Capitalists@Work

£61.6 billion secret loans; no scandal

2009-11-25T00:01:00.000Z

Lots written today about the Bank of England not disclosing the size of the loans to the bust banks last year. Some truth in that they could perhaps have been fully open beforehand.

However, the idea of a lender of last resort is that you take effective action and this is certainly one of the few times the Bank of England made the correct decision in the credit crunch.

Also, in its own way the Bank of England balance sheet, published weekly, made it quite clear huge sums were being lent, but not to whom. However, it was not rocket science to guess who was big enough and desperate enough to want the money; just check out the collapsing share prices of the biggest banks!

So all in all this is a bit of a storm in a teacup as I see it. If small shareholders in Lloyds think this is yet another aspect of deception then so be it; why don;t they campaign for Eric Daniels to go, he after all is the remaining architect of the deal?

Working/Trading

2009-11-24T07:00:00.000Z

Having had to work a weekend for the first time in a while, the true nature of the volatile markets we have had has hit home. Prices of UK shares are rising and falling very quickly right now and day to day. If you can't follow the markets closely then your positions become very exposed.

This is normally a bad sign, similar to a spinning top running out of energy, as the wobble grows the crash comes nearer. QE has prevented a crash so far and yet the top of the market seems close now. My hunch is that we will see 2009 out and then in 2010 there will be another roller coaster with big drops in prices of oil, commodities and share prices in the first few months of the year.

Interesting times for trading, if only I can find the time to keep up!

Blacks in the red.

2009-11-23T20:41:00.004Z

Blacks Leisure have avoided administration and destruction by getting landlords and creditors to agree to a company voluntary agreement. Landlords are having a bit of a moan at having to take all the pain but they have little option. Long lease agreements with upwards only rent increase and unfair rent reviews have punished retailers for a long time. A unit may have had a brand new retail park open at the other end of town and still find itself locked into a 12 year lease with increasing rents as its footfall continually drops making it not just unprofitable but completely cancelling the profit from another store or two.
Now, with empty space on every high street in the land the hiking boot is on the other foot.

Liz Peace, chief executive of the British Property Federation, said: "While this CVA has covered landlords' empty rates payments, it has not taken any bite out of shareholders' or other creditors' pockets. Landlords have borne all the pain, and when you consider that many of our pension funds are invested with them, it is clear this is not fair."

Oh dear. Boo Hoo.

Landlords have to pay the rates even on empty buildings and with virtually no chance of an early let for the newly empty Blacks and Millets units the administrators X in the £ wouldn't have gone far.

In fact landlords still have a pretty good deal. For one, they are not among the 450 staff who will be unemployed shortly as Blacks Leisure close their 89 worst performing stores, about a 1/4 of the group. Secondly they will get a 6 month rental payment. Thirdly they will continue to have the rates paid on the empty units, which are usually a third of the total rent bill, by Blacks instead of having to pay them themselves.. Fourthly, by being forced to agree to monthly, instead of three monthly in advance rents, they have greatly increased the chances of the firm surviving to honour its future rental payments.
Lastly, although there is no detail, it would be amazing if the new lease agreements do not contain entirely favourable conditions for the landlord, such as a one way, one month notice to quit, or rent review in 2010 or something similar.

Blacks has been on the C&W sick list a long time. KPMG who brokered this CVA also did so for JJB, another on the very sick list. They are not in the clear, just temporarily out of intensive care, but the new improved medical facilities might just help them survive.

Its not guaranteed though. BQ can think of at least two high street chains that currently pay zero rents and are still losing money every day.

Gold Again: And It's Still Impressive

2009-11-22T16:28:00.007Z

A few weeks ago I wrote that, from my utterly non-insider's viewpoint the gold breakout looked impressive. A commenter agreed. Turned out it was the Indian government buying a whole heap for their reserves.

Since then it's soared away (leaving a few notable casualties in its wake) and is apparently forming a ... wait for it ... a Swiss Stair. This, according to my diligent google-researches, is taken to imply that (as I surmised before) some heavy-duty players are intent on buying in large quantities, and the market knows it.

