Capitalist - Sick Note Again

Not that well today and after still managing a full day in the harness am struggling to blog about Osborne's non-event 'electrifivation' speech or the key issue of the our times, gay marriage.

So instead a quick quiz? Why this picture and the title?

Nunc Dimittis - That Makes My Week!

This blog has long had a soft spot for Chris 'Crapper' Huhne.  It is a pile of ordure - sorry, anaerobically-digestable matter - maturing nicely to become fuel for generating subsidised electricity.  Well, it's only fitting.

The Judge may have a harder spot in mind.  Either way, I am content, even as Cleggy weeps his big crocodile tears.

What an excellent start to the week.  And at Candlemas, too ! - if you'll pardon the profanity, but Sunday's sermon is still fresh in the mind.   
Nunc dimittis ; I have lived to see the day.

ND

Bank Shares - Still toxic in 2013

Back in the early 2000’s, bank shares were some of the best long bets you could take in the market. They were viewed as de facto defensive utility stocks, when in reality they were leveraging up their balance sheet from 20x to 30x and even 50x in the case of those exotic Icelandic banks

Of course, we all know how this ended in 2007-8… the wheels not only came off, but the wreckage careered over the cliff as well and took the poor British tax payer with it! All bank shares were caught up, even the more restrained organisations such as HSBC and which managed to rack up £20 billion in losses on sub-prime mortgages and other exotic CDO and CLO products.

Since then, many banks such as RBS and Lloyds have been reduced to penny share status, Government bailouts and the ignominy of share consolidations to restore prior share prices!

As well as the hangover from their own bad debts, the regulators have got to work bashing the banks for all their mistakes too and imposing regulation piles on regulation. There is the Vickers report, Basel III regulations and the retrospective changes to product laws have also really kicked in. In response, the banks are shrinking their investment banking divisions and putting aside huge provisions for mis-selling on everything from PPI to Derivatives. We have not even mentioned the Euro Crisis…

Despite all of these headwinds, banks are of course a utility business for corporates and retail customers. As such they can turn out big profits every year even in hard times. During the crisis, they have been able to hugely reduce employee compensation and also sell off the non-core assets they acquired in the boom. This slimming down has started to make big improvements in their returns on equity.


So what will happen next? Every year it seems, bank shares have a run up in their share prices until their results come out, this pattern for long positioning has held steady for 3 years now. Looking at RBS its shares are up 40% in a few months. However, be prepared for its usual denouement and this year will be no different I guess. Despite their efforts, the pain of mis-selling scandals and re-structuring is still ever present and this year won’t be the year that the big banks turn around their profitability. Also, they are still over exposed to the housing market and the euro-crisis and as either of these can turn nasty in 2013 there is still huge risk in the bank shares, more so when they have run up collectively to the degree that they have in the past few months.

This post is sponsored by site sponsor spreadbet magazine.com (CU adds: if you have not looked at their blog there are some very good analysis of small AIM's on there frequently, not just the ones I write...)

Name That Car! VW Needs Your Help

Back in 2001 when VW was testing names for its new high-end SUV, the focus groups would have told them that 'Touareg' carried romantic associations of hardy desert tribesmen wandering freely across the rugged terrain.

And back in 2001, by no means did it conjure up visions of jihadist hordes riding Toyota pick-ups with heavy-calibre machines-guns mounted on the back, raiding desert gas-plants, murdering oil workers and chopping bits off thieves - no, no, no !

Now this is just a wild guess ... but it occurs to me that VW will be looking for a new name for their splendid flagship 4x4.  Given the precedents of 'Touareg' and 'Tiguan', it may need to begin with a 'T' ... but probably not 'Taliban'.

Just a guess.

Weekend compo - your suggestions, please.

ND

Infantilism over Interest-Rate Swaps

Kerr-ching !

It is possible to envisage the mis-selling of an interest-rate swap - see below - which would be deserving of punitive action.  But has this really happened on the scale we are led to understand ?  I find it very hard to believe.

