Monday, 27 October 2008

UK in worst position of G7 countries

Graham Ruddick has an interesting piece in the Telegraph explaining some of the reasons behind the appreciation of the carry trade currencies. Whilst carry trade unwinding has made the fall of sterling towards the $1.40 mark much faster, in the end the level it reaches is determined by economic fitness of the UK in relation to other major economies.

For many, the most telling thing about the article is the following quote from Standard Chartered:

"The reason that sterling is doing badly is that, in our view, the UK is expected to be the worst performer among the G7 economies over the next 6-12 months because it will contract around 2pc next year," says Mr Mann at Standard Chartered".

When Gordon Brown mentions recession, he adds the prefix "global".. at PMQ's the other day he twisted and turned reeling off the names of other G7 countries before tacking on the UK as if it were an innocent victim of events beyond it's own control. To economic incompetence and distasteful greed for power we can add unseemly hubris - and total contempt for the electorate which he has betrayed.

Gordon Brown.. sinister or stupid?

Gordon Brown's comments regarding Osborne and Mandelson, relayed in the Telegraph this morning, show us his true colours. The Electoral commission have made it clear that there is nothing to investigate in the Osborne case, just as the European commission appear to have done in the case of Mandelson.

Gordon Brown backed Lord Mandelson and again called for an inquiry into the "illegal" approach by Mr Osborne.

The Prime Minister told BBC Scotland: "This was an issue where someone had tried to get a donation from a foreign citizen and that is unlawful. It is clearly unlawful. It's in the legislation of Parliament that it's unlawful to take, or solicit, or even to further the objective of acquiring foreign donations.

"That is the issue and that is what has got to be investigated and I know that the Electoral Commission has been asked to do it, the Parliamentary authorities. It's a matter for these authorities, it's not a matter for me."

On the accusation levelled at Lord Mandelson, who he brought back into the Cabinet earlier this month, he said: "What I actually think is that when these things are investigated by the authorities and the authorities say there's nothing, there's nothing to look at, there's nothing that's causing a problem, that unless people have any other evidence, it should be left as having been dealt with."

Either the Prime Minister doesn't read the newspapers, or he is stupid enough to directly contradict himself in the most flagrant way from one paragraph to the next, or - and this is the sinister bit - he believes that what is lawful and what isn't depends on whether you are a member of his cabinet.

Saturday, 25 October 2008

Mandelson returns to the crime scene

Why is it that the spectacle of Peter Mandelson writing a letter to this morning’s Times has something of the air of the murderer returning to the scene of his crime?

It’s not just the mealy mouthed words or the crafted attempt to blame others for a statement released by his office which amounted to an untruth (albeit a lie of omission rather than the more explicit kind). Nor is it the undisguised contempt with which he writes of the electorate (“some people formed the reasonable view, therefore, that my first meeting with him was in 2006” – what view did you intend them to form?).

No - if weasel words and half truths are what we have come to expect from Mandelson the man – then no Ermine robe is likely to change that.

What is sinister about the letter is the reminder it brings of the real reason Mandelson has been called back into Government – because it most certainly is not for his skills at the DOT, no matter how many Oligarchs he can boast of in his Blackberry. The mere appointment of a Minister for Trade wouldn’t justify the return of such a controversial figure to a Government that already has the greatest Chancellor in the known world – with Alistair Darling to help out if the need arises.

The real reason that Mandelson is back is to change the narrative, keep out the bad headlines, and help the public swallow the line that the recession is something global and impossible to protect against - as unpredictable as an attack from Mars or a shower of meteorites.

Changing the narrative requires two things of the media, firstly that they are assiduous in delivering the party line (and the BBC appear now to surrendered all pretence at unbiased reporting), and secondly that they are prepared to be led on the kind of wild goose chase that we have all been on this week in the Yachtgate affair, expending time and resources on a barely founded smear campaign while allowing the truth of a failing economy and a tanking pound to slide to the back burner.

Only one man can do this – and no matter how great the discomfort among the electorate of all sides, for Gordon Brown this last desperate Faustian pact is worthwhile. This morning’s excuse for an explanation (headlined by the Times as if it were an apology of sorts) will be the first of many.

Friday, 24 October 2008

Taki's take on tacky tycoon...

Knowing Taki to be many things, but above all a good judge of both trout and character (he would have to be dragged kicking and screaming onto a yacht as ugly as Oleg's) I reproduce here his own unique take on the Osborne story (finally, one that doesn't mention Osborne).

Apparently the worse hit is Oleg Deripaska, a cheeta look-alike without the chimp’s charm and good manners, whose two great buddies in the U.K. are none other than Jacob and Nat Rothschild, now nervously not answering their mobiles in case Oleg needs cash.

Perhaps we haven't quite seen the end of this story, especially if Guido is right about the tapes

What a (US) morning!

