The Squeeze

Fairly Silly Advice from the FSA...

2012-01-30T19:40:00.004Z

The mind boggles with this one. Those nice chaps in the UK's main financial regulator have noticed the prevalence of con merchants stealing people's pensions.

The scam is simple. You buy a list of suitable targets, and persuade them to transfer their old occupational pensions into a SIPP. Here, it can be invested in 'land' (sold as an UCIS to the consumer), which is not FSA regulated. Hence you can use outbound telesales and other high pressure sales tactics to fleece your victims with elaborate, land-based, investment scams. Hence the FSA are (finally) warning people:

Despite this rule [the FSA rule banning the promotion of unauthorised collective investment schemes (UCIS) to the general public] we have seen evidence that ordinary members of the public are being sold UCIS, with some customers being advised to invest their self-invested personal pension (SIPP) into a UCIS.

Well more likely the punter has been advised to dissipate their old occupational pensions, from their old jobs, and transfer into a SIPP by an iffy FSA regulated IFA. But anyway, what do the FSA advise one does to protect themselves?

Before you agree to invest in a UCIS your adviser should be clear that they are permitted to promote the scheme to you and explain why the scheme is suitable for your particular circumstances.

If you are not sure whether you fall into any of the groups that can have a UCIS promoted to them you should ask your adviser which category applies to you. If you have already been sold a UCIS you can still ask the firm which eligible investor group you fall into.

If you are considering investing in a UCIS be sure to read all available information, ensuring you understand and accept the risk that you may lose some or all of your investments. If your adviser is not able to clearly explain the nature of the underlying investment and risk to you then consider whether you fully understand what you are investing in.

You should also confirm with your adviser what charges there are, what the rate of return is and whether this is ‘actual’ or ‘targeted’.

Perhaps most importantly, you should ask whether you may have access to the FOS and FSCS if things go wrong, and seek independent professional advice if you are in any doubt about the potential risk and returns involved.

If you believe that a firm has promoted or sold you a UCIS that is not suitable for you, sold it to you unlawfully or that the risks were not fully explained you should make a complaint to the firm involved.

So in other words, ask the person who is assisting the fraud being perpetrated on you (and getting a hefty kick back in the process) if you should go ahead and hand over the cash.

Now these SIPP scams can't be pulled off without the assistance of an FSA regulated IFA. Therefore I predict that when the proverbial hits that fan, and tens or even hundreds of thousands of people realise their pensions have disappeared into the offshore bank accounts of high-living crooks, that they will kick off. Since they were advised by an FSA regulated IFA, it will be very hard to say the free to the consumer Financial Ombudsman Service doesn't apply.

Benefit caps - just change the damn laws in London!

2012-01-28T20:31:00.005Z

Make no mistake, capping benefits at £26K is popular, and capping them at less than £26K would most likely be even more popular. Everyone who walks around with their eyes open knows who is on the receiving end of these above average income payments. It's those annoying people who have loads of kids and no job.

£26K after tax is like £34.6K for a single, childless worker who pays tax. The vast majority of folk in the UK, me included, earn considerably less than this. With child tax credits and child benefit factored in, earning £34K for a childless man is like earning £26K for a bloke with 5 kids.

Now the crunch comes when you factor in private sector rents. A fairly liberal (on a good day) northerner, like me, baulks at the idea of simply handing someone this much cash on a plate. Whereas a fairly liberal Londoner thinks it's 'fair' because of the rents in London.

Northerners who lose their job in London do tend to head back up North, and in fairness, they bill the jobcentre for travel to job interviews in London. Proper Londoners don't really have the option of heading 'back' up north do they? So what to do? Should the coffers/taxpayer fund their high rents? For how long?

Well, in my view, the problem here is that London has been politically divided into 33 'Boroughs'. No other city exists like this, even Birmingham has just one city council. The simple answer is to change the housing laws in respect of London. Forget the 'Paris doughnut' bogie, all cities have their depressed areas.

While we're on this, can anyone explain to me how someone with hardly any connection to the UK, let alone London, can turn up at the housing office in a Zone 1 London Borough and get put straight on the housing list? I suspect corruption and backhanders are rife here - this needs to be investigated - and London housing laws need changing, perhaps with a greater role for the elected Mayor.

Why not simply merge all the LB internal audit departments into the Mayors office, with some new blood, and root out (and deport where appropriate) the fraud?

Attack of the neo-con dolphins...

2012-01-20T07:44:00.001Z

Peter Singer reckons the US Navy are abusing dolphins by training them to hunt for mines and deploying them in the Persian Gulf.

Iran might use mines to [close the Straits of Hormuz], and if they should do so, then, according to retired US Admiral Tim Keating, who previously commanded the US 5th Fleet in Bahrain, "we've got dolphins."

OK, so far so good, you learn something new every day and all that...

According to earlier reports, the US Navy has trained about 80 dolphins to detect mines. Some reports say that the dolphins only locate the mines and drop acoustic transponders nearby, so that humans can destroy the mines, but it is also possible for the dolphins to set off the mines and die in the resulting explosion, and, of course, using the dolphins in this way makes them – and any other dolphins in the area – targets for the Iranians to destroy if they can.

Well OK, there might be some ethical considerations...

To believe that, because they are members of a different species, we can ignore or discount their interests is speciesism, a form of prejudice against beings who are not "us" that is akin to racism and sexism. We should give equal consideration to the interests of any sentient being, where their interests are similar to our own.

Speceism? FFS! Anyway, the dolphins presumably swim back as opposed to swim away, and by all accounts are very clever creatures. It's never dawned on him that the dolphins might just want to ~~get~~ bring freedom and democracy to Iran.

Taking profits/hitting the chicken switch

2012-01-19T19:26:00.005Z

All in all, not a bad start to the year. Getting long risk (i.e. financials) and a German manufacturer has boosted the summer holiday pot from £750 to £1,105. Two weeks in the Canaries has become two weeks in Thailand, happy days, for now.

The oilers, BP and Gulfsands, stay for the longer term, at least until BP announce their next results in February. I expect the big institutional shareholders will be busy lobbying for a bigger dividend, and that the stock could re-rate dramatically in the event of a meaningful increase.

In all honesty, I suspect this mini bull run has a bit left in it, but this is more about booking a profit, letting it 'sink in' (i.e. you stop thinking about the extra cash as money you've 'won' and start thinking about it as money you 'own') and reducing exposure to risk.

CU pointed out Man Group looking cheap the other day, and it'll be worth a look to see if the battered supermarkets, especially Tesco, could be oversold. There's a task for the weekend then - find some more cheap stocks.

New(ish) anti EU campaign that might have traction...

2012-01-07T06:17:00.005Z

Greens, socialists, right wing tories, celebs and captains of UK industry have all supported this.

When challenged by Hugh Fearnley-Whittingstall, EU technocrats support their discard policy and ironically accuse him of wanting to create a 'utopia'.

If you hate the EU sign up - this one could go somewhere!

New Years Predictions 2012...

2012-01-03T05:04:00.003Z

I've had a crack at the C@W New Years predictions a couple of years running now. 2011 wasn't a good one for me, only 2/5, but I'm aiming for a perfect 5 this time and will definately keep my money where my mouth is on at least BP!

1) FTSE 100 will trade in a range of 4,750 to 6,500 all year. Selling long dated put options - although very risky - could be a good investment strategy to take advantage of all the fear about.

2) The USA outgrows Europe and as a result the EUR/USD pair falls below 1.20 and ends the year there.

3) BP climbs back to 600p a share.

4) India choose the Typhoon over the Rafale, boost for BAE shares.

5) UK deficit starts to fall and economy grows 1.5% as Olympics flatter figures and Coalition begins sneaky Keynsian infrastructure stimulus (most funded via bank lending, PFI and foriegn direct investment).

Stocks to watch 2012 (2)...

2011-12-30T03:21:00.006Z

I'd normally make the effort to at least read some accounts, check some P/E ratios, dividend yields etc. But I'm drinking a bottle of Chianti, half watching Scarface and catching a train tomorrow. I'm not making much sense of them the financial statements.

But neither is anyone else making any sense about the recent ECB intervention. Supposedly clever people are calling it a 'failure' simply because the (printed) cash has shown up as a deposit on the ECB balance sheet. Now think about it. When you take a loan from a bank they pay it into your ****ing account and it shows up as a deposit on their balance sheet. These are 3 year loans that will bail out the bondholders of screwed EU banks and screwed EU governments. They will be used to pay back bondholders and subscribe to the ever increasing issuance of sovereign debt.

So these are all long positions, based on the thesis that companies who have been sold down because of the EU debt crisis will recover as they get bailed out by monetiziation. The plan is to take these positions when the market opens in the morning. Here goes please note, these are not investments, they are spread bets BETS, and this is a kind of diary, not investment advice:

Someone seems to think high yielding, establishment insurance firm Aviva has exposure to dodgy euro debt:

Lloyds might have bottomed. Another establishment company that might benefit from a big high street presence and monetization:

Barlcays didn't get gobbled up by the government, but suffers whenever the euro-debt crisis rears its ugly head:

If the bondholders do get their cash, what will they do with it? A sluggish economy, low mortgage issuance and cash-rich blue-chips means they might bid up the dividend payers. Is BP oversold - will the Gulf of Mexico/problems in Russia really cost 25% of the company? The world is still thirsty for oil

Happy hunting!

2012 and the 'axis of evil' ...

2011-12-29T05:31:00.007Z

Does anyone else find these rolling news reports of that stumpy adolescent that's just supposedly taken over control of the supposedly nuclear armed DPRK a tad disturbing?

There he is, not knowing whether to look sad, proud, overwhelmed or confused. Note he's surrounded a bunch of old men that would most likely get done for the worst humanitarian crimes since Hitler's henchmen. But only in the unlikely event that a collapse of their regime happens to coincide with the west finding the political will to see some justice done in the world. If just ten percent of this well referenced wikipedia article on the realities of a North Korean prison camp is true, make no mistake, those comical looking guys in the green uniforms flanking him are truly evil bastards.

Then there is Iran. Zerohedge has taken to ~~winding up their gun toting readership~~ reporting that Iran have been playing wargames about closing the Straits of Hormuz right through the festive season. Today's post over there can't help but make you think Iran's military - bolstered by years of high oil prices and arms deals with Putin no doubt - might actually be a force to be reckoned with.

As far as I know, nobody has ever been ~~stupid~~ brave? enough to take on a Nimitz-class US carrier group. Well the the 5th Fleet is rumoured to be hanging around the vicinity. Maybe I've been off work, indoors, reading the internet for too long over the holidays.

Nevertheless, remembering the events post 1929, the world economy apparently going to complete shit, revolts still kicking off in the middle east and a US presidential race about to get going, and you have to ask the question. Could 2012 be the year the 'axis of evil' actually eclipses media coverage of what the f**k western governments are playing at?

Time to abuse the guaranteed stoploss...

2011-12-23T15:23:00.004Z

The markets going to be closed a few days, while everyone gets drunk. As we all know, alcohol is a depressant, I bet the traders come back to their desks and sell it down a couple of hundred points ...

... and if they don't the guaranteed stoploss at 12270 only costs 4 points. Gulfsands put nearly 20% on today too! Merry Xmas!

And most depressing blogger Xmas 2011 goes to....

2011-12-22T21:57:00.001Z

He started on 20th December with a heart-warming childhood tale from over the Irish Sea:

It was for me the epitome of hardship and deprivation. I grew up in this building during the whole of Margaret Thatcher’s first term in power. The only building of significance close by was the corner shop, and as a young boy it, the shop, was the centre of my universe, a place to lavish oneself in luxury should you ever come into a bob or two. But you didn’t did you?

Before treating his readers, on 21st December, to:

"7 reasons why 15 million Britons are set for a Tory Christmas from hell." A post which concluded: "Winter will kill about 30,000 people this year as the Tories have cut the Winter Fuel Allowance payments."

However, if that's not enough misery for you, while berating 'the death of the high street' on 22nd December Eion promises:

I will provide updates over the Christmas break of other companies that go into administration.

To top it all off though, he followed up with 'Domestic Abuse at Christmas'. Complete with chilling tales of rape and other violence it includes this advice for 'Green Benches' readers:

Now please keep an eye on your loves ones. No matter how functional the relationship may appear please be on the look out for signs of abuse and violence.

Well if this is the sign of things to come over at Eoinomics, I'll be won't be renewing my subscription! He seemed a bit merrier yesterday though (and certainly made me chuckle), when he penned this absolute corker, entitled "Ed Balls is right" and containing this little nugget:

Brown also believed in restrained spending right up until the dot.com crash of 2003. He spent a little, correctly, to steer us clear of dot.com danger, and perhaps slightly neglected to slow the pace of spending a little after 2005. But up until then Gordon was, in many ways, prudence personified.

Merry Christmas Eoin! Merry?

Stocks to watch in 2012 (1)...

2011-12-21T12:14:00.000Z

I can't get my head around small cap oil stocks. They are impossible to value. Even if you know how much oil is down there you have no idea how much it will cost to get out. Furthermore how long it will take to get it out or how much the management or host's regime will have off you in the process.

So take a look at Gulfsands Petroleum PLC:

Here we have an unfortunate mix of assets in Syria, Tunisia and the Gulf of Mexico. However it's trading at book value based on it's 2010 annual report balance sheet, and on a gross yield of nearly 20% based on 2010 earnings. This isn't some little prospector, it's a profitable company, albeit in a volatile region and market.

So before you get carried away with rumours about Exxon grabbing Gulf Keystone, check this out. I'm tipping it to have a happy 2012 and I'm in at around 166.5p.

Chart of the day - 5 year spot gold...

2011-12-21T06:51:00.001Z

If you are long term bullish on gold, now might be the time to pile in...

...I levered the £700 in my spread betting account up to £11,200's worth of the barborous relic last night while I was plastered - then woke up yesterday afternoon £150 richer. Then promptly closed it - which I will most likely regret one day!

Interesting entry in the register of interests...

