2011-12-31

Striking a blow against capitalism in Lydney

Google brings us a wonderful New Year's Eve gift, finding this story of the brave foot soldiers of Forest of Dean Against the Cuts protesting Government cuts in the heart of Lydney. You couldn't make it up.

I'd pay good money to watch these Occupiers take on the only capitalist pigs in the Forest of Dean.

2011-12-29

The Irish canaries are chirping

It seems that not all the Irish taxpayers are enamoured with the policy of standing behind their banks' losses. To be sure, this piece in the Guardian is written by a media studies lecturer and the director of the Centre for the Study of Wider Europe (the Guardian columnist stereotypeometer just melted down) but their basic point is what I've been expecting to hear for a while - why should the Irish voter be expected to pay for the profligacy of its banks and the stupidity of European banks in lending to speculative property buyers?

The money quote:

The far-reaching implications of the fiscal compact will surely outweigh political anxiety about volatile public opinion, and result in a referendum.
That's not going to work out too well for the debt-holders if it happens. If I were the Irish leadership I'd be using articles like this as a sword of Damocles over the heads of the debt-holders. "Nice bonds you've got there; 'twould be a shame if anything were to happen to them." I wonder if there are going to be some quiet re-negotiations and write-downs in the months ahead. If not (supposing for instance that the central European banks are so leveraged that any significant write-down on the debt would seriously hit their numbers) I can foresee a particularly bloody confrontation.

I particularly liked careenage's comment:

This isn't about rewarding Ireland, it's about protecting the world banking system from the consequences of its bad lending decisions. The question you should really be asking is, if Ireland were to default, would the consequences be any worse than what is currently happening? What would the EU do? Park tanks in the centre of Dublin? Tell the EU and the banks to get lost. Things will be painful for 18 - 24 months but it can't be much worse than it is already.
I wouldn't like to play him or her at poker.

2011-12-28

CSC and Lorenzo's Oil Slick

My thanks to the Grauniad for a heart-warming tale of Computer Sciences Corporation (CSC) admitting that it might have to write down a cool £1bn as a result of the ongoing epic saga of failure that is its Lorenzo software for the NHS.

To be scrupulously fair to CSC, Lorenzo was originally developed by iSoft, whom CSC acquired in August 2011 (after the FSA had given a well-deserved kicking to four directors of iSoft whose accounting practices turned out to be somewhat more murky than is considered proper). By my reading of the many threads in the story, Lorenzo was a key element in CSC's delivery which it had subcontracted to iSoft; once the latter was holed below the waterline, CSC's only real option was to acquire iSoft and hope to make the damn thing work well enough to at least approach the project milestones.

In another warm and fuzzy development, CSC itself is being sued by the Ontario Teachers' Pension Plan due to alleged concealment of the disasterous financial results of its participation in the NHS National Programme for IT.

The Guardian notes a whistleblower's mail to the CSC CEO:

"The project is on a death march where almost as many defects are being introduced as are being fixed."
For those of you who have not read Ed Yourdon's Death March, you really should. In essence, once a project is on a death march, the chance of completing it is essentially zero unless a) you can hold your engineers' families hostage or b) you have a near-infinite amount of money to hose at the problem. Looks like CSC has neither of those options.

If CSC writes down 40% of its market value, that really screws the pooch for all its management and senior engineers who no doubt have a very substantial equity and/or equity options holding. Then the OTTP's legal action drags the share value down further - if not curtains for CSC, it's certainly the end of the world as they know it.

This situation of a Government IT supplier actually getting its come-uppance is tragically rare, but I intend to enjoy it while it lasts.

2011-12-26

Striving for mediocrity

Via Longrider who spent some time in National/Network Rail and has some more depth on the matter, the Scottish railway signallers are striking for 72 hours because they don't like a proposed change to promotions. Let's leave aside the cynicism of choosing 3 days across Christmas as the strike dates, and look at the underlying grievance.

Contrast the Guardian's take on the reason for the strike, which is far from clear:

The Rail, Maritime and Transport (RMT) union claims Network Rail managers have ripped up an arrangement which had been in place for more than 30 years where staff were "slotted" into a post when it became vacant.
Network Rail said the union wanted a signaller removed from his post before it would negotiate. It said resolving a dispute before the Christmas rush was made "impossible" by the stance of the RMT.
with Longrider's much clearer explanation, that currently promotion is based on seniority and that Network Rail have the temerity to demand that some measure of competence be substituted for this:
The unions didn’t much like the idea of competence based promotion back in 1994 and it seems they still don’t. It does surprise me that there is still dispute about it getting on for twenty years later, though.

What's really concerning about this is that there is nominally no financial impact on the union membership as a result of this policy change - the same posts exist for the same salaries, and union members occupy them. One union member's loss is another's gain? So why strike? It seems pretty clear that the union is very sensitive about any toe-in-the-door relating to paying or promoting people based on any form of measured performance. Heaven forbid that any unionised workforce should be paid by result.

2011-12-23

Happy Festivus!

In the spirit of today's Festivus Day, I'd like to wish everyone a very happy Festivus.

With that out of the way, we come to the Airing of Grievances:

Hector Sants and the FSA
Hector, my friend, you continue to disappoint. You couldn't regulate your way out of a wet paper bag. Bernie Madoff did more for effective financial regulation than your bunch of clowns ever achieved.
Kim Jong Il
Why didn't you pop your clogs about ten years earlier, you lazy git? Were you waiting for Team America: World Police 2 to be released?
The Occupy Movement
On behalf of everyone who pays the taxes to clean up the disgusting messes you leave behind you: get a job. Performing bodily functions inside St. Paul's Cathedral? What the hell?
Apple
As per my earlier post, what kind of inept monkeys are you employing in the software development and QA departments these days? Keep this kind of performance up and Android is going to eat not just your lunch but also your dinner, elevenses, and possibly your midnight snack.

On the bright side, we were delivered a genuine Festivus Miracle today: nuclear sector workers being paid to spend more time in meetings. Something to warm the cockles of one's heart.

Has Apple quality started to slide?

Over the past month I've noticed a lot more trouble with my OS X machines; networking (especially Airport) being much more reluctant to connect even to perfectly good networks, and several cases where my laptops just won't wake up after being opened. Safari (5.1.2) is also troublesome with various UI glitches and, if open for long enough, it refuses to load any new pages: a close and re-open is required. Notable that Firefox on the same machines doesn't have the same difficulties.

I've seen something analogous at Apple stores during 2011: the "can't do enough for you" attitude can still be found sometimes, but other times it feels like you're just intruding on the employees' time. Perhaps these are the slackers attracted to a successful company like ants to honey.

With Jobs' passing, has the quality mania at Apple started to disappear and be replaced by "just good enough to ship"? Are they going to do a Microsoft? Enquiring minds want to know.

Update: Just after I posted that, my Wifi icon started strobing as if it were trying to find a network, despite being very clearly connected to and posting through a perfectly good one. WTF?

