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Friday, 29 April 2011

Golden balls-up

Say what you like about David Beckham, I though he cut a dash in his well cut Ralph Lauren morning suit, and his Victorian style wing collar and old fashioned tie. I am not sure about his shoes.  He might have gone even more Victorian and worn Oxford boots rather than Oxford shoes.  Shame about the OBE on the wrong side though.

It probably looked right when he checked in the mirror.

Every move recorded for posterity

Tuesday, 26 April 2011

A Saucerful of Secrets

I don't particularly care whether Andrew Marr had an affair with Alice Miles a journalist with the Times, and I wouldn't seek to comment on the fact that she had a child, which she and he thought was from the relationship but turned out not to be, while he continued his marriage to Jackie Ashley from which he has a son and two daughters.

Neither do I particularly mind that Marr should ask Gordon Brown whether he was taking prescription medicine in the run up to an election, because voters have the right to know whether candidates are in good health.

But I do object to the fact that Marr as an interrogator of politicians should choose to take out a super injunction to prevent newspapers publicising his affair on the grounds of protecting his children. "I also had my own family to think about, and I believed this story was nobody else's business."

A bit late for that surely?. Mr Marr had already ignored the well-being of his family.

But most important of all, why should politicians fear inquisition by journalists if they know the journalist is trying to hide a guilty secret? If the BBC had any guts, Marr would be off our screens tomorrow, but he will probably still trouser his £600,000 of license payers money because the BBC has no guts.  Still we can all now think of him as the jug-eared.love rat.

Monday, 25 April 2011

Wedding invites

Rules for wedding invites, particularly Royal ones

You think this is a day for the bride and groom.  Forget it.  Since the parents of the bride normally get to pick up most of the tab, the mother of the bride gets to decide who is coming and who is not

Doesn't apply to next week's big day, where the honour would normally fall to the mother of the bridegroom because his side is picking up the tab.

Again doesn't apply here because she's not around, so it's granny who gets to have the biggest say on the list because it's all back to her place for the reception.  Naturally she's going to have some of her pals to keep her company with a good natter away from most of the part, but she also gets to pick some of extended family and a few business contacts.

Being in the unelected lifetime monarch business there are obviously quite a few to invite, quite a few that we have never heard of, and probably a few monarchs of countries that disappeared in the last century, but never mind they are glad of the invite and will be keen to make a splash on the wedding list.

Which leads us to the issue of the preferment of Arab dictator princelings to Scottish ex-prime ministers.  Now let's face it, if it came down to a personality test, it would probably be a dead heat, but that isn't what counts.  Forget protocol (there is none), and consider the feelings of the young couple.

Which would they rather have at their wedding?  The one who isn't just going to give them a full dinner service, but also a pair of his and hers matching Lamborghinis and a year's supply of petrol. With some wedding guests, excessive lavishness is de rigueuer.

... but not Phoney Bliar and Prudence McDoom.

AV is tosh part #94

One of the arguments, in fact the only real argument in favour of AV is that it is supposedly more representative of the electorate.

Come again. How does that work?  Well it presupposes that how you vote demonstrates who you want to be elected, although that is clearly nonsense because your third or fourth selection may be elected using your vote, and they clearly aren't your first choice and probably not that representative of your opinion.  Does that mean they can't represent you?  Of course not, but there is something that we have forgotten.

At the last general election, only 29.65 million of the 45.54 registered voters actually voted.  The other 16 million or so either were unable to vote or more likely couldn't be bothered to vote.  Does that mean they don't consider themselves to be represented? Well, maybe or maybe not, but the chances are they still recognise their MP and since they couldn't be bothered to vote against any particular candidate, one can assume that most of them were quite happy to leave the decision to their fellow citizens (Oh, OK, subjects) so they can have no gripe at the outcome. Not voting is a free choice and one that we are entitled to exercise, but AV proponents choose not to respect that choice.

