Capitalists@Work

Hester gets the BBC hyperbolic treatment

2012-01-27T10:27:00.001Z

The BBC, alleged guardians of truth and responsible reporting, currently have as their lead story:

"OUTRAGE OF HESTER BONUS"

I do wonder, who's outrage though? What exactly is the going rate for running an organisation of over 100,000 people and being tasked with turning round a company that lost £28 billion shortly before you joined, into one that can be sold for double its current shareprice and deliver back to taxpayers £35 billion whilst also removing £250 billion of liabilities from the UK national debt.

I don't think any rational person would say this is a median wage job. In fact the majority of FTSE bosses get far more than this - yes we can argue that they are paid too much. But really, I am hoping that this is the top of the media circus. Stephen Hester is not Sir Fred Goodwin, he is already a rich man and took on a difficult job, failure at which will cost the Country tens of billions of pounds.

Things do need to calm down in the UK on the pure money envy front. Lots of people get paid too much, footballers, bankers z-list celebrities and lost of people earn very little too. it's never been any different and the general howling at people who have got on however lucky they have been is a vision of a society that I don't want to see.

That way lies communism and the utter failure of socialism, valuing equality over achievement, trying to go directly against the human condition and desire of competition - attributes that capitalism does so well to focus to positive rather than negative ends.

Finally, the BBC of all organisations, is also a large public entity, has many people on its pay roll - like say Alan Hansen at £1.5 million - who perhaps do not have the Country's financial future in their hands and yet are paid even more directly by the taxpayer...

Question Time update

2012-01-26T16:01:00.003Z

David Dimbleby is joined in Plymouth by Jeremy Browne MP,met him a few times. Nice chap.. for a Liberal.He has one of those ministerial jobs that is just 'whatever is left over that no one else fancies.'
David Lammy,MP for Tottenham, and far too sensible to be in the Labour party.
Liz Truss,new breed Tory MP who wants a more business friendly society.
Mark Steel , one of my favourite comedians. Like to do historical sets.
Wrote a book on the French revolution that I didn't much agree with, but was very funny. For an ultra socialist he comes across as quite balanced, which is good.
and Melanie Phillips. British journalist who is regarded by the left as a traitor since defection from the Guardian to the Daily Mail. Considered by everyone except herself as ultra right.

BQ THINKS 1. The benefit cap and the barmy bishops. {Think on this Bish. If child benefit is included on top of the £26,000, then those on the highest rate are in danger of being given child benefit whilst those who work to earn the same equivalent amount not only pay 40% tax, but can't receive their own child benefit as they are considered too rich. Madness!} 2. Iran and oil. Is the west about to attack another poor defencless country to seize their oil? 3. -0.2% growth says Britain is heading for disaster/recovery. Is it time for plan A/B? 4. Devo-max/Independence. Is the wording important? 5. NHS leaked report. the NHS is not safe in the government's hands.

26/1/12

Cityunslicker - 18

Miss S-J - 16
Nick Drew 15
Dick the Prick - 14
Malcolm Tucker - 13
Measured -12
Timbo614 -12
Botogol - 11
GSD - 11

Sebastian Weetabix - 10
Amy 10
Hopper - 10
Bill Quango MP - 10
Jan - 9
Budgie - 9
appointmetotheboard - 9
Philipa - 8
Hovis - 7
Andrew - 6
Measured - 6
Miss CD - 5

Mark Wadsworth -1
Dearieme - 1

CU is romping away. He was 200/1 before the start.
{any errors report to the steward in the comments}

The Great Depression

2012-01-26T08:00:00.000Z

If you put five economists in a room and ask a question, you'll get seven definitive answers. The IMF seems to have covered all its bases by suggesting ever more stimulus for America, a little stimulus for the UK and austerity for PIGS.

Three economists on Newsnight debated the merits of Keynesian economics. The New Deal got its usual airing. What surprised was that they never seemed to point out that all the major combatants of world war two had a different approach to resolving the great depression. And all were cut short before the effects of whether they were a success or a failure could be realistically measured.

The Fascist Germans pursued arms production with a vengeance, but needed to have an export market to obtain the hard currency to buy the missing rubber, steel, copper and oil to feed the factories. So Germany's pre war boom was accompanied by frequent busts as it struggled to balance its economy. Germany funded its boom with a mixture of taxation, confiscation, restriction and promises. The Mefo bills his 12 billion RM of debt. Unemployment was tackled by removing women, by benefits for staying at home having children, and Jews and undesirables, by imprisonment and death, from the workforce. What would have happened to Germany if they hadn't embarked on war? The opinions at the time were that it was running such unsustainable spending that it would eventually be unable to continue funding its war machine and the cost of all the arms and armaments that it had created, and just implode. But at the same time Germany's 1930's recovery was seen as a miracle, similar to West Germany's.

The Japanese devalued. Abandoning the gold standard that had trapped them, the Japanese devalued the Yen by about 40% and Japanese exports, especially textiles, soared. Large Japanese stimulus spending was used for large drainage, irrigation, land reclamation. Arms spending was also great of course. The worlds third biggest navy had to come from somewhere. All this was funded by government issued bonds. The government issued bonds to the banks and the banks sold them to private investors. Japan was on a Keynesian road to recovery by 1933. Unfortunately in attempting to control inflation and an overheating economy, the finance minister , Takahashi Korekiyo, cut military spending and so was assassinated by militarist radicals that destroyed the Japanese during the 1930s/40s. It is not known if the Japanese economy could have been deflated successfully without setting off a second recession. It wasn't tried. Military spending followed Germany and went ever upwards. And as all countries found rearmament forced up the price of raw materials, so forced up the costs of rearmaments, so increased inflation..

