Monday 21 December 2009

Backing away from total blind panic

"There is an element of consumers backing away from a total blind panic," says Ed Garner, director of research at TNS Worldpanel. "If you go back a year ago, the roof was falling in and it was awful.

As our contribution to the end-of-year economic stocktake, GOM is pleased to bring to the attention of the nation his eagerly anticipated annual Mince Pie report.

Mince pies December 2009

Sainsbury's Deep Filled
Price for 6: £1.00
Price each: 17p
Price 09/ 08: 72%
27% cheaper than last year but also of lower quality; cardboard-like case; filling a solidified paste with little evidence of fruit or nuts; reflects effective application of value engineering, ie cheaper and not so good

Sainsbury's Taste the Difference
Price for 6: £2.19
Price each: 37p
Price 09/ 08: 107%
7% more expensive than last year; tangy & fragrant filling; light pastry case

Sainsbury’s Connoisseur
Not in evidence at Fetter Lane outlet of Sainsbury's Metro

Konditor & Cook
Price for 6: £5.94
Price each: 99p
Price 09/ 08: 111%
Smallest of the pies we sampled; plump sultanas; falls apart in hand after 30 secs on highest microwave setting; convincing appearance of being hand-made; tart & aromatic filling; pastry to which a rolling-pin has been applied

Gregg’s dahn Leather Lane
Price for 6: £1.40
Price each: 30p
Price 09/ 08: 111% (single pie); 86% (pack of 6 pies)
11% more expensive than last year; but 14% cheaper than last year if you buy six; largest pies we sampled; flying saucer-shaped; after 40 secs of microwave high power, fissures appear in lid and bottom collapses; soft pastry rather than biscuit crumb; bitter & tangy filling, contains fruit; well-filled; moist mincemeat. A man dressed as Father Christmas in the store.

GOM concludes that Greggs' pricing power has become more prominent; and that the offerings of Konditor & Cook are not three times better than Gregg's. However we warn our readers against attempting the Gregg's so-called Cheese & Onion Slice.

GOM also reports that connoisseurs are no longer to be found, at least in the Fetter Lane outlet of Sainsbury's Metro.

These findings seem to run counter to reports from Waitrose of three-bird roasts (turkey, goose and duck) tumbling off the shelves at £120 a pop.

But I've always thought that partial (rather than total) blind panic was a more sustainable stance.

Friday 11 December 2009

Thoughts from the departure lounge

As I sit here struggling with 11 across, [A term of abuse, sounds like Banker (6)], I’m a bit puzzled by one bit of Darling’s rhetoric about City bonuses.

I understand the politically-driven punitive motive (indeed most of us would like to see these fat cats in the stocks) and I understand the hypothesis that it is a good thing to discourage payments that might lead to excessive risk-taking using other people’s money.

But how does this apply to the “guaranteed bonuses” that have become such a bogey for No 11? We learn today that is was only after intervention by the Attorney General that Darling was persuaded not to include guaranteed bonuses in the super tax target area, since to do so would infringe Human Rights legislation.

A guaranteed bonus is, by definition, not performance related. If one accepts that variable pay is more likely to influence behaviour, surely the very fact that these payments are guaranteed makes them less likely to drive day to day risk taking? Why then the bogey status?

Am I missing something here?

Nurse! Isn’t it time for lunch?

Monday 16 November 2009

Relocating the casino

Gentle reader, if I hear one more self-serving statement from a City fat cat or compromised politician to the effect that “the City is too important to our economy for us to insist on caps on earnings.....or over-zealous regulation.....or the rigorous collection of corporation tax.....or the proper taxation of non domiciled financial sector workers.....”, I’m going to throw up.

Surely the Mafia is equally central to the Sicilian economy, or the Camorra to Naples', or the Triads to Taiwan’s, cocaine to Columbia’s, whale hunting to the Japanese fishing industry or for that matter the widespread use of bribery to the international arms trade.

Centrality is one issue. What is morally appropriate is another.

Must we give credence to these fellows who have made Faustian pacts with the devil.

Friday 23 October 2009

Bankers’ bonuses

It is hard not to feel some frustration when many of the investment bankers who have condemned us to massive levels of public borrowing are now about to receive bonuses rivalling those paid out in the pre-credit crunch years.

For decades the investment bankers were the loudest exponents of a free market, natural selection, law of the jungle Weltanschauung. Now, having been partially or largely rescued through nationalisation they want to retain the obscene levels of earnings that they enjoyed while taking huge risks with our livelihood.