So - now you know too! Click image to be blown away ...

(long gold meself; do yer own DD etc)

ND

Retail online sales predictions

2009-11-21T09:31:00.001Z

.Just thinking about last years predictions for this year. One of the better ones was pick firms, especially retailers with a strong online presence.

Consumers are expected to spend £8.9 billion this Christmas, representing 20p in every £1 spent according to research carried out by the Centre for Retail Research for Kelkoo.

The piece goes on to describe a 50% online sales Christmas by 2015, which seems ridiculously optimistic as it requires full retail Y-O-Y growth, online to continue growth at 24% while offline takes no action to combat that. Even so online continues to make advances.

Capitalists hard at work...

2009-11-20T16:26:00.001Z

hopefully back from 'tut mill shortly....

Gazprom in Wonderland

2009-11-19T09:45:00.003Z

As promised, an update on Gazprom’s travails in the European gas market.

The story so far: gas demand in Europe has slumped and the spot price has collapsed, facts that (under the Civil Code contracts used by continental gas buyers) can be adduced to force a renegotiation of prices and/or volumes. The big wholesale buyers are politely bringing this to the attention of Gazprom, their friendly Russian supplier. Gazprom has told them to, err, take a hike, and that their expensive oil-indexed contract prices are here to stay. Now read on...

Gazprom is reluctantly being forced to takes its arguments public. Trouble is, they are truly awful arguments, to wit:

‘Gazprom has defended oil indexation, saying there aren't trading hubs with sufficient volume to provide better pricing signals than oil products. "The NBP [the UK pricing hub for wholesale gas] handles 15 billion cubic meters of gas a year while Gazprom sold 160 billion cubic meters to Europe last year," said Sergei Komlev, head of price formation at Gazprom Export. "If we used the NBP it would be like the tail wagging the dog".’

Unfortunately Cepëж мой друг, the figures are not these at all – you are out by two orders of magnitude.

According to best estimates, trade at the NBP is approx 10 times the amount of underlying UK demand, itself around 100 billion cubic meters per annum. A higher multiple would be preferable, but a churn of 10 is pretty respectable. Hence, price formation here is based on around 1,000 BCM of trade – around 6 times more than Gazprom’s exports. Some tail !

NBP price formation is not beyond technical criticism, but inputs include the dynamics of diverse pipeline gas supplies and LNG; the smaller German, Dutch, Belgian and French wholesale markets are highly correlated to NBP; and it is used as a pricing basis in vast amounts of contracts for traded and delivered gas and a range of derivatives across all of the UK, much of northern Europe, and in the substantial Atlantic LNG trade. It’s a real, meaningful price, reflecting the fundamentals of supply and demand. An ideal candidate for indexing long-term contract prices, obviating the need for future price renegotiations.

Still, Gazprom can rely on plentiful Stockholm syndrome amongst its counterparties.

‘The International Energy Agency said on Tuesday there could still be a big surplus of gas in the global market until 2015, but an E.ON executive said the IEA was being "a little bit on the pessimistic side".’

Yup that’s E.ON, a buyer, one of Gazprom’s biggest, hoping the surplus won’t last long! When our suppliers start thinking like this, heaven help us consumers.

ND

Queen's speech - continued

2009-11-18T18:38:00.004Z

My government will set out its legislative platform for the coming parliament. My government will continue to lead the way in the economic management of the country. My government is also continuing to put the welfare of the people of Britain first and believes in a caring welfare state to protect them. It also believes in a robust economy, and a halving of the national debt by 2014. My government believes in pretending to legislate for further devolution of Scotland and Wales. The government also believes in completely unfunded free care for the elderly, new railway stations for labour voters, space hoppers for children, a bill to encourage the invention of domestic robots for hardworkingfamilies.