2011-12-20T08:22:00.001Z

Via HPC, it turns out Mr Bernanke has been re-mortgaging himself to the hilt every two years, probably on a 30 year fixed rate like you get over the pond. James Saft of Reuters is careful not to accuse Ben of anything untoward, penning:

To be clear, I see no conflict of interest in Bernanke refinancing his mortgage, and his actions are entirely consistent with the way you would expect someone who has pursued his monetary policy to behave. He’s within his rights to refinance, and indeed refinancings like his are one of the most important channels through which monetary policy can stimulate the economy.

I must admit I have a sneaking admiration of Ben. Despite what Ron Paul says, the Fed seems to me to be much more transparent than the Bank of England. I mean has Mervyn published a detailed spreadsheet of where all the Special Liquidity Scheme money and other hush hush loans went? Just how big is Mervyns mortgage anyway? Whilst we expect officialdom to declare their interests in equities and property prior to making decisions for us, we don't ask Jack about their interest rate exposure. That applies to the MPC too!

'wesatch' sums it all up well in the comments at Reuters:

No conflict of interest. Baloney. Every soul in America that has paid off their mortgage and has money in the bank at negative rates of interest is paying for the great Bennie’s 4% mortgage.

Savers lose. Deadbeats and debtors win in Bennie’s wonderland of monetary policy. The greatest transfer of wealth in history is happening by fiat right before our eyes at the rate of $750 billion a year. A confiscation of wealth without just compensation by an out of control unaccountable economist.

Nope, no conflict here.

QUITE!

Bunds - to sell short or not to sell short?

2011-12-14T07:34:00.000Z

FT Alphaville summed up the main reason not to on 5th December - pointing to the shortage of 'safe' assets. But what are the reasons to get short bund futures? Let's look at the possible scenarios:

1. Deflationary depression

If the Eurozone stays together, this could be bullish for bunds, as price/wage deflation drives what money there is left toward the eurozone's safest debtor. But who will end up with the bill for the PIIGS? The German taxpayer?

2. ECB QE

What are the chances of QE being used to buy bunds? In fact ECB QE could possibly raise German borrowing rates as investors flock to the higher yielding the ECB are bidding for.

3. Eurozone break up

Even if Germany did re-introduce the mark, a break up would send shockwaves throughout the market, bunds would likely be sold down for T Bonds. The Deutschemark would most likely rise, making Germany less competitive with the rest of Europe. Investors chasing up the new Deutschemark could inflate bund prices however.

4. Japan-style 'lost decade' or two for the eurozone

Who will get the bill if the populations of peripheral nations are to be appeased? Germany would have it the City of London, but Frankfurt and Stuttgart are likely to end up with the bill, putting pressure on their borrowing costs.

I'm sure there are more scenarios, including another bull market in equities pulling money out of bunds and raising inflationary expectations. Possibly from QE3 over the pond? Nevertheless, bund futures are trading within 300 basis points of their 52 week highs and a juicy 1,600 beeps from their lows in the spring. Here's the prices from Deutsche Borsk:

High 136.84
Low 135.97
52-Week High 139.58
52-Week Low 119.86
Close Previous Day 136.54

So I'm in at 75p a beep, it's got to be worth a £250 bet with the stoploss above the previous high. Only hard question is this: if I start winning were does the limit order go???

UK housing - how to let the bubble down...

2011-11-22T07:55:00.001Z

Yesterday just demonstrates why many people seldom vote. In the blue corner it's all about government under-writing high LTV mortgages - one of the things that got us all into this mess. Writing for the red corner, Jack Dromney bigs up more ~~social~~ affordable housing, groaning "It would be absolutely wrong to see the combination of falling council stock and rising rents.

Look at the stark facts:

1) The UK runs a massive trade deficit
2) The people we run it with want a safe return on their money.
3) Loads of young people want cheaper rent or a bigger place to live.
4) A few hundred thousand tradesman want more work.
5) Parliament can grant more residential planning permission.

Can anyone see the solution here? I would have thought it would have made sense to allow folk like the People's Bank of China, the Qatari Investment Authority etc to recycle their surpluses into building houses for rent, wherever the demand is, on the private market? We could even ask investors to bid for the planning permits and make a few quid there no?

That might take pressure of rents, whilst getting a few people back to work and stimulating the economy, you know, fixing the budget deficit? Making inroads on the trade deficit and the budget deficit, creating jobs and improving our housing stock into the bargain? What's not to like?

Just how much longer of the house price bubble sucking us all into a giant economic vortex are we going to have to put up with before people realise the real cause of our stagnant economy? It's not the euro wrecking the UK economy it's the house price bubble. Welcome to the 0% growth, decade or more long 'soft landing' they promised you in 2008.

Government policy succeeds...

2011-11-18T07:14:00.000Z

Via the BBC

"More than 500 jobs are to be lost with the closure of a Northumberland aluminium smelting plant. Rio Tinto Alcan, which owns the plant at Lynemouth, said it plans to close the site, where 515 people work ...

... It is clear the smelter is no longer a sustainable business because its energy costs are increasing significantly, due largely to emerging legislation. We are hopeful that the [coal fired] power station can remain in operation under new ownership.",

Not only do the poor folk of Ashington and Blyth no longer have to tolerate a dirty Aluminium recycling plant. That's 500 less journeys to work every day and 500 less families jetting off to Tenerife next year.

See, these green energy policies do actually reduce CO2 emissions!

Risk warning of the day...

2011-11-16T07:15:00.000Z

This is cut and paste from the prospectus for TBT, the Proshares ultrashort 20+yr US T Bond ETF. It is supposed to compound 200% of the daily rise or fall in the Barclays (did it used to be Lehman Bros?) long dated US T Bond index.

So, if I'm reading that correctly, they reserve the right not to stump up for margin calls on any given day. To hell with that, they reserve the right to ~~bet~~ invest your money in something entirely different than T Bills altogether!

I'm still convinced there must be a good shorting strategy for some of these ~~monstrosities~~ weird and wonderful creations. I just still haven't found it yet. In the mean time, I chickened out of long XTA, short AUD/USD. I should have just been boring and bought WTI crude oil futures it turns out! Anyone got any good spread betting tips then?

Chart of the day - AUD/USD

2011-11-01T19:44:00.002Z

Even the Aussies here are getting bearish on their currency, let's hope they are right. At least if there is a massive crash now it'll make me a grand or two.

MF Global...

2011-11-01T13:28:00.004Z

With all that Nick Drew has lectured us about dominoes and counterparty risk over the years, I've decided to close the Xstrata position this afternoon. This was only a notional £942 position, ad I'm stil bullish on the stock medium term. The ~~wishful thinking~~ idea based on careful anaysis was that it would recover to about 1250p by Xmas and I'd bag £300 towards my holiday. These first trades have left me about 5% down so far.

So gone is Xstrata, gone is Xcite (to free up margin, I don't think they will have much expsure to derivtives at their stage of life) and now we're short the Aussie dollar against the greenback at 50p per hundreth and a stoploss at 1.0800. Hoprefully any major loss of confidence (or even panic) will show up in this pairing as people close their trades, run for USD and bet on deterioration in China and the other BRICS.

Something tells me this trade could be a bit horse, stable door, bolted etc. This is the price of not paying attention, I reckon it's a bit like tossing a coin. It's going to be an eventful week I reckon, and probably one that will end with me wishing I'd stuck to my guns. Yet MF Global was a bit of a black swan.

The shape of things to come?

2011-10-19T18:30:00.004+01:00

I've not been keeping a close watch on the news of late, but this caught my eye over at the FT:

"The number of households in “fuel poverty” would fall almost a third to 2.7m if the government were to accept a new definition of the problem suggested by an independent inquiry ..."

Now I don't agree agree with Labours' 'poverty' targets (I consider them misleading and aimed to direct cash at key blocks of votes) but cooking the books is becoming a sign of our times.

Most notably, inflation targets were doctored the Western world over in order to ignore an inflationary credit boom that was popular with the masses. Now governments are buying up their own bonds en masse with printed money to reduce the supply of the paper they intend to circulate to the tune of several trillion over the next decade. How long before they simply cancel some of it out or open a bigger 'ways and means' overdraft with Sir Mervyn?

I wonder how long it is before other key economic indicators are tweaked, re-designed or simply fudged in order to tell us what we want to hear. Confidence took a bump on the news of 5%+ inflation in the UK and only 9.1% Q3 GDP growth in China. They tell us prosperity is around the corner, but I suspect the re-balancing of wealth from the debtor/importer nations to the creditor/exporter nations has a good few years to run yet.

Whether your wages are stagnating while prices rocket in the UK, or prices are stagnating while your wages plummet in parts of the EU, the effect on the consumer is the same. The textbook is simply softening what would have been a very hard landing and leading us into a decade or two of stagnation and relative decline. Since they seem so reluctant to rip up the textbook, how long before they simply change the way they measure the outcome?

Well I got one thing right...

2011-10-11T18:18:00.007+01:00

Whilst making an awful call on Sainsbury shares in March, I commented:

"In the wider context of the near 3,000 point run from March 2009, the index is falling back towards the bottom of its range. Seen as it is commodity based stocks are holding it so high in the wake of the banks, I'd imagine that any break below 5,500 would be down to a major sell off of mining stocks. Maybe they are the ones to short, one to look at another day perhaps."

Unfortunately I didn't do anything of the sort, and after having my 2011 profits wiped out by getting caught up in the Xcitement on small cap oil stocks and a foray into the corn future market I decided to give it a rest for a few months. Blogging has been non-existent because when I've not been snowed under at work I've generally been partying in my new commune with a load of migrant workers and backpacker. Time to sober up and charge up my new Cityindex account with a monkey and see if I can win enough for a nice holiday in 2012 then!

So what's it to be? Those mining stocks? My pick would be Xstrata:

Or what about December 2011 Sterling STIRS. Banking stress has pushed 3 month LIBOR to 99 basis points, will £75bn of QE sneak it back down to 75 by Christmas?

On a lighter note, I see Mr Trichet says he will clamp down on EU countries making foreign currency loans to consumers. Does this include providing mortgages in Deutschemarks to Spanish and Irish property speculators???

Moving, so blogging might be light for a bit...

2011-09-05T21:31:00.002+01:00

Should be sorted in a week or so.

Lefty falls foul of lefty 'hate' laws...

2011-09-04T12:56:00.003+01:00

According to Tony Greensteins blog:

The case centred on testimony from Paul's former friend, Jewish fellow student, Chanan Reitblat. Reitblat told the court that both Paul and his co-accused, Sam, had soiled his Israeli flag, following up with comments that "This flag is a terrorist symbol; Israel is a terrorist state; you are a terrorist". No other witness corroborated this statement by Reitblat.

Of course, the anti-Israel mob are up in arms about it. It made the Daily Mail too. Now let's imagine that read:

The case centred on testimony from Paul's former friend, Pakistani fellow student, Asif Ul-Haq. Ul-Haq told the court that both Paul and his co-accused, Sam, had soiled his Pakistani flag, following up with comments that "This flag is a terrorist symbol; Pakistan is a terrorist state; you are a terrorist". No other witness corroborated this statement by Ul-Haq.

Seems a fair enough conviction to me. No-one needs to corrobrate the witness testimony. Witness testimony is primary evidence.

Shorting Ultrashort ETF's revisited...

2011-08-31T06:30:00.000+01:00

Back in October 2010 we discussed going long big oil stocks via shorting the Proshares Ultrashort Oil and Gas ETF. This fund compounds 200% of the daily returns ofd a basket of oil and gas stocks, weighted to the US majors. Would this have been a better strategy than a) Buying the sister long ultra (NYSE:DIG) or b) Buying the US oil majors? First up DUG's sister fund DIG:

Best performing of the 'big 3' US oil majors, and 2nd largest holding, Chevron Texaco, returns getting on for 50% - and it's not leveraged at 2:1!

Largest holding, Exxon Mobil doesn't bar Chevron, but still returns over 30%:

And here's shorting the Ultrashort (NYSE:DUG)

Although it averts the need for picking the right best oil stock, and gives back less in the crash than DIG, it looks like buying oil majors on double the leverage, or going long the ultra still beats short the ultrashort. We'll have to have a look in another 6 months and see how they are getting on.

Of course, in a higher interest rate environment, there are considerable advantages to short selling - i.e. you get paid to hold the position. So it might just be worth researching this strategy for sometime in the distant future.

Shorting the VXX revisited...

2011-08-30T05:45:00.001+01:00

Back in February this year we looked at the iPath VIX ETN and asked whether a rolling strategy of shorting it via spread betting or cfd's was a good idea. This is what we said:

"This ETN just goes down and down. If there is a Lehman Bros style event, the idea is, it will shoot up. It's for short term hedging of stock market crashes. It not only looks proper contangoed, it trades options and therefore loses time value - and - the VIX index is designed to be flat in the long term. It fell 67% the other year.

It's listed as a CFD too, if I was Diamond Bob I'd have a rolling program of shorting it going on. In fact I might just do that, it's tempting. The only danger is that VIX options are catastrophe insurance, so if something really bad happens one Sunday you could start Monday afternoon bankrupt."

Well, not we've had the Arab Spring and the recent stock market correction, lets have a look. I made this chart (click to enlarge):

So, if you started shorting it once a month (or once a week if you were feeling flush) in February 2011, all the bets would be down at the moment, but had you say started in June 2010, you'd still have 6 months worth of bets that were up.

The S&P 500 did not reach it's June 2010 lows in the recent fall. However, it is lower now than it was in December 2010, yet the short VXX trades from then would be up. Am I onto something, or is this just a crazy, unneccessarily risky idea?

Nothing on TV? Try this...

2011-08-27T21:31:00.004+01:00

It's about people bumming each other in a prison in Alabama, I found it quite interesting. Note the casual attitude of the prison officer, who thinks it 'keeps them outta our hair'.

Maybe Italy will be OK after all...

2011-08-22T01:40:00.005+01:00

Zerohedge, speculating that someone is after Libya's gold reserves, reckons Italy has over 2,450 tonnes of gold. I make that over $145bn. Might buy them a few months. Of course, if paper money did collapse, then it might be (technically) debt free in a year or two.

