Well they would say that wouldn't they

A West Yorkshire Police report has found "no evidence" Jimmy Savile was protected from arrest or prosecution by his relationship with the force.

Well that's hardly surprising. Picture the scene down at 't Batley Cop Shop.

"Ay oop Sarge. Another lass saying she's been you know what wi' long-haired cigar-chomping kiddie fidler off 't radio"

"Right lad, tha's goin nowhere. File it wi' all others in 't bin. The lad pays us enough into Coppers Ball Fund."

"Righto Sarge, and should I put a record on't file."

"No you daft ha'porth. You want this showing up in 15 years when I am about to draw my pension".

One for Dr Who fans

According to this sign at Paddington station, the "facilities" now cater for women, men, the disabled and daleks.

Hodge Podge

The irrepressible (shame really) Margaret Hodge and her PAC has come up with what she claims is a damning report on the cosy relationship between the Big 4 and government.

True enough, while one side of the accounting firms is picking the pocket of government departments  advising on PFI and privatisations, another side is marketng tax avoidance to its corporate clients.  Reminds me of a story I heard about Glenda Jackson at a party in London before she was famous, but that dear reader, is a story for another day.

Anyway, the relationship between the Big 4 and government is not that cosy, simply because the respective government departments never talk, neither do the partners in the Big 4 talk across departments, or at least not very much.  On the one hand they have the audit departments who do pretty much wha it says on the tin, plus sometimes some generic technical accounting advice for non-audit clients.  And when companies can no longer get their accounts signed off as a going concern, the Big  have their Corporate Recovery and Insolvency practices.

Then there is the tax department, often with a legal bit attached, which is there primarily to review the tax accounting for audit clients, but also helps individuals and companies in tax compliance, tax disputes.  They also come up with tax ideas, tax avoidance if you will, and offer companies help in "structuring ther affairs".  Last of all comes the corporate finance arm, which also includes a bit of whatever consulting they can do without falling foul of Sarbanes-Oxley.

Note to David Cameron:  that last bit was where your hot whizz-kid "accountant" Chloe Smith, fast tracked into a ministerial position worked on a spreadsheet jockey desk at Deloittes.  She may not know about insolvency, which side of a T-account to put a debit, nor whether a liabilty to capital gains tax may be reduced by a brought forward deficit on non-trading loan realtionships, but she does know that cell C1 is probably equal to A1 + B1.

Anyway, back to La Hodge.  Her main complaint is that one of the tax spivs at KPMG worked for the gummint on a draft of tax legislation designed to incentivise R&D by giving tax breaks.  No complaints about the work that was done for the Treasury, but shock horror, when the bean counter went back to his old job, his firm started selling his services as an expert on the subject, putting out marketing materials asking clients "What's in it for you?".

God forbid that after the government has decided to promote investment through tax breaks that any accountant should go round offering his services to explain how the new legislation actually works.

A partnership of unequals

So Alec Salmond wants to use the British currency in an independent Scotland.

Go on, nothing's stopping you.  You could use the dollar instead, or even the euro, but if you go for sterling, don't expect us to take Scottish economics into account when setting interest rates.  No, the rest-of-the-UK politicians will set interest rates to set their poltical cycle, not yours.  If you want Scottish interests to be aken into account, then you will have to join a formal currency union, where by definition, if it is a seterling union, Scotland will be the junior partner.  If you think it should be a partnership of equals, look at Germany in the eurozone and think again.

So faced with the reality that the UK would only allow Scotland into a currency union on the UK's terms, Scotland accuses the Westminster of being provocative, and in the next breath, threatens to walk away from its share of the National Debt.  Actually we shouldn't be asking Scotland to assume part of our debts, because that isn't fair on the lenders.  They should be raising that amount of money on their own account and buying pack 10% of the National Debt from the market.

Walk away from that and we will take their oilfields if we haven't already sold them to the Norwegians.

Well I never

I watched the BBC report on Panorama about North Korea, although there was nothing to report except that Jon Sweeney's wife who works at the LSE obviously thought she could bring along hubby to make a vid for his work.

So nothing new to report .. except, hang on, according to Sweeney and his editors, The People's Republic of North Korea is .. wait for it .. run by a Far Right government.

Yes, that's right.  forget the pictures of Marx and Lenin, t the fact that their past allies have included China and Russia, you know, the ones who kept them supplied with arms and even went to war on their behalf in the 1950s, he political prison camps similar to the Russian gulags or the Chinese re-education camps, NK is in fact a far right state according to the BBC.

And how do they figure that?  Well it has a big army, so that makes it like Nazi Germany or fascist Italy.  Let's forget that the Russians actually had a far bigger army that Germany in the Second World War or that the Chinese Red Army is and has been for a long time, by far the biggest country in the world.

