Saturday, 31 January 2009

LIfe on Mars

I woke up yesterday with that unnerving feeling that I had been transported back in time to the 1970s. Almost expecting to see John Thaw bursting into the door shouting 'Oi, shut it!', I turned on the radio to find even worse.


This is a word that had almost gone out of normal use yet the person being interviewed was explaining why his fellow workers somewhere up in Teesside had down-tooled and en masse had stopped working in 'solidarity' with refinery workers in Lincolnshire. Even worse, a second interviewee from Milford Haven who was a convener for the GMB Union explained that ,'This is nothing against our BROTHERS in Italy or the rest of the Continent.'

I had to blink hard and shake my head. Strikes, Wildcat Strikes, Secondary Strikes, Solidarity, Brothers - these were terms of a nightmare past of industrial mayhem back in the 70s which culminated in the two major strikes in the Steel and Coal Industry in which finally Margaret Thatcher broke the backs of the most powerful Unions and, in her own uncompromising way, actually paved the way for a more prosperous Britain. Sadly, in the process and in the interests of Free Market Enterprise, she also gave way to the systematic destruction of the UK's bedrock manufacturing base - a legacy that has hit us very hard in the current economic climate.

So What Was Going On?

At a refinery in Lincolnshire it was discovered that an Italian Contractor had won a sizable contract for work and had decided not to allow local, skilled workers to work on the contract but had instead actively barred locals from the jobs which had been given only to Italian and Portuguese workers who were being shipped in and accommodated. There were cries of foul play as there are Pan-European agreements on the rates of pay on such contracts, it seemed to say that these workers were being employed because they were cheaper or perhaps as 'blatant protectionism' by the Italian firm - a bit of latitude here as there were other foreign workers involved.

I think most people would have sympathy with the plight of the Lincolnshire workers - surely it would be cheaper, easier and more expeditious to employ locals rather than have to ship in and accommodate a load of people from abroad, many of whom would have difficulty with the local language but at least would not go hungry given the volume of local Italian restaurants and ice cream shops. It did not seem to make economic sense, unless there was a violation of the cost-base agreements.

The local displaced workers in Lincolnshire did what they thought right - they went on strike. Pretty soon, across similar sites in the UK, other workers came out in solidarity with the Lincolnshire workers and went on strike. It was the 1970s all over again.

The Issue At Stake

While the EU allows free movement of trade, people and labour across all member borders which is a distinct advantage in some respects, it poses major problems in tougher times. Unemployment in the UK has just reached 1.92m and is rising. Britain has a large workforce of foreign workers, particularly Eastern Europeans, who see the UK as a land of opportunity as they can come in and work for less while the UK Welfare State provides a safety net. Many have brought families or got married locally, which makes them permanently part of the British fabric. It was on a similar issue that William Hague fought almost an entire Election Campaign only to be ridiculed by the then boyish and knowing smiles of Tony Blair who claimed immigration and asylum were non issues.

It is another Hallmark of this Government that popular opinion and soundbites dictate policy and there is little attention to the long term problems which we face. Immigration and Asylum were ticking time bombs.

But now we have this. A blatant snub of UK workers for local work by foreign firms (the refinery owner is French) - and we are told by Union officials that this is not the only case. Perhaps, the argument goes that Britain needs to stand its ground. As it was often the case in the 70s, strikes came about at the worst possible times when businesses were struggling to survive. The last thing needed at that time and now, is workers withdrawing their labour - Britain is on a knife edge and anything that erodes its ability to do business literally threatens business for the future.

There is a real danger that if strikes continue, the affected businesses will in turn collapse - there has to be another way. Lucky in this instance, it's an oil company but they only need the excuse.

Enter The Government

The problem with soundbites, as Gordon Brown is learning fast, is that they can come back to haunt you. In one of his rallying cries, he pledged 'British jobs for British workers' which sort of rings of Protectionism but let's not go there as this is another powerful soundbite that GB is using right now.

So as the situation unravelled, people in Lincolnshire rightly turned to our PM who had uttered the words so stridently for reassurance. Sadly, Gordon could not take their call as he was busy preaching on 'Global Confidence' and 'Creeping Protectionism' at the freebie in Davos for the rich, the powerful and Gordon Brown (be patient Gordon, the riches come later in Non-Executive roles at around £1.5m a pop - trust me).

Instead, the riled workers got Pat McFadden, the Minister for Employment Relations, who sadly was doing more important things like moving house and therefore could only say that when GB had made this pledge, he had not meant to flout EU laws on labour. A fat lot of help in the situation and little wonder it did not mollify the growing concerns. He went on to say, 'What he's saying there is, I want to see the British workforce equipped for the jobs and skills of the future and that's precisely what the government is doing,' which also did not help.

At this point, Old Lefties felt it their duty to brush the dust off their Red Books and speak out. Hilary Benn, asserted that these workers were 'entitled' to an answer as to why they were not being used. For a descendant of that old left wing war horse it really was an insipid line, but then again he is an Environment Minister and the one thing you don't ever do in New Labour is rock the boat or have a conscience, just ask Clare Short.

Talking The Talk

The PM, still somewhere in Switzerland doing another round of desperate rallying calls for global unspecific action to help save his neck, said that he had no regrets for making his statement about British jobs for British workers prior to his non-election as PM. He explained, 'I do not see a reason for regret in that the action we have taken has meant that we are now putting in place measures to ensure that British workers can have access to the vacancies that exist in the system.'

'We are now putting in place measures.' Well that really explains it.

It sums up Britain under New Labour - it's been 10 years of talk and little action from which Britain has benefited. You take a look across the Britain and while we have been prosperous it has had little to do with our disposable income which has been eroded and while our pocket has been pinched for more and more tax, we see little tangible difference in schools, hospitals, transport, crime and although unemployment went down we had a corresponding rise in those claiming on grounds of long-term disability. Because we felt prosperous thanks to the equity in our homes, all this has been swept under the carpet.

When the PM talks of getting jobs for British people, he made the fatal mistake of departing from the New Labour tried and trusted plan - never make a pledge that can be measured by real people. Sadly, losing your job to an Italian brought in on contract instead is very, very measurable.

Friday, 30 January 2009

Sorry, Gordon Can't Answer The Phone Right Now.....

Well I ask you. All I was trying to do was to call and tell him to stop wittering on about 'Global Confidence' and Gordon wouldn't even take my call. But at least it brought a smile to his otherwise dour face.

As GB gibbered on about 'It is time for the world to face the crisis as one', having just muttered something about 2009 being the year when the world 'came together' to tackle the economic crisis, my head was starting to spin. As he then went on to warn about 'creeping protectionism' I began to lose the will to live and so I decided to call him. Thankfully the call interrupted his drone and brought a smile to everyone's face - even his.

Word Games

Protectionism seems to be in the 'in' word at the moment. The Chinese Premier used it in his speech which upset GB as he had laid first claim on it and threatened to impose sanctions on China if the word was not retracted with a formal apology before his speech. In rushed behind the scenes diplomacy, it was decided that the country with a budget surplus could use the word first, although those with borrowing higher than 57% of GDP could have second use.

