Tag Archives: George Osborne

December 1, 2014 · 22:12

Show me the money!

That is what I wanted to shout out loud today, not because of a scene between Tom Cruise and Cuba Gooding Jr, but because of the story written by Larry Elliot (the Guardian economics editor). He is not wrong, probably with his insights and degrees he is more right than anyone else so why am I all up in arms about it? You see, if he is right then there is something extremely wrong with this world. Here is the crux, either he is wrong, or the bulk of the planet has become demented. What will it be?

Why do I consider this to be my view?

The view evolves when we consider the following aspects of the British economy. First there is “The budget deficit will be almost £100bn this year and is rising. It was supposed to be below £40bn. If the current Treasury chief secretary, Danny Alexander, is foolish enough to leave a little note for his successor, he will only need to insert one word into the one penned by Byrne: still” and “Britain currently enjoys the sort of growth rate that Germany, France and Italy can only dream about. The economy should expand by 3% this year, making the UK the fastest growing G7 nation. Jobs are being created at a record rate, a development that explains why Britain is proving a magnet for migrants from the rest of the EU“, we have seen this. Yet, as immigration is not capped to the extent it should be, jobs go to the cheap Polish workers, whilst we see a massive +50 workforce unable to get jobs, which we get from the Guardian (at http://www.theguardian.com/society/2013/nov/13/unemployment-fall-masks-jobless-over-50s). “Bennett is one of more than 400,000 people over 50 in the UK who is registered as unemployed, according to the latest official jobs data released yesterday“, you see, the mature experienced workforce is deemed useless in many areas and as such, the economy will take two hits. The first one is that these people in the end still cost money, in the second that as companies rely on cheap labour; we see that they go three steps forward, two steps back; it is getting them nowhere fast and at great expense too. So as those people have an income, the companies are just scraping by, having therefor the dubious benefit of living at tax level zero. That keeps the Osborne coffers (also known as the UK treasury) pretty empty.

Let’s take a look at some events linked here “Former BBC director general Mark Thompson has said sorry for the £100m failure of the BBC’s Digital Media Initiative (DMI)“, “Siren police IT project’s £15m failure a ‘debacle’” and not to forget “Abandoned NHS IT system has cost £10bn so far“. There is a level of sheer incompetence that is beyond measure. Yet, I think it goes further than that, I think that as areas have cut back and scrapped from the bottom of the barrel, we see cogs of non-comprehension that just twirl having no connection to any other cogs. Companies, which are no longer structured in the old ways, but still presented as such, they are niches into rooms, where only the manager has access. Like the American cubicles, that only one person oversees, absent of checks and balances, whilst the people no longer talk to each other, no clear communication. That represents the new era of work. The 50+ population have seen why there are issues with the cubicle approach and the manager who needs to get the task short-sightedly done is barring 50+ from being hired, this results in a sliding slope of minimised success.

What do they have to do with one another?

Let’s get back to the writing of Larry Elliot at this point “It took until 2013, however, for the level of output to get back to its pre-recession level, the slowest recovery of the post-second world war era. Osborne thought the economy would cope with austerity better than it did. He underestimated the impact of higher VAT and cuts in spending on growth. The chancellor thought his tough deficit reduction plan would boost growth by generating more confidence in the private sector that the books were being balanced. He was wrong. The upshot was weaker growth, lower than expected tax revenues and higher than expected borrowing. Half way through the coalition’s term in office, Osborne abandoned the idea of sorting the deficit in one parliament, and reverted to a more modest plan akin to that drawn up by his predecessor, Alistair Darling”

The crux is “The upshot was weaker growth, lower than expected tax revenues and higher than expected borrowing“. I think that it is not entirely correct! Yes, Elliot writes the truth, but behind the curtains we see projects failing due to bad decision making (like the headlines mentioned earlier), in addition we see mergers of an unparalleled size “The chemist chain Boots is being sold to the American retail company Walgreens in a £10bn deal that is delivering a huge pay-day for its private equity owners“, which sounds nice, but how does that fill taxation coffers? It does not!

Corporate choices are made to avoid taxation like “U.S. Treasury Seen Loser in Tax-Avoiding Pfizer Move to U.K.” is at the heart of the second tier of failures. Not a failure by George Osborne, but a failure by their corporations that bleed nations dry, whilst not being held accountable, there the nations have failed themselves by not alter the proper legislations to avoid these acts of non-taxability. Whatever happens next will happen too late, the coffers are empty and those who walked away will do so in non-taxable luxury for the rest of their lives and the lives of the next 3 generations of their family to come.

The next part has a few issues (none of them are Larry Elliot) “The foundation notes that two-thirds of people who have moved from unemployment into work in the last year are paid below the living wage, the average self-employed person earns 13% less than they did five years ago and there are around 1.4m contracts not guaranteeing a minimum hours. Over half of them are in the lower-paying food, accommodation, retail and administrative sectors” Many of these lower paid jobs are all about areas where we see high rent, a massive drive to turn around orders and well above counted hours are needed. Life in London (as well as in Sydney) has become a life not unlike hyenas. These bosses are trying to stay afloat, which they do by hiring the weak, the cheap and the manipulative. One waitress mentioned this in a forum “Now I understand I am competing with people on the dole who can be near enough forced to work for free but it still sounds a bit shady“, the mention has bearing, as people are pushed more into unpaid extra hours, less rights, less options and less energy, we see a community that has devolved from symbiotic into parasitic, with only one winner in the end, the landlord!

Both the UK and Australia have been unwilling to deal with this entity, leaving the people at large to fend for themselves without any support.

The next part is a statement of fact, there is nothing against it in any way “If it is taking longer than expected to knock the budget deficit back into shape, the same can be said of Osborne’s other objective – to boost exports from a re-invigorated manufacturing sector so that Britain once again pays its way in the world”

How to go about it is at the heart of it and several options are open as they always are, but consider that out of a dozen avenues, one is a solution, three are deadly and the rest tend to have a costly non solving effect. Several parties in play, not Just George Osborne, but in that same view, Alistair Darling and Gordon Brown all had the same flaw (as I personally see it). Instead of finding a solution that is a mere band aid, they all failed to seek the solution which had the visionary idea to include the next generation. I had that idea on two instances; the one that matters here is the article ‘What’s in a health system?‘ on June 29th 2014, where I state “When people ask which company will do this, the answer should be ‘None!’. The UK is filled with universities, some of them regarded as the most prestigious and brightest on the planet. Consider that most IT people, might claim experience, yet their drama skills are the only ones that improved for the most, is it not up to the Universities, those who are introduced to the newest ideas, design a solution that would make the work of the doctors and nurses at the NHS better, slightly more efficient and a truckload of less hassle! Is that such a tall order?”

Like a regional solution for a independent Scottish IT environment, the visionary approach is to bring this to the universities, to develop a new system, not just a mere frame that goes on top of something else, but an actual new system, LINUX based option, a security enhanced LINUX for healthcare, one that is designed, not for 2016, or 2017, but for the next generation. Why not give the universities access to design their new future, not leave it to these current so called executives that waste up to 20 billion not delivering anything. That visionary approach is missing and it could be the death of us all (UK and Australia alike), we have so many similar issues, why not tackle them together, open up avenues that have never been considered. If you want visionary, then look at the Netherlands, they decided to change the bicycle lanes into solar panels, do you have ANY idea how many bicycle lanes the Netherlands has? It is actually a visible percentage of that nation’s surface. Now, they decided to give it a second function, which means generating electricity, without needing any space at all, illuminating the bicycle road through fluoresces, making it safer at night. They decided to attack road safety and energy issues all at the same time. That is the level of innovation we need to see, preferably without spending another 20 billion pounds. So how about changing, or better stated evolving universities and giving them a real hand in innovation and solving future problems we have ignored and left dead for granted (like the NHS).

The last part is seen here “Ed Balls, the shadow chancellor, said: “I am not that bothered about being behind on economic competence. In opposition, we are always behind on economic competence. Brown and Blair were at this point before the 1997 election. “I would rather we were further ahead in the polls but the Tories are leaving it a bit late for a feel-good surge. That’s why Cameron is talking about red lights flashing on the dashboard. Maybe he thinks he can scare people into voting Tory.””

I disagree, Ed Balls needs to get scared shitless real fast! George Osborne needs to do something similar! Economic competence is not something that is behind, the indicators are that they are close to non-existent. As numbers are hidden behind the statistics of ‘% of GDP‘ we are diluting ourselves that we have a handle on things, once the message is that the total debt has decreased below 750 billion, we have an actual message, but for now, that 25% decrease is nowhere in sight. Life in the UK is all about meeting the payment of the interest debt, whilst none are tackling any solution regarding the total debt for the future. That danger has been voiced by several players all over the field. The message now is that ‘Investors Underpricing Risk May Threaten Growth, IMF Says‘ (at http://www.bloomberg.com/news/2014-09-17/investors-underpricing-risk-may-threaten-growth-imf-says.html) as well as ‘Flug Flags Underpriced Risk as Investors Drop Corporates‘ (at http://www.bloomberg.com/news/2014-09-30/flug-flags-underpriced-risk-as-investors-drop-corporates.html), which gets a punch from today’s news ‘New York Hops on $15 Billion Israeli Corporate Bond Boom‘ (at http://www.bloomberg.com/news/2014-11-30/new-york-hops-on-15-billion-israeli-corporate-bond-boom.html). Like the housing in Hackney through Westbrook Partners and Round Hill Capital in the Netherlands, we see again a change in markets (like they always will), but this is different. Like Greece (again) last week with “A Greek official says the country is under pressure from rescue creditors to impose new austerity measures to resolve an ongoing budget disagreement worth a reported 2 billion euros ($2.5 billion)” (at http://www.cnbc.com/id/102222375), we see a market that keeps on getting pushed whilst there is no money left. By the way, those two players (Westbrook Partners and Round Hill Capital), did you consider combining these facts?

Have you considered when Westbrook goes market value and they merge with 2-3 other players (perhaps Round Hill Capital as one of them), when they merge, how much taxation will be missed out then, also, what danger will these tenants be placed in at that point?