No, according to the Beeb, faced with the fact that NK are presently the bad guys, which runs contrary to the fiction they would like to peddle, North Korea is not a left wing state at all. Oh no.

You live and learn.

Another tax scandal

Npower has admitted it has not paid corporation tax in the UK for three years - just months after increasing prices by around 9%. The company made the admission to the Energy and Climate Change select committee. Npower reported a 34% rise in profits to £413m last year. The admission came as the "big six" energy companies were questioned by MPs over issues including profits and how they treat their customers.

Which was enough to get Labour MPs jumping up and down, particularly as the company had reported a total of £800m in the last five years.

But not so fast. Chief Executive Paul Massara said: "Effectively we have invested £5bn in the last five years building power plants, creating jobs, creating employment and helping to keep the lights on."  A company statement added: "Looking at RWE npower specifically, our investment programme since 2008 has amounted to almost £3bn, which means we have seen a large increase in tax relief.

Yes that's right £3bn of capital spending which as any fule kno, gives rise to capital allowances at the rate of 20% on a declining balance basis compared to the 25 year straight line depreciation charged to the accounts (i.e. 4% per annum). In other words the capital allowances in the first year alone will reduce the taxable profits compared to the accounting profits by 16% of the capital expenditure (20%-4%), in the second year by 12% (20%x80%-4%), in the third year by 8.8% (20%x80%x80%-4%), which in just 3 years makes 36.8% of £3bn, which is more than enough to wipe out the tax on £800m of profits.

So where is the scandal?  The scandal is that there are Labour MPs paid £65,000 a year (and the rest) drawing up and voting on tax legislation that they clearly don't understand.

Worse than that they don't understand why a company like nPower would be investing so much in new capacity. The Large Combustion Plant Directive (LCPD, 2001/80/EC) is a European Union directive which requires member states of the European Union to limit emissions from combustion plants with a thermal capacity of 50 MW or greater, which means that a large part of our generating capacity has had to be replaced.

The current directive was issued in October 2001.  I seem to recall there was a Labour government at the time.

A word of thanks

I would like to extend heartfelt thanks to the many young people across the internet who have taught me so much about the vicious Mrs Thatcher in the last few days.  They may have been too young to young to have been around when she was wreaking havoc on this country, but they are all very eager to remind me of how she decimated the coal industry.

I say "decimated", but I am not sure that it is quite the right term for a reduction in output of 10%, but at least it has got a 10 in it.

Anyway, her cruel victimisation of the miners and the 160 mines that she closed was in marked contrast to the 290 mines closed by Wilson.  Mark my words, Thatcher wouldn't have dared to take on the 550,000 miners working in 1962.  It was only due to the unstinting efforts of the Labour Party under Wilson and Callaghan in reducing the workforce by 350,000 that Thatcher was able to take on the remaining miners in 1983.

And how she provoked them. In 1983 Thatcher and Peter Walker connived make the unscrupulous offer to every miner working at the pits scheduled to be closed the choice of either a voluntary redundancy package or a job at another mine. And to add insult to injury she offered to invest a paltry £800 million in the coal industry.  Scargill quite rightly rejected this, saying that there was no limit to the price the tax payer should pay to maintain the number of NUM members paying his salary.

Scargill was, of course, also correct in his thinking that it was better to extract coal at a cost of £40 a ton at the pithead than to pay South Africans, Americans and Venezuelans £28 per ton for coal delivered to any UK port.  After all, who needed any of this so-called 'high quality' foreign coal when there was plenty of the British stuff full of ash and sulphur?

Of course, when the strike was over and many miners had lost their jobs the devastation in Scargill's home area was tremendous, with wide scale unemployment in villages that had been mining coal as long ago as the 1930s.

And we have only just begun to realise the environmental impact.  The abundant growth of the Scandinavian pine forests was kept in check for many years by the naturally occurring acid rain, powered by sulphates and nitrates emitted by UK coal fired power stations. With the replacement of coal by so-called 'natural' gas, those trees now have to be felled using petrol driven (CO2 emitting) chainsaws.

One of the all-time greats

Sometimes when people pass away we are given to hyperbole, to exaggerate the importance of an individual, to overstate their relevance to modern life.  But today it has to be said that we have lost someone who changed they very feel of the 1970's and 1980's, without whose unstintining efforts the UK would not be the same today.

I refer of course, to the recently departed and sadly missed Andy Johns, engineer on Led Zep II, III & IV, Exile on Main Street and Goats Head Soup and a producer and engineer of a host of stars on both sides of the Atlantic for the last 40 years.

A tale of our time

I know lots of young people who are going through a very tough time finding jobs after graduating, many of them with high quality degrees and ending up without work even after zillions of internships, but this article in yesterday's Evening Standard really struck a nerve/chord.