The British Empire tried austerity. Austerity first was the UK solution. The decision to rejoin the gold standard in 1926 had caused harm to the only slowly recovering export trade. Wages and jobs were cut to make factories more competitive and led to unemployment and the general strike. And from then it just got worse. the Wall Street crash was followed up with government tax rises and wage cuts which just removed purchasing power from the economy and unemployment soared to 3 million at a time when the population was just 50 million and women were not working in many workplaces at all. Coming off the gold standard and trade tariffs with the empire helped, but did not end, the damage done, and the recovery was a very long time in coming. Chancellor Neville Chamberlin was a firm believer in controlling overspending and defending the value of the pound. His limited rearmanent policies had not created the booms experienced in Japan and Germany, but hadn't created the debts either. Great Britain could have not have fought long if it had gone into WW2 with an empty treasury.
Even so, with the stimulus in arms spending from 1938 unemployment still failed to fall significantly in the UK, probably as much of the money went on air defences. The aircraft industry, unlike the navy, requiring fewer, higher skilled, workers.

France tried everything in the late 1930's and failed at all of them. It reversed policies so many times it ended up with debt, austerity, unemployment, giant stimulus spending, frightful unproductivity, devaluation and shortages. France was in a terrible position to try and resist the German arms race, partly from having fallen into the depression last and pursued policies that meant it didn't emerge until last either. In 1936, in France, the Keynesian stimulus was spent on increased wages and social benefits rather than increased output and so caused ever increasing inflation that ate up all of those 1936 wage gains by 1938, without the necessary investment to lead to increased productivity. A reminder of how government spending in the 1970's didn't raise living standards, but actually decreased them through stagflation.

And the USA. The New Deal. Well, we know it worked. Sort of. The slowing of the stimulus spending in 1937 led to a big rise in unemployment. up by around 5% to 20%. The US economy stalled that led the right to complain that all the government spending had done was to push up wages, cause thousands of strikes at a time when workers were desperate for jobs, and lead to too high taxes on business. It all got very acrimonious. But what can't be denied is that stimulus had not ended the great depression of 1929. Even the orders for arms from Britain and France that poured in from 1938 didn't sort the economy. What would have happened if the war had not broken out? Could Roosevelt have just continued priming the pump indefinitely? If any country could, the USA could. But would it have worked? Or would each time government spending was reduced, economic measures fall?

World War Two turned all democracies into totalitarian, centralised, bureaucratic economies. Debt and consequences weren't an issue and so the answers to which countries were the most right in ending the depression can't be known.

Oil and More Rumours of Wars

2012-01-25T14:25:00.009Z

Just as the Baltic Dry falls through the floor (a reliable indicator of global slowdown), our good friends Gazprom cut their prices again, and commodities soften generally, oil is once again in the spotlight. And not in a good way.

Yes, at home and abroad the prospect of trouble at t'pump looks to be on the cards. Starting with Petroplus*/ Coryton: this may provide an excuse for a price-hike in the South East, but in reality its effect will be limited. When the owners of a conversion-process asset like a refinery go under, the creditors step in smartly to ensure it keeps running, just to generate whatever basic turn is there to be had: no-one wants to see the cashflow dry up. We've seen it a dozen times with power plants (in the dire period 2002-04, for those with short memories). What tends to happen is that the asset, which should be run on a highly-optimised basis when in the hands of a proper owner, slips into a dumb but still effective mode of operation, with reduced but still positive margins.

If it turns out this isn't possible, i.e. only a hyper-optimised refinery is profitable, it will mean there is a surplus of finished products (petrol etc) anyway. So no big worries just yet.

The main story, though, is in the Middle East where Syria is in turmoil, Iraq is nudging towards civil war, the Iranian war-drums are beating, and the carrier groups are massing once again. A war-weary western public may be forgiven for groaning déjà vu and assuming it's just another galling waste of blood and treasure to satisfy the American electoral process.

But from the C@W standpoint, is there something really rather new and interesting afoot ? The possibility that oil might start being priced in gold is not hot news, but could be a serious development - and one that might make the US pause for careful thought. I have previously highlighted the forthcoming Chinese Pan-Asia Gold Exchange as a potential Chinese strategy to supplant the dollar: lots of countries are looking to a post-dollar world: the euro is hardly a candidate anymore and oil-for-gold would be a very logical step along the way.

The ramifications of this will be many. Here's one: if this catches on, a lot more countries and companies will potentially be in the market for gold hedges (just as they are for oil and dollar hedges, as a matter of day-to-day risk management). But the paper (forward) gold market is, allegedly, one of the most heavily manipulated in the world (along with silver and the Swissie and oil and ...) - hmm.

Any other suggestions as to how oil-for-gold would change the world ?

ND

* Petroplus was always a quirky operation. The cleverest thing they did in the last decade was develop an LNG import terminal in Pembrokeshire, and planned to do several more around the Atlantic basin - they are very easy to build, even for a company whose main business at the time was oil storage tanks. But they sold this nascent LNG business, '4Gas', to Carlyle in order to concentrate on becoming a 'specialist refiner' ... hah! Should have stuck to tankage.

UK Recession Porn in overdrive on -0.2% GDP Q4 2011

2012-01-25T09:32:00.001Z

With Mervyn King effectively leaking last night in a Speech in Brighton that the GDP numbers out this morning are going to show a small contraction for the last 3 months of 2011, the media hae been engaged in a full bout of recession porn.

With doom and gloom everywhere, the media and the BBC in particular are able to get their reporters to stand in front of empty buidlings and declare the World Is Ending.

Labour Ministers will be dragged out this morning to spout their tautological 'too far, too fast' claims (this line would work better on Mr Huhne, but they have not realised that yet).