So back to Greece and their dwellings, Greece should both be dissolved and offered to Turkey (just to make it sting a little more) or they need to clean up their act, including dealing with these massive strikes. Let’s not forget that Greeks themselves did this to Greece (partially through Goldman Sachs). We see cogs of greed interacting, finding new connections not to be held accountable, whilst its population gets the bill, blaming Germany for all of this. In that same light we see how we are now confronted with underpriced risks. So, not unlike the 2008 crash with all these “sub-prime” borrowers and bailing on 8 trillion, we now see governments trying to intervene by ‘forcing’ banks to make low cost loans to the underprivileged “sub-prime” borrowers, trying to create a fake boom, whilst at the same time, they have created a more likely than not risk that it will only explode in their faces, whilst imploding their economy (this is as I personally see it). Here in the end, we see that the bank wins no matter what, either the government pays them, or they just own it all. Like the landlords of London, it will destroy the quality of life for more and more people, whilst not showing any resolution in solving the actual problems.

This all comes together when we consider the IMF part on underpricing risk (mentioned earlier), there we see the part that is truly linked to all our woes: “Policy makers from the Group of 20 nations meet this week in Cairns, Australia, to discuss ways of boosting global demand. The Fed today maintained a commitment to keep interest rates near zero for a “considerable time.” At the same time, Fed officials raised their median estimate for their policy interest rate at the end of 2015 to 1.375 percent, compared with the 1.125 percent estimate made in June“. The crux: “ways of boosting global demand” it is at the heart of the failures we see. It is worse than bad marketing. The last thing we need to do is boost demand. We need to resolve debts. Yes, the US wants to see demands boosted, as it was one step away from bankruptcy 5 steps ago. They are trying to bluff into a new era of not being dead, whilst they have been unsuccessful in dealing with their debts, having no solution and even less options. We must find another way. If the Netherlands, one of the smallest nations in the world can turn around an age of innovation to their advantage in a novel way never seen before, then so can we! If you wonder how this linked, then consider how their solution can become a new era of energy independence all over South America, parts of America and all over Europe and Africa. Solar panelled roads, a patented solution that can change the face of the earth in one mere step. Once the high pressure solution is done for cars, we will see a new era of energy. Not bad for a place that is famous for wooden shoes and a leaky dike! So where are we in the Commonwealth? Where is our innovation?

In the end Larry Elliott spoke the facts, the truth and wrote an excellent article, I just disagree with the views they link to, in the end, it might be me who was wrong and it is all in the eye of the beholder!

In this age of debt, innovation and Intellectual Property are soon to become the only currency that will have any true value! The Commonwealth needs its own share of those, less it becomes as desperate as America currently is.

 

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December 1, 2014 · 11:33

I have seen this before

It was not a pretty picture this morning. The Australian deficit is about to be blown clearly out of the waters surrounding it. Yes, there was nothing wrong with the initial assessment that Australian would no longer be in the red before 2016. The plan was bold, it was feasible and after the Australian Labor party had blown its spending in the hundreds of billions, from a 57 billion debt, Australian Labor blew the national debt and grew it in excess of 250 billion, in addition, the forward spending spree by Kevin Rudd and Julia Gillard would give the Liberals a 600 billion headache, and it is a firm headache, which is about to get a lot worse.

Whether we see it as politics, treason or just incompetence, the Labour government seems to have played an intentional game of silencing certain contracts. It is my view that there is not possible, that after only 3 weeks into the liberal government that the car industry decided to just walk away. This was planned all along and they played nice with the Labor party for the view of whatever benefit game was played. So the Liberals ended up with massive invoices and bills that Labor should never have spent, but this is not about that, this is about a second game that has been in commencement. It has been played for a little longer that the Liberals have been at the helm, but in that instance, I will state that neither party is to blame. This is not political; this is political management of another nature.

For the second game I need to take a little detour to the 80’s. When I grew up in the Netherlands, more specifically Rotterdam, I was all about harbours, ships and engineering. My work with IT systems in the harbours gave me an interesting edge. I had access, I was busy all day programming new container solutions in Clipper and I dealt with cargo of several natures. One of the things I used to see on a daily basis was an enormous mountain of iron ore. It was meant for Germany, yet at times that mountain would not shrink; it would grow and grow and grow. In those days it made no sense to me, little did I know!

Now we get back to today, the current administration is about to bleed out no less than 20 billion for the simple reason that revenue of iron has gone down 40%, not that less is produced, no, iron is worth a lot less now. So, to get even, Australia needs to ship 250%, which is not an option. So why sell it at all? Now we get to an interesting article in the Sydney Morning Herald (at http://www.smh.com.au/business/price-drop-signals-the-end-of-the-iron-ore-age-20140912-10fxr7.html), we see here that the initial rise and fall was all in the previous government, there is also a clear view that not only is this rise temporary, the overall trend shows that the previous government had a lucky break (and still overspend by close to half a trillion), yet the current government is not innocent either as their view on iron revenue should have been downgraded by at least 20%, which would have lessened the impact. Neither is to blame, but also, neither is innocent here. So as we see the solution, we need to worry what will come next?

This is where it gets to be dodgy; it is sheer speculation in my side. I think that someone is playing chipmunk here. I think that a mountain is created using all manners of non-taxation and then they will sell it all off at a massive profit when iron price suddenly makes an upturn. Between March 2010 and April 2010, the price went from 139.77 to 172.47. Even though such a jump is not conceivable, the fact is that if housing improved only a little, iron prices will grow again and it is a global market, so as one person needs more, iron will do better again. so buying and storing when prices are down, transferring to a foreign account and then selling as prices bounce back, will yield massive profits for those non-taxable entities. Is it true? No, it is speculation (from my side), yet we have seen similar acts before, so it is not inconceivable, in addition, the Australian government is bleeding deficits fast, and they are amounting to serious amounts within the next three months.

This part is all on the Liberal side, it is not their fault, but they will need to amend their budgets and forecasts accordingly. And it is not just Australia, the UK has similar issues, yet not to the same extent, but the pressure is there too. The UK will take a 30 billion dive, which is a sizeable amount. This all beckons, why were predictions not made a little less enthusiastically? You don’t skin the bastard until it is dead (and very healthy for the poacher seeking crocs). This again shows the need to take a better look at how certain items are anticipated and budgeted. If you doubt that part, then ask George Osborne and Joe Hockey on how many complications those billions bring and it is not the only worry, because there is a second downside. Whoever has these current mountains of ore, they do have a firm grip on driving prices high soon enough, then what will we do?

So, when did I see this before? Well, that is the fun part; I saw it happen around 1989, when the prices went up a little (16%) form $12 to $14. Yes a mere $2. It becomes an interesting view when we look at the data form the last 30 years. The entire mountain of increase and decrease started pretty much in December 2003, when the price was $13.82. From there it would shoot up to almost $178 (2011), now if it is going back to its foundation price. Why was this not better investigated? How come that a commodity is driven up by 1369%? The final part we see in the Economist (at http://www.economist.com/node/21564559). The quote “In the longer term, overall iron-ore demand will grow as China’s march to urbanisation goes on. Demand in the rich world may be drooping, but Wood Mackenzie, a consultancy, says steel consumption will not peak in China until 2026“. Is that a given? When we consider the site macro business with the article ‘Chinese Iron production is booming‘ (at http://www.macrobusiness.com.au/2014/08/chinese-iron-ore-production-is-booming/), we see the question I had in my mind.  “The one question that nobody in the iron ore sector (or Australia more generally for that matter) dare ask is what if Chinese iron ore production does not close as Australian miners ramp up output. The reason nobody asks it is that the outcome will be calamitous“.

It comes down to, why should China import? They have cheap labour and resources, and they have iron (at http://www.srk.com.au/en/newsletter/focus-iron-ore/iron-mineral-deposits-and-projects-peoples-republic-china), so why import when they can become a supplier themselves. It is not inconceivable that Australian iron moguls like BHP, Fortesque, Rio Tinto and Hancock will see a decline in numbers. There is no way to tell whether it will return to pre 90’s prices, but if China gets their own iron and their demand for it goes down by 70% or more, the hard news hitting us now will be nothing compared to the bash we get when an industry of 250,000 miners will shed part of their people. We thought the car industry was a nightmare, well; consider that under current conditions if 40% less minerals are needed, we might see the shedding of 100,000 people, a level of bad news Australia has never faced before.

Even though Australia mines a lot more than just Iron, the metal impact could be harshly felt in 2015, if the situation does not improve.

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November 20, 2014 · 21:40

Classifying defection

This is at the centre of my dilemma today. Part of me knows that some of my exam results have been posted. I have two more exams, which makes me too scared to check them. If I fail, my life will feel it is over and I feel like admiring the great view a person has when he leaps down the Empire State Building, some say that this view is the best and it is apparently a one-time option. Anyway, if I fail, I will get more depressed then I already am, If I pass I might relax a little too much whilst I have two exams between now and coming Tuesday morning, hence the fear to check.

On my 2 hour point of rest, I got my hands on this article ‘Rochester by-election: “two more Tories ready to defect”‘ (at http://www.theguardian.com/politics/2014/nov/20/rochester-strood-byelection-voters-polls-ukip), for most of my life I  have seen defection for the most as an act of treason, we take a team and we stick by that team (or company), I have watched scores of ‘managers’ ‘defect’ to the status or situation that benefited them the most, which I considered betraying the company that hired THEM to do a job. The then hid behind words like ‘miscommunication’ and ‘what was the best option’ the added part ‘for themselves’ was a bit of an issue to me. Corporations take this as the cost of doing business, but is that the acceptable truth of the matter? I actually do not know.

So these thoughts were in my mind as I read the article. You see, the question becomes who does an MP owes allegiance to? The party he is in or the people who elected him? That part is now unclear. Are these two MP’s Tories who serve Rochester and Strood, or are they Rochester and Strood MP’s who serve the conservatives? That is the question that phrases my mind. Yet when we look into the article another option is started to form. When we see the following parts: “My view is that Ukip membership should come back and join the Conservatives and be part of a centre-right majority in this country” and “Tolhurst said she was still hopeful of winning, but was reduced to begging for votes from supporters of other parties in an attempt to keep Ukip out of the constituency“, so what are we dealing with? Is this a situation where two MP’s are actually trying to sway both sides to stay in a seat, no matter whom they serve, are they playing both sides against the middle or are we looking at another play, one of voter management into getting the waters slowly managed by surfing the questions of the voters and through surfing these waves, to guide themselves into the opportunity to make the waves alter slightly, little by little into a new direction.

It is consistently illogical to expect the waves to react to the surfer, but is that entirely true? As the surfer becomes part of a wave, does that surfer not influence that what he is part of, or does the surfer just glide the wave, enjoying the motion but never to interact the wave so that the surfer will not get crushed by the wave as it engulfs him? What is true, by which definition and to what extent?