Will he go down fighting like Tony Montana?

2011-08-22T00:05:00.003+01:00

I like to think it'll go something like this in Tripoli tonight. But something tells me he'll be whisked out on a plane.

Hilarious Nick Drew gaffe?

2011-08-18T03:40:00.008+01:00

In his letter from Singapore, Nick Drew explains "I am glad to report that the Asian edition of C@W is going down very well. This may have something to do with the ads we are running in our sidebar ..." Maybe CU can clarify exactly what kind of ad that is, but it always seems to try and persuade me onto sites I've already visited or to look at things I've been searching for.

This is what I tend to get when I log on:

And this is what Nick sees when he logs on in Singapore:

I'm sure he just popped into an internet cafe, or used the PC in the hotel lobby, or something. What do the C@W smart ads offer you?

Back to the markets...

2011-08-16T06:17:00.003+01:00

It takes a lot to distract me from the markets, but the chaos on our streets did just that. Well I've said my piece now and we'll leave it at that for the time being. Here's some chart porn, and a few thoughts:

Is it time to get back into the DAX? A 50% fibonacci retracement on from the March 2009 lows to the Jan 2011 highs, coupled with strong, competitive industrials on good P/E ratios makes a play on the DAX look tempting:

The markets have given up all hope of interest rates rising. But what if sterling gets sold off and we start importing too much inflation? That market seems to be ignoring the fact that the UK deficit is remaining stubbornly high, and the OBR forecasts look a load of poppycock.

The taxpayer is registering a 50% loss on RBS stock now. Did Gordon overpay for his portfolio of zombie banks?

Reckless regulation of social media is neither 'necessary' nor 'proportionate'...

2011-08-15T08:33:00.002+01:00

As a direct consequence of the actions of the lawless, social media users now stand threatened with retaliation from the regulators. Consumer adoption of the internet has been a game changer for intellectual property owners, the high street and revolutionised our social lives. However, the anonymity afforded by cyberspace does not mean we are unaccountable for our actions when online. There are central concepts of English criminal law that predate the telephone, let alone instant messaging, yet still regulate our behaviour in respect of what we do on the Internet. To understand this, we must examine what those concepts are, how they might apply to the rioters, the existing powers of the Police and we will then see why there is no need for more regulation of social media.

The common law offences of incitement were recently replaced by statutory offences by the Serious Crime Act 2007. There are three offences here of encouraging or assisting other offences. The section 46 offence relates to encouraging or assisting potentially multiple offences, with no actual belief as to which one will be committed. Where a riot is concerned, criminal damage, theft and public order offences are par for the course. In theory, encouraging a riot using social media, that results in these offences can be punished as per the offences that are actually committed.

Predating SCA2007 by three decades, a statutory conspiracy is basically an agreement by two or more parties to carry out a course of action that, if carried out, would lead to the commission of an offence. Although defined in the Criminal Law Act 1977, there is no reason in law that a conspiracy cannot be entered into via instant messaging or text message. A conspiracy to engage in a riot, and thus commit criminal damage, theft or public order offences, could in English law be organised online.

Then there is the concept of ‘joint enterprise’ - or ‘common purpose’ - which results from a manslaughter case heard in 1846. Two men engaged in a cart race, which resulted in one of them running over and killing a third man. It was never proven which man was driving the cart that struck the innocent man, yet both men were found guilty. In laypersons terms, if a number of people agree to engage in a course of action involving criminality or recklessness, they can all be held responsible for the outcome.

The response of the police and the courts, in bringing wholesale justice to the offenders has been commendable. We are seeing multiple charges brought for violent disorder, burglary and some for arson. These crimes carry maximum sentences of five years, ten years and life imprisonment respectively. A lot of people are finding themselves in serious trouble. It is easy to get the impression however that it is the latecomers to the riot, the opportunists, that were picked up first and that the police investigation has now moved into the more organised criminality we all witnessed on our televisions.

In terms of bringing the ringleaders to book, the Police can access the content of electronic communications such as instant messaging using powers under the Regulation of Investigatory Powers Act 2000. Doing so requires a signature from the Secretary of State, and they must satisfy themselves that the invasion of privacy is both necessary and proportionate to the crimes concerned. Where we are talking about the crime of arson, that intentionally or recklessly endangers life - and this includes the lives of emergency services workers - the Criminal Damage Act 1971 prescribes a life sentence. Arson is one of the most serious crimes in the book.

Whilst it is natural for politicians to want to be seen to be ‘doing something’ about last weeks outrages, knee-jerk regulation is neither necessary nor the answer. The midnight sittings of our Magistrates’ Courts were necessary, but the criminal justice system does not work overnight. Politicians need to let the authorities get on with investigating the crimes associated with the riot. At the end of this, the defendants will most likely range from the opportunists who looted broken shops, to the people who engaged in arson by joint enterprise, conspiracy and incitement. Even if their only involvement with the burning buildings was via instant messaging, they could be looking at life sentences.

The right response to the riots is to re-enforce the concept that people are responsible for their actions, not to allow senior Police Officers and politicians to use them as a pretext to further restrict the personal freedoms of the law abiding majority. It is worth remembering that any state intrusions of our right of privacy have to be 'necessary' and 'proportionate' in order to be lawful.

Told you so! This was the inevitable result of (insert your own prejudice here)...

2011-08-14T13:36:00.003+01:00

A great many ideas and theories have been trotted out about the riots happened. As far as I can see, people who think inequality and relative poverty are the root of all evil blame it for the riots. People who think that big-state socialism is the root of all evil blame it for the riots. The 'Enoch was right' crowd are also out in force, blaming immigration, multiculturalism and New York style 'gangsta' culture or rap music.

They are all wrong. The cause of the riots was home-owner-ism. We have created a system where the quality of your child's education depends on:

a) Your abilities as a parent;
b) What sort of house you can afford (or how much money you have).

The people with the skill sets best suited to our economy (academic, logic, creativity, communication etc.) get the best jobs and earn the most money. These are also the best people and transferiing such skill to their children from an early age. The housing market ensures that their children all get educated together.

The parents with poor academic ability, poor communication skills and a low capacity for logical, independant thought all end up in the sink estates, their children all in one school being educated together. There are no bright kids / bright parents to lift them up. The bright parents have all paid a massive premium on their house purchase in order to ensure their kids are not dragged down.

Until we stop excluding the children of parents with poor schools, via our home-owner-ism, the cycle of youth crime and underachievement will not be broken.

Google searches that really hit that G spot...

2011-08-13T02:03:00.003+01:00

Try:

"arson" "life imprisonment" "riots"

#1 of 122,000

122,000 is a good start, I need 30,000,000 people to back me up on this. I want arson charges, by joint enterprise if neccessary, brought under the Criminal Damage Act 1971 against the people who tried to burn down our capital city, or tried to loot it in 'common purpose' with the arsonists.

Please spread the word, I'm off to watch what is left of the test match.

Who has been charged with the riots?

2011-08-12T02:46:00.005+01:00

You can download some of the charge sheet on a spreadsheet. It makes interesting reading. Here's some snippets:

Aaron Mulholland, a 30 year old lifeguard has pleaded guilty to a Theft Act offence in Camberwell Mags Court. He's been remanded in custody and is awaiting sentencing in the Crown Court.

Dayle Blinkhorn, a 23 year old carer to his disabled mother has pleaded guilty to a Theft Act offence in Manchester Mags Court. He's been remanded in custody and is awaiting sentencing in the Crown Court.

Ricky Gemmell, 18, won't be going back to his call centre job in Liverpool. He pleaded guilty to a Public Order Act offence and got 4 months in custody.

Saffron Armstrong, a 21 year old freelance journalist, has pleaded not guilty to a Theft Act offence, she's been remanded in custody and will have her day in front of a jury in the Crown Court.

There are no arson charges on there, but according to this BBC article, people have been charged with arson in respect of the Sony Centre in Enfield, and in Solihull. I can't find out whether it's the Criminal Damage Act 1971 they have been charged under. This is the offence:

1 Destroying or damaging property.

(1)A person who without lawful excuse destroys or damages any property belonging to another intending to destroy or damage any such property or being reckless as to whether any such property would be destroyed or damaged shall be guilty of an offence.

(2)A person who without lawful excuse destroys or damages any property, whether belonging to himself or another—

(a)intending to destroy or damage any property or being reckless as to whether any property would be destroyed or damaged; and

(b)intending by the destruction or damage to endanger the life of another or being reckless as to whether the life of another would be thereby endangered;
shall be guilty of an offence.

(3)An offence committed under this section by destroying or damaging property by fire shall be charged as arson.

4 Punishment of offences.

(1)A person guilty of arson under section 1 above or of an offence under section 1(2) above (whether arson or not) shall on conviction on indictment be liable to imprisonment for life.

Even if you weren't the one to light the match, or throw the petrol bomb, you can still be convicted under joint enterprise. If you get found guilty of this offence, that's it, game over, there is only one sentence that can be passed - life imprisonment. Over the next few weeks we may learn who has stupidly and irreparably ruined their lives in a single night of madness.

Tony the arsonist...

2011-08-11T17:56:00.005+01:00

This is a case study about someone called 'Tony' from some mental health research on arsonists and learning difficulties:

"His anger and frustration grew, and following a number of rows at home he set fire to the garage of his home while under the influence of alcohol. He was found sitting on a wall opposite the burning garage with a mobile phone in his hand, having phoned the fire brigade. He was convicted of arson with intent to endanger life, and was given a life sentence.

Diversion from custody was not immediately apparent to the authorities, and following half-hearted but significant self-harm in prison, Tony was assessed by a team of professionals from a specialist medium secure unit. He was transferred on a section of the Mental Health Act 1983, after which he remained sullen and quiet ..."

Tony was given a life sentence because section 4 of the Criminal Damage Act 1971 makes it mandatory for arson. Most arsonists can't handle a life tariff and end up in secure wards. Some never leave.

What happens to people that burn buildings...

2011-08-11T06:36:00.003+01:00

Put it this way, it's not pleasant, from wikipedia:

Rampton Hospital houses about 400 patients who have been detained under the Mental Health Act 1983 under one of these classifications:

* Mental illness
* Psychopathic (personality) disorder
* (Severe) mental impairment, which is the legal term for what would now be called a learning disability.

Rampton Hospital has a staff of about 2000 and provides the national service for patients with a learning disability, women and deaf people requiring high security care. It also provides services for men suffering from mental illness and personality disorder. The hospital has a Dangerous and Severe Personality Disorder Unit opened in 2004 as part of a national DSPD pilot (the Peaks Unit).

About a quarter of the patients have had no significant contact with the criminal justice system, but have been detained under the Mental Health Act and are considered to require treatment in conditions of high security owing to their "dangerous, violent or criminal propensities". Others have been convicted of an offence by the courts and either ordered to be detained in hospital or subsequently transferred there from prison.

There are also dozens of less famous 'medium' secure wards in the UK (places with windows that face in on the courtyard) where people get forgotten about.

How's that 'low level civil war' going?

2011-08-10T07:00:00.002+01:00

Years ago, when I used to hang around on wibbler's boris-johnson.com forum, I remember one commentator venture the opinion that the whole 'crime and punishment' debate was really a debate about a 'low level civil war'. Did he have a point? I think he did.

So how is it going? The rebels scored some major points last this week, catching the politicians off guard (much like the financial markets did) while they were sunning it up abroad. The threat of another 10,000 coppers on the streets of London tonight, with an implied mandate from middle England to break a skull or two with those nightsticks, seems to have seen things come back off the boil. Vigilantism might also scare them more than the Human Right Act.

Nevertheless, as it gets harder for people to make an honest buck (or as many honest bucks as they would like) it is likely more of them will begin to flirt with the black market. The government don't help with their 'sin' taxes and prohibitions, they just create more arbitrage and more opportunity.

The low level civil war has stepped up a gear, and the underclass are high in numbers.

Review of the day - Project Armageddon...

2011-08-09T01:17:00.006+01:00

Over the weekend I made a point of reading 'thinking the unthinkable, might there be no way out for Britain' a research paper by Dr Tim Morgan of Tullett Prebon. It's a good paper, but I would say that as it goes with a theme that has been a feature of this blog since day one.

In my first post I opined "The fact is, we brought too much spending forward. People maxed out the plastic and used their homes as an atm." I'm proud to say that Dr Morgan agrees with me, but explains my thesis much better than I ever could.

On 4th August 2010, I mocked the assumptions used by the newly established OBR in the emergency budget as bollocks:

"By 2015 the FTSE All Share will have risen by 22%, there will be 420,000 less people on jobseekers and our salaries will be 19.6% higher. House prices will be up 21% and commercial property prices will have risen by 32%. The best bit is we will have lived through 5 years of on-target inflation. A bit further down to table C7 and tax receipts will have rocketed by £152 billion and the budget deficit will have been all but wiped out."

Dr Morgan's in depth research shows how 70% of our economy is now a growth-free zone, again he explains perfectly the thesis this blog was founded on. Some his solutions are a bit dodgy (for example he suggests implementing laws to allow judges to revoke unfair terms in consumer contracts - which already exist) but it's still a must read document.

All in all it is a call to start shorting gilts and perhaps sterling. With 10 year gilt yields under 3%, London bursting into flames, the economy flatlining and the deficit staying reluctantly where it started, a UK bond crash or sterling crisis can't be too far away now.

Comment on the riots (and the apologists)...

2011-08-08T19:19:00.004+01:00

I was hoping this would be a one-off kind of thing. Whilst MP's on all sides have quite rightly condemned the crimes we see being committed on the streets of London, some people, in certain sections of the media, seem to be making excuses for it.

The excuses go along the lines of "these people are marginalised, excluded, victims of economic repression blah blah blah ...". It's complete and utter bollocks.

Try finding a starter job right now in Newcastle or Middlesborough. It's really grim up there for young people who want to get a foot on the ladder. The people you see looting on your TV are housed (probably at taxpayer expense) in a global financial centre and an international employment hotspot.

