-end   Ans: CDU/CSU and SPD

 5. Dollar / rouble exchange rate on Christmas Eve    Ans:  78 - 79 range

 6. FTSE100 on Christmas Eve   Ans:  9,890

Results:

1.  Nobody got this one.  (Wonder if any Tory MPs guessed?)

2.  Nobody technically on the money here either.  Several of us mentioned Miliband and it is rumoured he was indeed for the chop, but dug in furiously - and here he still is.  Mr Cowshed saw Rayner as perilously positioned, but not the cause of her exit.  He also saw Lammy as highly vulnerable - an excellent call.  SubOptimal got the timing right.

3 & 4.   Mr Cowshed correctly had AfD second, and Caesar H had the first three in the correct ranking.  CH and Sobers both called the coalition correctly.

5.  Sobers a comfortable winner here with 87 (though on incorrect reasoning, viz a Trump-enforced peace deal): everyone else had it higher & most had it >100.  The exact state of the Russian economy is a highly vexed issue, of course, with good data hard to obtain (FX, at least, is transparent).  Nabiullina is under colossal pressure from Putin to reduce the interest rate to 10%, which she has resisted thus far: it's at 16%, having blipped above 20%.  If she succumbs, and/or quits or is fired, let's revisit that FX rate again ...

6.  Nobody saw the FTSE rising!  Nul points.

From the above, there's a 3-way tie: with two ranking mentions each, it's Anomalous Cowshed, Caesar Hēméra and Sobers !  Well done all.

*   *   *   *   *

There was also a bonus wildcard essay question : at headline level, what will be the state of play in Ukraine at year-end?  We'll return to that one in a few days: but next up - the 2026 compo ...

HYN!

ND

Blogstats in a year of intense LLM "training"

Last year I noted the Top Six locations for C@W hits, as follows (in descending order):

Hong Kong / China / USA / Singapore / UK / Norway

2025 has been a bizarre year for blogstats.  Much as I'd like to think the upsurge represents long overdue global recognition for this blog, many other blogs have found the same and the widely accepted explanation is that the latest generation of LLMs, ever hungry for new "training" material, have been voraciously "reading" new bodies of text.  Obviously, the nearly two decades of flawless prose and compelling reasoning to be found on C@W make us a highly suitable educational experience for these eager students.

Anyhow, the "readership" has increased six-fold over 2024, with a mighty spike in June.  Someone in the LLM industry could doubtless explain this in detail.  Interestingly, while the spike has long since receded into the rear view mirror, it has left a pronounced tail in its wake**.  Presumably, the said LLMs keep coming back periodically to check on our latest gems: and I wonder if also their initial burst of reading resulted in a wider dissemination of C@W as a cited source, which ordinary ("human") www-browsers now access more than previously.

Anyhow, here is the Top 10 for 2025. 

1. Brazil - first by a good distance
2. Singapore
3. USA
4. Vietnam
5. China
6. India
7. UK
8. Japan
9. Bangladesh
10. Norway

Questions:

• Does this mean that electricity is cheaper in Brazil?  Or is it the cost of bandwidth?  I haven't heard of a rash of data centres being built there.

• To what body of hitherto untapped sources in the digitised world will the LLMs go for their next training binge?  What's left that is broadly literate, extensive, ignored thus far - and free?  The complete speeches of Stalin, Mao and Castro?  Might it be something of unspeakably awful content, such that LLMs will soon be effing and blinding like a docker and sharing pictures of nudified politicians ..? 

• May we hope that the wholesome diet of C@W wit, wisdom and literary excellence will raise the whole tone of AI output?  (*ahem*)

ND

PS: start thinking about your 2026 predictions ...