So with something around 35% of the electorate expressing no particular preference, any candidate with 16% of the electorate actually voting for them (about 24% of those actually voting) could reasonably claim that less than 50% of the electorate had voted against them.  Or in other words, if we add the non-voters to the votes for the winner under FPTP, do we ever have a winner with more than 50% of the electorate voting against them?

And at the last election the answer is no.  In 2010, one candidate only had 15% of his electorate vote for other candidates, the highest was 48.4% and the average was 34.5%. So when you really think about it, the only argument that AV ever had is a complete non-starter.

Tuesday, 19 April 2011

My 2 cents on voting systems

"First past the post" electoral systems have their faults and I wouldn't say they are perfect, but the merits of AV have been over-hyped. The argument that the winner of AV has more than 50% of the support of his constituents is simply wrong. For a start, around 50% of them will not vote and of those who actually do count towards his score a fair proportion may well be second preference votes. Not much of a show of support when Mr Apathy gets 50% first choice.

But, in fact, the results under AV can be quite ridiculous and I give the following by way of an example.  The colours used here are for example only and should not be taken to express any particular prejudice.  The numbers and the backstory are not particularly extreme and may fit many constituencies.

Imagine a hypothetical constituency where 49.9% of the electorate vote for the Red candidate, 25% vote for the Yellow candidate and the remaining 25.1% of the vote is taken by a motley assortment of Blue, Purple and Violet parties.  (OK, 49.9% is pretty borderline but in reality anything from 45 to 50% is not uncommon, and the story wouldn't be very different).

It turns out that the Yellow candidate used to be the Red Party MP, but he defected a few years back when it looked like he was going to be deselected, so as a result no Red party voters will put the traitor down as their second choice, and since the rest of the field are far too Blue/un-Red, most of them don't put down any second choices.

On the other hand, because the current Red candidate is seen as quite a good MP and the candidates of the various-shades-of-blue parties all have reputations as shysters and chancers, nearly all of the voters who put the Yellow candidate as their first choice put the Red candidate as second choice.  Perhaps they feel guilty about the defection.

The Blue, Purple and Violet candidates realise that they each have no chance of winning and tell their supporters to vote tactically and put the other blue-ish candidates as their second and third choices, the Yellow party candidate as their fourth choice but to omit the Red candidate.  Voters being like sheep and not wanting to be herded don't do exactly this and a few (say 0.2%) actually put Yellow as their second or third candidate.

So the Red candidate is the first choice of 49.9% of voters and the second choice of 25% of voters (i.e. first or second choice of 74.9% of the voters), while the Yellow candidate is the first choice of 25% of voters and the fourth choice of 25.1% (i.e. first to fourth choice of 50.1% of voters).

Looking at it in terms of which candidates voters don't want to win, the Red candidate has been omitted from the voting slips of 25.1% of the voters, while 49.9% of them have not voted for the Yellow candidate

The Red Candidate has twice as many first preference votes (49.9%) as the Yellow candidate (25%).

The Yellow candidate has been rejected completely by almost twice as many voters (49.9%) as the Red candidate (25.1%)

Who wins under AV?  The Yellow candidate, of course, because AV is so much more "fair".

FPTP may have its faults, but nothing as egregious as this.

The RAF's first billion dollar aeroplane

Getting very little song and dance in the news is the arrival of the first of 14 new aircraft for the RAF for in-flight refuelling and troop transport. And these 14 planes dear tax payer will be costing you £10.5 billion pounds.

That may not sound like much, but actually it is for what you get.  The RAF are billing the planes as the largest ever flown by them, but so what?  The plane is in fact a slightly converted Airbus A330.  The A330 isn't the biggest plane that Airbus build, being smaller than the 4 engine A340 and much smaller than the super-jumbo A380.  This variant is actually a shorter variant, the A330-200.