Interest-rate swaps are not "absurdly complex" products as has been stated - in combination with a floating-rate loan they result in a fixed-rate loan.  What sort of businessman borrows millions who cannot understand this ?  And a 'collar' is only a tad more difficult.

We read that some borrowers were told there would be no loan unless they took a swap.  This means, the bank in question was unwilling to offer a floating-rate loan.  But (for various reasons we could go into) they frequently have a practice of quoting on a floating-rate basis, and swapping it out when the loan is agreed.  The two-step process is a bit unnecessary, perhaps, but it's how things are often done (and not just for loans - it's quite usual in energy contracts, too).

So - a very simple product, sold in a somewhat redundant two-step way.  And yet we are told that 90% of the borrowers hadn't a clue what was going on - to the tune of £10 billion in compo !  Someone's surely avvin' a lucrative laugh: and we are allowing the Great British Businessman, Mr Diddums, to walk away from any responsibility for his own affairs.

So what would have to happen for genuine mis-selling to occur (which, to repeat myself, would certainly merit redress) ?  I suggest it would need to be one or more of the following:

•  the bank rep lied through his teeth, and stated that the swap was in fact a call-option ('cap', or 'ceiling'), and would only operate if interest-rates rose
• the bank rep asserted strongly and convincingly that interest-rates were definitely going to rise, and that a fixed rate was the best choice
• the bank rep stated that floating-rate loans were not available anywhere, from any lender
• it was self-evident the client was as thick as shit, or spoke no English whatever (see below)
• the loan was much bigger than the client needed 
• the strike-price on the swap was way off the money (in the bank's favour) at the time the deal was struck

If 90% of customers can demonstrate one or more of those, I shall be very surprised.  They will take the compo anyway, of course, and a new claims industry will be born, adding several points to GDP growth.

Footnote: these little cameos from the Telegraph make interesting reading.  I particularly found the case of the non-English-speaking Turkish patisserie owner instructive.  Taking the numbers cited at face value, Mr Bey must have borrowed several millions.  Quite a patisserie, I'd say.

ND    

Question Time - return of the NHS

David Dimbleby chairs Question Time from Lancaster. 
On the panel are Baroness 'working class' Warsi, foreign and Commonwealth Office minister; Alan 'tax rates are different are they?' Johnson, former home secretary for Labour; comedian Dom Trigger Happy - I found a TH cd only yesterday - brilliant music' Joly; Guardian columnist Zoe 'pregmum' Williams; James 'climate change is hippie biscuits' Delingpole of the Daily Telegraph.

 Enter your guess for what you believe the audience will ask the panel. Maximum of 5 guesses allowed. Various special rules apply ;


rough scoring guide

bang on,as the script, right answer - 3 points
Close enough for government work, right answer -2 points
in the right ballpark - 1point
witty comments - 1 point
sole entrant to guess a question asked - 3 points
guessing a 'catchphrase/bandwagon/party message' spoken , accurately - 1point 
Only choosing 4 questions out of a possible 5, and only 4 are asked  - 1 point.
Posting first - 1 point
Predicting correct colour of Dimbleby's tie - 1 point {must guess before 9pm.}

This tournament is sponsored by Timbo 614

  

Week 4:

DtP 25

kynon 21
Botogol 22
BQ(MP) 22
 Measured 20
Timbo614 20
GSD 20

ND 19

Hopper 19

Budgie 17
Malcolm Tucker 16
Blue Eyes 14

What Has Parliament To Do With Soccer?

On the matter of overpaid MPs with altogether too little to do ... may we ask Mr Quango what business his colleagues have pronouncing on the shortcomings of the Premier League ?

We have become wearily accustomed to Keith Vaz and his Home Affairs committee grandstanding on any issue he considers is worthy of a sound-bite on the News and fleeting paragraph or two in the tabloids, so I suppose we can't be entirely amazed when the Culture committee does likewise.  But can there be any reason whatever why a nano-second of Parliamentary time is devoted to this topic, or why the Sports Minister greets the 'report' with "If football does not deliver then we will look at bringing forward legislation" ?  

