Hands-on at EMI: Can Pop be Sold Like Popcorn ?

Mostly business here today, though Guy Hands is certainly well-connected politically. Later this week he is expected to reveal his strategy for the newly-acquired EMI: staff fear large cuts and key ‘artists’ (OK, Robbie Williams) are said to be truculent.

Hands’ traditional MO is to buy unfashionable companies with reliable cash-flows (pub chains, cinemas, rental properties etc) and securitise the hell out of them. How does EMI fit that pattern ? Is it the vanity purchase of a very wealthy man; or a new business model - or does he see the same underlying business dynamics to be exploited one more time ?

I’d guess the latter: he is probably looking to extend the concept of securitising royalty streams, as pioneered by David Bowie. Accordingly, part of Hands’ due diligence was an attempt to assess what teenagers are willing to pay for downloads. Can there really be any stability in that ?

‘Trooble at mill’ from Mr Williams et al is perhaps something he has catered for in his planning, with his talk of 'incentivising' EMI acts (profit-sharing, I imagine, not percent of the gross). Likewise, with the vast increase in the number of bands spawned from the YouTube generation, perhaps he is anticipating a wholesale commoditisation of pop music, and consequent reduction in artist-power. But I also reckon he is expecting to run an efficient business with slender and predictable margins: he refers to his Odeon cinema chain as being in the popcorn business, not the movie business.

Good luck, matey: the pop industry may be fuelled on alcohol (and other substances) but music doesn’t flow quite as smoothly as beer.

ND

Sunday Business Round-up : Stagflation guide

The usual round-up of the 10 best stories, I could not help noticing having reviewed all the papers at length that there is a common theme of rising prices and falling sales and tightening credit. For 2008 read 1976?

The pic next to this is taken from here, an US stagflation watch site.

Here are my 10 most interesting links:




Energy rip-off - The Times leads with allegations of price fixing in the UK energy market. Very convenient for the government...

Retail figures for Boots - Mixed cheer from the retail sector post Christmas.

Northern Rock management - Treasury has team lined up for inevitable nationalisation.

Lost Rock - Even the Guardian concede the Government will have to step in to clear up its own mess.

A Tribute to Sir John Harvey-Jones

Stagflation speculation - more of this to come this year, even if what we experience will only be mild compared to the 1970's. Get ready for comparisons aplenty with 1990 bust Japan too.

Threats to UK employment - A good piece in the Telegraph, maybe help is at hand from the falling pound.

Music Industry still a-changing - EMI to cut jobs, the fundamental Business model issues still unresolved.

Nuclear button pressed - The Observer writes a puff piece for NuLab - worth a read for the insight to lame government thinking.

Credit Crunch - Still the fire is lit as Citi seeks even more money for a bail out from Saudi sources.

Janurary nearly half-way through

The weather is nice outside for a short while and I am not at work because it is Saturday. Best of all we are nearly half-way through January; the worst month of the year.

Interestingly my anecdotal evidence suggests there is plenty of work going on in The City and things are picking up as the year goes on; perhaps this could be a sign that the slow down will be mild after all?

Have a nice weekend everyone.

Goldman's roll the dice on Northern Rock

Alistair Darling has today admitted that it may not be possible to put together a private deal to sort out the Northern Rock mess.

Goldman's who are advising the government have also announced an idea to try and sell the Wreck debt as bonds (junk bonds anyone?).

This is surely nearly the end game. It is highly unlikely that the EU would allow the bonds to be issued as they would be government guaranteed which means illegal state aid.

What this activity does show is that Goldman's perhaps know more than they are letting on about the prospects of the RBS and Citigroup lending to one of Virgin Money or Olivant.


The taxpayers are going to be in the hole for a long time...

FTSE4failure?

Many of the predictions at the end of last year were for an average year for FTSE100 shares; with good corporate profits, falling interest rates and a poor housing market the money would have to go somewhere.

Here is the Graph below for the last month, not looking so good is it. I am struggling to predict which sectors will do well this year, maybe tobacco and oil?

UK Interest rate decision

Now it is not often that Iain Dale beats us to a profound statement about the economy and interest rates...but he did this week.

Iain asked the question of what is the real interest rate. This is indeed a hoary old topic, old enough to have been my first decent post on this blog.

The fact is that the Labour government had to change the old RPIX rate to the Euro standard CPI rate as ordered by our European masters. This has helped us in early years of the naughties to be able to lower interest rates and stave off a real dot-com bust. However this fuelled an asset bubble, experienced by most people in the form of housing and a huge increase in mortgage debt. It has also allowed banks to release lots of money into the economic system in a bid to maintain or grow their returns in a low interest environment.

These chickens are coming home to roost in 2008 and the Government may well be make matters worse by persisting in a flawed inflation measure.

When the Bank of England meets tomorrow it will see a set of figures suggesting we have a low interest rate and decreasing economic activity. Just as Alistair Darling effectively asked for in his press conference on Monday, the MPC committee will likely vote to cut rates.

This will be a personal relief, given my indebted mortgage status and its help to drive the gold price higher for my investments....or will it?

Food prices according to the ONS are 10% up on a year ago, Npower, provider of leccy and gas to chez Slicker, have just put up prices 27%. Hmmm...seems like quite high inflation to me...almost as if corporates feel they have strong pricing power. Now to keep a lid on this the idea is generally that a government reduces the flow of money to try and encourage saving over spending, which in turn forces retailers to lower prices to drive sales (as is happening on the high street, but not elsewhere in the economy). Yes there are other drivers and reasons, but I don't want to bore forever here...