Pathetic, utterley pathetic!

History of currency debasement - the Lira...

2011-08-08T01:47:00.006+01:00

Using the information on wikipedia, the market prices as I type, if one Lira (using the rate of 1,936.27 Lira to the Euro it was converted at) was still pegged to the value of 4.5 grams of silver (as it was in 1861) then one Lira would today be worth about 15,875 Euros.

Ambrose Evans-Pritchard, over at the Telegraph, quotes Umberto Bossi, the leader of Italy's Northern League as saying joining the Euro had been an "historic mistake" for Italy. Has anyone else noticed that it's the contries that used to havebig numbers on their banknotes that are coming unstuck first?

Is there something about the culture, the politics and the economics of these nations that yearns for inflation? If so, how were they ever going to survive in a currency union with the Germans, who hate it with a passion?

Meltdown 2011, falling knives edition...

2011-08-07T18:55:00.009+01:00

It's not quite a fire sale, but not far off. Coca Cola is still above it's 2007 highs for a start. Yet for the long term investor, there a few falling knives worth watching. They might even be worth catching.

First up, Rio Tinto. This mega-cap miner plummetted to under a tenner during round one of the crisis, in an all-out fire sale it could do again. Here's some basic technical analysis on where the gamblers out there might want to try and catch this ~~falling knife~~ big pile of natural resources:

Daimler, aka Mercedes. Broken out of it's bull run, but German exporters are flying and it was trading on a gross yield of over 8% before the crash. More technicals:

Sky Deutschland suggests a fire sale. This is a play on whether or not this company can persuade a few million Germans to switch from their current AV offering to something a bit new and different. It aint going to be affected by PIIGS debt all that much, and is tipped by at least one asset manger as a potential decade-long hold that could bag you some big profits. Why is it crashing after good results?

For the long term investor, all these stocks look good fundamental value to me now.

Skooz me Sir, saury to borthur yu, Arm trahin ti git a pund torgethar for tha Megabus Express (hic)..

2011-08-02T23:20:00.007+01:00

The Guardian report on Stagecoach's foray into new and unloved markets:

From 5 September Megabus will offer passengers their own berths on an overnight service between London and Glasgow. Each of the berths, which are laid out in sets of three with just a curtain for privacy...

...Although Megabus operates at the no-frills end of the travel market, passengers on the sleepers will receive a free overnight pack containing a toothbrush, toothpaste and an eye mask...

...Coaches will run seven nights a week in both directions, leaving Glasgow at 23:15 and arriving in London at 07:20, and departing from London at 23.59 and arriving in Glasgow at 8:05...

...It may lack some of the romance of catching the train, but tickets for the service start at £1, plus booking fee...

Having taken the mickey it'll probably prove more effective than the ASBO at making sure ~~vagrants~~ street drinkers get home safely. But is it scraping the post crunch barrel?

Gratifying google search, Rebekah Brooks edition...

2011-07-31T17:55:00.002+01:00

Try:

"Rebekah brooks would you give her one?"

#1 of 2,150,000!

Eoinomics (moral hazard edition)...

2011-07-28T03:16:00.004+01:00

As part of his three point plan to stop residential housing bubbles, Dr Eoin Clarke prescribes the following policy:

"The state should provide a national insurance protection scheme to prevent repossessions. The customer was foolish yes but it was mostly involuntary. The banks and government knew better and so it is unethical that the homeowner should bear the brunt."

So I take out a big loan and buy a house. I pay some extra NI (or everyone does?). I get fired. The government pays my mortgage (indefinitely?). Happy days, I'm quids in, the bank is quids in. What could possibly go wrong?

I like the idea that consumers suffer from 'involuntary foolishness' too, and that between them the banks and the government need to pick up the tab for bouts of such behaviour. This must surely rival Alan Greenspan's 'irrational exuberance', whereby investors display herd-like foolish behaviour and the central bank should do nothing until the resulting bubble bursts, threatening to wreck the economy. Under the Greenspan doctrine, at this point the central bank the comes running to the rescue.

That worked too didn't it?

Hold still, now you might feel a little scratch...

2011-07-26T23:54:00.005+01:00

So it's not going according to plan. Both labour and the tories 'recovery' plans were built on forecasts of strong GDP growth, real terms rises in house and commercial property prices, real terms wage rises and real terms rises in consumer spending. Inflation was forecast to be back on target and oil prices in a steady $80 or so range. If they used RPI as the GDP deflator we might even be in a double dip now.

So what next? Over at FT Alphaville, they are reporting that Dr Tim Morgan, global head of research at Tullett Prebon, reckons 1.4% trend GDP growth is more likely, and that this is bad news. All labour and the tories seem to want to argue about is whether to pull the same levers one notch or two. IMO, it won't make much difference at a macro level.

Jim Rogers view of the UK is slightly different. He's famously quoted as prophesying:

"Around 1918, the UK went into decline. By the mid 1970’s, it was bankrupt. Starting in 1979, it experienced a bounce-back rally of sorts – thanks to their oil fields in the North Sea. Most people give Maggie Thatcher credit for their comeback, but the real white knight for the UK was the North Sea oil discovery,” he said.

You give me the largest oil field in the world, and I’ll show you a good time too. But the US would need four or five North Sea oil fields to save the current situation...because the Federal debt is unpayable."

What's that Jim? The USA is bust too? Of course there are those that argue nations like the UK and USA can't go bust because we can monetise our debts. The Bank of England and the Fed can just type some numbers into the computer and start bidding for their own sovereign debt in the marketplace. Of course, all this new cash has to go somewhere, and the last two years suggest that the Fed's massive liquidity injection found its way into equities and commodities. Raising stock markets and the price of energy, food and raw materials.

When Mervyn launched QE1, the pound was trading at under $1.40. QE1 coincided with the bottom of the market for risk assets and the pound rose along with the FTSE as investors sold dollars and US T-Bonds to buy risk assets. Of course, if Mervyn announces he is printing another couple of hundred billion quid, there is a chance that the pound will become the risk asset. Will the sterling denominated international equities listed on the FTSE be enough to prevent an all out rout on the currency? I doubt it. Plunging sterling will also deter foreign investors from buy sterling denominated corporate bonds at low rates for a start.

It's playing with fire. There would become a tipping point where monetising UK government debt will cause a sterling crisis, runaway imported inflation, falling bond prices, rising real-economy interest rates and plummeting living standards. Of course, there will also come a time where mounting government debt - and the inability of the UK to stop racking it up - will cause a crash in UK government bonds. This will cause falling bond prices, rising interest rates and plummeting living standards.

HM Treasury, and the new OBR, are playing this like a normal cycle. It is nothing of the sort. It is a correction. Whilst consumers may no longer be behaving like headless chickens, HMT has stepped up to the breach and we are borrowing 10% GDP to create less than 1% GDP growth. The UK economy is probably about 10% smaller than we are still pretending it is. One way or another the return to planet Earth is really going to hurt!

Range trade of day...

2011-07-25T23:49:00.001+01:00

Vedanta Resources, worth a punt with a tight stop?

Cartoon caption contest - Euro bailout edition...

2011-07-22T16:19:00.003+01:00

Nick Drew over at C@W wins! I spent an hour this afternoon trying to better his effort to no avail. Well done ND!

Simply click to enlarge, right click and copy and paste to 'Paintbrush' or software of your choice, then do your worst ...

Post your entries on your blog or email them to bamboozled at live dot co dot uk and I'll post them here (unless they are too rude).

Closing date Sunday 6pm!

POW! Take that!

2011-07-21T22:20:00.004+01:00

I've been reading the musings of CU and Blue Eyes since 2007 I think. I read the cutting edge comment over at CU's place daily, it's great place for a bit of original commentry by some clever people. I've never seen anyone quite knock CU onto the ropes like this though, enjoy ...

"No CU you didn't answer my point at all. Did the Germans impose the Euro on anyone? Nein. The Euro was a French idea to tie German success up so that a reunified Germany couldn't pull too far ahead of France so that a power imbalance ensued. Remember there was a serious fear that a resurgent Germany could try to take Europe by force again.

Germany did not force Greece, Spain, Italy, Portugal, et al. into the Euro. Those countries wanted to get into the strong economy club and thought that adopting the Euro would be a short-cut to that. Greece wasn't even allowed to join at first. The evil German industrialists were hardly going to get excited and shoe-horn in a country which makes up 1% of the Eurozone market for BMWs and Audis.

As I said above, the German economy hardly got a free ride at the start. Should the Spanish taxpayer have transferred massive funds North in the first ten years while the Spanish economy "boomed" and Germany stagnated?

You are seeing the whole situation with very short term spectacles on and through the prism of "it's all a German conspiracy to take over Europe by stealth ...""

Bloody hell Blue Eyes! Where did that one come from??? Having 'grown up' (blogging wise) on a diet of CU and John Redwood there I was thinking Damn Germans, trying to hollow out people's export markets and take over Europe by stealth too!!!

Fair play BE!

New poll: does anyone else wanna screw Rebekah Brooks?

2011-07-18T02:40:00.004+01:00

I never used to want to do her, yet the more Sky News put her on TV the more I wanna give her one. Do you? Vote now!

Gordon, airbrushed from History...

2011-07-13T21:44:00.005+01:00

I stumbled across this over at ~~eoinomics~~ the Green Benches, where Garry Kitchin has launched a ~~Gordon Brown love-in~~defence of the former Prime Minister:

"Gordon's response to the International Financial crisis was incredible. That was his moment. He led the world effort to stop the recession becoming a full blown depression. It is not only I who think so, but many a world leader. Gordon's reputation among the great and good soared."

To which Dr Clarke responds:

"As an historian, I am confident the history books will reach a truthful judgement on Gordon Brown. I look forward to it."

Well the fact is, the history books are airbrushing Gordon. Hank Paulson's account of the financial crisis has two references to Gordon, both fleetng mentions, compared to dozens of pages on Bernanke.

'This Time is Different' by Reinhart and Rogoff - zero references to Gordon, one to Bernanke

'The Ascent of Money' by Niall Ferguson - zero references Gordon, 4 to George W Bush

'Crisis Economics' by Roubini and Finn - zero references to Gordon, 3 to Bernanke (including several pages about him)

Try it, go onto a bookshop, pick up one of the many good books on the financial crisis and see how many times it mentions Gordon!

Eat that Sarko...

2011-07-13T20:27:00.002+01:00

JR has been talking to a German professor...

"[Professor Henkel] believes the best fix would be for Germany, Finland, Austria and Holland to leave the Euro and create a new stronger currency, which would revalue against the Euro. France would remain as the leader of the Euro group ..."

LOL!

Let's have a whip around for the banksters, come on, don't be shy now...

2011-07-12T00:06:00.005+01:00

Or with Italy about to go tits up should we be shorting their shareholders again? Click to enlarge the weekly charts, most of them seem to be at or below post-Lehman lows!

NIMAS (not in my airspace) of the day...

2011-07-11T21:38:00.002+01:00

Iain, over at JR's place reckons...

The 3rd runway at Herathrow would have been a disaster for the people living in west London. What Heathrow wanted to do was to annex the living environments of these people to exploit it.

If you think the 3rd runway would be such an economic success, I’ll tell you what, lets do away with planning controls and make Heathrow negotiate with house holders for the right to pollute their living environemt, lets restore the property rights of these people, or is the 3rd runway only a going concern if it getss the Goverment to allow them to steal peoples living environment without conpensating them.

To which I replied:

"I’d suggest that proximity superior transport links, like Heathrow, are one of the factors that make west London land so expensive.

Besides, the NIMBY’s can’t have it both ways. One one hand objecting to anything over 3 stories tall, then on the other making out they own the airspace 5,000ft above their house is just silly isn’t it?

The air space, new flight corridors and new landing slots are state property and it’ one man, one vote. Not one house in west London, one vote."

Yes, and it's a bl**dy nightmare!

2011-07-11T19:17:00.004+01:00

From the Guardian money section:

"[CML] analysis of 86,000 room rentals around the country, and 30,000 flathunters' profiles, shows the number of tenants to each room has increased from 3 to 4.1 over the past 12 months. In Brighton the figure rises to 13.3 ..."

If you ain't 20 something with nice tits forget finding a flatsahre here. When I moved here every room I looked at told me they were seeing at least 10 other people. You turn up with a grand in your pocket ready to sign on the line and they tell you 'We'll call you' basically. You pay £600 a month for a shoebox studio flat (tax included) but it is literally a shoebox. It's easier to rent in London.

There is plenty of space to build here but with 31 NIMBY conservations zones forget it ever happening. In Waitrose the other day they were even collecting for the local residents association. A NIMBY campaign groups that lobbies the council not to build anything.

Out of the 3 charities to choose from, the NIMBY's had the highest pile of little green chips too. Come September I've moving back to the hostel I started off in, £10 a night and using work as free storage. The boss will hate it but they are all NIMBY's too so sod the lot of them.

I'm getting like Frank Davis is with the anti-smokers these days. When I hear a NIMBY complain about house building I just want to beat them to death basically.

Opinion poll election thingy...

2011-07-09T04:58:00.001+01:00

Vote for who you want to run the UK in the sidebar and leave a comment below (or one or the other).

Green Deal chart of the day...

2011-07-07T23:43:00.003+01:00

From the 'Green Deal' consumer protection guide...

Discuss?

Is the 'Green Deal' a good deal?

2011-07-07T20:06:00.004+01:00

Remember those 'Home Information Packs' the coalition scrapped? Remember the 'Energy Performance Certificates' they said they couldn't scrap because of EU directives? Remember that thing in the Coalition Agreement saying that they would finance energy efficiency savings for householders from the cash savings on fuel bills they would generate?

Welcome to the new world of green finance. If you look at an EPC, it will list some improvements that could be made to your home and how much cash they will save, based on the governments Standard Assessment Procedure. Imagine you could turn all those cash figures into interest payments on a loan? That's what the Green Deal does. It'll be a year before this gets off the ground, but the DECC policy documents give us an idea what to expect.