In spite of the harrumphing coming from Nos. 10, 11 and the FSA, precious little is being done to prevent a massive act of injustice. The reason for the limpness of response, we are led to believe, is that the UK financial institutions are too important to our economy for sanctions to be applied, when such sanctions might force this grotesquely profitable investment work into foreign hands.

But so what? Suppose we were to place stringent limits on the earnings of UK investment bankers and their partners in crime? Will the UK economy really suffer?

I suspect not as much as the bankers’ lobbyists suggest, because:
  • UK financial institutions are notorious for avoiding most of the corporation tax that tax experts suspect is due
  • Overseas institutions and their highly paid staff will continue to pay tax in this country (particularly when the UK tax rules and employment laws continue to stay so attractive), and
  • These staff will continue to live in the UK either because they prefer it here, or because they sank their last bonus into an over-priced property which cannot be now sold or rented at a commercial rate. And while they and their families stay here they will spend here, so the trickle-down won’t dry up.
If a few UK institutions crash out as a consequence, so what again? Two years ago the bankers would have said that failing companies fail because they deserve to fail, “it’s the law of the jungle, squire”. So my ears are deaf to their entreaties.

More importantly what would happen to the deserving stakeholders, the taxpayer, the shareholder and the innocent employee?

Innocent employees are mostly in the retail parts of banks and could be protected best by splitting the retail and wholesale operations as Mervyn King is promoting.

Taxpayers and shareholders might be harder to protect but the old shareholders in, say RBS or HBOS, now have nothing left to lose anyway. Those proud champions of shareholder value, Fred Goodwin, Andy Hornby and Adam Applegarth poured that investment down the pan a year ago.

What of the government’s (i.e. the taxpayers’) holding? Well the sooner the banks pay off their debts the better, and they’d do that a littler faster if they didn’t trouser over 50% of their revenue.

Monday 12 October 2009

Whose moral hazard?

As our increasingly feeble minded GOM contemplates the imminent arrival of a wholly inadequate private pension he ponders the term “moral hazard”.

This insurance industry expression has been popularised by Mervyn King and is now bandied about freely in the context of the derivative creators, investment bankers and fund managers who took the fruits of the economic boom but left the customers (mostly pension fund investors) with the costs of weak performance and (in conjunction with other tax players) sole ownership of the wreckage of the economic recession.

As he looks at what he paid pension managers over the past decades and the loss of value he has received at their hands the GOM certainly has no time for these scoundrels.

But are they the only villains of the piece? What about another group of people who took the credit for the boom but who were wholly protected from the growing level of risk?

Might it not be the case that the continued payment of MP’s and civil servants’ pensions out of current revenue, not the proceeds of past investment, has exposed them to an entirely comparable risk of moral hazard?

Could this be why successive Governments have done so little to head off the inevitable pension train crash? They were simply immune to the consequences of their irresponsible inactivity.

Let’s hear it from Mervyn (whose pension, we suspect, will not rely on “past performance”, either).

Thursday 21 May 2009

Clinging on to the past

As the local road sweeper said this morning, “If they kick that incompetent b----d upstairs now they’re just proving they have no bloody clue”.

He has a point.

What sort of message are they sending when the rhetoric speaks of modernization and the behaviour demonstrates an inability to let go of the past?

Tuesday 28 April 2009

Don’t waste the space

It seems to me that we could be missing a trick in London.

As I understand it we have spare capacity in Canary Wharf, a shortfall of funding for the Olympic Village, and some embarrassment in Westminster about MP’s second homes.

Surely the solution is staring us in the face? Why not turn those redundant banking towers into a social housing complex, downriver, which could accommodate both homeless athletes and provincial MPs in town to claim their Commons attendance allowance.

Indeed from their windows the latter could admire the Dome they insisted on building, while contemplating the savings to the taxpayer that would accrue from not building an absurdly ephemeral Olympic Village.

And in 2012 we might even have a new Olympic event in which they could compete?

Given the UK’s superiority in sedentary events (cycling, rowing, sailing and motor racing) the concept of competing for a seat is an obvious proposal.

And with the Tories’ excellent suggestion that the number of constituencies should be reduced we have the possibility of winning a gold medal in musical chairs.

Thursday 26 March 2009

Expressions we no longer need

One of the many benefits of the credit crunch is that we can divest ourselves of a fair measure of jargon, simply because the world has no further use for it.