We are caught in a vicious trap of rising prices in many areas which will drive inflation - out current CPI measure discounts big chunks of this and relies on a near random and politically influenced basket of goods, not really very clever stuff in 2007 in a world of super computers on people's desktops. The ONS has admitted its data could be better last year. But headline inflation is low and Brown and Badger are hardly going to advocate a change to make it reflect its true rate!

So the Bank of England may well vote for a cut in rates which may or may not be a good idea; the issue I have is that it is working on a false mandate from Government, which belies the idea that it is independent at all.

Going Down !

This could get monotonous ...


($2.10 was just November)

Updates and poll results

I really liked Ed's post on the fallacy of the US/UK wealth comparison, spot on Ed. Also Mark's review of the need for a citizen basic income is worth a read. Having not been convinced originally I am coming round to this ideaas the only solution to our broken benefits system, I see even 'a lefty' like Chris Dillow is too...amazing we can all agree!

Also poll result from last year voted the August credit crunch the biggest shock of the year, followed by the Northern Rock collapse. I was a little surprised the order was not reversed but not too much.
Anyway, according to the media the crunch is over. Let's see how long it takes forLIBOR rates to creep up again as the fear comes back to the banks. I see Citigroup is strongly rumoured to have a another huge write-down in the pipeline.

Finally, there is a new poll, what do you think will be the biggest event in business and economic terms this..just a bit of fun!

IT - Are Government Cock-ups Uniquely Bad ?

Exclusive to all newspapers last week was the news that the Government has wasted £ 2 billion on badly-executed IT projects. And the rest ! You can find a handy summary of recent episodes courtesy of the well-informed Dizzy, and Private Eye has covered these scandals for decades.

The Drew has had some exposure to government departments over the years and could also tell some horror stories. (High on the list from personal experience - no names, Minister - would be the development from scratch of a rather basic database, when superior generic products were available from PCWorld for £ 200.)

Fact is, I’ve seen the private sector being royally ripped-off too, primarily by so-called System Integrators (again, no names). Another quick story from personal experience: a blue-chip energy company spending around £ 6 million on a trading system that did no more than could easily be achieved using – coughs - MS Access ®: and the bulk of the dosh went to the SI, not the software
vendor (*gnashes teeth*, I was once a software vendor …)

So – is government uniquely bad at IT, or are their cock-ups just more high-profile ? There are many less prominent but equally vivid red faces in large organizations everywhere.

ND

UPDATE

2008 inaugral sunday round-up

The new year sees the return of the business round-up this week. Last year was a very significant year in terms of business and economics; this year will be even more so.
Before you get to the click-fest below, let me know if there are any changes or additions you would like to see to this format....more international news? more focus on specific areas? etc..

Here are the 10 stories to get us started, many will be with us for a few weeks to come:

Housing crash threatens Rock sale - The fall in house prices is giving the jitters tot he banks who are proposing to lend to the potential Northern Rock saviours. Alternatives to state ownership are now nearly all gone..

Goldman to the rescue of the Rock - However, perhaps the above can be trumped by a new financing initiative from Goldman Sachs. We will know the answer before long.

Cohen rounds on AIM - Veteran investor sides with the yanks and asks some difficult questions of the LSE's AIM market. Hard to answer these, especially as the overall shares on this market go south. This year could be a tough one for AIM investors.

M&S leads the denouement - Retailers to continue the 'bad' news (bad for them, good for those managing personal debts in a more sensible way) from the last quarter.

Bank urged to cut rates - The Bank of England is under great pressure to cut rates again. Few chances now to avoid stagflation.

Comment of the week - Liam Halligan in the Telegraph on the meddling of politicians.

Nuclear power funding - This will be a story for the next 20 years. The sums involved and the risks are astronomical.

Gold heading to new highs - Volatility drives up the price even further. Gold is doing even better than Google!

Challenges for TV in 2008 - Good summary of some of the regulatory and economic changes coming to the media in 2008.

Guardian share tips - just for a laugh...

Friday fun; welcome to the new year

this image is shamelessly copied from an amusing US blog: have a good weekend everyone.

Wider Still and Wider

Last month, having shafted the Nation (and shorted the Pound), Gordon Brown made a feeble attempt to draw a line under the EU Constitution, stating:

We expect no change in the foreseeable future so that the union will be able to fully concentrate on other challenges ahead.

Meanwhile, the Ukrainian Ambassador has written to the Grauniad in pained terms, concerning an 'atlas of carbon hot-spots' he found in its pages:

… I tried to find my country on your graphic ... After some effort I finally found Ukraine in the section for Eurasia. The point is that Ukraine does not possess a single square inch of territory anywhere outside Europe. Ihor Kharchenko, Ambassador of Ukraine

No prizes for guessing what His Excellency wants for Christmas. Don’t worry pal, no-one listens to Brown: and if Bulgaria qualifies . . .

PS, as regards your own little 'hot spot', you’ll love Sarkozy’s idea for a new EU nuclear policy

ND

Don't underestimate The Drew

In his predictions of just yesterday, Mr Drew of this house predicted gold would hit over $1000 an ounce.

I scoffed at this suggestion in my cereal this morning, as much as I am a gold bug, it seems outlandish to think that the market will get so jittery and the dollar fall so much as to make this a plausible scenario.

Then gold shoots up today to $851, just $150 shy of Drew's prediction and it is only Jan 2!