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** A company of my acquaintance that publishes a notable blog (as a promotional exercise) has suffered the opposite effect.  Its content having been extensively devoured in the same way, it now gets fewer hits, because AI searches give answers based on the LLM's reading and summarising of that blog.  These days, such searches do at least give links to the original source; but most lazy bastards go no further than the AI summary.  Which, to be fair, characterises much of my own use of AI - given the excellence of the summaries!  (Which is not necessarily a crass, circular assessment: when full reasoning & explanation are incorporated, you can pretty much judge that nothing salient has been omitted or "misunderstood".  And it's self-regulating, too: if the search is for an important purpose, obviously you dig deeper.)      

Some established business models are of course being actively trashed by the phenomenon - not to mention the upcoming fate of many professional, semi-professional and clerical-type jobs ... 

When the King invests in the bubble

Not only do human beings have a marked propensity to believe in perpetual motion machines, nuclear fusion, price forecasts and sure-fire betting scams wheezes, they love investing in a good bubble.  When a bubble really gets going - the classic case study being the South Sea variant - almost everyone with any spare cash piles in, accompanied by eejits who've even borrowed to do the same.  And by 'everyone', we mean (in the South Sea case) the King, the Court and, for good measure, Isaac Newton.  Yep, the suckers' propensity has little to do with brainpower or status.

So now we learn that a Trump family enterprise is getting into nuclear fusion, with the AI bubble in mind and the correspondingly vast putatively future demand for electricity.  Has the Orange One finally taken leave of his senses?   Well, note that the story says "the move would 'create one of the world's first publicly traded fusion companies'" which speaks more to making a killing on the share price rather than actually producing anything tangible like, errr, electricity.  So maybe it's quite canny.  What's more, who'd be surprised to learn that the Trump "50% share" is in the form of carried equity?  I'm just guessing here: but after all, his big contribution is surely to act as the pedlar of the snake oil** to his millions-strong legion of sucker-followers for whom he can do no wrong.

Needless to say, the announcement goes on to claim: "the combined company planned to begin constructing the 'world's first utility-scale fusion power plant' next year, with further plants to follow".  Well of course it does: what else would they say?  "Starting construction", as any dodgy building firm will tell you, doesn't need to mean anything more than clearing a site.

Publicly traded, hmmm ... does this mean we'll be able to short the Hell out of this thing?   

Merry Christmas to all !

ND

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** The so-called Swansea Bay Tidal Lagoon, a dreadful scam that ran 2012-2018 before HMG finally put it out of its misery, provides a sobering lesson on such matters.  The promoter, one M. Shorrock, was evidently very good at getting people to part with their money.  Some of his investors were high-rollers (who definitely ought to have known better, shame on them) but he also persuaded hundreds of small investors to take a punt, frequently on the heartwarming pitch that it would provide lots of jobs and cheap electricity for the benighted town of Swansea.  In this way he raised, and spent, somewhere between £37m-£50m before the scheme went bankrupt.  You won't be surprised to learn that many of these millions went to others of M.Shorrock's companies in the form management fees and loan interest paid at 20%.  He has a very nice house in Gloucester.

Oh, and for his own shares in the enterprise (he held approx 23%), how much did Shorrock himself pay?  Answer:  £70.  Not £70,000.  £70 (seventy).  PS, had the scheme ever reached financial close (which, had HMG given it a 'green' subsidy, it probably would have - the banks were lined up), Shorrock would have been paid £14m.

It is not known whether he currently acts as financial adviser to D.Trump.  Possibly not, since he was last sighted selling solar panels in, errr, Vietnam.

Miliband & the perpetual belief in perpetual motion

There's something very deep in human psychology that encourages people to believe in magic swords, universal elixirs, price forecasts, perpetual motion machines etc etc.  It's out there - and it just needs that little bit more human ingenuity to bring it to reality.

Ed Miliband is (we are told) a human, and clearly suffers from this syndrome.  Here are some of the things he believes in:

• a "net zero electricity grid" by 2030
• nuclear fusion as a practical source of power
• "negative CO2 emissions" from burning trees for power and burying the CO2
• hydrogen as a wonder-fuel of very wide practical application
• himself as a dominant force in a post-Starmer UK government

A man can dream: but he's spending our money on the first four of these (and indirectly, one might say, on the fifth).  In a harder-headed world, they would disqualify him from the fifth.  