However, let's think back a whole year, I know, its forever ago, but the last quarter of 2010 saw the economy contract 0.5% not 0.2% and yet, amazingly that did not lead to a deep, dark recession. Yet Europe was still a mess and the Arab Spring was to come with its oil price shock.

This time, its no different, a small drop in final quarter has been expected, but month on month, October was the worst time, not December. Growth in services at 70% of the economy does not point to an imminent deep contraction This suggests a potential for an upturn in this current quarter. Certainly the stock markets have been perking up from their October lows and these are normally a leading indicator of what is to come.

So, my bet is in a minor return to growth in 2012, at least for Q1 and so the technical recession of two quarters of negative growth will be missed. Everything caveated by the non-implosion of the eurozone, if that goes then all bets are off.

Just don't expect to read that anywhere else today that the UK is Not in Recession....

A £1,000,000,000,000 Debt for Britain

2012-01-24T10:20:00.001Z

Picture of £1 trillion by the Daily Mail

For the first time in figures announced this morning the UK National Public debt has passed a trillion pounds (for pedants, this is a thousand billion, not a billion billion).

This is quite some number, when Tony Blair and his merry band of lunatics took over in 1997, the national debt for £350 billion pounds. During the past 15 year the debt has grown by nearly 200% (ah, the power of compound interest! Inflation alone at an average of 3% for that period would imply an increase of nearly 60% in the debt) - so from 1997 if we had kept UK spending flat and incurred no more debt today we would expect Public Debt to be about £560 billion.

Instead the Country has about £460 billion of extra debt that we have incurred. Sadly, I can see little evidence during my adult life that this has been spent at all well. Some schools and hospitals have had money spent on them, but there are no new airports, railways, publicly built ports. Infrastructure indeed seems to have been forgotten, true investment ignored. What is clearer when you also look at Government spending is the inexorable rise of Social Security, from less than 15% to nearer 30% of all Government spend. This is all a real terms rise, and unfortunately accounts for a huge chunk of the extra debt taken on.

Labour have bequeathed the Country an underclass and benefits addicted population - on the plus side, getting this under control could mean a brighter future for the UK. However, there are few signs of this really happening, with the current hand-wringing lefties in the Lords decrying that families receive benefits to the same value of higher rate taxpayers who work full time - as if this is some sort of moral crime. This money is borrowed and spent, not invested for the future, it is true hand-to-mouth existing at the expense of future generations of taxpayers.

As we print our own currency, the UK cannot default, what we can do though is debase our currency. Already we have seen the fastest and deepest devaluation in 200 years since the 2008 onset of recession. At the rate our current policies are progressing, I can't see this being turned around anytime soon. Britain will be a nation getting poorer and poorer for the foreseeable future. If you do have investments, then Sterling denomination isn't for you.

Even as I write, the Pound is retreating against the Euro - yes, that benighted currency on the verge of collapse - not a very auspicious sign, that.

Priorities For Our Time

2012-01-23T07:50:00.003Z

IfL, the Institute for Learning, is “the professional body for teachers, tutors, trainers and student teachers in the further education and skills sector” - a spurious closed shop imposed on the adult-teaching profession a few years ago. Its slogan is Benefits, Status, Voice.

It has a new President, one Beatrix E Groves, who comes into office at a time when adult & further education is under enormous pressure from t’Cuts: courses and teaching posts are being axed the length and breadth of the country. So, what is Groves’ number one priority ?

Yes, it is Equality and Diversity, or to be even more precise:

“Bea has concerns about how people enter the profession and how open it is to ‘non-traditional’ entrants. Transgender people are one of the most persecuted groups, and one of the reasons Bea stood for president was to show that a transgender woman could hold public office”

Bea, there are no new entrants ! How about having concerns about that ?

ND

Analysts awaken

2012-01-20T14:00:00.000Z

Finally, even the mainstream fund managers are getting it. Saker Nusseibeh in this interview with the Telegraph points out the purpose of this blog. Apparently it has dawned on him that politics has a very important impact on the markets. Indeed, an understanding of the politics is as important as an understanding of business and economics for investors.

Back in 2006 this blog was started with that very view in mind. So many of the really big decisions are in reality taken by politicians, they set the scene for markets. They decide taxes, they decide where airports get built, who runs the trains, who can or can't work in a Country, what currency is used.

And of course, the more wild a Country the more important politics becomes. My own investments in Iraq, Spain and other places are almost entirely governed by the political process and the outcomes achieved by the Companies there are entirely dependent on political decisions.

The world 'twas ever thus, but interestingly in a world of Quantitative analysts and algorithmic trading systems market participants moved away from the normal view - instead thinking that by the application of mathematics and science they could find a new way. Human nature prevents this, man is a political animal at heart. therefore the need to understand both qualitative and quantitative elements is key to making good decisions.

I'd love to see a quantitative analyst try and explain the creation of the euro or predict how it will end - the whole process is politically driven, with seemingly scant attention paid to the underlying economic drivers.

2012 looks indeed like politics as a whole will be king, so I'll look back at the end ofthe year to see how the balance of posts here between politics and econimics has stacked up in the course of the year.

Go And See Hockney

2012-01-19T20:26:00.006Z

You can safely ignore Brian Sewell's peevish review of Hockney at the RA. It's a fantastic show, a tour of remarkable force. A force of nature, offering more separate full-scale works, surely, than a single artist has ever exhibited in such a show. And what scale ! "Bigger Picture" hardly does it justice.