Time to stock up in bits and bobs from Hatton Gardens per chance?

2008 Predictions

Lots of people have their predictions for 2008, here are mine (CU that is, Nick Drew is adding his in the comments). After my success of last year and more recently I hope to continue the winning streak, not that this has made me any money, yet.

As an aside I will count this as part of Dizzy's meme; 8 for 2008 -

1. The FTSE will suffer a very eventful year, and may well be down quite considerably by the summer, but for a variety of reasons, including a re-bound in bank shares will end the year in the 6000's just as now.

2. On the currency front, after last year's excesses the pound will have a much more challenging year, especially as rates in the UK head for parity with Europe. As a result it will be more like 1.80 to the dollar and 0.70 against the Euro by mid-year. I don;t think you can predict currencies much beyond that. The oil majors will be the big spenders in terms of mergers and acquisitions.

3. Politically in the UK, there will be no election and Gordon Brown will still, unfortunately, be Prime Minister this time next year.

4. The UK Housing Market will slow much faster than most economists are predicting and the overall rate might touch 20% by the year end. Those viewing the market are not factoring in the role of psychology enough into the falling market. My friends who are estate agents reckon they will all have closed within 3 months - so things are looking pretty bleak.

5. Barak Obama will win the Democratic nomination for President and then go on to be elected as the 44th President of the USA.

6. Northern Rock will be nationalised (officially, it already is in many ways) as ways to try and get a private buyer founder. This will be the biggest government crisis and will cost Alistair Darling his job as Chancellor in 2008.

7. The credit crunch will continue long into the year and the credit retraction will cause a recession in the US and below inflation rate growth in the UK, which will only just avoid the two consecutive quarters of negative growth that defines recession.

8. The UK Government will raise taxes quite heavily, probably on motorists and luxury taxes, in the budget to try and balance the books. There will be more public sector strikes as the government attempts some desperate controls on the spending tiger it has unleashed.


Some pretty bold ones there, I'll be impressed to get 65% right again this time next year!

2007 Predictions update

So before unveiling my predictions for 2008, it is always worth remaining oneself and the readership of what I said last year and how accurate I was with said predictions (in case you can't be bothered to read further, 65% right!).
With such an auspicious past, I hope you all look forward to the 10 tomorrow.

So here they are below with new comments added:


1. Gordon Brown will be Prime Minister - An easy one, one tick.

2. Tony Blair will resign from parliament and get a US based job - another easy one, half a tick as he seems to be unhealthily (for us) keen on staying in London.

3. There will not be a general election. - Another tick, not such an easy call bearing in mind October. My faith in Brown's cowardliness showed good reward here.

4. The FTSE will end lower than it has done this year (below 6200) - No tick here, the market managed a crawl of 5% to 6500.

5. Menzies Campbell will be ousted as Lib Dem leader - Another tick, now what to predict for Clegg next year. Much egg on the face of Praguetory for disagreeing with this in the comments next year.

6. Taxes will rise again in the UK - Yup, not so hard this prediction thing with a Labour government in power. Tick.

7. Hilary Clinton will lose support and no longer be the front runner for the Democrats in the US Presidential race. So close yet no tick, Hilary is still front runner but Barak Obama is oh so close. Do I deserve a tick here for effort?

8. British troops will leave Iraq (most if not all) - Tick, again, easy to rely on Brown's cowardliness.

9. Hamas will lose power in Palestine. - Tick, even if they are now more ensconced in Gaza.

10. Two key UK political bloggers will start writing predominately for the MSM. - No tick's here, only Iain Dale has got his Telegraph spot and the economist has yet to inquire of my doubted talents...

One for the commentors.

This is the first full year of blogging at this place and also the year in which Mr. Drew became a not-to-be missed presence.

When I started blogging, it was not to do more than become more than a mirco-publisher, as work and family would always play too much of a role to allow more serious blogging efforts.

However, as time has gone on and the blog has remained I am humbled by the regulars who add so much to the place. Many of my shorts are indeed done in a few spare minutes, yet the quality debate they often create is very good indeed.

So I wanted at the end of the year to say thanks to all of you who read and especially to those who comment. I have come up with a list of those who usually to the best:

Dearime - A fine commenter and, if there was such a thing, a professional. A man with a clear sense of economics and business and sharp sense of what is bullshit and what is not.

'Anon' - There are lots of anon's, but there is one who comments here a lot who clearly knows a lot about a lot. See the comments' to the post of earlier today for good examples. Anon has been know to get very excited about housing and social policy from time to time. maybe 2008 will see this person revealed to us all.

Ed - Mr Clarke, who I recently had the pleasure of meeting at our drinks of a couple of weeks ago, is a true gent. He is on the both merry and jovial , but beneath his exterior lies a fine brain and witty raconteur. Shame is is a lawyer, but I guess you can't have everything.

There is of course a much longer list to add to this of people who can't go unmentioned, Steven-L, such devotee of time and well-thought prose, Mark Wadsworth, never short of a viperish comment for Badger, Ken from Glocs, Matt Ferries, Ellee Seymour and many more.

Thanks to you all and I wish you all the best for 2008 and hope to see you back here then.

True Courage

A shocking end to the year.

Two generations of the Drew family have had the privilege of knowing this brave and thoughtful lady who must surely have been the West’s best hope for rational future dealings with Pakistan.

She may not have held all the answers, and I do not know a great deal about the politics of the region: but I recognise physical and moral courage when I see it.