Is a state subsidy required to keep Walcott at the Arsenal ?  Is soccer distracting the yeomen of England from their archery practice?  Does Balotelli's haircut contravene Health and Safety ?  Are soccer stadiums occupying land urgently needed for agriculture ?  Is there perhaps a Trade Descriptions angle: are people falsely being promised cultured football or something like that ?  Is the carbon footprint of a Cup Final going to make the UK bust its emissions targets ?  Was the hair for Rooney's transplant obtained from people-trafficked minors ?  Was Bercow once wrongfully thwarted in his ambition to play in goal for West Ham ?

What is going on ?

ND

MP's Pay. Bill Quango responds to CityUnslicker

Its not easy being an MP you know.
And as you said earlier CU, the salary is pitiful.

Just £65,738 + £3,000 for each seat on a committee & £10k for each Quango chairmanship. Then there's the coveted cabinet position that brings an extra £68,827 to the pot.

I suppose there are some minor fringe benefits. A free house with full profits from the sale. Free household items; loo roll, toothbrush, vase and plinth, bathplug, bookcase, trampoline, canteen of cutlery, table lamps, dishcloth, tea towel, flat screen 3d TV,  Hot tub ..etc.

Free travel to the workplace, by any means, from anywhere in UK. Free vehicle. Own office building with paid for staff, telecoms, Internet, TV, business services, free postage, free stationary and utilities, rents, rates plus a pool of eager interns willing to assist with any whim.

Then there's all the food in the fridge. Overnight first class accommodation. New computers, Sky subscription, magazine and newspapers.  Free Ipad 3. Free smartphone. Free laptops..As many as one invoices for.

At the main office there are  subsidised meals in a choice of luxury restaurants, open all hours. There's a choice of good bars and a club, fitness centre, and choice of some of the finest wines in the land. And there's an exemption from the nationwide smoking ban.

Then..the best, gold plated, unfunded, pension provision in the western world. A special golden goodbye in case of job loss. Free healthcare, insurance, private security. Free legal, media and  medical advice. A guaranteed OBE or better in the New Years Honours list.
There's always a retirement job in the House of Lords, which can also be used as a parachute to a job If one has made some terrible foul up.

There's access to first class media teams. The best PR gurus in the world. Top four accountancy firms readily donate their time and experience. As do banking, military, medical, engineering  businesses and such.. A comprehensive library and records department. And you work in an office with the best security and policing in the UK. Its even got its own tube station!

There is the opportunity to employ family members, without the need for all that employment law guff about advertising jobs. Family members can and do cross use the facilities of the MP's home office to run their own non related business too.Which an MP can also be a partner or director in.  There's free overseas travel and holidays for all the family at overseas conferences, requiring little participation and held in truly, luxury destinations.

There are unlimited opportunities for future directorships of FTSE companies. Exemption from the need for tiresome receipts for expenditure. Exemption from libel and slander laws.

There are free tickets to concerts, films , opera, ballet, football, Olympics.. 
There are opportunities to be wined and dined by the most successful companies in the land. Charities. Celebrities.

So you see, £60k odd.. isn’t much for a job with no set hours. No actual remit. No possibility of workplace scrutiny. No line managers or supervisors. No direct boss. No censure for uselessness. No direct performance reviews. Its perfectly possible, even desirable, to have a completely non related well remunerated job, in either the public, union, third or private sector, which can be done at the same time as the MP is working for the government.

  In a safe seat there isn't even a remote chance of deselection except for the most corrupt or those that have gone gaga. There are no real requirements to do anything at all. Its possible to even go off and do a TV show in the jungle, during the working week, & no one much minds. Its perfectly possible to just Tweet all day about what's in the papers and this counts as 'informing public opinion' and is acceptable as actual work.

And there's the chance to be a minor celebrity. Have views aired on social media, television, radio and newspapers. Appear on dedicated political and current affairs programs, pontificating wisely.

