Tax, Growth and confused Government

I don't really understand what is going on in the Government at the moment. For a bunch of people who aspire to be Alistair Campbell like they are doing a pretty bad job.

Let's take their latest efforts on tax. Bounced by the Select Committee into reacting to the news that big companies use legal loopholes to avoid tax, the Chancellor now rushing around declaring HMRC are to have more money and Companies WILL PAY MORE. In the Telegraph today they are discussing looking at the spending habits of peoples' wives to see if there is undeclared money being spent by the self-employed. This latter point, how Orwellian is this - your other half's spending being monitored before any sort of accusation or claim is made against you.

It all sounds good to the floating Lib Dems (how many of these are left I wonder?), but makes for no impact in real terms. How does going crazy about the tax take fuel the needed growth agenda? If it does at all, it is negatively. If you want to start up a social media company, why start in the UK when you can go to the Silicon Valley and avoid all this?

And yet the true Conservative answer would be much clearer and have a better long-term benefit. The tax code is now 11,000 pages plus thanks to years of efforts on behalf of Gordon Brown. Halving this over a 3 year period would reduce the opportunities for companies and their advisers to optimise their tax payments. Similarly for individuals, harmonising and simplifying taxes so that the self-employed did not enjoy such a massive benefit over the PAYE employees could form part of this.

So instead of shouty, populist nonsense, we could have a sensible reform proposal which also highlighted the blame for this mess that lay at Labour's door.

Why Carney might not do it at the Bank of England

I have long been a huge critic of the Bank of England, writing many posts in the bubble demanding interest rates rises and then watching them pump the bubble with no idea on how to close it. Worse, the BOE have popped the cork on Quantitative Easing and it seems they will not stop anytime soon despite the lack of impact it has had on the real economy.

So George Osborne, a highly conservative chancellor, who in effect is not much different to Alistair Darling, the previous incumbent has gone for a big change. This has been celebrated around the City as a bold choice.

Carney has a reputation as a hawk and this, given the above mistakes, has been viewed as a good thing. But is a hawkish BOE Governor what we need now as we enter a 5th year of potential recession post the 2008 financial crash.

Raising rates has its attractions but the Main UK lending banks will suffer as their bad loan books are still quite large - £80 billion for RBS and over £100 billion for Lloyds. With all of the banks hugely scaling back their investment banking operations the possibility of large profits has gone the way of the fairies. Higher rates also risk moves on the mortgage book impairments as the leveraged UK borrowers have grown used to low rates and low repayments.

Carney too has to take over a the macro prudential part of the FSA which will be distracting in the first instance as the integration of staff and the systems of the rather pushy FSA into the sleepy and Ivory tower types of the Bank of England.

The current BOE committee is quite dovish and this might save Carney as he fails to get backing. Yes to stopping QE but not to raising rates. But the UK economy is on life support and has been for sometime, with few signs of anything changing in the near future. Government spending is too high, austerity will have to continue for years to come and there is no support from the Eurozone of elsewhere. It's high risk to tighten policy too much from here.

With all this in mind, I don't think Carney will prove a big success, much like Sven Goran Eriksson a promising start and good wishes will not prove enough in the long-term....

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A Shocking Energy Bill

Under cover of Leveson, the government has published its appalling Energy Bill.  (Quite how successful a piece of news management this was can be gauged by the fact that it received not a single mention in the Mail (normally hostile to greenery) which devoted its entire news section - 14 pages - to his Lordship and Sgt Nightingale.)

The major elements of this Bill - the ill-conceived 'Energy Market Reforms' - had been around for a long time.  But nothing had really prepared us for the scale of dirigiste powers the government is proposing to award itself.

Ordinarily I would consider it part of the service to have digested it for C@W readers.  I may get around to doing this but for now you'll have to forgive me because (a) it's a monster, full of technical stuff, and (b) it makes me gag.  I note that other energy-covering blogs have mostly also failed to come up with detailed instant commentary: let's see what folk come up with in the coming days.