2011-12-19

Predictions for the world in 2012

I'm choosing to get my 2012 predictions in early, and hope (possibly in vain) that events in the next week or so don't render them redundant.

Eurozone
Eurozone governments engage in a sequence of progressively more desperate kicking-the-can-down-the-road exercises. A replacement source of funding fails to appear. The tension between the Germans resisting inflation and the rest of the Eurozone demanding economic relief. The ECB is inexorably pushed towards turning on the printing presses. Greece, Ireland and Portugal turn on the screws demanding more help with the threat of default. French and German banks turn out to be shockingly undercapitalised, to the surprise of no-one who was paying any attention.
North Korea
Kim Jong Un has an attack of common sense that may or may not result from being hung from a lamp post by a length of rope. North Korea opens the shambles of its nuclear enrichment program to international inspection in exchange for desperately needed aid. The humanitarian crisis turns out to be even worse than expected, with deaths of tens of thousands from cold and famine before the West and South Korea can organise aid shipments. China is less than helpful.
UK economy
Growth peters out to practically nothing, perhaps dipping in and out of negative territory. Huhne gets squeezed by popular pressure resulting from ever-rising energy bills as the Conservatives keep him in the firing line. More effort is finally made on new gas plants, probably some more test drills for shale gas, and the planning permission and local challenges for nuclear plant additions grind on. Inflation stays above the 2% target as groceries in general and goods from China in particular rise in price.
UK politics
Con-Lib coalition effectively falls apart on several issues (e.g. energy). Labour fails to capitalise on this. Grumbling in the Labour party about Miliband and some early manoeuvering by potential challengers.
Olympics
Substantially poorer showing for the UK than 2008, except in sailing and cycling. Boris makes at least four major gaffes during the Games, making him the only real entertainment. Fewer visitors than expected results in a significant financial loss for the UK.
USA
SOPA passes albeit in a modified and mostly annoying rather than harmful form. Congress and the Senate continue to be bought and sold. Obama starts feeling the pressure from within the Democratic party but just edges the election against a Romney/Bachmann ticket.
China
A slow-motion implosion, rising popular anger at financial losses mostly held in check by increasingly brutal actions from the PLA. China makes an increasing effort to diversify out of US Treasury holdings but is stymied by lack of a reasonable alternative given events in Europe.
Middle East
Iran continues to posture, Iraq's new government breaks apart and reforms a couple of times. Afghanistan is still a mess, Pakistan becomes an even more dangerous snake pit.
Climate
2012 weather proves to be a combination of too hot, too cold, too windy, too wet and too dry. Much like 2011.
Random
Britney's engagement doesn't last 2012. It may barely survive 2011.

2011-12-18

The FSA was out of its depth, who knew?

Tony Shearer, who saw the incompetence of the FSA first hand, writes of how they regulated minutae and completely missed the big picture failings at RBS, HBOS and Kaupthing Singer & Friedlander. He was chief exec of Singer & Friedlander as it was acquired by Icelandic behemoth Kaupthing in 2005 - three years later, after to Kaupthing's implosion and seizure by the Icelandic FSA, everything went foom and the FSA was forced to step in.

As Shearer notes of then FSA chairman Callum McCarthy:

I invited him to visit Singer & Friedlander to see at first hand how the FSA regulated what I called "trivia and minutiae" and paid no regard to the possibility of "systemic failure of the banks" (which was one of only two of the FSA’s objectives).
It was, in hindsight, inevitable. If you staff the FSA with moderately intelligent but unimaginative drones and then micro-manage them, they're going to focus on the ticking or crossing of many small boxes on pages and pages of forms, with a short summary essay at the end. They're not going to take the time to look at the big picture and ask "what if" despite the fact that this is exactly what a national-level financial services authority should be doing. Where's the personal job security and professional advancement in that? They have no skin in the gain. After all, no-one was going to be fired even if half the UK banking sector went "kablooie".

If you want effective regulation you need to hire really good people, pay them very well, but defer most of their pay over 5-10 years and have it at risk in the case of failure or significant fraud in the institutes they regulate. Maybe even pay them in restricted share units of the institutes they regulate. I want very sharp regulators who feel that their testicles are on an anvil, and that the taxpaying public is nearby with a large hammer. In the case of Hector Sants, I'd like this to be literally true -- assuming that he can find the organs in question.

2011-12-13

Even for the Guardian, this is pretty thin

Philip Rubio defends the US Postal Service claiming that the only funding crisis results from that gosh-darned Congress making them pre-fund retiree health benefits:

So how did an organisation that actually earned a $6131m revenue surplus over the last four years – which included the worst recession since the 1930s – get so deep in debt, with a $10bn deficit this past fiscal year?
The USPS is the victim of an invented crisis. The 2006 Postal Enhancement and Accountability Act forced the postal service to unnecessarily prefund its retiree health benefits 75 years into the future at the rate of $5.5bn a year over a ten-year span.
(my emphasis). Hmm, so that looks like a $4.5bn deficit to me even ignoring the prefunding issue. I wonder why he thinks prefunding health benefits of current retirees is so objectionable - just where does he think the money is going to come from in future?

At least CiF is diligent about giving writers' backgrounds (albeit through a link):

Philip F Rubio is a retired postal worker and an assistant professor of history at North Carolina A&T State University. His second book, There's Always Work at the Post Office: African American Postal Workers and the Fight for Jobs, Justice and Equality (2010), won the 2011 Rita Lloyd Moroney Award for scholarship on the history of the American postal system

So not an entirely disinterested party then. He also seems to regard a major role of the USPS as a job factory. As Mr. Worstall is fond of saying, jobs are a cost, not a benefit.

For what it's worth, my experience of the USPS's efficiency made me look favorably once more on the Royal Mail, and its delivery of junk mail is particularly objectionable -- wrapped around real mail so you have to take particular care to ensure you're not throwing out your bank statement along with the flyers from shops you have no wish to ever visit. It may be that prices of letters have to rise substantially - it wouldn't surprise me if 1st class stamps doubled or even tripled in cost to reach break-even - but UPS, Fedex and co. have successfully eaten the USPS's lunch for parcel delivery, and USPS have no-one to blame but themselves.

Remember how Jerry Seinfeld screwed up USPS postie Newman's chance to go to Hawaii when he covered for Newman's round:

Newman: Too many people got their mail. Close to 80%. Nobody's ever cracked the 50% barrier.
Jerry: I tried my best!
Newman: Exactly. You're a disgrace to the uniform.

2011-12-09

Sauce for the goose

A heartwarming Christmas tale in the DT of striking Unilever workers going without their Christmas hampers.

Approximate sequence of events:

  1. Unilever finds £680m hole in its final salary pension scheme
  2. Unions and Unilever have 8 months of talks about terminating the scheme
  3. Unilever ends talks, axes scheme (which, let's face it, was the inevitable conclusion)
  4. Unions protest, ballot, strike
  5. Unilever cancels traditional (discretionary!) Christmas hampers, parties and bonuses for strikers
  6. Strikers whine "it's not fair!"
Unite national officer, Jennie Formby, said it was "spiteful" of the company to cancel Christmas perks for staff on strike. She said: "First Unilever slash pensions, now they're cancelling Christmas celebrations."