Sadly, I don't think they do.    

ND

Enron's plan for property-price derivatives market

Canary Wharf: cornerstone 

Following on from the post about the 'predictions market' & how various attempts to make financial markets in superficially prospective areas have sometimes come unstuck (water; bandwidth, weather): I'd mentioned that just before the Big Collapse, Enron was planning a property-price derivatives market, meaning futures / forwards at the outset, and ultimately options.

The rationale for there being demand for such a thing was this.  Many individual and commercial entities, as well as outright investors, can find they have a lot at stake as regards the variability over time of property prices in general, and the differences between property prices in different regions (technically, a source of 'basis risk').  Simple examples at the personal level: someone who hasn't yet sold their current property but has committed to buying a new one - needs a hedge against prices dropping while they find a buyer.  Someone who needs to move from London to Manchester for a couple of years but expects to return to London thereafter: needs a hedge against London prices outstripping Manchester over that period.  Someone who wants to lock in an attractive price they've seen the identical house next door fetching when it sold last week, but doesn't plan to move just yet: needs a hedge against local prices falling.  Etc etc etc.  

And of course once a market is established, speculators and punters can pile in: unlike weather (see previous post), people often really do have strong opinions about whether the property market is overheated or underpriced.

So how was Enron going to get the show on the road, back in 2001 at the time of the Collapse?  They put some of their best people on it.  Regionally specific price indices already existed - the sine qua non for derivatives.  Key to any market is liquidity, in turn requiring market makers and critical mass: and, with some aspects of derivatives, the ability to cash out into the physical.  They had a strong relationship with the Halifax (then a big property player and publisher of indices) and planned to start with the London commercial (office space) sector - and to ensure physical delivery, as an opening gambit they were going to buy Canary Wharf !

Sadly, we will never know how this would have panned out ...

ND

Kalshi billionaires & the "predictions market"

As fans of open markets, generally speaking, what do we make of the soi-disant "predictions market"? in which the firm Kalshi has made paper billionaires out of its youthful founders (one of which is the youngest ever female paper billionaire).

Well, first of all, good luck to them: I assume their investors are consenting adults, hopefully with a brain cell or two to rub together.  Investment bubbles help make the world go around: where would we be for railways if there hadn't been an "irrationally exuberant" railway-mania boom in the 19th C?  Just so long as it is private cash, hopefully not pension money, that someone can afford to lose 

But secondly, this is just a slightly exotic betting platform with good PR, right?  And will they ultimately prove correct in that it's possible to "monetise every difference of opinion"?

A story.  At the back end of the 1990s when Enron had triumphantly succeeded (against strenuous opposition) in becoming a highly profitable market maker in all manner of commodity contracts that nobody except them thought was remotely possible - indeed, some academics declared was a priori impossible - a lot of people in the energy sector and much-larger financial / insurance sector were looking for the Next Big Thing to commoditise, create derivatives on, and trade.  I could tell you an amusing but irrelevant story about the attempt to do this with water: and at the time Enron went bust (2001) it had a clever plan, never realised, for doing it with property prices.  But the one that's relevant here is weather derivatives.

It's clear enough that a great number of companies and individuals often have something of value to them that is riding on what the weather will be.  Ice cream manufacturers, energy companies, holiday concerns both buyers and sellers, brides-to-be, county fairs etc etc.  They often buy insurance, from long-established specialist insurers.  So what?

Well, in principle we can identify all the technical factors required to establish financial derivatives.  Financial issues at stake in very large measure, impacting on a huge plurality of players.  Gains and losses related directly to uncertain but measurable outcomes.  Data on said outcomes that are objective and not open to manipulation or influence by the prospective winners & losers.[1]  So the weather-related derivative products were devised and a very large number of players from several sectors piled in with traders, marketing teams, software, complex stochastic analyses etc etc - all the paraphernalia of traded markets.  All these costly resources created, they sat back and started trading - mostly with themselves.  but surely, the genuine "natural counterparties" / end-users (entities with something at stake), the 'locals', the outright punters, would come along in due course?  What's critical in any such market is transparency (easy), clearing & systems, but above all else, LIQUIDITY.  