My government is an aspirational government and firmly believes in Magic, The Bermuda Triangle, The tooth fairy, witches taking the form of cats, Santa Claus, that Red Bull is really good for your health, UFO's and unfunded public sector pensions.
My government really believes that the winner of the X factor is always the most talented, that utility companies have the best interests of consumers at heart, owning the banks will encourage greater lending. My government has a strong belief that Emus can really fly but choose not too , That MP's are appointed to high office on merit not loyalty, climate change is not just a scheme to raise taxes, films with Ben Affleck make money, broken biscuits contain no calories and that the Lib Dems have a fair chance of forming a majority government.

Finally, my government would like to state its unshakable, iron like belief in Aliens, the Loch Ness monster, it all started in America, the 5p being a really user friendly coin, Northern rock will generate a profit for the taxpayer, magic beans, Gordon Brown campaigning for Tony Blair to be president of Europe will be a benefit, Pokemon, zombies stalking the earth at night, werewolves, recycling, telepathy, age reducing skin cream, Scotland would beat England at soccer,Dr Who, Hades, that the EU is about to sign off its accounts, crime really has reduced since 1997, if you cut open a tennis ball it contains poison gas, printing money doesn't cause inflation, peace for everyone and an end to all war,hunger,poverty,disease,discomfort,irritations,niggles and ennui. Most importantly my government steadfastly believes that it will win the next election.

I commend this fantasy speech to the bin.

Queen's Speech; Brown makes Queen lie to Parliament

2009-11-18T10:46:00.004Z

That is the essence of the Bill being fanfared around by Peter Mandelson this morning. No not the ludicrous, gimmicky bankers bonus' bill (where is theMP's expenses bill?).

No this is the financial commitment to halve the UK annual deficit in 4 years. It is important to understand what this means. This is not reducing the Country's overdraft, this is reducing the rate at which the overdraft is increasing.

Currently it is at a catastrophic 12% per annum. Gordon Brown and the EU used to say 3% per annum was too much. Now we have twelve. If in 4 years we can get this down to 6% then apparently this is some kind of triumph.

In fact it is a total fiscal disaster, where will will have DOUBLED the real national debt and as such will be paying DOUBLE the amount of interest, in fact with interest rates set to increase this could TRIPLE or QUADRUPLE. This amount of interest is currently equal to the defence budget, quadruple it and it is the NHS budget. So we will need massive tax rises and cuts come what may.

The Government will be out today saying how committed they are to debt reduction. They do not mean anything of the sort and it is an outright, plain and simple lie.

Bid for Minerva plc

2009-11-17T10:44:00.002Z

One of my main trading shares this year has been Minerva plc. A UK property developer whose share price got mauled in the collapse of last year and this. However, Minerva was and is building top quality office space in the City of London which will always attract premium pricing.

I had Minerva from last year in a small way, figuring it was very oversold and that Kifin, a South African stake builder, might bid. I held in April through the stock market collapse and topped up. Over the summer through the boom it became my largest investment. Then I sold and re-bought as the price started to move on the refinane news.

Today a bid has finally come in from Kifin for 50p a share, my average is now 22p, up from a low of 10p. Still not bad. There is a strong chance this bid won't be accepted as it is really still a cheeky offer for a company with reasonable prospects.

In many ways it will be a shame to book the money on the deal, for as much as there is satisfaction in having made a good choice, it is always fun to run with a share where you know what is going to happen next and how to buy and sell the peaks/dips. Still with an increased bid I will be most satisfied.

Hope some of you have followed this story closely, as most of the time I tipped it the shareprice was under 15 - so should be 300%+ gain in 6 months.

Digital Mandy

2009-11-16T15:31:00.003Z

No.3 in the PowerPoint (R) series ...

Incompetent Government can't even blow bubbles

2009-11-16T07:00:00.000Z

The current Government is intent on blowing an asset bubble to get us back to 2007 . Oh, happy days. A key part of that is to re-pump the housing market. This will help the now Government owned banks with their mortgage portfolios and keep the all important Daily Mail onside.

However, as ever, Governments are not very good at joined up working and here is a typical modern example. The Daily Mail et al were very upset at the introduction of Home Information Packs; all set to bring added administrative burden, a lack of inspectors, that sort of thing.