The family of an academic who fell to his death after he could only find a job in a call centre today spoke of their devastation.

Dr Philip Elliott, 31, who had recently completed a PhD in artificial intelligence at Reading University, fell from scaffolding at a block of flats.

The scientist, who was a qualified engineer, was described as a “high academic achiever”, but was “frustrated and unhappy” about his professional life, an inquest heard.In the weeks before his death he had received “a number of blows to his confidence” which had an impact on his morale, Westminster coroner Darren Stewart said.

On January 27, he climbed scaffolding in Cromwell Street, Kensington. Passers-by called the police, fearing he was going to jump and officers arrived within five minutes but were advised not to talk him down because it was too dangerous to get on to the scaffolding.

An hour later, he made a gesture with his arms and “dived” to the ground, said Mr Stewart.

Today, his mother Patricia, from Rossendale, Lancashire, said: “We are shocked and devastated at the news. Such a waste of a young life with all his future ahead of him. He was so well thought of. He would help everybody.”She said that he could only get a call centre job was indicative of “these times of recession”.

Recording a narrative verdict, Mr Stewart said he was not sure beyond reasonable doubt that Dr  Elliott meant to take his own life because the fall could have been a “cry for help”.

Now the bit that really touches a nerve is the last sentence  Here we have a fine example of someone on the public sector payroll who doesn't understand or doesn't want to admit that he is part of the problem.  Of course it isn't a cry for help.  The guy has gone through 25 years of education for no reward, and he knows that the speed that he will hit the concrete is sqrt(2gh) because he is an engineer, and he knows that is going to kill him.

He has also realised that he is not going to get a job worth having because nobody in their right mind is going to invest in Europe while there is a vast overhang of taxes that will have to be levied to pay for the deficits run up by the government, and that isn't going to go away until everyone in the public sector, and that includes the coroner, has taken a massive pay cut.

If they don't, expect many more Dr Philip Elliotts.

More in a similar vein at the Register here.

Crap bank, crap management, crap regulation.

I have posted about HBOS before, but it is good to know that the Parliamentary Committee on whatever pretty much agrees with my assessment of HBOS.  The bank didn't fail because of some unfortunate event in the markets.  It failed because it was run by a bunch of people who were either insufferably over-confident (Stevenson) or knew nothing about lending (Hornby and Crosby).

As I pointed out before neither Hornby nor Crosby had any background in lending money so how they ever got to run a bank that was basically dependent on lending and making a margin in that business is a complete mystery.

I did my credit training at an American bank famed for its credit courses and although I spent most of my career putting deals together without lending money the principles still stick in my mind.  First of all, banking is a very simple business. You lend money at a margin and you take in deposits at a cost.  Whereas some of your loans might go bad, all of your deposits will have to be repaid if you stay in business, so to be profitable in the long term you have to make damn sure that your losses on your loans don't wipe out the slender margins that you make on your lending business.

To put it in perspective, for every loan that goes bad you need 50, 100 or maybe 500 good loans in order to cover the losses that you make on the bad loan. And that means that you have to take a conservative risk position, lend carefully and be damn sure that you are going to get your money back.  Which makes most corporate lending pretty dull.

HBOS had a different mindset.  Attract retail deposits with TV adverts and then put the money raised out to borrowers to generate the cash flow to pay the retail deposits.  Almost arse about face, but if you were a retail manager at ASDA like Hornby you probably didn't realise that you were thinking the wrong way.  Fact is any bank can raise deposits and the retail end of banking is pretty straight forward.  All people want is somewhere to bank their pay and some pretty straightforward services to pay bills.  A bit of interest is noice, but there isn't a lot more that you can do.

Lending on the other hand is a different matter, and requires some skill and judgement, qualities that HBOS lacked in abundance.  Surely at some point you would have thought that the numskulls in charge of the bank would have sat down and wondered why the experienced banks at JPMorgan and Citi, Barclays and HSBC, SocGen and Deutsche didn't just copy their business model of lending more against less security than any other bank.  The answer, as the other banks knew and HBOS eventually found out, is that if you keep lending against nothing more than fresh air, eventually the whole house of cards crashes to the floor. Which it did.

So I have no qualms about the HBOS senior management all being kicked out of the City, but the bigger question that deserves more of an airing, is why hasn't the same level of punishment been given to the senior management of the FSA?  As often noted here, the FSA promoted a culture of box ticking to handle customer enquiries, money luaundering etc, but it failed abjectly in its supervision of banks.  In the case of HBOS, it failed to ask about the quality of the assets, the amounts lent against commercial property, and about the amount of residual risk taken on its books.