And one does have the ability to actually frame the laws of the land to suit one's chosen agenda. To benefit from those laws. Or to exempt oneself from the more  onerous laws. Its possible to skew the system in one's or one's parties favour. To ensure that money flows to one's supporters and away from the enemies fiefdoms.

Oh..and there's another whole super level of politicking to be had at a later date, in Europe, where the rewards are greater, the taxes lower, the scrutiny even milder. The democracy minimal. The expenses more bounteous and the grandeur and splendor rise as the workload shrinks.

Oh yes, almost forgot. A paid holiday entitlement a teacher could only dream of..As much as 16 weeks.

Don’t we deserve at least another £25,000 on the basic?

Performance related pay for MP's

The deserving poor

This week, as is becoming more frequent in a Country which is on its uppers, there are some big raging disputes about pay and with it the usual class warfare that has become endemic. Yesterday I opined upon the Bankers and their approach to their own pay and rations. Shame is foreign word for them and money tops morality at every turn, especially when there is so much less of it about (OK, we have Quantitative Easing, but that is yet to leak out in a positive form, just inflation), the bonus's on offer are very precious.

Today the focus will turn to MP's pay. David Cameron is keen to restrict this to 1% or less. An MP earns a paltry £63,500 a year. In London, a few secretarial staff at law firms earn this, albeit in other parts of the country this is a very good wage.

The Speaker Mr Bercow, the dwarfian menace, was quick to rise yesterday to accuse Mr Cameron on not caring about MP's pay because he was too wealthy himself to notice. Of course, the same could apply to him but the House of Commons is indeed made of glass and full of stone-throwing hypocrites, but I digress.

What better way of moving forward than assuming the better aspects of banker pay and using this to help with the Gordion knot of MP's pay. MP's should be paid a no salary and a performance bonus.

so for 2012 for example:

George Osborne - A truly rubbish performance, missing targets, unable to co-ordinate with his team and a big fail on financial targets bonus withheld.
Nick Clegg - Approach to work caused many unnecessary divisions with the Government and also leads to confused strategy which heavily impacted on delivery on key performance targets. Bonus withheld
Ed Milliband - Some improvement in performance over the previous year. Still given to talking more than doing, a useless quality. Half rations
Michael Gove - Hyper-active and effective in transforming a difficult education department. 150% bonus payout
Gordon Brown - Failure to attend work at all. No pay, Human Remains to be informed and to be placed on weekly reporting...

I missed off the obvious one - what do you think?

RBS Bonus row, part 69....

It is fairly wearying reading the wild gnashing of teeth about the latest developments at our state owned RBS bank. The bank is due to announce a fine for LIBOR trading that will be in excess of Barclays but somewhere short of the UBS fine, where the criminal behaviours will be tested in court.

But at £500 million, of taxpayers money, much of it will go to the US Treasury, at a time when our own deficit is climbing and the share of the state taken by our Government is climbing too (back to 49% of GDP now and rising).

Moreover, £250 million is set aside for bonus's to bankers at RBS, this will really stick in the craw of the public. Whipped into a frenzy of hate against bankers by the Anarchists and an ex-Labour Government who seek to apportion blame for their failings elsewhere.

Yet RBS has shrunk its Investment bank, where much of the damage that led to a £45 billion state bailout was done, by some 70%. Of those, not all would have been in place in 2008. So we reach a moment where those under attack are not those who committed the acts of folly.

Luckily, the bank does not have clawbacks in its bonus system that will enable it to reclaim much of the past bonus's of those who have failed. The system is improving. However the principals have not changed and I am at a loss to understand why. Clearly bonus's are paid for performance and if the overall performance is leading to losses then extra rewards should be verboten.

There are plenty of unemployed bankers, and increasingly, algorithms, that can replace traders who say they are special at RBS. Also there are plenty of good people there who will not leave. If the price of respectability at the institution is another few years of no bonus's until the place really is on the mend, then that is the most sensible course. Why every year they go through this charade and wind-up is beyond me, performance related pay should mean just that, performance of oneself and one's organisation.