So why is this small part of Kent so distinct? I do not think it is distinct, I think that there is a play in motion, but to what extent is not clear. Consider the entire change as UKIP is growing beyond what most parties considered possible. Tories are scattered, Prime Minister David Cameron is all over the place to get a hold of the change, but the issue is not conservative based or Cameron based, it is in my mind constituency based. What is planned for the 75,000 voters and how should they be regarded as? In that area Mark Reckless does have a massive advantage, so why is there an issue with UKIP? The question becomes, what will happen, will the 23,000 people support conservatives and all move towards Kelly Tolhurst, or are we witnessing the sentiment within a constituency as they align and identify with the values that UKIP is advocating? If that is happening, are the conservatives on the right path, or are they ignoring the drastic need to educate the people towards why UKIP is the bad choice. Let us not forget that the conservatives got the economy started to the smallest extent whilst the EU is bleeding recession all over. The cautious approach by George Osborne is what is moving England towards better economic waters, which is also why the influx of immigrants is taking massive shapes, all towards better times. It seems to me that UKIP talks nice, but they have at present no way to continue the positive waves, in addition, the needs of change they will force upon the system could undo the forward strides the conservatives achieved within the first 6 months Nigel Farage starts implementing change, which he will believe to be ‘for the better’. The greatest danger here is that the results are only known after the fact, then it will be too late, so there is the link to my own fear, knowing will have repercussions. Ignorance is bliss to some extent; it lets me focus on what needs to be done. I can do it to my issues, Mark Reckless can do it towards the change he believes will make the difference and Kelly Tolhurst will just focus on becoming the new conservative for Kent. Yet Parliament will not get to ignore anything, it needs to dynamically alter its strategies on changes as they happen. David Cameron needs to remain dynamically active, but what of Nigel Farage? Is he dynamically active as we see ‘Farage rejects deportation claims amid UKIP migrant row‘ (at http://www.bbc.com/news/uk-politics-30111694), is he tactically changing points of view in regards to the battles he can win versus those that halt him (a dynamical act), or is he stating dynamical changes whilst not actually being dynamically active? As we see the quote in the BBC article “But Conservative MP Damian Green said Mr Reckless had come ‘dangerously close’ to advocating a repatriation policy while Labour’s Yvette Cooper said Mr Reckless had ‘let the mask slip’“. Is he truly slipping the mask, is he opportunistically inclined as the bulk of middle managers all over the place, or are we watching a different tactic, one that requires the voters top change course, just like the waves for a surfer, yet if waves cannot change direction, was the direction of the voters an actual direction which was never seen correctly?

This is part of my thinking, part that all parties seemed to have ignored, or at least it is a change that many did not consider. These matters are centre in the upcoming by-elections. The people have made mental changes to the parties and what they stand for. Instead of waiting election, Nigel Farage seems to be changing the landscape by these tactical changes, as areas move towards by-elections, we see a shift for the worst (if you are a conservative), so as the deck is stacked in favour of Farage Ukiporated, we see the approach where the 2015 elections are already being drawn vastly against the conservatives. Yes, 75,000 people in one part of Kent is not a big thing, but as this is only one constituency, which others are under attack? Let’s not forget that it is not just the conservatives that are under attack, the Liberal Democrats and Labour both have areas where the voters have been making changes, waves that are all taking other turns and directions, what will happen there? The UK, 650 surfers (read constituencies), and its politicians all trying to ride the waves, will they change boards or get crushed in the waves as they are not respecting the power of the wave. In my mind we will see plenty of surfers adapting to the waves, so will they therefor be the betrayers of the party that gave them the surfboard, are they respecting those who voted for them as they change the waves in a mindset of the price of doing business or are they doing nothing more than serve themselves as they surf for as long as they can. Who do they surf?

 

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November 17, 2014 · 01:59

Rated into immorality

Can anyone explain something weird to me? The news is given (at http://www.theguardian.com/technology/2014/nov/14/twitter-given-junk-credit-rating) to impress upon us a combination of values and steps that are beyond immoral. Consider the tweet, tweet twitter engine. I use it almost every day, it is the one unbiased part where we can follow events, people and companies so that we keep up to date, small messages that bring the actual information. A company that had a massive idea, is making money, when we see the quote “Jim Prosser, a spokesman for Twitter, pointed to S&P’s own words as comment: “Twitter will continue to experience very strong growth and not encounter a significant increase in competitive pressure.”“, we see issues, but is anyone seeing the question behind it? Then we see the one little gem hidden in all the text “The rating is unsolicited“, is this part of the issue? You see, as we look at companies, their revenue, their profit and some might consider their contribution, so as we look at it why is S&P suddenly decided ‘Twitter given junk credit rating‘? It seems to me that there is an economic shift going on. As companies are doing well, they are now getting downgraded for not meeting the expectations of some analysts.

Yet, where is this world going to?

Consider the application of morale (a word not found in a financiers dictionary) and reasoning for my thought train at present is the following: ‘Forex-rigging investigation: George Osborne gives full backing to SFO‘ (at http://www.theguardian.com/business/2014/nov/14/forex-rigging-investigation-george-osborne-sfo). Libor, Forex, Tesco and there is absolutely ZERO indication that this is just it. At the edge of reason we see the quote ‘Because I don’t want you to see any of my wobbly bits‘, which sounds ample and applicable as the financial district of happily ‘screw everyone over‘, it is all about the wobbly bits, according to Bridget Jones!

Consider the Forex articles. The second one is http://www.reuters.com/article/2014/11/14/us-banks-forex-crime-idUSKCN0IY0LV20141114. The issue is not just the events, the quote “Royal Bank of Scotland, HSBC, JP Morgan, Citigroup, Bank of America Corp and UBS were hit with penalties. Barclays is still in talks with authorities over a settlement“, which not just how far the issue has overstepped, but the issue is where banking laws are falling short, short to the extent that we have in access of half a decade. The issues continued after the banking collapse as the financial population continued to be nothing more than an eager courtesan to the bonus they so crave. The end result is a malignant decay of morals, standards and all this now (as I personally see it) on the standards as the poor are left with less than none, so Standards & Poor it is!

We now get back to what I regard to be a new level of exploited levelling. Consider the hidden simplicity that Libor held; now consider that debt ratings Moody’s, S&P, Fitch and the relative newbie Egan-Jones decide on ratings. Combine ‘how to lie with statistics‘ (a famous book by Darrell Huff) and the need to manipulate the market for 23 billionaires and we see the light of junk status made Twitter in a whole new light. Consider the basic state of an economy. A company sells, makes profit and pays taxes, a nation flourishes! This is a naive (remember my non-economic degree?) approach towards the worlds cloud of business. Investors, shareholders, analysts and raters are a cog within a machine of cogs. Yet this inner circular machine is different. It inflates, malleably changes and coaches towards a change that seems to be intent on syphoning and draining virtual cash flows into a different premise of profit, which is then turned to actual money. In an age of debts that go beyond the total of all treasuries, virtual numbers that have little to no foundation. The foundations and the levels they have been compromised towards are of a dimension we never imagined possible. Consider that the big banks have been fined in excess of 2.3 billion (at http://www.forbes.com/sites/halahtouryalai/2013/12/04/big-banks-fined-2-3b-over-illegal-libor-cartels-more-fines-on-the-way/), I wrote about it in ‘60% confiscated and counting in Cyprus!‘, on April 1st 2013, yet do not think this article to be a joke. I stated “If this is what frightens the US, then consider the consequences of a system like LIBOR being manipulated through the total value of trade. If that would have been off by 11.2%. Out of $1000T (UK and US combined) then that difference would be $112T“, several people laughed out loud then, yet now consider not just Libor, but the audited events of Tesco, the $5.3 trillion market of Forex and the fact that morality might be found in a church, but as we see the evidence, morality is not found in banks and financial institutions, where will it end?

With the Twitter events that question becomes more debatable and the impact that rating companies now impress upon profit turning companies have. Is it just about profit, or about the stated ‘anticipated statement of profit’? As certain ‘analysts’ claim that events are not exceeded, stock becomes junk, waves are created and as such, the welfare of companies are tweaked into a state of artificially changed state, some are inflated, some deflated, but always towards the claim of raters and analysts. The bottom line set towards an algorithm. Consider these states as we have seen not just the change of Tesco, but the events as they also gave way of downgraded profits with Sainsbury, which was not so vocally seen before that day in September. Interactions on many levels, based upon foundations that no one seems to question. Consider how the expectations were set by ‘analysts’ based upon data given to them and data available to them, now consider how Tesco had a quarter of a billion inflated and how the Pricewaterhouse Cooper auditors were ignorant of the inflated condition, now consider how Analysts used that element in predicting waves, the raters predicted and set the value and they are now setting the anticipation of investors and shareholders, an artificial pool with tidal wave creating capacity, and the two elements that have the ability to set the power and size of the waves. So how is your view of financial morality now? Consider the final part in this story. When we consider a story on Fortune titled ‘Twitter is junk, while Alibaba is class, ratings agencies say‘ (at http://fortune.com/2014/11/14/twitter-is-junk-while-alibaba-is-class-ratings-agencies-say/), why is that? Twitter is still holding its own, is it perhaps that the waves of Alibaba can be more easily influenced? Companies valued at the ability where the waves can be decided by the financial cogs, the stability of Twitter is less interesting to them, so they make way for whoever can aid in creating the waves these financial people want. (The last part you read is all speculation on my side), yet speculation or not, when we see the waves of Libor and Forex, are my thoughts so far out of bounds? How Twitter making millions is downgraded, how Tesco, beyond the inflated profits, still made a billion, it’s downgrade of 90% seems excessive beyond punishment, but Tesco is not a good example (because of their own internal manipulation), Consider the Fortune quote “And the fact that Alibaba is 90% dependent on a home market that is slowing, while acknowledged as a risk, doesn’t seem to scare the agencies“, it does not scare them, or it appeals the dependency of Alibaba to make certain decisions down the line? There is a side that seems ignored by all, I personally still have a hard time believing that (as my calculation went in ‘Price Waterfall Blooper‘ on October 25th) the price for 199 auditors could not find two events of inflation of each well over 100 million. Are my suspicions in regards to manipulations that far-fetched?