Futures limit down during the night, fist fights on the floor of the CME as traders argue to get a new low print of 835 in for the S&P, and a new high for the VIX (the so-called fear index).. what does all this mean?

On balance, and absent any new catastrophe.. it's all looking pretty hopeful. If the market rallies this afternoon and remains above it's intra day lows from earlier in the month, then the buyers we have seen particularly in metals, railroads etc. this morning could have the best of a 'santa claus' rally in the near term. It's also noticeable that the Financials - which got us here in the first place - have held above their recent lows.

So equity-wise we might see a bit of a rally (complete with double bottom on the chart) which will give us all a chance to offload stocks before the real drop begins.... on the other hand if we retreat this afternoon and break the recent lows...

Sterling Crash Now worse than Black Wednesday

Sterling now suffering it's worst week since 1982 (by a long, long way) - 30% worse than Norman Lamont's Black Wednesday in 1992.

Week Ending Open Close Percentage
25 October 2008 1.7285 1.5498 -10.34%
19 September 1992 1.8723 1.7342 -7.38%
27 April 1985 1.278 1.216 -4.85%
03 August 1985 1.4278 1.371 -3.98%
04 October 2008 1.8445 1.7716 -3.95%

Hope Gordon is proud that he has not only "abolished boom and bust" but is now, apparently, "leading the world out of recession".

FTSE at historic lows, Pound Tanking, Growth -0.5

Update: The GDP figure is worse than expected at -0.5

FTSE trading within 20 points of October (intraday) low, and falling.

Pound at $1.56 and falling fast...

If this is leading the way out of a recession then I would hate to know what going into one looks like.

“Gordon Brown leading the world out of recession” - Markets beg to differ

Labour’s hubris reached new heights yesterday evening on Question Time when Roy Hattersley told the audience that Gordon Brown was now “leading the world out of recession” – an impressive claim given that (officially at least) we are only going to enter one today.

Either Hattersley doesn’t understand the difference between a liquidity trap and a recession or he has a touching faith in the ability of Labour spin doctors to convince the lumpenproletariat that the unemployment queue in which they are standing and the bailiff at their door are simply figments of their imagination, unpleasant side effects of an international crisis which is not of Labour’s making.

The currency markets, of course, are a tried and trusted mechanism for telling us which countries are going to withstand a recession better than the rest – which is why the pound is about as popular on Foreign Exchanges as Phil Woolas at a Cabinet meeting. The fall in the pound, which could now test the historical 1992 dollar lows, is only going to be made worse by the spending plans of a Government desperate to cling on by their fingernails. Living standards will be hit faster and harder because after eleven years of New Labour we just don’t have the balance sheet to be issuing new debt on this scale.

Edmund Conway in the Telegraph this morning compares Darlings new found faith in Keynes to the actions of a Gambler.. but as everyone knows there is a world of difference between the player who doubles up when he is winning and the desperate man who stretches the last of his credit trying to claw his way back into the game.

Thursday, 23 October 2008

Senior BBC editor accuses Osborne of concealment

BBC Political Editor Steve Mawhinney has been sent out to defend the actions of his reporters in covering the Osborne story. Trouble is, he makes the BBC look even more stupid and biased than the reporters did in their own coverage. It appears as if he has accepted his instructions from the spin doctors without actually reading the Nat Rothschild letter.

This is what he thinks he is reporting on:-
"a specific allegation of wrongdoing - indeed possible law-breaking - against the man holding the most sensitive post in the shadow cabinet outside of the leader."
He goes on:
"that he solicited a donation to the Conservatives from a Russian billionaire, Oleg Deripaska, and talked about ways to secretly channel that donation to the party, on the face of it could have put him in breach of the Political Parties, Elections and Referendums Act 2000."

Trouble is, this is not what Rothschild alleged at all (even if you were to accept Rothschild's version without question). The worst allegation made by Rothschild - in terms of soliciting is that Osborne went "on to Mr. Deripaska's boat to solicit a donation." - and the witness statement he produces to back up his claim apparently acknowledges that no substantial conversation on the subject actually took place. The best he can offer is that "Mr Goodwin recalls that the subject of a donation by Mr Deripaska’s UK company also arose briefly while we were on the boat, but the conversation gained no traction".

So, absent an actual conversation on the subject between the Russian and George it would appear that the worst offence was to discuss a donation - principally (it appears) with Rothschild himself.

Worse still, Mawhinney introduces the idea that Osborne in some way sought to "conceal" a donation - which is an offence. Mawhinney's ill thought out blog entry is the first allegation we have seen that Osborne was attempting to do something in secret. Had Leyland (a famous UK company after all) made a donation (and they did not, it was turned down) there is no suggestion whatever, from anyone, that it would have been done in secret and - of course - Oleg's ownership of the company is a matter of public record.