Where will we find brave leaders like this in our own country when we need them ?

ND

All good news

In the next few posts will be some reflections on last years predictions, predictions, some timely praise for commenters' here and sundry other posts.

However (having myself been ill the whole of this week and now back at work), I saw this piece of cheery news and just wanted to share it with everyone. According to this rather, um, how to put it, limited? Piece of journalism all is now well with out pension funds. Those clever actuaries and company directors have turned what was a huge deficit into a nice surplus.

So we will all be paid after all.

This does, perhaps, rather skip over the biggest reason for this change. That is that by closing final salary schemes and pushing staff into much, much worse defined contribution schemes, the problem of retirement has magically gone away.

At the same time the government and its employees have voted to stay firmly with the rather more comfy final salary schemes.

It is a sad reflection at this time of year, of just how much the 'parents' of the 60's generation are prepared to screw their own children in order to finance their own lifestyles. You can be sure none of the actuaries or company directors are in defined contribution schemes.

Merry Christmas

Apologies for the lack of posting I have been down with a nasty flu bug. Just hoping it clears up by tomorrow.

Merry Christmas everyone, thanks for reading all year and I hope that you spend some quality times with the ones you all love most over the next few days.

Back on the 27th.

Christmas Spending Poll Results

Here are the results:

More than last year	0 (0%)
Less than last year	6 (40%)
About the same	8 (53%)
last hits on the Cards....	1 (6%)

I think it is quite consistent with the anecdotal evidence that people are either struggling to find the money or else wary of what the new year may bring that causes them to vote for less than last year.

On a more positive note, the majority of people are holding their spending the same; so it can't all be doom and gloom.

Personally, more children in the family , both my own and close relatives, means a higher spend come what may....one last trip to the shops today for us!

Friday Fun: Nigerian Style

I have been inundated with some real Christmas gifts this week. I need to think of appropriate responses to such generous offersand wondered if you could all oblige with your comments.....perhaps these are the offers that will make Mutley rich at last?



FROM THE DESK OF MR NEDUM
BILLS AND EXCHANGE MANAGER,
BANK OF AFRICA (B.O.A)
OUAGADOUGOU BURKINA FASO.

Dear Friend,

I am the manager of bill and exchange at the foreign remittance department of BANK OF AFRICA (B.O.A) here in Ouagadougou, Burkina Faso. In my department we discovered an abandoned sum of US$30m dollars (THIRTY Million US dollars) in an account that belongs to one of our foreigncustomer (MR. ANDREAS SCHRANNER from Munich, Germany) who died along with his entire family in Jully 2000 in a plane crash.

http://news.bbc.co.uk/1/hi/world/europe/859479.stm

Since we got information about his death, we have been expecting his next of kin to come over and claim his money because we cannot release it, unless some body applies for the next of kin or relation to the deceased as indicated in our bankingguidlings and laws but unfortunately we learnt that his next of kin died along with him in the plane crash.

The banker law and guidline here need a responsable person,and who the bank can introssted this treasury as unclaimed fund. The request of foreigner as next of kin in this business is occassioned by the fact that the customer was a foreigner and a Burkinabe cannot stand as next of kin to a foreigner.

I agree that 30% of this money will be for you as a respect to the provision of a foriegn account , 10% will be set aside for expenses incurred during the business and 60% would be for me Thereafter, I will visit your country for disbursement according to the percentage indicated Therefore, to enable the immediate transfer of this fund to you arranged,you must apply first to the bank as relation or next of kin of the deceased indicating your bank name, your bank account number, your private telephone and fax number for easy and effective communication and location where in the money will be remitted.

Upon receipt of your reply, I will send to you by fax or email the text of the application . I will not fail to bring to your notice this transaction is hitch-free and that you should not entertain any atom of fear as all required arrangements have been made for the transfer. You should

contact me immediately as soon as you receive this letter.
Trusting to hear from you immediately.

Yours Faithfully,
MR NEDUM

As if this one was not enough, shortly after I received this email too...

FROM MR.WILLIAMS EKE.
AUDITING AND ACCOUNTING UNIT
FOREIGN REMITTANCE DEPARTMENT
UNION BANK PLC FEDERAL REPUBLIC OF NIGERIA


Let me introduce myself. My name is Mr. Williams Eke,
I am the auditing and accounting officer of Union Bank
Plc .I got your contact over the Internet in my search
for the relatives of one of our numerous customers who
died alongside with his family in an air crash. During
the routine check in my branch, I discovered an
abandoned sum of Twelve million Five hundred united
states dollars,(USD$12.5m). in an account belonging to
an expatriate customer Mr.Lynn Roy, a mining
consultant/contractor with one of the leading oil
company in Federal Republic of Nigera before his
accidental death on Saturday 4Th May 2002 in Nigeria
via the ill-fated EAS Airline crash.

Ever since then, valuable efforts have been made to
get to his people but to no avail, as he had no known
relatives and more so, he used his wife's name as his
next of kin in his account opening forms. I have been
expecting his relatives to come over to claim his
money as it cannot be claimed unless somebody applies
officially for it as his next of kin as indicated in
our banking guide but no avail. Unfortunately, I
discovered that his supposed next of kin (his wife and
children) died with him over the plane crash incident.

Over the years, I decided to look for the necessary
papers relating to the deposit in order to make
business out of it as the deposit was made in my
branch. Now that all papers are ready, I am asking for
your assistant to release the money to you as his
relation/next of kin for safekeeping andsubsequent
disbursement. I know that a transaction of this
magnitude will make any one apprehensive but I am
assuring you of the Security of us all as modalities
have been perfected for a swift and smooth operation.