I wonder how long it will take for the law to catch up, for the Department of Public Prosecutions (DPP) or Crown Prosecuting Services (CPS) to get a handle on these events and deter these actions to such a degree. There should be additional questions as the raters are all American, in light of their shortfall that approaches 18 trillion at present. It seems that the US has no options, no solution and no resolution strategy, yet we see that the big four give ratings are all American. The last part is not an accusation in any way, yet the fact that the Auditors need new oversight, especially in the light of American auditing firm Pricewaterhouse Cooper as they will face questions regarding Tesco. As the 4 largest auditors include UK and Netherlands, why are there only American raters (of the proportions of the large 4)? With the risk of manipulation, should there not be a British and even a French or a Dutch rating service? Let’s not forget that PwC faces possible investigation, not because they are more likely than not guilty, but because their innocence needs to be proven beyond any doubt, especially in light of the amount of companies audited by them as well as the issue of 199 auditors (as I calculated them) not finding anything. When we consider the length of time that PwC has had Tesco as a customer, yet, these are two separate issues, there is no inkling of suspicion that auditors are part of any manipulation, yet the auditor’s data is essential to such steps.

Where is the solution?

Not sure if I know of one, laws can be made draconian to give much harsher sentence to the transgressors, but the issue is not the transgressors, the issue is that these ‘manipulators’ have by definition of law not broken any rules. Yes, we see the fines of Libor and soon Forex, these transgressions are seemingly clear, but what of the raters and the analysts? The issues of data are at the foundation here. That what is raw data and how it becomes processed data is now at the centre of it all. That what is construed to be the creator of waves through analysts, raters and auditors; Auditors collecting the data, analysts to manipulate (which is what they might see as a simple application of personal preference and weighting) and raters to set the pace for investors and shareholders.

So tell me, how wrong is MY view and why have these influential cogs not been dealt with through legislation?

 

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October 25, 2014 · 19:08

Price Waterfall Blooper

I am sad to say, I am sorry to report
we have not seen any fraud of this sort
not a win or a gain, but just sadness and pain
are the man plainly vain, they do not travel by train
it will not go to court, yet the profits fall short

as my profits progress to the basement below
as executives go, with no exit fee show
we will wonder awhile, what results they proclaim
as we now still decide, should we name, should we shame
where is the pee double you sea and its dough

So, yes, is this the beginning of arts, the limericks and the consequences of non-accountability?

You see, there is no doubt in my mind that the initial investigation is only the beginning for both Tesco and PwC. Whatever we may think, we can be certain that if Dave Lewis had NOT rung the bell, the mess would be a lot larger then it is at present. I think we should also ring the bell of honour for the whistle blower, because without it Christmas would have been the grimmest of experiences in the UK.

Let’s take a look to the last two days, when Deloitte got its report out (to some extent) as reported (at http://www.theguardian.com/business/2014/oct/23/tesco-profits-black-hole-bigger), we see a few things that do not add up.

  1. “He dismissed the idea that fraud may have been involved in the accounting blunder: “Nobody gained financially as a consequence of the overstatement of performance.”“, is that so? You see, there are a few issues that we have; I will step over one of them because I prefer to tackle that part a little further down.
  2. Laurie McIlwee (former CFO) as well as Mike Iddon require closer scrutiny. Mike was a group finance director, planning, treasury and tax. When we see tax, we see a person who will dig, trying to find any cent that is deductible, as a good FD should be, and in 13 years at Tesco, he had not seen anything? Seems rather clumsy doesn’t it? The fact that the accounting hole is a little bigger (15 million is not much when you say it fast), also came with the knowledge from Deloitte that the hole was there for a longer while, so basically, the inflated 265 million, means an inflated payment of taxation, how is that ever a good idea?
  3. So consider Tesco, the size and scope of it. They lose a CFO and a FD, and all along NO ONE at Tesco, I state again, NO ONE seemed to offer to pick up the baton for those months? Even if it was at no extra pay and only for 3-4 months, 99% of the financial industry would be chomping at the bit to pick up the baton, so that they can add this to their resume, it gets even better. It is a win won for whomever picks it up, because if that person does well, then the value of that person goes up by a lot and his/her future, whether within or not with Tesco would be a few steps on the large corporate ladder, even with nothing to gain it ends up being a win/win.

Let’s just face it, I am nowhere near next in line to take command of the 591 Signals Unit at Digby, but if I get the chance because the current commander was on the list to become Air vice-marshal, I would get there running, even if I was still in my pyjamas and was holding only a toothbrush. No matter how well my performance would be, if I made it I would be eligible for a nice challenge at GCHQ, a seriously cool way to skip half a dozen steps on that ladder, now consider that NO ONE had these levels of ambition at Tesco? I truly believe that beside the whistle blower a few more had a clear picture that taking that seat from within would turn out to be nothing less than poisoning their career.

  1. “He dismissed the idea that fraud may have been involved in the accounting blunder: “Nobody gained financially as a consequence of the overstatement of performance.”“, now we get to the issue that I have had since day 1.
  2. Consider that PwC had (a reported by the Guardian in an earlier blog) last year; PwC was paid £10.4m by Tesco for its auditing services and a further £3.6m for other consultancy work (a newer version at http://www.theguardian.com/commentisfree/2014/oct/23/guardian-view-tesco-auditing-debacle-pwc-systemic-shambles). This article now shows the following quote: “At the very least, this is a very cosy and lucrative relationship“, which slightly debunks the statement of Dave Lewis via Deloitte regarding ‘Nobody gained financially’; it depends on ‘how’ we regard ‘gain’, when the alternative is losing revenue, remaining at status quo is clearly a gain.
  3. So as we see these two numbers, let’s do a little math, let’s say an auditor makes £65,000 a year (a little less usually), so we now see that the annual fee gives us 153 auditors for a year and an additional 46 auditors for the consultancy for a year, that gives us 199 people going over the books, checking it all. No one saw anything? Now, the reality is not exactly like this, but considering that PwC is one of the big 4, we now have a clear case for some serious questions for 25% of all the large audited companies in the UK, how much taxation was not collected, how many large bonuses and incomes were honoured in such a symbiotic incestuous relationship? No wonder George Osborne has such a hard time, the deck seems to be seriously stacked against him.
  4. There is one more thought that comes to mind, but this one is, as I will happily admit, based on shallow grounds. This was all found by Deloitte in a little over a month, mainly because they knew WHERE to look. But, it is entirely plausible that the whistle-blower just knew about that one thing, what else is there and what has not been found yet?

This is important for two reasons. The first is that it then debunks the statement from Lewis, likely via Deloitte who said ‘He dismissed the idea that fraud may have been involved’, I am not convinced! It took Deloitte to find the obvious over the period of a month. We can consider that the fact brought by a whistle-blower gives weight to intently hiding, if not than this person would have stepped forward internally and the old crowd would have solved it, that did not happen. It is not unlikely that those involved hoped for a quick brush under the carpet, this circus was unlikely anything they ever desired. What was signed off on, by the equivalent of 199 auditors remains a serious issue.

This part we can see in the Guardian quote “The making up of the profits figures was not in a report signed off by PwC. That happened in August – three months after PwC had given the supermarket chain’s figures a clean bill of health. Even then, it noted that there was something potentially funny with the numbers, and expressly warned about “the risk of manipulation” – but allowed them to pass anyway“, so something potentially funny does not warrant digging? Let’s not forget they had the equivalent of 199 people for the year, so plenty of digging resources. If we add the following “It is one of the primary ways in which investors, business partners and regulators can tell the true state of the company they are dealing with“, so not only is there a link to possible fraud, the implied length of this gives reason to suspect intentional misdirection towards investors, which makes the news releases all over the papers on class actions against Tesco a plausible worry for some time to come.

It becomes a much finer point of debate when we consider the following abstract ‘Misreporting in our model covers all actions, whether legal or illegal, that enable managers of firms with low value to make statements that mimic those made by firms with high value. We show that even managers who cannot sell their shares in the short-term might misreport in order to improve the terms under which their company would be able to raise capital for new projects or acquisitions‘ (at http://www.law.harvard.edu/faculty/bebchuk/pdfs/2003.Bebchuk-Bargill.Misreporting.pdf). It comes from a paper by Oren Bar-Gill and Lucian Bebchuk, published at Harvard in 2003.

Now we add what they wrote on page 21 “3.4 Creating Opportunities to Misreport, at T=1 managers decide how much to invest in creating opportunities to misreport earnings. The equilibrium level of this investment decision is characterized in the following proposition“. after that it becomes increasingly mathematical, but behold, the initial text ‘whether legal or illegal’, so if the old Tesco gang focussed on ‘legal’, was that the reason they needed to pay an additional 3 million in consultancy (a clear and admitted assumption on my side), yet is that really too weird a thought? Let’s face it PwC signed off on books containing an additional quarter of a billion, which took some time to create.

I know that incestuous is all about keeping it in the family, but the fact that this could possible all be legal is just a little too hard to swallow.

Could it be that both Corporate Law and Taxation Law within the Commonwealth are in dire need of an overhaul? Some might say that it could be an idea to do this before Christmas, to them I say “Bah! Humbug!“, Monday the 5th of January 2015 will be soon enough. It will give Lord Blackwell, Lord Goodhart, Baroness Goudie and Lord Haskel something to look forward to as some might be enjoying a large roast with potatoes, Yorkshire pudding and thick gravy. The Rt Hon Lord Millett has done more than his share in his long career and his Lordship, as right honourably retired can enjoy a second helping of Christmas plum pudding with custard (unless his lordship prefers the challenge of making corporations a little more accountable then the currently seem to be). I would, as blogger Lawlordtobe be happy to lend a helping hand, but I never studied economy or taxation laws, so I would only get in the way, yet I remain available for assistance if need be. I do reckon that the members of the House of Lords who are members of the Joint Committee on Tax Law Rewrite Bills should consider their calendars, especially if the investigation turns out that the Financial Reporting Council (FRC) will be unable to press any criminal charges, to me and likely to all it should be clear that such levels of orchestration must be addressed!

 

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October 5, 2014 · 22:41

The cost of doing Business

It is the guardian again, not in anything specific; however generically speaking there is an issue that requires visibility.

Let’s take a look at the following headlines: “Ebola is in America – and within range of Big Pharma“, “How bet365 profits from Chinese punters who risk jail for gambling” and “Brutal competition batters supermarkets the world over“, here is the cost of doing business.

How is it relevant?