So what does it do?  Well first of all it flies troops around, like a normal A330, landing at airports, like a normal A330, carrying 291 troops up to 6,000 miles. A normal A330-200 carries about that number of passengers, crew and luggage for 7,200 miles, but hey.  The Voyager (fancy name) also has 2 cargo compartments, forward and aft to get all that equipment round the world ... just like the bog standard A330-200.

However, the new plane does more.  It also has in-flight refuelling capabilities, implemented by a 100,000 litre tank in the middle of the plane (actually lifted straight out of the A340, but what the heck) and military avionics.

Now let's remember that this spanking new plane (actually not new yet because it is still in testing) basically has the same refuelling functionality as the VC-10's and Tristars currently in use with the RAF which were retro fitted to those aircraft when they were handed over by BOAC in the 1960s.  So it can't be that expensive.

Comparing the price with the $1 billion per aircraft that we will be paying for these planes (no paint job, just military grey), what would you expect to pay for a run of the mill unconverted A330-200 these days?

According to Airbus, about $200 million, but with haggling and bulk discounts for 14 planes that should come to around $170m with some flight simulators and training thrown in, which means that through MOD incompetence, we are blowing an extra $830 million on each plane.

Let's call that 2 new hospitals per plane.

"An insult to the British public"

Isn't the internet a wonderful thing? If it were not for the world wide web of news most of us would probably accept the anti-Government/pro-Labour spin that comes from the BBC.  This morning they are playing down reports that David Cameron might veto Gordon Brown's appointment to head the IMF (if  it ever got that far although the story is one that is playing largely in the minds of the editors of the Guardian, Mirror and BBC, not the wise heads who will make the decision).

Actually Cameron is simply echoing the words of his Chancellor who said that the idea was an insult to the British public, and he should know because he is charged with clearing up the mess from Brown's fiscal diarrhoea.

But are the BBC likely to report this objectively?  Of course not, any more than they are inclied to report on the downgrade of US government debt and favourable comparison (for the UK government) of UK and US fiscal policies. Instead the sages of the BBC Business news give us "Strong sales lift Burberry shares", "Apple sues Samsung for 'copying'", "CBI warning on inward investment", but no report of stock market mayhem around the world.

In some ways news reporting in this country is like that in Iran or North Korea.

Monday, 18 April 2011

Osborne 5 Brown Balls 0

S&P don't seemed to be too impressed with the noises coming out of Washington promising to cut the US deficit (measured in trillions but every thing is bigger over there), so the agency has cut its "outlook" on the US government's debt issuance to "negative", and consequently sent the US debt markets into a nose-dive.

But the good news for this government and its policies comes in the section at the end of the S&P report where the US's budget plans are compared with actions taken in other major western economies:

While thus far U.S. policymakers have been unable to agree on a fiscal consolidation strategy, the U.S.'s closest 'AAA' rated peers have already begun implementing theirs. The U.K., for example, suffered a recession almost twice as severe as that in the U.S. (U.K. GDP declined 4.9% in real terms in 2009, while the U.S.'s dropped 2.6%). In addition, the U.K.'s net general government indebtedness has risen in tandem with that of the U.S. since 2007.

In June 2010, the U.K. began to implement a fiscal consolidation plan that we believe credibly sets the country's general government deficit on a medium-term downward path, retreating below 5% of GDP by 2013.

We also expect that by 2013, France's austerity program, which it is already implementing, will reduce that country's deficit, which never rose to the levels of the U.S. or U.K. during the recent recession, to slightly below the U.K. deficit. Germany, which suffered a recession of similar magnitude to that in the U.K. (but has enjoyed a much stronger recovery), enacted a constitutional limit on fiscal deficits in 2009 and we believe its general government deficit was already at 3% of GDP last year and will likely decrease further. Meanwhile, Canada, the only sovereign of the peer group to suffer no major financial institution failures requiring direct government assistance during the crisis, enjoys by far the lowest net general government debt of the five peers (we estimate it at 34% of GDP this year), largely because of an unbroken string of balanced-or-better general government budgetary outturns from 1997 through 2008. Canada's general government deficit never exceeded 4% of GDP during the recent recession, and we believe it will likely return to less than 0.5% of GDP by 2013.