"...companies with the appropriate capabilities – including High Street retailers - will promote the Green Deal to consumers using their preferred market channels, enhanced by access to the EPC database..."

How about that? To put your home on the market you have to have an EPC done by law. Which the goes on a national database that direct sales home improvement companies will be allowed to trawl?

"In addition, the Green Deal Code will set out the permissible financial terms allowable under the scheme (e.g. fixed vs variable, index linked or nominal etc.). The Green Deal will be different from traditional financial products..."

A loan that looks and behaves like a loan but is 'different', a bond that looks and behaves like a bond that is 'different' than a 'traditional' bond. How about that? It goes onto say that a 'green deal' plan can last up to 25 years like a mortgage.

"For example, External Wall Insulation can pay for its self in 30 years based on an installation cost of £7,600. With a subsidy, the repayment period could be significantly reduced and brought within usual finance periods of 20 to 25 years."

On my numbers, at 5% interest this insulation needs to save you just under £500 a year to repay a 30 year loan. Are they sure they are calculating this the correct way? Of course 8% is more normal for an unsecured loan. So what if it all goes wrong?

The government will set up a Green Deal Advice line

Kind of like centrally planned double glazing sales, all on tick and with a state of the art call centre then?

Pay cuts or tax hikes?

2011-07-06T01:46:00.002+01:00

Without bothering to link to loads of articles and blogs stating the obvious, the trade unions and anti-cuts groups are arguing that the deficit be fixed via higher taxes and the centre-right and libertarians via public spending cuts. Fair enough?

Well the thing is, that the unions want to convince us that the extra money needed to fix the deficit can be raised rather painlessly. They argue that we can convince or compel multinational companies and the mega-rich to donate more to the UK Exchequer.

They reckon Vodafone should repatriate its' foreign profits to the UK and pay UK tax on them. They reckon that Swiss outfit that owns Boots should leave Boots' profits in the UK and pay UK tax on them. They reckon foreign shareholders of UK listed companies like Mrs Green should be forced to pay UK tax too. They even reckon we can unilaterally tax the global trade that goes through the London markets via a financial transactions tax. They want more tax.

Yet when it is suggested that public sector workers pay more tax they kick and scream and threaten strikes. If you are paid out of the public purse (x) and you pay back in direct taxes and a defined benefit pension contribution (y) to receive a net pay (z) well it looks like this:

x - y = z

So whether you cut x (like Southampton City Council and Shropshire County Council are trying to do) or raise y (by increasing pensions contributions) the net effect either way is that public sector workers pay more tax. Southampton are out on strike and Shropshire are balloting. UNISON et al will most likely ballot on pensions too.

The silly thing is, there is nothing really bad about thinking that the tax to GDP ratio should be 50%, it is in a lot of EU nations and it's not exactly an extremist position to take. But the idea that this can happen without everyone paying more tax or everything getting more expensive it just plain naive (or at worst dishonest).

The sheer hypocrisy and foolishness of it is mind boggling, it really is. To think I have to negotiate my pension through these people!

Best comment of the day...

2011-07-05T20:55:00.003+01:00

Percy, over at John Redwood's place says on those carehome plans:

"The baby boomers are the Conservatives very own version of Labour’s feckless benefit scroungers, a nice little client state you can depend on come election time; the only trouble is the rest of us who have to pay the bills have quite frankly had enough."

Murder investigations...

2011-07-05T19:02:00.004+01:00

All the usual stops get pulled out when there is a murder, especially a grizzly unprovoked murder where the killer could strike again at any point.

For example, there is a standard table that gives the rough probabilities of getting a DNA match from various items. Chewing gum is really good for getting a DNA match, if you have been the victim of a burglary and there is some chewing gum on the scene most police services will probably spend the money to get it analysed.

Chewing gum wrappers on the other hand are very bad for a DNA match and are usually considered a waste of money. In a murder investigation they will do it even if the chances of a match are only one in a hundred.

Public outrage will probably demand that the News of the World are treated with the scrutiny and revultion reserved for a murderer now this has come out, rather than a burglar who steals from an MP or pop star. This all goes back to what I was saying the other week about the professional classes thinking they can just do whatever they want.

Sooner or later someone goes much too far.

Here comes the medicine, open wide...

2011-07-05T01:09:00.004+01:00

During the new labour years we were lectured endlessly about 'child poverty', which we were told meant living on 60% or less of median income. Exactly how this was all worked out was never really explained to people, but most people agreed that raising a family on £15k a year was more or less 'poverty' and most people received child tax credits, and they tasted good.

But the 'child poverty' movement had a little secret. With benefit caps back in the news, outraged sympathisers of the Brown regime (and I suspect insiders in the 'poverty' industry) are letting it all out over at the Guardian, here's some snippets:

The Government use something called "equalised income" to compare the standard of living of households of different size (and e.g. measure child poverty).

This adjusts income to account for a households lower/higher size-related costs compared with a 2 adult, no child household.

These numbers are:
1st adult - 0.66
Subsequent adult or child 14+ - 0.33
Child 13 or under - 0.2

So, take a 2 adult married couple with a baby, a 7 year old and two 14 year olds.
They would be given a score of 2.06.

Yes, they do, so anyone with four or five kids who didn't have an income in the top quartile was classed as living in 'child poverty' basically.

'Decent Homes' requires for council supported provision to provide a bedroom for each child ... you are unlikely to find five bed accommodation for less than £2K a month ... So what do you do? remove all the people on benefits from London? And put them where?

Well, either the rents go down in places like Hackney (and the house prices) where the concentrations of these big families on benefits live or they move I guess. I often wonder who owns all these houses anyway, but I'm not suggesting there is some kind of scam going on.

Conveniently you leave out that this is the average for individuals, not households. The Coalition has got the public and their base to swallow a great many lies by deliberately confusing the difference.

Well blow me, another one of them blurts it out. These people actually believe that housing large families in plush London townhouses at taxpayer expense and giving them more and more cash for every child they have is a 'fair' policy. The Brown regime deliberately kept the payments at a level which enabled them to claim that they were suffering from 'child poverty' whilst actually creating a state within a state where masses of people were incentivised simply to have as many kids as possible and not work. The more kids you have the bigger the house you get and the more money you get. Once you've got five it's probably like a full time job anyway.

Now I disapprove of all sorts of things this government are doing, but the more of this medicine they load the spoon with, the more I feel like voting for them. I reckon a lot of other working people feel exactly the same way.

How to get cleaned out in one easy lesson...

2011-07-04T00:24:00.005+01:00

Place a long bet on corn futures! I'd been saying to people for the last year that grain prices were a bubble as the high futures prices would make people plant more. But I decided to listen to the inflation-mongers and although this bet won't quite clean me out it looks certain to leave me at a loss for the year so far.

Irritating thing is that when people have asked me about betting on food prices in the past in terms of moral objections, I've always told them I don't do it for financial reasons. Those being high spreads compared to other markets and the severe lack of information available to the retail punter.

The other day, when corn futures opened only to hit their daily limit and promptly close again I could not get one single hit on google news to tell me why. If trading had been suspended on the FTSE or the FX markets it would have been plastered all over the financial pages.

I broke the (my) rules and lost. Lesson learned! Truth be told, I always thought food price speculation had an evil tinge to it and I'd be punished for ever trying :(

Feed In Tariff fun...

2011-06-30T02:05:00.012+01:00

It never ceases to amaze me how the government seek to protect us from making stupid decisions via regulation with one hand, but either don't care about - or actively promote - equally stupid ones with the other.

We can all walk into a bookies or a casino and lose as much money as we want with minimal fuss from Whitehall, yet playing the financial markets is subject to all manner of risk warnings and disclosures. Investment advice is another that gets me. Whilst we can all offer our opinion on the markets, we have to be authorised to give professional investment advice relating to stocks, bonds, options and futures. Yet anyone can sell property investments and advise people how to leverage themselves to the hilt on a pile of bricks in Luton.

The latest mass market investment/gambling opportunity that falls outside of the FSA remit is sold via direct marketing and high pressure sales pitches in your home. They will tell you it's both safe and very profitable. They will show you fancy charts and graphs. They will bamboozle you with jargon and impress you with big numbers. Like with the holiday makers who left Tenerife in the 80's and 90's the owners of new timeshare apartments, this product is snapped up by the mortgaged masses on the basis that it is a safe, shrewd investment, not consumption.

There are a multitude of firms out there now that want to flog you solar panels for tens of thousands of pounds. It's marketed as a risk free government backed opportunity. What could go wrong? Well lets have a look. For a start these investments are sold on a 25 year basis. The future returns are calculated using various assumptions and a standardised formula. The variables include where you live, which way your roof faces, what angle it sits at and whether and to what extent it is shaded. These figures are dictated by government in the Standard Assessment Procedure.

This document does not however lay down standard assumptions for inflation. As the 'Feed In Tariffs' (a creature of statute) are set to rise by RPI inflation, and the savings you make relate to the future price of electricity, the compounding of these rates of inflation is key to future cash returns. Using the online calculator on this website, I have constructed a table showing the cash profits over 25 years on the most profitable model, at a cost of £13,512. This is on a good south facing roof too!

Of course the salesman will tend to assume RPI at 3.5% and electricity price inflation at a mighty 9%. This usually allows him to quote an annual 10% return, which he will compare to the return on demand deposits in the bank. He will conveniently neglect to remind you that your capital isn't coming back and it is doubtful he will make a more accurate comparison like buying a 25 year UK government bond (which you can still trade unlike solar panels).

Of course, if you are looking at sinking money into something for 25 years the stock market or property is usually your best bet. A 9% annual return in cash terms (about the long term average for stocks and land) would leave you about £103,000 in profit. This is more than double the best scenario above. However this comparison doesn't take into account the present value of the income stream from your panels against the compounding of the 9% annual return. It's all rather complicated actually, and probably well beyond my financial capabilities to work out without seriously brushing up on my finance and making a big spreadsheet.

So any householder who doesn't understand all this (and the risks, such as the government changing the law again, someone building some shade over your roof or your panels breaking down) should probably consult a financial advisor or accountant (any readers volunteering to do some workings with PV taken into account?).

Being an unregulated investment, the man flogging panels to your Granny ain't going to have to remind her of this and will be allowed to claim government approval for his charts and sales patter! He will be pretty much untouchable in terms of the very stringent laws on misleading consumers (despite the fact no one ever seems to actually achieve the output claimed by the official assumptions). Career change anyone?

What's with the carbon price crash???

2011-06-28T22:19:00.005+01:00

I logged onto my cfd account for a nose around last night to notice that EU ETS carbon permits (which had been trading steady in the E16 to E17.5 range for a few months) had plunged to E12 before bouncing back to E13.5 or so.

A quick dig around online reckons it's something to do with a new energy efficency directive and some backstepping on including airlines in emissions trading. I find this market opaque. All the info you need comes at a premium no small time retail punter is going to pay. You can find snippets of info here and there.

Nevertheless, I find myself fancying a punt. The spreads are getting smaller, and unlike a lot of commodities futures listed on spread betting or cfd accounts the contracts are fairly long dated (the December contract with an expiry on 15/12/2011 is currently up for play). I ridded myself of the Xcite Energy position last week after it had almost wiped out all my profits since I funded the account last November.

Looking for a punt on something I've gone long corn futures. I know nothing about corn but it's taken a hefty dive recently and Hugh Hendry, Jim Rogers and the Mad Hedge Fund Trader all seem to think it might have some legs long term. They are all better investors than me so I'm just going to stick my fingers in my ears and listen to them.

The position is up $122 after 24 hours (or $62 after dealing fees) so I'm feeling optimistic now. Fingers crossed it rallies 20 per cent or so back north of $7 a bushel so I can win my profits back!

High street carnage...

2011-06-27T21:50:00.007+01:00

It's getting cut-throat out there in case you hadn't noticed. The Levis shop is flogging smart jeans at £40 a pop and a good range of nice tops have been slashed by 50%. Ted Baker has 50% off their best range of shirts, whilst for the tight-fisted amongst you H&M short sleeves are flying out the door at £7.99. There's even a good selection of Nike Air Max trainers at £60 for the first time in donkeys' years.

On the stock market, the big US boys (Nike, Ralph Lauren) are trading around record highs on p/e ratios around the 20 mark with nice earnings growth, sweet returns on equity and lovely sets of accounts to show off. Over here in blighty Burberry and Ted Baker are flying too. Is this heavy discounting an everyday price war? Could it be a general sign of distress on the high street or are the major league hitters turning the screw, ready to deploy their cash piles to buy up burned out rivals at a snip?

It's not hard to buy decent second hand clobber here in Brighton. So far I've had a pristine white Lacoste polo for £16 and a pair of RL Polo patchwork shorts for a fiver. Normally I'd probably go back and grab a couple more nice polos from the multitude of vintage clothing shops on the North Laines. You can even get a nice pair of second hand Levis in good nick for £25 on a good day.

Yet, if the Levis shop if going to flog me a brand new pair for £40 I'll be there Thursday lunchtime. I'll probably bag a nice shirt off them for £30 while I'm at it and then pop next door to Foot Locker (market cap $3.6bn) for a new pair of Nikes.

Let's hope the sales last 'til pay day, something tells me some retailers will be lucky if they do.

Beware, hot weather is DANGEROUS!

2011-06-27T00:36:00.006+01:00

I just wanted to take this opportunity to remind my readers (all 10 of you and the odd random arrival from google) that while we might be tempted to enjoy the ~~nice weather~~ heatwave, we all need to heed some basic health and safety advice.

Can you see what these girls are doing wrong? That's right, no sunglasses. UV rays are very dangerous to our eyes and the sea can reflect them. Make sure you buy EU approved 'CE' marked sunglasses before venturing out in the hot weather.

This girl is being sensible, following official advice from her wise and benevolent government and applying sunscreen. But how do you choose the right sunscreen? all those different factors and ratings and things can be confusing for consumers can't they?

If you have ginger hair and fair skin you should choose a higher number. Geri would probably need a good coat of a factor 30 or something to keep that cleavage safe from dangerous sunburn.