That is the first part, this is not about relevance, and also, these issues are not linked (as far as I can tell), but they do have something in common (other than that they were all in the Guardian on October 5th 2014). Let’s take a look at big pharma. The article comes from Julia Kollewe and is a good read, from the article I got the following parts:

“Unfortunately, the standard economic model for drug development, in which industry takes all of the risk in R&D and gets a return on investment from successful products, does not work for diseases that primarily impact low-income countries and developing healthcare systems” and “GSK is developing a malaria vaccine that could be ready late next year and is expected to be sold on a not-for-profit basis. Its success rate was only about 30% in infants but better in toddlers, although final clinical results and data on the effect of a booster are still due“, last there is “Turner says two commissions are looking at alternative financial models. One idea is that governments could underpin the economic cost of drug development by committing early to buy the first 2m doses of a new vaccine, for example“. How is any of this ‘just accepted’? Let’s take a look at GlaxoSmithKline. It made 25 billion in 2013 with a net income of well over 5 billion (20% net income is amazingly good). Is that not enough? Is the issue not on how they come up with something, how it becomes a solution and then they make a fortune. So, why must they get ‘a set government incentive’? Why are we allowing for governments to bank on failure? Is their continued existence not based upon proven success? Now let’s take a look at the BBC article from May 10th 2012 (at http://www.bbc.com/news/business-17993945) where we see: “The programme obtained confidential tax agreements detailing plans to move profits off-shore to avoid what was a 28% corporate tax rate at the time. Those involved include pharmaceutical giant GlaxoSmithKline (GSK)“. So, not only are they ‘avoiding’ certain due invoices to the Coffers of Osborne, they want pre-ordered and ordained solutions? An anointed decree of set maximised profits. It reads like these boards of directors have a spine no stronger than a paperback, one that is comprised of balance sheets I might add.

So, as we say goodbye on how big pharma will find new ways to get loads of cash on possible medicinal solutions, we should take a look at number two.

‘Brutal competition batters supermarkets the world over’, the article states ‘observer writers’ yet gives us no names. When we look at certain parts we see a view that is incomplete, but seemingly not inaccurate “Aldi has made huge gains in market share in Australia, from about 3% in 2005 to 10% this year“, this means that the two running the show (Coles and Woolworths), will get a third to deal with. There is more to the entire situation, as we look at the price of milk in Australia “The battle for the hearts and dollars of Australian consumers has distressed the dairy industry, threatened small shopkeepers and prompted a Senate inquiry“, yet is that it? Consider that the dairy market is suddenly downgraded in revenue in excess of 20%, how can that be fair or even good to the supplier and when that is no longer an option, how will the consumer pay for milk when offers will dwindle to 2 suppliers? Then what will the market do?

Last there is ‘Revealed: how bet365 profits from Chinese punters who risk jail for gambling online’, which is an interesting article by Simon Goodley. It is the subtitle that gets us the first part “Bookmaker ‘rotates website addresses to keep ahead of authorities’, says employee“, which already implies that the cost of doing business and ethics are no longer in synch with one another. Ethicality has become a nuisance, especially when a business is actively ‘keeping ahead of the authorities‘.

Then we read “The gambling group says its legal advice is that it has broken no law by taking bets from the country“, is a local law the only part of legality?

When we consider Part 2 of the Serious Crime Act 2007 (UK), we see at sections 44 through to 46, three inchoate offences of intentionally encouraging or assisting an offence; encouraging or assisting an offence believing it will be committed; and encouraging or assisting offences believing one or more will be committed. Is that not the implied part of the ‘alleged’ crime when we see the term ‘keeping ahead of the authorities’?

When we look at section 48(3) we see that a person can only be found guilty of the offence under section 46 (encouraging or assisting offences believing that one or more will be committed) if the offence or offences that the jury find the defendant believed would be committed are specified in the indictment. Yet, this is not enough, for the most, it is not clear to me whether this applies to crimes outside the UK, however In Part 1 section 4 we see “For the purposes of section 1(1)(a), a person has been involved in serious crime elsewhere than in England and Wales if he;

(a) has committed a serious offence in a country outside England and Wales;
(b) has facilitated the commission by another person of a serious offence in a country outside England and Wales; or
(c) has conducted himself in a way that was likely to facilitate the commission by himself or another person of a serious offence in a country outside England and Wales (whether or not such an offence was committed).”

This seems to give enough to warrant it all (if the Jury would agree on this). So why is there such an abundance of acts and actions?

You see, the three articles are unrelated, but together they show a massive change in morale and ethics, the kind that people tend not to get back from. This might be the UK (to some extent), but it is clear that these events have been a fact in the US and are starting to get a more stringent grip to the acts of people in both Canada and Australia.

Now for the part that is linking these three views together. Let’s be clear, that this is a personal link, and as such it is debatable on many levels and also that is up to you to agree and disagree. I am not here to path the road for you, I merely speak of where the next place is, and how you get there is up to you. The press seems to favour emotion over logic (to a certain degree), you see, logic is all about reasoning and emotion is about (rashly) acting. The press gets more signals from the emotional reader, so as we react to soaps and reality TV, the press is having a field day cashing in on a league of events, all informative (in their viewpoint), yet overall not that result driven. Is it for that reason that we see a growing calendar on ‘human events’?

As we look at the big pharma piece we see a growing lack of ethicality. They state one thing, whilst pressing other avenues. The statement of moving in one direction, yet not willing to go the entire distance is something entirely unacceptable. We see the stories on how it is all so expensive to create a drug, yet the other side is not told, on how the top 20 are making in excess of half a trillion dollars, whilst in addition their net revenue is around 25%, which is one of the strongest profit margins. At this point we need to take a look at the initial premise of ‘pre-ordaining’ 2 million vaccines. How unbalanced is all this and with margins that large, why are they allowed these tax breaks?

The Bet365 issue could be regarded as an act, likely to be recklessly criminal. If there was no crime, these places could live on a static IP and we would not see the phrase ‘keeping ahead of the authorities‘. We have entered a stage of living where morality is not just taking a backseat, it is leaving the room, add to that a rapidly declining system of ethics and we end up with a change into chaos. You would wonder how a government would allow for that. Well, that is where the issue becomes murky. I think that for some time now, we have been living under a false pretence. Not unlike Sweden, where in 1917 the King’s powers were considerably reduced, becoming a figurehead with only limited political authority. A change that was done in that case for the good of the Swedish people, yet in many other nations big business made a similar change, only they did not remove power of those elected, as a long term strategy they placed themselves ABOVE the law. This is shown in several of my blogs and the acts BBC showed involving GlaxoSmithKline is only the smallest of examples. I discussed this in my blog ‘The Sanctimonious pretender‘ on August 30th where I stated: ‘Big firms consider leaving the Netherlands, says KPMG report‘, the quote “Some of the Netherlands’ biggest companies are considering leaving the country because of the worsening climate for entrepreneurs, according to a new report by consultants group KPMG“. Well, this is not about worsening climates, this is because nations with a monarchy require a fair bit of accountability, which is why the Netherlands and the United Kingdom has seen much stronger measures for the protection of the people and less so in favour of Big Business.

It is important that we seek solutions that require accountability for all, not just those who are not too rich. It is a tall order, but it can be done if we work together. We accept that there is a cost of doing business, but the view as agreed upon seems to differ as to what big business accepts as a valid cost and what everyone else thinks is a valid cost.

In a world of rapid degeneration of values like Ethics, Morality and Accountability we need to make sure that we see a stronger focus in these three values, if not, standing up to big business might no longer be an option.

 

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September 30, 2014 · 22:57

Thriving Team Tesco?

Another day, and another moment where we see the Guardian (amongst others) giving us more news on the corporation Tesco. I will be honest, I have a soft spot for Tesco, the moment issues became visible both the CEO and CLO went all out keeping everyone in the loop. It started exactly a week ago, someone miscounted 250 million to coin a phrase. People were removed and all kinds of actions were started. A few days ago in the Guardian (at http://www.theguardian.com/business/2014/sep/28/tesco-crisis-doesnt-add-up) we see additional information.

So what can be done?

First of all, we need to take one additional look at a few items. You see, as stated more than once, I am not an economist. Now I know that minus 250 million is not a small amount, yet, the article states “its profits for the first six months of the year would be some £250m lower than the £1.1bn previously indicated“, which means that they are still getting 750 million in profits, which is a lot. So why is Blackrock ‘suddenly’ pulling out like that? The shares will bounce back! That is at the heart, the fact that the shares took such a tumble, whilst making a decent profit. Let us also keep in mind that the investigation is still ongoing. I touch on one side in ‘Double Jeopardy!‘ on September 27th, less than a day before this Guardian article. In there I ask the question “I stated before, what if this was not about the event, but about the orchestration?” Is that what is going on? It is a sincere question, I do not know, yet for a company to have a lesser profit, there would be consequences, yet would it be to the extent we are seeing here? Seems like a massive overreaction in my view.

Now let us get back to the article.

“The chairman has been the leader of this organisation that seems to have failed at every turn, was the assessment of David Herro, chief executive of US fund manager Harris Associates“, perhaps this is true, yet he is not there alone, why are the other members of the board not speaking out? This is not a boys club where you wash my back and I wash yours….real hard!

So, there seems to be a few issues, yet, this is at the top, so this means we are looking into several layers before we get to lower management. Either they have no clue, or they do not care. I am actually puzzled by the thought on what might be worse. What is a given is that Tesco is bleeding. Unlike those paperback investors, I like a puzzle and I want to solve it. How can this be turned around? First of all, to create places of peace, certain issues need to change, with the unemployment numbers, these people can either get on board, or leave the company. Greed will be stricken. Which means that this quote “The list includes disputing or delaying payment of invoices for more than 120 days; cutting a product’s price and then demanding compensation to maintain the profit margin; and demanding upfront payments in exchange for hitting sales targets that do not materialise” this can no longer be a method of operation. To get Tesco safe, the board will need to change methodology and remove anyone who is not on board; in addition, payment delays should be trimmed back to no more than 60 days. It is just absurd to get payments settled outside of the quarter to that extent. To truly become a contender, why not revamp Tesco Mobile? iiNet went from ‘seems to exist‘ to the number two in the Australian market by offering ACTUAL deals they left the rest behind them almost overnight, this means a mobile, not unlike the current offers, but with 1Gb data at £19.90 a month, Now we are starting to build a customer group! As I look at the different business groups, Dave Lewis might want to change a massive option, if they allow for the iiNet approach in the UK, Tesco Mobile could become more than a contender. Some might say that at this point it is not a good idea to make large changes. I disagree, this is the best time! As some of the rats are leaving the ship, why not upgrade the ship from cargo vessel with passengers, into a ferry with a large cargo hold. As you grow the passenger, all needing your cargo, you will offer a massive footprint with a loyal based cloud transporter. London is one of the largest mobile workforces on the planet. Use this as consumer strength!