There are further talks going on to agree on the meaning of the word after Japan and China had imposed tariffs on imports to keep their local products first in sales yet were using the word liberally. There was vague agreement that 'protectionism' could be applied to banks only lending to companies and consumers in their own country which was seen to harm global trade and exacerbate the problems. Most nodded ascent on this point and so Mr. Brown ploughed on with the point, "The thing we know about protectionism is that it protects nobody and least of all the poor."

Many nodded their heads sagely before saying, 'Eh?'

Protecting Jobs

GB's point was that it was high priority for political and business leaders to rise to the economic challenges and act to help those worried about losing their jobs. I may be a bit thick here but isn't that part of the point about protectionism? Anyway, the PM pushed on regardless to applaud the US in the main for pumping money into the economy as part of 'The largest ever Fiscal Stimulus' to which there were many in the audience who tittered at the economic innuendo, several were openly embarrassed and at least one Financier shouted 'This is outright financial pornography' before storming out throwing his papers in the air in revulsion.

"We have a choice what happens next," GB said stridently. "It is time for action and it is a time for having the confidence to act......It is trust that we have to rebuild as a result of the credit crisis and the failure of the banking system."

I love it - as usual GB was distancing himself from the cause of all this which he has put down to the sub-prime scenario in smalltown America. The fact that Governments and Regulatory bodies just sat by doing nothing does not seem to enter his mind or his conscience. Once again, we see fingers pointing solely at the banks, yet hardly a bank in the last 10 years could have survived the most simple test of liquidity if the derivative scam had suddenly ground to a halt. Trust, I would argue has to be rebuilt in the Political system too - the one that told us we had a rock solid economy that would not be affected by a recession, would survive better than others if it did and had a bedrock built on the value of people's homes.

It would be just nice to see Brown just show a bit of humility, puff out his jowls and admit he blew it.

G20 and Away!

So it is all eyes on the G20, the global economics equivalent of the Olympics and coincidentally being held in London, probably at some hastily erected new building to keep in spirit of the Government bringing forward large spending projects because we are short of a few. There seems to scepticism about whether there can be a collective, global action to tackle the economic problems.

If Brown is anything to go by, his blatant protectionism was shown when he threatened to launch law suits on Icelandic banks if they did return savers' money. As noble as that may have seemed, it was hardly a nice gesture to a country that was quite literally going bankrupt and equally if you are prepared to allow foreign banks to lend you must allow them to take deposits if they need to - and if they hit problems well that's the rough and the smooth surely?

I have great sympathy for private savers but what on earth were Local Authorities doing putting money into foreign, less protected accounts just to earn a shaving of a percent of interest more? Who allowed them to do this in the first place and who in these Local Authorities is qualified to make such investment decisions? And it wasn't just a few spare quid it was nearly £1bn of rate-payers' money? Why was it not paid back to the rate payer to invest themselves and asked for only when they actually needed it?

I don't know - I'm no expert but I can't help feeling Brown's rallying calls are signs of a growing desperation to help Britain out as our economy is so dependent on foreign investment in the City particularly, without it Britain could well be a spent force in the world of high finance. It also seems it's pretty much one way - GB seems to be saying invest in us but we are not going to do anything for you, but I may be wrong.

One last line of hope from GB was a touching reminder of the global commitments to climate change policy and helping Third World countries. Well, the wasted money put into propping up the fat cats in the banks might have been much more happily received in parts of starving Africa. Once again, epitomising the New Labour years, we see wasted opportunity.

Davos Snub

I rang the organisers at Davos yesterday and apparently my invite got sent to Will Young by mistake although I did give my opinion on the global banking situation which they kindly said they would pass on.


I was not the only person to miss out on Davos this year. Apparently Chancellor Alistair Darling isn't going as when the team in the US realised that they had to sit in a meeting with him they all feigned illness, cars did not start and many found clashes of diaries with the nail specialist. Rumours were that the PM had refused to sign his travel docket as he was still too pessimistic and until he realises the world is fine he is not allowed out of his office.

US Fed Chief Tim Geithner allegedly pulled out when he heard I would not be attending and when told he would meet Darling remarked 'Alistair who?'. Barack Obama is not going this year, he is too busy choosing a dog for his kids - they are now down to the last five in a voting format not dissimilar to 'X Factor'. This week there will be an ice skating dance off and the Canadian Huskie is expected to win although the rat-like dog from Peru named 'Juan Sargeante' was once again unexpectedly voted back on by the public.

You Haven't Missed Much

Gordon Brown will fly in later and is expected to lay down his thoughts in anticipation of the G20 in London some time later, though he has yet to find a bank to sponsor the event or suitable venue. They may have to use Ron Sandler's shed which currently holds all his money from his consulting at Northern Rock but is plenty big enough. Thesaurus and Dictionary sales have sky-rocketed in anticipation of Brown's speech and the pre-session synopsis printers sent out for lots of tippex as they thought 'deleveraging' was not a real word and put in de-icing instead as it sounded more appropriate. The talk will not actually be the sell-out Brown anticipated as most delegates don't want to be bored to death by half-baked drivel delivered with all the monotony of an undertaker - it will be chaired by Jet Li and Will Young will be question master, I understand.

Bookmakers have been laying spread bets on which words will be used most often and 'New World Order', 'Pangs', 'Deleveraging', 'sub-prime', 'protectionism', 'Saved the world', 'Fiscal Stimulus', 'help, I'm sinking' and 'Deglobalisation' are hot favourites to be most used while 'stable economy', 'recession-proof', 'can't happen to us' and '10 years of steady growth', and 'VAT giveaway really worked' are expected to be used least while 'Tony Blair' is red hot favourite not to be mentioned.

Blame Culture

Tim Geithner, while staying at home, was quick to hurl insults blaming the world economic situation on China for 'Currency Manipulation' that led to US trade deficits. I have to say I have heard of a great many excuses for the current financial woes of the world but this was a first - and many are checking as to whether he was talking about something completely different like the Superbowl.

Perhaps Tim wasn't feeling too well as the retort from the Chinese Premier Wen Jiabao who is at Davos was 'Inappropriate macro-economics policies of some economies and their unsustainable model of development', 'failure of financial supervision and regulation', and 'lack of self discipline' which landed the world economy 'in the most difficult situation since the Great Depression' which he made clear was not the name of a Chinese restaurant in Hammersmith. It's clear that Mr. Jiabao is more on the ball but he actually may enjoy sitting in on Gordon Brown's talk as they have similar prowess on econo-speak.

Vladimir Putin, Russia's democratically elected Prime Minister, put the boot in too saying, 'Poor quality financial regulation' led to 'the collapses of the existing financial system'. He was also hard on the dollar saying, 'Excessive dependence on what is basically the only reserve currency is dangerous for the world economy' which resulted in 'a serious malfunction in the very system of global economic growth' and that 'whole regions of the world including Europe found themselves at the periphery of global economic processes' and so 'were outside the framework of the key economic and financial decisions.' A clear reference that Russia wants more of the profits next time around.

Putin and Jet Li put on a Martial Arts demonstration before a short exhibition of bear shooting got a little out of hand when Putin started taking pot shots at Investment Bankers.

Bankers Missed

Apart from executives at Barclays pulling out as they are working on the Annual Accounts and so Bob Diamond is attending a Microsoft workshop entitled 'How to use Excel to help save your company from Middle East investors' which involves simply changing all the red cells to black.

