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Sunday, 22 December 2013

Cable gets a twisted pair

Vince Cable objects to the government's planned range of measures to toughen welfare rules for EU migrants, including:

  • New migrants not getting out-of-work benefits for the first three months 
  • Payments being stopped after six months unless the claimant has a "genuine" chance of a job 
  • New migrants not being able to claim housing benefit immediately 
  • Deportation of those caught begging or sleeping rough, with no return within a year 
  • Quadrupling fines for employers not paying the minimum wage
According to Mr Cable and his boss Clegg, these measures would be illegal and impossible to implement. Well not quite, unless you hadn't noticed Mr Cable, you are a minister in the government and the law is whatever the government (that is you) manages to push through parliament. So if you don't like the measures proposed by the rest of the cabinet you can always resign.  Oh but that would mean losing your ministerial salary and chauffeured car.

As for "impossible to implement", what can be difficult about not giving benefits to people who are currently not entitled to them?  Rather than taking away a right that is already established, the government simply has to deem that certain categories of immigrants are only entitled to receive benefits under tighter conditions than UK citizens, but less stringent conditiond than those from outside the EU.

As with most Lib Dem policy statements (as picked up by the BBC) this is no more than willie-waving. As Mr cable told Andrew Marr: "There is very little evidence of benefit tourism from people coming from eastern Europe. All the evidence suggests that they put far more into the economy in terms of tax than they take out in benefits."

In which case, then why is Cable making a fuss?

Wednesday, 27 November 2013

Fishy numbers from Salmond and Sturgeon

Buried in the Scottish Parliament's White Paper is the purported justification for independence, or at least the calculations that say that Scotland is a viable independent state, or to put it in Salmond's terms, marginally better off outside the UK.

Sadly as we larn all too often, when a politician gives you facts, they are probably lying, and this case is no different.

Take the offshore oil tax revenues.  remarkably, Salmond and Sturgeon claim that 94% of the current tax revenues would accrue to Scotland if the revenues were divided on a geographic basis.  Which is quite remarkable because 22% of all offshore production and 51% of all gas production (public figures) are on the English side of the border.  That implies that oil production is something like 5 times as profitable as gas production., which it isn't, so something funny is going on.

By geographic basis, the SNP mean working out which oil and gas fields would lie on either side of the border and calculating the tax that would arise based on production of each field.  Which isn't quite right, because the corporation tax and PRT arising on each field is a bit more complicated than that because both cortation tax and PRT are taxes on profits, but computed on a different basis with a different set of rules on what is allowable and when, and PRT is deductible as an expense in corporation tax calculations.  The only person who really knows the answer about how much CT is paid and where is HMRC, who say that in in 2011/12 and 2012/13 the percentage paid in England was about 17% (corporation tax is largely paid on an estimation basis so the figures for this year are already known).

Now 17% is quite a lot more than 4%, which implies that the corporation tax from offshore oil and gas attributable to Scotland is some £1.3 billion less than the SNP calculation.

Then we come to the PRT, which runs at about £2 billion a year.  According to the SNP 94% of this is attributable to Scotland, although they give no justification.  In fact PRT was abolished for all oil and gas fields that came online after 16 March, so that most current oil fields, the notable exception being Forties, are not subject to PRT, although most of the gas fields are.  I happen to know for a fact how what a large percentage of the PRT receipts come from just one field because several years ago I worked on a PRT scam that was so effective that the Oil Taxation Office took only e weeks after the oil company's semi-annual PRT return went in to come up with some legislation to shut it down - but not before we put together a second deal.  So rather than the £80 billion or so of PRT attributable to England, I would say the figure is closer to £.800 million, which puts the total overstatement of offshore revenues at £2 billion.

Then we com to the amount of corporation tax attributable to Scotland, and here we simply have to look at the distortion created by the banks.  In the SNP report dated March 2013, the amount of corporation tax attributable to Scotland was over £3 billion, which is strange because in the HMRC report of last month only £2.6 billion would occur in an independent Scotland.  Even this is likely to be an overstatement because of the number of people working south of the border in banks that are Scottish registered companies.  The HMRC analysis allocates the UK profits of groups according to where the NI is paid, but the reality is that all the London based trading activity would fall to be taxed in the UK as a business carried on by a foreign company acting through a UK branch, and while the Scots would be free to tax the same income again, in all likelihood if they took on the UK tax rules, the UK tax would be creditable against Scottish tax, so that little Scottish tax would be paid on those profits.

