Monday, 31 January 2022

The Boris Blitz and what it betokens

 ... aside from the fact that the man is utterly shameless and very desperate indeed, a dangerous combination.

Few who pay any attention whatever to anything other than the lowest form of social meejah output can have missed the Boris Blitz of apologia, stunts, diversionary announcements and other attempts to "regain control of the narrative".  We can confidently expect him to visit a slit trench "somewhere in the Ukraine" shortly.  Sadly, we can also be confident he will spend epic quantities of our money on ill-conceived attention-grabbing policies.

It signals two things worthy of note: one specific and one timeless.

(a) He has some competent advisers.  They may not be in the Cummings class in any particular dimension (recall his extraordinary performance in the Autumn of 2019), but they know the basics of their trade (mostly, Lynton Crosby's Dead Cat** strategy).  And they must be broadly "loyal" because, given their shameful brief, they are advising intelligently and comprehensively.

(b) Government always has the whip-hand - or at least, a whip-hand - because like it or not (and Starmer won't like it at all) it can always set the news agenda and has a truly vast array of levers at its disposal: with a little creativity, even more levers than are obvious.  This is something Mandelson always knew instinctively, and exploited to the full.  Cummings likewise, in that Autumn 2019 campaign (proroguing Parliament!)  However, a surprising number of "experienced" politicians don't.  Probably the total lack of creativity, of course. 

It's why the oft-heard suggestion "this is an Election to lose" is always wrong.  Power, when held in the right hands, is always the right answer.  It's like: who doesn't want choice?

Incidentally, none of the above acknowledges Boris' strongest card, which is that the Energy Crisis buys him guaranteed time - and time is always also of the essence.  Playing for time is a pathetic business, but often the very core of political strategy.

Not even Starmer, I think, wants to be PM until after April ... even though that flies in the face of my dictum above.  Lack of creativity, see.

ND

____________

** Before this Crosby coinage became the generally-accepted nomenclature, I used to think of it as the "Royal Yacht" strategy.  Back in 1997 after the great Blair sweep-to-power, Blair disappeared off for an extended summer hol ... leaving Mandelson in charge (amazing to recall).  Several things started to go wrong rather publicly and embarrassingly - the one I remember specifically was the Millennium Dome project.  So Mandelson announced the Royal Yacht was to be scrapped, and immediately grabbed all the front pages.  So easy - when you realise what's possible. 

Thursday, 27 January 2022

"Biden to get gas for Europe" - Really?

It's jolly nice of Joe Biden to say that he'll make sure "Europe is able to make it through the winter and spring" as regards natural gas, if Putin switches off (some of) the taps.  But he'll search in vain for a good precedent.

Oil is proibably the most relevant.  Yes, Saudi Arabia has been prevailed upon from time to time to open the taps a bit - but in terms of total volume, only to marginal effect.  (The effect on the price can be disproportionate, of course: that's how the market dynamic of commodities operates.)  But what about the First Oil Crisis 1973-74?

Recap: Israel invaded Egypt; OPEC reduced overall production and instituted an "embargo" of sales to countries it deemed to be supporting Israel - notably, the Netherlands on some pretext I've forgotten.  So the OECD set up a small working group in its Paris offices, (an organisation that was later to become permanent as the IEA) to coordinate the entire free world's oil stocks.  Everyone played ball, and a scheme of global rationing was put in place.**  It kinda worked, and eventually OPEC backed down.

But let nobody imagine it was a walk in the park.  (a) All motoring was severely impacted, for months++.  (b) Not a few power stations around the western world were oil-fired back then, and there were serious power cuts.  (c) The price of oil went up from around $3 to $12, and stayed there (until the Second Oil Crisis in 1979, of course, when it went to $30).  This of course is widely blamed for the serious western inflation and economic downturn of the '70s, Thatcher & the Wicked Tories etc etc.

And oil is very much easier to re-direct and store than natural gas, even with today's big fleet of LNG vessels.  Biden makes great play of how he's talked to the Qataris about "more gas for Europe" but believe me, at recent prices they and every non-Russian gas producer on the planet has been flat out at max already.  (Whisper it softly but the UK has been importing US shale gas for months now.) 

The parallels of the oil crisis of 1973 if played out in natural gas in 2022 would be extremely painful, possibly long-lasting, and inflicted on populations that have forgotten about commodity privations and how to get by.   (1973 was less than 30 years after WW2, and only 20 years after UK rationing stopped.)   In particular, who can see the Germans - among the worst exposed - going along with it?  As noted here before, Merkel spent the long years of her regime doing absolutely nothing to lessen German dependence on Russian gas (not even a single LNG terminal) because, truth be told, (i) she's a Russophile and (ii) Germany's foreign policy vis-à-vis Russia has long been based on a voluntary Danegeld principle, which privately they've convinced themselves is a positive thing.  They're appallingly exposed; and the rest of us still largely depend on gas for heating, and (across the whole of Europe) balancing the grids when the wind doesn't blow.

So Good Luck Joe, and thanks for the thought, even as we contemplate shivering through until spring.  But you try getting the Germans fully onside.

ND

_______________________

**  They wanted the rationing to be "optimal" (big word, that) so they needed a Linear Programming approach of unprecedented magnitude.  The maths doesn't change with size so it's conceptually straightforward - but not so easy on the computers of the day.  So Exxon offered the use of its suite of mainframes at Florham Park, NJ, and its expert staff of mathematicians (which big energy companies used to have in those days).