The delegation from Citigroup are still at the airport awaiting their aircraft - no one had the heart to tell them the order was cancelled. Easyjet has offered to take them instead.

Generally bankers have been fair game at the event with small sideshows on offer to entertain delegates. John Thain, ex CEO of Merrills, has a 'Bake your own cake' stall, Dick Fuld has a Real Estate stall entitled, 'Properties going cheap - only one left, buyer already found, honey', while there are pillories and stocks for delegates to pelt their least favourite banker.

New World Order

The Davos song will be sung by the group of the same name and the song, 'I saved the world' written by G. Brown is expected to reach number one later this year. Meanwhile, a new league table or world order is being constructed with the US still at number one and then countries like China and India moving up the table. The UK is a little way back behind Mauritius but ahead of Iceland thanks to the threatened law suits by 'Big Bad I want my money back Gordon'.

Nasty Bankers

Barack Obama, fresh from signing the new lease on Guantanamo Bay Camp and renaming it 'Bankers Boot Camp', has laid into Wall St bonuses calling them the 'Height of irresponsibility' after finding out that employees of New York banks collected bonuses of $18bn last year. Obama adopted a Head Teacher approach and told banks 'It is shameful, and part of what we are going to need is for the folks on Wall St who are asking for help to show some restraint and discipline and some sense of responsibility.'

No doubt the bankers were standing in corridors with ear-rings in their ears, shirts hanging out, collars undone and ties pulled down and saying, 'Whatever' and 'Do I look bovvered?' Obama continued his tirade, 'The American people understand that we have got a bog hole we have got to dig ourselves out of but they don't like the idea that people are digging a bigger hole.'

Gordon Brown commented. 'I think President Obama needs elocution lessons as there is a real danger that people will understand what he is talking about and that means he may have to do something. It is far better to sound as if you know what you are talking about by using words not yet invented and unintelligible and then do nothing. People appreciate big words and no action.'

I am still unsure what purpose Davos serves but as the world pours billions into the financial system and then watches Citigroup order a private jet and bank executives pay themselves bonuses, it seems that we have all lost our sense of perspective. It would be a good idea to ask the views of the bewildered people of Africa who must surely have a problem with the 'intelligent' comments of people like Gordon Brown about how to save his Political neck and the bank balances of a small number of financial executives while millions wonder if the world will ever remember they exist and are starving.

In its voracious appetite to kick start economic growth, the world has forgotten about the starving people who aren't included in the jamboree. Just imagine what those $18bn bonus payments would have done for those people - I dare say the bankers who received them will not lose a wink's sleep.

Thursday, 29 January 2009

Planning For Survival

I make no apology for bringing up the subject again - we are officially in a recession and there has never been a more important time to understand how sensible, regular planning is a discipline in business that can help you not only survive but flourish.

But I'm A Nimble SME, Why Do I Need To Plan?

I have blogged ad nauseum that this recession has struck at a merciless speed and how, in short trading cycles, household name companies with long, proud trading histories have literally collapsed in front of ours eyes and gone bust.

Insolvency Practitioners and Liquidators are having a boom time as many more companies go to the wall and require their services - it's the nature of the beast.

One way to avoid all this is to do some basic, disciplined planning. And in my estimation this comes in two forms: 1) Front End - Sales and 2) Back Office - Finance. In reality the two are inextricably linked as one fuels the other. However, very often planning is only actually done in Finance - at the front end we have only Forecasting.

Forecasting vs Planning in Sales

It's a nit pick but I would say a basic salesman's forecast is pretty much guesswork based on historical data with a guesstimate on some of the more sizable deals which may have a larger effect. When this is rolled up to management level, very often there are factors and trends applied to arrive at the sales forecast en masse. By that time, the overall number is pretty much a real guess and bears little resemblance to the sum of the raw data. This may actually work fine when sales are buoyant as what often happens is that opportunities are plentiful enough to accommodate the odd deal drop out - the overall number becomes more predictable.

Generally, little planning is involved in that process. It's just an approximation and if sales are close to budget there are no real causes for concern. It's when things start to go wrong that you realise that a bit of planning might have helped.

Planning, when applied to forecasting, is actually reviewing every single deal and working out what is required to win that deal, what margin does it yield, is the customer capable of paying, making sure the terms are agreed, what factors in the market can effect it and what can you do mitigate their effect. This not only gives you a realistic view of every sale but it also gives a very full view of the cost implications of either winning or losing a sale.

Again, these implications seem less important when the graphs are pointing up and to the right, but when there are hazardous market conditions like downturns around, suddenly this level of understanding becomes important.

Right now, it's not a good time for a sizable proportion of your business being in sales to car makers or banks for example and even if they are it is highly likely that the sales may get protracted, become more price sensitive and possibly involve longer payment terms. This level of detail is vital as the Finance Planning is the key part that balances resources to sales.

Financial Planning

Most companies do a budget and a cashflow forecast but it is very likely that SMEs will tend to do these on a monthly, at best, and usually quarterly basis - some may only budget once a year. However, there are plenty of natty tools out there that could make Planning simple and a daily task (cf.

If the Sales Planning has been done properly, then the Finance side can take the input and do a new level of scrutiny. The first step maybe to review the credit lines to every company on the sales forecast to take account of the prospective sales - the outcome may be to ensure that all existing invoice queries on the accounts are cleared down and settled, credit lines actually raised ahead of a big sale or the credit team can swing into action to look at options to help the customer pay like leasing or debt assignment etc. If the Planning is done properly, Finance can be proactive in helping to deliver sales rather than an order arriving and then tantrums occur as Finance won't extend the necessary credit.

For new customers, get a credit check done. They are not that expensive and they can save wasted effort and heartache. So often a deal comes in and Credit Control (sometimes called Sales Prevention) step in and say 'no credit'. Good Sales Planning will alert Finance early and they can get the checks done ahead and have time to plan if and how a sale can be managed. And there is a downside - sometimes sales are not worth pursuing because the customer does not have the necessary ability to pay - Sales need to know the hard truth early and in these austere times they need to be told if they have to go find another customer to make up the shortfall. Good planning breeds realistic thinking and focuses everyone on the really vital things and avoids 'wishful thinking'.

Once Finance has a realistic view on when sales will drop, when and how customers will pay and if this can be smoothed in any way, then they can take a detailed look at the overall cash position. When times get harder, they can start making decisions on policy to help get resources into winning sales rather than on less important things - a classic example might be cancelling the Corporate Jet when sales drop (take note Citigroup)!

The Results

What Business Planning can do is focus in on the really important things that can directly affect driving sales, creating cash and maximising profits (or indeed, minimising losses in some cases). In harmony, Sales can focus on tactics to close orders and get invoices out early, while Finance can help offer incentives for the customer to settle early or get leasing involved to secure the cash. Meanwhile, Finance can also turn their attention to suppliers to renegotiate or back off the terms of deals so that pain is shared on the cash front.

