Oh my cri!

 Omicron has done a number on the markets that is for sure. They have bounced a little today, but from sharp falls last week. 

I can't help but think the media is again taking the bad news and running with it. No real time has been spent understanding if this variant is really any worse than Delta or even if it will be able to out compete it - a high bar given Delta was already 6x more catching than Alpha.

It will be a few weeks to see, the Governments across the world are quicker now with restrictions, but it might all blow over very quickly - it is my hunch, so I hope I am right!

A cure at last!

It has been hard with Lockdown to get to grips with the virus. It creeps up unseen, an invisible enemy as President Trump says. You don't know who has it, it could be your spouse or close family, your neighbours, even as we have discovered, the Prime Minister.

It is a nasty virus to if you catch it. Some people do seem to be able to wear it lightly and get by, but for other the symptoms get worse and worse. Fever seems to be one of the maing signs, and the lying around lethargic with the odd peak of howling rage.

I am of course talking about social media addiciton virus, which is a curse of our age. All of our political and media class suffer hugely from this debilitating disease. With it, they lose most sense of reason and all sense of proportion. The current ridiculous and confected issue with Dominic Cummings is the latest example.

It proved for me though a release, having watch some loopy lady on Sky insist that he was patient zero for the North East and could be prosecuted for murder, enough was enough. Already I had been recovering (a nice email from a regular reader here helped too), but slowly I was looking less at Twitter, ignoring the daily briefings and generally getting on with a bust job and life. Now was the time for the big switch off.

I feel a lot freer for it, to limit the interaction with 24 hour news is good for the soul. One or two bouts a day for 10-15 minutes will keep you in the know but not consumed by it. The nature of the Corona virus impact and how much it changed our lives nescessarily made following the news a key element in all our lives. But now, as lockdown ends, perhaps the height of super tension will reduce too. Sadly, I fear for the media it is far too late, in their desperate search to keep up with free news, they have reduced themselves to the same level as those whom they used to criticise for sensationalism,

Self-Sufficiency: Good or Bad?

Our old friend Sackerson and I have periodically debated between ourselves what attitude one should take as regards national self-sufficiency.  On the one hand, to be dependent upon imports for any vital need is to offer a hostage to fortune in difficult times.  The very concept of the nation-state is often identified with this situation.  Only when man (or proto-man) existed in isolated and self-sufficient communities could reliance on trade be thought of as irrelevant.  On this analysis, nation-states exist when, and because of, the move to specialisation and trading, which requires the thus-extended and non-independent communities to organise in such a way as to (attempt to) make this a viable state of affairs.  Sometimes, typically in warfare or conditions of famine etc, such arrangements fail.  History is littered with case studies, Germany in WW2 being a fine example: suppose the Third Reich had been self-sufficient in raw materials ..?  Today, China is endlessly nervous about its own dependencies on imported raw materials - just as we are about their monopoly on rare earths.

On the other hand: given this potentially fatal outcome, why do people surrender their self-sufficiency in favour of specialise+trade at all?  Because it is a thousandfold more efficient to do so - in "normal" times!  Even George Monbiot rapidly tired of life as a subsistence farmer; and many on the green-left reject what is termed "deep adaptation" (= living in caves).  All capitalist instincts (and not just doctrinaire capitalism either) speak in favour of doing what we're good at, and buying those wonderful things someone else excels at.

So - how is the balance to be struck?  How does a government decide what percentage of, say, the country's electricity should be generated within its own borders, or (a similar problem) how many rarely-to-be-used snowploughs should litter one corner of Heathrow airport?  How much Risk Capital should a bank hold?  How high should the Dutch dykes be?  Or how big should be our armed forces, to rectify matters when "normal" affairs get out of hand?  In the abstract:  how much of our resources should be tied up, how much potential comfort should we forgo today, against adverse future contingencies?