++ I was at Sandhurst at the time.  We had our use of trucks severely curtailed, and frequently had to get to training areas on 1930's vintage iron bicycles!  Riding a heavy bicycle, in winter, on unmetalled tracks in full kit with a GPMG on your back is no joke, I may tell you.  Character-forming, indeed ...

  


Tuesday, 25 January 2022

2 Great Examples of Green Bandwagoneering

For a couple of years now I've been writing that decarbonisation is the only game in town - for businesses, banks, NGOs, unions, leftists, world-governmentalists, subsidy-farmers, kleptocrats, con artists, fraudsters, organised crime etc etc.  Trillions upon trillions at stake; ignore or deny the opportunity to advance your cause at your peril.

Here are two nice examples of self-interested bandwagoneering:  

(1) McKinsey   (I won't tell you which category they belong in) 

McKinsey, which advises many governments and large companies ... warns that the economic transformation will affect every country and every sector ... It estimates that $9.2tn will need to be invested every year for decades

(2) the Race Relations industry, as it used to be known.  (Being old fashioned I don't quite know how they like to be called these days.) 

... a reflection of the racist attitudes built into our political and economic systems ... climate justice is intertwined with other struggles against state hostility and negligence ... If we can’t even talk about racism and the part it has played in climate breakdown, then how do we get better? How do we break down the systems that got us here?

Grand entertainment.

ND

Saturday, 22 January 2022

The Limits to Financial Responsibility

Every capitalist is in favour of financial freedoms: it's fundamental.  Every conservative is realistic about human failings.  Both statements need qualifying; but they are not irreconcilable.  They do, however, add up to limits at the 'freedom' end of the continuum.  Bracing and salutary as it may be to give financial responsibilities to as many people "as possible", there is little point in conferring freedoms where they will inevitably be abused on a scale to be of general disbenefit.  

It's a scalar matter, and there is no merit in striking purist, polar attitudes.  We don't, for example, allow people to sink their pensions into the shares of the company that employs them; nor drive cars without insurance.  There are all manner of constraints on banks etc.  

Another very sensible restriction is that placed on local authorities before 2012, preventing them from getting into commercial ventures (beyond some very tightly limited, essentially de minimis cases).  Heaven knows, I was a local councillor for a number of years and saw at first hand the limitations of a large proportion of my fellow elected representatives - and indeed those of full-time council officers, notwithstanding the genuine specialist skills many of them possessed.

Then along comes G. Osborne - complete with his student-politics talent and deeply unrealistic political attitudes - with his Localism Act, which turned LAs free to enter more or less any contract they fancied.  And away they went, not least in my own home town of Croydon, bankrupt thanks to crazy commercial schemes (mostly in property, in that case).  Croydon, however, is not the subject of today's story.

It's Warrington, another council I've written about before which, in 2019, bet the farm on shares in a distinctly ropey-looking small energy company, "Together Energy".  (How the Together management pulled that one off, one can only speculate: but the words "due diligence" don't quickly come to mind.)  Remember that by that time, Nottingham and Bristol city councils were very publicly staring disaster in the face with their own hopeless energy ventures, "Robin Hood Energy" and the less imaginative "Bristol Energy", so it was already pretty well understood that there was many a deep pitfall down that path.

But no, Warrington Council parted with £18 million of its residents' money for the shares, plus more in loans and guarantees, and then more loans and more guarantees ... and still Together went bust, just this week, when Warrington wasn't willing to allow matters to go even further - as was obviously always going to be the case eventually.  To make matters even more poignant, Together Energy even bought (with hard cash) the residential customer portfolio of Bristol Energy along the way.

Now tell me, Osborne, what possible contribution to the Public Good is represented by allowing such things to happen, as they inevitably have.  Does it teach other councillors a lesson?  Evidently not: Bristol and Nottingham were foundering in the full glare of publicity when Warrington got started.  Fact is, councillors and council officers are proven wholly unfit to be allowed to embark on commercial ventures: and that's a fairly restrained way of putting it.

The challenge of striking intelligent balance in policy-making is endless.  Right now, this one is badly out of kilter.

ND

Thursday, 20 January 2022

Boris: Never Going To End Well

If it isn't this time, something Even Worse will come out next month.  The Tories should do the deed swiftly: can anyone, save possible Starmer, make an argument for delay?  A finger in the dyke now will cause the pressure to build up even more.

Après lui, le déluge?   Boris, we are told, warmly espouses the Great Man theory of history, and no surprises there.  FWIW, in very broad terms so do I, in the sense that individuals can (sometimes) dictate the direction of history at critical forks in the road.  But the clue is in the coinage.  Not Great Charlatan, Great Entitled One, Great Pussy-Whipped Oaf, Great Serial Truth-Dodger.

It's Great Man.  And we don't have one.  So History had just better get on with it.

ND

Wednesday, 12 January 2022

Midweek Reading: Ukraine; Legislating the Internet

Being somewhat too busy for writing, here are a couple of excellent reads for you.

Ukraine:  First, a caveat, I have absolutely no idea whether "Consortium News" is a website of good repute (as regards conspiracy theory etc etc - everyone has to rely on their own judgement, and virus protection etc).  Also, the article I'm linking to here - What War With Russia Would Look Like by seemingly ultra-well qualified former US marine Scott Ritter - definitely serves Putin's purposes, whether or not the author has any leanings that way himself or, as I hope we can assume, not.

That said, it's a really good analysis of the realpolitik in play just now - or kiddy-politik in the case of Joe Biden.  Sobering stuff.  It contains an observation you might have read here at C@W before: 

Russia has studied an earlier U.S. military campaign - Operation Desert Storm, of Gulf War I - and has taken to heart the lessons of that conflict.