The key thing is anticipation of issues - when cash is tight you have to be on top of everything from negotiating terms, to collecting cash and extending terms with suppliers and paying as late as you can. One of the biggest areas of cash slowdown is mismatching terms or invoicing inaccurately - communication between front and back office becomes ever more important and this is where Planning really pays dividends so that all discounts, rate plans and terms are agreed formally and the details passed to Finance and equally Finance make sure the invoices are sent out accurately and early. Debt chasing should be more vigorous and leveraging the Sales relationship can often get customers to pay up on time especially when they need something urgently - Sales should have a handle on all that and get leverage.


While cash is king, profit is crucial and maximising it in tough times is a priority. Now is the time to challenge why people travel so much, entertain so often, travel Business Class or use trains when a car could be cheaper or vice versa, then look at all cost lines and squeeze every penny of saving you can so that as much resources can be applied to winning sales as possible and not go on flowery 'nice to haves'.

I have said this before but never underestimate the power of communication with staff. Everyone loves to get good news and pats on the back. But there seems to be an automatic assumption that either staff don't want to hear bad news or they can't handle it or they can't be trusted with it. All of those assumptions are wrong - in tough times, the support and innovation of your staff will help share pain when needed and equally help make sure cost cuts are achieved without a large loss of productivity and sales are made as planned. Leaving them out of the loop can really affect the plan detrimentally as well as ruin motivation.

Get Innovative

So much of sales behaviour is driven by compensation plans and you need to be able to gear the plans toward meeting priorities in tougher times. A profitable deal is not profitable until the cash is in, so why not think of either changing the point of commission payment to when the cash is collected or accelerate the earnings for early payment and the opposite for late payment. Further, focus on success so raise the barriers at which commission is paid but give more for overachieving.

Planning will also reveal the margin hotspots and highlight those deals where margins are low. If such deals are with customers whose payment records are poor then you know that your real margin is lower while possibly smaller deals with customers at higher margin and good payment records are worth proportionally more to you. Make sure you have all the information to make the judgement calls and give the bad news to salespeople early rather than wait for deals to come in or, worse still, snipe at them later. The decisions to accept these deals should be shared.

Tackle Cash Requirements Early

What this detailed Planning will allow you to do is to get a much more realistic picture of how your cash positions will pan out and therefore dictate how much cash may be needed and when. So much of what is going on in business right seems to be guesswork but in your own company it should not be that way. Having all the deals and expenditures explored, terms agreed, collections strategies in place, credit checks done will actually make the task of going to your bank or similar far easier. Why? Because you can answer their questions. There is nothing worse than bluffing in this situation as you don't get a second chance at that but having a detailed Plan with contingencies built in and the even the compensation plans geared to help, the Banks cannot fail to be impressed with your ability to know and run your business. They still lend on trust and that should be your priority.

Get Advice

There are going to be a lot of vultures out there who will want to start telling you how to cut and restructure your business, turnaround experts who are just accountants with knives. What you need is to give yourself a better chance to win business with a cost line that can support it. Too many companies Plan badly and then just hand over the company to accountants when things go wrong.

Plan better now and you will not only survive - you will THRIVE when the recession is over. Make sure your planning is done with your Sales and Customers in mind as the key priority - focusing inwardly will make you lose sight of your path to survival.
For help on planning to survive, call me on 0207 193 2356 or drop me a line at

Billions And Billions

There was a time when a billion was a big number.

Orders of Magnitude

I worked at a Computer Distributor called Frontline many years ago and when I left there, the revenues were around £100m per annum. That year the company got taken over by a larger German Distributor called Computer 2000 and when I arrived back at the company just a few years later they were celebrating breaking the £1bn per annum in sales in the UK for the first time. It had been a tenfold increase in sales in a short space of time and the company became one of a handful of UK companies at the time with revenues over £1bn a year.

Even today, even though the FTSE250 is going up and down like a yo-yo, the 100th company on the list has revenues less than £1bn per annum. So from a point of view of product or service sales, to have a turnover of over £1bn a year in the UK you would be part of a relatively small and elite group of companies.

Billion Becomes Old Hat

One of the consequences of the Credit Crunch and recession is that the word 'billion' is being used in almost every other sentence. Suddenly, it has become the only number that expresses the order of scale of the extent of our economic woes and the monies required to put it right. We are even beginning to use 'trillion' to describe the scale as billion no longer seem to cut it. The current estimate of the scale of the global bank bail outs are around $5 trillion and rising. This is measured against an annual global output of around $50 trillion.

The numbers are immense and they are being flung at us so nonchalantly these days that we are beginning to lose all sense of proportion. The fact is, £1bn is an awful lot of money.

So when we are told that £2.3bn to bail out the car industry is not enough, it no longer strikes us as a big number when compared to the fact that we have had two bank bail outs in the last few months at £600bn and £300bn a piece.

We are no longer impressed or depressed that £30bn was pumped into just one bank, RBS, in order to save it. But the worrying thing is that RBS has a funding gap of around £161bn and total liabilities of £1.3 trillion - larger than the UK's GDP, yet its market worth is around £7-8bn in total.

Making Sense of It All

This week's Euromillions Lotto Jackpot is around £26m and I think you would agree that's an awful lot of money. It could buy you several houses, nice cars for everyone in the family and you would still have plenty of money left over in order to live in luxury for the rest of your life and probably leave a sizable legacy to your offspring.

So imagine if you had £1bn. This is 1,000 times £1m or around 40 times greater than this week's Euromillions. It's more money than you could imagine.

Well so far around £900bn has been pumped into the banking system to shore it up and only yesterday a Treasury committee thinks it is not enough claiming that the Government is acting in a piecemeal fashion to tackle the problems in the financial system.

£900bn is 900 times that £1bn I talked of and 36,000 times the Euromillions Jackpot this week. It is a stupendous amount of money.

But it's not enough. Over the course of the last few years, the value of the open derivative positions in global markets is over £500 trillion and rising and there is a further £400 trillion of associated insurance positions and £1 trillion is 1,000 times £1bn. This derivative value is the approximate roll up of all the idiotic trades of debts between institutions that amounts to the total liability the world faces for the mess that the banks have put us in. Unpicking the complex web of bargains and trades is the nightmare associated with this and although a good proportion of all this is underpinned by assets of some value, no one any longer has any idea what the true position is. And as markets and asset values fall, the problem is getting worse and worse.

Equity for Debt

As Governments in the US and UK underwrite bad or toxic debts with the bail outs and take equity positions in banks, there is a belief in financial circles that this is somehow good for all of us who have allowed our tax money to be used as collateral for the borrowing required to do this. The belief is that companies like RBS will recover and that the money we have pumped in will be repaid handsomely as the company grows in value.

Today. RBS is valued at around £8bn and we have pumped around £50bn into it so far for around a 70% shareholding. My maths may be rusty but it would mean that in order to break even from this current position, RBS would have to grow around tenfold in value as a company.

Do Not Be Fooled By Numbers

As everyone throws around numbers like a billion pounds as if it were pocket money, do not be fooled - it's a very serious sum of money.

But if you think that the £26m Euromillions Jackpot is too large a sum for one individual to be given, then just chew on this. In the last year alone, this was no more than double the annual gross monies received by the lowest paid CEO of a UK Bank. In the last week, a single Hedge Fund made £90m on betting that RBS shares would fall on the announcement of the second bail out. In a single day, Hedge Funds and Banks lost $30bn on single share (VW) on betting the wrong way.