I note that this week politicians are also voting on their own pay rises again, but more on that tomorrow...

Nuclear Endgame - and a Rogue We Will Miss

Looks as though the nuclear strike-price endgame is in prospect.  EDF had softened us up with mention of £140/MWh for their Hinkley output; I had predicted £119.95: DECC seems to be trying to keep it under the hundred, "whatever that means", as the Inde's writer justly puts it.

Because whatever the notional outcome, bear in mind that (a) it will be index-linked, and the electrons will not be in action until 2021; and more significantly  (b) there are so many valuable concessions EDF can be given under the table by way of capped liabilities etc, the headline figure needs to be very heavily qualified - except we probably won't find out in our lifetimes.  (I remember selling diesel fuel to the old GLC / LTE: they would do anything to keep down the nameplate price - the only thing that was reported to the politicians at County Hall - including offering 12 months' interest-free pre-payment !  Easy when you know how.)

Anyhow, we may be sure it will be trumpeted from the rooftops as a great triumph for all concerned - double (prices) all round !

Marchant: Rogue CEO

With impeccable timing, the industry figure who has done most to highlight the outrageousness of all this has jacked his hand in, and we will miss him greatly.  Ian Marchant, the unlikely CEO of Scottish and Southern - only SSE and Centrica of the Big 6 remain as independent British companies - is calling it quits.  I'm guessing not many C@W readers will have met Fat-boy Marchant, but suffice to say he is not a typical FTSE100 boss. His irreverent, flamboyant speeches, and more importantly his plain-speaking comments on the electricity market 'reforms' in general, and the nuclear nonsense in particular, have been a delight over the years.  

Hopefully he will still be around in some capacity or other, and we hope for even more uninhibited outbursts from that ample quarter.

ND

Adroit Dealings On Europe

However it came about; however reluctant he was to do it, the Cameron 'initiative' is a Good Thing. The cat is among the pigeons, and the ensuing disturbance will throw up who-knows-what.  

The reflex of a startled bird is of course to poop, but we can laugh confidently as the snarling and sniping 'project' promoters threaten to crap all over us. They can't be getting any pleasure from the better-informed public commentary: Raedwald has a good piece on how the intelligent European press knows the score. All manner of insights and opportunities will emerge as the dust and feathers begin to clear. 

Many thought 2010 was the election to lose, including many of our C@W regulars; but I always maintained, and still do, that you are better holding the levers of power - provided you know what to do with them. The ability to take meaningful initiatives is the prerogative of Government.   
That's why my scorn is greatest for Osborne, who sold himself aggressively as a Strategic Genius, and so was given total control of the Strategic Initiatives brief - on which he has singularly failed to deliver.  He really is just the student politician he appears to be, all tactics, spite and silly sneers.  Trumping Brown on inheritance tax was a wizard wheeze, but it doesn't put him in Mandelson's bracket (if you see what I mean).  Mercifully a real strategist has come to town, and if Miliband and Clegg are troubled now (as they clearly are) they will enjoy little sleep on the long road to 2015.

The despair over Cameron has frequently stemmed from his inability to be ruthless with his friends.  But Osborne has let him down; the Brooks woman was nearly disastrous for him; and Clegg's treachery over boundary changes is as big a political betrayal as any of recent years.  We may hope (upon hope) he has learned these hard lessons, and is up for the coming war of euro-manoeuvres.

For now, I offer the following: the precedent of France's stance in NATO.  For decades, France was 'in, but semi-detached' - and they really were in.  When a soldier I met French officers at all sorts of important gatherings - and they were keen to be there; and the rest were pleased they were there.  They maintained a decent division for deployment in Germany, and stuck to NATO protocols. The proof of the effectiveness of this, when the moment came, was how seamlessly they fitted into Schwarzkopf's great campaign for the liberation of Kuwait in 1991 - which was complex, successful, and entirely run using NATO doctrines and protocols.