So while the rating agencies might be criticised for their performance in analysing structured debt, their understanding of international economics still far exceeds the collective wisdom of the Labour party, and in particular the one undergraduate year of study (in a 3 years PPE course) that was the sole knowledge and experience of the Brown Balls undynamic duo.

Mining the family tree

Go back 4 generations and more from Prince William, and you reach George V, Edward VII and Queen Victoria. Go back the same distance on the lass Middleton's side on her maternal grandmother's line and you 3 coal miners, John, John and James Harrison.

Arthur Scargill would be so proud if he were alive today to see it.

Oh, he is?  Well he can do one then.

Your taxes at work

If UKIP came up with a report that said our EU contributions were being spent on sending Belgian dance teachers to teach the people of Burkina Faso (GDP per capita $1,200) how to dance, you wouldn't believe it.

But some things are beyond parody.

"The aim is to offer socially disadvantaged young people in Africa an artistic training course which fuses tradition and modernity and promotes social and socio-cultural integration. Social, economic and health-related problems can lead to young people becoming drastically distanced from the societies in which they live."

Maybe, but that doesn't explain why we are paying for it.

Twisted knickers over Vickers

Some Financial wizard at another pink paper has tried to whip up a storm over the fact that the Vickers Commission could not control the capital of any EU incorporated bank that wanted to buy up a UK retail banking network and operate it as a UK branch of the foreign bank.

European Union “passporting” rules allow banks from across the EU to operate in each other’s markets as “branches” subject to regulations in their home-country, rather than full-blown subsidiaries that would have to operate under UK rules.

Banks such as France’s BNP Paribas, Germany’s Deutsche Bank and BBVA of Spain, which might be tempted to enter the UK retail banking market, would only be subject to their home market capital rules.  Indeed there is little reason why UK banks that are already foreign owned (Abbey, Clydesdale, Yorkshire, AIB (UK) etc) could not be restructured this way.

Of course it sounds like the indirect source of this whining is coming from UK banks who would see their source  of cheap finance for bond trading and the rest drying up, but as a a tax payer, why should I care? I would happily see the responsibility for all these banks passed to foreign governments, with more downward pressure on the over remunerated third-raters at Barclays and RBS.

Friday, 15 April 2011

The Irish problem

One level above junk bond status, outlook negative.

If it goes any lower then no matter what their preference might be, most institutional investors will be prohibited by their governing documents from buying or holding Irish state bonds.

Now tell me why anybody thinks a £170 billion annual deficit is sustainable.

Who is Matt Zames?

Matt Zames is one of the contenders to take over from Jamie Dimon at JP Morgan. Why? Because he makes money for the bank. That's why. Or rather, the traders who work under him on the bank's OTC fixed income derivatives trading desk which has made money when the rest of the bank was going close to the wall. If your desk is the only one making serious money, you get to call a lot of the shots, and Zames, an ex-LTCM employee was promoted rapidly in the last 5 years to the executive committee.

Bully for him, but with power comes responsibility and Zames may come under a lot of scrutiny because of a court filing from the trustee charged with recovering money for Mr Madoff’s victims.

John Hogan, a senior risk officer at JPMorgan’s investment bank and a member of the company’s executive committee, voiced concerns about Mr Madoff’s firm to colleagues in 2007, according to a new version of the 114-page complaint. The allegation is part of a $6.4bn lawsuit filed against the bank by the trustee, Irving Picard. Mr Hogan is said to have learnt of Mr Madoff’s Ponzi scheme from Zames.