It is certainly possible to see Hockney (post-portraiture) as a one-trick pony, and that trick is depth: artful, profound and utterly compelling. Depth contrived in a dozen different ways; simple ways, conventional ways, unconventional ways; unsubtle ways, subtle ways. Ways depending on his excellent draughtsmanship; ways depending on tone alone. Ways, paths, lanes, roads, tracks. Depth showing how it can be achieved using the limited methods of Van Gogh; how it should have been achieved by Seurat, Pissaro and Picasso. Depth delivered in so many different ways that Hockney must rank as a serious contributor to the psychology of human visual perception.

He is of course also a great (not to say gaudy) colourist. And he uses colour for more than just stunning effect: in the show there is a neat juxtaposition of a landscape where the distance is given in green, the foreground in red, against another where the colour-roles are reversed. Yet both are wholly representational, figurative, realistic.

His deployment of still photography is well-known: I was less familiar with his work using multiple moving images (all of a piece, just as the stills, with his experiments in perception and representation). His use of the iPad doesn't seem to move anything forward but I'm sure he has fun. His very considerable skill in charcoal is a revelation (and a neat rebuff to Sewell).

And the wall-full of hawthorn blossom is a delight.

A fantastic show.

ND

Dimbleby in Shrewsbury

2012-01-19T14:04:00.005Z

Cityunslicker leads the pack at the first corner. Can he continue?

David Dimbleby is joined in Shrewsbury by Baroness Warsi, Stephen Twigg, Caroline Lucas, Germaine Greer and Charles Moore.
Miss CD Says,Too soon to judge the captain.
How much unemployment can Cameron stand?
Should teacher's be allowing massages in schools.
Does selling the Big Issue count as a real job?
What now for Sarkozy?

Cityunslicker - 13

Miss S-J - 11
Dick the Prick - 11
Sebastian Weetabix - 10
Amy 10
Nick Drew 10
Measured -10

Botogol - 9
Timbo614 -9
Hopper - 8
Malcolm Tucker - 8
Jan - 8
Bill Quango MP - 8

appointmetotheboard - 7
Hovis - 7
Andrew - 6
GSD - 6
Budgie - 5
Measured - 4
Miss CD - 4

Philipa - 4
Dearieme - 1

The IMF Delusion

2012-01-19T10:19:00.002Z

Leading French lady and President of the IMF, Christine Lagarde, has been on manoeuvres this week trying to bounce the IMF into supporting the Eurozone. A new £300 billion of funding to help 'satbilise' countries across the World. Clearly this is aimed at her home Country and the Euro.

Sadly though, the US Congress would have to vote on a huge chunk of this extra commitment; as would the UK Parliament - chances of success of agreeing to a French led bail-out - zero.

It is desperate to see this being floated as an idea as the Countries of Europe continue to avoid the obvious route of breaking up the eurozone and using devaluation as away out of the debt crisis. At the rate we are going the debts are going to take 100 years to pay-off which is not practicable at all.

Even if the US does bail-out Europe, it will be through the Federal Reserve lending to European banks.

No end to the crisis in sight, which means big risk of further dislocations in the markets and in the World economy.

MAN enough?

2012-01-18T13:21:00.001Z

Sometime ago, back in the pre-2008 crisis, I used to trade the giant FTSE100 Man Group quite a bit (its EMG.L).

Since then, things have been going very badly for the group. Its main fund has done quite badly the last couple of years, notching up 6.3% down last year (I dream of returns like this, 50% down last year...). It made a huge and expensive acquisition of GLG partners which was only ever going to be a good deal for the GLG guys selling to them. Clients have been pulling money out in droves, which also makes it hard to make money on the funds (forcing liquidation of good positions etc). Also MAN only makes good money when it hits its high performance targets, so underperforming funds really affect its profits

So all in all its a bad story, no wonder the shares have fallen from 300p to 112p. Now today there is a new statement out saying that there is a need for a further round of cost reduction. However, the divi of 16.5 cents is still be paid. This is quite some divi at 10% for a FTSE 100. Furthermore, analysts think it is probably just about sustainable, even with all this bad news backed in.

Now, I doubt 10% is sustainable, but that is because 6-8% is more likely and that is probably going to happen when the shareprice recovers from these depressed level. EMG could easily get back to 150p odd this year which would mean a decent profit even without the divi. With little downside, protection of a big dividend and a shareprice at bargain levels this one is back on the watchlist.

Too hard, Too long

2012-01-17T22:51:00.007Z

The initial casualties of the recession amongst retailers were the elderly and the already weak and sick. Woolworths had been in the hospice for about a decade. Zavvi had no money. Some of the weak ones went into CVA , escaped their unpayable leases, wrote off their taxes and just started again.
The slashing of interest rates, the realisation of the creditors that a deal was better than administration and the landlord's slowing coming to understand that the shoe was on the other foot, meant that many of the retailers that could, and indeed should, have collapsed, did not.

There was always a good chance the storm could be ridden out providing cash flow could be maintained,costs cut and most importantly, that the recession was not too long lasting.

It does look like the recession has gone on too long. Staff levels were already at a historic low in 2007. So were cost prices. Energy costs were manageable. The biggies, rent and rates, were artificially high and they came down, but there wasn't much else to cut.

A quick look over 2011/2 shows some of those same administration survivors going into administration again. No company can continue loss making for ever. Amidst all the annual, gushing 'best Christmas ever' headlines that the British retail consortium were putting out daily between 20/12 & 1/1/12 there was their report on administrations.

The total number of retailers in England and Wales falling into administration in 2011 increased by 11% from 165 in 2010 to 183...and the very worrying .. Administrations for the fourth quarter of 2011 were up more than 25 per cent compared with the same period a year earlier.