You are being contacted because Since nobody showed up
for his money and I don't want it to go back into
Federal Republic Of Nigeria account as unclaimed bill
when the next audit is conducted. The banking law and
guideline here stipulates that such money if remain
unclaimed, will be transferred into banking treasury
as unclaimed effect. The request of a foreigner to act
as next of kin in this business is occasioned by the
fact that the customer was a foreigner and a citizen
of Federal Republic Of Nigeria cannot stand as next of
kin to a foreigner.
I am ready to negotiate the mode of sharing with you.
I will visit your country for the
disbursement/investing of my share according to the
percentages we shall agree upon after the successful
transfer of the money to your account. I will not fail
to bring to your notice that this transaction is 100%
hitch-free and that there is absolutely no risk in it,
having concluded.

the modalities for a smooth operation and my position
in the bankguaranteesits successful execution. All I
require is your honest co-operation, a guarantee of
your sincerity and capability to enable us conclude
this deal. Note however that the sensitivenature of
this transaction demands that you have to keep it
absolutely confidential.Please accept my apologies,
keep my confidence and disregard this letter ifyou do
not appreciate this proposition.

Thank you very much for your time.
Trusting to hear from you immediately,

Best regards,
Mr.Williams Eke 

What Price Sterling ? . . . What Price Gold ?

As we coast towards year-end, Sterling finally tips over the edge and we are back below $2. And the CBs have panicked – here’s Franklin Sanders writing at Goldprice

Let's see . . . The world's central banks, obviously working together, inject $0.540 TRILLION dollars into the financial system in one day. Would that classify as pushing the panic button? Is a pig's rear pork? Can a duck swim? Does a bank suck blood? Of course! You can hear the sweat dropping off their foreheads from Tennessee. Scares me, I'll promise.

And if this doesn't grip you, check Sackerson for other scary stuff.

On the other hand …gold (in Sterling) is at an all-time nominal high (a 19-year high in real terms). So – how are you placed for 2008 ?

ND

EU: Capitalism @ Work?

Sometimes the EU can just parody itself so well; it needs no Mark Steel to try and expose its flaws (where are the right-wing comedians, by the way?).

Today brings us this classic tale. Our greater European government for progress has deigned that all cars need to meet strict emission standards by 2012. Personally, I think this is the way to go, regulate the market and offer incentives (cough, socialists be here though as they propose fines rather than incentives in this case...) to bring about the changes you want in an efficient way. Allow the market participants to decide how to get there. one quibble is that 2012 is not very far away in R&D terms, so i would have added another 3-5 years, but this is a thumbs up from me. I would rather our own government did this, but we don't seem to get asked about that anymore...

Anyway, back to the matter at hand. This idea has met with growls of fury from the car manufacturers, but of course. best of all, they have successfully lobbied their governments to make a storm about this. Angela Merkel has come out against and now the whole policy lies in jeopardy.

If this fails, which seems likely when the Germans and French get together against an EU idea, it just goes to show the pointlessness of the EU. It has not enough power to be a true state actor (fortunately), but has the cost and bureaucracy of several states.

This one and related green (tax) ideas will run and run....to nowhere.

Has Northern Rock been nationalised

I know, I know, I am beginning to sounds like Robert Preston, always posting about Northern Rock.

Nonetheless the Government engaged in some classic spinning today. Early this morning it decided to back the Granite bondholders of Northern Rock, which has added at least £17 billion to the amount owed to the Government. However, this has in effect been the last straw to privatising Northern Rock.

The market in shares is now utterly false, in that the shareholders will have no claim on the company in administration, nor do they have any influence over management decisions.

Despite this de facto nationalisation, Brown spins away saying they are looking at a private solution. This is true in the technical sense that the Government wishes to be rid of its Rock, but it/we now own all the major assets and have guaranteed all the others.

Then tonight it emerges that Bradford and Bingley wishes to buy into the Rock. Well, we all have so why not. Who would not want to own a mortgage company that issues mortgages with AAA rated guarantees from the Government? Not only this, but many in the City see B&B as the next most vulnerable company after NR. So perhaps a clever play on their part to get involved now before their own model (buy to let, in this case) fails in the face of the credit crunch.

Interesting times indeed.

Reflections on Bali - Drew's Energy Policy

Critical ? Ultra Super Critical !

The season of Goodwill is almost upon us . . . but not quite, so let us start with George Moonbat’s observation today: “Hilary Benn is an idiot”. Yep, and UK energy policy as a whole is idiotic too.

But as one of my genteel interlocutors said over a beer on Thursday: OK smartarse, what would you do ? So first, an important Fact: latest-technology new coal-fired power plants will use 30% less coal than the plants they can replace. This technology goes by the suitably exciting name of ultra super- critical pressure, is available now, and will be genuinely economic very soon.

Coupled with the better-known facts that coal is plentiful, comes from relatively friendly places, and the dry bulk shipping fleet is expanding rapidly, this has striking implications for an entirely practical energy policy.