“For whatever it’s worth, I am sitting at lunch with Matt Zames who just told me that there is a well-known cloud over the head of Madoff and that his returns are speculated to be part of a Ponzi scheme,” Mr Hogan allegedly said on June 15 2007, nearly 18 months before Mr Madoff’s Ponzi scheme was revealed.

Of course Zames' concerns went no further. How much he really knew, how much he disclosed and how much he acted on his suspicions to his own benefit may have a significant bearing on his career.

Too long in PFI land

There was a time when the UK arm of Fujitsu was known as ICL and they made their own computers. They didn't work as well as their American cousins' machines, but they were British, and as a result they won a lot of government contracts and they collected their fair share of bearded wierdy graduates to feed their business. Then they were taken over by the Japanese firm Fujitsu who didn't exactly bring the complete range of IT services that they might have found with IBM or Digital, but enough to allow Fujitsu to bid for more government work, which has been the mainstay of their business ever since.

But old habits die hard, so when Fujitsu announced that they were forming a collaboration with Virgin Media, TalkTalk and Cisco to build a new super-fast fibre network capable of delivering Internet speeds of 1 Gbps and upwards to 5mn homes in rural Britain, the press went hoop-la. But a little digging (excuse the pun) shows that although Fujitsu talk about spending up to £2 billion on the project, the first precondition is that they should be given £500 million of the £530 million that the government had set aside for national rural broadband, with no commitment as to how much this would cover and actually no commitment on their part to actually spend any money.

Then we hear from the spokesman of their partner at Virgin Media that the group would like to be granted better terms on the poles and ducts network that earlier governments had "given" to BT. Well, no it didn't pal. When the government owned the telephone part of the Post Office, it generated a profit for the government and funded the expansion of the network itself. BT was then sold to private investors (who in inflation adjusted terms paid about the same as today's market cap), so if you want to use the network, you can pay a commercial rate to the people who bought it.

But going back to Fujitsu's comment that their network roll out will cost up to £2 billion. Does anybody think they are going to invest anything like "up to £2 billion" when the turnover of the UK subsidiary is only £1.7 billion? Not without a lot more government money, and as anyone who has read broadband service claims will appreciate, these days "up to" translates roughly as "at most 15% of".

Wednesday, 13 April 2011

Do you have confidence in Britain's nurses?

Let's leave aside the fact that the median salary in the private sector is around the midpoint of the salary range for Band 5 nurses (the usual grade for qualified nurses), and that the top of the nursing pay grades is £97,478 (Band 9 point 54), and just consider the fact that nurses say they have no confidence in Andrew Lansley.

Why? Because instead of coming to give them a speech and walk away, he wants to attend a meeting with 50 of them where he can listen to their views.

It must be Spring

Inflation dropped yesterday from 4.4% to 4%, and today UK unemployment falls by 17,000 to 2.48 million.

Meanwhile, the number people in employment rose by 143,000 to 29.23 million, compared with a pre-recession peak of 29.56 million recorded for the three months to the end of May 2008.

The good news is that most of these new jobs are real sustainable jobs in the privcate sector, not headline number packing non-jobs from the Brown/Balls school of economic vitality.

Tuesday, 12 April 2011

How can we forget Global Crossing?

The international fibre optic company that was reportedly worth $39 billion in 2001 and went into administration in 2002 has just been sold.  For $3 billion. Which makes it a good deal for Singapore Technologies and Hutch Telecom who bought the dark-fibre-and-hubris megalith in its darkest hour for a mere $407m.

And it is going to a sympathetic new owner, Level 3 whose shares could have been bought for $140 in 2000. The lucky shareholders in that dot.com bubble company who hung on to the stock are holding over $14 of paper per share even today.

Monday, 11 April 2011

Why is the BBC making a fuss about NHS job cuts?