Well, nope: despite this huge global investment the weather derivatives market market never took off on anything remotely like the predicted and expensively planned-for scale.[2]  Why?  Because no bugger has any view whatsoever on what the rain is going to do next August 13th at noon, in any regions other than the Sahara or Antarctica (where there's no end-user business to be had).  Not even inveterate gamblers of the Sky Masterson variety.  Somebody may well have a horrible exposure to rain at that precise time, but no broker or market maker will be able to find anyone willing to take the other side of the bet - when there's a perfectly good insurance-based alternative.  (For those interested in the technicalities of financial risk management, insurance is a completely different paradigm to hedging, with different applicability.)

Why is this different to, say, the price of oil on August 13 next year?  Because there are very large numbers - sufficient numbers! - of people willing to take the other side of almost any number you care to put out there.  If I say $50/bbl, there will be loads of people with theories that say it'll be less, and loads who'll say it will be more.  The proof of this is the liquidity of the forward market for oil.  And any number of other commodities, as well as financial variables altogether more abstract.  Ditto big sporting events.

But weather?  Nah - or so it turns out.  Could this have been foreseen?  Some folks did, and saved themselves a bunch of time, money and effort.  But no so many.  Meanwhile, the perfectly healthy weather insurance market continues on its merry way.

So: a market in differences of opinion?  Well, sports and political betting are well known to be ultra-fertile ground for these things[3].  But if Kalshi is to break into new territory, it seems to me it needs to think of something a bit more interesting than "Will Trump attend another UFC event this year?" - and a heap less open to, *ahem*, manipulation.   (Guess who might be taking the other side of that bet?!  I think we can fairly be blunter: that kind of thing is really, really crass.)  

Nobody can rule out Kalshi actually finding a rich new seam of prospective punting.  But (a) this is a crowded field, and (b) it won't be hard for a load of other players to pile all over it.

Did I say "paper billionaires"?  They'd better try to cash out PDQ - as regards young(ish) female billionaires, I suspect Taylor Swift is the more solvent ...

ND

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[1] I am not interested in entertaining conspiracy theories about how weather data is systematically manipulated  by the Deep State or the Green Blob or whatever.  Obviously, forecasts are forecasts, and weather forecasts are substantially better than forecasts of commodity price & other financial variables forecasts which are seriously manipulated by vested interest all the time. 

[2]  Some AI disputes the notion that it never took off, suggesting it's a $25bn market.  That's derisory.

[3]  Is it unkind to laugh at Alasdair Campbell's son's sure-fire sports-betting syndicate?

Cost of Sizewell C, part 2

Part 1 was a qualitative summary of what the SZC deal looks like.  It isn't difficult to find more exact details - Mr W has provided several links & AI will yield more - though history suggests almost anything with a £ sign or a timeline will necessarily be a wild guess.  And even when apparently tied down contractually, EDF shamelessly just asks for more money / time whenever it feels like some, as the Hinkley Point experience amply demonstrates. 

We now turn to the questions posed in Pt 1.  

Why SZC's "identical design" won't cost less than HPC 

We've heard this story before: HPC would be a doddle, because Flamanville and Olkiluoto had blazed the trail for the EPR design.  But of course neither of those was remotely complete & commissioned before work started on HPC, so there was a distinct dearth of Lessons Learned from the outset.  Also, both had started development before Fukushima, so there were always going to be new considerations to contend with.  But EDF persisted with the "cookie-cutter = cost savings" promise: so now SZC will be even easier, even cheaper!  Nowadays, of course, with HPC being a complete fiasco in project management terms, they blame it on the UK regulators moving the goalposts / Covid / inflation etc etc.  Well, all those things to some degree[1]; but how about several outright, scandalous EDF failures along the way?  To give but one example: they failed to make an adequate geological survey of the HPC site, and thus missed systemic faulting in the bedrock.  Result: epic additional quantities of additional concrete being required for the foundations, and at least a year's delay.  There are several more examples of this kind which EDF - & HMG - find it convenient not to mention.  And it ain't gonna change: EDF is not remotely as competent an engineering concern as it ought to be, or as it claims, or as many would like to imagine.  