Let's cut to the chase: we are on a continuum and there is no definitive socio-economic calculation to be done.  There is indeed a ton of maths and modelling we can do, with Nobel prizes on offer for advances in technical Risk Management analysis - but the basic inputs include critical and wholly subjective judgements**.  So nobody should get hung up over what can be portrayed as, or mistaken for, a science.  Only towards the very ends of the spectrum can anything strong be stated, e.g. (a) the Vatican isn't a viable state, and needs to be embedded in something a lot bigger;  (b) Canada is very fortunately placed, and very unusually so (and even Canada is somewhat parasitic on the USA for defence);  and (c) the dykes had better be higher than the average high-water mark.

Covid-19 makes this otherwise rather academic debate ultra-real; climate change ditto.  (For example: we may note that in some quarters it seems to count as wicked not to be self-sufficient in ventilators and virus testing chemicals; but just fine to depend on migrants to staff the NHS ...)  And when it comes to reordering the world in due course, some highly motivated parties will be competing for control over those "critical and wholly subjective judgements".  

We can at least be grateful they won't include Bernie Sanders^^ or John McDonnell.

ND
____________________
**  Another post, maybe.  I can bore for England on this
^^ Definitely another post!  There are fascinating developments on the lefty front

Why Hitchens Is Wrong

This is potentially going to upset some of our most loyal readership, but ... Hitchens is Wrong.

I first met him a long time ago: I was editor of a student newspaper and he came to interview me.  His write-up was flattering, and he didn't choose to report that we carried nudes on page 3.  Student life was more robust in those years: pitched street battles with the NF; open IRA meetings in pubs; it took (if I may say so) balls to be a rightwinger in them days.  Many students are stroppy and angry now, but they are a bunch of wimps.  (If anyone had taken against the statue of Cecil Rhodes back then - and they didn't - it would have been torn down and smashed the same evening.  "Rhodes Must Fall"?  Pah.)   Students I meet nowadays say: it seems to us that you had more fun back then ... and indeed we did.

But I disgress.  Hitchens wrote recently in opposition to a lock-down and associated regulations: 

Is shutting down Britain – with unprecedented curbs on ancient liberties – REALLY the best answer? ... I see very little evidence of a pandemic, and much more of a PanicDemic ... Epidemic disasters have been predicted many times before and have not been anything like as bad as feared ... dissent at this time will bring me abuse and perhaps worse. But I am not saying this for fun, or to be ‘contrarian’ –that stupid word which suggests that you are picking an argument for fun. This is not fun. This is our future, and if I did not lift my voice to speak up for it now, even if I do it quite alone, I should consider that I was not worthy to call myself English or British, or a journalist, and that my parents’ generation had wasted their time saving the freedom and prosperity which they handed on to me after a long and cruel struggle whose privations and griefs we can barely imagine.  

No time to write a lengthy rebuttal, so let's cut to the chase.   We All Know What He Means: and even the Grauniad (this is significant, subject of a later post perhaps) argued strongly for the sunset clause to be set at 6 months, not 48.  True, what's happening now is, in large measure Fear of Fear Itself.  But it's real, for all that, and needs to be addressed as such.  To say that the population - the real 2020 population of individuals who routinely behave as though they expect and deserve to live forever, not the WW2 generation that knew better - could and should take a higher level of "avoidable" early deaths on the chin, is like saying that nobody alive today suffers from "Absolute Poverty" because they all have smart 'phones and housing benefit.  

We all understand that argument, but it's irrelevant.  Oh, and by the way, even the universally Godfearing populations of the 15th, 16th and 17th centuries were not at all sanguine about the Plague.

So keep going with your articulate contrarian stuff, Hitchens - you're allowed to, and it's needed.  (Peregrine Worsthorne had an even better line in columnar contrariness - really ingenous, he was.)   But you've overcooked it this time.

And now I must go and bury a close relative.  They tell us it wasn't the virus; but it was certainly pneumonia, and who knows these days?

Have at it in the comments.  Fearlessly.

ND

Ride a Black Swan

One of the many great things about Enron, long before it went under, was that it brought really strong financial practices into the energy industry and made people take financial risk management (FRM) seriously.  We can talk about the rich, deep ironies another time.  I was never a risk manager myself, but was strictly schooled in its principles, technical and pragmatic, the better to negotiate sound contracts (which is my trade).