Yes indeed it has - being deeply impressed, nay shaken, by how successful was NATO AirLand Battle doctrine on its first roll-out in earnest.  Russia had a ringside seat, and was watching intently.  Here's another good soundbite: 

Russia can survive being blocked from SWIFT transactions longer than Europe can survive without Russian energy.

Yes, that's Angela Merkel's enduring legacy.   A Russophile all her life, she did nothing to fix Germany's dependence on Russian gas.

*   *   *   *   *

Internet:  Hey, we're a blog, and we don't much like the idea of our freedom of speech being curtailed.  That said, we are still bound by (e.g.) the laws of copyright and libel ... so obviously internet freedoms are on a spectrum.  Here's a great piece by my favourite practising American philosopher (and qualified lawyer), Brian Leiter: The Epistemology of the Internet and the Regulation of Speech in America.  (You can download the full paper from that abstract.)

No need to buy into all his conclusions to agree that (a) there's something very wrong with some of what gets pumped out on the www; and (b) the concept of "epistemic authority" is very powerful.

I'm guessing Dominic C agrees with the latter.

ND

Saturday, 8 January 2022

Weekend: Homecoming of a WW2 Pirate's Ship

A very telling episode in British WW2 history is the remarkable story of Sidney Cotton and his associates.  If you don't already know it, a very brief summary appears below.  

Anyhow, the aircraft in which Cotton flew some of his most daring MI6-sponsored missions, a Lockheed 12A, eventually wound up in the USA and has recently been up for sale.

I have it on good authority (and you heard it here first, for sure) that it has been bought by an unnamed British interest and is being readied for return to the UK, restored to its original British aircraft registration G-AFTL.  For WW2 air buffs, if and when it happens, this truly will be a red-letter day.

*   *   *   *   *   *   *

It is often said that when war breaks out, initially it is in the hands of the Gentlemen; but that things will only get properly underway when the Players take over.  If ever a man epitomised this, it was Sidney Cotton.  At the same time, consummate players like Cotton are often, how shall we put it, not always wholly reliable when it comes to things like, errr, facts.  Many of the accounts you'll readily find about Cotton are based on self-serving, highly embellished claims by the man himself and shouldn't be depended upon as regards details.  In particular, he was prone to laying claims to the deeds of others.  But the truth is more than exciting enough and, in very brief outline, goes as follows.

Cotton, an Australian, served with distinction in the Royal Naval Air Service in WW1.  In between combat missions he designed the 'SidCot' flying suit which protected pilots against the cold, wet and flying oil they encountered in the cockpit, a design which remained in production until the 1950s  Along with many early aviators he saw limitless opportunities in using aircraft for novel purposes, and was involved in many buccaneering commercial enterprises around the globe in the inter-war years.  Biggles had nothing on this man.

In the year or so before the outbreak of WW2 the RAF realised it needed to get back into the business of purposeful aerial reconnaissance, an activity and skill that for several reasons had effectively lapsed between the wars.  It commenced an extensive programme of quiet recce, mainly of Italian positions across the Mediterranean and North Africa, using regular RAF resources (mostly flying boats).  But by 1938-9, flying badged military aircraft missions against Germany itself, both for ourselves and the French, was not on.  So, sponsored by MI6 and its French opposite number the Deuxième Bureau, the word went out: can we find a civilian who'll be able to do it on a clandestine basis?  Cotton was "known to the authorities", eminently qualified, and only too happy to oblige.  With secret Anglo-French funding he acquired a couple of high-tech, all-metal Lockheeds and a smaller Beechcraft, along with a daring young co-pilot and a base at Heston.

Cotton at the controls
G-AFTL in particular was cleverly modified, James Bond-style, (Cotton and Fleming were friends, naturally) to conceal a suite of cameras behind sliding panels, in the underbelly and the leading edge of a wing root.  On spurious commercial pretexts, Cotton and his merry men flew an impressive series of flights across a range of target areas, most significantly across Germany - sometimes even with German passengers aboard.  One of their sorties was the first operational recce mission of the war - actually, just hours before war was declared - over the German fleet at Wilhelmshaven, bringing back vital photos. 

The war having been declared, the RAF formally took over responsibility for air recce, using its carefully trained fleet of Blenheim light bombers, of which more later.  However, Cotton's "civilian" crews still had an important role.  Belgium, the Netherlands, Denmark, Ireland and Italy were all neutral at the start of the war, but of potential value to the Germans in one way or another.  So up-to-date aerial recce was urgently needed, to map them out accurately and from a military perspective.  The Lockheeds, again on spurious "civil" journeys, were ideal for the task.  They only became redundant in this role when Germany moved against the Low Countries and then France itself late in the spring.

It will be great to have G-AFTL back in blighty again.  Its new owners are being very coy about who, when and where - so, watch this space.

*   *   *   *   *   *   *

So much for the Lockheeds: what of Cotton?  He was lobbying for a revolutionary idea.  First, some perspective.  The original use of aviation in WW1, right from the very first days in 1914, had been for reconnaissance.  The second use was for shooting down the enemy's recce aircraft!  Hence, the received wisdom was that recce results (at first, visual; later, photographic) had to be fought for.  So the RAF's plans before WW2 revolved around a relatively fast armed aircraft - the Blenheim light bomber, operated by Bomber Command, which upon its initial introduction was faster than any biplane then in service with the RAF.  From the very first week of WW2 they started flying Blenheims for recce against German targets, in ones, twos, threes, even in fives and sixes.