It is all right to write operating leases with large residual values on aircraft if you have a vast number of used aircraft salesmen and management who understand the risk like ILFC, but if you are just a bank based in Yorkshire, you are not only a fool for taking such risks.  You deserve to be shot, and so does your regulator.

You couldn't make it up - well they just did

Imagine you are a climate scientist.  perhaps you are already. You are probably making a pretty penny from the government working up ideas to explain how the tiny heating effect of infra-red absorption by carbon dioxide can lead to Armageddon - mostly, as the current thinking seems to be, through feedback effects rather than from the paltry degree Centigrade which is (a) probably am over-estimate and (b) neither here nor there in the whole scheme of things.

Now as anybody who has modeled anything in the real world, and in particular anything on a large scale with limited inputs (i.,e. in this case the heat from the sun), negative feedbacks are much more likely (e.g. the hotter the earth gets the faster it cools - basic black body radiation: energy flux proportional to T^4).  So it comes as a bit of a difficulty for the warmists when they find that not only is the temperature not racing away to infinity but has in fact been rather flat for the last 10 to 15 years, but worse than that the extent of the Antarctic sea ice is actually increasing:

Quick as a flash they fob us off with the ridiculous idea that the increased ice capo is due to melting. The abstract of a paper produced by a bunch of Dutchmen reads as follows:

Changes in sea ice significantly modulate climate change because of its high reflective and strong insulating nature. In contrast to Arctic sea ice, sea ice surrounding Antarctica has expanded, with record extent in 2010. This ice expansion has previously been attributed to dynamical atmospheric changes that induce atmospheric cooling. Here we show that accelerated basal melting of Antarctic ice shelves is likely to have contributed significantly to sea-ice expansion. Specifically, we present observations indicating that melt water from Antarctica’s ice shelves accumulates in a cool and fresh surface layer that shields the surface ocean from the warmer deeper waters that are melting the ice shelves. Simulating these processes in a coupled climate model we find that cool and fresh surface water from ice-shelf melt indeed leads to expanding sea ice in austral autumn and winter. This powerful negative feedback counteracts Southern Hemispheric atmospheric warming. Although changes in atmospheric dynamics most likely govern regional sea-ice trends, our analyses indicate that the overall sea-ice trend is dominated by increased ice-shelf melt. We suggest that cool sea surface temperatures around Antarctica could offset projected snowfall increases in Antarctica, with implications for estimates of future sea-level rise.

Which makes no sense at all.  To claim that ice forms more readily in unsalty water than in salty water is fair enough, but it makes no sense when the extent of the sea ice is greater than before.  Essentially there would be little or no unsalty water to freeze unless the extent of the sea ice was less than before.

You can fool some of the people all of the time, but I'm not falling for that piece of stupidity.

Sunderland AFC

Sunderland is a football club with a long tradition, linked closely to the working class and in particular to those fans living in the immediate vicinity of the stadium.  Now located at the Stadium of Light above the old Wearmouth colliery, their seventh ground, it still lies in the heart of its fan base.  I dealt with the club several years ago and the finance director explained that while the club had some of the lowest season ticket prices and a strong supporter base, long cup runs and European competitions would deplete their resources because most fans could not afford the extra tickets.

Not surprising then that the club have been roundly criticised for their association with an anti working class sadist, a man who according to many has never had any previous real work experience in his life and shows contempt for those that do. A man from a family of privilege who had no real connection with the Sunderland fans  or hard working people anywhere come to that.

STOP PRESS: No need to worry.  Sunderland FC have done the right thing and David Milliband has resigned

Tie me kangaroo down sport.

Stranger things have happened than the sudden outburst of grief all over the pages of the BBC website following the death of the obese actor Richard Griffiths. His portly frame would not normally merit any comment here, but it does seem to have been a contributory factor in his death from complications following a heart attack. (And yes, since you ask, I manage to keep a relatively trim figure with a certain amount of exercise - mostly cycling and stuff in the gym - and a rigorously low starch/low carb diet.)

 But Mr Griffiths seems to have been relaunched from a minor supporting actor to a thespian of the standing of Olivier, Richardson and Gielgud. At least in the eyes of the BBC.

 Or could it be that on a quiet news day that the BBC is doing all it can to push today's news that an 82 year old man from Berkshire has been arrested under operation Yewtree. A few days ago the BBC readily told us that Jim Davidson was having his collar felt by the Met. Fortunately, The Age, An Australian newspaper is more forthcoming and tells us that the pensioner in question is an Australian entertainer, and they have spoken to family friends in Sydney.

Nevertheless, despite a search warrant an arrest and being bailed until May, the press have been less than forthcoming with the man's name.

Can you see what it is yet?

So David Miliband ....