However, there are people queuing up to be HIPS inspectors in our new wonderful spare capacity economy. Where there is a block however is in local Government. Due to cuts backs C@W understands that 3 big London boroughs, Woolwich, Croydon and Greenwich are processing as few as 2 HIP requests per day. Indeed, they have been cutting back on Property Searches recently to save money.

Given that you can't legally sell your house without a HIP this is going to cause a great blockage in the system. At the moment volumes in the housing market our very low so the impact is not yet noticeable in the mainstream; it will be though as bubble keeps getting blown.

Of course, a sensible Government may just scrap HIPS altogether.....

Deserves Some Kind Of Award

2009-11-15T12:50:00.006Z

Over the years I have been kinder than many towards foibles of the Grauniad, but my policy is now under review. Get this - from yesterday's editorial 'leader':

"The solution may be to do something that was last successfully tried in the 80s – and fix prices for fossil fuels. This would force producer countries to negotiate with a full range of consumer countries from Britain to Bangladesh. Oil could be charged at different rates to different countries, depending on their wealth. Rich nations would be charged full whack, to wean them off fossil fuels and on to green energy; the world's poor would pay less and would have greater certainty over their fuel bills. Part of the revenue would go into a pot to help poor countries deal with climate change"

Solution ? Successfully ?? Bleedn'ell ! One would hope this wouldn't pass muster even for today's devalued 'A'-levels; but for a leader in a national broadsheet ?!

Tell me it's a spoof ...

ND

EU shoots wrong target

2009-11-14T10:51:00.003Z

As ever with the financial crisis, the Authorities in Europe are taking aim at the wrong targets. Today we can see the Private Equity and Hedge Fund industry being targeted for bonus payments like the banks.

Yet, the history of the crisis shows the Hedge Funds had very little to do with anything, the short selling crisis was made up; bank share prices fell more after the short selling ban. When it ended the share prices of banks rose!

However, a victim needs to be found, and the Eu authorities don't want the people to know that many of the problems are in fact regulatory failures; exploited by the Hedge Funds.

Also it so happens that this industry is in London, outside the Euro and with an incoming Euro-sceptic Government. A nice target to hit. The Hedgies are going to Switzerland; personally I can see benefits for the UK to copy the Swiss model of co-operation with the EU rather than membership if we are simply going to be targeted as evil Anglo-Saxons at every opportunity.

Friday Fun 19th Century style

2009-11-13T12:09:00.015Z

If our great leaders were propelled back in time which particular style of mustache or beard would they adopt for that all important Punch cartoon sketch for the First Lord of the Treasury's pronouncements or posing in the churchyard remembering the Khartoum war dead.

This week fit the facial hair to the politician.

David Cameron
Peter Mandelson
Gordon Brown
Ed Miliband
Ken Clarke
Jack Straw
Alistair Darling
George Osborne
Boris Johnson
Nick Clegg
David Laws
Ed Balls

Jar of Cockburn's Fortitude Beard and Bristle Wax to the winner

We love Spain

2009-11-12T15:46:00.004Z

Oh yes we do and not just because of beauties like this lady.

You see Spain has so much going for it, a great place to go on holiday, beautiful weather and landscapes, nice people and thanks to Euro membership and economy even more shot to pieces than the UK economy.

In addition to all that, the Spanish Airline Iberia is just about to merge with our own, dear British Airways. You know the one, where all the staff strike at being paid double the industry standards; where the pension deficit is far bigger than the value of the company; the one that loses a million pounds a day and has done so for 2 years straight. Brilliant, thanks Iberia for being willing to share the load with us.

You may remember these posts too, when another kindly Spanish company Ferrovial enriched UK shareholders by buying BAA in huge top of the market leveraged finance deal. Now it has all gone sour for the Spanish owners with BAA splilt up and the debt overhang too heavy to want to even think about.

So for the hat-trick lets all hope that strong Spanish bank Santander can come along and take RBS off the UK taxpayers hands; what a coup that would be for the UK.