All in all maybe a £2.5 billion overstatement of Scottish sourced revenues, so when the Scottish government says that they contribute 9.4% of public revenue and receive 9.3% of public spending, you can see that they are overstating the case.  If the more accurate figure is that they supply more like 8.9% of public revenue and receive 9.3% of public spending, then we have a picture that more closely resembles perception.

The trends are:
over 1998-2008 manufacturing exports from Scotland fell by 17% while they rose by 72% in the UK, 176% in Germany, 100% in France and 95% in the US.
in 2010 Scotland accounted for 6.6% of UK manufacturing employment, well below its population share of 8.8%.
85% of the 212,000 growth of employment in Scotland over 1995-2008 was in Health and Social Work, Education and Administration, Defence and Social Security

The reality is that while spending per capita in the rest of the UK is £10,800 per head, in Scotland the figure is £12,100 and in future if they want the same services at the same cost, the Scots are going to have to find an extra £1,300 for themselves. Up until now, the rest of the UK has been funding them, and  for one will be happy to see them go.  It is a zero sum game.  Their loss is our gain, and we might even be able to raise the average IQ of the country as a result.

Friday, 22 November 2013

Never say you cant trust a Frenchman

.. or woman. Hats off to Doria Tillier for being as good as her word.

She can sing too. Not everybody's cup of tea but more talent than you see on British TV.

Thursday, 31 October 2013

Are you up to the job?

There seems to be a debate as to whether teachers need a special qualification to be allowed into a government funded classroom.  I have looked up the senior members of staff at my former school and discovered that three of them do have a BA(Ed) or similar, but no PCGE's or whatever. Lord Denning (Maths) taught there for a year before he went on to do other things in The Law, and probably very interesting he was too.

Still, various MPs are raving about this in the media.  Of course, state funded MPs are paid more than state funded teachers. That wasn't always the case. Why are they paid more? Because, they would say, they do a more important job.

So where is the specific qualification that allows them to do this job.

Wednesday, 30 October 2013

Windfalls and thin slices

We have quite a big garden, and in that large space we have quite a few apple trees, which at this time of the year means we have a lot of apples, and this year's harvest has been as good as last year's which bodes well for this year's production of chutney, apple crumble and more.One of those mores, which will start next week when the Aga gets fired up will be the baking of thin slices of apple, which make a very healthy snack for the winter.  Think crisps without the salt and less starch.

Thinly sliced apples seems to be a metaphor for our times, or at least for the world famous phone manufacturer from Cupertino. A few weeks ago I bought a tablet.  Not one of the Californian wonder products, but a smaller version running a different operating system from a famous UK supermarket chain, at 25% of the price of a MacBook-without-a-keyboard. And very good it is too. It may not outperform a fully blown iWhatsit, but it is a lot better than the same size iWhatsit Mini that came out last year, at half the price (or even less with loyalty vouchers). And it is not the only offering at a similar price bracket.

This year Apple hit back - with a *thinner* model.  Well I have been buying technology for decades, following trends, buying when I though I could see the way things were going, but I have never, repeat never, chosen any technology simply because it was slimmer than the competition, and even more emphatically, I wouldn't pay twice the price for half the thickness.

Which is why I see the whole of Apple going the same way.  In the latest reported figures, sales are up, but margins are down.  Increased sales are mostly of the iPhone 5C, a model designed for mass sales in the Chinese market, but net margins have fallen below 35%: still eye-wateringly high but decreasingly rapidly.  The number of fools willing to pay over the odds for so-so technology has its limits, and the Chinese appear to fall outside that category.

My forecast for Apple is that their ability to screw more money from a fairly limited product range is not going to be enough to sustain the current Market Cap.  In the long term we are all dead, but in 2014 expect the maggots to show in the Apple share price.

Wednesday, 25 September 2013

Do the math, Miliband

The combined profits of the big 6 UK energy companies last year was £3.75 billion which is supposed to be a lot, but consider the following:

The average dual fuel bill last year was £1,420, and there are 26.4 million households so that works out at £37.488 billion of domestic fuel sales.  Of course not all of those energy sales were domestic.  We still have some industry and of course a lot of those sales were to government owned institutions such as schools, hospitals, the military and  government offices, so let us guess that only half of the profits were related to domestic sales, so that is profits of £1.85 billion on sales of £37.5 billion, or profits equal to 5% of sales.

Now consider the cost of the fuel, mostly gas.  Britain has had some of the cheapest gas in Europe because of the North Sea, and in fact at the moment it has the cheapest n Europe on average, and nearly half the cost of gas in Germany, but the difference is diminishing rapidly because North Sea gas production has been declining rapidly and we have had to import much more from Norway, from the Middle East via LNG carriers and from Siberia or Algeria via very long pipelines, all of which are much more expensive options than buying the gas that lies on our doorstep.