For today let me simply say this: the scale of shameless heavy-duty interventionism envisaged by the authors of this loathsome Bill is such that they are effectively re-nationalising the electricity industry.  (Needless to say this will be done at enormous cost to consumers.)  Is there not one in government who believes in the free market ?

ND  

Busy on a Friday

Question Time State Control vs Slebby victory special

If you can't guess question one tonight, you haven't been paying attention for 3 years. Which you probably haven't as its a real bubble story. 

David Dimbleby presents Question Time from Swansea on the day Lord Justice Leveson's report on press standards is published.[Even Dimby is giving us hints tonight] On the panel are singer and phone hacking campaigner Charlotte ' my friends would never sell a story about me' Church, former News of the World executive editor Neil ' few rotten apples''Wallis, columnist Simon, I'm so like Jon Snow it hurts' Jenkins, transport secretary Patrick ' no one else would come on'McLoughlin MP and shadow immigration minister Chris 'pantomime' Bryant MP.

 Enter your guess for what you believe the regional audience will ask of the panel. Maximum of 5 guesses allowed. Various special rules apply that are hidden even more cunningly than on the whereabouts of an alternative pay meter in a car park..

BQ says 
1. Brian's big day out
2. Part time jobs and falling hours
3. Booze price
4.Cyrill Smith

Doubt we'll have more than 4. Maybe not even that many.  

Can Invensys revive AIM?

The Execs at Invensys deserve their champagne today after the deal announced to sell their Rail Unit to Siemens for a price not unadjacent to the share price for the whole business. Now analysts are speculating that there may even be a counter-bid.

For years the management have said the company is under-priced, but the Markets of late have been uninterested in long-term value stories. They saw a pension deficit and a boring company. Plus the markets have been moved by macro events for some years now. What a company was actually doing, or whether it was any good in its markets, has been of little interest. Value Investing had gone the way of the Dodo and those who practised it had gone to the wall unless they had very deep pockets.

For the smaller AIM market, this has proved a toxic mix. Poorer retail investors have pulled money out, day traders and high frequency trading rule supreme and the net effect has been a huge drop in volumes and a massive spread of P/E ratios. Companies that were highly valued on speculation then drop - even as they deliver on their business plans. Crazy city lore such as buy the rumour sell the news seems to have been applied without thought (this is the role of algorithms after all).

But one day, the tide will turn. Pure momentum trading has been suffering from the law of diminishing returns and then there are companies like Invensys that can suddenly show a huge return for the patient investor.

A move away from macro risk-on/risk-off would be a welcome boost to the markets and indeed will help companies to complete placings and raise finance again to get the markets moving again which in turn will feed through to the real economy fairly quickly.

Chukka gets the Big Crunch?

Now some more frequent readers will be slightly aware of high level of disregard I hold for the labour Business shadow, Chuka Umunna. From is pathetic interviews, populist idiocies and frankly hide-behind-the-sofa dreadfulness whenever he appears on the Gogglebox he comes high up the list of "first against the wall when the revolution comes" ( I loved this phrase, how come lefties gave it up?).

However today in the Telegraph he has said something, unbelievably, that makes sense. That the leverage ratios that are potentially used in an acquisition of a company should trigger further investigation by regulators.

Where have I heard this before - oh yes, here, in one of my very first posts in 2006. Private Equity was in a real blitz then offering 10x leverage plus to acquire businesses. Even at the time this was blindingly obvious as a bad thing per say. Chukka is concerned about protecting his tax base to pay the for public sector worker and a benefits claimants - I am more worried about the destruction of viable companies and with it jobs and pension schemes.

It is still the law that you cannot buy a company with its own assets (i.e the seller can't help the buyer), but with leverage finance, in effect you can. Look at Man Utd and the Glazers takeover, filling the company with debt. Now you can argue that Man Utd has suffered little for this, the business is still growing and thriving. However, the Glazers simply took a huge bit of profit out right at the start and since then have denuded the club of investment - it has become a zombie.