The other important factor to register is that the challenges for nuke projects on this scale are, in detail, very heavily site-specific.  It's not too much of an exaggeration to say that every big nuke is almost sui generis.  It's absolutely clear, for anyone following SZC in detail over the years as I have, that the Sizewell site poses a load of different engineering challenges that need to be addressed piecemeal.  And again, EDF has been doing this incompetently or, as many believe, deliberately skimpily so that it could keep down the early cost estimates and reveal the "unexpected problems" one by one over the years, thereby "excusing" the relentless increases in budget and timetable they'll drip-feed onto us.  To give just a few examples, of which 2 & 4 are outrageous:

1. HPC enjoys the benefit of an already-existing, conveniently close-at-hand dock for the import of very large items.  Sizewell does not.  SZB utilised a temporary jetty during construction: EDF has shilly-shallied about whether they need to do the same this time around.
2. Access to fresh water (needed in large quantities both during construction and in routine ops thereafter) hasn't been a big issue at HPC.  It's a massive issue in parched East Anglia, and the SZC plans approved by HMG (under the Tories) don't include a resolution of this issue.  (The Planning Inspectorate declined to approve the plans accordingly, but were over-ridden.)  We may be sure that whatever solution they come up with, it'll add significantly to the budget (or dumped onto general water bills!).
3. Faulted or not, there was at least bedrock close to the surface at HPC.  But just under half of the SZC footprint lies on a former marsh (a small river delta) with bedrock very far below surface level.  The piles that will need to be sunk will be very extensive and costly.
4. The coastline of Sufolk is subject to serious, constant, millennia-long erosion patterns - as eny fule kno.  Right now there is a shifting sandbar directly offshore Sizewell which has been protecting it for several years.  But it's on the move, and that protection won't last the 135 years (sic) that the site must cater for, such is the way decommissioning works for UK nukes [2].  So (a) the concrete platform on which SZC will be built, needs to be much higher than that of HPC: and likewise the sea wall.  Additionally, (b) there is a really obvious possibility of sea encroachment inland, on the north flank of the site (the marshy side - that old river inlet): the RSPB which manages that land reckons it'll happen within 50 years at most.  Experts have long told EDF they need an extension of the sea wall to the northern flank accordingly, as well as on the (east-facing) seaward side.  But only the latter is in the approved plans and the publicly-announced cost estimates.  Additionally, in the aforesaid 135-year timeframe, inundation of the whole area is inevitable, so a full operational plan is required for the contingency of the entire Sizewell site - SZA, B and C - operating in 'island' mode on its concrete plinth.  Again, this isn't in any published plan.  Diligent investigation by campaigners has recently revealed that EDF have known about this all along, and do in fact have unpublished "supplementary" plans for all of it.  But of course none of this features in any public "budgeting" or cost projections.
5. etc etc - I could go on.

Against all these cost-boosting special features of SZC, what are the much-vaunted cost savings we may expect from EDF?  Well, they sure ain't going into mass production for EPR reactor castings: they've vowed never to build another one after SZC.  Recently, EDF proudly announced - and the government proudly re-announced it - that they'd be re-using some rubble from a grubbed-up part of the SZA site, in the foundations of SZC.  Well pardon me if I'm less than bowled over by this astonishing feat of saving tax-payers' money.  