Why is that?

Because all the other suppliers always have the choice of selling to the rest of the world at the prevailing spot price delivered less delivery costs, and UK gas will always be sold at a price of world spot price delivered to the world market less delivery costs. In other words if a quantity Russian gas delivered to Germany costs 100 delivered, and it costs 20 to ship/pump the same quantity from the UK to Germany, then UK suppliers will happily sell to the UK market for 80 + a small bit.

On the other had if it costs 10 to ship from Norway to the UK and 25 to ship from Norway to Germany, the Norwegians will happily sell to the UK at 85+.

On the other other hand the Qataris will sell to the UK and Germany at about the same price because they bring their gas in by LNG and the Russians will probably charge the UK a bit more because the cost of shipping from Russia is higher to the Uk than from Germany.

So UK gas gives us cheap gas, but it is running out and the average wholesale price paid for gas is rising rapidly as more is imported, which is why average wholesale fuel prices have been rising at more than 10%.

So that in six months the likely rise in fuel prices (6/12 of 10%+ is probably greater than 5%) will wipe out most or perhaps all of the energy companies' profits, and a further 14 months retail price freeze will have them trading at a loss or going out of business.

Well done Miliband mi.  No idea what they teach on a PPE course but it doesn't seem to be Politics or Economics.  Must be a lot of Philosophy.

Tuesday, 24 September 2013

Scottish independence resolved

So Ed Miliband thinks he can control energy prices if he comes to power in 2015.  The only thing he can control is the price of hydrocarbons from the UK Continental Shelf.

And it's clear to see which way the Scots will vote now.

If Mr iliband is standing on an election promise of fixing energy prices, will he resign when it turns out that he can't.

Friday, 20 September 2013

As I was walking down the stair I met a tax that wasn't there

So the Labour Party say they are going to abolish the "bedroom tax". There is no such thing, so it shouldn't be too hard to abolish.

Wednesday, 18 September 2013

There's no such thing as a free lunch

Liberal Democrat Conference Stunt of the Day was the announcement of "free" school meals for the first three years of school.  Now it's never too early for our youngest students to learn that there is no such thing a s a free lunch (or dinner if you are up north or in a state school).

All these lunches have to be bought by the tax payer and cooked and served by paid staff (although the marginal cost of the latter may be relatively small if they were already working), and the cost of this will fall to the tax payer, or rather be added to the deficit.

So who is going to pay for it?  Why of course the very darlings who will be chomping the "gratis" Turkey Twizzler's, only they will be paying for it over 20 years with interest. Net gainers?  The middle class mums who will see their purses about £12 fuller every week?  The net losers?  The offspring of the "mostvunnerableinsociety" who will be paying for this mallarkey through the tax on beer & fags in 2035.

Tuesday, 10 September 2013

The value of nothing

I was struck by a claim at the BBC enquiry yesterday. In a typical piece of obfuscation Mark Thompson claimed that in laying off 227 managers in three years the BBC says it has spent £25 million over 3 years but saved £35 million in wages in the same period, and had thus saved money which is a good thing.

Maybe, but that isn't the whole picture because in saving £10 million the BBC loses up to 3 years of work per person, so it only makes a real saving if you assume that the work of those 227 senior managers had a value of less than £15,000 per year per person. Which makes you wonder why they were paid so much in the first place.

Monday, 9 September 2013

False economy

I've listened to it several times, but I must confess I am baffled by the suggestion.

Mark Thompson suggests that the BBC saved money by paying departing executives more than they were contractually entitled. The only way that works is on the assumption that BBC management are such bad negotiators that if they discussed paying less than the contractual obligation they would negotiate a figure that was far higher.

Monday, 2 September 2013

Oh how we laughed at Peston this morning

The idiot socialist who reports business for the BBC as though it is a crime gave us his low down on the Vodafone disposal of  its interest in Verizon Wireless.

There would be a substantial capital (true), which would be exempt from UK capital gains tax (true), because the shares in the US company were owned by a Dutch holding company (also true) and therefore outside the scope of UK Capital Gains Tax (no disposal by a UK company) and also exempt from Dutch tax (Peston didn'y go into theis but s called a Participation Exemption), If you really want to know  the participation exemption applies where a company holds at least 5% of the nominal paid-up capital of another company and the participation is not held as a portfolio investment or the company is subject to a tax on its profits that is reasonable according to Dutch standards or the aggregated assets of the subsidiary consist for more than 50% of business assets where the profits are taxed at a reasonable tax rate according to Dutch standards.