There are a few more Australian approaches that could rock the foundation and make the future a stronger reality. It starts by changing the entire premise on how business is done. The Tesco bank seems to have overlooked options for both funeral insurance as well as the Wester Union approach, which many banks are overlooking, yet such a presence to such a service makes perfect sense in a shopping mall/supermarket. Consider that Western Union made over 5 billion in the last year, this gets us a net profit of around 14%. In the end good business is where you find it!

There are a few other options, but overall. There are several things Tesco can do, even if it was for the sheer fun of seeing Blackrock lose out on a good deal. If profits were lower than now this presently seems to be a likely fact. The reaction that some have now pushed for seems too much overkill, especially when you realise that they are measuring events and Tesco is in trouble, but not in the size and scope that Neil Woodford and Blackrock seem to imply it to be. Consider that Blackrock has over 4.5 trillion dollars in Assets under management. 250 million seems like a mere drop in the ocean. So, that there is no misunderstanding! The assets under managements represent 4,500 billion, the adjustment for Tesco is 0.25 billion,

Yet, instead of whinging about that part, why can we not do something to strengthen the Tesco position? It is all good and fine to be the sideline quarterback and comment on every aspect of the game, but what can be done to get the game going and to improve the game? One idea is to see if the Australian iiNet solution could work in the UK. It is only one of the options and that would lower mobile expense tensions by a roughly stated 57%, so the numbers are all on a level where the top 6 mobile and broadband providers will feel a new level of pain as they see their people run towards the upgraded Tesco Mobile provider.

It would be a start, but will it be enough?

No matter what we do and the amount of ‘more’ we create, there are fundamental issues that need to be addressed. How a company decided to run without a CFO for that long will be cause for questions, and perhaps even cause for investigations into criminal negligence. Consider that a company is set to structure, order and reporting pressures, how can a firm be without a CFO for six months? This is not at the heart of the matter, yet there is an overall level of concern in that mere part of the entire mess. In addition the quote “Although the investigation into Tesco has only just begun, analysts think the Albert Heijn scandal, which had woeful corporate governance and aggressive earnings management at its heart, provides an interesting history lesson, if nothing else.” Is that enough? There is an overly eagerness to appease shareholders and stakeholders far beyond the point of acceptability. If you consider opposing that (which might be valid), then consider how the numbers had been inflated by 29% just to keep the wealthy masses happy.

So, improving Tesco will require another level of changes. That part is seen in the Guardian article by Aditya Chakrabortty (at http://www.theguardian.com/commentisfree/2014/sep/29/tesco-accountants-auditors). It is quite a witty style of writing and well worth the read. One of the more interesting quotes was “He found a bunch of men well aware of the boredom of the audit and of the shortcuts they were forced to make“, so how does that work when we consider “Tesco paid PwC £10.4m in the last financial year – plus another £3.6m for other consultancy work“. Was that not enough? You see, this reminds me of some conversations I had in the 90’s. How short sighted Americans truly believed how business can grow, with the same staff, by 20% annually. Prices had to remain the same, to remain competitive. But as short sighted as they were (being sales people); they forgot that the time of a consultant is finite. It is measured in time (you know, that pesky 60 minutes in an hour scale), so as they are set at 90% billable, it means that by year three you’ll have to work an average of 57 hours a week (whilst getting paid 40 hours). It seems that there are levels of short cuts set into place to get results completed, whilst there is no proper investigation on the amount of work that needs to be covered. It is only one cog in the entire failing machine and if Tesco is to stand up from this, illustrating and changing the entire approach to how accountancy is done seems like a logical next step, especially considering that the PWC pass never spotted 29% of inflation somehow.

It is my opinion that the entire system has been duct taped for far too long. This now falls back onto the desk of the Chancellor of the Exchequer George Osborne.

You might ask why.

It is clear that Tesco is the most visible one, but I feel 99.5336% certain (roughly) that they are not the only one. As the British Cabinet minister responsible for all economic and financial matters, it stands to reason that if the economic recovery is to be preserved and maintained, we will need to make certain that not too many sheep fall of the paddock. This means taking a look into these regulations and more important, if (according to the article) 90% of all audits is done by the big four, seeing 25% fall of the reservation should be ample reason to forego sleep for the foreseeable future (sorry, Mr Osborne, that is why they pay you the extra £26.90 a week!).

It is clear that actions need to be taken, but it is also pretty curious how there is a massive amount of bashing on Tesco, whilst PWC is not getting the spotlight as much, can anyone explain that? Let’s be clear here, it is very possible that this is all due whilst PWC has not been involved at all, so this is not about their optional guilt, it is however valid to ask how some involved thought of pulling this off, it seems that a whistle-blower started all this, yet did no one else notice, did PWC (Price Waterhouse Coopers) have ZERO visibility that something was going on? And, let me be clear, it is very possible that nothing was visible at their last audit, which means that these systems had to be orchestrated and specifically edited to not raise flags, mainly because 250,000,000 is just too much, it would require over 5 billion rounding issues for this to be validly invisible, I reckon we can ignore the likelihood of the latter scenario.

Can Tesco become a team again? Yes, but it requires a massive sanitation of the board of directors as well as the higher managers. One final thought here, they were without a CFO for 6 months, was number two in that hierarchy (whomever reported to the CFO) not on the list, the longer I consider the facts and the numbers, the more I feel that this has been going on for some time to inflate something to this amount, did previous audits not pick anything up?

Can Tesco be a team again? Yes, but compartmentalisation needs to be removed, there needs to be overlap of high directors as well as a fundamental change in communications.

Can Tesco thrive again? I would think so if the previous two points are dealt with and adding the iiNet solution to Tesco might be needed sooner rather than later.

By the way, Mr Lewis, if you read this, consider that this mess came about whilst Philip Clarke made £1,171,000 a year, I reckon that my good insights and ideas are worth a mere 20%, especially if my Tesco mobile solution helps you gain more momentum in the mobile field.

 

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June 15, 2014 · 10:50

Rising rates from just economy?

It is not always that one wakes up badly to ‘good’ news, but there you have it! When looking at http://news.sky.com/story/1281763/interest-rate-rise-signals-end-of-crisis, we see the changes that are now at odds when we consider the end of a crisis.

The question becomes, why am I not all in glorious ‘hurray!’ on this one? The economy is getting better, the time line which I proclaimed since early 2013 has indeed been correct. All these people following some economic analyst on half-baked data have been proven wrong, so why am I not happy?

That is because this has all to do with what we call in Australia ‘Fair Dinkum‘. I have always believed in this and matters are not in any dinkum stage and they are a lot less fair.

The quote “With the economy recovering faster than anticipated, analysts predict the interest rate hike could even come as early as this year” is at the heart of this. You see, the economy has become strangely unbalanced. As powers had been given to big business, leaving many nations with certain levels of legalised slavery, we see that their businesses are indeed getting better, there is more commerce and as such, things should be getting on par for all. There is the crux, ‘on par for all’. That is the part that is no longer in the stated cost of business. For those working people, who has not heard the following “this is for <insert name of large company>, we have to finish this off today“, “if we lose this client, we have to let go more staff members” or “we can’t afford to keep slackers around“. On average well over 80% of the workers will have heard these phrases in their work environment. The BBC published this in 2005 (at http://news.bbc.co.uk/2/hi/uk_news/magazine/4149835.stm). The quote “Britons work so much unpaid overtime they are, on average, providing their employers with free work for the equivalent of nearly eight weeks of the year“. That was in 2005. I feel certain that this number is a lot higher now. So, it comes to companies getting almost 20% of free workforce and they are not in any hurry to change these numbers, which makes for two dangerous issues. One is that as this had not been dealt with the effect of legalised slavery grows and grows, which in term stops these people from adding people to the workforce, which means that the unemployment rate is not dealt with, so the end of a crises is not yet in sight and rate rises give a signal that almost 10% of the UK population are about to get worse off. When we look at two quotes from the same BBC article “People don’t tend to feel resentful because the whole bonus and compensation system is geared up to rewarding people for their performance” and “The whole thing’s just money driven. If people don’t feel their bonus is reward enough they’ll just leave and go somewhere else“, these two quotes ignore several markers. One is that bonuses are often for management only and the people working overtime are not paid for it. The second marker is that the term ‘go somewhere else’ is often not even an option, which makes for these two observations to be inaccurate and also guiding marks to how office slavery tends to get legalised. These parts are only emphasised by the small fact the BBC mentioned “Londoners do the most – putting in 7hrs 54mins extra per week“, that adds up to one day a week of unpaid work ‘free labour for the manager‘, do you have any idea how many billions this adds up to?

So when we see the end of the crises motion, we should regard this as an additional signal that exploitation is quite possibly reaching an almost uncanny height!

Let me be blunt to ‘some’ extent, I am not against working an extra hour every now and then. This just shows dedication to your work, but an average of 8 hours a week is not dedication, but clear exploitation. It is interesting that no one is currently actively researching those bosses is it not?

So how did I get to this when we consider the quote in the Sky News article “the British economy is growing, that jobs are being created, and homes are being built, and that’s part of our economic plan“?

First we have the following BBC article (at http://www.bbc.com/news/business-27791749) stating the following “The number of people out of work fell by 161,000 to 2.16 million, bringing the unemployment rate down to 6.6%“, which is great news. The second quote to consider is “But the quarterly rate of earnings growth, including bonuses, slowed to 0.7% from 1.9% the previous month“. So, are these connected? Consider the following “The number of people claiming Jobseeker’s Allowance in May fell by 27,400 to 1.09 million, the ONS said“. So the jobs created are not on par. Yes, there are less seeking a job seekers allowance, but that is not the only source. It seems that jobs are shifting, but how many people ended up with multiple jobs just to get the bills paid?