If you are blessed with a darker complexion, like Miss Lebanon here, you might get away with a factor 2 tanning oil. Make sure you don't miss hard to reach areas, or better still ask a friend or passer by to help.

Enjoy the sun and stay safe!

What sort of idiotic 'system' can't handle a Greek default?

2011-06-26T00:03:00.006+01:00

According to Reinhart and Rogoff's book, Greece spent 50.6 of the years 1800 to 2010 in default or a rescheduling of its debt. We're talking about a nation that ranks up there with Bulgaria on corruption indices. Yet the talking heads are out in force trying to convince us that a Greek default, or Greece leaving the Eurozone, will be the end of civilisation as we know it.

Rumour has it that some bright sparks have been writing ~~insurance contracts~~ credit default swap derivative contracts on Greek debt that they cannot afford to cough up on. I'm reminded of summer 2005 when Bangladesh beat Australia in a one day cricket match. A guy at our cricket club won two grand on Betfair on that result. I remember thinking that the poor guy on the other end had probably been laying stuff like that for a few years only to see one freak result wipe his account clean.

Of course, unlike credit default swaps, Betfair (or Lloyds of London insurance markets) don't let punters lay bets they can't afford to honour. If they did, then the system wouldn't work would it? The whole sorry episode reminds of the Long Term Capital Management debacle that came unstuck after the Russian default of 1998.

LTCM had been laying huge bets that volatility would never rise above a certain level on various markets. After Russia defaulted volatility spiked and LTCM was bailed by the Fed to prevent a 'systemic crisis'. Sound familiar? The 'Trichet Put' is in full play.

Fishy tales from the riverbank...

2011-06-24T17:39:00.006+01:00

The aims were threefold and simple. Catch my first barbel, catch a decent pike and catch a river carp.

The big pike snapped me (using high quality Shimano 12lb line!) by making a massive run for it just as I was passing my pike rod underneath my barbel rod and couldn't give it any line. It was only after it had done this I realised that it had been a really big pike swimming toward me as opposed to a jack failing to put a bend in my big pit carp rod (which it bent almost double). I did bag a hard fighting 6lb jack pike next cast from exactly the same spot.

The barbel front was more successful. This (non-weighed) four pounder was my first barbel, it snaffled a spicy tuna and sweet chilli boilie legered with a pva string of free offerings:

A nice chap was on hand with some scales two days later when I landed this seven and a half pounder, again on tuna and sweet chilli (which by now the bream had also developed a taste for) fished with a cage feeder and pellet and hemp groundbait.

Next cast, in the same place, saw a two pound bream take the bait. It came in easy on a 2.25lb test curve heavy barbel rod, coupled to 12lb line on a Shimano Baitrunner.

Then as I was down on my hands and knees putting the bream back something dragged my 11ft Fox Duo Barbel 1.5lb rod (RRP £139.99) in the river. It flew off the rod rest and disappeared into the weir pool like a torpedo. The one that got away, got away with my best barbel rod in tow, never to be seen again. It'll probably have been that Thames carp I wanted (and a good one) or the sort of barbel that would get you featured in the angling press. I'll remember to flick the baitrunner on next time. Doh!

Gone fishing...

2011-06-19T09:41:00.001+01:00

As I'll be sat on the river bank all week I'll probably miss a Greek default or a French bank go bust or something. Ho hum!

How to make money online...

2011-06-15T02:30:00.004+01:00

Lesson #1 - Sex sells, simple as that, but here's the evidence:

1,450 hits, uploaded 20/05/07 'Woodsets 27lb Mirror (balding middle aged guy catches massive carp - and the dickhead keeps it out of the water for nearly 5 minutes)

332,568 hits, uploaded 22/05/08 'Blonde girl fishing for big ones' (average looking American girl catching tiddlers to tedious music)

946,708 hits, uploaded 08/11/08 'Sexy Bikini Girl Fishing' (no actual fishing, just a rear view of a hot girl in a bikini)

If I'd started a porno blog in 2007 instead of a political blog my bank balance would probably be looking a lot healthier!

Momentum stocks and leaving it to the pros...

2011-06-12T21:16:00.006+01:00

These stocks have largely been gleaned from the newsletters of fund managers over the last month or two and placed on my watchlist. Out of these tips, below are the ones that have indeed bucked the 'sell in May' trend. They are stocks I wish I had bought instead of Xcite Energy. I would normally use charts, but the 'right mouse click' on my laptop has given up!

Croda International PLC

A Chemicals company, tipped on the grounds of nice clean accounts, good and rising earnings ratio, strong expert markets and nice patented products. Up over 18% year to date and still up slightly since May 3rd.

Xchanging PLC

A business services company that fell 50% in February and is down year to date. It was tipped on the basis it had fallen too hard and has reasonable fundamentals. It has risen 25% or so since the beginning of May.

Sky Deutscheland AG

Repeatedly tipped by a highly respected fund manager throughout 2010 on the grounds of massive growth potential in the German domestic market for satellite TV. Been all the way down to under EURO 1.00 and now standing at EURO 3.39, and up since the beginning of May.

All the above stock tips come from one boutique fund management company, and are held in one absolute return fund I backed briefly when it was launched before listening to the people who slag off funds as expensive. I should have stuck with it. This chap is over 70% up in 2 years, which despite the odd good trade (usually closed too early) is much better than I have done!

Answers to Roger...

2011-06-09T20:55:00.003+01:00

[How] I can go bankrupt leaving huge debts but keep my house/beemer/millions.

I once used to have meetings on behalf of disgruntled consumers after refunds with an undischarged bankrupt who drove a brand new Ferrari and had a nice villa in Marbella. His twenty-something trophy wife probably had everything in her name. It's quite possible that he had defrauded creditors but this had never been proven by the insolvency authorities. If you have the balls and are prepared to do utterly outrageous things that most people won't do for fear of being sent to prison you might get away with it basically.

How I can get 5* ratings for my company when I flog it and see it go bust a month later.

Not sure what a '5*' rating is. Who provides them? Remember, making false statements dishonestly in order to line your pockets is fraud. Have you tried reporting it to CID?

Why the "Regulators" seem positively designed not to regulate their sector in the consumer's interests. Witness the FSA, the Banking regulators, the Care Quality Commission, the Energy regulators. All seem to favour the supplier rather than the consumer - not by accident but by deliberately ignoring obvious facts of human nature and economics.

Most industry regulators are effectively bossed around by the Mandarins at the Department for Business, Innovation and Skills. BIS is there to lobby for the interests of business in government, not consumers. The financial regulators (BofE and FSA) are effectively controlled by HM Treasury mandarins. I'm not sure what HMT's raison de etre is, but I do know that they do a lot of plotting and scheming in there. The 'revolving door' thing is a problem too in my opinion. At BIS and their executive agencies there is a revolving door with the CBI and the industries they are supposed to regulate.

A lot of regulators are not fit for purpose because of incompetence too. The civil service is dominated by policy generalists that tend to believe people like them are best cut out to do everything. The truth is that most are incapable of carrying out a criminal investigation due to lack of skills and knowledge of criminal investigations and procedure legislation. Many are also a bit thick.

How I can get a seat on a quango.

It's the catch22 associated with most jobs/career paths. Once you get your first seat and have relevant experience then the headhunting firms that source quangocrats might put you on their list. Most people get their foot in the door via informal networks, aka nepotism. Like anything you can probably get blacklisted for being 'awkward'.

Too big to prosecute?

2011-06-08T18:46:00.004+01:00

Over at Capitalists@Work today, Nick Drew was questioning the actions of some Barclays bankers and asking if banks are 'too big to be regulated' when Budgie said something very interesting:

"Whether it is leftwing apparatchiks and quangocrats or rightwing 'bankers' (ie bank directors), they all seem to get away with vast amounts of dosh whilst fiddling the system and refusing to accept responsibility. Only the little people get hammered."

I find it very hard to open up a copy of Private Eye, or even read a newspaper these days, and not think to myself that the so called 'great and the good' are in fact largely a bunch of criminals. Whilst incompetence is not a crime, theft, fraud and blackmail are. In my professional life people often get in touch with me to accuse others (and often wrongly) of fraud of blackmail. The truth is, there are probably very few of us that have never technically committed these (potentially very serious) offences.

Fraud

This is now defined by the Fraud Act 2006. There are three main types of fraud which I will explain below:

1. Fraud by false representation. In lay mans terms this means dishonestly lying to someone (or even a machine such as an atm) for the purpose of lining your pockets. Be aware that 'a representation may be express of implied'. So you don't even actually have to tell the lie, it just has to be 'implied' by something else you are doing/saying. Technically, pulling sicky at work when you are not in fact ill could be fraud, lying about what it on your balance sheet could also be fraud.

2. Fraud by failing to disclose information. This only applies to information you are under a legal duty to disclose and has to be done dishonestly, it must be for financial gain to to expose another to loss or the risk of loss. So if you fail to tell the police who was driving your car when it was flashed, when in fact you know, and you are trying to save yourself extra insurance costs and a fine, this is fraud.

3. Fraud by abuse of position. This applies where you dishonestly abuse a position where you are expected to safeguard or not act against the financial interests of another person. So if you dishonestly abuse your position as a senior banker or quangocrat in order to line your pockets at the expense of your shareholders, creditors or service users you might be guilty of fraud.

Blackmail

There are four elements to this offence. First you have to make 'unwarranted demands' of someone, secondly it must be done 'with menaces'. Third up it must be with a view to making a gain for yourself or a loss for another. Last you have do it with a state of mind where you know your demands are unwarranted and that the menaces are inappropriate.

So, say at work you arrange your affairs in such a way that if you're not there the business will fail (you could be an IT expert for example). Then you use this leverage to demand lots of money with the implicit threat of wrecking the business. Well, this could be blackmail.

Prosecution policy

The Code for Crown Prosecutors is quite clear that just because someone has committed an offence does not mean they should automatically be prosecuted. If however, they are in a position of trust (such as a senior banker or quangocrat) if people are likely to copy the offender (such as they might a senior banker or quangocrat) or if not prosecuting them would damage confidence in the criminal justice system (such as not nicking a senior banker or quangocat caught with their fingers in the till might) the code is quite clear that prosecution will become more appropriate.

No one (bar the monarch) is 'too big to prosecute'. In fact, the bigger they are the more they should be prosecuted if they commit crimes because people copy 'the great and the good' and they are in positions of trust. I agree with Budgie but I would add that a growing number of our professional classes are getting completely out of control and seem to think they can just do whatever the f*** they want and b***** the consequences for anyone else.

Perception is everything...,

2011-06-06T02:25:00.007+01:00

No one seems to know what to say about the markets, other than they are uncertain right now. Yet, the out of fashion high yielding stocks (Glaxo, Scottish and Southern etc.) are at last up.

Will commodities rise or fall? Who knows, ask an expert, my vote is this is a dip and the bull market will continue. There is a stream of thought that reckons higher stock/commodity prices are dependent on the US printing more money. I reckon the de-coupling of the emerging markets from the US might be beginning.

I was in Prague recently, and I got the tram out as far as it went and did some shopping at a local supermarket. I bought a bottle of what we call 'rough alcohol' (or politley put schnapps). The Czech barmaids in my hotel told me it was 'really bad' and 'what kids drink' but I've just cracked it open and it's actually quite drinkable. It was £3.50 a 50cl bottle of 35% ABV peach schnapps. The barman in my hotel was defending paying £40 a bottle for malt whisky. Snobbery exists in stocks as much as drink.

When stocks dipped in May 10 people said Vodafone smelled bad at 130p and yielding 6.5% on divi. If you are building a long term portfolio, look for yield and value. Value is still there...

Southern Cross, credit bubbles and RPI linked rent...

2011-06-01T21:58:00.009+01:00

Jeff Randall gave the guy from Southern Cross Healthcare a bit of a going over on his Sky News show, yet otherwise the coverage seems to be angling we're 'all going to have to pay more' to SC's landlords.

I've summarised their 2010 balance sheet below:

NON CURRENT ASSETS (£m)
Property/Plant: 118.4
Goodwill: 219.2
Deferred Tax: 25.2
Other: 3.4
TOTAL NON CURRENT ASSETS: 366.2

CURRENT ASSETS (£m)
Cash: 1.2
Trade Receivables: 32.6
Inventories: 1.1
Property for sale: 14
Other: 21.3
TOTAL CURRENT ASSETS: 70.2

TOTAL ASSETS: 436.4

CURRENT LIABILITIES
Short term financial: (0.6)
Trade payables: (93.7)
Provisions: (2.3)
TOTAL CURRENT LIABILITIES: (96.6)

NON CURRENT LIABILITIES
Long term financial: (6.0)
Provisions: (18.7)
Deferred government grants: (2.4)
Future minimum rental increase accrual: (260.8)
TOTAL NON CURRENT LIABILITIES: (287.9)

TOTAL LIABILITIES (345.5)

EQUITY/NET ASSETS: 51.9

I'm noting that the single biggest asset is 'Goodwill' which as far I know means the sum that they overpaid by when acquiring other companies. Since these are essentially property based companies we'll have to assume that they have overpaid by over £200 million for freehold and leasehold property.

There is also a little note tucked away in there that hints their rental agreements are RPI linked, with RPI now running at 5%. Far from a crisis in 'care' this all smacks of just another part of the credit, M&A and property bubble and bust.

We keep getting battered with big figures about how much care costs. I'm not surprised either. Go to any nice city and loads of these big old town houses that everyone wants to live in seem to have been knocked into care homes by property investors who then bill the taxpayer rent. It looks like some of them levered themselves too much on easy credit, although I'm sure there's plenty of smaller ones sitting pretty, laughing as the taxpayer slowly buys them a nice property in SW3.

If the geriatrics can afford to rent these nice town houses then fine. The taxpayer cannot however afford to house the greying population like this. Is it any wonder Britain is going bust?

Musings from .cz

2011-05-19T14:21:00.003+01:00

Everything is more expensive here, bar the beer, which is at Tenerife prices. I imagine it has something to do with tax. A Levis short sleeve shirt, in the Levis shop, will set you back 75 quid, same shirt only 60 back home. Fish is the worst. They eat carp and pike here. I am going to go and eat a pike tomorrow for lunch.