This, Jenny my love, is the downside of strike action. You did realise that there was a downside when you were encouraging your workers to strike? If you remove goodwill from the worker side (an absolute right, along with the absolute right to withdraw one's labour) then you don't have room to complain when the employer withdraws their goodwill too.

Fortunately, there are still winners:

Unilever has chosen to cancel striking workers' Christmas parties, hampers and bonuses, instead opting to give away thousands of hampers to charity, along with £15 gift vouchers.
What's wrong Jenny, do you feel your members are more deserving of the hampers and money than charities? Whatever happened to concern for the poor?

Unilever, I like your style - if not your Marmite.

2011-12-07

Las Islas Malvinas son nuestras, mi culo

Argentina is saber-rattling about a blockade of the Falkland Islands and various pundits are speculating about a re-attempted invasion, now that the British military have down-sized.

Just one question: has anyone in the press looked at the ORBAT of the Argentine military? Never mind the land forces, what ships would escort troop-carrying craft and what aircraft would provide air cover?

According to Wiki the Argentine Air Force order of battle shows 2 squadrons of Pucara light ground attack prop craft (about 24), 2 of Skyhawk A-4AR (about 20), 3 of Mirage variants (about 20). The Argentine Navy has 4 destroyers of early 80s vintage (most delivered around the end of the Falklands war), three diesel subs that should be in a museum, and 9 corvettes with no apparent SAM equipment.

Assuming a generous 75% availability rate, that would give the Air Force 15 Mirages against the 4 Typhoons on Mount Pleasant. That's not going to cause the Typhoons to even break a sweat. On the naval side, the destroyers wouldn't stand a hope in hell against a Trafalgar-class SSN, let alone an Astute-class (HMS Astute seems to be on track to be in service in early 2012).

This is all about Cristina Kircher trying to willy-wave, but the problem with this is that she doesn't actually have a willy.

2011-12-05

My friends at the FSA

The clowns at the FSA have published their latest report on borderline criminal financial advice given, in this instance, by HSBC advisors to elderly retirees in nursing homes.

You'll note that it's the HSBC entity paying the fine, not any of the scumbag advisors who were, presumably, paid on commission and have now moved on to non-HSBC jobs safe from retribution. You'll also note that all of the advisors would have to have been FSA-certified as fit and proper persons to offer investment advice.

As the summary says:

The advice and sales were unsuitable because in a number of cases the individual's life expectancy was below the recommended five-year investment period. As a result customers with shorter life expectancies had to make withdrawals from these investments sooner than is recommended. The combination of withdrawals and product charges led to faster reduction of capital than should have been the case if customers had received the right advice. A review by a third party of a sample of customer files found unsuitable sales had been made to 87% of customers involving these types of investments.

An unsuitability rate of 87% isn't accidental. That's a planned and focused campaign. It may not have been HSBC management planning the details, but they sure as heck didn't do much checking on suitability as the money rolled in. The entity doing the dirty deed was NHFA - acquired by HSBC but separately regulated for most of the period in question.

The Companies in the UK website helpfully lists the directors of NHFA up to 2010 showing the office in Eynsham just outside Oxford. Picking one scumbag at random, it seems that Andrew Cheesewright is now at First Direct Investments and one can only speculate at what guidance he is giving to the sales force there.

For all the sound and fury of the FSA's announcements, there are still 2000+ pensioners who have been ripped off by NHFA (and, by proxy, HSBC) with no comeback to those who made the mis-selling. It is hard to see how, in the circumstances, the FSA can claim to be an effective regulator of financial advisors. One wonders how much further their performance could degrade given, say, a 40% cut in their funding and immediate ending of any final salary pension scheme for their members.

Update: (6/11/11) the Daily Mail actually performs a public service and goes after the directors of NHFA. Good on them

2011-12-02

Naming and shaming - BAE Systems

Some moderately appalling behaviour at the individual and corporate level with BAE Systems employees slandering the Medal of Honor-winning marine Sgt. Dakota Meyer. While consulting for BAE Systems he expressed his objection to BAE Systems planning to sell thermal optic scopes to Pakistan, pointing out that this would give the Pakistan army (and therefore, in short order via ISI help, the Taliban) better scopes than the American forces over the border in Afghanistan.

The reaction of his supervisor McCreight was a classic "play the man, not the ball" tactic, claiming that Meyer had a drink problem, and worse:

Sgt Meyer's lawsuit alleges that Mr McCreight "berated and belittled" him after he objected to the sale.
Mr McCreight mocked his Medal of Honor nomination as "pending star status" and took exception when he went on a business trip for a more senior boss.
Just for that comment about the MoH nomination, McCreight deserves to have every soldier who passes by his house take a leak in his front yard. McCreight is not fit to tie the shoes of a man like Dakota Meyer, or Leroy Petry, or Salvatore Giunta (which I'm sure feeds a huge inferiority complex).

Now I'm not blaming BAE Systems for employing assholes like McCreight; I'm sure he's not the worst employee of BAE Systems either. What I note in their response is that they don't even try to deny or justify the sale that Meyer objected to. For sure you can't stop your weapons ending up in the hands of undesirables if they're determined enough, but you could at least bloody well try not to make it easy for them.

2011-11-29

Credit where credit's due to George

Poor Mr. Osborne has come in for a hammering on these pages recently, so it's only fair I give him credit when he does something right. The end of national pay bargaining is long overdue. It's insanity that the wages of equally skilled nurses in Surrey and Cornwall are the same, despite the huge difference in their living costs. The effect is that the good nurses go to Cornwall where they can afford to live reasonably well in the villages around Truro, and the less able ones who can't compete for jobs in Cornwall have to suck it up in Surrey and live in dingy rented accommodation around Croydon. So if you get sick, make sure you do it in Truro.

On a practical note, of course, the current Cornwall nurses' pay isn't going to be slashed, so the levelling out is going to take a while; effective pay freezes for the areas with lower living costs, as the expensive areas rise roughly with inflation modulo supply and demand.

I realise this won't be popular with the unions, since it also makes it far more difficult to establish the conditions for a 'yes' vote on a national strike, and local strikes have far less impact. To quote Dr. Evil, "boo frickety hoo".

2011-11-28

If you're not reading jgc then you're missing out

If you're at all interested in the join between software and hardware then you should be following John Graham-Cumming's blog for a procession of tasty electronic, software and crypto treats. Stick him on your bookmarks list, go on; I'll wait for you. If you liked Joel Spolsky when he was still blogging regularly, you'll particularly appreciate jgc - not least because, unlike Spolsky, you don't feel a periodic urge to slap him silly. But I digress.