To take a few examples, I doubt we’ll see the following phrases used very often, except in a tone of irony or nostalgia:

• “post neo-classical endogenous growth theory”
• “economic forecast”
• “profit forecast"
• “full employment”
• “free trade”
• “laissez faire”
• “early retirement”
• “pension pot”
• “embedded value”
• “hi-growth opportunity fund”
• “shareholder value”
• “light-touch regulation”
• “wealth management”
• “mortgage broker”
• “trickle-down”
• “sports sponsorship”
• “charitable giving”
• “capital gains tax”
• “tax relief”

And we can pray for the imminent demise of a few more.

My list would include:

• “guaranteed bonus”
• “remuneration committee”
• “independent non executive director”
• “tax credits”
• “public sector pensions”
• “PPF”
• “MP’s second home allowances”
• “targets”
• “short selling”
• “reality television”
• “celebrity culture”
• “personal trainer”
• “nail bar"
• “Chelsea tractor”
• “bottled water”
• “designer“ (anything)
• “RBS Six Nations”
• “Olympic village”

But then I’m feeling a bit sour.

Wednesday 11 March 2009

Sit-aside: a solution for our times

The UK normally produces more management consultancy than is needed by domestic clients at any one time. Since it is difficult to store management consultancy for consumption at a later date, and demand in export markets is subdued, there is a need to provide incentives to reduce over-production.

A proposal very worthy of consideration is now being mooted: Sit-aside.

Under this scheme, management consultants will be able to claim support payments so long as they remain unutilised on client work, and instead devote their spare time to cultivating useful crops such as linseeds, oilseeds and protein crops such as peas, beans and lupins.

Management consultancies will be allowed a choice as to which teams of individuals will sit-aside each year; or alternatively the same team could be sat-aside for a number of years. This will give management consultancies more flexibility as they plan future staff utilisation, either on billable work for clients, or as claimed sit-aside credits.

Management consultancies would be obliged, however, to manage their sat-aside team so that it could be brought back into production if necessary.

It might be argued that price cuts would be a better method of reducing over-production; but this would overlook the fact that Sit-aside will act directly and quickly to reduce production and provides significant environmental benefits.

Sitting in their offices, the damage to the economy caused by these management consultants in the normal course of affairs will be significantly reduced. The sat-aside consultancy resources will provide important ancillary benefits, such as acting as buffer zones for preventing buzzword drift, providing habitat for the incubation of new management fads, becoming idea-banks where beneficial ideas can live and breed, and creating wildlife corridors around offices where animals and birds can find cover.

They will provide stewardship on behalf of the nation for key legacy management consultancy assets including PowerPoint formats, process mapping methodologies and work breakdown structures. And a pound spent supporting a management consultant will be spent in turn on goods and services created and delivered in the UK, thereby revitalising the economy in deprived areas such as Surrey and Berkshire.

In assessing bids for Sit-aside payments the Government will use the flexibilities available under the “Temporary Community Framework for State Aid Measures to support access to finance in the current financial and economic crisis”. The focus will be on ensuring that the management consultancy industry emerges from the current downturn with the skills and technology base needed to be competitive in the global market.

Enough of the gloom! Let's not look backwards: let's look forwards!

Forward to kick-starting the economy! Time to commit to Sit-aside!

Wednesday 18 February 2009

A short lesson in economics for bankers

The expression "those bankers just don’t get it" is becoming exhausted through repetition, but their capacity for self delusion still amazes.

It has become fashionable to suggest that they (along with regulators, governments and the rest of us) had got stuck in belief in an economic paradigm based on the supremacy of rationalism.

Recent events, however suggest that they’re not very hot at applying even this old style economics.

The argument that bonuses still have to be paid (e.g. by RBS) to prevent staff migration (e.g. to Barcap) surely flies in the face of traditional economics. Why?

1. The banking sector employs twice as many people internationally as it did 15 years ago.

2. In London that ratio is 3 to 1.

3. The demand for banking services will now shrink as the depression continues, and banks will be shedding staff in the tens of thousands.

4. It’s anyone’s guess but we might assume that two in three wholesale, investment or forex bankers will become redundant.

5. In a buyers’ market the price bankers can charge for their labour will therefore plummet,

6. and they’ll be lucky to have a job at all, let alone a bonus.

But I suggest that there is one area where performance related pay is now badly needed, the Cabinet.