What caused you to give up your position as a £65,000 a year socialist MP for the arse end of nowhere, and take up the job of CEO and President of a New York based charity that receives donations of $40,000,000 a year and government grants of $260,000,000 a year on a salary of $400k and if reports of your predecessor's remuneration are to be believed, annual bonuses around the $500k mark? The irony is that the charity changed from being a Holocaust / Jewish refugee charity to a government funded NGO when the US decided to help refugees from the Castro regime in Cuba.

Storm in a teacup

The BBC is doing its best to cultivate a row between the government and the opposition over a Budget initiative aimed at helping people get on the housing ladder. that Labour say could be used for second home purchases. Well it might, but since nobody has seen any draft enabling legislation, nobody can say for sure that it will or it won't. But a lack of facts won't stop Labour from making a fuss, for its own sake.

Shut up and listen, you might learn something

Teachers are considering going on strike over pay and conditions:

At £23,010, the average starting salary in teaching is high compared to the average graduate starting salary. Experienced teachers can earn up to £64,000 in London and £56,000 outside London, while head teachers can reach a salary of between £42,379 and £112,000.

Source:
http://www.education.gov.uk/get-into-teaching/salary.aspx

Taking the fun out of fund management

Not content with meddling with bankers' pay packages, it now seems that the EU wants to meddle with the moolah of their near neighbours, fund managers.

Now there may be some merit in constraining the behaviour of traders whose capital base is effectively underwritten by taxpayers, but where is the sense in limiting the pay of fund managers when the customers are willingly signing up to contracts that reward their firms for performance.

Personally, even though I pick and buy my own stocks, if I did use a fund manager I would want him to be on my side, and preferably paid 100% for performance.  Under the EU proposals with a bonus capped at 100% of salary, the fund manager gets 50% of his maximum pay even when my investments are tanking.  It seems that MEPs who are paid a massive amount without really doing anything useful, think we should all be like them.

I don't remember any funds blowing up because the fund managers tried too hard. A bad solution to a non-existent problem.

A failure of objectivity

The BBC have a programme going out tonight on the Iraq War: "Iraq: The Spies Who Fooled the World."

Sorry, but you don't have to apologise for your old pal Blair.  He fooled himself, but he never fooled me.

Savers kebabed

The Cypriot cash snatch has probably given UKIP their biggest PR boost in many years.

For the benefit of those who haven't got to the bottom of the story, in summary international lenders have agreed to a €10bn of the Cypriot government on the basis that the government will also grab €5.8bn from Cypriot bank deposits.

The cash from account holders with Cypriot banks and the Cyprus branches of foreign banks will come in the form of a one-off 9.9% on deposits over €100,000 that will be taken from their accounts when the banks reopen on Tuesday,. Monday is a Cypriot holiday. An additional 6.75% levy will be imposed on deposits below €100,000.

Western Europe has not seen such arbitrary retribution since the WWII punishments meted out by the Germans in response to attacks by partisan and resistance movements. Cyprus is the fourth eurozone country to receive a sovereign bailout after Greece, Ireland and Portugal. Spain has also required €40bn in EU aid to shore up its teetering banking system. The Cyprus precedent means that the next time a country is bailed out, the Cypriots can reasonably expect that country to receive the same treatment, so from now on expect a run on banks and capital flight whenever a eurozone economy looks in trouble.

The EU and others leading the negotiation have justified the measure by saying it broadened the number of people who will shoulder the burden of the bailout. Without the measures, he said, much of it would fall on Cypriot taxpayers; by going after all large deposit holders, many of whom are Russian or British, outsiders would help fund the rescue.

Cypriots hit by the levy will be granted shares in their banks of equivalent value to their losses, but it is hard to see how the Cypriot government could order foreign banks that have taken deposits in the Cypriot branches to issue shares to their Cypriot depositors, particularly when the confiscated cash would be used to pay off the government's creditors.

Christine Lagarde, the IMF managing director who participated in the marathon talks, said she would now recommend to the fund’s board that it contribute to the bailout, though she said it was too early to say whether it would chip in one-third of the cost as it has in Ireland, Portugal and the first Greek bailout. So the Cypriots were strong armed into ponying up 10% of other peoples' money without actually getting any idea of how much the IMF was going to put up.

Remember dear reader, that at no point have EU officials said how much they would contribute to any of these bailouts, because they have contributed precisely nothing. Indeed, only 2 days ago the European Parliament voted against a measure that increased the EU budget by only 1% per annum, because that would limit their power to splurge.

On the other hand, if you are a UK tax payer, you will be picking up the bill for the compensation of UK military and diplomatic personnel. Yet again, the general public is picking up the tab for the profligacy of the public sector, this time in another country.

Crime of next week: Cyprus

Eurozone finance ministers have agreed a 10bn-euro (£8.7bn) bailout package for Cyprus to save the country from bankruptcy. The deal was reached after talks in Brussels between the ministers and the International Monetary Fund (IMF).