The same is true across the economy, the leverage finance boom left many companies in PE hands, all with huge debts. In fact this has been a key factor in forcing low interest rates despite inflation by the Bank of England, in order to ensure the Zombie companies don't go under.

This has then also led to the Swaps mis-selling scandal, as companies that sought protection against high interest rates as their business model were so financially strained. Instead interests rates collapsed and now the same companies owe millions to the Banks who sold them the swaps. 

It is all messy and an important thing in life is to learn from mistakes. Somehow excessive leverage deals have to be prevented - at the moment with lack of credit, its not an issue, but the boom times will be back one day....

The Mighty, Fallen: Tales of Two Leaky Banks

1.  Leaking Information

So then, Robert Peston.  Live by the leak, die by the leak, eh ?  His epic fail on calling the new Bank Governor is surely the final nail in the coffin of his reputation.  All those reporting scoops in the heady days of '07/08 - but not proper scoops, just his being used as a privileged conduit by a couple of highly-placed leakers.  Except now, he gets fed garbage.

Everybody has his number.  Here's how C@W can scientifically assess his decline: back in 2008, if we got a link on his BBC blog, we'd get thousands of hits.  Two years later and this had dwindled to hundreds or less.  Nowadays we don't even notice.

"As it happens, I did not think Mr Carney was in the frame because a well-placed Treasury source told me - in terms - that the unknown fifth person on the short list 'was very unlikely to get the job'". Pathetic. And wasn't he subdued yesterday, interviewing Boy Osborne?  Hope his fat Beeb package is success-based.

2.  Leaking Money

UBS - what a shower. When Kweku Adoboli was being sent down, the news channels played extracts from tapes of calls between UBS Compliance and the talented trader, with such gems as:  

Financial Controller: "So you're going to confirm exactly which counterparties are involved, and the quantum of the exposure".  

Adoboli:  "OK, will do". 

WTF ?  I fell off my chair.  There shouldn't be a trading floor on the planet that doesn't have deal-capture systems, confirmation processes and risk metrics which make these issues 100% transparent and subject to checks by staff who are independent of the traders, by the end of each trading day at very least, but near-real-time is the standard.  It should be like trying to do a transaction on the web: a required field pops up, and if the entry doesn't compute perfectly, instantly, you can't progress to the next stage at all.  (Given that Adoboli was in a 'Delta One' outfit - deals with the simplest risk profile - there aren't even any complex sums to do.)  

Phantom counterparties ?  Trade books he 'set up himself' ?  And all this 3 years after the banking crisis.  So UBS indeed deserves to get it in the neck.

Gaol.  Only language they understand - and corporate fines be damned.

OK, not you Pesto - ignominy will suffice.

ND

25% VAT?

OK, Daily Mail scare story is certainly is - however this is also the considered response from the Institute of Fiscal Studies as to what to do about the growing hole in the UK's already holed budget.

Rather worryingly they seem to think tax rises are the answer. Already the UK has some of the highest personal taxes in the whole OECD and now, with a nasty budget deficit, the idea is to raise more in taxes.

The far and away more obvious thing to do is to cut spending. Little progress has really been made in cutting spending and those with their hands out are adept at showing the difficult cuts that are made to say disabled services. Less point is made about say, closing libraries in the age of the Internet.

The real truth is that the Government is still far too big and is spending more money than it has by a colossal amount. The crisis of 2007/8 will forever be a denouement moment for the ear of socialist spending for it came as the endgame for social welfarism was beginning due to the ageing of Western societies.

The better news, not that any political party is currently thinking it, is that all is not lost. There are plenty of ways to save money, cutting aid budgets, reducing welfare spend on the middle classes and others (e.g. the butty tax credits), reducing money spent on the NHS by regionalisation and privatisation, encouraging Scotland to go its own way and taking its welfare insanity with it. Not to forget pushing a planning-led boom, building new airports and railways together with exploiting cheap energy sources like shale gas - all of which will help renew our manufacturing capacity over time.