All bog standard tax planning, but likely to incur the ire of all the tax protesters of the world, particularly those who like camping outside big city churches that are handily placed for Starbucks.

So our joy was unconfined when Pesto came back on the radio at the next business broadcast to repeat the story, only adding this time, that if the disposal had been within the scope of UK Capital Gains Tax it would have been exempt under the Substantial Shareholdings Exemption, an invention of Gordon Brown.

The curious thing about the SSE, which I never really understood, was that according to the Scottish Fool who introduced it, it was supposed to encourage investment, yet rather than giving tax breaks when investments were made, the tax breaks arose when investments were sold, and applied equally to investments tat had already been made prior to the creation of the exemption. Still I am not the leader of a political party that was desperate for contributions from friends in the private equity business, and that's a story for another day.

Friday, 30 August 2013

Revenge is mine

Over 20 years ago I worked on a deal to fund a Spanish airline, well actually let's not beat about the bush, it was Iberia, and the deal was quite complicated, but it was probably the lowest cost source of funds that the Spaniards could have found anywhere in the world (seriously sub-LIBOR), but it entailed a certain amount of risk.

The downside would be that if the deal was terminated early Iberia would have kept their annual savings to date but would have to refinance under a different structure, probably with the same funders. As it happened I closed the same deal a few months later with an American airline, OK, let's not beat about the bush, it was American Airlines, to fund two MD-11 aircraft for about $146 million, a sweet deal for them and a $2 million fee for us as I recall, but let's not dwell on that.

Back to Iberia.  After several trips to Madrid explaining the deal, faxes (those were the days) of term sheets, mark ups and negotiations between the airline and the investor, a big party of lawyers, arrangers and investors set off for a meeting in Madrid with the airline, and in particular with the fairly recently appointed CFO, Sr Enrique Dupuy De Lômé Chávarri, to finalise terms.

As we are about to start the meeting, Sr Dupuy stood up and said he had read the term sheet and he had decided that while he liked the low cost funding on offer, he wanted the investor to take all the risks. At which point the lawyers, arrangers and investors all stood up, shook hands (they were, if nothing else, polite), walked out and went home. The shortest meeting I have ever attended.

But yesterday, I received notice of an Extraordinary Shareholders Meeting of International Airlines Group (the holding company for BA and Iberia), with five items on the agenda, the fourth being the appointment of the very same Enrique Dupuy De Lômé Chávarri as an executive director of IAG.

Will he get my vote? Dream on, pal.

Wednesday, 28 August 2013

Syria: follow the money

There is lots of waffle in Westminster circles about Syria, military action/intervention, chemical weapons and a whole lot more, but what is it really all about?

The UK government and quite a few others are up in arms about supposed chemical weapons used by the Assad government and they may be right about them, but they were less up in arms when rebel forces allegedly used sarin bombs four months ago. But why would they want to get involved in a civil war in a foreign country thousands of miles away?

On the one hand we have a Russian backed Alawite-regime that is strongly allied to Iran, while on the other we have a Sunni-muslim rebel/opposition front, financially supported by Qatar and Saudi, but mostly Qatari.

Neither side is likely to be particularly friendly to the west.  Anything that keeps Russia and Iran away from the Mediterranean is probably a good thing while the rebels are filled with revolutionary elements that are abhorrent to their sponsors, so do we really want to help either side?

Well to get the answer we have to look at the interests of the sponsors, particularly the Russians and the Qataris.  The Qataris would like to build a gas pipeline to Europe, which would reduce the cost of gas in Europe and would eliminate the Russian monopoly on supply.  The Russians obviously would not like that, and thus happily support the Assad regime that is willing to keep out the Qatari pipeline.

So there you have it.  What this is really about is that both the Qataris and the Russians are quite willing to oversee the deaths of 100,000 civilians in Syria in order to maximise their respective gas revenues.

However parliament votes tomorrow, they will be focussing on the wrong targets.

Friday, 9 August 2013

The organisation whose hypocrisy knows no bounds

is the BBC of course.

The organisation that is willing to criticise the salaries and bonuses of bankers but not the pay-offs paid to its own staff (currently under investigation by the SFO according to Reuters, but not reported on the BBC ho actually claim there was no crime, and I don't remember any police investigation of bankers' pay), the organisation that is willing to criticise the phone tampering of other journalists but is curiously uncensorious about the kiddie fiddling of its own staff, which it is quite likely they had know about for years, has done it again (if you can follow the logic of such a long sentence).

The ASA has decided to investigate the banners on the back the Home Office's "go home or face arrest" vans following 60 complaints, although the ASA say that since the BBC started reporting the story they have received many calls of support.  The BBC run with the idea that even though the vans clearly say that they only apply to illegal immigrants, they are clearly threatening.

