Break in Service

Monday, April 11, 2005 | 0 comments »

Due to an eagerly anticipated holiday involving:

* beaches
* Mount Gay Extra Old (70% of CC readers may need to google this one)
* Test Match cricket (ah, ditto)
* family
* late nights out with old school friends doing not a lot

there will be no postings on CC until after 4 May 2005.

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Long-shot: a fun-money idea...

Examining the spreads for this contest over at (look for the live prices tab) the following broad observations can be made about bettors' beliefs:

  • the Labour majority will plummet from 160 to about 60
  • 1 percentage point separates the projected popular vote for Labour and the Tories
  • there is an 85% chance Labour win a majority

These are all interesting positions to debate and wager on. But an intriguing scenario is this: if these spreads come right, where would that leave Prime Minister Blair?

A leader who scratches out a pyrrhic victory based on 37% of the popular vote and a majority slashed by over 60% does not endear himself to a party already half convinced that his finance minister would make a more politically palatable PM. Concrete traces of this rift (though it's hardly new) are all over the press - here's an example from the Tory-supporting Telegraph; and another take out of the left-leaning Guardian (we strive for balance).

So, consider carefully the spread for "Who will form a government after the next election". Prime Minister Blair enjoys overwhelming favour at 88-92. That is, one must bet 92 to win 100. Gordon Brown's spread is at 0-2. Viewed another way, is there really only a 2% chance that a skin-of-the-teeth victory fails to convince Mr Blair to walk? Or be made to?

Put this to Mr Brown and he would likely cite the Machiavellian Francis Urquhart.

"You might well think that; I couldn't possibly comment".

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Last in this series from the desk of CC's UK man:

Lexicographers will mark 15th March 2005 as the day when a new word entered the vocabulary: "Ebbered". As in "to be Ebbered", verb. Can also be used as an adjective meaning totally screwed (and I could have been more vulgar) having lost a high profile court case.

Seriously though, 15 March was an important landmark in that, at last, one of those who fraudulently ramped their company and rewarded himself obscenely will finally pay his just dues (well, here's hoping) as opposed to some minor sentence and fines like Martha (Stewart).

Still, this correspondent was flabbergasted to hear a contact say, "well, it seems a bit tough - wasn't it a victimless crime?" Jeeze. If we all thought like that it'd be like the wild west! Come to think of it.

Roll on the Tyco and Enron cases - and those still to emerge (see below)!

As Elliot claimed another scalp this week with the demise of Greenberg at AIG (not to mention Buffett scheduled to testify before regulators), US investors will come to rue the day when he moves into politics full time.

Since he turned his focus on the boys in New York his success rate has been astonishing. Which just goes to prove how bad things must have been in Wall Street and how lax the recognised regulators have been [Editor: or what weak tools they have to work with]. Now I want to know will the vaunted Sarbanes-Oxley legislation nail Greenberg or not?

The Euro:
The Governor of the Bank of England Mervyn King, a man who I generally respect, last week (24th March) dived into waters in which he shouldn't be swimming. Whilst he may have a point about the relaxation of the budget deficit, realpolitik must play its part too. His comments about a collapse of the Euro may be correct. But, sitting on the other side of the channel, that may be no bad thing. It should also be noted that the only other game in town, the Greenback, is on a double deficit roller coaster and can't at present put up much of a fight (if that's what is required).

Finally, "but for the grace of God go I" should be his mantra. Expect choppy times for UK plc and sterling in Labour's third term.

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Our UK scribe worries and scorns (some more):

This scribes gets about a bit and it hasn't escaped his notice that in Britain's second city (Birmingham for those Mancunians who think they know better) is in the throws of a building boom. Flats (OK, apartments) are springing up everywhere.

However, as students of booms know, when everyone is doing the same thing that is the time move on. There are numerous in progress projects in a market that is already oversupplied according to an informed source. Let hope they don't remain that – in progress.

In the meantime, take my advice and only buy property out of necessity.

Birmingham (Metal) Bashing:
Speaking of Birmingham, the FT ran one of its surveys the other day and one journo made the fatuous comment that the 8,000 employees of the new Bull Ring centre (the Armadillo to the cognoscenti) were more important to the economy than MG Rover Group. This is, it seems, the received wisdom of the day - so why should any one journo buck the trend?

However, whatever the rights or wrongs or MG Rover's current difficulties, it does employ a lot of highly skilled and well-paid workers, makes a positive contribution to the balance of payments and does produce some good product. Now - don't get me wrong - the shop assistants deserve a job. But to suggest that these unskilled, lowly paid workers selling largely imported goods are more important to the local economy is just plain wrong. [NB: I'll be expecting the editor's comparative advantage lecture again, the one where the Chinese steal everyone else's designs and rig the market in their favour].

Jottings installment III follows tomorrow...

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CC's UK correspondent writes:

Retailing gloat:
It was with a small sense of pride to read in Patience Wheatcroft's column in the Times that, yes, there was a retailing recession; that vacancy signs were appearing in high streets up and down the land; and that businesses were beginning to go bust and things were hard out there. Well, what a surprise. Remember, you read it all here first three months ago.