Bravely flown as they were, they were shot down in alarming numbers and, sadly, brought back precious few photographs (albeit occasionally of very good quality).   By 1939-40 the Blenheim was no longer up against slower biplanes; and the training of its crews and the cameras it carried were only geared to what would now be regarded as low-level photography.  They were sitting ducks.  Notwithstanding Bomber Command's legendary willingness to take casualties (and this was even before Bomber Harris took over), the Air Ministry at the top was less sanguine.  These casualties "were not to be borne".

They had before them an alternative concept, being pitched by Cotton and others.  Precisely whose original idea it was is open to debate (there are at least 3 main candidates) but the proposal was clear enough.  Instead of fighting for your photos, send an ultra-fast aircraft, at high altitude, with cameras of much longer focal length - and obtain your pictures unopposed.  Bomber Command strongly resisted this idea but, greatly assisted by the secrecy of Cotton's outfit (still officially reporting to MI6), work rapidly started on putting the concept into practice on a very small scale: one aircraft, to be precise.

Of the technical desiderata, the ideal cameras were not at first available; but urgent development work was put in hand to acquire what was needed.  Meantime, there was a really obvious candidate for the aircraft - a Spitfire.  (Needless to say, Fighter Command initially declined to hand one over, but they were outranked.)  Cotton stripped out the armament, ballast and armour, sanded the machine down, painted it blue, made various other clever tweaks to the airframe and engine, added more fuel tankage - and fitted cameras.  The result was something that flew faster and higher than a Spitfire had done before and, most importantly, was comfortably able to outclimb and outrun Me109s.  It was the first of several marks of recce Spitfire, getting progressively more advanced in every dimension as the months went past, that were operational before the fall of France.

Their success rate, both in terms of the photos they acquired and their survival rate, was vastly superior to that of the brave Blenheims, as was immediately obvious to all.  It should have been no contest; but Bomber Command mulishly and indeed deviously resisted the inevitable for many months of intra-service wrangling to come.  They were, however, basically bypassed** with the formation of a well-equipped "strategical reconnaissance" organisation at RAF Benson near Oxford, squarely based on Spitfires (and later Mosquitos, and later still with US personnel and assets).  This was complemented with a new science/art of "photographic interpretation", centred at Medmenham down the road on the Thames - as much advanced from WW1 photo analysis as was the recce itself, and developed just as rapidly; initially by maverick civilians who were the strong-willed equivalents of Cotton in their own sphere. 

The exploits and achievements of this entirely new strategic organisation had no parallel in Germany, and rival Bletchley Park for their importance in WW2.  Stories galore for another day.    

To start with, all this was under the highly resourceful and decidedly unconventional command of Cotton, now an RAF Wing Commander.  During its pioneering development phase, everyone recognised it couldn't be any other way: cameth the hour, and so cameth the man.  And the achievements of his revolutionary endeavour were extraordinary, in a very short space of time.  However, he was putting noses seriously out of joint, up and down the land and over in France.  The final straw came - and Cotton went - after he accepted money from French industrialists to spirit them out of Paris in RAF aircraft just before Hitler arrived.  That was Sidney Cotton for you.  Definitely a player.

Come home soon, G-AFTL ...

ND

_______________

** Such is the bizarre nature of service politics that Bomber Command was allowed to carry on using its own costly recce in parallel to the new purpose-built strategic setup for more than a year.  One of the Command's motives was to ensure that only its own people carried out Bomb Damage Assessment - they were determined to mark their own homework.  Eventually they were called up on this too, much to their disgust - as it was proved conclusively that their bombing was not even remotely as accurate as they claimed.  Though his Command's relations with Medmenham were often strained, to his credit Bomber Harris personally came to value its accurate output.

Friday, 7 January 2022

Holland's energy commitment for the new year - a practical guide for UK energy policy


"The pessimist complains about the wind; the optimist expects it to change; the realist adjusts the sails." William Arthur Ward

The huge natural gas reserves in Holland have meant that the country has been a petro-state for a while, just a very quiet one. There is a reason here as to why it is such an agreeable country, even if my personal business experience of dealing with the Dutch is they are as tough as nails when it comes to negotiating. 

However, as with all of Europe, they have been prone to green-virtue signalling about their energy for a long time. Given the pre-disposition for windmills, you would expect nothing less. However, as is typical across Europe, a lot has been spoken about but not much done. Since 2015 they have though moved electricity generation from green power from 5% to 15% of the Dutch grid. Oh well, I am sure the climate will be thankful for this. 

All the rest is gas, all 85%. 

So of course the recent shift in gas prices has a strange dynamic in Holland, on the one hand the huge Groningen field can still produce a huge amount of taxable profits, on the other the citizens re very exposed to the huge prices increases. 

So, making a sane decision for once, the Dutch have decided to double the output of Groningen field this year, making Exxon and Shell very happy. This will actually wind down the field, maybe even causing a few earthquakes. No matter, desperate times (and profitable ones) and desperate measures. The domestic supply will be sated, profits made and, err, problems kicked into the future if the Russians continue to ignore their customer base. 

Meanwhile, in the UK, we still have politicians wittering on about the need to go green at all costs. The Liberal Democrats are actually suggesting windfall tax on Oil and Gas businesses now, to help the consumers - just as they need funds to open up capacity. The Scots have already cancelled the huge Cambo filed development off Shetland, incredible; the Tories are considering subsidizing the retail energy sellers to help them hedge the market - not thinking at all about supply or the further downside risks of hedging in a volatile market. 