If nothing else comes of this financial crisis, I hope that we get some perspective on the real earnings of a very thin slice of the population of this world that has squandered our savings, pensions and future. I hope also we get some perspective of the amount of money it will cost each one of us in future tax payments each time a Government Minister glibly announces some new 'Financial Stimulus' package or bail out.

You would have to win this week's Euromillions Jackpot over 1,200 times over just to have enough money to have propped up RBS that second time. I guess my point is that the executives of these banks were earning Euromillion scale Lotto wins EVERY year while we have to pay thousands of times that much in order to just stop their companies going bust.

For every £1 billion mentioned, think that there are only around 30m taxpayers in this country which means that we are each liable for around £33 - not much, eh? Well, at £900bn so far in bail outs, each of us are liable for around £30,000 and that does not include the liabilities of £1.3 trillion should just one bank like RBS actually fail.

This week at the Davos Summit bankers are getting vilified for their greedy stupidity in building up these kinds of liabilities. I think Governments are the stupid ones for allowing it and then exposing us all to the cost.

Hold The Latte!

I have blogged before about the collapse of the Coffee Shop culture around the time of the South Sea Bubble and how last quarter we saw history begin to repeat itself with the Starbucks results. Well, I make no apology for resurrecting the story as Starbucks have just announced their latest figures and the froth is certainly missing let alone the chocolate sprinkle.

Sour Coffee

I have never seen the attraction of the Starbucks brand of coffee. The little shops are nice with their comfy couches but often there is no room to sit down as that sort of seating is limited but it's the coffee I didn't like. It was either overly sour or had silly little seasonal flavours which made me gag. We once bought a pack of their filtered coffee beans and I would never do so again, always preferring a Coffee Direct as being at least equal in quality and a far cheaper product.

But it has become a way of life for lots of people and has sprung a new Starbucks-speak language to describe what people drink - 'Tall, skinny latte to go, please' is just a simple statement, they can be far more complicated.

I had a VP of Sales once who would periodically drop in from the US and he was quirky to say the least but he was the branding executive's dream. He would not go to any restaurant or hotel that was not a recognisable US chain, so he stayed at an expensive London Marriott, ate at McDonalds and drank Starbucks coffee. Our trip to Sophia Antipolis was a nightmare and culminated with me threatening to stop the taxi and make him walk when he complained about the superb French coffee we had drank at a curbside cafe because it did not serve vanilla essence to mix in.

But that was the Starbucks magic. It hooked a lot of people into buying £3-5 buckets of sour coffee with all imaginable options of their choice - everyday.
Changing Times

This time round, things got considerably worse for Starbucks. They announced a 69% dive in profits and that they will cut about 6,700 jobs and 300 stores, making only $64m profit in the quarter to 31 December 2008 down from $208m a year ago.

Around two thirds of the stores to close will be on home turf USA which is a double blow on top of the 660 stores shut there in 2008. Hailing from Seattle, this is a body blow to the West Coast city as two of its other flagship businesses, Boeing and Microsoft, also announced lay offs in the week .

Starbucks revenue fell 6% to %2.6bn.

History Repeating Itself?

The coffee shop culture died roughly around the time of The South Sea Bubble where all the gossip and stock broking activity thrived in the small streets of London. It's a little different this time around but it very much falls into pattern of the boom years we have enjoyed. The coffee shop was not just associated with the market players like stockbrokers or starving writers and artists communing to meet like-minded people - it was the 'to go' culture of popping in and grabbing a $5 cup of coffee. And everyone did it, not just Hi Tech executives or super-rich bankers - it was a defining sign of the times.

In the years of leveraging equity in our homes, such little luxuries became a way of life and a trivial yet essential daily routine. Many new companies sprang up to satisfy the 'fixes' required and we have good alternatives here in the UK in Costa, Cafe Nero and AIM. But in the US there was a strong reposte from the likes of Dunkin' Donuts and McDonalds who had the edge of leading with food and they added in equally good coffee to Starbucks at a fraction of the price - and this has hit hard as everyone starts to look at the cash in their pockets rather than in their equity.

It is very much a sign of the new austere times that small but expensive luxuries are the first things to go - perhaps along with membership to swanky Health Clubs as the next obvious area of concern then maybe regular eating out at middle to high end restaurants and, of course, up market holidays.

Or have we just woken up and realised that we could make a very decent cup of coffee at home, stick it in a thermos and go to work for a fraction of the price. I also think part of Starbucks' vulnerability is that it never had anything more than expensive coffee to sell - it was a model as flawed as the boom itself, just like the South Sea Bubble all those years ago. Personally, I have always preferred a decent cup of tea and you just can't get one outside of the UK.

Perhaps Starbucks has missed a trick all along.

Wednesday, 28 January 2009

Business As Usual

Spital Square was always a busy place. It's where a small fleet of very smart private taxis wait for RBS staff to give them a ride to wherever they may be going - home presumably. You may think such little luxuries go by the wayside when their company has collapsed in value but not these good fellows.

Last night, the little fleet of smart cars were ferrying evening-dressed managers from RBS to a swanky City dinner so they could blow some expenses, I dare say, and congratulate themselves on another terrific year. It appears there is little scope for consideration of bail out monies or public scrutiny - the business of the City must go on, come what may. Perhaps it may have been Cava not Champers this year. I doubt it, must keep up appearances, eh?


As the banking system staggers after each explosion, it does not sound like the glamorous career it used to be with the potential of somewhat less bonuses in the future. A further advert on why such a career is pretty revolting was last night's TV documentary called 'Million Pound Traders' which was yet another show designed to satisfy our seemingly unending appetite for 'Reality TV'. This time a foreign investor gave some money to a group of would-be traders who proceeded to spend it in a series of trades designed to show how good they were in making profit. They were headed by the seemingly hard-nosed 'Anton' who said for the camera's benefit that 'It's time to press the brutality switch'. All sense of Employment Law naturally goes out the window in such environments as we saw in the excellent docu-drama last week called 'Sex, the City and Me' which acted out an amalgam of real stories set around a successful woman who became a mother and her career in a fictional trading house.

What it illustrated was that the City is so single-minded about greed as to make the people who do it at best seedy and at worst down-right revolting. Coupled with the lack of guilt displayed by people at the top like John Thain, Fred Goodwin, Dick Fuld and others it shows that it comes from the top down.

Once again, it really does not inspire confidence that Gordon Brown surrounds himself with the flannel-talking, obsequious Investment Bankers as his Advisers at this time.

Bail Out, Bail Out

'No, this is not a bail out', stressed Lord Mandelson yesterday as the newly enlightened Business Secretary outlined the basis for around £2.3bn of loans designed to save the car industry. I have blogged on this before and at stake are around 850,000 jobs associated, directly or indirectly, with the car industry as production has collapsed by 49%, sales by over 35% and acres of unsold cars litter our countryside.

He was right - according to the Tony Woodley of Union Unite, it falls short of what is required to save tens of thousands of jobs. Mandelson is hosting a summit for the industry today but there will be calls to extend the £1.3bn of loan guarantees and offer of £1bn of lending for car makers in order to safeguard their industry and attempt to stimulate demand. A whole raft of car makers have downgraded or stopped production and the immediate effect was felt by steelmakers, Corus, who announced 2,500 lay offs this week.