Striking a particular chord today he dissected an Ludditism from John Humphreys who proposed that a computer user need not appreciate how a computer worked under the hood any more than a car driver need appreciate how a car worked. Read the whole thing, but I particularly liked the following paragraph:

If you teach someone to operate a word processor (as is done in the UK's stupid ICT classes) you are not teaching them to use a computer at all. You are teaching them to use a word processor. It's a bit like teaching them to use a typewriter only this one's a bit more sophisticated. In fact, there's be far more outrage if the UK's current ICT classes were called what they actually are: secretarial skills (that's not to demean secretaries as I went to learn how to be a secretary so that I'd be able to touch type).
Discussing the UK's ICT curriculum is one of the easiest ways to make me start to foam at the mouth. jgc skewers it with this pithy characterisation.

It's just possible that Humphreys was making a sophisticated point about the incuriosity of the average driver. Given his resumé, however I suspect that would be over-charitable.

2011-11-27

If it doesn't work, do more of it!

Looks like the mortgage subsidy plan was just a warm-up for our boy George Osborne. He now proposes to sink a good few £bn into underwriting bank loans to small and medium businesses. What could possibly go wrong?

Why does this look to me like a "heads I win, tails you lose" plan for the banks? They can up the risk they are willing to take on, safe in the knowledge that the Government will backstop their losses. So businesses that should not have got a loan will now benefit from one, proceed to pour money via direct and indirect means into the pockets of the less scrupulous, then fold. If this scheme is to be at all successful, it must end up putting Government money into the pockets of a business that would not have received a bank loan - the Government is relying on the bank to pick its winners.

I await Tuesday's Autumn Statement for the details, but I can't see this going well.

2011-11-21

Uncomplicated feelings about mortgage subsidies

I doff my cap to Quantitative Politics who ably skewers the demented Government plans to subsidise the risk of first-time buyers' mortgages. Let's remember that the UK housing market is in the doldrums because of a) potential buyers facing an income squeeze from the current depression, b) limited supply of capital for mortgages, ensuring the available capital is concentrated in low-risk LTV ratio mortgages, c) house prices being sticky-downwards such that vendors are very reluctant to lower their prices and d) ultra-low interest rates ensuring that house vendors aren't pressed to sell with any urgency, while at the same time savers' deposits accumulate interest at a miserable rate.

What is the Government analysis of the situation? Given that first time buyers are risky loans, let's remove that risk from the banks by subsidising it with taxpayer money.

Pardon my language, but what the hell? Have the Government not heard of the notion that what you subsidise increases? If the Government wants to un-stick the housing market (and it's by no means obvious that it should even get involved) it could reduce transaction costs by slashing stamp duty, or maybe fire Mervyn "inflation will come down soon, honest" King and tell the MPC committee to stick to its 2% inflation mandate, or else.

QP puts their finger on what is probably behind this all:

So all in all a thorough package to boost the finances of existing homeowners. And we all know who are the biggest homeowners, currently holding the most property title deeds, the banks of course!
Bailing out the mortgage-holding banks in some way or another might even be defensible. But I wish, I really wish that the Government would have the stones to do it explicitly rather than hiding behind a smokescreen of concern for the welfare of first time buyers.

The Guardian article has the usual clamour of rent seeking:

Marc Vlessing, co-founder of Pocket, one of London's affordable homes agencies, said: "This helping hand for mortgage deposits is not a panacea, but will be welcomed by frustrated first-time buyers as well as those of us concerned about the destabilising prospect of an entire generation locked out of home ownership."

If you want affordable houses, speed up the streamlining of the planning process you silly arse. Tell the NIMBYs to sod off and build a lot more houses.

2011-11-18

Complicated feelings about pension tax breaks

The Telegraph is heavily hinting that Osborne will be axing higher-rate relief on pensions in his Autumn Statement. Leaving aside the observation that it's pretty frickin' late in autumn, indeed one might almost term it a Winter Statement if not for the associated negative press, what does this mean?

As a private sector higher rate taxpayer myself (boo hiss, oppressor of the poor etc.) I certainly appreciated the existing tax break: £1000 of gross income, with an employer-matched-up-to-5% deal, taxed at 40%, means I spend £600 of net income -- let's ignore the 1% employee NI for simplicity and the marginal effect on my employer of employer NI -- to achieve £2000 in my pension. This will be subject to tax when I finally take it, after a 25% tax-free lump sum, but at current annuity rates I'd be lucky to see a few hundred £/year in current money in my pension from this. Still, assuming retirement at 66 as the standard and if I plan to live past 80, that's not a bad deal.

If George gives me only 22% tax relief, I'm spending £780 (30% more) to achieve the same effect. That's less attractive. The killer issue is the return I expect from my pension investments and the price of annuities. If low interest rates are going to persist for the next 30-odd years (and, let's face it, they might) then my expected payoff will be lower anyway.

Suppose I say that my pension payments aren't worth the candle, and I'd rather spend now. Then George gets £400 of that £1000 in tax right now, and I get £600 in disposable income. That stimulates the economy and boosts tax receipts right now, at the expense of my pension's value at retirement. And since I'm a higher rate taxpayer, George can calculate that he won't have to cover any of my pension shortfall -- oh, wait, it's in 30 years, so who cares?

From where I'm sitting, this is a total no-brainer for the Government - money now, popularity now, and diffused downside in decades' time. After all, who cares if people don't have adequate personal pensions? Perhaps they can tax anyone on a public sector pension at 50% for any income over the median pension....

I can't blame George, a politician, for creating a politician's solution; to misquote the repulsive Freddie Lee Cobb from A Time To Kill:

You can't blame a politician for being a politician, no more than you can blame a dog for being a dog
but it behooves the rest of us to contemplate the effect on society in twenty to thirty years from reducing individuals' personal savings towards their retirement. It's not going to be pretty.

2011-11-15

And I bet he loved puppies too

The world's cuddliest ex-dentist, Ayman Al-Zawahiri has been giving a eulogy for Osama bin Laden:

"People don't know that this man was tender, gentle, kind, with refined feelings, even when life was hard," Zawahiri says in the video, dressed in a white robe and turban and sitting in front of a green curtain.

We could also add "open minded" to that list of virtues, at least as of May 2nd.

2011-11-13

Gene Simmons, we salute you

Rock god Gene Simmons isn't impressed with a lot of folks in the debt crisis but unlike practically everyone else opining in public, he doesn't give a free pass to the victims:

It's so simple. If you spend more than you tax, you're out of business. MPs don't know what they're talking about.

And we created this miserable economic state. It's like fat people who think it's the bakery's fault they got fat.

No, you kept going in there and you kept eating cake. It's not the bakery's responsibility to tell you to slow down.

He's writing in the Sun, of all places. I can't imagine any article better suited to make Polly Toynbee spontaneously combust. Do go and read the whole thing (it's the Sun, it's not like there's a lot of text) especially his closing argument.

2011-11-11

Ben Bernanke and the bong

John Hempton at Bronte Capital reckons that Ben Bernanke needs a Hawaiian shirt and marijuana pipe. I'm not entirely convinced, but he makes a compelling case. If the USA wants to stick the Chinese with at least some of their financial losses in the next 5-10 years, he contends that you need to make the American people believe that Bernanke can't be trusted with their money, and they should spend it now before inflation renders it value-less.