In return, Cyprus is being asked to trim its deficit, shrink its banking sector and increase taxes. OK, so far, fair enough, but the sting is in the tail, because there will also be a one-off levy of savings deposits.

• Depositors with under 100,000 euros deposited must pay 6.75%
• Those with more than 100,000 in their accounts must pay 9.9%
• Depositors will be compensated with the equivalent amount in shares in their banks

Which is a nifty for the banks who will see their capital base increased by 10% of their deposits, but not so hot for savers.

How and why did this come about?  Well according to Reuters, someone in Germany said they were pretty convinced that most of the money in Cyprus belonged to Russian money launderers, so rather than bothering to find out the facts, the EU just decided to effectively confiscate cash from all depositors next Tuesday.

Crime of the week: SAC

Two affiliates of SAC Capital, the giant hedge fund, settled insider trading charges with the Securities and Exchange Commission for $614 million on Friday, in what the agency was the biggest ever settlement for such cases. The settlements spare SAC’s founder, Steven A. Cohen, who hasn’t been charged with wrongdoing.  Also he gets to keep his billions.

Mr. Cohen, one of the most successful hedge fund managers in the world, has long been considered a dodgy dealer .. errm ... target of federal investigators.

The amounts paid by SAC surpass the $400 million that Michael Milken paid to settle charges by the agency in 1990. But such are the low standards of today that this will pass without a murmur and unlike Mr Milken who ate a lot of porridge, the US judicial system is unlikely to be troubled by Mr Cohen.

One affiliate of SAC, CR Intrinsic, agreed to pay over $600 million over charges tied to one of its employees, who is accused of trading on illicitly obtained confidential information about the drug makers Elan and Wyeth.  The other affiliate, Sigma Capital Management, agreed to pay $14 million to settle charges that it engaged in insider trading in the stocks of Dell and Nvidia. SAC’s management company will pay the settlements, meaning that investors of the hedge fund are not on the hook

Which is good for investors who get to keep their illicit gains.

A spokesman for SAC said in a statement, “We are happy to put the Elan and Dell matters with the S.E.C. behind us. This settlement is a substantial step toward resolving all outstanding regulatory matters and allows the firm to move forward with confidence." You bet your bippy they are!

Which makes it all the more amazing that a firm can be found guilty of insider trading, fined such an enormous amount, and yet be considered fit and proper to carry on in business.

Lynch mob

Any aspiring criminals who want to avoid investigation should follow the lead of Autonomy, and do business with the investigating authorities.

A criminal investigation into Autonomy by the Serious Fraud Office has been thrown into confusion just as it began after the UK agency admitted that its £4.6m contract with the software-maker could present too much of a conflict of interest for it to continue pursuing the probe. Which is a shame, but particularly when the opinions voiced in America last year are considered.

Autonomy was founded as Cambridge Neurodynamics in 1991 by Michael Lynch, a Cambridge-educated computer scientist. Nothing wrong with that.  There are lots of us.

The company was based on the then-hot concept of Bayesian search, named after 18th-century mathematician Thomas Bayes, and ultimately developed an all-encompassing software package it called IDOL — Intelligent Data Operating Layer.

Hewlett-Packard say they "stand behind" IDOL.  And so they should; otherwise they would have to write off the rest of the $11 billion they paid for Autonomy.

But, in short, the naysayers say that there isn't really much to the concept, more just smoke and mirrors that Autonomy has used to make people think they have got something very impressive.  It's basically a search engine, like Google's and a host of others, but unlike Google's it just works on a company's own data, and doesn't have the portal/advertising business model of Google.

So how did Autonomy show such big numbers? They would go to customers and offer them a deal they couldn’t refuse. Say a customer had £5 million and four years left on a data-storage contract. Autonomy would offer them, say, the same amount of storage for £4 million but structure it as a £3 million purchase of IDOL software, paid for up front, and £1 million worth of data storage. The software sales dropped to the bottom line and burnished Autonomy’s reputation for being a fast-growing, cutting-edge software company a la Oracle, while the revenue actually came from the low-margin, commodity storage business.

Lynch’s management team also was practiced at the art of wringing attractive-looking growth out of a string of ho-hum acquisitions. The typical strategy was to bolt IDOL and other software onto a target’s existing products and try and convince customers to pay more for the “new” products.

If that failed, they’d milk the existing customer base by halting development and outsourcing support, my source says, using the cash from the runoff business to fund more acquisitions.

Which to come back to the SFO, tells us why they might feel a conflict of interest.  Not because they are a loyal and willing customer of Autonomy, but because they spent a fortune on software that they don't use as part of a ho-hum data storage contract.