So there is plenty of hope, lots that can be done. Rather worryingly, none of the politicians we have are ready for this. All are in thrall to the often state-sponsored special interest groups and also, dare I say it, the Group-think position of economists who see Keynesian demand problems everywhere and think the UK is like Greece (these being the same economists who did not see the Credit crisis coming).

of all the UK parties only the Tories and UKIP even come close to trying a few of these ideas out and they get roundly criticised for it. MY my question is what will be the trigger for sanity - do we only get sanity with another crisis?

North sea oily Bridge Energy recent new issue - worth a look now its 30% cheaper?

One golden rule on AIM, in fact the markets in general in my opinion, certainly coming hard on the heels of the Facebook, Zygna, Groupon et al debacles, is never to buy a new issue. As this has become a rule of thumb for many, traders and investors have stopped looking at new issues altogether. This leads to a self-reinforcing downward spiral in which there is a dearth of new issues. Those few issues that do get away result in small trading volumes in the after market and it is only after the inevitable fall in the share price that interest is rekindled. It happens nearly every time.

There is a time and a place for a debate about whether brokers and banks are doing a sensible job placing shares at the right price (they are not - again greed and vested interest are the culprits behind this broken sector of the public markets), but that is for another day…. One very rare example of appropriate pricing in a new issue is that of Direct Line recently - sadly this stands in isolation.

And so to AIM newbie Bridge Energy. I am a fan of North Sea Oil explorers, there have been some nice M&A takeouts of the minnows in recent years and great success stories like Dana Petroleum. Bridge operates in a safe exploration environment that is politically favourable and with good infrastructure in place. A new find and it is around 18 months only before production could begin - contrast this with the huge hurdles in places like Kurdistan and the Falklands. This means a good drill and a company is made, if it can overcome the inevitable tricky financing hurdle that is be-devilling a lot of AIM oilies at the moment.

Bridge Energy acreage is very spread out and it has a mix of currently operated areas and stakes in others. With a big spread and plenty of licence blocks to look over it is in a good place in my opinion. Throw in experienced ex BP management and also plenty of financial expertise on the board then with a fair wind it should be a good bet.

Prospects
Mid Norway Bridge Energy currently has 1 licence in this area which is non-operated.
Norwegian North Sea Bridge Energy currently has 15 licences in this area, one of which is operated.
UK - Northern North Sea Bridge Energy currently has 3 Licences in this area. All are Traditional Licences and non-operated.
UK - Central North Sea Bridge Energy currently has 3 Licences in this area, all of which are traditional and two of which are operated. This area includes the producing Duart oil field.
UK - Southern North Sea Bridge Energy currently has 6 Licences in this area. Of these, 5 are operated, 5 are traditional and one is promote. This area includes the producing Victoria gas field and future developments in Vulcan East, Vulcan NW and Victoria Phase 2.

As the chart below shows, Bridge has not had a good debut over the last 2 months .  A dry well and a recent announcement of a less than thrilling current drill have dampened the already very weak fervour that there was in September. The price has declined 33% to factor this in. The last RNS sums it up:

Chief executive Tom Reynolds, said: “The Bridge 2012 exploration programme has delivered discoveries for us at Garantiana in Norway and Contender in the UK and whilst the interim results from the Noor horizon at the PL457 well were not as expected, initial results from the Asha horizon indicate the presence of hydrocarbons and we will make a further announcement following completion of drilling operations.”

Nobody said they would hit the black stuff every time. But, with two successes and two probable failures they have had a good year in E&P terms. Also the Duart operating platform is out for a year and this will bolster revenues by around £8m - a decent amount for a company valued at £60 million. A contrarian indicator too is that the big drop in recent weeks has been on poor volume  - as a new issue, the stock is tightly held so low volumes can see swift drops. However the RSI shows the stock is oversold and today’s turnaround could well be the bottom.