The state controlled airwaves have been full of the jabberings of nursing union honchos whingeing about 2,000 front line positions being cut in the NHS. But let's get a few things straight:

1. This is 0.1% of the employment in the NHS. All organisations get reorganised from time to time.  No organisation is perfectly efficient, and even if they were, technology improvements and changes in demand will mean that they need to review their staffing needs from time to time.

2. Nobody will lose their jobs.  Staff turnover in the NHS averages a bit under 10%, but in mental health it is as high as 15% across the whole NHS.  Just wait a few months and staff numbers will always decline to hit the targets.  It just means nobody is to be recruited to fill the post.

3. But don't worry, the number of clinical posts in the NHS isn't going down.  It is actually going up.

Not that the unions or the BBC will tell you that.  They leave that up to the head of the NHS. whom they quote on their website.  You would have thought that would be the end of the story.  Surely the head of the NHS should carry more authority than a union leader?  Not in BBC land, where story from the union is that the NHS has to make savings of up to 20%.

True, but they don't tell you that the 20% saved from existing budgets will be spent elsewhere in the NHS, with more cash added to increase spending in real terms.  What sort of savings are we talking about?  Well, downgrading some of the staff positions, so that some tasks are not performed by overqualified staff.  And then some positions will disappear because of improved medical techniques.  Just as the aspirin and antibiotics replaced the nurse to mop the fevered brow of sufferers, new procedures reduce the need for staffing.  Sadly some parts of the NHS have been very resistant to change, the notable case being the old-fashioned surgeon who operates in a  fully staffed operating theatre when the same procedures could have been undertaken more efficiently if the surgeon had learnt and adopted modern techniques.

Instead the BBC backs the whingers of the £135 billion a year healthcare industry.  That figure almost represents 10% of GDP (If we deduct the budget deficit from GDP to get a figure of what we might consider "sustainable" GDP, then it is over 10%).  Another way of looking at it is that this is over 20% of private sector activity, the ultimate means of paying for all government services with far fewer than 20% of the total number of private sector employees.  Which is why most nurses and all doctors are paid substantially more than the median public sector wage, not that you will hear that from the RCN or the BBC.

Running the world is too difficult for politicians

Three things have come to light over the weekend that have shown that letting politicians meddle in things they don't understand can be disastrous, and they all relate to banking, and I could have told you that they would all end in tears.

#1. First of all we have Gordon Brown's admission that putting the FSA in charge of bank supervision was a mistake, covered by the BBC here.  In effect the most useless chancellor and prime minister we ever had said that the people behind setting up the FSA (i.e. him and Ed Balls) didn't understand that banking supervision was a matter of more than regulating banks individually, but somebody had to oversee systemic risk.  As the initial investigations into the banking crisis discovered, the FSA didn't think that liquidity risk was in their remit because nobody had told them it was.  They just assumed that responsibility for monitoring liquidity and market activity remained with the Bank of England.  Trouble was, nobody told the BoE.

#2. Then we have the Vickers report out today, recommending the segregation of licensed deposit taking from speculative or principal trading, and as a tax payer I have to say that is a good thing.  Expect a wailing and gnashing of teeth from bank traders who will say that this will raise their cost of funding, but quite right too. Why should a commodity trader get a cheaper source of funds than any other trader, just because he is trading for a bank that can fund his trading book from government supported low cost retail deposits. To allow the extent of trading within retail banks has been political f***-up #2 of the last decade.

#3. And last of all, also from the Vickers report we have the suggestion that the LLoyds/HBOS retail network will have to be broken up.  You remember, the one that the prime minister of the day said Lloyds would be allowed to keep if they would do us all a favour by absorbing HBOS, and getting the government off the hook, an idea warmly embraced by the banks chairman, Sir Victor Blank (proposed for a knighthood by the Blair government in 1999), but less so by the chief executive. So if you are a long suffering Lloyds shareholder who has seen your investment in the conservative but stable bank wrecked by government pressure, you will now see the assets that you acquired being sold off at fire-sale prices because what Mr Brown told your company's management was palpably false.