So the question we must ask ourselves is why, when defending his reporters against allegations of bias, does Mawhinney put pen to paper and make a further totally unfounded and quite possibly libelous accusation against Osborne? Does this organisation's arrogance and stupidity really know no bounds?

The Hedgie doth protest too much...

As nothing further of any significance emerges in the "Yachtgate" scandal, one is tempted to wonder why Nat Rothschild continues (through unamed friends) to issue stark warnings to Osborne to keep his mouth shut.

And wiser minds can't help wondering why such a big fuss is being made over a paltry fifty thousand donation which didn't actually happen, and which - had it happened - might have had all of the appearance of being facilitated by Rothschild himself.

To Gordon Brown it is "a very serious matter" requiring examination by "the authorities" (although he has yet to create the authority in question - watch this space). The newspapers are positively falling over themselves to keep the story alive, as long as doing so doesn't involve publishing new information which might help to clear Osborne in the public mind at least.

In this financial climate I suspect that most British people feel that a recently elevated Cabinet Minister who stayed on a Yacht two months ago but can't remember doing so, and a hedge fund tycoon who - according to his friends - feels he holds sway over the composition of the Shadow Cabinet, combined with a state broadcaster which has abandoned all pretence of impartiality might between them contain the seeds of a story far more interesting than who said what to whom before the donation was turned away.

Interestingly, over at the Spectator Melissa Kite looks like she might have the beginning of it.

Wednesday, 22 October 2008

Pressure grows on sub-editors as story fails to develop

The Times is beginning to look faintly ridiculous in it's attempts to make a crisis out of Nat Rothschild's tantrum.

Under the front page headline Pressure grows on Osborne as questions mount over Deripaska claim it fails to produce, by way of example, one single new question which has arisen today over the issue. The article does, however, reveal shocking news from the Tory 'grass roots' - in the form of a single councillor from Angus - who is sufficiently upset with the party which he represents to tell the world that Osborne should resign if things have not improved by Friday.

Which is ironic, considering that The Times is still suppressing the only known evidence which hasn't yet been published - the three changing versions of the Rothschild letter, including the first example - only briefly published on times online on Monday before being withdrawn.

Perhaps it's journalists are too busy - according to Guido - conducting leading telephone polls in a desperate attempt to undermine Osborne.

Is this a sterling crisis?

Just in case there is any doubt about the size of the headlines which Mandelson needs to cover up, the chart on the left (composite sterling since June '07) gives a pretty good idea of just how bad a sterling crisis we are facing, and how quickly the fall is accelerating.

Those that are hoping blithely for lower food prices, energy costs etc. in the months to come may want to examine how much of the food they eat and the oil they consume is denominated in sterling...

On the bright side, exports will be cheaper. If there are any.

Seekingalpha speculates that the pound may now re-visit the historical lows of 1992, and trade below $1.40. Perhaps Gordon shouldn't rule out 15% interest rates in such a hurry!

A Question of Judgement

Keeping the press busy with holiday gossip for a second day while the pound goes into freefall was always going to be a challenge - but Gordon Brown has stepped up. Fresh from avoiding Cameron's question three times at PMQs today, he called for an enquiry by 'the authorities' into Osborne's behaviour which he describes as 'very serious indeed'.

He doesn't seem to know which 'authorities' or specify which behaviour - and neither, apparently, do his lackeys

So let's try and help him out. The law in question says this:-

Offences concerned with evasion of restrictions on donations

(1) A person commits an offence if he—

(a) knowingly enters into, or

(b) knowingly does any act in furtherance of,

any arrangement which facilitates or is likely to facilitate, whether by means of any concealment or disguise or otherwise, the making of donations to a registered party by any person or body other than a permissible donor

1. I'm no lawyer, but I doubt very much that hypothesising about a donation, setting out or testing the legal obstructions to a course of action, amounts to an "act" in furtherance of anything. Even in Brown's Britain.

2. A careful reading of the statements from both sides would suggest that - if anyone - the principal intermediary, the man doing the facilitating, who introduced all the relevant parties, who brought the UK companies into the Corfu discussion, and who (apparently) broke the news in a September phone call of a possible donation by Leyland was none other than ... Nat Rothschild.

3. Even that has it's limits - the board of Leyland are free to make a donation on behalf of the company, and so they should be. The political environment in Britain directly affects all their stakeholders... employees, creditors etc. - not just to their controlling shareholder wherever he may be domiciled. They are a company, a UK taxable entity, and they are a legal donor - so long as the board arrive properly at a decision to donate from the company's own resources.

So the question of the day must be - what on earth does Gordon Brown think there is to investigate? Why does he think that this is a very serious matter?

Doesn't this all say more about his judgement than that of Osborne?