Personally, I'd get Bernanke elected to the Senate, maybe in a Louisiana or Illinois seat. That should do the trick.

Dear Sophie Lee...

Damn you, Google, for making me bawl my eyes out.

2011-11-09

Giving a whole new meaning to 'pouring money down the drain'

Jefferson Country, AL votes for bankruptcy after going $4.2bn in the hole, including $3.1bn for a new sewer system.

Everyone wants to know - how do you spend $3bn on a sewer system? Anyone? Bueller?

Expect some searching questions (and court actions) directed at JP Morgan's Muni department in the near future... Also expect some searching questions to be asked about who is exposed to muni default. Don't forget that state employees' pensions are paid out of county operating funds, not from purchased annuities - there's no magic protected pot of money. When the county runs out of money, its pensioners get to stand in line for the remnants.

2011-11-08

Zero Hedge and a pinch of salt

The Streetwise Professor takes on Zero Hedge today, comparing and contrasting it with Russia Today (an obvious and up-front bit of Kremlin propagandising, albeit with substantially more appealing presenters than classic Soviet TV) and asking whether ZH's Daniel Ivandjiiski is nothing but a slightly covert Kremlin operative. It's an interesting question.

My feelings on the matter are complicated. Certainly there are any number of commentators on Zero Hedge who are outright deranged, but this goes for pretty much any blog on the Net so we shouldn't condemn them for that. Heck, you get equally deranged commentators on The Guardian's Comment Is Free, would you argue that this is a hotbed of - oh, wait, bad example. There's certainly a good range of contempt for the financial establishment, banks, governments and personalities therein, but that is also pretty well replicated worldwide; Goldman Sachs 666 for instance could not be said to be a fair and balanced view of the Vampire Squid. Indeed, you'd be hard to find a blog sympathetic to most of the financial establishment.

As with The Professor, I find ZH to be an OK news aggregator, and it has generated some interesting leads I've used to dig around and produce blogs in the past. The charts don't lie - at least, I assume they've not been photoshopped (hello, Adobe lawyers! trademarked term in common use, bite me!). The editorials and commentators seem to be rather dedicated chartists, an inclination which I personally regard as somewhat demented, and indeed there are conspiratorial hints in some articles (they're out to punish the shorts! gold margins going up shows that the CME is being instructed to punish gold bugs!) which don't really pass a sniff test; however, it seems a little thin to hang Daniel as a paid hater of Western capitalism. After all, he used to make a living from it.

That said, the commentators on the Professor's article seem so rabidly pro-Russian that he almost must be onto something - either that, or the SVR want us to believe that he is. Who knows?

2011-11-06

A modest proposal to the FSA

The UK Financial Services Authority has been on the receiving end of a fair amount of abuse over the past few years, much of it justified. Being a kind-hearted soul, I have a modest proposal to get my mate Hector back in the good books of the public and government.

You may be surprised to learn that the strict standards in the railway safety industry (if your company is on a contract for Network Rail, they can turn up at your workplace and demand you submit to drug or alcohol testing) do not apply for FSA-registered individuals. Banks may tell their FSA-registered employees that they are subject to random drug or alcohol tests, but I assure you that this doesn't happen in practice. Heck, why would it? If as a bank you feel you can adequately monitor an individual's trading performance, why would you want to rock the boat by testing that employee unless he's making a loss and you're looking for additional grounds to fire him?

So let's have the FSA declare that a random drug and alcohol testing regime will apply for FSA-registered individuals at any UK-located branch of a financial institution with over 25 registered employees in that location, from Jan 1st 2012. The testing unit turns up having given 1 hour notice and get witnessed (yes, watched wizzes) pee samples from randomly selected 2% of the registered employees. The employer gets the results. Anyone with significant intoxicant samples goes straight to a board where they can appeal the pending loss of their FSA registration. Operating costs come out of existing FSA operational funds, so no additional operating costs to existing firms with unintoxicated employees.

The FSA gets to do something useful and popular; the programme gives a significant boost to the UK drug testing industry in time for other events; the government gets to point at something concrete being done to counter the drug-addled dipshits depicted in popular culture renditions of the City; the City gets something to point to and deflect such future criticism of their employees. What's not to like?

[It may strike the reader as incongruous that we don't similarly test Civil Service and Government members engaged in decision making of equal import compared to the railway and financial services domains. Your correspondent can only invite the reader to draw the appropriate inference for future action.]

2011-11-03

Popular Science misses the point

Popular Science has an entertaining plot of rising computing power which is really good from the 1930s thru 1990 or so, but at that point misses the point entirely. It plots current day desktop computing at 500 billion (5 x 10^11) operations/sec for $2000 (about right for a 3 GHz 8-core superscalar desktop) and then at 8.5 x 10^15 ops/sec the Japanese K Computer for a cool $1.25 bn. What it omits is the ease of networking tens of thousands of desktops together in datacenters to form distributed computing systems such as Amazon's EC2 cloud or Google's Skynet (yes, they don't call it that officially but I think we all know where this is headed).

If I put together 20k desktops I'd get a raw 1 x 10^16 ops/sec for a mere $60mm (adding 50% for networking gear and datacenter-level power, cooling which seems about right). You'll note that this is more computing power than the K Computer for 5% of the cost. That is the real triumph of modern day computing - the software and networking to harness efficiently the computing potential of thousands of commodity hardware PCs. The challenge now is to shape problems in a way that such machines can help us solve them.

[For readers expecting another Greek-related tirade, my apologies - normal service will resume shortly.]

2011-11-01

Timeo Danaos et dona ferentes

When the Greek PM decides to replace the heads of all three armed services plus the National Defence Force, eyebrows may reasonably be raised. Since this is less than 24 hours after he announced a national referendum on the Eurozone deal, followed by the opposition forcing him into a confidence vote on Friday, a tad more concern may be warranted.

As Kate of Small Dead Animals says, "It's Probably Nothing...."

Hope the Greeks are taking notes

It seems that Argentina is introducing exchange controls in apparent anticipation of a default. No doubt Papandreou is flying over observers...

2011-10-31

My indulgences

Reading The Daily Mail is probably my least healthy indulgence. I know it's bad for me, but just can't help it. Like browsing at a cream bun buffet, the sugar rush of some of the stories (e.g. perjuring student immigrant goes to jail but can't be deported!) is near-irresistable, and feels shamefully good while you're doing it, but it soon turns into a sickly stickiness and you just know there's a sugar crash coming further down the line.

Contrast that to Comment is Free in the Guardian, and in particular the musings of one of my favourite columnists Polly (wanna cracker) which has the opposite problem; you read it because you feel it's good for you to do so, like a slice of Ryvita, but it leaves a scratchy dry feeling in the back of one's throat and feels deeply unsatisfying.