In my view the last quote gives us the angle “Weak pay growth and the ‘cost of living crisis’ remains the Achilles heel of the economic recovery, said Chris Williamson, chief economist at Markit.” This is where the elements meet. Yes, the UK is getting stronger, but what side is getting stronger? If we consider those happy to even have a job and working one day a week for no pay, then the bosses are mighty happy, yet when we consider the payments required getting by, we see a dangerous side that is now rearing its ugly head. I think it is important EVERYWHERE in the Commonwealth that we do not end up with some kind of Wal-Mart example, where the working people ending up on food stamps and government support because their income still keeps them below the poverty line. Whatever the republic on the other side of the Pacific river (for people in the UK it is that nation on the other side of the Atlantic river) wants to do, but we as children of the British Empire (I like the old titles at times) have a sworn duty to ourselves and to our sovereign Queen to make lives better for all of us as well as for our country. We do not deny our bosses their profits, but they are required to give us the fair share of our labour, unpaid overtime to the extent it is pushed onto many of us is massively unacceptable.

It is perhaps the one blemish that is still undealt with if we consider the following (at https://www.gov.uk/overtime-your-rights/overview), where it states “Employers don’t have to pay workers for overtime. However, employees’ average pay for the total hours worked mustn’t fall below the National Minimum Wage” I think it is up to the Prime Minister (David Cameron) and the Chancellor of the Exchequer (George Osborne) to change that part into “Employers don’t have to pay workers for overtime. However, employees’ total overtime hours worked must never exceed 10% of the paid hours worked a week”. I just saved the people in London half a day of non-paid working hours, which might get more people into jobs as well.

I will of course as per today humbly accept my knighthood (should it be offered).

 

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January 22, 2014 · 22:56

Cooking the books?

Sky News is bringing us another update on how good the economy seems to be. The reporters are so happy and so full of joy to voice the information on strong the economy is growing. It is a worrying turn of events. So, after the IMF had voiced on how George Osborne is playing with fire, now his vision will be bringing the UK a 2.4% improvement sending the UK back on par with the pre-crash numbers (at http://news.sky.com/story/1197837/imf-upgrades-uk-growth-forecast-above-rivals). The one part I do accept is that it is growing faster than its rivals, although, I do wonder how fast the German Economy would grow. Now personally I do believe that the status of the UK has always been correct (the fact that their economy was growing). My non-economic view had been in the area of 1%-1.5%, which would have been a pretty good result considering the mess most European nations were in.

In ‘A noun of non-profit‘ on May 15th 2013 I wrote “I personally join the group “Oh ye of little faith” on that one and if they are able to get the economy up to 0.2% positive in 2014 than they would have achieved quite the small miracle.” This was my view of the Dutch economy at that time. So far I am still to be proven wrong (at https://lawlordtobe.com/2013/05/15/a-noun-of-non-profit/).

The second quote in this regard is “It is the latest boost to the fortunes of the Chancellor, coming barely 24 hours after the Ernst & Young ITEM Club also increased its projection for UK economic growth this year. Although the Fund’s forecast for growth this year will be shy of the 2.7% predicted by the ITEM Club, the scale of the upgrade underlines how quickly sentiment about Britain’s economy has turned in recent months.”

I believe that we are being played! Let me be clear, the UK economy is getting back, it is stronger than most others and I think that this is a good thing. It is that 2.7% that I have a problem with. The number is way too high. I am not stating that the number is impossible, but it is extremely unlikely. (Feel free not to believe this non-economist blogger on this).

Why is this the view I have?

As I quoted in my blog ‘Cretan Independance‘ (on January 10th) “a senior policymaker in Brussels said: ‘The worst of the crisis is over. So the pressure to take tough measures is off. We’ve had enough of discipline, enough of sanctions, we’re sufficiently unpopular already. The worst is over, so let’s stop now.’”

This view seems to hold up, but when we consider the total of debts, whilst we consider the other debt issues I mentioned, we should consider that we are not out of the woods. The UK numbers seem too inflated to me. Even though there is general optimism (at http://news.sky.com/story/1198691/osborne-hails-new-imf-growth-forecast-for-uk), there is also too relaxed a view on the damage we are all still facing. The quote “The IMF forecasts that the world economy will grow by 3.7% in 2014, up from 3.6% in its last forecast.” is one of the most interesting ones.

There are two sides. The one side might mean that the economy is going up, which could be good. Yet, the negative side is the side of government overspending all over the place. Add to that the fact that big business still has way too many loopholes to fly through (avoiding the taxation the governments are already spending), which means that no matter how good the economy, government overspending means that you and me will end up with the combined tax invoice. As balance is lost in these matters, the economy looking up, does not mean that life will get any better for you and me for 16-24 months and even though BusinessWeek had ‘good’ numbers to mention in their article (at http://www.businessweek.com/news/2014-01-22/u-dot-k-dot-unemployment-drops-to-7-dot-1-percent-in-lurch-toward-boe-threshold). If we consider this quote “Unemployment measured by International Labour Organization methods declined to 7.1 percent in the three months through November from 7.4 percent in the quarter through October, the Office for National Statistics said in London today.” we could consider this as good news, yet, until the February numbers are known, any party-hat shown is for now one too many.

Do not get me wrong, I would love to be wrong in this instance. Yet, I have seen several outlets blasting away the good news left right and centre, and 2-3 months after that some unfortunate bad news is thrown our way. Some message like ‘we had expected slightly better news, yet it seems that the numbers for the immediate future will stagnate‘. At that point, you better believe that you are watching a bad news management routine. The UK is on the right track and that is really good, but to weaken resolve anywhere in 2014 is in my view a really bad idea. I prefer to see the UK coming out on top at the end of 2014. George Osborne has shown that his vision was right; I reckon that the UK will be a lot stronger at the end of 2014. There is additional supporting news in my favour in regards to the picture we are getting painted (at http://www.businessweek.com/articles/2014-01-09/investors-are-getting-hungry-for-pigs-debt-again).

It seems that the 4 biggest indebted nations are at it again. The quote “Europe’s having a bond rally and the PIGS are playing host. Portugal, Ireland, Spain—and even Greece, where Europe’s debt crisis began—are heading back to the bond markets and enjoying their lowest borrowing costs in years, as investors appear reassured that the region’s sickest economies are on the mend.” is a little colourful, but it seems to fit with the picture we are offered. First we see messages of the ‘sudden’ light at the end of the tunnel as well as the mention of easing from a senior policymaker in Brussels. I think it is all about the next wave. If these bonds fall through, who will bail others out? This is in my view the fear we should have and as such it is also the fear UKIP is playing on, which is why May 2014 could change the game for all concerned, because the Eurozone will see the shape of an entirely new nightmare, one that will haunt us all for a long time to come.

The Bloomberg article does bear a nice quote “The reduction in the risk perception, and this sort of market euphoria, is leading to a rerating of sectors and countries most penalized during the sovereign debt crisis.” This reads in two directions. The first is that it implies that perhaps the most penalized nations should not have been so and the reduction of risk perception. That is in my view the real fear. It is not just about the reduction that is implied, but the extra shifting of debts. But when payment is due, which will happen and payment needs to come from new debts, what will be left?

This is the one side no one wanted to deal with. Just move on! It just doesn’t work this way, because in the end the taxpayer gets that bill and as such we must make sure that the people realise that these games on the gambling green will cost us all. Politicians and corporations will not have to pay a dime of the debt they all happily bestow onto us, what will happen then?

The entire story becomes even more fun when we consider todays mention in the Guardian (at http://www.theguardian.com/business/2014/jan/21/imf-world-economic-recovery-outlook-weo). The second quote is “Blanchard confirmed the IMF had raised its UK growth forecast to 2.4% for this year, from a previous forecast of 1.9%. It was Blanchard, who last year warned Osborne has was playing with fire with his austerity drive, but the forecast for the UK is well ahead of Europe’s largest economy, Germany, where growth is forecast at 1.6%. France’s economy would grow by a much weaker 0.9% given ‘policy uncertainty is weighing on growth’, Blanchard said.” I stepped over the first quote on purpose. The events are not as they seem to me. The first quote was interesting “The global economic recovery will pick up pace this year but remains ‘weak and uneven’, the International Monetary Fund’s top economist has said.”

This is at the centre of my reasoning. The economy is weak, it is uneven and it will remain that way as long as nations keep their credit cards maxed out. That is at the centre of the issue. Those maxed out credit cards are great for the banks and great for the IMF, but you and me are only hurt by it as our utilities, our monthly costs will gain a rising momentum whilst our income rise remains nearly frozen.

Good for all except for us, the simple taxpayer! This is why I am so against the game that is getting played.

 

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January 17, 2014 · 04:20

Year of the last Euro?

Wednesday’s news on ‘George Osborne lays down ultimatum‘ seems to have remained a little quiet. So, was it all hot air, or are there silent runners under the waterline? The situation reminds me of a poster I once saw. It was a photograph of water, with the by-line ‘Submarine racing, a spectator sport!‘ I thought it was quite funny. Whilst scanning for the latest on this event, I find several people mentioning it, but no real update for a day. The Guardian article was quite informative (at http://www.theguardian.com/politics/2014/jan/15/george-osborne-reform-eu-quits-tory-dismantling ). However, I regard the BBC version of it a little better (at http://www.bbc.co.uk/news/uk-25740462)

The BBC article does however have two items I do find interesting, but they are slightly debatable.

The first one is “I believe it is in no-one’s interests for Britain to come to face a choice between joining the euro or leaving the European Union.” Why is it one or the other? In my view, the only part keeping the EU from collapsing is because the United Kingdom DID NOT embrace the Euro coin. I will get back to this a little later.

The second part is “The 28-member group also had to do more to ensure economic competitiveness with rivals like India and China, he added.”

I feel that the UK could become a lot stronger if the Commonwealth brethren embrace each other as family and as mutual protectors. This means that the UK should become the centre force in group that includes Canada, Australia, New Zealand and India.

In my view, the issue is that Chancellor Osborne is too adamant to sing-a-long with the American tune. I view this like a game of musical chairs. An iteration game of leave one out! The problem is that this game includes one chair that is only meant for the rear end of America, so it will always have a chair to sit on. They should not even be included in this game, but there you have it, for some reason they are part of the EU game.

So let us get back to the first part as promised. The EU (or EEC if you prefer), has 28 nations. In the GDP rankings the UK is at number three. The issue is that the top 7 has Germany, France, Italy, Spain, the Netherlands and Sweden (these 7 are 79% of the entire EU GDP). Only Germany is in a good position, The Netherlands is on the thinnest ice imaginable, whilst Sweden in its economic state seems to remain skating on the ice it has (for now). The rest has gone through the ice and are in a bad place. So, why should the UK risk it all and add themselves to a currency that is drowning itself because the local politicians refused to stop spending when they could, they kept on spending when they should have stopped and now they are in that bad place. Many should be thankful that the UK and Sweden are not part of the Eurozone at present.