Vamos a ver?

Oh, The Irony

2009-11-11T20:30:00.003Z

"The decision on who should be Europe's first council president and foreign minister may have to go to a vote [sic] next week, as agreement among EU leaders proved elusive"

here

ND

No hyperinflation then?

2009-11-11T11:27:00.006Z

The Bank of England has come out today (see chart above) and said that as the economy is recovering a bit quicker than expected, that inflation may increase more than it had previously predicted; All very well couched, as usual.

However, it seems to think inflation is unlikely to go to much more than 2% by 2012 and that interest rates will head to the same level by then.

The BOE has been spectacularly wrong during this recession, keeping interests rates too high; might they have gone gone the other way now?

It is not likely, the high chance of a renewed recession next year is discounted, even when a cursory glance at the banks, quantitative easing and government deficit suggest a very bumpy 2011.

As such UK rates will remain low; don't go rushing to fix your mortgages just yet.

Enough Energy to Raise a Smile

2009-11-10T12:32:00.010Z

- but only just.

Miliband (Ed)'s much-trumpeted nuke-and-coal announcements yesterday offered no meat that wasn't already on the table, and just about enough collateral comedy to raise a thin smile.

Firstly it offered us the plaisanterie of EDF's Vincent de Rivaz trying to argue that a government guarantee to ensure a price-floor on CO2 emissions wouldn't be a subsidy. Hohoho, monsieur. Then, we had Paxo's opening question to little Ed on Newsnight last night (8 min 45 into the prog).

Paxo: "so: will all these 10 nuclear plants be built ?"

L'il Ed: "did you say 'will they' ?"

Paxo: "Will they be built ?"

Li'l Ed: "err, err, well, that's err, err" (etc) (hint: no, they won't)

And all this cheery banter on the night his brother apparently confirmed he won't be accepting the nomination to be Europe's Lord High Whatever, thus dashing Ed's hopes of succeeding Brown next year. Tough shit Ed, but you had it coming.

Seriously, though, Miliband Minor must be credited with being the only member of Brown's Cabinet who instead of whimpering into his handkerchief is trying to conduct business as usual.

But what sorry business it is.

ND

+ UPDATE + this apposite Grauniad piece should add to the gaiety of the nation.

Hammy Christmas

2009-11-09T20:00:00.002Z

The must have present this Christmas is a battery powered hamster.

Toys R Us has said that the “must have” toy for Christmas 2009 will be a battery operated hamster that has caused such a stir in the US that the company could not include it in its Christmas toy catalogue for fear of disappointing customers. 

The Guardian had the story today. A range of battery-powered toy hamsters, costing just under a tenner a time, are proving to be among the must-have toys of the moment.

It's better, but not always necessary, for a toy that appeal to girls and boys to be picked as the big seller. In the past its been cabbage patch dolls, Mutant Ninja Turtles, PSPs. This one looks like you should be looking for a stockist about now as its low price entry of £9.99, and many retailers scaling back the inventory this year, make it a sell right out line.

No Woolworths this year ..
Where are you going to get your
Christmas toys from this year?

Berlin's wall was capitalist legacy

2009-11-09T12:52:00.004Z

20 years ago the Berlin wall came down today. yet everywhere in the UK media today I see revisionism at work. it is sad. this article in particular takes the biscuit; a real i am all right jack how dare you pull the ladder missive.

In the midst of a recession mad lefties are saying how the fall of communism has only slightly pre-dated the fall of capitalism. Utter drivel of the highest order. George Galloway said he was sad the day the wall came down.

In fact the fall of the wall is down two indisputable facts; the people of Eastern Europe were sick of the dictators and the failure of the 'communist' economic model to keep pace with the West in guns or butter terms, meant that the revolutions succeeded. Thatcher and Reagan were key to the latter part.

Let's not pretend this celebration is about anything other than the joy of watching freedom and liberty overcome the forces of autarky and repression. It should do the left well to reflect too on where their hearts lie on these matters.

The worst policy of New Labour, Ever.