Now let us compare that with the behaviour of TV Licensing, like this:

A fairly common letter from TV Licensing, and typical of the letters they send, but one which is clearly threatening the recipient, even though the only reason for sending a letter is that the recipient doesn't have a TV license, which of course he is not obliged to have if he doesn't have a TV.  Nor is he obliged to answer the BBC's persistent mail.  But that doesn't stop the BBC sending  people an "Official Warning" that they are being "investigated".

Wednesday, 7 August 2013

Batting rule #1

Duck if you can get out of the way, hook if you really must, but never slash at a bouncer, Mr Panesar.

Where is Bongo-Bongo land?

The President of Gabon from 1967 to 1973 was Albert-Bernard Bongo.  On his conversion to Islam he changed his name to Omar Bongo, and remained president for another 30 years. He was succeeded by El Hadj Omar Bongo.

There were two acting presidents in 2009, Didjob Divungi Di Ndinge and Rose Francine Rogombé. Didjob did the job for 5 weeks and Rose blossomed for the next five months before the current president, Ali Bongo Ondimba, took office.

On that basis Bongo-Bongo land is Gabon..

Sunday, 4 August 2013

Gibraltar border row

The Spanish say that they are considering imposing a €50 fee for border crossings into Gibraltar.

There is of course only one sensible response to that.  Move the border 50 km further into Spanish territory.

Tuesday, 30 July 2013

Masters of the universe (part 2)

Remember Blythe Masters? Perhaps not, but then who has a long memory these days?

If you can cast your mind back 4 years you may remember one female Labour politician saying the 2008 crash wouldn't have happened if Lehman had been called Lehman Sisters. Silly claim because as we all knew the systemic disaster that is the credit default swap sprang from the loins of the derivatives team run by the ever so definitely female Blythe Masters at J.P. Morgan.

Quite an achievement, but where does a career go after that?  Well in Ms. Blythe's case, back to NY to build up the physical commodities business at JPM, and by all accounts it seemed to be goin fairly well with the business becoming one of the largest on Wall Street, active in electricity and gas trading. But then it all went horribly wrong .... again.

JPMorgan Chase has just agreed to pay $410 million to the nation’s energy regulator, a move that will allow the bank to settle allegations that traders in its Houston offices manipulated electricity markets in California and Michigan. The pact announced on Tuesday is a record settlement for the regulator, the Federal Energy Regulatory Commission, which has ramped up its policing of Wall Street trading in recent months.

While the regulator fined the bank, it stopped short of penalizing individual JPMorgan executives. That decision is a reversal from earlier this year, when the regulator warned JPMorgan that it might seek to sanction Blythe Masters, the influential leader of the bank’s commodities business. Initially, investigators also planned to recommend that the agency hold three of her employees “individually liable.”

The accusations of market manipulation initially surfaced this spring in a confidential commission document, reviewed by The New York Times. The document, a warning that investigators would recommend that the agency pursue civil charges, had originally concluded that Ms. Masters gave “false and misleading statements” under oath.

From the outset, JPMorgan argued that Ms. Masters never made false statements.

The accusations against JPMorgan originated from its rights to sell electricity from power plants that it acquired after the bank took over Bear Stearns in an emergency rescue in 2008.

The plants that the bank inherited were outdated and inefficient. Still, the regulator said, traders in Houston found a work around. To transform the power plants into profit generators, the agency said, JPMorgan’s traders adopted eight different “schemes” from September 2010 to June 2011.

The trading strategies offered electricity at prices that appeared falsely attractive to state energy authorities. The effort prompted authorities in California and Michigan to make excessive payments that helped drive up energy prices, the regulator said.

As part of the settlement on Tuesday, JPMorgan will pay a civil penalty of $285 million to the Treasury Department. JPMorgan will also pay $125 million in “unjust profits,” the energy regulator said on Tuesday. That money will go to ratepayers in both California and the Midwest, where JPMorgan’s trading practices, the agency said, drove up prices for electricity.

Honestly, these women.

You have to feel a bit sorry for Mohammed Morsi

After years of listening to the West talking about the value of democracy, the Egyptians hold what appear to be reasonably free and fair elections, and Mr Morsi wins.  Not the result perhaps that everyone in the west was generally hoping for, but hey, that's democracy and, fair enough Mr Mohrsi gets to take charge.

Fast forward a few years and things may not have run that smoothly.  There is serious rioting in the streets, and the army, as they often do, decides that as self appointed guardian of the nation, they have to step in and take over.