L.K. Bennett:
So Ms Bennett, 42 outlets (of which 9 are store implants), a woeful website and a design team are really worth £75m? It shouldn't have escaped your notice that sales are probably stalling / shrinking as we speak and that the moment to sell has already passed. The purported £50m that was apparently turned down this week will seem like riches from heaven in a couple of years!

The Prudential:
"You can't be too Prudential" used to be the slogan of Prudential PLC, the UK insurer and fund manager. With the abrupt demise of Jonathan Bloomer last week the jot hopes that new boy Mark Tucker (due in harness on 6 May) will take an axe to Bloomer's protégé who could do no wrong - Paul Gratton. Gratton, the Egg "Chief Executive", managed to lose over £200m (!!!!) in two years on the Egg operation in France. Roll on the day! And, please, no outlandish break fees...

Taking the proverbial?
By the way, I see that Grant Thornton in the UK have taken to using premium rate numbers (0870) in some of their offices. Taking the pee or what? Still, you have to admire their brass neck!

Jottings installment II follows tomorrow...

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View from Brooklyn Bridge toward the financial district

The Easter break weekend was spent in New York City. Not pure investment-writing material, perhaps. But interesting to see the place in which the world's financial capital resides; and perhaps get a feel for how its employees are affected by the NYC environment. Or at least that's the justification for this blog entry.

This scribe lived in NYC for a very short time in the mid 1980s but clearly had forgotten the detail of the city. Some things that stuck out on this trip:

1. The NYC minvan taxi market is dominated by Honda Odysseys and Toyota Siennas. Private NYC minivan owners favour (an unscientific opinion) the Odyssey over competitors by a long shot. Note to self: check the Honda accounts.

2. French Canadians were everywhere; Brazilians a distant second; and a whole bunch of nationals whose lingo went unrecognised were also all over. Who says foreigners don't know how to trade a soft dollar?

3. Central Park appears to be controlled on Saturday mornings by large, complexly organised gangs of dog-owners and their four-legged friends. Economic ramifications uncertain, but any place where dogs wear shoes has money to burn.

4. Outside the Port Authority it is possible to witness a man doing a superior James Brown song and dance and then ask onlookers for payment whilst leering at everyone's woman. The scribe can confirm this is self-defeating alongside the cash-ask. A rare example of a poor NYC sale's pitch explaining, perhaps, the performer's station.

5. Huge bargains are to be had in electronics: a Dell pda, a gps unit and navigation software cost 76% less than in the UK and 73% less than in France (yes, sadly, a spreadsheet was assembled prior to departure). Currency alone? Doubtful. Note to self: write to Dell asking explanation for these differentials.

6. The Mercedes C240 costs $35k. This is known thanks to a huge billboard on the approach to the mouth of the Holland Tunnel. The price compares to 35k euros in France (the scribe's domicile). Unfortunately, the C240 will not pass as hand luggage. But at that price, where's the cachet? Note to self: are Mercedes doing a Jaguar and ruining the brand image?

7. In France, a Volkswagen Touran is a massive, fuel-guzzling monster car. In Manhattan, it's a discreet runabout and probably perceived as under-powered. Note to self: why don't small car models sell in NYC?

8. Time Square not as threatening as in the mid-1980s, and more commercial as a result. Street crime looks to have been beaten back significantly. Seasonal note to self: would the crowd have given known thief Barabbas the nod over JC under a zero-tolerance crime regime?

9. NYC service is a curious mix ranging from cold and warm professionalism (but both charismatically-detached), right through to the "stop bodderin' me I'm tawkin' on the cell" style.

10. One waitress wrote on our bill "little note for foreigners: tip (in USA = 15-20%) not included" just in case. She didn't make the range.

11. HBO much more explicit than 20 years ago. Ran a piece on a male sex doll (interchangeable accoutrements and $4,000+ price tag if you are interested) being put through its paces by a bevy of, ah, actresses. Explicit visuals. Told the wife he/it was too expensive and would be hell to get through customs. Won the argument but can't help feeling the bar has been raised. So to speak.

12. Food is cheap and servings heroic (still); but taste directly proportional to price (still).

13. There are less obese people than the media conditioned this correspondent to believe.

14. Ground Zero more a construction site than memorial and a place where hawkers flog NYC and World Trade Center trinkets. A desecration by commerce, I'm sad to say. Nearby St Paul's Chapel (built in 1766) and its cemetery sits incongruously next to the modern Hilton Millennium but, appropriately, right opposite the WTC site.

15. Most taxi drivers actually know how to get from A to B nowadays. Or maybe we were just lucky.

Conclusion: if France is the land of savoir-vivre, NYC is the land of savoir-vendre, home to worshippers, masters and slaves of commerce. Hopper's paintings are beginning to mean something.

Normal economic comment to resume next week.

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