Unhelpfully business rates rise another 5.5%. {unfortunately the value of domestic/business properties was calculated at the absolubte property boom aug 2007 peak.} That may well prove to be the final nail for many businesses. Outside of those having a good war, John Lewis, Greggs, Poundland, Matalan, QD stores, profits have been down for two+ years now. There are no reserves. Any further sales decline just tips stores into closure. The retail analysts consensus is that many more administrations waiting to happen in the first quarter.

I can't say I've seen anything that would contradict that.

Failures so far in 2012

Peacocks - some talk of a late deal.In administration.
BonMarche.- Same:There are 550 stores and 9,600 employees.
La Senza, 146 stores, 2,600 employees.
Past Times 100 stores and perhaps 1000 employees.
Blacks Leisure, 98 Blacks stores and 208 Milletts shops. There are 3,885 employees.

Failures in 2011

Hawkin's Bazaar 400 staff and 120 stores.
D2 Jeans 47 stores, of which 19 were immediately shut with 200 employees dismissed, and there are 300 more employees in the remaining stores and head office.
Barratts 191 stores, 391 concessions, and employs 3,840 people.
Cooks Bakery, 8 stores and 62 employees. It had 120 bakers' and coffee shops five year ago. You might remeber them as Three Cooks.
Best Buy, the Carphone-Warehouse controlled electrical chain began closing its 11 stores last week. It had hoped to have 200 stores by now.
Alexon, the fashion chain, went into pre-pack administration at the end of September. The group owns 990 outlets trading as Ann Harvey, Kaliko, Dash and Eastex employing 2,700 staff. Sun European bought the company out of administration saving the group, but at the costof shareholders (loss £4 mn), suppliers and HMRC (lost £12 mn).
Walmsley, the 60-store furniture retailer. 25 stores have been bought.
Floors-2-Go, the floor covering firm collapsed for the second time. 53 of 88 stores were closed with the loss of 200 jobs,.
Lombok, the furniture chain, went into administration in August for the second time in two years. Nine of its stores closed immediately, leaving three.
TJ Hughes, 57 stores and 4,000 employees.6 stores saved.
Jane Norman,90 outlets, 1,600 jobs
Habitat 33 remaining stores. 900 staff. . 3 stores remain.
Homeform, Moben and Dolphin, Sharps and Kitchens Direct. Sharps bougt. I think the rest went.
Life & Style, 91-store fashion lifestyle chain . Collapsed for the 3rd time. 62 stores bought up.
Haldanes, the grocery retailer 26 stores,- 600 staff. I
Focus DIY chain, 3,919 employees and 170 stores
HiHo Jewellers 14 stores and an online business - 55 employees
Oddbins,
Alworths, the successor to Woolworths, went into administration at the end of March. Stores sold to poundstretchers.
Easy Living Furniture 20 outlets- 150 people
The Officers Club into administration again 900 people in 102 stores, 46 of which (400 staff) have now gone to Blue Inc.
Henleys, 18 stores and dismissing 200 employees.
Bennets, the Norwich-based electricals retailer with 14 branches and 300 employees
Auto Windscreens 1,200 employees, 68 fitting centres, 550 mobile units, a call centre and distribution depot
JJB Sports, 45 problem stores then closing a second tranche of 50 stores. Needs a fantastic january to survive.
British Bookshops and Stationers, a 51-store 'discount' stationery/books chain with 300 employees in the South was the first major retail casualty of the 2011, going into receivership in Jan 2011. W H Smith bought 22 BBS stores.

Read this and rejoice for UK Shale gas reserves

2012-01-17T08:49:00.002Z

No, not my grammatically poor prose, but this article here. This appears in businessweek but it reads more like a crazed press release from a desperate small company. Wild claims are made.

Yet, amazingly, this is all true. Shale gas really has brought about an energy revolution in the USA. There is now no demand for the ridiculous wind turbines nor the eye wateringly costly and risky nuclear power stations. And there is easily enough shale gas, which is a low carbon emitter compared to coal or oil, to last until real energy security is developed in the form of Fusion power stations - not due commercially for another 50 years or so.

America has over 400 hundred years reserves of shale gas. The reason to rejoice is that so does the UK - hundreds of years of energy freedom are at our finger tips. In a world where oil prices are being pushed up by mad mullahs in Iran - we have the solution to all our energy problems here at home.

There are of course some technical challenges to be worked out, such as not causing even tiny earthquakes. None of these are insurmountable though and most have been overcome in the can-do USA.

So on a day when the Euro news and much else is poor, at least this is a reassuringly good piece of news to digest.

Socialism@Work from the Coalition

2012-01-16T10:52:00.001Z

John Lewis is a very well regarded company. Its high end Department Stores and successful Waitrose food business have done the company well in the last decade or so. This was not always the case and the Company has had bad times too.

In the past few years it has benefited from many people who have kept their jobs in the recession having more disposable incomes as previously enormous mortgage payments have dropped from their monthly expenditures.

Now today, Nick Clegg is extolling that in fact, John Lewis, because it is owned by the staff is in indeed a better business. I do have some concerns here as to whether this is the case or ever sustainable on a grand scale.

Firstly, there used to be many Mutual Building Societies, these eventually all demutalised as the holders of shares wanted a short-term return. As it has turned out, due to rising costs of capital, mutuals that remained have done very badly in recent years and there have been numerous rescue mergers and busts. This are not rosy in this sector of stakeholder ownership.

Many companies too have big Save As You Earn schemes - Northern Rock and RBS amongst them. these too have not done their participants much good when their shares have been wiped out, often along with their jobs.

The idea of making a legal obligation on companies to offer their employees shares is its potential for risk concentration . You already get your salary from somewhere, now invest in it too, so that when things go wrong you lose everything.