Drew’s 5-point energy policy

(1) promote efficiency and conservation measures that are economic anyway: amazingly there is still huge potential here

(2) no subsidies for renewables or microgen (in particular, no free ride for wind farms on the system-balancing problems they cause): some technologies may well have a meaningful rôle to play but there’s only one rational way to find out

(3) no subsidies for nucs, and in particular no EU subsidy for France’s decommissioning programme. Let’s really find out whether nucs are economic

(4) clear the decks for planning consents on brownfield sites for lots of new hi-tech coal plants (ditto for investments in ports, pipelines, road and rail that may be needed). No subsidies required, though some infrastructure may need to be built by regulated monopolies such as National Grid

(5) relentless pressure for a free-trade regime along the full length of the various energy chains

What will be the CO2 reduction resulting from this ? Don’t know, but (a) it will be material, (b) comes with improved security of supply, (c) doesn’t require subsidy and (d) minimises the hit on GDP that will inevitably result from high energy prices.

Above all, it’s for real - not yer fantasy targets for 2020 and beyond that those in power today know full well they will never be held accountable for. The dash for gas delivered a private-sector technology and environmental revolution in the 1990s, and a new dash for coal can do the same in the 2010s.

ND

Sunday Business Round Up - 16 December

Bit late today, been out Christmas shopping at Bluewater. Busy as it was, it was no the hideous mess I would have expected, perhaps that is a small piece of anecdotal evidence for the type of Christmas it will be for retailers?

I digress, here are the 10 stories that caught my eye in the press today. This will be the last round-up until January, as there is much space filling in the next two weeks as most companies see a big chunk of their stuff down tools:

Ashley has more fun - Now he is to make himself chairman of Sports Direct. I wonder what the bonus payments are to the teams who got investors into this Turkey!

Google vs Microsoft - An excellent in-depth piece from the New York Times.

Nomura to but Collins Stewart - Will the fast growing small broker finally get snapped up?

No Resolution - FSA looks into market abuse during take-overs. Something that share prices will indicate is quite common, but is very hard to prove.

Rock bottom - Will the Northern Rock be nationalised over the Christmas break, whilst everyone is distracted with other Turkey's?

House Prices glum - Citigroup predicts 10% fall, quite modest really...

FTSE review - the excellent Tom Stevenson with a review of the year investing in the FTSE 100

Darling trouble - Our fantastically awful Chancellor is considering ways to avoid future crises. Perhaps he could could start by resigning?

PWC criticised - Another aspect of Northern Rock that will soon emerge, who is to blame. Shareholders mat well settle their aim on the auditors.

Fighting Pru - Winner of the week's most bizarre story is the CEO of Prudential, fighting in a Sunday football match....

Unintended Consequences: HIPS recession?

With the economy in very troubled waters as we near the end of the year, my hopes would be that the Government would be thinking very hard about what it can do to avoid a recession next year.

A recession is by no means guaranteed, but with inflation on the rise, lending decreasing and house prices decreasing it could easily tip over. Add to this that the government is cutting its own spending and we could see a big drop in demand.

So in the middle of this 'perfect storm' what do we have. The utterly useless and clueless Ruth Kelly promoting HIPS for all houses. These sales packs will slow the supply of housing to the house market and so lead to a greater slowdown. Whilst falling house prices are probably a necessity after a bubble, this government policy has come at exactly the wrong time.

People will no longer put their houses on the market on a whim when they need £600 (including a fatuous 'energy' report, care of the EU) to spend up front. Estate agents will struggle to fill their books at a time of year that always a slow time. We may well see the property market drop quite rapidly in the new year when the new statistics are out.

Not good policy or joined up government and a very dangerous policy to push through now of all times.

Blogging will be light

I am here tonight and will have hangover and work tomorrow....

back Saturday!

Credit crunch solved at last

Today saw a big move by all the Western central banks to try and ease the liquidity problems that banks have been having. Effectively they have all agreed to accept a wide variety of collateral in return for loans at normal rates.

All sorted now then. [This sentence is issued with a warning; laughing too hard can split your sides]

This means no Northern Rock style punishment for having to go cap in hand to the Banks. So why now? Why not a couple of weeks ago?

I see 3 main reasons:

1. With year end approaching all banks need more cash than usual to close out books for the year and maintain ratios. The crunch had been getting worse and may have taken down a major institution.

2. The UBS move of this week, to go desperately to the Middle East for funding, was threatening to put many of the major Western firms into the hands of sovereign funds and oil rich investors. It was therefore quite important that 'we' sorted our problems out before 'they' took too much of the action. Citigroup, Barclay's and others had already done a UBS previously.

3. With bonus' due banks need loads of cash to pay their staff. Most of the world's central bankers are ex-Goldman Sachs or other investment houses and did not want their friends to go short; it would have ruined all their Christmas' social parties. [this sentence may contain wildly exaggerated statements[

Did I miss any?

Poll Result; Happy Days for 2008

The poll for last week has been somewhat affected by the fact that the Bank of England reduced rates halfway through the poll.

The Question was where would rates be in a year's time and below are the votes as cast:

Higher than they are now	8 (33%)
Lower than they are now	11 (45%)
The same as now	2 (8%)
At 0%, fighting economic depression...	3 (12%)

Showing my sheepish rather than bold side, I voted for lower than they are now with 45% of you.

My thoughts are; Even though it seems we are headed for a bout of stagflation next year, it seems unlikely that input prices will remain so high as the economy slows. Other factors such as wage inflation will act as a dampener on core inflation.

However, those who voted higher or the same may have the last laugh; any major global event that kept oil high or over $100 and inflation will be here to stay with rates having to stay high even as the economy nosedives.

Finally, the nihilists who voted 0% and staving off a depression...wow would that do my mortgage repayments some good!

Christmas Drinks for Mugs..