I am a French telecom service

Apparently. French prosecutors have been asked to investigate Microsoft’s Skype because of its failure to register in the country as a telecoms operator, in the latest attempt by France to control the activities of global internet companies. In a statement on Tuesday, the telecoms regulator Arcep said that it had contacted the Paris public prosecutor after the instant messenger group ignored “several requests to declare itself as an electronic communications operator”.

So what exactly does Microsoft/Skype do to warrant being called a telecoms operator? Well we all know about the software that they distribute for free, but that is just software, so where is the telecom operation, Arcep said the fact that Skype allowed its users to make voice calls to fixed line and mobile numbers in France meant that it provided a telephone service, and therefore had an obligation to allow emergency calls and to allow French police and security services to monitor its voicemail traffic when legally required.

So because Skype owns some boxes that sit between the internet, provided by whichever ISP that might be and the public telephone service, that makes Skype a telecoms operator, even though they don't actually own any wires.

Now that is patently absurd.  Way back when in one of my first banking jobs, I had some involvement with a message transmission system, a bit like SWIFT, but connecting to the telex network (I said it was a long time ago), international leased lines and a whole host of internal networks and computers. The network of message switches owned no external wires but we connected to lots of them all over the world in many different countries.  Diod that make us a telecom operator? Of course not.

Mind you, the French authorities description would fit the ever growing network at Chateau Masterley (latest count 4 desktops, 5 laptops, various handhelds and wifi-enabled phones, broadband @ > 75Mbps and a phone line for backup).  So that makes me a French telecoms operator.

And so is my wife.

Lonely hearts

WANTED: Short term lover (9 weeks - 8 months max.) in Westminster area to replace long(er) term partner who is unavoidably detained. Europhobes, climate change "deniers", Cons and Labs need not apply. Must like the colour yellow, Aardman Animation characters and windmills. GSOHubris appreciated,  as is ability to spell schadenfreude. Gender unimportant. Apply in confidence to CarinaT@thatman.co.uk

Short, sharp and to the point

From The Sun:

If the Tories don’t wake up, they will be destroyed at the 2015 election.

A crucial poll of 109 marginal seats — the ones that decide elections — puts Labour on course to seize 93 on their way to a majority of 84.

The Conservatives have only themselves to blame.

It’s no good bleating about the Lib Dems.

Who is wearing the trousers in this Coalition?

Not David Cameron.

The Tories have lost the plot.

Welfare spending is still way too high.

Promised cuts in quangos and bureaucracy never happened.

Overseas aid wastes billions.

There’s nothing wrong with a humanitarian fund for catastrophes, but no excuse for Cameron handing out cash just to make himself feel good.

On Europe, he dithers while UKIP surges.

On taxes he offers nothing.

On slashing the regulations crippling firms and worsening unemployment, there is only talk.

Venezuelan democracy in action

 

A firefighter extinguishes a fire set by supporters of President Hugo Chavez to burn the belongings of opposition students who had been demanding information on Chavez's health, and fled after hearing of his death. Photograph: Geraldo Caso/AFP/Getty Images

In praise of the malus

Bonus as any fule kno' comes from the Latin:
Etymology: From Old Latin duonus.
Adjective: bonus m (f bona, n bonum); first/second declension
1.good, honest, brave, noble, kind, pleasant, 2.right, 3.useful, 4.valid, 5.healthy

It's opposite would be a malus.  I have long been a fan of the malus, because that would allow for the clawback of previous bonuses when the business goes pear shaped.

Until now the idea hasn't really caught on, mostly because turkeys will never vote for Christmas, but now I think it is an idea whose time has come. Not perhaps in the form that it was originally intended, but in the wonderful world of finance, old ideas have a habit of coming back in new guises, and this particular structure seems to be a slightly contrary way of getting banks and their employees around the restrictions that the EU are trying to impose.

Let us suppose that nobody in their wildest dreams would ever expect to get a bonus to make their total pay equal to 10 times base salary.  So we set that figure as the annual pay for bank staff.  They don't actutally get paid 1/12 of their annual salary every month, but only 1/120, with the final 109/120 due in the final month.  Also payable in the final month, or rather repayable, is the "malus", which is a sum recognising the diffference between actual performance and the performance required to justify the full salary. Management sets the malus for every employee up to 108/120 of the annual salary, and offsets the amount of the malus against the alary payment for the year.

Net result: 0% bonus, and even if the malus was taken into account, the amount of the malus is always loess than the amount of the base salary.

Left wing dictator dies - BBC goes crazy

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Venezuela's Hugo Chavez dies aged 58 NEW

Venezuela's President Hugo Chavez dies at the age of 58 after a battle with cancer, his vice-president announces.