2009-11-07T23:19:00.000Z

Really, I have heard of some daft Government policies, Cones hotlines, Dangerous dogs, 5-a-day, etc.

But today takes the biscuit big time. At the G20 Alistair Darling and Gordon Brown started advocating the tobin tax. This is an old left idea for taking a tax on all international finance transfers.

Not only do very few countries agree with this idea, it is simply impractical to implement; and wrong. more tax is never the answer as all good capitalist know.

What really staggers me though is that Badger and Brownstuff could promote this idea in the very week in which they confirm the UK taxpayer is to own the largest international bank in the world by assets and 43% of another top 20 bank.

So the UK government now owns banks and is advocating a policy which will cripple there recovery. This is beyond stupidity, it really is.

In years to come the political world will have a new lexicon for all this Government;

'as stupid as a Brown plan' - for a truly appalling policy announcement

'even Brown would not have done that' - for a really turkey of an idea

ad infinitum.

Rangers a sign of things to come; Football Finance

2009-11-07T07:00:00.001Z

The situation with Rangers Football Club and Lloyds Banking Group has been widely reported. Looking in from the outside there seems to be a good situation if you are a banker. Rangers owe money, they have plenty of saleable assets and a valuable brand. Step in and make some noise, a new buyer will appear and the loans are paid back.

Banks in the boom lent an awful lot of money to football clubs. Lloyds (not the new group with HBOS) stayed out, but Barclays and RBS went mad for footie finance as did HBUST.

Key examples are the Arsenal stadium finance (sold on through a securitisation by RBS) and RBS's backing a Liverpool takeover to the tune of a cool £250 million (UPDATED - ta Scrobs).

West Ham were bought by an Icelandic consortium and now is in the hands of the Icelandic Government. They chairman Andrew Bernhardt is an ex-Leveraged finance banker - how appropriate!

Football is big business and it is really showing in the credit crunch. In fact Rangers and West Ham are the first of the many. Unless you have a billionaire owner the future is not so bright for a premier league club.

Hull are next on the hit list and their CEO has already resigned. Hull have huge debts and are going to be forced to sell players. If they are relegated they may well follow Forest, Leeds and Southampton down the divisions.

My view is it is that the billionaires have priced non-billionaire clubs out of the market. In the Premier League Everton, Hull, Portsmouth, Bolton, Stoke, Burnley, (Wigan) and Wolves all have no chance of competing with the other clubs who have mega-wealthy backers. Without a level field to play on financially, they should really just shrink the league and make participation based on how much money owners are up for putting into the clubs - more like Formula One. Radical, but the league would be more exciting to watch with a higher level of competitive teams.

Football clubs are not listed on the stock exchange so much anymore, but all of the above are in danger of over reach on their budgets and any could pop this year. Hull will go first, but how many will follow?

As for the banks I wonder how many football loans have made it into the RBS APS scheme - to think some players wages are likely being guaranteed by the taxpayer!

Saving the World Again - Or, Errr, Not ?

2009-11-06T08:37:00.007Z

Remember how, back in September, Gordon Brown decided it was time to save the world again; and how he was going to elbow Miliband (Ed) aside and personally lead the charge in Copenhagen ? Because mere environment ministers 'don't have enough clout' ?

Well. In the meantime, Obama and the Chinese seem to have decided they'll each adopt a unilateralist approach to climate change: and despite his best huff-n-puff efforts Brown couldn't get the EU to agree anything concrete last week.

And lo ! Little Ed (the one with insufficient clout) has been thrust to the front once more, and is now inviting us to lower our expectations.

I'm guessing there is a spare seat on the plane to Denmark, too ...

ND

BOE new QE target of £200 billion

2009-11-05T12:01:00.002Z

That is £25 billion more of printing money in English. Clearly the Bank of England have seen the pre-Budget report which will show how bad UK Government finance are and have acted accordingly.

My hunch is the money printing will track the Government deficit this year; the really hard question is now the Government has this wonder drug (QE= Fiscal Heroin) will it ever be able to wean itself off?