On the downside, a bad report from Noor may result in further weakness in the short-term, but the drilling programme for 2013 is strong and an upside surprise from Noor could see a sharp turnaround in the recent price performance. One day too, the PI investors who follow Xcite, Antrium and others will notice this new entrant to their market and the increase in attention will help volumes and the share price measurably we believe.

 

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What a crock

A tax rise on ceramic goods will add 17.5% -58% to the dockside import costs of goods from China.

The move that has been widely condemned as anti free trade by EU member states but the tax has ALREADY come into pace, and it did so at 24 hours notice.

As some one who imports, sells and distributes Chinese ceramic and cookware goods I can only remark *****!! I mean, what the ****!

As the British Retail Consortium says 

These new duties will feed through to higher prices in stores. And, because China mainly supplies the value end of the market, they will deny less well-off customers access to affordable crockery.

Exactly. just why the EU has decided to force up the price of cookware, plates, mugs, gifts, moneyboxes, teabag holder, fridge magnets and  coasters is a mystery. they fear that China is 'dumping' goods on the EU at low or nil profits. Why the Chinese would bother isn't explained. to kill off all the ceramic firms in Europe, perhaps?

 The EU market for ceramic tableware and kitchenware is worth €1.5bn. Half of that (€730m) comes from China, said the commission. In volume terms, 80% of all the EU's imports of ceramic tableware come from China.

So, from January, once existing stocks are exhausted expect a very large price rise. 

This will happen. In 2008 the EU added 50% to the import price of candles. The BRC ran an almost identical article to their current one. And they were right. The price of candles rose to a point where they aren't worth stocking. 

In 2007 BQ industries used to carry 20+ varieties of Christmas candles at £2 - £5 a go.

This year, just 1. And that is priced a bit too high for comfort at £5.95 for a small candle. So we have a tiny, tiny holding.

 We don't buy dearer French or Belgium candles instead of Chinese ones. We just don't buy candles full stop. We won't buy high priced mug and coaster gift sets either. People won't buy them.

We'll stock something else.

The surprise is that the EU has the right to increase taxes, for up to 5 years, by any amount it likes, without majority member consent. While you're over there Dave, maybe look into this unnecessary inflation adding rise in homewares?

Question Time to 'chav or chav not' edition

David Dimbleby presents Question Time from Westminster Hall in the Houses of Parliament. On the panel: Work and Pensions Secretary Iain Duncan 'Shhhh! Quiet'' Smith MP, Shadow Home Secretary Yvette 'shouty shouty' Cooper MP, former leader of the Liberal Democrats Charles 'glug glug' Kennedy MP, businesswoman and star of Dragons' Den Deborah 'I'm out' Meaden and the Independent columnist Owen ' shriek, squeak' Jones.
Enter your guess for what you believe the regional audience will ask of the panel. Maximum of 5 guesses allowed. Various special rules apply that are hidden even more cunningly than on a apple iphone update.

Nick Drew guessing from Singapore has

1. Gaza ceasefire. Tony Blair fixed it?
2. Women Bishops. Church to discuss for 2000 years more.
3. Life sentences for crims. Yuman roits iinnit?
4. Leveson says + new BBC DG
5. Student march - Owen tells us its the end of hope.

 
 

Banking reform in deep crisis

It is not being seen like this, but I do think there is a big crisis in Banking reform in the UK in particular, as well as EU and the World more generally.

Clearly there was a need after the disastrous credit build up of 2001-2008 to make some big changes to Central Bank policy making, Government Policy making and private bank regulations. All of which when you think about it was going to be messy as so much needed to be done so quickly.

As ever, the US come up with the simplest ideas - in this case the Volcker rule - to try and fix things quickly. And of course the UK, beladen with all-knowing bureaucrats, goes for the complex route.