A rather pertinent model for viable and constructive semi-detached positioning in a European context, I suggest.  And that's if we need to be semi-detached: I'd say there's a decent chance the next 3 years will throw up opportunities for something even better.  Over to Dave: no quarter for Clegg; wean yourself off Osborne; get in the habit of taking proper advice - and march towards the sound of gunfire.

ND

Question Time: In ,out, in, out, in..or out edition.

 David Dimbleby chairs Question Time from Weymouth. On the panel conservative health minister Anna Soubry MP, former Labour culture secretary Ben Bradshaw MP, former leader of the Liberal Democrats Ming Campbell MP, editor of Private Eye Ian Hislop and journalist Angela Epstein.

Enter your guess for what you believe the audience will ask the panel. Maximum of 5 guesses allowed. Various special rules apply ;


rough scoring guide

bang on,as the script, right answer - 3 points
Close enough for government work, right answer -2 points
in the right ballpark - 1point
witty comments - 1 point
sole entrant to guess a question asked - 3 points
guessing a 'catchphrase/bandwagon/party message' spoken , accurately - 1point 
Only choosing 4 questions out of a possible 5, and only 4 are asked  - 1 point.
Posting first - 1 point
Predicting correct colour of Dimbleby's tie - 1 point {must guess before 9pm.}

This tournament is sponsored by Timbo 614

  Week 3:

GSD 20
Botogol 19
BQ(MP) 17
Measured 17
Timbo614 16
DtP 16
kynon 16
ND 16
Malcolm Tucker 14
Hopper 14

Budgie 9
Blue Eyes 7

What will Spanish unemployment be in 2017?

Because it is not a very pretty site today. In fact it is at nearly 60% for under 25's!

As much as we think a potential 2017 UK referendum on Europe is a long time away, it maybe much further than the average man on the street, or even Ed Milliband thinks.

A country like Spain should not have to suffer with such massive levels of social misery. Spain remember did not even stoke up a banking crisis or a have a crazed government borrowing from every body's future.

Spain was a victim of the political decision to join the euro currency. The euro had low interest rates and this over-heated the Spanish economy to epic proportions, causing a huge property bubble which has now brought disaster to the country.

Yet for now, as BQ noted yesterday re Greece, the people are not clamouring for a Euro exit; perhaps clinging to nurse for fear of something worse.

But worse is to come. Spain is in its second recession and won't escape that until next year. Losing jobs at a rate of 2000 a day, that is another half a million people out of work. And in today's fast moving world, having no skills and not keeping up with developments will take huge chunks off your potential earning power.

It is only 2013, the Euro crisis has received a hefty kick down the road last year and people have quickly forgotten about the dreadful underlying macro-economic disaster that is baked into the Euro project.

It may well end up that all this 2017 focus becomes entirely redundant and not just because the Tories probably won't be in Government....

EU want in or EU want out?

We have avoided mentioning it much here. Mainly because the arguments for an in/out referendum and a further fusing of the UK to to the EU isn't much of a real issue. Much like the Obama election , the result isn't in doubt.

In any referendum the nation would vote to stay in the EU, but to be allowed to have some minimal power restored. Probably the working time directive which we ignore anyway. Immigration would be the issue citizens would like to have control over, but that isn't going to happen. A slight move on  citizens being able to claim benefits in any member country from day of arrival to maybe after 3 or 6 months or something might be as far as Brussels would be prepared to go. 

The EU actually wants greater powers. A larger budget. Control of nation states finances. Its not going to start unraveling what it has already achieved just to placate a nation that isn't going to really leave anyway. Sure, the UK might become 'uncooperative.' But that's about it. 

No poll has the UK wishing to leave the EU over treaty negotiation.

Not nearly enough of the population want to leave and no amount of huffing and puffing and pointing to idiotic banana rules or millions of new arrivals from Bulgaria will change the opinion polls much. So that's that. 

For eurosceptics the Liberals are in love with the EU and would have the UK join the euro and become a proper , respectful, member state. 