One of the interesting aspects of FRM is that no commercial institution, even a bank, is held to providing 99.9% certainty in its hedging etc - not even 99% in fact; because it can't be done using shareholders' equity without crippling economic cost.  Everyone knows that 100% physical safety is impossible - the cost of moving from, e.g. Five Nines to Six Nines is prohibitive - and likewise that extreme financial events happen out in the "fat tails" of the distribution, that can't really be catered for within the economics of an enterprise in the same technically-sound ways that can be implemented out to two standard deviations.  But what if folk are deeply risk averse, as they surely have the right to be?  The textbook solution to this puzzle is that they must take (partial) responsibility for their own FRM, by diversifying their exposures.  Not everything will go pear-shaped simultaneously ...

Except of course when a Black Swan glides onto the waters.  At this point, hitherto non-correlated risks all become correlated, in the shit-direction: so Diversification fails (as well as hedges not performing and insurance not paying out).  And then we are down to the last resorts:  burning through capital reserves (which were anyway set at the 95% risk level, so by definition they don't go far enough), and then ... socialisation.

Now as CU said the other day, 2020 looks like making 2008 seem like a picnic.  (E.g., I had a massive hedge on against 2008, and it paid up.)   This time, it's straight through to socialisation, and pray God that good decisions are made.

A lot of Socialists are drawing understandable (sort-of) but very wrong conclusions.  Wonderful, they say - and let's keep it fully socialised thereafter because Capitalism Doesn't Work.  This is the merest crap.  I won't rehearse what a feeble-minded misunderstanding that represents as regards What Capitalism Is; suffice to say that they were saying the same thing at the outbreak of WW1, and WW2 (and in fact every day of every week).  It was equally ridiculous then as it is now.  We socialise against the Black Swans, the Kaiser, the Nazis, the C-virus.  And in normal times, we optimise our affairs intelligently.  Leftist snipers can f*** off, and do something useful in the community. If they know how.

One more weekend thought for now.  The EU can f*** off, too.  Their threats will have no force whatsoever, when negotiations recommence.  What, they gonna threaten us with a 1% hit on GDP?  Shortages in the supermarkets and bread riots?  By then, we'll have solutions for all that stuff - and quite possibly better ones than theirs.  Small comfort right now, but I'd confidently say we'll get a sensible deal quite easily - with whatever's left by then.

Keep safe, all.

ND

The Virus and the Left

Wow, we have copped Interesting Times, right in the solar plexus.  Given that these days, everyone operates under the slogan never let a good crisis go to waste, there's a lot of manoeuvering in prospect.  And lucky old Alex Salmond, eh?  And lucky old Labour Party (EHRC report).

Now then, the Left: and first to Xi, the ultimate leftie.  He's probably thinking he's ridden this one out, and taken the opportunity to ramp up universal, highly-granular state micro-control into the bargain - so a rather good bargain it may seem, to him.  As we wrote in Feb, mass outbreaks elsewhere may take the heat off him good and proper.  Now all he has to do is promote the "US biological warfare" meme in his spare time.

Now to our own miserable Left.  Obviously they are itching to go Full Hostile against Boris' handling of the thing, and of course they have the luxury of making free, cowardly sniping attacks, thinly disguised as innocent questions etc.  They have form, bigtime.  In WW2 they sniped at the National (coalition) government mercilessly: Churchill survived several ultra-close votes.  At the start of the war, of course, the far left opposed it altogether, on Uncle Joe's orders, as a capitalist war against his ally, that nice Herr Hitler.  And at the height of the Battle of Britain (as Londoners of my father's generation never forgot) the Liverpool dockers were on strike.  Oh, the luxury of opposition.

And then of course there was the relentless work of the Labour Party to advance their strategic cause, triumphing in 1945 while the war on Japan was still being waged.  Don't all the Labour hopefuls dream of playing Attlee to BoJo's Churchill?  (Though they wouldn't want to push the analogy too far.)