The solutions to the crisis are actually within our grasp, but the politicians we are led by will suggest anything but the obvious and practical solutions. The UK should still be an energy exporter with certainly no domestic shock - indeed, it should be windfall times with our gas reserves. It is totally stunning how stupid and badly advised they are collectively. 

"Oh, what a tangled web we weave, when first we practice to deceive!" (Sir Walter Scott, 1808)


Monday, 3 January 2022

Predictions game 2022

 So for this year, more free form for the predictions game.

The four topics for consideration are UK Politics, Global Politics, Macro Economics and Covid.

Make a prediction for the development of each of these, plus one bonus as a tie breaker.

Get started in the comments!

For me, in UK politics Boris will survive the year somehow, in global politics Russia will not invade Ukraine directly but engineer a civil war of some sort and perhaps then take a police action. In macro economics inflation will fade in some products as goods and trade recover, but remain high as energy costs drive it like the oil crisis of the 1970’s. Covid will be with us, Omicron signalling the end for a nice spring and summer but the autumn will see a new variant. As my bonus, Northern Ireland will cause huge Brexit issues and a desperate Boris will invoke Article 16 as a way to try to drag both the EU and the US into a new round of negotiations. 

Friday, 31 December 2021

How did 2021 Predictions go and our annual winner

The questions were; the price of  Tesla, the price of Bitcoin, would Biden still be President, when will the Tier system use end and the FTSE price.

Quite finance focused but let's see what the real-world results are...


FTSE: ending at around 7400 - up from 6500 at the end of last year, so a decent recovery back to levels of, err, 20 years ago. 

Tesla  - up from 700 to 1090 - wow. a mere 50% gain. 

Biden is still President. 

The Tier system ended in June.

Bitcoin has gone from $30,000 odd to $50,000 odd. 

So if we had all bet our money quite simply we should have made a bundle. Sadly, I was contrarian and as usual missed all of this!


THE WINNER IS:


Electro Kev:


FTSE 7500 (just following the crowd here, really)

TESLA £733.25 (because that's $1000 at present exchange rates and TESLA is technically diverse and trades on myth and legend status.)

Tiers end - 2022, Spring. (They're using the Spanish Flu handbook.)

President USA - Harris (a few senior moments will see to that. He should avoid wearing white trousers in public)

Bitcoin - £32,000 (I just looked at the trajectory on a graph and I think major investors will hold out - also drug dealers are the only people travelling on public transport and are making a killing in this crisis... the stench of cannabis is everywhere.)


A very good effort there from Kev. Most entries were very out on Bitcoin - Kev nailed it. He also nailed Tesla and was only two percent out on the FTSE. 


This must be the best ever performance in the 15 years of the competition!






Thursday, 30 December 2021

Aston Martin DB7 - best car design evaahhh

The one and only; the original
The other day I happened upon a Kia 'Stinger', of all ridiculous things, and for the 294th time I found myself saying: no prizes for guessing where they got that design ...

Yes, it is the greatest car style ever designed, the Aston Martin DB7.  Which itself didn't just come from nowhere, of course: the marque evolved organically, and by the time of the DB3 the pattern was well and truly formed.  After the DB6, Aston Martin took a wrong turn (in business terms as well as styling) with the DBS, an Italianised parody of a design, albeit very much of its time.  

But with the DB7 which followed a longish while later, they'd perfected the art.  And every single vehicle designer in every car manufacturer ever since has self-evidently had it in the back of their minds at all times.  Sometimes, when the boss has just rejected their nth drawing-board effort for the new model, there's only one way to satisfy demand.  Audi, BMW, Ford, Jaguar, Kia, Mercedes, Toyota, (you can add to the list for yourselves**) ... they've all harked back to the immaculate tapering rear hatch, the lithe haunches, and even - Ford, this especially means You - the grill and front lamps.  (On a Fiesta, FFS!)  It's shameless, it's unimaginative, and it's Not Clever.

Actually, though, it probably is quite clever.  It is, after all, the design everyone really wants on their front drive, whether subconsciously or not.     

Just briefly, a few decades ago, Mercedes had pulled off something similar with its deceptively simple 3-flat-box design, which Ford and Toyota and even Audi raced to emulate.  But that's about as far as it went.   

Essence of DB7.  That's what every car manufacturer wants sprinkled on its products.  Just like they spray that leather smell inside.  Gotta have it.

ND

** and Bentley, and Lexus, and Maserati, and Tesla ...

Monday, 27 December 2021

Energy Supply Carnage: Last Man Standing?

A very traditional business strategy, in sectors where for some reason corporate survival is by no means assured, is "last man standing". Just hang on while competitors go under or vacate the field, in the hope of cleaning up when there's nobody else left and the benefits of monopoly can be reaped.  Well, for a few years at least - until the competition authorities eventually forget how worried they once were.

The UK energy residential supply sector has offered the prospect of this for many years.  The comfortable days of the 'Big 6' - when the barriers to entry were so high that new entrants rarely stayed the course - were always likely to be under threat at some point, with chaotic fallout.  So what were those barriers?  