Labour is very keen on the EU and only pretends towards mild euroscepticism to retain its large working class vote share. Its unlikely to want to join the euro anytime soon, but wouldn't rule out joining at a later date. 

Cameron's Tories, maybe as many as a third,  are unhappy with Brussels so he will plot a course to try and win something from Brussels, possibly in exchange for agreeing to that 10 year increased budget that the EU wants.

UKIP, polling nicely, looking a better bet than the Liberals, but would be lucky to gain even 1 MP in an election. That gives them as much power and influence as the Greens. .. None.

Cameron is expected to say he would allow a referendum in 2015, AFTER the election. Good politics. Vote Dave and see if he'll really do it, or vote someone else and never, ever get the chance to vote on even mild reform. 

I expect Miliband, if the election looks winnable for him, will avoid any commitment that he would have to break. The EU is an issue he wants the Tories to implode on and not something that he wants opening any divisions in his own ranks.

So, for Eurosceptics, the future is bleak. The EU is as weak and as divided and as poor, and as unpopular and impotent as its ever been. Yet still the majority favour being in. In Greece, with daily riots, racism, fascism and communism on the rise, real, actual poverty, record 27% national unemployment, no realistic prospects of recovery shackled to the Euro, the populace voted to stay in.  Still vote to stay in.  And they have a party, an extreme party to be sure, but a party that COULD take them out. The devil you know carried the day.

There isn't really much reason to believe a referendum would produce a different result here.

Nuclear Stand-off Hotting Up

The business pages of the Telegraph are a favourite platform for commercial vested interests.  De Rivaz of EDF has used them before to 'frame' the context of the farcical bluffing contest being conducted over what outrageous guaranteed price (and other ultra-valuable concessions) he can screw out of HMG for getting started on just the first of his 4 'promised' new UK nukes.

And here he is again, the little Gallic tease - 'framing' for all he is worth.  We must assume the 'negotiations' are at a critical juncture. 

"Almost all of the necessary pieces are in place. Our new build project at Hinkley Point is 'shovel ready' and only a few crucial milestones remain to be passed. ... Yet I am still asked – should the UK do it? And if so, do we have the industrial capacity and expertise to pull [it] off?"   

Careful with the 'we', monsieur.

"Just two more pieces need to be put in place. First, we await a final planning decision."  

I think you'll find that's a given, matey: this lot have long since bent over for the shafting.  Or do you perhaps want some sort of new environmental indemnity thrown in for good measure ...?

"Secondly, and, most crucially, there must be a balanced, stable and durable agreement on the price of the electricity generated. To be durable, this price needs to be fair and balanced for both our company and the Government."

 'The Government': how sweet.  What about the people ?!

"I believe we can reach an agreement with the Government which will transparently display the economic viability of new nuclear, and which can underpin a robust business case for investors. EDF is now closer than ever to being able to make a decision."

Ah yes, economic viability.  And while we are at it, tell us again will you, about the security of supply for all that uranium you get from, errrr, Niger.  Surely, a great age of eco-satire is upon us.

ND 

Rose Delivery

So, Sir Stuart Rose, a much respected retailer is going to be chairman of Ocado. This has been allied to rumours of A takeover of the Ocado business by M&S.

Now M&S is in trouble on the clothing side but its food business is going quite strong and has been for years. As far as I can see it does a great job in selling to wealthy empty nesters who don't need to make big meals anymore but still want to eat nice food.

How that matches with Ocado is beyond me. Ocado is a slow motion car crash of a business. I am a keen user, as I am of all companies who want to serve me so well that they lose money hand over fist; it always makes me feel satisfied knowing they are going that extra mile (over the cliff...) for me.

The Ocado shareprice since its float is disaster zone and their weird attempts at raising cash last year are ample demonstration of this companies many woes - the main one being that it is much better to have mutiple channels to market and that it is trying to compete in one of our most competitive sectors as a new entrant where size is everything!

If M&S make a bid then I am clearly living in the wrong universe....