So we ended up with the unhelpful Vickers report which did somethings but did not split the Investment and Retail banks up which would have made everything alot simpler.

Worse is Basel III and the meddling FSA. The latter is not helped by the Governments refusal to put the detailed meat on the Vickers bones - so they are left not sure what guidance to issue. Basel III meanwhile stipulate capital increases fro banks to allocate against products.

You may or may not have noticed that this has ended Investment banking as was. There are many markets that simply are not economic anymore - the amounts of capital allocated is too great to mean returns. As such only advisory businesses work and fixed income and equities, as well as come trading has simply been stopped. Hence the tens of thousands of redundancies in the City - RBS, UBS, Credit Suisse, Citi are all making five figure redundancies at the moment. Yet to come, but baked in now, will be the loss of support jobs in Legal and Accounting firms.

Bank don't know what products are going to work in such an environment of regulatory flux, as their staff are expensive they are sacking them. In a year or two perhaps they will figure out what to do and hire some back. Those who are left are on salary packages often a quarter of what they once were.

This is going to have a big impact on the UK economy - so big that it will delay any meaningful growth until after 2015. And it didn't need to happen - its the impact of bureaucratic imposition on the regulatory reform process.

Of course, no one will care and I expect many comments saying hooray or so what, because Bankers are not popular. They are very popular in the Treasury though - watch those corporate tax receipts fall and a big drop income taxes as bonus's go.

Energy Policy, Asian Style

My contacts here in Singapore are abuzz with the news from Indonesia, another nation whose energy policy is up the creek. 

They do need an energy policy because they are a major producer of oil and gas - indeed, a member of OPEC until 2009.  The structure of their oil and gas industry is centred around a system of 'production sharing' agreements (quite common in the developing world) whereby exploration and production companies - substantially foreign concerns, 303 firms in total - are investing billions of dollars in drilling etc, in return for being allowed to receive revenues from part of the production: the rest goes to the state.  This is mediated by a state-owned entity called BPMigas, which is the counterparty to all these deals.

Or rather, was: because last week the Indonesian Constitutional Court put an end to the arrangement, having been petitioned by parties including Muhammadiyah (an Islamic organisation), and the 'scholar and cleric' Hasyim Muzadi, who argued that it was unconstitutional.  The Court agreed, and summarily dissolved BPMigas.  There's nothing like a good bit of constitutional propriety, eh ? 

I had lunch with a couple of BPMigas guys today, who at least have return tickets, but are wondering what awaits them when they fly back to Jakarta. They are not the only ones wondering what happens next: companies right across Asia buy their gas and oil from this crew.  To whom will they make their payments next month? they wonder with a smile, since their contracts are with an entity that no longer exists.  Then again, will next months' cargo arrive at all?

The energy minister, one Mr Wacik, would like it understood that everyone should carry on as if nothing had happened; that a new "task force" called SKSPMigas (see what he did there?  almost sounds the same) will pick up the pieces; and it's all a big mistake.  He's got that right. 

Over at Muhammadiyah, flushed with success, their chairman Mr Din Syamsuddin is planning to have the Coal and Mineral Resources Law overturned next.  Yes, Indonesia is a very big exporter of coal, too.

In due course I am guessing that our new friend and big-time coal importer, Chinese energy supremo Vice President Zhang Dejiang will be having a word in these jokers' ears.  Meantime, energy lawyers across Asia are going to have a splendid Christmas.  Or whatever festival Muhammadiyah celebrates at this time.

ND

A long time ago ...

The past seems to be getting further away.