Once again, it seems the Government has come up with a half-baked, knee jerk solution which has been devised by unskilled Advisers and not listened to the views of the carmakers themselves.

What is the Point of The FSA?

"Highly paid bunch of layabouts," spat my source close to the FSA. "Cushy jobs for former mandarins or retired City types, combined with tons of Non-Executive Directorships - it's just a nice place to have an office, get rich and play online games all day."

Well my source had nothing to with the FSA but was making an irritated observation at the apparent lack of action by the FSA in the lead up to and since the banking collapse. No heads have rolled, no explanation as to why no one spotted that the whole system was at risk and no comment or insight as to how the future of banking will shape up. It really is time we got some people in the FSA who are actually going to do something in these key roles rather than former names who just collect the cheques and ignore the obvious.

If the FSA is to survive going forward, it needs to start dictating the rules Brown's 'New World Order' and get some sense of proportion into banking that removes the blind avarice that causes the problems we face today.

Dive, Dive, Dive

The Commercial Property market paid out record bonuses last year and whooped it up at the tail end of the property boom. Many claim they have set aside plenty of funds to ride out the downturn in their defence but I sure hope it's going to be enough.

I will lay a small wager that we will see plenty of job cuts in this sector before the year's out and not a penny of all those whacking bonuses will be repaid.

The share prices of the barometer companies in this industry have dived at an alarming rate. In the last 12 months shares in British Land have collapsed by 58%, Hammerson by 65%, Land Securities by 60% and Liberty International by 63%. The predicted fall in capital values from 2007 to 2010 will be 45% and it is now anticipated that rental values will collapse in 2009.
Bonus well-earned then.

Financial Stimulus to Defibrillation

The rather salaciously termed 'Financial Stimulus' package we know as 'bail out' is already in its second iteration. What started as silky stroking of the poorly patient, the Economy, had little effect. It now seems the patient has been rushed to A&E where a team of 'Advisers' are now administering rapid pulses of electricity to its chest. We had the second bail out and now we have the car industry bail out - pretty soon we shall be having more. That is, if the views of a body of influential MPs are to be believed.

A report from a Treasury Committee has expressed what most of the country felt that the bank recapitalisation program announced in October did diddly squat and because of the 'onerous' terms may actually be hampering them, the poor lambs. Credit, or lack of it, to consumers is seen as the biggest threat.

Erm, haven't we got around £1 trillion of it unsecured on our credit cards already?

While the report talks of the £12.4bn VAT giveaway having about as much effect as attacking a tiger with a bottled fart, it warns of a 'self-reinforcing deflationary cycle' occurring if we aren't careful. I dare say they have either looked in Gordon Brown's Terminology Booklet for Gobbledygook or this is a new type of carbon-friendly bike as yet not available at Halfords.

I still think it's cuckoo land expecting consumers to go and clock up more debt to get Britain out of this mess. We are going to have to take a lot on the chin before things get bright enough to start loaning again.

The Mortgage Scam

I need to be careful here. Why is it that it is extremely hard to get a tracker mortgage that is not some way above Bank Base Rate now?

My current one, taken out around 2 years ago is 0.49% above base rate. Most UK banks now have access to money from the Bank of England at base rates and are no longer worrying about having to borrow at the inter-bank lending rate which went sky high in the Credit Crunch as no-one wanted to lend to one another.

Well here's a thought. If all these banks can borrow at 1.5% and have their borrowing guaranteed under the generous schemes by the Government, then they can lend this out at the LIBOR rates to foreign banks who are struggling to get credit and also make an absolute mint on lending for mortgages. Trackers have absolutely no reason to be so high in particular as they are directly linked to base rates - if it goes up, so do they offering a consistent margin to the lenders. It should be the fixed rates which should be the premium products when you think about it as base rates must rise again some time in the future and so decreasing the margins.

I bet there are an awful lot of lenders rubbing their hands at the very, very easy money they are making, completely underwritten by the very people they are lending to - us! Nice one, Gordon - as usual make sure the banking boys get their bonuses next year at taxpayers' expense.

Lordy, Lordy

I couldn't let the day go by without taking a poke at the scandal in the House of Lords. Again, there is widespread surprise that some Lords are claiming massive expenses, as much as £400,000 per annum in some cases. That's nothing - now Lord Mandelson is on the scene, we should see some real growth here. Further, the Evening Standard reports that Ministers like Jack Straw have received donations from companies associated with Lord Taylor.

I am so glad that Brown and his cronies got turned over on MP Expenses transparency. It really is time that whole political expenses, donations and backhander gravy train got really looked into by real people who care about how the money is being spent rather than by Government-appointed stooges who themselves are on the train.


Ah, I thought it said Davros, not Davos - apologies but the word springs to mind.

I am delighted such luminaries as the well-paid Bob Diamond, CEO of Barclays Capital which recently bought part of Lehmans Bros and then caringly laid off a load of their staff to part-pay for it which I am sure they were all suitably grateful for, will not be attending to the Davos Summit this year. I believe he has more pressing matters like the bank's earnings announcement after it was feared Barclays could fall into the clutches of the Middle Eastern investors who bailed it out in preference to the Government's largesse.

Things must be tough for bank executives to miss a freebie like this and hobnob with the likes of Jet Li, whose insight on world matters is legendary, I'm sure.

The World's Favourite Debt - Not!

Fresh-footed back from India having secured new routes there, BA CEO Willie Walsh might be choking at the headline in the Telegraph which warns that Standard & Poor could rate the airline's debt as junk. Willie must have been delighted that in a year which saw the Terminal 5 fiasco show his skills at its best that his company announced a £150m loss for the year. S&P have now put BA's rating as BBB which does not stand for 'Bad, Bad, Bad' but isn't far off. In a comment of blinding decisiveness, S&P analyst, Andreas Kindahl, said "There is a 50:50 chance the next move could be down."

Poor Willie - he did so want 65% of the merged new airline between BA and Iberian but at current market prices, Iberian is actually worth more than BA. If that's the case, maybe the Armada did not die in vain.

From Jet Li to No Jet

As Jet Li prepares to take his place at the Davos summit, spare a thought for the executives at Citigroup who have had to cancel their order for a private jet. As they were not prepared to cancel the order themselves, new US Treasury Secretary, Tim Giethner, stepped in and did it for them.

Let's get things into perspective, Tim, it was only $50m. Compared to the bonuses paid out by these fellows to themselves last year, this was just a snip.

Thain Update

Poor JT - the billions of dollars paid in bonuses to executives at Merrills just days before the merger with BoA and the recent announcement of a mere $15.3bn loss in the quarter are beginning to get blown out of proportion as he has now been called before the real beaks as part of a legal investigation into the matter.

Aw, how dare they harass the poor chap.

Maybe they should look more closely at Dick Fuld, the glassy-eyed ex-CEO of Lehman Bros who got hauled up before a Senate committee to explain how, after paying handsome bonuses to himself and his executives, that he managed to bust the company.

Poor Dick had to sell his house at a knock down price, you know. The $13m Florida mansion had to be sold for just $100 which shows the terrible extent of the property market.