Snow Joke for a triple dip

I knew it would not take long. The FTSE rally has been very strong this year, as it often is in January as people get optimistic that the coming year will be better than the last. Well here we are 2 weeks in and it is all unwinding quite quickly.

The heavy snowfall in the UK will depress economic activity in Q1 enough that the likely slight fall in Q4 will be repeated and so we will have a triple dip. Having said that, it does not matter too much as the -0.1 readings are hardly like a repeat of the 7% falls of 2008!

But the vibe is not good and no doubt he markets will start to reflect this again in the next month or two.Whilst long-term the switch from Bonds to Equities will underpin a good boost for shares overall, the loo-out for the immidieate future is back to 6000 or less on the FTSE.

The Prime Minister dragging up Europe as a topic is not really helping matters either - that is an issue to be dealt with at key moments when th epublic is focused, not to raise all the time to appease your own headbangers. Oh well, long ago has Cameron shot his bolt. 

RBS: the faliure of Vickers already evident

6 years from the implementation of the Vickers report and its failings are already clear to see. RBS is about to get a huge fine for Libor rigging, as is par for the course for seemingly every bank that had a trading division in the City.

RBS though are using this as yet another chance to re-structure what is left of the investment banking division. The CEO is going to go and maybe one of the deputies too. The remnants of the investment banking division are going ot be split into a pure trading desk for Bonds and Derivatives and a Debt Capital Markets business that will support its more corporate businesses.

Apparently the FSA and some of its own directors think there is still room for considerable reduction in the Investment Banking scale of the bank. There is nothing wrong with this idea per se, but what exactly is this doing to drive shareholder return? It is keeping the regulators happy, but the GBM division has made £10 billion in profits since 2008. Not any more, as the business is radically scaled back.

What has this to do with the Vickers Report? Well the guidance form the report is to split banks in theory but not in practice. Investment Banking has been given extra risk weighting and the retail banking is ring-fenced to protect taxpayers.

So now we have this. IN stead of RBS selling its investment bank and there being separate units, we have investment banking scaled back and nearly killed off - but not allowed to be set free to see if it can work independently or not.

This is going to be the same story at Barclays soon. It is the worst solution, splitting the banks would have been easier, safer and probably delivered better economic returns.

Danger: Molesworth At Work in the Financial Markets

I have long held the view that many Germans who should know better just don't understand markets at all (e.g. here and here).  And now, meine Damen und Herren, we have another entertaining example. 

Competition: Europe seeks the most dangerous financial product 

It is known that many [financial] products are dangerous. They are opaque and complex and thus threaten consumer protection with concealed risks and high costs. They harm third parties such as the global poor particularly in developing countries by speculation with food and land. They put the stability of the financial system and sustainable development at risk because in some cases they cannot even be sufficiently analysed by financial markets experts or regulators and because they exacerbate price volatilities (also for currencies, credits, etc.). Other products might harm the environment by inefficient investments in non-sustainable industries or resource consumption... Please submit your proposal that should be banned here.

No, I am not fabricating this - it is a construct of the fertile mind of one Sven Giegold, a German member of the European Parliament. Nor am I making up Markus Henn, one of the 'jury' that will judge the competition, described as 'Financial Markets Expert, WEED' (sic).  Nigel Molesworth, it seems, grew up to be a star trader for a hedge fund, chiz, and still persecutes Fortherington-Thomas to this day.

If we may be serious for a fleeting nano-second (and I'm not sure why we should be in the face of such provocation), it is a fact that there are some 'exotic derivatives' that do indeed defy all rational analysis and are clearly the result of some over-indulged traders jerking off in the corner of the trading floor.  But any bank whose policies permit these things to be transacted has got much bigger problems than just hyperbolic gamma or whatever is the resulting exposure-dynamic.

I'd say pensions are pretty lethal - you put aside a lifetime of savings and some Brown, Balls or Osborne comes along and trashes them.  Not to mention Equitable Life.

Hopefully this earnest competition will attract some creative entries ...

ND