This is an acceptable position if you are the owner/founding management and you stand to get rich if it all goes right - indeed the risk capital put in will have been hard to get hold of. But if you are say a secretary and your shares are only a tiny fraction of the business at best, even in a winning situation you won't have done that well. Whilst in a losing one, you will have done your savings as well as your job.

Capitalism has many forms and employee partnerships can be successful and compete against normal shareholder companies very successfully. Mandating this as a way out of our current problems is not really the answer though. The idea of responsible capitalism is a very political one and one with strong socialist routes. I have worked with 'Works Councils' in German companies; these councils are not the reason for German business success. Germans work longer hours than anyone else, have better training and a positive work culture - these things are much more important than how a company is structured.

Finally, a theme I mentioned last week. Shareholder owned businesses have to access the private capital markets, not the public ones. Mutualisation, as such, would in theory shrink the capital markets of the UK and make it harder for pension funds and other long term investors to find good investment opportunities. I can imagine this is what the economically illiterate Lib Dems want, but is this really a public good?

Remind Me, Where is Qatar ?

2012-01-13T15:12:00.014Z

These days we get a lot of our gas from Qatar - sometimes as much as a quarter - more even than from Norway. LNG trade is increasingly important worldwide; see this from Shell for RUSI. Mercifully, supply is becoming ever more diversified: but Qatar is the biggest global producer.

And where exactly is the source of all that LNG ? It's here.
The world's largest gas field, shared between Qatar and ... Iran. Oo-err. And the UAE have screwed up the oil pipeline project that could by-pass the Straits of Hormuz: $200/bbl, anyone ?

So à propos of CU's latest post, and BQ's on US defence priorities: perhaps we shall find ourselves 'engaged' in the Gulf again shortly, at the instigation of the USA, and probably with quite a few 'interested parties' egging us on.

Here we go again. National interests at stake ? - well, in this instance at least the case could be made. Now, about that shale gas ...

ND

The World just refuses to end, again

2012-01-13T11:06:00.000Z

One thing that gave me hope at the end of 2011 was that everywhere I looked I found bearish prognostications about 2012. Not just the ludicrous Mayan Calendar stories (the calendar stops because they ran out of wall on the temple, sigh), but that the Eurozone was finished, along with America and China - plus Iran was going to cause World War III and the Arab Spring would unravel.

The hope was that of course in life i have seen when everyone agrees on something, they are usually wrong. It is one of the nice little ironies of life.

Thus far this year, in terms of markets and economic data at any rate, the contrarian Bullish position has been proved correct. Volumes aren't too bad and markets are up. The moving average of the FTSE is in a steady upward move, even if this move is a rather shallow one.

Moreover, data suggests the UK has avoided recession in late 2011 despite the catastrophic macro events that took place - this is quite encouraging. The US too is up for a modest recovery. Only in Europe are things not really improving and there massive cheating by the Central Banks is calming the bond markets for now.

I somehow doubt the doomsayers are totally wrong and can't see 2012 being a good year. I am reminded though that 2011 was going to be a good year, the first year of proper growth since the recession with the FTSE predicted to be at 6500+ by many analysts. It turned into a bust with a 7% decline. So perhaps this year will be better than expected, which if all it means is the end of the World refuses to happen, well then that is fine by me.

Question Time - new series.

2012-01-12T10:13:00.004Z

New series of the world famous Question Time game.
All the fun of Punch and Judy politics with a dose of class war and public/private pension apartheid.

The rules are simple.

Consider the recent news stories, the QT panel, the week's location for the show. Deduce the likely thinking of a BBC producer/editor in attempting to craft an entertaining, yet serious, politics/current affairs panel show.

Then you list up to five questions that you believe that members of the audience will ask the panel.

Tonight: David Dimbleby is joined in London by
Justine Greening,{One of Osborne's 'Untouchables.' - So called because she's one of the trusted trigger men and women at the Treasury Department. Or possibly, she just doesn't like being touched.}
Douglas Alexander,Shadow Foreign and Comm office. Long time cabinet member, planner,plotter and part of the Scots labour mafia. Can be convincing when he wants to be. Will have to be against ..
Nicola Sturgeon, {SNP deputy, probably the most able deputy in any UK party. Has that Thatcher ability of sounding correct, even when she isn't. She'll be pleased with that comparison.}
Lord Paddy Ashdown, {Question time regular. Venerable elder statesman who now holds the same post as Kelvin MacKenzie .. instant desk filler for Sky/BBC news}

QT quiz regulars will spot the Scottish independence, HOL rebellion on disability,Ed Miliband's a lightweight questions in that.
And the real experts will have slyly noted the Camden Town reverse branch back to Paddington and the Sunday transit rule that allows a change at Tower Hill

Enter up to 5 guess questions into the comments below or tweet to @BillQuango who will also post on #bbcqt along with the myriad of other MPs, spads, spinners, political agents, pollsters, vested interest groups, drunks, politics students, media studies students who want to sleep with politics students, ax grinders, hippies, supremacists, communists, weirdos and the rest of the great British public. BBCQT - providing DIY entertainment.
Points awarded for accuracy, intelligence, wit,cynicism and exclusivity and on an arbitrary basis for no discernible reason at all.

Cityunslicker - 6
Miss S-J - 6

Hopper - 5
Malcolm Tucker - 5
Jan - 5
Botogol - 5
Timbo614 -5
Bill Quango MP - 5
Sebastian Weetabix - 5
Dick the Prick - 5
Amy 4
Measured - 4
Hovis - 4
Nick Drew 3
Budgie - 3
Miss CD - 3
Philipa - 3
Andrew - 3
GSD 2
Dearieme - 1
appointmetotheboard - 1

Winners are Miss S-J and Cityunslicker -6pts each who get to choose the route of HS3.