Trouble is, notwithstanding the free hits the Left can make with their peashooters, their opponent Boris-Cummings seems to be sticking to the rather compelling advice of his impressive and highly-regarded scientific advisers.  Experts!  So all the predictable Polly Toynbees and the silly Simon Jenkins have to hold back a bit (just a bit), because what do they know?   And because the government's sages advise differently to the foreigners (and who on earth would want Christine Lagarde running their banking?) ... oh, all manner of puzzles for a lefty to grapple with.  (Even Aaron Bastani is a teeny bit inclined to be impressed by the government's actions.  And what are the Euro-maniacs to say?  "Extend the transition period" (© Lisa Nandy 2020) is a pretty feeble battle-cry from a desperate politician.  (Where are Starmer and Wrong-Daily in all this, BTW?)

And: what do I know?   Except that there's an acid test coming soon.  Perhaps the most interesting political development is the would-be Red Guard of Momentum supposedly mobilising its private army of 100,000 to Do Good in their communities.  This tries to tap into the strand of altruism, love and goodwill (sic) that definitely is to be found within the nastier rantings of the youthful 2017-vintage Corbyite left.   (Seriously, it really is in there, in all the bile.)  Now my observation is that, however honourable this sentiment, it doesn't typically stretch to the traditional kinds of Salvation by Good Works like actually rolling up sleeves and becoming a decent, hardworking local councillor.  But who knows?  The Chinese CP gained power by many years of slogging away at local level, solving ordinary people's pressing practical problems.  Oh, and adroit military tactics too.

Interesting Times, eh?  Keep safe, everyone.

ND

UPDATE:  Kier Stamer has duly broken cover with this pious and platitudinous pile.  Précis:  I want to be Attlee ...

Flymaybe no more

Well, Coronvirus strikes! It has not killed anyone yet int he Uk but has taken a corporate victim. Flybe was in a poor state anyway, needing tax holidays and more investment to try and keep going but the collapse in bookings has done for it.

I hope that there is a chance of a phoenix rising from the ashes to take over the profitable routes (hmm, are there any I wonder) and slots to try and keep the regional air capacity going. However, with the virus about to hit I think this is unlikely and a decision by a Private Equity house would be needed in the next day or two. So sadly, a wind down and sell-off is most likely.

That means the more likely scenario is a bunch of small start up's trying to cherry pick routes and lease planes for the forseeable in the regions - so in the short terms there will be a big undersupply, especially with the virus putting off new entrants.

This may well impact on ariport viability - perhaps here the Government should step into at least help with the costs of mothballing facilities for a a few months until some more services start running again.

In the medium term, trying to be optimisitc, we might find that Flybe's oligopolistic position was the cause of its donwfall. More nimble and smaller suppliers who do not try to create demand but to service it might mean we end up with leaner routes but better services. I can see it being more pricey as after all Flybe was losing money hand over fist as a company so something was wrong with with the financial model (sometimes of course this is just debt loads after long-term mismanagement).

Plus, having flown Flyeb a few times, the abysmal customer experience surely can't be hard to improve on for any new entrant.

It will be interesting to see the capitalist response to the demise of Flybe.

Corona virus finally breaks through

So the Corona virus has hit the World stock the markets as the bears have exepcted it too for a while.

I have been travelling a lot of late (hence no posts - thanks Nick Drew!) and my twitter and other feeds have long been full of doom-saying Hedge fund managers who have bet bit against the world markets and gone long gold.

They have been rewarded at last with the spread of Corona Virus. Actually, sad as it is the economic hit is already much worse than people realise. China, a huge chunk of the physical global economy in its hands now and much of this has shut down. Electricty demand in China is down by 2%  - but this is a big chunk of the industrial output. This will affect supply chains aroudn the world and of course the oil price as demand sinks for energy.

We can only hope that the virus is controlled by the heavy handed approach of the Communist party. other Countries seem less concerned, the Iranian health minister was interviewed on live TV yesterday whilst sick with the virus.

Even, with control, it seems the Virus will push the world into the recession that has been in the works for a long time. Perhaps by bringing it on early it will be less steep than expected, perhaps too a recession will concentrate the minds of the EU and UK on reality of the need for a deal on trade rather than the current round of grandstanding.