Which is not so good for Mr Morsi, particularly because he is carted off to some unknown place while the current boys in charge figure up some trumped up charges to put him on trial.  Of course he is generally immune from prosecution during his time as head of government so they have to try to dig up some dirt going back to 2011 accusing him of plotting with Hamas to free prisoners from Egyptian jails. Maybe he did, maybe he didn't, but if he did, Mr Morsi probably considers himself to be like those who stormed the Bastille.

Certainly this democracy thing is hard to figure out.

But then they really rub salt into the wound, because who should pop up to talk to Mr Morsi for a couple of hours in his salubrious oubliette than the unelected and unaccountable Lady Ashton, whose rise without trace echoes that of many of the leaders of the former National Democratic Party. Although, no doubt she was able to lecture him on the democratic systems of the west.

Sunday, 28 July 2013

Once a slimeball always a slimeball

An email sent by the then British ambassador in Tripoli details how a prisoner transfer agreement would be signed once Libya “fulfils its promise” to buy an air defence system. The last Labour government, always insisted that Abdelbaset al-Megrahi’s release was not linked to commercial deals.

The email, which contained a briefing on the UK’s relations with Colonel Muammar Gaddafi’s regime, was sent on June 8 2008 by Sir Vincent Fean, the then UK ambassador, to Tony Blair’s private office, ahead of a visit soon after he stepped down as prime minister. Blair flew to Tripoli to meet Gaddafi on June 10, in a private jet provided by  Gaddafi  , one of at least six visits Blair made to Libya after leaving Downing Street.

The 1,300 word briefing explains how keen Britain was to do deals with Gaddafi. It also suggests that:
  • the UK made it a key objective for Libya to invest its £80  billion sovereign wealth fund through the City of London
  • the UK was privately critical of then President George Bush for “shooting the US in the foot” by continuing to put a block on Libyan assets in America, in the process scuppering business deals
  • the Department for International Development was eager to use another Libyan fund worth £130 million to pay for schemes in Sierra Leone and other poverty-stricken countries.
The release of Megrahi in August 2009 caused a huge furore, with the Government insisting he had been released on compassionate grounds because he was suffering from terminal cancer, and that the decision was taken solely by the Scottish government.

Megrahi had been convicted in 2001 of the murder of 270 people when PanAm flight 103 from London to New York blew up over Lockerbie in Scotland in 1988. It remains Britain’s single worst terrorist atrocity.
Libya had been putting pressure on the UK to release Megrahi and in May 2007, just before he left Downing Street, Mr Blair travelled to Sirte to meet Gaddafi and Al-Baghdadi Ali al-Mahmoudi, Libya’s then prime minister.

At that meeting, according to Sir Vincent’s email, Mr Blair and Mr Baghdadi agreed that Libya would buy the missile defence system from MBDA, a weapons manufacturer part-owned by BAE Systems. The pair also signed a memorandum of understanding (MoU) for a prisoner transfer agreement (PTA), which the Libyans believed would pave the way for Megrahi’s release.

The British government initially intended the agreement to explicitly exclude Megrahi. However, ministers relented under pressure from Libya. In December 2007, Jack Straw, then justice secretary, told his Scottish counterpart that he had been unable to secure an exclusion, but said any application to transfer Megrahi under the agreement would still have to be signed off by Scottish ministers.

With Mr Blair returning in June 2008 — as a guest of Gaddafi on his private jet — the government appears to have used the chance to press its case for the arms deal to be sealed. At the time, Britain was on the brink of an economic and banking crisis, and Libya, through the Libyan Investment Authority, had billions of pounds in reserves.

Sir Vincent gave Mr Blair’s office a briefing on the state of relations with Libya. The email suggests that Mr Blair was being used as a conduit. Sir Vincent wrote: “There is one bilateral issue which I hope TB [Tony Blair] can raise, as a legacy issue. On 29 May 07 in Sirte, he and Libya’s PM agreed that Libya would buy an air defence system (Jernas) from the UK (MBDA). One year on, MBDA are now back in Tripoli (since 8 June) aiming to agree and sign the contract now — worth £400 million, and up to 2,000 jobs in the UK.

“Saif [Gaddafi’s son] says they are to come back to conclude; but there is opposition within the Libyan armed forces, from those in the Russian defence equipment camp. We think we have Col Q’s [Gaddafi’s] goodwill for this contract: it would be very helpful if he expressed it more clearly. This issue can also be raised with Libya’s PM, and the Planning Minister. It was PM Baghdadi who told the media on 29 May 07 that Libya would buy British.