  • Competence: gas may be a relatively easy business to participate in, but electricity is fiendishly difficult, in several dimensions, as many an apparently competent energy player has found to their cost (Shell, BP, Total, Statoil, Conoco, ...)
  • Branding & trust (a.k.a. inertia): people were fairly well accustomed to, and comfortable with, buying from "the electricity board" (not realising the concept was otiose from the mid 90's, with the restructuring of the industry and the separation of the supply side from "the wires") 
  • Low margins:  the business might have been comfortable for long-term incumbents, but fortunes were not readily made - indeed, once the market settled down after the initial upheavals of sector restructuring, there was always at least one of the Big 6 thinking seriously about jacking it in
  • Capital adequacy:  at very least, in order to be able to hedge the commodity price risk (a very necessary requirement in circumstances of volatile wholesale prices), a basic minimum credit standing is required
This all speaks to energy supply being the preserve of relatively large, competent, well-financed companies.  Was a market of "only" six suppliers necessarily non-competitive?  There are many other sectors where six, competing properly, would be considered pretty good.  To be fair, it can be argued that the Big 6 'competed' in a rather nominal fashion, and did little actively to shake up the significant degree of customer inertia: but the acid test - the trajectory of prices for end-consumers - was broadly favourable, and had been ever since the market opened up.

The picture began to change about a decade ago when a number of aspects came together to facilitate participation by players with quite different business models.

  • government and regulators were very keen indeed on seeing new entrants, and proved willing to ignore the kind of arrant dross that was applying for supply licences (interspersed with a handful of genuine and properly-financed innovators).
  • for the same "reason" (presumably), Ofgem simply hasn't enforced its own rules on smaller players, e.g. the requirement to provide a telephone call-centre service to customers. 
  • one of the major barriers to entry - the need for complex systems (again, particularly for the electricity side) ceased to be an issue with the advent of decent-quality off-the-peg supplier software packages at reasonable prices. 
  • wholesale prices: they started on a multi-year trend of slowly falling.  This facilitates the "Northern Rock" trick: sell long (e.g. one-year contracts at fixed price), buy short (on the spot market, where because of the falling price-trend, it'll be cheaper than when you made the sale).  Buying spot requires minimal credit; which is, errrr, handy for companies that have almost none...
  • the "flipping" model: price comparison firms that offered to switch customers "automatically" (i.e. passively, on the customer's part) onto the cheapest available tariff.  A supplier with next-to-zero marketing capabilty could thereby "buy" as much market share as it wanted, simply by pitching its prices accordingly.
  • some of the social-policy costs levied on suppliers only apply to the larger players.
This helps explain how an inadequate company might be able to get into the energy supply game.  But why would they want to?  There is no single motive, but alongside some perfectly creditable intentions, others of them are very bad.

  • genuine, albeit speculative profitability of the "Northern Rock" model - for just as long as wholesale prices continue to fall AND the supplier isn't going to the trouble and expense of hedging against the possibility of rising prices (not least, because it doesn't have the credit standing to do so! - see above).
  • positive cashflow: notwithstanding various unavoidable start-up costs and system overheads, with a customer base once established the supplier is able to get ahead of supply-cost outgoings via (a) direct debit charges and "estimate"-based payments, i.e. borrowing its customers money; and (b) collecting, as it is required to do, ever-increasing "green" levies, which do not need forwarding to the relevant authorities until several months later (if indeed they are ever paid out at all) - another cheap source of "finance". 
  • ease of syphoning off this cash: small players with no public profile nor recognisable corporate governance can readily and quietly play tricks like borrowing from Related Parties at outrageously high interest rates, "investing" in Related Party ventures, and paying Related Parties for extremely costly "software services" and "consultancy".  How do I know about this stuff?  Because sometimes it's as plain as day in their annual reports!  (That's for the supply firms that aren't so small, they don't have to file full accounts ...)  Where were the authorities in all this?  Evidently, neither Ofgem nor government could give a stuff.    
Until now, of course, when they are dropping like flies.  In the meantime, the Big 6 has ceased to exist!  SSE and National Power have exited: we are left with E.on (German), Scottish Power (Iberdola of Spain), good old Centrica, and of course EDF, probably only still in the game to give it political cover for its UK nuclear machinations.  True, Ovo and Octopus have stepped up to the plate: but then, so had Bulb - until last month ...

At least some of the current survivors will be hedged through to April-ish, when the prevailing energy price cap is scheduled to end (see earlier posts).  Of course, nobody will be making any positive plans whatever until the government has shown its hand on replacing the cap.  If it gets this wrong, chaos ensues, probably followed by de facto nationalisation in some shape or other (like the banks in 2009). 

But there must at least be the chance that Centrica's unwavering 25-year strategy of positioning itself to be the Last Man Standing finally pays off.  And a Happy New Year to all concerned!

ND

Thursday, 23 December 2021

Mr P's bold gamble -but what is it?

Very expensive business keeping 100,000 troops on station and ready to go. Let alone prepare an area with bridging equipment, tanks and all the logistical supplies needed for a war. Sooner or late the treasury will start weeping at these costs and the men will want to go home to see their families. 

Mr Putin has been playing this game for months though, Troops positioned to both expand Crimea to attach to a Greater Russia and conquer the Donbass region with its big cities and heavy industry. More worryingly, the maskirovka is in full swing  - stories of the CIA prepping chemical weapons in Ukraine for example. 

The price would be high though, Ukraine will fight on home territory, they don't much like the Russians and the russian troops - who knows how they will do, many are just conscripts. Russian equipment is both good on paper and poor in performance. 

But the West will not defend Ukraine. Some sanctions yes, severe ones even, but Germany still need Russia's gas. Mr P is currently turning this on an off in a display of his power. How Merkel, so lauded like Obama, has left a gaping strategic wound. 

Can Europe survive without Russian gas? In the short term, no, not without power cuts which will visit the UK too. In the long term yes. Plenty in the tank of Uncle Sam that can be shipped (at a price!) to Europe in a war-footing scenario. Equally though, the yanks might let Europe squirm a bit, having told Germany not to do this for decades, they will be very keen on an 'I told you so' moment. 