The Czechs have embraced Tesco and Tesco has embraced the Czechs. I walked off the city centre tourists maps today and czeched out a shopping centre. There was a huge Tesco with two floors, the top floor was all non food too. Tesco is a department store here.

The fish counter at Tesco is not only full of carp, it has three great big fish tanks with live carp and trout swimming around in them. How cool is that?

Gone drinking (back next week)...

2011-05-17T22:27:00.003+01:00

This'll be me sqiunting at Prague tomorrow night...

Eoinomics (again)...

2011-05-17T02:15:00.009+01:00

Dr Eoin Clarke is puzzling over housing and employment policy and wondering why inner London has seven times the proportion of workless households than the south east in general. Dr Clarke goes onto say:

I scratched my brain about this one I must admit. There are plenty of jobs available in London, the all round unemployment rate there shows it. It is only when you examine a breakdown of the makeup of the homes in question that you gain a more accurate picture of who these people are. He goes on to display this graphic:

These are the figures of the whole of the UK. Whereas the London's Poverty Profile website has a useful analysis on inner and outer London. It shows that in 2008, out of the 170,000 children living in workless inner London households, 50,000 lived in household with two parents. That's 30% of children in inner London households living in households with two parents. It seems a long stretch of the imagination to assume then that only 20% of households with children that have never worked in inner London are two parent households.

The LPP website also demonstrates that inner London single parent worklessness is 60% compared to 40% in the rest of the UK. So it does seem that lone parents are less likely to have jobs in the UK's employment hotspot. Why might this be? Is there a solution? Dr Clark holds thinks there might be:

"As we know in London the rent is £1500 on average throughout the city per month. Thus, a single parent would have to earn a considerable amount before making work worth her while. Housing Benefit alone is not the option. The government should consider allowing lone parents who have never worked to retain their social housing at nominal rent."

Here we come back to marginal withdrawal rates. When the parent (lone or otherwise) gets a job they only keep a pittance as their housing benefit and tax credits are withdrawn. Doubtless, this does act as a disincentive to work. However Dr Clarke seems to be advocating correcting this via the creation a new economic incentive to get pregnant in the first place - a £360,000 inner London house, rent free for 18 years (based on £1,500 a month and a 5% rental yield).

Now £1,500 a month is more than I get paid, in the south east, a month after tax and NI, and I haven't got a bad unskilled job either. On the contrary I have a first class degree and a professional qualification. However, having said that, there are not many highly paid inner London jobs I would have a good crack of the whip at getting. Inner London local authorities have to pay between £25 and £35 an hour to get people with my qualifications and experience in on short term contracts. Because of housing and commuting costs people simply won't do it for less.

If we take the middle figure, £30 an hour, it works out at £1,050 a week gross. I doubt very much that these lone parents would be worse off working for that kind of money than being on benefits. I reckon it's more like they haven't got the skills and qualifications needed to compete in the inner London labour market. Save than for the sorts of menial jobs that young people with no children are prepared to do, either because they are students, live with their parents or are travelling/on working holidays.

No, if you want a big house and some money to spare in inner London, the current benefits system incentivises you to just have lots of kids and kick your heels up. We won't know the results of the 2011 Census for a while yet, but I'm guessing that it will show that the areas with the highest worklessness are the same areas that the largest numbers of immigrants from third world places like Somalia and Bangladesh have been housed. These people don't need much encouragement to have 5 kids by the time they are 30 anyway, big families are part of their culture.

All this begs a question - why are we housing the UK's least productive and most unemployable people in the most valuable and in demand areas? Dr Clarke's solution is to give these people a subsidy equivalent to, or even larger than, most Brits annual salary. Surely the answer would be to boot them off the prime land in inner London and to build new cheaper housing for them on green belt land nearer the M25? The prime land can then be rented out at market rates to inner London workers or re-developed. This might also solve the third world levels of corruption and black marketeering in the inner London social housing sector.

Same old thinking from Labour by the looks of things then. More massive fiscal transfers from the working to the workless classes.

That Tim Ireland and Nadine Dorries affair...

2011-05-15T15:19:00.006+01:00

Nadine Dorries writes on her blog:

"Today I had a meeting with Bedfordshire Police. They informed me that under caution and recorded on tape at Guldford Police station, Tim Ireland, of bloggerheads, has been issued with a warning under section two of the harassment act."

Whereas Tim Ireland sees it as follows:

"This is Dorries’ way of saying the investigation following her belated complaint to Bedfordshire Police has closed without action. There was nothing in it; she was thrown a bone that offers only some reassurance that I have agreed not to act in a way that I have never acted before, and that’s all."

So what are we to conclude from this? Well for starters, there is no 'harassment act' there is a Protection from Harassment Act 1997. Section 2 makes it an offence to breach section 1, there is no statutory 'warning' provision, so what happened?

Well 'harassment' is not fully defined for the purposes of the act. To be guilty of an offence you must have engaged in a course of conduct (which includes speech) on at least two occasions, that a reasonable person ought to know amounts to harassment. This can include doing something which alarms or distresses someone. There is a defence that:

"in the particular circumstances the pursuit of the course of conduct was reasonable"

I think in this circumstance we have to consider that Nadine Dorries is an MP who is in the public eye by choice. Engaging in public comment about an MP or entering into communication with them about a political issue (even if they don't want you to) can never be the same as doing the same with regard to the old lady next door.

There is not much evidence to go on here, but we do have this 10 minute video recording filmed by Mr Ireland himself and broadcast on youtube:

So what can we learn from this? It seems that several people present were misled regarding whether or not Mr Ireland was broadcasting them online, however as far as we know this is the only time he has done this. This would fall outside of the scope of the Act by virtue of it being the only time he has done it. Besides, we are led to believe that Ms Dorries is the complainant in this instance.

Ms Dorries refers to several emails Mr Ireland allegedly sent her. Doubtless there is a line you can cross with regards to writing to your MP and the Act. However we do not have access to this evidence. It would seem though that the police have decided that either they do not amount to harassment, or that any prosecution would have failed the various tests under the Code for Crown Prosecutors.

Of course, if Ms Dorris disagrees, she is free to take civil action against Mr Ireland under section 3 of the Act and claim damages for harassment. Over to the court of public opinion then. Now that the appropriate authorities have decided the legality of all this, readers of The Squeeze are invited to vote on which one of them is the biggest prat.

Form an orderly queue...

2011-05-14T19:29:00.005+01:00

Unsurprisingly, nations without consumer debt problems, house price bubbles and better balance of payments than the UK - such as Germany and France - are growing faster than the UK. This non-news has prompted the Guardian to quote Ed Balls as follows:

"These figures expose how, since George Osborne's spending review and VAT rise, Britain's economy has gone from the fast lane to the slow lane ... We've gone from the top end of the economic growth league table to being stuck at the bottom just above Greece and Portugal. These figures show the huge risks George Osborne is taking."

I'm amazed somebody hasn't punched this irritating little man in the nose! In other news, as stagflation bites consumers are forming an orderly queue to buy NSI inflation linked savings bonds. Much to the annoyance of the banksters.

Could this be an early sign that increased inflationary expectations are going to start weighing on government bond yields and drive interest rates up? Balls was part of a government that forced interest rates down into negative territory and presided over a 25% or so devaluation of sterling. You can't put a fag paper between labour and the tories on monetary policy, but if inflation does rip, and Balls starts pointing the finger ...

... well I'll buy photoshop and make lots of rude pictures of him.

Bought - one flash crashed oil stock

2011-05-11T08:28:00.003+01:00

I have no idea why or how these so called 'flash crashes' occur. But whether it was stocks in May 2010 or commodities in May 2011, the right thing to do trading wise seems to be to buiy them. So I've bagged £1,000 worth of Xcite Energy this morning at 235p.

Let's hope Mr Unslicker is right about the medium term prospects for this company. The way I see it is:

a) It's some sort of a scam/turkey and I lose my £1000.
b) CU is right and I'll double my money.
c) It's now trading at fair value and a play on oil prices.

Want an allotment? How to beat the waiting list...

2011-05-09T23:32:00.004+01:00

It just came to me in flash while having a debate with a well meaning socialist. It's genius, it's the best idea I've ever had. The pinkos at work were getting aggrieved by this article in the Indy:

"Eric Pickles, the Communities Secretary, is examining plans to free local authorities from a 103-year-old obligation to provide plots of public land for cultivation by gardeners. The proposals could see local authorities, many of them strapped for cash under government-imposed cuts, selling off allotment land for social housing or even for profit to major companies."

Now there's a lot of positive things to be said about allotments. They give a lot of people a lot of pleasure. There is more demand for them than supply. They are productive assets and loved by capitalists and socialists alike. My beef was that they are often sited on prime land worth £1m per acre or more and that on my rough numbers the tenants on such plots are getting a subsidy of £4.5k per annum to grow leeks (based on the missed opportunity of selling the land with planning permission to developers).

But my initial policy of selling them and telling the small holders to club together and by a field was not popular. So instead of abolishing the statutory right to ask for an allotment I propose amending it as follows:

1) Everyone in the UK will be entitled to as many allotments (of 1/16 of an acre) as they want anywhere they want - even in the middle of Kensington.
2) A National Allotments Authority will take applications and then buy suitable land via a reverse auction in order to meet the demand.
3) Applicants will pay a one off fee to to cover the admin costs, hopefully this will be mo more than £100.
4) There will be no rent payable.
5) The rules will be relaxed so that in accordance with animal health, pollution and noise nuisance laws you can keep chickens and other livestock.
6) You will be allowed to turn your allotment into a pond or even a trout farm.
7) You will be allowed to build small structures such as greenhouses.
8) You will be allowed to be allotted gravel pits and forests to build fisheries or mountain biking tracks.
9) You will be allowed to generate income from your allotment and trade your produce and services with the public.
10) You will have exclusive access rights to your allotment(s).

There is just one catch. Every year, up front, you must pay an 8% land value tax to the NAA or lose the rights to your allotment.

Of course, it won't be long before people are lobbying the NAA to be allowed to build houses with swimming pools on their allotments. Cunning huh?

What have Lucas's lot got in store for Brighton then...?

2011-05-09T01:39:00.004+01:00

With the largest number of seats, but no overall majority, it looks like the Greens will take control of Brighton and Hove City Council. They have a rather large manifesto too, here's some choice snippets:

"Work to ensure the use of exclusively green/non-animal tested products in council cleaning and office products."

Since all chemicals in workplace and consumer products have at some stage been tested for toxicity on animals, this is a really a boycott of any company with an R&D department. I wonder if the big listed pharmaceutical and chemical companies concerned will return the favour and boycott Brighton Conference Centre?

"Introduce a ‘Meat Free Mondays’ in all Council catering establishments."

What makes them think anyone actually uses 'Council catering establishments'? What'd be really funny is if they tried to ban us from eating meat full stop on a Monday.

"Promote the environmental/green imperative for reducing meat consumption."

You never know, they might just try. A few loony left councils in London enforce a 'fartrade only' policy on workplace tea and coffee clubs.

"Work to reduce the ratio between the salaries of highest and lowest paid council officers to a maximum of 10."

In other words they look set to start a rucus with senior management by trying implement massive pay cuts on them. This should be funny.

"Involve front-line staff in designing and delivering improved local services."

Because presumably front line council staff have never been involved in this? Durr!

"Ensure that at least 30% of energy consumption in public buildings is generated through renewable sources by 2015."

That would mean solar panels and windmills of the roof of every council building surely?

"Explore the use of local government bonds to raise the capital for major improvements to the city’s transport infrastructure."

Ahh, start flexing the credit card is it?

"Work with bus companies to introduce Oyster Cards and hybrid buses."

And give it to the bus companies by the sounds of things. This is going to be amusing, let the fun and games commence!

Gratifying 'google' search that'll really get Wadsworth's goat up...

2011-05-07T03:44:00.002+01:00

Try why has silver crashed

#2 out of 50,200,000!

How about that eh?

Has the silver crash started?

2011-05-02T02:35:00.004+01:00

$48 to $42 in 15 minutes or so. That's one hell of a move, and followed by bounce back to $45 or so.

If you look at recent precedents there could be a short term trading opportunity to get short the silver market here. Think back to summer 2007. If you had shorted bank stocks after they took their first big plunge you'd have been quids in (provided you got out before the government banned shorting bank stocks - I still wonder how many spread betters they managed to bankrupt doing that). More recently there was a nice opportunity to get short Ocado after John Lewis ditched their stake and the stock fell sharply from 290p to 250p, it bottomed at 190p a couple of weeks later. Of course, other events like 'flash crash' and the 1987 stock market crash suggest the opposite.

There is an ISAable ETF - the Proshares Ultrashort - that compounds 200% of the daily rise or fall. Of course this only trades between the opening and closing bell on Wall Street, so it wouldn't have caught this move. But if you think there's a fair old chance of a sustained fall in silver prices over the next few weeks it might just be worth a punt. Its sister long ETF - Proshares Ultra Silver - put on 500% on the way up, rising from $60 to $360 as silver rocketed from $18 to $49.

That Bernanke speech - a translation ...

2011-04-28T02:23:00.003+01:00

Something along the lines of:

"I'm not going to stop monetizing bonds yet, but I might do soon. When I do, I'm probably not going to do anything about all that cash I printed for a while. I'm hoping at this stage of the cycle that the corporates start spending their cash piles, that M&A activity increases and that all this investment gets inflation and employment going. But, if price/wage inflation does get going (and after all, that is the plan) we're going to start dumping bonds and ramping up interest rates as the bear market in bonds begins. Hold on to your hats folks, it's going to be one hell of a ride home."

To which Mr Market responded:

BUY, BUY, BUY ... BUY everything!

And here we are, and it's a funny one. Because even if real US GDP is not growing much due to stagflation, as long as nominal GDP is the west will get moving as opposed to sitting on it's hands (or cash). This doesn't mean that standards of living will necessarily feel like they are improving. This doesn't mean that the squeeze is coming to an end. Quite the opposite in fact. The next stage of the squeeze, and the great global rebalancing, could be on its way.