The curse of something must be done

2012-01-11T11:35:00.002Z

or in this case HS2 - a new railway to Birmingham.

I mean, really, Birmingham. I have been to Birmingham, its um, OK. It is not the heart of British Industry and commerce that it once was. It is a City of less than a million people. In China, it would barely make the map and would not be even in the top 100.

So to spend at least £16 billion (and possibly double given the way these projects go) to reduce the journey time by 30% in 13 years time - seems, well, over-egging it a bit. This is not the stuff of Brunel's dreams is it?

Sure one day oil is going to be dreadfully expensive and flights costly and we will be glad of a rail network - but this is perhaps over a decade away - especially if we use shale resources properly. It maybe a century.

So where is our new airport to meet the needs of our growing export business and world interconnectedness. Where is the remedy to London's failed mass transit infrastructure? Heaven forfend that 90% of UK journeys are by road (and that road tax / fuel duty pays the transport budget several times over) that we may see some new motorways or A roads upgraded to meet actual demand.

None of this really matters, something must be done about UK infrastructure investment and this is a something. Better still it is not a controversial nuclear plant - the people it upsets are Tories in the shires whom the Government can afford to upset given their political position - in fact it probably even helps.All of the above investment proposals are either politically challenging or lack in vote winning appeal. Birmingham is, of course, full of marginal constituencies.

Here is a big project, lasting forever (i.e. more than one term in Government) that will employ the Polish migrants so short of work today. So let's do it.

Salmond Baiting Season

2012-01-10T20:01:00.005Z

So, the protracted Salmond-baiting season has started, and he's already been wrong-footed neatly by the merest of opening gambits. His endless game of 'referendum-but-I-won't-tell-you-when' has been called smartly to an ignominious halt, and the best he can do to cover his blushes is to pick a date later than the one Cameron suggested.

Much more of this and his reputation as the smartest political operator in these isles will take a bit of a re-assessment. Of course he is wily, determined and as focused as only a monomaniac can be - so he'll often steal a march when no-one else is looking. There will tactical ebbing and flowing for months to come.

But the long-overdue power-play will soon be seen, the game's afoot, and the beaters will drive him into the open. If Hatfield Girl is correct, every man's hand is turned agin him and he may end up pretty bruised.

For the record: it means something to be a Brit; I am a unionist; he is a charlatan; and I wish him three years of misery.

ND

UPDATE - apparently we have George 'student politics' Osborne to thank for this. No surprises there ... game on!

Its that {Question} Time again.

2012-01-09T23:00:00.003Z

Question Time in 2012.
The next program on Thursday 12 January will be from London.

Propose some FIA/NBA/NFL/FIFA unexpected and game changing rules alterations.

1} Maximum of 5 questions
2} If only two OR fewer people gets the question. {Being the only person was very difficult.} 2 EXTRA points each.
3} No more ½. Full points or nowt.

Optional .. We'd better decide now..Damn prog is on again this Thursday!
A} Teams as well as individual scores. So if you {inexplicably!} miss a turn, your team will carry on without you. Players will be assigned a random team.
B} Teams instead of individual scores.
C} One 'joker' / season / person. All answers score double
D} 3 points for a bang on correct guess. 1 point for a partial.

Or move onto something else instead? PM questions? This Week? Closing price of the FT on a Friday?

Or just leave it as was and get on with it?

Hey Scotland, where's my vote?

2012-01-09T09:31:00.000Z

Always worth a quick glance back in history to see how things evolved. Back in the 18th Century Scotland had decided to get into the colonisation game and the King and Lords of the land had put up much money to sponsor adventures in the new world, to places such as Panama.

Unfortunately for them, these all failed and the vast costs and debt weighed heavily on the State. So much so that they really needed the help of their hated English brethren to get them out of a spot of bother. the end result of this mess was the Act of Union of 1707.

Today, there are moves by the SNP to have a vote for Scottish independence. but I ask, where is my vote as an English taxpayer? We saved Scotland 300 years ago and have continued to do so for the time since, including most recently when HBOS and RBS were the 2 main banks along with Northern Rock to bring down our financial system.

Instead, we are to be told that it is up to the Scots alone as to whether they want to remain part of the UK. As it happens I am quite in favour of them leaving. The cost of the Socialist state in the North more than offsets and oil and gas revenues and will also ensure a much more right-wing Country is left behind. As it would jeopardise our UN status and military standing I am quite keen too - for I don't see how the UK can afford to continue its current high spending ways in a world where we are dropping down the GDP tables at a precipitous rate. Scotland leaving the Union will force and honest conversation to be had by the remaining peoples of Great(ish) Britain.

Where is my vote though - it stakes two to tango after all. In the US secession was enough to kick off a very bloody civil war. Now of course I don't want that, but for an amicable split, as with marriage, it is best if all parties agree rather than one flounces off alone.

Why the unionists don't insist on this or at least use it as a bargaining chip is beyond me. The negotiating stance of the Government (and previous one) leaves a lot to be improved upon.

Milliband attacks the economy, again

2012-01-07T13:34:00.001Z

Here we are, early in 2012 and already the Labour party leader is attacking business and trying to destroy the economy. The sheer ignorance of business, rationality and capitalism is breathtaking.
In a weird article in the Graundiad Mr Milliband lays out his insane agenda. He wants more 'responsible capitalism' what this amounts to seems to be an attack on executive pay.

This is so short-sighted. Already the City itself has done a good job of undermining the public equity markets. IPO's like Ocado last year that are priced to fail and succeed only in making investment bankers and the proprietors rich are limiting the amount of companies coming to market. Huge market volatility is causing smaller AIM companies to delist at a very fast spreed. Volumes are falling - the Equity markets are shrinking.