For Mr P, the upside is an odd one. yes an expanded Russia but international oblivion for 20 years. Long-term, less dependency on her gas which is the only valuable product they have. Maybe he plans to sell it all to China, who are less concerned about CO2 emissions anyway. 

Maybe it is all an elaborate ruse to get Ukraine to say it will never sign up to Nato and to get Nord-Stream2 approved which will in turn impoverish Ukraine suitably. 

But the troops are there now, the stand-off has a time limit. 

Tuesday, 21 December 2021

The End of Brexit and the return of the Remainers

 Why do I write this you ask? 

Well if you recall the crazy days of 2016 there were 4 very strong Brexiteers. Farage, Boris and Gove with guidance from Cummings. They really led the charge  to the Brexit vote. In more recent times, the brain charged with delivering Brexit has been Lord Frost and he has made his excuses and exited stage left (because of Covid, allegedly). 

Here in 2021, Boris is on the edge, his reputation will never recover from this, even if he limps back up a bit for a while. Farage is a radio host and Cummings sniping from the sidelines, disillusioned by the realities of power. 

Meanwhile, remain leader - Keir Starmer - is happily sitting an waiting for the Covid mess to hand him the keys to No 10. Future Tory leaders like Liz Truss and Rishi Sunak are both europhiles. 

Whilst no one, above all Brussels, will want us back in the EU full time. The machinations will begin to get the UK into the vast majority of EU things, maybe even the army using Ukraine shenanigans as cover. 

Won't it be ironic, that the outcome of the Covid pandemic will be a long-term remainer victory? Even though in reality the jabs, boosters and even-handed approach to the science have overall been very effective from the Government since the early disasters of March 2020. 

Who is there available to the Tories who could credibly lead the post-Boris Brexit faction. The loonies on the right of the party like Andrew Bridgen are only going to make things worse - who is there?

Monday, 20 December 2021

Frost In The Bleak Midwinter

 ... with the usual apologies 








 

 



In the bleak mid-winter 
Windy Frost made moan 
“Johnson’s cred is falling, 
Falling like a stone” 
Shropshire North had fallen, 
Polls were running low
 In the bleak midwinter 
Time to go 

How can we persuade him?
“Fall upon your sword!”
You have f*****d up mightily 
Right across the board. 
If you are a wise man, 
(“King of everything!”) 
Drink the hemlock now, man 
Do the decent thing

ND

Thursday, 16 December 2021

Interest rate rise klaxon!

My goodness. 

The denizens of the Bank of England have only gone and done it, raising interest rate by 0.15% today. A harbinger of the doom to come. 

Inflation sits at a mere 5% or thereabouts and surprisingly wages for the year have manager, err, 0% rise. Too much covid and change in the economy to sustain wage rises even though some sectors have done well. 

Still this is almost the first rate rise I can remember! People under 30 won't even really know what the Bank of England does or what the significance of interest rats is - we have been in a zero-interest economy for so many years, nearly a decade and a half now. 

Of course, with Quantitative Easing and inflation, real interests rates are at -5%. Holding cash is very bad for your wealth, much better to spend it or buy assets as quick as you can. 

It is still a long way from going back to a 'normal' economy and I still feel in the end the only way back will be with some very high inflation to erode the debt pile of the West vs East dynamic in the world - and that will be so painful that the politicians might try and put it off for generations yet. 


Tuesday, 14 December 2021

To Whom the (Energy) Spoils? A Genuine Puzzle

There's an interesting dynamic rumbling in the energy sector and associated financial elements, the dialectic of which is as follows:

  1. We can't use fossil fuels in future, oh dear me no.  Perish the thought.  Put my pension into something else.  Let me believe that the ambulance runs on pixie-dust and electricity comes entirely from wind.  Don't allow any more production of North Sea oil & gas.  Make Shell's life hell if it even thinks about such a thing.  I might even start to feel very strongly about all this.
  2. Actual disinvestment starts apace: actual pension funds switch out of fossil fuels by the billion.  For the BPs and Shells, the Centricas and even the EDFs (see below), the cost of capital starts to rise.  They actually sell some of, maybe all of, their hydrocarbon-related assets.  
  3. But in the world outside of all those tightly-shut eyes & heads-in-sand, the ambulance still runs on diesel and electricity is still generated using fossil fuels.  
  4. In fact, the market for fossil fuels right now is pretty tight (see previous post) AND, what with all this wind in the power fleet & other kinds of uncertainty, prices are exceptionally volatile.  They are likely to stay that way, even if in absolute terms they subside from today's level.
  5. Some people are making a Great Deal of Money from this - right now.  And the scope for a great deal more to be made in the coming years is huge: particularly via assets (and managements) that are responsive enough to make hay from all that volatility - e.g. efficient & flexible gas-fired power units.  Even just the continued supply of simple gas to western consumers (whether the green-woke like it or not) has a lot of mileage still in it (at least two decades, I'm guessing).
  6. But the 'traditional players' seem to feel themselves unable to make the usual response to an economic reductio ad absurdum, in terms of investment (long term) and arbitrage (short term) to take advantage of the mispriced assets etc.  
For present purposes, let's put aside the amusing cognitive dissonance that ought to be (though probably isn't) increasingly wreaking havoc with all those who like to mouth "we don't need fossil fuels" but still like to be warm etc etc.  It's the economic & commercial dissonance I'm interested in.

We can easily spot little Volodya Putin and other traditional upstream players making pots of money out of the situation.  They probably hope to make yet more.  China, though essentially an energy importer right now, will probably benefit in relative terms (that is, relative to the West) by being untroubled by 'green' scruples.  All this is easy stuff.  