As the purchasing power of western consumers decreases relative to those in the eastern producer economies, with a bit of luck, they might start buying more of our tat, whatever that is. Well that's the plan anyway and the best case scenario. Of course, it could all go horribly wrong!

Happy Easter!

2011-04-24T11:22:00.000+01:00

Silver poll - the bulls case ...

2011-04-21T00:15:00.004+01:00

Bernanke is no Volcker and US consumers can't handle a Volcker. I stole this from the Daily Mail and improved their annotations:

Poll - which way for silver prices?

2011-04-20T20:43:00.007+01:00

I'm not far off crying myself to sleep these days. I spent a few weeks eyeing up the silver charts last summer, before stashing £400 I had spare one month away in the non-leveraged ETFS Physical Silver ETF when it was trading at $18 or so. I chickened out at about $23.50.

A few weeks ago I levered up the cash in my cfd account, buying just under $12,000 worth at $29 point something, only to chicken out at $31 point something chuffed with my five-hundred bucks in two days, but somehow knowing I'd regret it (the same way I 'knew' it was just waiting to go mad back at $18). Well boy am I regretting it, that trade would be over $7,000 up today, and I'm not rich, $7k is a lot of money to me.

Anyway, I'm going to run a poll on where silver is going, giving you 3 options. Option one is that a parabolic bubble and bust has begun but will crash soon:

Option 2 is that there'll be a retracement followed by a once in a decade opportunity to get seriously minted as a spike to $80 or so is followed by a crash:

Option 3 is that this is the spike and if you buy in now you lose:

Then there is option 4. Ever since the banking crisis kicked off these people have been popping up on the interet telling you just to pile all your money into gold and silver. Like most people, I've generally disregarded them as a bit mad. Well, it turns out that their trading strategy has probably been the most successful of them all. They argue that gold and silver are NOT GOING UP, that your cotton money is simply returning to it's real fundamental value.

Vote (or even better comment) now!

Why I love 'The Big Society' ...

2011-04-20T09:02:00.003+01:00

It just dawned on me in a kind of 'eureka' moment. There I was reading a Whitehall consultation. It was recommending we embark on one of these Dr Thaler style 'nudge' initiatives to change peoples behaviour with regard to 'healthy eating' You know, the sort of thing that sees council officers traipsing around fish and chip shops handing out salt shakers with less holes in. Then it came to me ...

... maybe 'The Big Society' are probably best placed to deliver this one!

What is the real cost of the monarchy?

2011-04-18T21:33:00.005+01:00

You hear a few figures being banded about on this, but I reckon it must be a good few billion more than they like to tell us, when you take into account lost opportunity.

The media have reported that a 25,000 sq ft flat overlooking Hyde Park has sold for £136m. The 'One Hyde Park' development in Knightsbridge has reportedly sold 45 flats for almost £1 bn already with 35 flats still to sell.

So say we got rid of the monarchy, demolished Buckingham Palace (which belongs to the Crown as opposed to the Saxe-Cobergs) and built high rise luxury flats to sell to rich foreigners.

I reckon we could get a few £billion for it. If we were really sly we could maintain the freehold and run it along the lines of a timeshare scam to suck in wealthy foreigners with before periodically rinsing them with fee hikes and mansion taxes!

Don't tell me rich people wouldn't fall for this, they'd all leave and we'd be poorer etc. The world is full of dumb rich people, just look at the Madoff affair. They are greedy, vain, fleeceable and a new billionnaire is being made every day. By putting these people up at taxpayers expense we are letting them fleece all of us.

Local election totty...

2011-04-18T00:57:00.008+01:00

I've been leafleted by the Greens, who think they can take control of Brighton and Hove City Council. I got a whole newspaper off them, seemingly funded by people advertising solar panels on the back of those feed-in tariffs that make Nick Drew climb the walls.

Anyway, they want me to vote for this fine young fille (Ania Kitcat) and her hubby (Jason Kitcat)...

Cute isn't she! This is Alex Phillips one of their incumbents:

and Amy Kennedy, showing off NHS dentistry:

I think it's fair to say Brighton has the hottest elected members in the UK, shame they are all commie-vegans!

How naked selling ticket scams work...

2011-04-16T13:27:00.004+01:00

This is a good demonstration of how price controls mess everything up for consumers. Say you are a ticket tout. Being an entrepreneurial sort of chap you set up a website to tout your tickets on. The idea being you sell tickets for anything and everything, hoping to secure the supply though your contacts at a later date. In other words you are selling naked.

Lets say you start offering front row seats at the ABC Concert at £250. The first one sells in minutes, so you raise the price to £300 and sell two more. You keep raising the price until you sell one for £500. You have sold 10 tickets for prices ranging from £250 to £500. You go out to source the supply and the ten cheapest tickets you can find range from £250 to £400. This is set out in the table below:

So if you deliver all 10 tickets as promised you can make £450. But is this the best way to maximise your profits? Table two below sets out an alternative business model:

The five sales in the red box at the top are best forgotten about. You simply send them back their money. Of course, they have probably booked travel and hotels and things and will be awfully pissed off with you.

Instead of making £450 you have made £700. How about that? Happy days! Because of the industry imposed price control (the so called 'face value' of the ticket) the supply and demand are not balanced. You are just feeding off this imbalance and acting as market maker. As it happens you can make more profit if you breach contract with half your customers. A reasonable person might point out at this stage that losing half your customers is probably a bad thing long term. You are not reasonable or looking at the long term though, you are tyring to get rich quick.

This weekends question is - should promising people tickets, when you are really intending to do this, be illegal?

Eoinomics ...

2011-04-13T23:37:00.006+01:00

I don't know if any of you have noticed the rise of Dr Eoin Clarke's 'The Green Benches' blog recently. Much to the raptuous applaus of the Labour faithful, Dr Clarke defends Gordon Browns record as Chancellor of the Exchequor and attacks the 'tory-led cutz'.

Well yesterdayday he made this clanger.

"That means that the nation had £482bn more in assets than it owed. Today the nation has more than £600billion in assets than it owes. Thus in raw terms we now have a bigger gap between debt and assets."

To which I replied:

"GDP is not a measure of assets, it is a measure of output you plank!"

Which he deleted and replied:

"Steven, Incorrect. Output is one of three measurements... some choose expenditure or 'churn'"

Can any of the economics geeks that read this tell me am I the plank, is Dr Eoin Clarke the plank or are we both planks?

Cameron's 'Red Tape Challenge' needs YOU!...

2011-04-13T22:08:00.004+01:00

To a media fanfare, Callmedave has announced a complete review of all business regulation. As well intentioned as it may be (and it might just be a PR stunt) it is already apparent that the vested interests (i.e. the regulators) are flooding the comments with diabolical calls for MORE regulation.

YOU can help me stop them and you don't have to know anything about regulation to do so.

This week, the most anal of all the UK's Inspectors of Weights and Measures are demanding that the government force people to use metric measures for everything under the guise of 'simplification'. This is a personal lifelong bugbear for many of them. They are also demanding a return to specified quantities.

Of course the free market view should neither be in favour of metric or imperial, but in favour of supplier innovation and consumer choice. Let the market decide. Here are some examples of arguments you can make as to why calls for specified quantities and standardised measures are straw arguments:

1) There are no prescribed quantities for soft drinks. Coca Cola is sold in half pints, 16oz glasses, 200ml bottles, 330ml bottles, pints, simply 'glasses' and even in 'bottomless glasses'. Are they seriously saying that the market for soft drinks is not working? Why won't this work for beer?

2) In many EU nations beer is not served in stamped measuring glasses. Belgian bars have those tulip glasses and serve high quality beer with a large head in them. Bars in the Canary Islands have beer glasses that seem to range from about 400ml or so to the traditional British pint glass. Do the markets for beer in Belgium or Tenerife 'not work' then??

3) The regulators would have us believe that if they are not there overseeing everything we are going to get ripped off. The fact is that bars and restaurants need repeat business and have no interest in disappointing their customers. Customer satisfaction is more important that satisfying the lust of the bureaucrats for regulation and standardisation.

4) A freer market where suppliers can innovate will increase consumer choice and benefit consumers. Specificed quantities merely restrict much needed innovation and restrict consumer choice.

Don't forget there should be no requirement for traders to state quantity either, the idea of pubs selling beer by the 'glass' winds these people up like no other!

Now - GET OVER THERE AND WIND THEM UP! Spread the word too!

How the Chinese will end up owning our houses...

2011-04-12T18:30:00.017+01:00

Sometimes people try to tell me that shared equity schemes are the solution to housing affordability. They usually tell me that house prices will always rise faster than wages because of 'immigration' or 'a shortage of land' or simply 'supply and demand'. I usually explain to them that the inevitable consequence of their thesis is that the financial services industry and the government will end up owning all the houses. They invariably reply 'Well not mine they won't!' or something along those lines.

I've never believed for one minute that even the banks would want to, or be allowed to, take that kind of risk onto their balance sheets following the financial crisis. However something I read in the Telegraph the other day made me think again. Ian Cowie points to a report from Insurance giant Aviva recommending that Grandparents use equity release products in order to give their young relatives a big deposit for a house.

Now, let's think about what just happened:

1) Interest rates fell from the highs of the 80's, the US shrugged off the savings and loan crisis and a bull market in property started.
2) After dotcom and 9/11 interest rates were slashed even further and the bull market really got going.
3) China joined the WTO and the BRIC nations got their economies going.
4) Consumers in the house price boom nations borrowed heavily to consumer more goods from the surplus nations.
5) Savers in the surplus nations exported their capital to fund more borrowing, consumption and house price inflation in the deficit nations.
6) It all got a bit crazy, came to an end and crashed.
7) Now the house price bubble nations still have trade deficits, low growth and find it hard to get credit while the surplus nations are growing and saving strongly. They don't however want to buy our dodgy mortgage securities. The global boom and shift of power from west to east is still going strong.

But, what if more and more houses end up being owned by the financial services industry by way of things like equity release and the stamp duty breaks Boy George announced for multiple buyers in the budget? They could turn them into REITS and list them on the stock exchange.

Instead of people buying the rental yield on the money we borrowed to buy our houses they could buy the income streams from the rent we pay to live in them! This is surely the inevitable consquence of running a massive trade deficit with the emerging markets, high house prices and the credit squeeze. Using their surpluses and savings the exporters will become our landlords.

Banks and insurance companies will become the new estate agents, houses (or rental yields) will be traded daily and in high volume. The Chinese will become my new landlord. But, and this is the BIG but...

...since they will want a steady rental stream and it will all be managed by big business they will probably be a BETTER landord than the average British home-owner-ist wanker is. The public demand for greater civil rights for tenants will be greater too. They might even compete for good tenants by offering long term price stability. Bring it on!

Icelanders who want to give us money up fivefold...

2011-04-10T10:14:00.002+01:00

The Telegraph reports that 63% of Icelanders rejected stumping up the readies for UK local authorities that lost their money in Icesave. The yes vote is well up from just 7% in January 2010. We'll just have to keep asking them like the EU does.

In the spirit of all this, I'm starting a poll to find out which debts YOU want to dig into your wallet for.

At what point do the wheels come off (again)...

2011-04-09T04:24:00.004+01:00

In 2008 the wheels came off the debt-fuelled world economy. Oil prices peaked at $147, food prices spiked, borrowers defaulted en masse, lenders called in their loans en masse and the banking system crumbled.

China kicked off a global round of massive monetary and fiscal stimulae before Mr Bernanke printed $2 trillion and spent it all mopping up debt. Some western nations (those that run trade surpluses and don't have a house price bubble or consumer debt problem) are growing strongly again. The emerging markets are racking up big GDP growth again. Commodities prices are booming:

But inflation kills growth. At what point do the wheels come off the US economy again? At what point does printing money start to do more harm than good?

The tightrope recovery ...

2011-04-05T05:09:00.003+01:00

Bloomberg have Fed Chairman Ben Bernanke down as saying:

"So long as inflation expectations remain stable and well anchored” [and commodity-price increases slow, as he’s forecasting, then] “the increase in inflation will be transitory."

Is Ben saying he thinks the squeeze is nearly over? It seems reasonable to assume those commodities hit by bad weather, i.e. cotton, coffee and wheat, will pull back as producers finish covering their forward sales (or go bust) provided there is no recurrence in 2011. What of oil? The new paradigm seems to be that oil rises on good US economic data, strife in the MENA region and continued global GDP expansion. Ben goes onto say:

"We have to monitor inflation and inflation expectations extremely closely because if my assumptions prove not to be correct, then we would certainly have to respond to that and ensure that we maintain price stability,"

Is Ben hinting that the is a limit to the amount of inflation he will accept? Central Bankers have to keep their gaze on the horizon and his boss goes to the people in about 18 months now. There probably is a limit to the price of gasoline US swing voters will find acceptable. It's a rock and a hard place. Bad US data means cheaper gas but less jobs. Strong US data means higher gasoline prices.

He could always try to dent pump prices by signalling QE2 is over and interest rates are going to rise, but, there are two very big buts:

1) US consumers are paying a higher proportion of their income to service their debt in 2011 at 0.25% overnight rates than they were in 1981 when Volcker was driving them to 20% and beyond.

2) The Fed pays no overnight rate, it merely targets LIBOR via buying and selling US government debt. Raising rates will mean selling government debt at the same time as the Treasury is trying to sell record amounts of it to cover a trillion dollar fiscal deficit. Government borrowing rates could skyrocket.

Of course if the markets ever conclude Ben has lost control and the dollar is doomed, then borrowing rates could skyrocket anyway as investors dump and shun T bills. Ben really is walking a tightrope, and as he's boss of the world's reserve currency we're all going to have to walk it with him.

Has the Yen bottomed?

2011-04-01T02:05:00.002+01:00

With the Bank of Japan back in QE mode, a truce with other western central banks, 0%interest rates set to stay and speculators wiped out, is now the time to sell the Yen?