Mr Drew and I are having a few drinks this Thursday. In a wild bid to increase the entertainment we thought it might be nice if the odd visitor from here were to join. We have already couple of trusty loudmouths to make-up for our somewhat dull conversation in the form of Ed, Newmania and Croydonian.

See you HERE from 6.30 - if you email me at dominicdm@yahoo.com then I can give you my mobile so that you will be able to recognise us (as if a group of bloggerati was unrecognisable, don't you watch Doughty Street?)

See you there. Don't expect Mr Drew to buy any drinks....

SERIOUS Business - the Cost of a Child

If you don’t want to know the score . . .

look away now !

Flashback to August when we all joined in celebrating Mr & Mrs Slicker’s good tidings at the arrival of their second son. As Crushed by Ingsoc said at the time - do you know what you've let yourself in for ?

Well, Cost of a Child , the LiverpoolVictoria’s annual survey was out last week and the answer is … UK average £186,032: or with school fees, £258,989 (day school), £316, 589 (boarding). And the rest. But we love 'em, don't we ?

It could have been more – daughter … wedding … as Tony Soprano said, after enquiring about the cost of another wiseguy’s daughter’s wedding ($400 k) – so, Meadow’s gonna cost me half a rock ?!

ND

Sunday Business Round Up - 9 December

Well there aer only a couple of weeks left until Christmas in the UK. Normally this is quite a busy time of year, not just for retailers, but for everyone trying to get deals signed and orders firmed up before the last week in December.


As such, there are a few stories of note:

Wine to go - Here is a nice festive one to start from the Telegraph. The Off-Licence sector has strgguled in recent years as supermarkets have started to drink their lunch so to speak. The latest idea to fight this is a tie up of Oddbins and Threshers.

Woolies to go to- The long-0struggling high street reailer is already in trouble over it debt mountain. A bad Christmas will see the end of this business, but then this has been said every year for over 10 years now.

Commercial property meltdown - Difficult news this, the commercial sector is in all sorts of trouble at the moment and large investors are pulling funds out as fast as they can.

Northern Rock - Will a buyer finally be recommended this week?

Northern Rock collateral damage- Reports that Sir John Gieve will be forced to quit the Bank of England over the Northern Rock crisis.

Consumer spending to be hit next year - obvious, yet necessary look at what is really going to happen to the economy next year (answer, stagflation, bugger...)

Murdoch changes everything? - The Guardian has a hilarious story mixing envy and fear in equal measures and trying to paint James Murdoch as the new Darth Vader.

Pop goes Maxjet - New airline start-up's must be one of the most vulnerable businesses to get into. Which is one reason to admire Stelios for building up Easyjet and Branson for Virgin. Maxjet is another casualty with a poor business model that was doomed from the start...

International Summary - A succinct piece form Irwin Stelzer summarising some of the challenges to the EU economy from other parts of the world.

Emap break-up - More on the long running break up of this media institution.

Friday fun...

More stuff I picked up this week at work...

The usefulness of any meeting is in inverse proportion to the attendance.

The tasks and chores that get rewarded, get done first.

Everything put together sooner or later falls apart.

market realities

only time for a short one from me today...

yesterday the markets were loving all bad news, because it was all adding up to the Bank of England cutting interest rates today.

The FTSE ended up well over 100 points (it helps that banks are closing their books for bonus' this week and next too; traders want nice margins for the year as a whole).

Today, RBS announces a lot less sub-prime pain than many had been expecting AND the Bank does cut rates.

...and the market falls (at time of writing, may need an update later!). The price of these events has already been taken into account and now the market makers are looking at all that long-term bad news that has come out this week with a different set of specs on.

these ones slightly less biased by the short-term news....

EU clears Northern Rock aid; but why?

Amongst other more exciting stories today, the EU commissioner (Neelie Kroes, pictured) has as expected cleared the UK Government on the Northern Rock bail out. Interestingly the wording is vague enough to allow for a continuation of the situation beyond the normal 6 month deadline:

"These aid measures can be authorized as rescue aid in line with Community guidelines for rescuing and restructuring firms in difficulty...Under those rules, rescue aid must be given in the form of loans or guarantees lasting no more than six months, although certain exceptions in the banking sector to allow for prudential requirements, have been applied in this case."

So the Government may see light for an extension here is the auction process falls apart. This may happen, as although the Government is desperate for Branson to win, if the NR has virtually no savings at all after Xmas, which is a possibility, then really there is only a distressed book to sell off.

As Hatfield Girl pointed out in the comments yesterday, the EU is currently looking to expand its regulations on financial services over the UK. I have a hunch that it sees this as a very useful stick to beat us with and therefore is quite willing to leave our regulatory authorities and government swinging in the wind and giving them less room to manoeuvre out of greater EU interference with our Financial market regulations.

Easy credit come, Easy credit go

My attention was drawn today to some statement's issued in a polemic to lenders by Clive Briault of the Financial Services Authority, no less;

"It is clear that some business models are no longer as economically viable as they used to be"

and re Banks trying to cash-in (err..I mean solve the crisis, eh, Goldman Sachs)

"whether now is the right time to be exchanging liquid cash for illiquid mortgage assets"

So in a nutshell Mr. Briault here is saying that the model of lending indulged upon by Northern Rock is no longer feasible. This will go down very well with his fellow quasi-state employees at the Bank of England currently trying to get an auction going to sell this lemon and save the taxpayer.....joined-up or what?