But what of other business models?  Can 'western' firms somehow thrive in this crazy market?

Exxon:  it's been clear to me for a long time that Exxon, that ailing, blinkered and sluggish beast, is basically hoping it can quietly get on with not changing much at all, and not go down the costly, guilt-stricken route of Shell et al.  But is there anywhere to hide for a US stock-exchange listed firm of Exxon's prominence?  Can any others of its kind, smaller and perhaps less exposed to the limelight, pull off that trick?  

The big commodities players:  there are plenty of these big players - you all know who I mean, but slander is slander - who, if they have any scruples whatsoever, well I've never noticed.  (Ditto their shareholders: well they couldn't, could they?)   Some of these cos are indeed buying up fossil fuel assets: the energy version of money launderers and sanctions-busters.  Are the unscrupulous to be the big western beneficiaries?

A.N.Other Corp: this is where it gets really interesting.  Case study:  EIG Partners - ("Over the past decade, EIG has thoughtfully developed a quiet yet purposeful commitment to integration of ESG factors throughout our business")  - whose website homepage would encourage you to believe they are essentially investors in wind farms and solar.  But lo!  Earlier this year they quietly bought West Burton B, one of the UK's biggest, most modern and efficient gas-fired power plants, from EDF which is busily trying to reposition itself as 100% green.  And what magnificent timing: EIG has already made an absolute ton of money at WBB from the extreme market conditions of the second half of 2021.  

Here's another example: Vitol, who've also bought UK gas assets recently - this time from none other than Drax (who have problems of their own) -  and are likewise minting it this winter.  Here's how they brand this venture ('VPI'):  "We are part of the UK’s pathway to Net Zero, complementing the increase in renewable energy to power homes and businesses. Our portfolio includes hydrogen and carbon capture projects to help lower emissions and develop a future for decarbonised, dispatchable and flexible generation in the UK."  Oh and, errrr, gas-fired power plants.

So: is it all simply about greenwashing?   Maybe you just need the right "communications" firm in tow.  Good old capitalism at work:  assets change hands from those who don't know what to do with them, to those who do.  At distressed prices, if the former are panicky enough ...

Well, maybe.  I think Shell was hoping they could pull this one off, too.  Do we think it's all about shuffling the western-owned assets into less prominent, more media-savvy hands?  Or is it destined to be yet another massive transfer of wealth from the naive & decadent West to the hard-nosed East?   

ND

Monday, 13 December 2021

Energy Crisis: Nobody Seems To Care - Yet

The only time the global energy crisis was front and centre in the UK's dozy media was when there was also a completely coincidental "shortage" (i.e. mass hysteria) at the petrol pumps.  That resolved itself, as it was bound to do: at which point everyone stopped gawping at the levels of international wholesale prices of gas and electricity.

This negligence is of course encouraged by Theresa May's domestic energy price cap, under which most of us will be sheltering as our fixed-price deals roll off, and we can't find anything cheaper.  But of course this time-bomb is set to explode in April.

European wholesale 1-year power price for Calendar 2022

Just feast your eyes on this chart; and imagine what's going to happen when this works through to ordinary punters.  I reckon it will be a serious factor in Boris' decision-making on his political future.  Whoever's holding this baby when it goes off will be well-and-truly covered in ordure.   (To mix idioms freely.)

So: when will it get the attention it deserves?

ND 

Friday, 10 December 2021

Friday Post - Fun Tory Time Competition

Who will make the best next Prime Minister? You have to choose a current Tory MP to make it a bit harder.

I start with mine below:

Tom Pursglove. He is the youngest Tory MP but very experienced nonetheless. Rising up from roles as advisor and also from Wellingborough Borough Council, he has already fought and won 3 elections in 2015, 2017 and 2019. As the MP for Corby he is in the heart of the Country and so nicely between the ex-Red Wall seats but far from the Home counties. 

He has been chair of Conservative Youth and has expressed the "right" views on being anti-Europe and also a borderline climate change denier and actively campaigning against more onshore wind farms. A good anti-dote to the green obsessed Boris but still unlikely to undo Brexit. 

Being so young he is also unlikely to die from the ongoing covid pandemic and is not a member of either the Cotswold or Islington sets that have done so much damage to the body politic over the last few years. 


Answers in the comments please.

I'll try to engineer a job as an unpaid Tory spad for the winner.

Thursday, 9 December 2021

Not a very merry Xmas in Downing Street..or the Country

 A new baby, no money, no friends....attacked for a party he did not even go to. 

Boris won't be full of Christmas cheer. 

He has a lot of mouths to feed on his PM salary. Even more now but his happy day is not so much for Boris Johnson. 

I won't be surprised to see him quit in January. He always wanted to be Prime Minister and he has been. Because of Brexit it will always be remembered and Covid would have ruined anyone at the helm, there was just now way to come out of it looking good. Even the Goddess of the Left in New Zealand or Princess Nicola in Scotland have started to come unstuck. 

More worryingly, who will take over. I fear Rishi has not the 'common touch' of Boris. Raab is an idiot who doesn't know where Dover is and Liz Truss is more likely to be another May than a Thatcher. None of us could stand Gove, although  his streetwise and intellectual heft means he is probably the best of the cabinet. 

Luckily for them, they only have to face Sir Kneel of Lockdown and have a stonking majority to defend in any election. 

More widely, in times of Crisis we have typically had more PM's and also in the new media age, I wonder if over-exposure to politicians is reducing their sell-by dates even further. Even Thatcher may have found the endless well of hate emitting from Twitter difficult to live with.