• If Tony Blair was still PM he'd have been in power for 15 years.
• From the 65,000,000 military personnel of the 1914-1918 war there are 0 combat veterans still alive.
• Any surviving pilots from the battle of Britain will be a minimum of 90 years old.
• Margaret Thatcher has been out of office for double the 11 years that she held the office.
• The mobile phone company Vodafone is 27 years old.
• The BlackBerry smartphone is 9 years old.
• The widespread use of DVDs began 17 years ago
• Pulp Fiction, the classic modern movie, is 18 years old.
• Eric Morecombe has been dead over ¼ of a century.
• My first car, a Lancia, hasn't even been made for 28 years.
• Britain has been a member of the EEC for 39 years.
• The revolutionary wide bodied 747 jumbo jet is now a 42 year old design
• The church of England should note that the sexual discrimination act is 37 years old.
• Star Wars was released 35 years ago.

On an unrelated note, I've just noticed I need reading glasses.

That New Chinese Politburo

Pic: Wiki

So here I am back in Singapore with a chance to brush up my knowledge of the East.  The papers here follow Chinese affairs closely of course, and I've been reading up on the new Politburo.

Now the Communist Party of China works in mysterious ways, but it has come up with corker: the new Vice President in charge of Energy is this chap, Zhang Dejiang.

And - wait for it - he studied economics at the Kim Il Sung University in North Korea.

And we think we've got it bad on energy policy ? Actually, I always wondered about Chris Huhne ...  Good luck to the Chinese.

ND

Desertec's trouble highlights Solar energy failings

Now some stores you just can't believe and others you can write the script too far in advance. The Desertec story definitely fits into the latter category.

Desertec was a German Green-Party led idea for building 125 gigawatts of solar power plant across the Desert of North Africa for export to Europe. At the cost of a mere 400 billion euros this was supposed to save us from dominance by Gazprom and others.

Green energy, helping poor countries, getting away from nasty Russians and their gas. What a great PR opportunity.

The reality has proved, somewhat more complicated. After all, there are still foreign countries involved, ones that are becoming more unstable like Morocco. So the dependence is not cured. Then there is the fantasy technology that somehow the power can be transported across continents without catastrophic loss along the way. Oh and that all the private companies are now rapidly pulling out after doing some lengthy due diligence and would only return if Government put up the vast share of the investment.

All of this could easily have been predicted a few years ago, but wild dreams and promises (this reminds me a little of asteroid mining initiatives in the US) make for great media content, as do big ideas that solve huge problems with simplicity - its just that they rarely work.

In fact, Solar energy is an industry in huge crisis, over-supply from China of cheap, inefficient panels has pushed prices down to below cost and ruined many companies business models. Then the various Governments in Europe, including our own, have started to cut subsidies for a technology that does not really deliver any meaningful return on investment.

Politicians love to make grand statements about the future being 'Green'  - reality is showing this is far from the truth.

Next to go?

Generally electrical retailers and clothes retailing are very separate and dsitinct businesses. Comet has gone under this week and today is a sad day when it is expected that many of the shops will be closed and the staff made redundant - hardly an enjoyable Xmas looming for many of these… It has been a particularly tough time for electrical retailers of late. People increasingly shop for these products online and are less likely to feel the need to see the goods in store- hence internet based shops are doing much better and with their lower cost bases and consequently have taken huge bites out of the high street industry.

The leader in the on-line clothing sphere is ASOS (standing for “As seen on line”) and whose technology leading website and approach to sales has been impacting the market for clothes for some time. ASOS is a fantastic business and has been on my conviction buy list ever since I saw first-hand how terrified Debenhams management were of it when doing a strategy review for them in 2008.

Next though is the most successful clothing retailer in the country and one of the best, if not the best, performing stock on in the FTSE100 over 20 years. In CEO Simon Wolfson, they have a super and experienced Chief Executive. They are most certainly not going to go the way of Comet and have invested in a good online offering as well as their store catalogue - both actually act in complement to each other.

Just recently they announced their intents to carry a share buy-back when their share price is at an all time high - always an ominous sign for business that “suffer” a surfeit of cash as Apple pays testimony to in recent weeks! Last quarter’s results were not the best however with a warning of a tough time ahead and of course we have seen this week that headline Retail Sales in the UK fell sharply in October. It is not likely to be a good Christmas for retailers - again.