Chief CiF irritant today is Pete Sommer, an academic at the LSE who believes that the UN-backed Internet Governance Forum is going to be the go-to place for tackling cybercrime. I hate to break it to you, Pete, you're well-meaning but the unfortunate reality is that the government-backed Chinese hackers and hardcore Russian spam artists who are currently leading the cybercrime wave really don't give a monkey's left testicle for the IGF.

In particular, I liked his points about the London Conference on Cyberspace:

It could have aimed for something more immediately achievable – perhaps an agreement on identifying medical and humanitarian resources on the internet and protecting them. Or that the essential fabric of the internet, its cables, exchanges and technical protocols, should never be attacked.
when it's painfully obvious that if the Chinese military saw a tactical or strategic advantage in e.g. cutting the undersea fibre into Taiwan, they'd have minisubs and boltcutters down on the seabed in the blink of an eye; the UN be damned. I'm also curious what he expects the UN to do about the Iranian-backed Diginotar hack that compromised the SSL connections to major sites like Gmail for Iranian citizens. You'll note that the only effective action here in reality was taken by the major browser vendors, removing Diginotar's CA cert from the browser. I don't see the UN requesting that traffic engineer Ahmadinejad account for his government's actions here.

2011-10-28

Why studying maths is important

A strong contender for the biggest arithmetic error of recent times has to be an unknown accountant at Hypo Real Estate who calculated HRE's debt at E216.5bn when it was "only" E161bn. Germany improves its debt-to-GDP ratio by a whole 2.6% (which is the really bad news, if you think about it).

Johann Schmidt, or whatever your name is, we salute you.

2011-10-27

A mistake, Nicko?

Nicko Sarkozy says that letting Greece into the Eurozone was "a mistake", putting in a strong bid for the "No shit, Sherlock" award of 2011. But let us take this and follow it along. So in 2001 Greece wasn't ready to migrate to the Euro. Now, ten years later, Greece has turned into an economic basket case with massive civil unrest, a tanking economy and horrific debt. But given all this, Nicko still thinks that keeping Greece in the Eurozone is the right plan?

I don't know what Sarkozy is smoking, but I bet it has a street value over $500/gramme.

2011-10-25

ECB - capital requirements are for wimps

Alexander Gloy of Lighthouse Investment Management has done some digging and unearthed answers to two questions which have been bothering me: who is holding the Greek debt, and what does the ECB balance sheet look like?. It seems that the ECB is holding E55bn of Greek debt (16% of the total), Greek and Cypriot entities hold E100bn or so, and the IMF a fairly small E17.9bn. By Alex's math, a 50% haircut on Greek debt would conservatively wipe out E7bn of ECB capital even given generous assumptions about its purchase price. This is going to be a problem, because the ECB balance sheet shows E5.3bn in capital at the end of 2010, and I'm guessing it hasn't made too much money since then.

Alex also notes a balance sheet total of E165bn for the ECB, making it 30x leveraged. So for anyone wondering how the ECB could afford to buy up all the recent sovereign debt issuances (we're looking at you, Italy) there's your answer - it couldn't, but did anyway.

Supposing you were an Oriental power looking to make a relatively cheap investment that results in substantial leverage over European governments; where might you start?

[Hat tip: Zero Hedge which is still on the interesting side of crazy].

2011-10-19

And the run has begin

While I normally treat the reports of the Daily Mail with a pinch of salt, the flight of Euros from Greece was only a matter of time. Whether justified or not in their fear of losing large chunks of their savings as banks go under, Greek taxes go up or (worst of all) Greece redenominates Greek Euros to devalued drachmae, the Greeks with significant Euro savings are putting it somewhere safer. Much, much safer. Note that they're not even going to Germany.

10b Euro is still relatively small in the context of personal savings, but it's only going one way. When (and it's when, not if) Greece imposes capital controls and searches outgoing visitors / citizens for Euros, that's the moment that Europe goes "foom".

I'd be interested to know, by the way, what fraction of the savings going into Swiss banks are being exchanged for CHF. I wouldn't guess more than 10%, but if that's a lowball figure then I'd be a sight more worried.

2011-10-16

Accountability - are you really sure?

Seems like that nice Mr. Barroso wants to make individual criminal responsibility for financial players recognised in European law. I think that this is a fantastic idea, but suspect that Barroso has not fully thought this through.

I'd start off with anyone involved in accepting Greece's national accounts for the purpose of approving their entry to the Euro. I'd add in the French, German, Italian and Spanish governments for repeated and aggravated crimes of kicking-the-can-down-the-road, blaming-the-messenger and failure-to-do-basic-arithmetic. Olli Rehn gets a special mention here. Within the UK I'd happily indict Adam Applegarth of Northern Rock and Andy Hornby of HBOS in addition to the infamous Fred the Shred; but let's not forget the senior staff members of the FSA who did such a sterling job in supervising these institutions.

Any more suggestions?

2011-10-12

Defining diversity - tips for employers

It is reported to me that a number of major employers seem confused about what "diversity" is. So, in a spirit of helpfulness, here are my lists of what "diversity" comprises in successful firms - and then, a list for not-so-successful firms. (Wall Street and Canary Wharf banks, I'm looking at you.)

Diversity is:

  • preventing discrimination by members or associates of the firm with respect to gender, race, disability, national origin, sexual preference, marital status, veteran status, or any other characteristic that is inherent to a person;
  • active effort in recruiting to reach non-mainstream groups and provide them with the opportunity to do as well in the recruitment process as members of mainstream groups with the same level of ability; and/or
  • funding and staffing events in the local community designed to support the learning and employment training of children, students or adults who would not normally consider working at your firm;

For firms that have been usurped by the HR department's Diversity team, "diversity" is:

  • promotion of staff based on different gender, race, disability etc. over actual ability;
  • requiring all staff to participate in "diversity" events and programmes;
  • active solicitation of plaudits from external organisations promoting positive discrimination of their interest group;
  • tolerating staff self-aggrandisement based on gender, race, disability etc.;
  • active or passive punishment of staff who refuse to participate in diversity events and programmes; and/or
  • appointing diversity "champions" whose job is to propagate and perpetuate the diversity agenda rather than, say, bring income to the firm.

Also look out for employers which decide that groups can be represented by networks or lists with a ridiculously arbitrary label. So employees of Jamaican, Moroccan, Somali and Ibo heritage find themselves classified as "black"; Indian, Bangladeshi, Mongolian, Han Chinese and Filipino are "Asian"; Swedish, Faeroese, Manx, Catalan and Cypriot are "white". You can often have fun posing as a candidate with an Irish Indian-Moroccan father and English Austrian-Filipino mother and asking which "diversity network" you should join. If HR think that you are a troublemaker and protest that there are no such people as English Austrian-Filipinas, you can set them straight.

2011-10-09

The Streetwise Prof nails it

Streetwise Professor's game-theoretic take on the Euro crisis is one of the best recent descriptions I've read of the real problems underlying the signs we're seeing of Eurozone disintegration.