The new owner of the 3.3 acre site on Jupiter Island, where Tiger Woods and Celine Dion live, is a certain Kathleen Fuld who by happy coincidence is his wife.

At least they won't be needing their $21m Manhattan apartment right now as Dick is out of work and having to defend his good name - and his $20m art collection.

Bad News For Kids

Everyone gets hit by the recession, even kids. The news is that Hornby will be raising the prices of its train sets and scaletrix products pretty soon despite the recent success at Christmas thanks to their brands like Corgi and Airfix but they also own franchises for Batman, The Simpsons, Harry Potter and The Italian Job.

See, now look what your 'Deleveraging and deglobalisation' has done, Gordon? You've made the kids cry.

Tuesday, 27 January 2009

Catching A Dragon

TV's Dragons Den has announced the first failure of one of its investments. JPM EcoLogistics called in the administrators last week. Deborah Meaden and Theo Paphitis had put in £100,000 for a 40% stake and they put in a further £27,500 after an emergency cash call despite asking all the right questions.

No Guarantee of Success

While Duncan Bannatyne was swift to point out all his investments were doing fine, both he and James Caan supported Meaden's views that Investors tend to look at a portfolio of investments to spread their risk and increase chances of a success. Meaden is right in saying '....if you don't take risks you have no economy.'

Of course, this is cold comfort for the Directors of JPM, Jerry Mantalvanos and Paul Merker, who went on the show in 2007 to seek investment in their haulage firm which ran its fleet on bio-diesel. They must have thought, as many do, that having high-profile investors you have a greater chance of success. It is also a body blow to firms which Lord Mandelson has described as contributing to the longer term view of decreasing emissions which seems curious that he has not selectively moved to help save it. But I would have thought it was just another soundbite in the sea of them from the Government at the moment.

The Reality of Business

What JPM's demise shows is that programs like Dragons Den are for entertainment value only. The reality is that there is no substitute for investors who are going to pitch in and support you. Fair play to Ms. Meadon and Mr. Paphitis for responding to the emergency cash call but I suspect that the Directors probably rued the fact their choice of investors was more based around celebrity than hard business facts.

I have no formula of success to reveal here but sometimes in a business like that, it would be wiser to look for investors who are like-minded or in the business. Unless you have a patentable, new technology that is ground breaking, firms of that nature are just a new, green take on an existing model and success was highly likely to be dependent on a few factors - 1) the price of bio-diesel as compared to normal diesel, 2) the comparative cost of maintaining the vehicles as compared to traditional haulage vehicles, 3) the comparative fuel economy of the vehicles but most importantly 4) the response of the competition.

Assumptions are usually the things that conspire to kill a business and sometimes it is too easy for an entrepreneur to get seduced by their own subject or idea to see how the market may respond. The haulage business is very traditional and mature and in austere times when cargo rates have been dropping, it was not the time to introduce premium rates to help satisfy Corporate and individual consciences about the environment.

Cost is king at the moment and so it is not surprising that such noble thoughts fly out of the window.

Sympathetic Investors vs Practical

One way around such a problem of having a fresh approach to an old, established industry with no greater innovation than a green edge was to have sought a long term investment by another haulage or similar firm who may have a vested interest to start a more green business. The reasons for this may be several but the most obvious would be that the industry is going to be forced down that route at some point in the future by legislation, it may be possible to seek greater help from Government if an old-style firm is seen to be practically investing in the future even by shareholding, and finally, it may actually be a really good bet.

How this could have practically helped is by JPM having a more practical investor. For instance, more business might have been able to flow to JPM from its investor on a spill over basis or because it is premium or the investor might have been more amenable to running JPM as a loss making investment for longer for reasons of legislative moves as explained above and by supporting it through the profit of the main company. It also provides a ready 'exit strategy' for all parties.

The problem with Dragon style investors is that they are investing purely on the worth of the business opportunity as they see it and from portfolio of risk point of view. They are not looking at it from a long term compliment to their own business or portfolio of businesses which may have afforded better protection to JPM.

The Dragons have responded with James Caan suggesting in future Dragons will want a bigger stake for their investment and I think that is very indicative of why Dragons are not good investors for everyone, although Duncan Bannatyne has still said his decisions will be made on a case by case basis.

No Right Answer

From an entrepreneurs point of view, there is no real right answer. Investment money is investment money. But as a rule of thumb in my book, if you do not have a patentable idea just a new take on an existing business, then you are going to run at loggerheads with the existing market. For that reason you must, must, must get your assumptions right and test them to destruction before you start because the incumbents in the industry will see you as a threat and treat you accordingly. So your Value Proposition, marketing, service levels and cost base must be able to stand the test.

In JPM's case, clearly they became victim to the desperation within a tight haulage industry. The Value Proposition around green haulage depends on the buyer's belief in a greener future. Today, and very sadly, that is not a strong enough reason to prefer the service when every major firm is looking at its cost lines.

Together with that, and their choice of investors, JPM walked into a trap of their own making. If only they had a business centred around environmentally carrying bank executive bonuses or disposing of bail outs more effectively - that would be a good business to be in.

A Cold Day In Hell

I never thought I would read this but the recession has finally hit the greatest bastion of Britishness - beer sales are down. This hot on the back of the announcement last month that Britain is the biggest importer of wine in the world.

Hard To Believe Facts

It really is a day for shocks.

Beer sales are over 8% down compared to the same quarter last year, 5.5% for the whole year, and much of it is blamed on the 18% increase in duty announced in the budget; pubs are closing at the rate of 6 per day. Nope, nothing to do with the fact loads of people are losing their jobs and watching the pennies at all. Have lily-livered British people gone all limp-wristed and started quaffing wine rather our national brew? What has happened to the odd pint of Brain's SA 'Skull Attack', the legendary Felinfoel or 'Feeling Foul', Stella Artois 'Wife Beater', Speckled Hen and Scruttock's 'Old Scrotum'? (OK, I made the last one up).

Are we really swapping en masse to sipping wines and iced ciders while discussing the merits of Martin Corry's alleged eye-gouging or watching Mickey Skinner's 'Greatest Hits' or the 'Beautiful Game'? What is the matter with us? Have we actually swapped over to the much dreamed of Continental Cafe Culture that President Blair thought up? Now we are open all hours to drink ourselves stupid, it's apparent we are becoming a nation of wine-sipping, cider quaffing nancies.

Hey, Buddy - Don't Blame Me!

It's John Thain again - the now ex-CEO of Merrill Lynch who recently left his post at the new parent Bank of America is back in the news and fighting back. Flatly accused of lying in relation to the 'surprise' $15.3bn fourth quarter losses everyone forgot about at Merrills at the time of the BoA takeover, it is apparent that Mr. Thain and the Merrills Board signed off on $3bn to $4bn 'early bonuses' at roughly the same time. In fact, Mr. Thain complained he had been 'completely transparent' with the new parent, BoA, and that bonuses paid 3 days before the merger were paid in the full knowledge of the BoA Chairman, Ken Lewis.

Transparent he may well be and I think Ken Lewis knows exactly what this kind of transparency means. Good to know that BoA, having petitioned for a Fed bung to help it out in the light of these surprise losses, have had to use US taxpayers money to once again pay for a pile of bonuses that were completely unwarranted.