In addition, Greece, according to Finance Minister Yannis Stournaras does not need any more austerity (Nov, 2013). Spain stated “The budget is based on a forecast that the Spanish economy will grow 0.7 percent next year, up from the government’s previous forecast of 0.5 percent.” (at http://www.nytimes.com/2013/09/28/business/international/spanish-budget-avoids-austerity-measures.html). Yet Bloomberg noted on September 5th “Spain’s bid to meet its budget-deficit target for the first time in five years is running into trouble, fuelling concerns that increased financial stability is masking deeper economic problems.” So, what is actually happening here? Are we witnessing new waves of creative accounting?

In light of all the bad news, it must also be noted that France is at least still fighting to keep the austerity in place, even though President Hollande is slowly becoming the least popular president in French history. I applaud him for standing firm and I do hope he will not share the fate of Louis XVI (a one-time treatment at ‘La Guillotine’). Italy is for now also on the Austerity track, but internal developments are not good and there are signs that Italy cannot continue the course it currently is going. So out of the 6 (not including UK) one is doing decently well, two are on the edge and the rest is for now in a bad place. This is not the time to switch currency, especially as the UK is slowly recovering, to add their heads to a block whilst the Axeman is spending the night away. It is more than just bad politics to do so.

So, we see percentages all over the place, but in the end, what does it mean? Well, let’s take a look at the numbers (as far as I found them, and a stern warning, the numbers are unverified and not from the best sources). In my defence, the numbers do not seem to be clearly presented anywhere.

Sweden, the smallest and not in the worst state is a little over 1 trillion debt at over 180% of GDP, Spain at 2.3 trillion, which is over 150% of GDP, Italy at 2.4 trillion, but interestingly seems to be at almost 100% of GDP, the Netherlands at 2.6 trillion, however the numbers I found place them at almost 350% of GDP, France is at a whopping 5.1 trillion and like Sweden around 180% of GDP, lastly Germany owns over 5.5 trillion at a ‘mere’ 140% of GDP.

Whatever some of these so called economists are trying to tell you (they are hoping you do not revolt against additional borrowing), the current nightmare is far beyond the issues you can imagine. the populations of Sweden is almost 10 million, the Netherlands is at almost 17 million, Spain 47 million, Italy 60 million, France 66 million and Germany at well over 80 million. You see, in the end, the taxpayer gets to deal with these trillions. So, a large nation might seem safe, but consider France, where austerity seems unbearable and with that sizeable population, the debt comes to over 74,000 euro per person. The average income for a Frenchmen is almost 32,000 euro a year (before taxation), which makes the debt more than 2 annual incomes from every implied French resident. So, when people get angry, they need to get angry at previous government administrations that had spent to such a degree that the current debt is unbearable! (Something I have mentioned in several previous blogs.)

This is also the danger of UKIP! I am against the UK moving out of the EU for several reasons, yet the changes could be forcing the current British government to consider the one step that UKIP desires most, what a mess that will make!

Part of the issue I am struggling with is actually in another article in the Guardian (at http://www.theguardian.com/commentisfree/2014/jan/15/europe-welfare-spending-george-osborne). I do not agree with parts of it, but the article is well written and the writer Alex Andreou does set out his position very well. So, please do read it for yourself. My issues is with “The fact that as a continent we have embraced values of social security and solidarity, a high standard of education and health for all, and dignity in old age, should be celebrated.” I am all for that and I am in favour of that too, yet governments all over Europe (including the UK) have overspend by such a massive amount that cutbacks in these times are extremely painful. I get it, but previous administrations lived under some umbrella with the picture of a sun, which they took as an eternal summer! Instead of caution, they ignored basic rules and just went all out on a spending spree. Now that all the money is gone, the coffers are instead filled with ‘I OWE U’ notes. When every nation spends more than they are receiving, no one will have any money left, yet governments started to borrow to one another. So, those in debt were borrowing massive amounts to one another, even though no one had any money, is no one catching on? This is my issue! I am all for social security, but if we do not have the money, how can we get it done? In addition, Latvia, the newest member of the Euro states (at http://www.bbc.co.uk/news/world-europe-25567096 ) “The former Soviet republic on the Baltic Sea recently emerged from the financial crisis to become the EU’s fastest-growing economy.” Is that so, in that regard we can read the following at http://www.baltic-course.com/eng/finances/?doc=83279 “The state budget is projected to have a deficit in 2014, 2015 and 2016, according to the medium-term budget framework that Saeima approved in the final reading yesterday, informs LETA.” so the newest member already goes into deficit from day 1? This is quoted in the following way in the article “The medium-term budget framework is based on the following GDP growth forecasts: 3.7% in 2014, 4% in 2015, 4.1% in 2016, 4.1% in 2017 and 3.9% in 2018.” so already above the limits as stated by Brussels. Compared to the top 7, the amounts they refer to seem peanuts in comparison (al 35 billion of them), the issue is moving forward and gaining economic strength, not add to the massive debt. As I see it, the Latvians have plenty to worry about and in my view; the UK and Sweden would remain well warned and not join the Euro.

Time to get back to issue 2!

I stated earlier “the UK could become a lot stronger if the Commonwealth brethren embrace each other“. As the issues evolve, the Commonwealth should revert to a new British Empire, but only in an economic way (undoing the work of Ghandi looks wrong on way too many levels). One of the big dangers is the Trans Pacific Partnership. Australia and New Zealand are in my view to eager to add their names to an approach that is all about keeping America in ‘power’! Why do I have this view?

There are several articles, but at http://www.businessspectator.com.au/article/2014/1/14/technology/tpp-trades-us-clout-expense-innovation we see some of the issues that will bug many in the Commonwealth.

The quote that starts to scratch the surface is “in 2009, total patent applications made through the patent co-operation treaty process from applicants in these nations also exceeded those from North American applicants for the first time.”

This is the fear America has, which is why they are so eager to get all the autographs. You see, as I see it, Americans became (or were in the eyes of some) complacent, lazy and greedy (the American industry, not the people). For example, as I see it, the IT industry took a page from the arms industry and stopped true innovation and replaced it with iteration. A disastrous step as you will soon see. The powers at IBM and Hewlett Packard, as I see it, decided to listen to military giants like Raytheon and Northrop Grumman. So, America went from the innovation based, which brought the leaps from the 386 through to the Pentium II, and we ended with iterations like I3, I5 and I7. Newly coated computers, which now move forward in stepwise motion. The issue is that Asia had a huge delay keeping up and this all changed as their comprehension improved, in addition, it is for technology insiders relatively easy to learn the path of an iterative technology. This is the first step of fear as America is now facing it. Asia has its own group of innovators and in my personal view the passing of Steve Jobs took away one clear path of innovation. When Apple moves in that same iterative path, the last true American innovator will be lost! Now Asia has a massive advantage and as such America needs to clamp down on whatever they can, with the massive debt and no clear future path their world will all be about Intellectual Property! The article touches on it with the following quote “But what if the real motive of one or more parties was to isolate, control, enrich, deprive, penalise and stifle? In effect, to put a toll on the drawbridge.”

This is at the centre, but not at the core of all this. That is why we see the mention that India is seen as a competitor, because for America, they truly are the new competitor. That deadly error was made by the American administration in 2011. Forbes tells us about it in http://www.forbes.com/sites/henrychesbrough/2011/04/25/pharmaceutical-innovation-hits-the-wall-how-open-innovation-can-help/. They published it in April 2011. That story shows only part of it. The quote “The patents granted to these drugs last for 20 years from the date of filing, and since most drugs take 7-10 years to get to market, the pharma companies have known that this moment was coming for the last 10-13 years. It is the logical outcome of a deeper problem, which is that pharma R&D spending has been less and less productive for many years.” gives us two parts. One is that there are clear indicators that the pharmaceutical industry has been working on borrowed time. The second is that the ROI has been dwindling down and that these corporations will face the horror of generic medication as several patents hit the end date in 2015. That means in just over a year, the largest maker of generic medication (India, in case you were wondering) will get to have a go at several extremely lucrative prescriptions. Perhaps you remember news messages on how the FDA was so against Canadian medications. I personally considered that entire issue to be a joke, but the underlying horror for America was already there. I mentioned in other blog articles on the issues I have had with the Dow Jones index (‘Start making sense’, 11th march 2013). Now consider that the three large pharmaceuticals Johnson & Johnson, Merck and Pfizer represent 10% (3 out of 30) of this index, so America is plenty nervous here. Now take into account that these three will have several expiring patents by December 2015 and that means that within months India could have a quality generic alternative, which is likely to be more than 70% cheaper. Now, be aware that a generic medicine is often less effective than the original. Still, the price difference is huge. It is not just the US; the UK has its own share of pharmaceutical makers, so the knife does cut in two ways in this case. Still, when we need to cut back again and again, India could be a good thing for the Commonwealth at large. So, even though some see the TPP as an option, there is implied evidence that the TPP could strongly block innovation.

How does this link to the Euro? No matter how we twist or turn it, the hard times America will face as it has been facing them for the last few years will intensify as innovation remains absent. That will hit Europe in several ways. The Netherlands already saw that as Merck shut down activities like Aspen Pharmacare. The intertwining of corporations on that level are all over Europe, and as such as American Pharmacies are hit, their European links will suffer a lot more because of it. So, yes, India is a competitor there, but the UK together with Canada and Australia could look for a cooperative solution with India and not see them as the competitor (as America currently does).

So is this all linked to the end of the Euro? Yes! It does however depend on the actions of the UK. If is stops membership, the run on the markets and the panic Germany faces could be catastrophic for the Euro, especially as Germany cannot rely on the pillars named France, Spain and Italy. The other nations are either too weak or too small.

Could George Osborne be wrong?

That depends on your point of view and your allegiance. The latter is implied as I noted the reference to the musical chairs with the one reserved seat. News messages like “the call to end austerity by ‘insiders’ from Brussels”. Yet, in the other light governments must reduce their spending and they need to get clever about it fast. The UK non-working military recruitment solution at 1.3 billion is just one clear example. Pretty much every EU country has its own skeletons. I see that the UK could be stronger as the Commonwealth nations take a route of preference to strengthen their economies, it is clear that such a path in Europe would remain stagnate until late 2015. That does not make George Osborne right, it only means that a European route might work, however it will be a long term path and switching to the Euro (at present) does not seem to be a stable solution for the UK to implement.

 

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