What else does all this leave us with?  Several things:

• As mentioned before, the government is clearly desperate (they know wind + solar + batteries won't suffice) which, coupled with the endless willingness to be bullied by the French[3], is a recipe for bad deals at the start of the piece and non-stop piss-taking by the French thereafter.  It's exactly what's happened with HPC, is still continuing with HPC, and has been happening thus far with SZC.  Why would it stop?
• Even if we reckon the SZC deals are struck and definitive now, think of the scope this cost-plus arrangement gives France to pass through, well, anything they think they can get away with onto the "Sizewell C" account!  Accountants are good at providing "alternatives" when it comes to cost allocation ...   Sizewell B costs;  general EDF engineering charges; "management fees" (much beloved of all "related-party" arrangements when one player pulls all the strings). etc etc.  Now EDF retains just 12.5% equity in SZC, so on any cost that would otherwise be for EDF's own account, but that its accountants reckon can be passed through the SZC books, EDF sees at least a seven-eighths reduction, or more: and that's if it's borne by the equity.  To the extent it's passed through on the cost base or the appalling overrun indemnity scheme, it could be anywhere up to a 100% reduction.   Moral hazard, or what?  
• One last thing: surely, you may say, there are audit rights for HMG to stop any such hanky-panky taking place?  Doubtless, this is true, in that the contracts presumably say so.  But here's the thing: when the astronomically-subsidised Drax was caught (by the BBC!) playing silly buggers with its fuels reporting, and was forced to admit to Ofgem and DESNZ that it didn't have adequate data to account for everything it was self-certifying, it got a rap over the knuckles (£25m penalty) but nothing more.  MPs clamoured for full audits to be conducted of everything before a penny more in subsidy was paid to Drax - we are talking billions, after all.  But at the Select Committee hearing, both DESNZ and Ofgem stated clearly that they had no resources to check everything Drax tells them in its self-certified reporting on its complex fuel-sourcing operation. 

Why do we imagine that with this new, multi-billion subsidy arrangement for another operation of enormous complexity, EDF won't be able to rely on the same shameless, shoulder-shrugging insouciance from DESNZ and Ofgem that Drax seems to enjoy.  Too big to fail - and too big to audit!  

What other reasons might there be for the charade?

There's a longstanding thesis, much peddled by the SPRU team at the U. of Sussex, that the unspoken motive for UK 'civil' nuclear policy is cross-subsidy for our military nuclear programmes.  This once seemed more of a conspiracy theory than it does now: read this, from Kier Starmer just last week - his "strategic steer to the nuclear industry".  

... Nuclear technology is vital to our country’s economic growth, energy security, and national defence. It delivers reliable, low-carbon electricity and supports our nuclear deterrent ... We are building on this legacy with clear commitments on the future of our nuclear deterrent, our submarine programmes, Sizewell C and the SMR programme. 

Surely, the only intended readership for this bellicose Starmerite "strategic steer" is one V.V. Putin.  I rather doubt L'il Volodya is quaking in his boots.

ND 

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[1] As blanket excuses go, Covid is particularly open to challenge.  Building works were never subject to lockdown, the reasoning being they are outdoors.  I know a great deal about another large construction project which was comfortably able to speed up its project schedule and reduce its costs during Covid, when (a) various restrictions arising from the need to work around nearby sites of regular employment were lifted, because these other sites were now shut down; and (b) labour costs came down because many construction-related trades found that much of their regular work dried up.  OK, maybe (a) doesn't apply so much in the middle of Somerset: I'm just saying "Covid" isn't a free pass on costs and schedules.   

[2] The way we decommission nukes in the UK involves taking away some of the radioactive stuff upon cessation of ops, then sheathing and just turning the keys on the rest of the site, walking away, waiting for cooling down & the half-life effect (venting into the atmosphere, BTW) to reduce the radiation enough for final clearance.  SZA is in that state right now; also HPA.  2160 is accepted by EDF as the relevant date for SZC.  There's no chance the Suffolk coastline stays as it is for that long: and some extreme scenarios suggest 2190 would be the date.

[3]  I mean, what else can they do to us?  Take even more of our money and do even more nothing about the small boats - check.  Be even more beastly to us over any attempt to engage in ordinary trade & diplomacy with the EU - check.  What favours are we buying when we give them everything they ask for on HPC and SZC, with fat cheques included?