Quite how Thain can justify any bonuses at all in the light of the trading mess Merrills was in is a mystery. But I suppose the only surprise in the whole story is that John Thain was ever given a job in the first place. At least he has had the hindsight to go back and pay for the $1.22m cost of redecorating his office in which the wastepaper basket alone cost over a $1,000 calling it a 'mistake'.

The mistake was someone putting him in charge of a company let alone a bank.

Eat My Shorts!

The spookily named Paulson & Co is a US hedge fund that has made a few bob of late - just a cool £100m or so for a fair week's work. After somehow foreseeing that Royal Bank of Scotland shares would plummet on Monday, it had taken a short position a little earlier to thankfully see the shares dive 67% in a single day after the second bail out announcement. On Friday it reduced its short position just one day before the shares rallied upward by 19.8%.
There's no story, here. Nothing to read into this, move along please.

Seven Days That Created The World

Front page of this week's 'New Scientist' reveals that, on the 200th anniversary on Charles Darwin's birth and the day David Attenborough launched a new series about the value of Darwin's Theory of Evolution, the Theory is actually hokum and that the 'Tree of Life has been uprooted'. Creationists will be chucking a few parties bearing banners with misquotes but certainly it looks that at least the theory itself has evolved.

To get the context right, Newton's Theory of Gravity and Motion led the way to modern day thinking on the motion of celestial bodies thanks to his radical ideas. In the same way, Darwin's theory was the ground breaking thought process that leads to the modern views of evolution. The Tree of Life, as it is termed, was a very good way of expressing what was observed and, much like quantum mechanics changed physics, so too the new works on genomes, bioinformatics and other disciplines have transformed biology.

Still, having travelled into London this morning by car, I would like to have a chat with the theorist that said that by charging £8 to each vehicle per day for entering London would actually reduce congestion or carbon emissions. That is a theory WORTH debunking.

G'day and B'bye, Andy

Silly us. After two wins over Roger Federer and one over Nadal already this year, Andy Murray entered the Australian Open as favourite to win the title. It came as a stunning shock then that the Scot got beaten by Fernando Verdasco yesterday. We Brits are perennial losers when it comes to tennis but the good news is that Greg Rudeski has come out of retirement for our next challenge in the Isthmian Part-Timers Division of the Davis Cup where we play Liechtenstein's Extra A's Veterans in March. Should be a cracker.

The Banking Crisis Explained


No, I have not made this up and, no, it is not a sexually transmitted disease in cats. This the term applied to those individuals who fail to see the connection between a set of objects and the numerical symbols they represent, such as a set of 5 walnuts being represented by the word five or the numeral 5. However, equally these individuals may have still have high IQs, be highly intelligent, articulate and be able to grasp conceptual mathematics.

Remind you of anyone?

Monday, 26 January 2009

Loser or Just Losing It?

The following transcript of part of Gordon Brown's interview by foreign journalists this morning is reprinted with a warning to persons of a nervous disposition.

"But that would reduce global growth, deny us the benefits of global trade and confine millions to global poverty. .....we could view the threats and challenges we face today as the difficult birth-pangs of a new global order - and our task now as nothing less than making the transition through a new internationalism to the benefits of an expanding global society - not muddling through as pessimists but making the necessary adjustment to a better future and setting the new rules for this new global order. As the downturn spreads across the world, we are, for the first time, seeing cross border flows growing more slowly than domestic flows. And we are seeing banks favouring domestic lending over foreign lending. This is a trend which must be halted if we are to avoid the risk of a damaging worldwide spiral of deleveraging and deglobalisation - with adverse consequences for all economies."

Right. So just run that one by me one more time, please Gordon. Only this time could we have it English.

From Stable Economy to New World Order in Less Than 6 Months

I had to re-read this a few times as I initially thought the PM had talked in Swahili for the benefit of his foreign audience. Then, I may not have the best vocabulary but there are few cracking new words in there I should like to use in the pub to impress the ladies, especially 'deleveraging' but I fear I may be a slap or too. I have run the whole thing through my Thesaurus program and it came out with no known alternatives and I cut and pasted it into Babelfish and it said it was closest to Hungarian before giving up and saying 'buggered if I know'.

Perhaps the PM had a seance with John Maynard Keynes last night and got the latest scoop on the Credit Crunch or perhaps he was reading straight from a 6th Form text book most likely Homer's Iliad translated into Esperanto or perhaps he had simply had an Orwellian nightmare and was telling his analyst.

What you can be sure about is that it doesn't resemble English.

Delivered in his dourest tones he must have swigged too heavily on the Embalming Fluid or someone slipped Kryptonite into his Shredded Wheat because there was little hint of optimism in his voice and none of his superpowers were in evidence - he had as much wizardry as Pansy Potter rather than Harry.

The only thing that became apparent to me was that in a few short months we had gone from an supposedly stable economy that would avoid recession due to the prudence and cleverness of the PM to a New World Order that sounded like we had gone back to beings crawling out of the primordial soup or possibly the Bronze Age. It sent me in a lather rushing upstairs to see how many beads and blankets we had to barter with for supper tonight because we don't have any goats to work with while I started to snip up the few pieces of currency I had left as tinder for the fire.

Credibility In Techno-Speak

I remember the confident swagger that Gordon Brown had when he arrived in No. 11 all those years ago and dazzling us all with his intellectual economic techno-speak about 'In this economic cycle...' and we all nodded aghast as Britain seemed to do well. Perhaps it was just me but it all sounded too much like a the class swot regurgitating the text book verbatim than giving us the layman's explanation. More fool us, as most fell for it - twice. But now the phrases are all too contrived, too complex and far too convoluted for the ordinary person to get to grips with. If we could have a definition of 'deleveraging' it would be good as a start but when juxtaposed with 'deglobalisation' it conjures images of the great sphere of this earth deflating like a punctured football.

Quite where it leaves Gordon Brown is yet to be seen but his whole time as PM seems to have been a constant series of stumbles and lurches from one crisis to the next with a moment's respite when everyone actually believed for a moment that he had saved the world from economic disaster when in fact he had less idea on what he was doing than the average man in the street. The only thing he has succeeded in doing is taking his 'stable economy' and reversing it into a massive pile of debt which we may have difficulty in servicing and decreasing possibilities of borrowing more on sensible terms.

The only achievements that the two bail outs have had are 1) saving the skins of a bunch of the greediest, most irresponsible executives who made literally millions on the backs of our homes and none of whom are being made accountable for their idiot failings, 2) pouring £30bn down a drain into a company that collapsed in worth to just £5bn as they had not had the common sense to actually do some due diligence prior to agreeing the sums, 3) saving a worthless hunk (Northern Rock) which had the worst of business models and did not need to survive (we could have still protected people's money) and then paying an army of consultants massive fees to do what most O-level students could do while allowing the new executives to pay themselves bonuses just for repaying what they owe the taxpayer and 4) causing the worst run on our currency in the last century.

Strip away all that techno-babble and blah and what we have is a series of knee jerk reactions hastily put together at the whim of the same fools who got us into the mess. From his use of language it is very clear that either Gordon Brown does not know what he's doing or he does not know how to tell us what that is. I leave it to you to work out which you think is the answer.