“Linked (by Libya) is the issue of the 4 bilateral Justice agreements about which TB signed an MoU with Baghdadi on 29 May. The MoU says they will be negotiated within the year: they have been. They are all ready for signature in London as soon as Libya fulfils its promise on Jernas.”

The PTA was signed in November 2008 by Bill Rammell, a foreign office minister.

Megrahi was diagnosed with prostate cancer and released in August 2009 on compassionate grounds when he was given three months to live. He died in May 2012.

The Libyans never signed the arms deal, MBDA said yesterday. “MBDA operates, at all times, strictly within the limits of clearly defined export licensing regimes issued by the relevant Government authorities,” a spokesman said.

“All MBDA’s dealings with Libya were purely commercial and in accordance with the EU directive at the time.” The disclosure of the email, which was obtained by The Sunday Telegraph as a result of a Freedom of Information request, angered the relatives of victims of the bombing.

Pam Dix, whose brother Peter died at Lockerbie, said: “It appears from this email that the British government was making a clear correlation between arms dealing with Libya and the signing of the prisoner transfer agreement.

“We were told Megrahi’s release was a matter strictly for the Scottish government but this shows the dirty dealing that was going on behind the scenes.”

Mandelslime, who was business secretary when Megrahi was released, said he was unaware of any possible links between commercial deals and negotiations over a release.  Strange then that he should be all over the libyans and the Gadhaffi family, but totally ignorant of the UK ambassador's views.  But then we never did find how someone earning less than £150,000 a year before tax for all of his 40 year career could go from having to touch up Geoffrey Rodinson for a loan for a £300,000 flay in the 1990's to buying an £8 million house for cash 15 years later.

Jack Straw, who negotiated the PTA, said no deals were done over Megrahi, and it was always a decision for the Scottish government. Except that the ambassador's memo shows that deals were done.

The email from Sir Vincent also informed Mr Blair on the latest stage of Megrahi’s bid for release, and urged him to fend off any demands that he be sent back. By 2008, Megrahi was appealing against his conviction for mass murder. “Col Q may very well raise Megrahi,” wrote Sir Vincent, “Saif [Gaddafi’s son] raised the case … last week. It is now before the Scottish Appeal Court and sub-judice.

A spokesman for Blair said that the prisoner transfer agreements did not relate to Megrahi. The email, he added, did not show “that the UK government was trying to link the defence deal and Megrahi. Actually it shows the opposite — that any linkage was from the Libyan side."

Which is actually a travesty of the truth.  The memo mentions Magrahi by name, not that that would mean anything to the lying shyster.

Friday, 26 July 2013

An excessive build-up of mucus

At least that is how my dictionary describes catarrh, or to give it its modern Arabic spelling, Qatar.

And that is how the current debate over the 2022 World Cup sounds. Well we all know how the Qataris won the bidding.  It wasn't down to their excellent record in the competition - they have never qualified.  Nor was it down to the excellent quality of their stadiums and practice facilities - they have 3 and they are not fit for purpose.

Nor was it even due to their climate. As everyone else realised at the time and it is now dawning on FIFA, 50C is no temperature to watch football, let alone play it. And after a few years the Qataris now say that they would like to interrupt the European football season, requesting that the various leagues interrupt their multi-billion TV schedules so their audiences can watch Tunisia v Bolivia or Taiwan v Costa Rica.

The reason of course, as is always the case in modern global sport, was money, lots of money.  Possibly due to the bribery of football associations who were promised stadiums by the Qataris. Possibly due to the bribery of  the representatives f those associations, and possibly due to the bribery of Blatter and his muckers.  They have plenty of form as Panorama exposed two years ago.

In any event, the one set of interested parties that has always been overlooked is the fans.  Assuming that the tournament is played in the summer but not at the peak of the summer in June, allowing some time for post-season acclimatisation, that would imply the usual three week mid to late July timetable. Still thirsty weather, which is a shame for the average beer drinking fan.  Alcohol is usually available in the swankier restaurants in Qatar at 3 to 5 times the price in the same sort of venue in London, and is also available to licensed expats. But it is not available at all during Ramadan, which in 2022 begins on July 10th.

Monday, 15 July 2013

How the state lies to you

A fascinating story on the BBC about the failures of the NHS, notable not so much for the way the NHS has covered up its failings so much as the way that such dishonesty is endemic in parts of the state sector.

The headline reads
NHS failings 'suppressed for electoral reasons'
which seems fairly clear. It goes on to say
An independent expert on mortality rates has suggested that ministers have suppressed details of NHS failings to avoid losing votes.
Prof Sir Brian Jarman said a "basic problem" with the NHS was that the government both provided health services and monitored them.