A deeper question might be to understand whether these business models (which Bradford and Bingley and Alliance & Leicester, have engaged with to a lesser extent than Northern Rock, but still are in difficulties nonetheless) were ever sensible. And whose job was it to monitor this kind of situation at taxpayer expense to make sure that markets ran smoothly, eh Mr. Briault?

Also, although it may seem rational to tell institutions to prepare their balance sheets for rough times ahead, that does not really square with the Treasury's assurances of growth of 2.5% next year.... I can't really see how a credit crunch on the consumer next year is at all concomitant with a nice plain sailing year of growth. Perhaps he can have lunch with the Mandarins tomorrow and perhaps be persuaded to change his mind, as others have done recently...

Finally, on a subject close to ND heart Briault also had this to say:

"(You) should consider what liquidity and credit stresses would take you to the point of destruction, so that you can decide whether you are comfortable with what that implies about how you are currently positioning your business"

Having hit the iceberg, suggesting to the crew to look out for ice-bergs in the future is a somewhat redundant exercise.

The Price of Oil – It’s Politics

Yesterday Mr Unslicker drew our attention to the seemingly endless rise in commodity prices. If we look at oil, heretofore the driver of all energy prices, we are at the threshold of the $100 barrel – a doubling of the price (in $) since only February !

Sounds scary, and indeed it is. First, recognise just how extraordinarily high this is in terms of the fundamentals of supply and demand. A short post like this isn’t the place for much detail: but suffice to say it is estimated that at a sustained price of a ‘mere’ $80 per barrel, the world could physically produce at least 5 - 6 times as much oil as has been produced in the history of the planet to date. Even $40 would be enough to allow production of 2 times as much. No obvious shortage there.

Then we must consider what is causing this apparent suspension of the laws of supply and demand. A price spike is a price spike, but this is beyond a joke. The answer is of course the obvious one: the resources are increasingly in the hands of countries that do not permit full market access. And at these prices, many of them are in no imminent need of changing their ways.

Opinions will differ as to how outrageous this is: the average vendor of (say) software or pharmaceuticals has no intention of selling at cost-price either, if he can possibly avoid it. Western economies attempt to counter this tendency via competition policy, but not always with complete success (see, err, software and pharmaceuticals).

The laws of supply and demand, however, are not flouted indefinitely. The precise mechanisms by which they make themselves felt may be politically benign – for example, a spontaneous sharp correction in prices in the next year or two; or large-scale substitution of conventional oil with coal liquefaction.

But they may also include some uncomfortable outcomes: with hard times a’comin, neither China nor the West will long find it easy to live with $100 oil.

ND

Sunday Business Round Up - Quick Shorts

Not much time this week for me to do my usual round up; instead a quick pointer to the five stories that should continue to make waves for the rest of the week in the business world:

On the Block - Rank was named last week in my round up and appears again. the speculators will work their magic and the bingo to casino brand will be gone in the near future.

Credit crisis to continue - Stating the obvious, but the Guardian finally picks up on the point that mortgages are going to have to rise for people in the next few months if the crunch is not ended; whatever the Bank of England may do.

RBS write-down - Continuing the theme, one of the UK major banks will finally come out with its write-down number. I wonder how much will be ABN's recently acquired problems....

End of the euro - We have mentioned the strong possibility of this before. If the Euro can get through its first real recession then it will no doubt be here to say. However, might the Forex traders get their victim in the end?

Commodity challenge - Gas prices are set to rise, helping to push real inflation into the economy just when we don't need it. Hurry up and build those nuclear power plants and wind farms that you have been discussing for so long, Mr. Bean.

Back with a more in-depth round up next week. At least this will have reduced your risks of getting RSI!

Weekend Column; iCommuting and the istare

We Capitalists do from time to time have to travel too and from the office (except the end of this week for me which is quarter end and when you work for a US corporate you can forget going home to much, anyway, I digress).

Recently certain activities have begun to get to me, they are everyday run of the mill things, but as happens to many people I assume, a slow drip-drip effect can build annoyance within as you take a minor irritation and becomes a full blown irritant and finally reaches the point where you consider unlawful actions to make your point to the offender.

For me, this drip-drip is the growing need to commute with the istare generation. Whereas generally in the recent past men read papers and women read books whilst stuck on our crowded commuter trains, now anyone under 30 (or 40 for those with personality crisis issues) instead travels with just their beloved ipod and mobile phone. Soon these will be the same item no doubt.

What gets to me is not generally actually being on a train or bus with people listening to music, it is quite rare that they volume is so loud as to be annoying. The vacant istare can be a little off-putting, but is of no harm. A personal take of mine is that if you simply listen passively to music rather than read something you are wasting a valuable part of the day's few minutes of solitude; but this is their choice to make.

No, the hazardous part is the exit from any transport and the walking to one's office.

For ensconced in a world of their own, shorn of their aural perception, icommuters merrily push you in the back, nudge you to one side, amble along and step out in front of you. The more traditional commuters, papers downed and concentrating on the small task of exiting a station platform, have no such problems. the i-stare remains the same as they happily trundle along, oblivious of all around them. heaven help too when their oyster card does not work or some other such mishap. the travel from istare back to reality seems to take at least a minute of dumb-faced bewilderment, causing more delay for everyone else. And let's face it , it is not exactly likely that one's train or bus was on time in the first place, is it?

So for any i-starer's reading, enjoy life pleasures as you see fit, but perhaps time to be a little more considerate to others.

sigh. that feels much better....