For me, the money quote:

But the outstanding losses are not distributed equally across countries. This leads to disputes among EU members over how to provide the public support. Those facing bigger losses want to use EU-wide mechanisms that spread the losses to other countries facing smaller losses. The latter want those facing bigger losses to contribute the lion’s share of any public support.
It pays to see the situation not as a team of finance ministers trying to co-ordinate the best overall response to the crisis, but rather as individual national actors trying to optimise the overall response with respect to their countries' own interests - or indeed, in several cases, their personal political ends.

For instance, I view the Slovakian SaS political party's opposition to the EFSF bailout as a perfectly rational national response - Slovakia has no doubt done the math on its current and future exposure and knows it's better off now. Of course, if the Eurozone countries want a "yes" from Slovakia (and they do) they can change the maths by either promising future aid / funding / projects to offset the Slovak projected loss, or take a cheaper option and effectively bribe the key SaS decision makers at a personal level with EuroParl appointments and favours.

2011-10-07

IT in banks - a theory

I'm coming to a tentative theory that in the ecosystem of bank-on-bank-on-hedgefund trading (consenting adults, very limited requirements on required disclosure) the majority of bank profits are not made by clever trading, hedging, sub-millisecond HFT trades and so on. Those are just the symptoms. Principally, profits are made over time by simply not screwing up as massively or as frequently as the competition; unplanned network or power outages, bad software pushes, fat fingers without a checking system, misplaced decimals, they all contribute to a steady drain on the bottom line.
If you can engineer a trading system which is designed to be robust, and as long as it's not managed by the all-too-prevalent idiots in banks' IT departments, you're at least half way towards being ahead of the competition. What you actually decide to trade isn't too germane as long as you trade a lot of it around the market price.

2011-10-02

Fake Charity - School Food Trust

With thanks to The Devil who popularised the Fake Charity meme, a bit of Sunday afternoon charity accounts digging.

Occasioned by this BBC article on school lunches I had a look at the accounts for the School Food Trust which show that in 2010 they received £15m from the Department for Children, Schools and Families (or whatever they call themselves this week, currently "The Department for Education") and £5m from the Big Lottery Fund, comprising over 98% of their income. You'll note the grand total of £0 raised from voluntary donations. This makes them the epitome of fake charities.

Of the Board, Judy Hargadon trousered a minimum of £95k while her fellow directors managed sums in the £60k-75k range. There were also substantial pension contributions made. Nice work if you can get it. About £2.2m was spent on marketing. Looking at the Board members' interests, I wouldn't be surprised if some of the "grants" being made to regional councils by the "charity" didn't end up being used to purchase services or materials from the Board members' associated companies.

I suppose we can't complain about the Lottery fund pissing away money on whatever it wants, but next time someone tells you that you that "education cuts" are going to hit "the cheeeeldren", ask them how spending £10m on these bottom-feeding scum buckets in Aeron chairs helps education.

2011-10-01

Engineers with too much free time

An early entry for this month's "Engineer with too much free time" award is Mr. Plum B's Lego assault rifle. The mind-aching attention to detail and engineering prowess, notably in the slot-in magazine firing mechanism, should cause a conniption fit of admiration from anyone who wears black socks with their sandals. Stand up and take a bow, Mr. B.

[Hat tip: The Register]

2011-09-29

Admit it, they don't want us

It seems unarguable that the European Commission really doesn't want Britain to be a part of it - that's the only conclusion one can draw from its threat to sue the UK if we don't weaken the eligibility criteria for benefits. In one sense it's completely understandable - the European ideal (and policy) is for laws and benefits to apply equally to all EU citizens in any given country, so if you give this policy any credence then you must press for the British benefit rules to be amended.

In another sense, it's utterly demented. The Commission (an unelected body) is part of the Eurostate which is deeply unpopular in the UK; if you want evidence then see this week's Question Time from Liverpool. It's gifting headlines to any Eurosceptic UK newspaper, which is really all of them save the Guardian and Independent. Its timing is impeccable; when government cuts are pressuring budgets UK-wide it's threatening another £2.5bn+ spend on non-UK citizens. If it was trying to provide the UK government and Eurosceptic MPs with ammunition to argue against providing any more financial aid to the EU, it could hardly have done better.

Having met a COREPER member some years ago, I would lean towards the theory that the Commission genuinely do not understand the political implications of what they are demanding - they appear wrapped in their own little Eurocentric world with only a hazy notion of the concepts and implications of national sovereignty. What I don't think they realise is that in this approach they are only accelerating the inevitable demise of the Euro, and may eventually contribute to a substantial fracturing and simplifying of the Eurozone itself.

2011-09-22

Epic failure - the FiReControl project

I've been reading through the National Audit Office report on the FiReControl project, so my esteemed readers don't have to. By my calculations, you have each saved at least 10 points systolic on your blood pressure. If you wish to bank this saving, I recommend you read no further.

First, the basic facts: between 2004 and 2009 the Department for Communities and Local Government managed to piss away a cool £469m while attempting to consolidate 46 regional control centres into 9 super-centres. A good chunk of this money was picked up by the inept sharks at PA Consulting and the useless bags of skin at EADS. They carefully avoided involving the actual users of these centres (the Fire Service personnel) in any meaningful way while designing the systems and software. The initial estimate of £120m for the implementation was out by at least a factor of 5. The Department realised in 2009 that things were going off the rails but had confidence in the ability of EADS to correct course and deliver. This confidence was misplaced. The taxpayer ended up £469m in the hole with only 1 of the 9 centres fully built, and none of the software actually working; £250m spent so far and another £200m+ that has been committed to future spending.

It's a classic example of taking a distributed system that worked reasonably well but could stand improvement, radically altering it by centralising, pulling in outside consulting companies who didn't really know what they were doing and only really cared about billable hours, failing to involve key stakeholders in requirements and design, and spending other people's money on other people. The failure was, in these circumstances, inevitable.

Some highlights of the report:

there was no framework to assess consultants’ performance until late 2008, despite the fact that consultants and temporary contract staff made up almost half the Department’s project team during this period.
So the consultants had a billing feeding frenzy without actually needing to produce anything that worked
In July 2004, the Department estimated that FiReControl would cost £120 million to deliver, but this figure underestimated the costs of the project. The Department did not, for example, include the costs of meeting local and regional implementation work, or the costs of installing equipment in the regional control centres.
So the cost/benefit calculations looked much rosier than they were. Was this simple oversight, or deliberate omission to make the project look more attractive to ministers?
The Department appointed four Senior Responsible Owners and three Project Directors before those in post at the time of termination were appointed in 2008. EADS similarly has had three different Chief Executive Officers and four Project Directors since the IT contract was awarded.
So the most senior people never had any real tie-in to the success of the project
PA Consulting was contracted to provide consultancy services at a cost of £42 million to the end of March 2011. Its staff held key positions throughout the project, including the Project Manager, one of only two senior members of the team who remained on the project throughout its duration.
So we know where to point fingers for where much of the money went
Weaknesses within the contract agreed with EADS limited the options available to the Department.
The consulting companies are better at negotiation and contracting than Government. Shocker.
Seventeen of the twenty- seven Fire and Rescue Services that responded to our survey told us that the cancellation of the project had a significant negative operational impact on their service, and twenty-three stated that it had a significant financial impact.
So they were worse off than if this project had never happened, and note that this financial impact does not appear to be covered in the overall stated loss.
The Department agreed leases of between 20 and 25 years for each of the regional control centres and, should Fire and Rescue Services or other bodies fail to move in, the Department will continue to be responsible for rent, utilities and facilities management costs for each building over the lifetime of their lease.
Which is where the future money is going to be spent.