• Venezuela's Hugo Chavez diesLive
• Obituary: Hugo Chavez NEW
• A divided and divisive legacy? NEW
• A look back at Chavez's lifeWatch NEW
• The possible successorWatch NEW

Left wing journalists working late into the night to give the lowdown on dead socialist on the other side of the world....

Bonuses and maluses

I earn a bonus as a reward for my successful endeavours.
You earn a bonus because the institution needs to retain your services in a competitive market.
He/she/it's bonus is an unjustified outrage.

It seems that the CEO of Rolls-Royce is quite entitled to earn bonuses and other rewards six times the value of his base salary (total pay for 2012 as near as dammit £5 million against a base salary of £800k plus change since you ask), but that for bankers to earn a bonus of more than 100% of base pay is a mortal sin.

At least in the view of MEP's and the EU Commission.  Well, they are quite entitled to their view, but that doesn't necessarily have any relevance because they may not have the power to do anything about it, but more on that in a minute.  The immediate reaction is that the MEP's and EU Commissioners all live the life of Riley in Brussels on expatriate packages paying for second homes, living away from home allowances and in the case of those working at the EU, an infeasibly low tax rate on their salaries - all of which is of course completely risk free, not subject to performance appraisal or even financial results - not that there is any financial risk in their taxpayer funded business.

But let's go back to their powers.  The EU is only entitled to make rules in areas granted to it by treaties, and the relevant treaty and Articles would appear to be Articles 151-153 of the Lisbon treaty, particularly Article 153.  To give it some context, here is Article 151.

Article 151

The Union and the Member States, having in mind fundamental social rights such as those set out in the European Social Charter signed at Turin on 21 October 1961 and in the 1989 Community Charter of the Fundamental Social Rights of Workers, shall have as their objectives the promotion of employment, improved living and working conditions, so as to make possible their harmonisation while the improvement is being maintained, proper social protection, dialogue between management and labour, the development of human resources with a view to lasting high employment and the combating of exclusion. To this end the Union and the Member States shall implement measures which take account of the diverse forms of national practices, in particular in the field of contractual relations, and the need to maintain the competitiveness of the Union economy. They believe that such a development will ensue not only from the functioning of the internal market, which will favour the harmonisation of social systems, but also from the procedures provided for in the Treaties and from the approximation of provisions laid down by law, regulation or administrative action.

Now I think it is pretty unclear whether the regulation of banking pay falls under that heading, but let us give the Eurocrats the benefit of the doubt.  So then we have Articles 152 and 153 which you can read in the attached links which contains a lot of guff about the protection of workers rights and harmonisation, followed by the following in Article 153 (5).

5. The provisions of this Article shall not apply to pay, the right of association, the right to strike or the right to impose lock-outs.

Did you see that Mr Barosso? "Shall not apply to pay".  And that includes bonuses. Of course some Euro twit came up with the line that this wasn't about pay but about how much was paid as salary and how much was paid as bonus.

Wrong, thicko.  Pay is pay and I don't care how much Euro-spin you want to ladel out, the treaty couldn't be much clearer.  All pay controls are strictly off limits to the EU.  Try pulling a variation on 153 (5) and claim that the EU may not be able to legislate on the right to strike, but is not prevented on legislating on the length of strikes.  See you in court, loser.

Anyway, there may be another article under which the EU claim these powers, but so far, they haven't been able to point it out.

RBS: Exaggerating the fair value of its own b*llsh*t

Let's face the facts.  RBS is a crap bank.  So is NatWest. Always have been and always will be., but have never let the fact that they are chock full of ineptitude from trying to pretend to be "investment bankers", whatever that devalued term means.

Of course to the staff of RBS, being "investment bankers" means bonuses, but the truth is that yet again they have done nothing to deserve a bonus, having collectively booked a £5 billion loss.

Oh but no, say the would be bonus recipients, that £ 5 billion underwaterness has after all sorts of retail PPI and Libor fines, nothing to do with us and anyway, the loss items were all extraordinaries and not part of the operating profit.

Up to a point Lord Copper.  The few billion of LIBOR fines and PPI misselling penalties were actually dwarved by the loss on the "fair value of own debt", which as readers of this blog will recall is a function of prevailing interest rates.  When the yield curve falls generally, then the fair value of the fixed rate borrowings made by the bank will rise, so they will owe more and the bank makes a loss because it is mnarking its debt to market.

But as I have said before, this mark to market is happening on their funding for their operations, so why is it not included in their operating profit.  Add this number into their operating profit and they are already underwater om their operating profit (i.e. no bonus due), but by treating this annually recurring line as extraordinary (last year they booked a profit), they get to boost their operating profit.  But this year, to make matters worse they changed their accounting policy so that some of their hedging losses are included in this fair value, artificially boosting their pre-bonus operating profits.

Shonky accounting for a shonky bank.