Add to this a crazy idea about comparing pay and limit pay and wealth creators are going to ask why go public at all? With all the hassle and effort only to have your own pay limited anyway. Instead these companies will stay private where the Government cannot yet touch them. There is plenty of private equity money around today to fund private companies.

But this is terrible for our society. Pensions and Savers - who still outnumber debtors by some way, rely on public companies for their investments and yield. Private companies pay no dividends to retail or institutional investors. So by shrinking the markets we are reducing the potential for our savings to help fund our future and our investments and growth.

I am all for fixing the current mess in our financial system which as we all know is at crisis proportions - but having idiotic, populist, socialist politicians who have never had a job in their lives pontificate and lead the debate is a very sad state of affairs to be in. Let's hope the Coalition roasts them for this nonsense.

Pentagon defence cuts.

2012-01-05T20:43:00.003Z

80,000 US military personnel currently defend Europe as part of Nato.
That's a tiny proportion of their total numbers. About 5% of their manpower. So the announced large scale military cuts may come from some of the reserves in the USA itself. But some are bound to come from Europe.
American politicians have long complained of the cost of defending Europe. Why station those troops in Europe , at their own expense, so they can spend their cash propping up foreign economics that are to cheap to defend themselves?

Those troops were supposed to be home by 1948 at the latest. Except that the USSR just wouldn't let up and the western democracies were about to collapse from war debt and war damage. The 1990 end of communism should have allowed the US to get out but then the Balkans kicked off into civil war. It wasn't until 2004 that George Bush announced 70,000 personnel from Europe would go.

The USA {according to the BBC} had almost three times the Europe number in Iran/Iraq and just 50,000 in the far east. It makes a lot more sense for the US to deploy where the threat is.

The announcement of US troop reductions was a bit of a surprise. But it shouldn't be. Since the 1960's America has been telling its Euro allies to stump up some cash and defend themselves. UK and France do. The rest don't like to go much above 1-1.5% GDP. As recently as June during the Libyan involvement US defence secretary Robert Gates noted the allies are running short on bombs.

“The blunt reality is that there will be dwindling appetite and patience in the U.S. Congress — and in the American body politic writ large — to expend increasingly precious funds on behalf of nations that are apparently unwilling to devote the necessary resources or make the necessary changes to be serious and capable partners in their own defence,” Mr. Gates said. Some NATO nations are “apparently willing and eager for American taxpayers to assume the growing security burden left by reductions in European defence budgets.”

Europeans economies have long decided that American president's can't and won't cut military spending.
It's such a large part of the economy. And how weak would a President look to his opponent if he advocated military cuts? Those key industrial-military complex states would wipe him out. The only President to try was Carter. And look what happened to him.

But this IS the time to do it. And Obama is the President to do it. He has to make budget cuts. And there is plenty of fat in the defence budget to trim. It may look weak but his opponents are weak. US citizens are sick of war. Nearly two decades of military adventure haven't bought much glory. And even less stability. He can sell it as a time to stop intervention for no cause, for no gain. It actually puts the Republicans on the back foot. Obama can claim to have ended the wars they started and couldn't finish. And he can turn it to his own advantage even more if he cuts European defence spending.

Time magazine had a piece in April. How to save a trillion dollars. It suggested..
"While the U.S.’s military spending has jumped from $1,500 per capita in 1998 to $2,700 in 2008, its NATO allies have been spending $500 per person over the same span. As long as the U.S. is overspending on its defence, it lets its allies skimp on theirs and instead pour the savings into infrastructure, education and health care. So even as U.S. taxpayers fret about their health care costs, their tax dollars are paying for a military that is subsidizing the health care of their European allies."

Mr Gates again. "Do we really need 11 carrier strike groups for another 30 years when no other country has more than one?" And Time asks ..Do the Air Force, Navy and Marines really need $400 billion in new jet fighters when their fleets of F-15s, F-16s and F-18s will give them vast air superiority for years to come? Does the Navy need 50 attack submarines when America's main enemy hides in caves? Does the Army still need 80,000 troops in Europe 66 years after the defeat of Adolf Hitler?
If I was Obama I'd say yes to the submarines, maybe to the fighters, but definitely withdraw the troops from Europe.

RBS sale to mark the bottom of banking market?

2012-01-05T09:29:00.002Z

More news out today on our taxpayer investment in RBS. What I can't believe is the timing of all this change. The story goes that in the Investment bank the foreign units are going along with all of Equities and Corporate Finance (a business called Hoare Govett). Now neither of these are the really big pieces of RBS Global Banking Markets - but without them RBS is left with a very sub-scale debt business that is only good in a few areas such as corporate bonds.

But really, selling now, in midst of the Euro crisis? RBS will be lucky to get any buyers at all, let alone a decent price for these units. So in the end it may well have to sack everyone and close them down. yet in the last 2 years these units have been profitable. of course in the Brown Boom this was the unit that blew the bank up with all its bad buys, but now these are more controlled. So instead now it seems we are to throw the baby out with the bathwater - for RBS is already selling down all of its Non Core assets quite successfully.

All I can see here is the split of a bank in the worst possible moment which will int he long-run hamper shareholder return - which is rather crucial as the current share price of 20p is a long way off the 55p needed for the Government and ourselves to get out money back on the bailout.

Bizarre that this is being pushed now - there must be more to it? I have a feeling shedding the bankers with huge bonus' is clouding the issue here.

All in all though, Governments generally make the worst decisions with te worst market timing possible, see Gordon Brown's sale of the UK gold reserves. So perhaps this knifing of RBS will in time mark the nadir of Investment Banking in the current crisis.