A look at the chart below looks to be setting up the feared double-top. Many people have been trying to pick the top in Next for some years and each and everyone has been steam rollered. Perhaps this time it’s safe to throw out a short? The downside could be as much as 300 points. There looks to be an alignment of both technical bearish analysis and a macro bearish situation in the near term adding weight to this argument.

 

... and a Virtuous Energy Piece in the Guardian!

When I scanned the Grauniad sub-editor's effort at the top of this article by one Pierre Noël, I scarcely bothered to read any further:

Decarbonisation of electricity must be delivered at any cost ...

it read.  Well of course there are those who believe exactly that, but we may diskard them uterly.  We may diskard the sub-editor, too: read this extract from the article proper. 

The government's energy market reform ... commits the country to decarbonising electricity generation to a very ambitious level and using a limited and predefined portfolio of technologies. Those conditions mean decarbonisation of electricity must be delivered at any cost, irrespective of what other countries do, and via central planning rather than decentralised choices led by competition in a market ... 

the real costs are ahead of us and will indeed be large. The government implicitly asks the public to trust that the international climate change negotiations will indeed deliver a meaningful agreement; that the cost of low-carbon technologies will fall significantly; and that fossil fuels, especially natural gas, will be expensive for decades to come. Under these conditions the cost of the policy strategy looks manageable. However the 2009 Copenhagen climate summit and its aftermath revealed that delivering an international climate agreement is an uphill battle and the unconventional hydrocarbon revolution – especially shale gas and liquids – dramatically changed the prospects for fossil fuels...

A politically sustainable approach has to acknowledge what we don't know and cannot know: will there be a meaningful climate treaty and what the cost of clean energy from each technology will be? Several implications follow from this. The eventual level of national emissions reduction should not be legislated; costs have to be revealed and not assumed

Thoughtful stuff - I look forward to reading more from the good Pierre.  Can't see the Guardian hosting much more of it, somehow.

ND

Question Time Cor Blimey special

David Dimbleby presents Question Time from Corby as the polls close in the by-election. On the panel are justice secretary Chris Grayling MP, Labour's deputy leader and shadow culture secretary Harriet Harman, UKIP Leader Nigel Farage, Liberal Democrat Tessa Munt and Moray MacLennan, chief executive of the advertising agency M&C Saatchi.

Semi heavy panel and another outing for UKIP. Unusual for the BBC. Maybe they are preparing for the Libs to be the 4th party after 2015?

It'll be all about the Corby by election. for those who haven't paid any attention to it, which is all of us who don't live there, you can back labour to win but only at 1:100. So whatever the spin its a certainty and always has been. it was amazing Mensch ever won it..

Enter your guess for what you believe the regional audience will ask of the panel. Maximum of 5 guesses allowed. Various special rules apply that are hidden even more cunningly than on your utility companies website.

BQ predicts.

1. Corby, is the end of the libcon alliance, the end of conservatives, the rise of the Mliband Tendency, UKIPs finest hour etc etc. {its none of these things}

2. Israel begins peace talks with an attack.  Not very peaceable. Possible invasion. That hasn't gone well in the recent past. Is there anything we can do? Should do? Or do we have enough to worry about doing nothing about Iran and Syria?

3. The EU general strike. Its almost unreported, yet there were huge numbers on the streets in Spain. Less in Italy and Greece. How long can this euro crash go on?

4. The BBC DG resigns on double pay? The rewards for failure have never been higher.

5. Tax tax tax. Stabucks/Google/Amazon/Ikea have killed off UK companies and aren't even paying any tax! {except all that vat and employer NI and business rates - } Even I, low taxation supporter, believe HMRC's light touch is softer than a roll of Baby Bum Cuddly Andrex Softy Soft.{tm}
 The unlevel playing field .