How about making Ministers’ take home pay dependent on the delivery of the pledges in the manifesto and the achievement of all the targets they spray around like a tom cat sprays wee?

That might concentrate the buggers’ minds.

[Ed: I apologise for GOM's use of offensive language; he does get carried away sometimes]

Monday 16 February 2009

Beyond satire

Satirists might just as well pack their bags at the moment.

No sooner has one had a Swiftean moment than we read that the government has implemented it.

This weekend revealed that the FSA is to award itself £10m of bonuses.

And we have just heard that Tessa Jowell is attempting to remove gender differences from the Olympics by, for example, allowing women to compete in heavyweight wrestling.

I’d be tempted to suggest that the Secretary of State for Health has announced that men will soon be able to have babies, but there’s no point.

It’s probably already in the pipeline.

Tuesday 10 February 2009

Not select enough

One of the inquisitors on this morning’s Treasury Select Committee meeting revealed his lamentable ignorance by referring to "siren calls from risk managers", meaning siren as in claxon or fire alarm. And everybody else adopted the solecism without any indication of irony.

So now we know why Bankers and Parliamentarians have so let us down; it’s very simply their lack of a classical education.

Funny how much clearer life gets as one gets older.

Or as my old friend Catullus used to say "Totum ut te facient, Fabule, nasum"

Thursday 15 January 2009

Antilogisms

Years ago the witty chaps in The Times’ PHS column coined a new term, "antilogism", for a word or expression that means the opposite of what you’d expect. Not quite the same as an oxymoron, but more like a thumping great one or two word porky.

The term never caught on, and you won’t find it in the dictionary, but the financial crisis has brought the concept back out of the closet. We need that word again.

How else would you describe the following?

A security = something that is spectacularly insecure

Wealth management = the destruction of your savings

Investment management = the incompetent and spendthrift loss of your investment

Savings product = structured theft

Managed risk = unmanaged risk

Financial planning advice = guesswork on fees

Typical 10 year return = the same number with a negative sign in front of it

Personal pension provision = throwing your own savings away

Private sector occupational pension scheme = conspiring with your employer to throw your and their savings away

Defined benefit scheme = undefined benefit scheme

Public sector pensions provision = a charge on current tax payers, an increasing number of whom are private sector pensioners

Financial Service Authority = a body that isn’t an authority on either finance or service

Department of Work and Pensions = a group of civil servants overseeing the annihilation of both

Royal Bank of Scotland = an institution that is neither Royal nor Scottish

Bradford & Bingley = Whitehall & Madrid

Equitable Life = unfairness whichever way you look at it.

But the crisis is throwing up some terms that have a ring of truth: vulture funds do prey on the weak, and as more and more of our finance houses are nationalised the Bank of England is becoming exactly that.

Thursday 8 January 2009

A solution for your problem

Grumpy Old Man does not aim to provide advice on remedies for personal complaints or conditions.

However we have had drawn to our attention a new and unique product which we believe will meet the needs of many of our readers.

Monday 5 January 2009

Another roll of the dice

If we were to throw a die to forecast our future we might, like Luke Rheinhart’s Dice Man, load the odds so that one face predicts rapid recovery, four faces offer progressively increasing degrees of gloom ranging from a one-year recession to four-year deflation, and the sixth face suggests something very more radically threatening.

It is probably not too pessimistic to suggest that within a year or so the sixth face of the economic die will give us a scenario in which our bankrupt liberal democratic (and as it happens, capitalist) nation states will have no choice but to accept bail-outs from countries whose politics we abhor.

In this scenario our economic survival becomes dependent on Saudi Arabia, China or Russia and its old ’Stans. None of these are remotely liberal or democratic by our standards, nor are they strictly capitalist in our terms, in the sense of a diversified, decentralised economy.

Will this dependency come without demands? I suspect not.

For decades "our" IMF has bailed out third world countries only so long as they promise to adopt developed world capitalist economic management principles. I think we can be reasonably certain that financial support from the purveyors of sovereign wealth such as China will carry similar or more stringent obligations.

What is therefore at risk is not just our economic viability but the very freedom we have fought for over centuries to run our societies as we wish.

The supposed destructive threat of Al Qaeda will have materialised, but it will have been delivered not from Islam but by the free market capitalist fundamentalists that have infested our economy, out-manoeuvred our regulators and seduced their political masters.

The axis of evil will have triumphed but that axis will emerge to be not the barbarian at the gate but the enemy within.