Now I don't know how you read that, but to a simple reader like me, it would appear that this is a failing of current ministers.  But no, although the article does mention Andy Burnham a few times, you have to read down to paragraph 11 before you find that the BBC admits that this was actually a story about suppression of bad performance by ministers in the previous Labour government.

However, not content with misleading us about how much the last Labour government misinformed us about the failings of the state run health system, the Bolshevik Broadcasting Corporation gives its political masters to cover itself with a spin doctor's fig leaf.

Not so, says Andy Burnham, the last government "established independence" by setting up the independent regulator and that "was not the move of a government that wanted to hide".

Which is the least convincing piece of logic I have heard in a long time. Because they set up an independent regulator they can't have suppressed any reports.  Pull the other one. We know that the Care Quality Commission pulled bad reports and we know that they acted under pressure from ministers.

The trouble is that the BBC lets Labour get away with this flimsy thinking, Not surprising when their reporting is so stilted as evidence by the article.

Friday, 5 July 2013

And this is a crime?

"The wife of a convicted terrorist has pleaded guilty to failing to provide information that might have helped in his arrest and prosecution."

Or so says the meejah.  But there must be more to it than that. I think I would be guilty of the same offence, even though I have never met the guy, becuase I have also failed to provide any information that might have helped in his arrest and prosecution.

Wednesday, 5 June 2013

Location, location, location

I always think the property market is built on hype and unrealistic expectations, but now there is some good news for the global property market.

I refer of course to the news from America:

Our Solar System's Milky Way neighborhood just went upscale. We reside between two major spiral arms of our home galaxy, in a structure called the Local Arm. New research using the ultra-sharp radio vision of the National Science Foundation's Very Long Baseline Array (VLBA) indicates that the Local Arm, previously thought to be only a small spur, instead is much more like the adjacent major arms, and is likely a significant branch of one of them.
"Our new evidence suggests that the Local Arm should appear as a prominent feature of the Milky Way," said Alberto Sanna, of the Max-Planck Institute for Radio Astronomy. Sanna and his colleagues presented their findings to the American Astronomical Society's meeting in Indianapolis, Indiana.
If Mr Sanna is correct then every estate agent can update their material to begin "Conveniently located on a prominent feature of the Milky Way", which probably adds 5p to the value of your house.

Monday, 27 May 2013

Pull the other one, Mr Schmidt. It's got bells on.

Google's executive chairman Eric Schmidt has said he is "perplexed" by the ongoing debate over the company's tax contributions in the UK. Mr Schmidt told the BBC that the company did what was "legally required" to pay the right amount of taxes. Google paid £10 million in UK corporate taxes between 2006 and 2011, despite revenues of £11.9 billion.

I say despite, not on, because we all know that corporation tax is payable on profits, not revenues, or to be more precise it is a tax on the taxable profits of limited companies and clubs, societies, associations, co-operatives, charities and other unincorporated bodies. Taxable profits for corporation tax include trading profits, investment profits and capital gains. Companies within the charge to corporation tax include foreign registered companies that are resident in the UK, usually by virtue of their management and control, and foreign companies that carry on a trade in the UK through a permanent establishment.

Now Mr Schmidt may try to sound "perplexed", but the reality is that it is quite tricky to fall outside the scope of corporation tax, unless you really want to. That is not to say that it is impossible to do so, but that if anybody has UK sourced revenues of £11.9 billion, a permanent office in the UK from which sales and marketing take place then they had probably take a bit of advice from their lawyers and accountants.

Make that a lot of advice from their lawyers and accountants, which is going to cost a fair bit and someone has to approve the bills.  Which is why you're fooling no-one, Mr Schmidt.

Friday, 10 May 2013

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".

Friday, 3 May 2013

One for Dr Who fans

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

Friday, 26 April 2013

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.

Tuesday, 23 April 2013

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.

Friday, 19 April 2013

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.

Thursday, 18 April 2013

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.

Friday, 12 April 2013

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.

Monday, 8 April 2013

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.

Saturday, 6 April 2013

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.

Monday, 1 April 2013

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

Friday, 29 March 2013

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?

Wednesday, 27 March 2013

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.

Thursday, 21 March 2013

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.

Monday, 18 March 2013

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.

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.

Sunday, 17 March 2013

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.

Saturday, 16 March 2013

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.

Friday, 15 March 2013

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.

Wednesday, 13 March 2013

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.

Tuesday, 12 March 2013

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

Sunday, 10 March 2013

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.

Wednesday, 6 March 2013

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. 
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.

Tuesday, 5 March 2013

Left wing dictator dies - BBC goes crazy

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