What really grates is that although EADS appears to have been suitably financially penalised, PA Consulting has done very nicely out of it, and no-one at the Department of Communities and Local Government appears to have had their head on a block as a result of this farce. So the most important lesson is that it's absolutely fine to piss away nearly half a billion pounds of taxpayer money through incompetence - your job is perfectly safe.

2011-09-18

What does the tale of Kweku tell us about UBS?

The most interesting signals from UBS will come over the next 6 months or so as various people are quietly sidelined and/or 'encouraged to move on'. The former positions of those people will tell watchers quite a bit, although some care must be taken to avoid jumping to the wrong conclusions. If heads roll high in the Operations department it doesn't necessarily mean that Ops was most fundamentally at fault; it could just be that Compliance shouted loudly and pointed the finger early enough to avoid too many awkward questions about its role. It's shocking how many decisions in a bank are taken on the basis of who can shout loudest and wave their willy most vigorously. Someone on the board is going to have to go, so the question is whether it is someone representing London (the location gets the blame), or Operations/Compliance (failure to detect gets the blame).

What was the trigger for the loss? He was dealing with ETFs, so you'd think that if he was trading on an exchange then the margin calls as his position moved underwater would have sounded bells - you'd hope that even an incompetent bank would notice a huge and growing flow of money out the front door. Zero Hedge has speculated that he was very long the volatility of the Swiss Franc (CHF) which has been moving around like no-one's business over the past few months; however, once the Bank of Switzerland announced that it would hold CHF below $1.40 by printing as many francs as required to do so, volatility dropped off a cliff. The timing seems plausible for this to be related, but could be just coincidence. If it was this sudden then perhaps the margin calls were similarly sudden.

How did he get himself in this position without anyone noticing? The story of Jerôme Kerviel at SocGen is striking in its similarities - successful trader, sudden billion-sized loss, turns out to be unauthorised trading. One wonders if Kweku was the only one who thought that the firm's controls need not apply to him, or if a loose attitude towards controls and Compliance was prevalent among his peers and immediate superiors.

If I were a UBS shareholder I'd be asking pointed questions of various people and organizations. To wit:

  1. Operations: how was this position's VaR calculated? Was it calculated at all? If not, how did a contract backed by UBS avoid being flagged as missing a VaR calculation? If so, who implemented the VaR calculation and how was it faulty? What process was used to verify VaR calculations?
  2. Compliance: who was responsible for training and verifying this desk's compliance issues? What procedures were they following? Who wrote these procedures? Was it operator error or design that made them fail to identify this position?
  3. The FSA: how did UBS in London fail to implement suitable controls on this desk? Who in the firm was ultimately responsible for checking this? Who in the FSA was responsible for verifying the competence and actions of the firm representatives? Since the episode with Kerviel, what extra checks were added to detect that kind of fraud and why did they not work this time around?
  4. Kweku himself: if we promised not to sue you personally for the loss, could you point us at other places in the firm where this may be going on?

Traders and managers at the other banks must be regarding this with a mixture of amusement and concern. The former because Schadenfreude is an integral part of trading, and the latter because if this can happen in a bank where Compliance and the FSA were previously satisfied with its controls, why couldn't it happen in their own bank?

Update: UBS announces it wasn't the CHF trade but rather S&P, DAX and EuroStoxx positions, with risk offset by fictitious positions. So Kweku could cover multi-$bn positions with matching multi-$bn fictitious positions. Somehow this doesn't reassure me.

2011-09-13

What is the Monetary Policy Committee for?

The Bank of England's Monetary Policy Committee is responsible for setting interest rates, and is required to aim at an inflation target of 2%. I think we can call their recent efforts an utter failure. This makes one wonder: are they actually trying to reach their target? If so, they seem to be extremely poor at it, as per the forecast of 6 months ago where the current 4.5% figure was right on the edge of their forecast outcomes. Unexpectedly!

If they are so poor at their forecasting, they should be replaced by a team who may be better at such forecasts. If they are not good at forecasting, one can only conclude that they simply don't want to target a 2% inflation rate and view their task as something entirely different - say, a staggering transfer of wealth from savers to borrowers which seems to have had the side effect of keeping UK house prices much higher than they would otherwise be. Who knew?

While I wouldn't necessarily agree with Land Value Tax advocates such as Mr. Wadsworth, I must confess that I'm coming around to his observations that monetary policy seems to favour home owners to a considerable degree. Discuss.

2011-09-09

The Ming-o-meter

If you are sitting in your living room as you read this post, you may be wondering if you should clean up a bit. As a public service, here are scoring criteria to determine just how minging your room is.

Start with 4 points (original sin)

  • Deduct 1 if you have vacuumed within 3 days
  • Deduct 1 if you have tidied within 2 days
  • Deduct 1 if you have cleaned within 2 days
  • Add 5 if you don't know the difference between 'tidied' and 'cleaned'
  • Add 1 for each unwashed cup, mug or glass present. Add another 2 for each that has actual mold or insect life present.
  • Add 2 for each square metre of floor covered with unwashed clothing. If you washed it more than 1 day ago and it's on the floor then, believe me, it's not clean.
  • Add 5 if you cannot tell the original colour of the floor.
  • Add 1 for each 10 inches of your TV screen diagonal if the TV is currently turned on. Do this for each TV.
  • Add 3 if the curtains are closed and it's daytime.
  • Add 10 if Kim and Aggie would refuse to enter the room.
  • Add 2 for every unwashed plate. Add 2 if the plate has a detectable amount of food. Add 5 if that food is Mayo or tomato ketchup
  • Add 2 for every pet or small child that roams the floor. Add 5 if you have spotted poop in the past week. Add 50 if you still haven't cleaned it up.
  • If you spend more than 8 hours a day in this room, double your score.

If you're over 8 points, you really should clean up.
If you're over 20, stop browsing the Internet Right Now Dammit and go buy cleaning kit from your nearest supermarket.
If you're over 50, you still aren't as bad as the room I was in this morning. I need a shower.

2011-09-03

FHFA and caveat emptor

It seems that the Federal Housing Finance Agency thinks that various banks sold packages of bad mortgages to Freddie Mac and Fannie Mae..

Well, duh.

What I find interesting about this is that their contention seems to be that the banks, who bought the mortgages from originators and sold them to Fannie/Freddie, knew much more about their properties than Fannie and Freddie did - given the same public information. So the banks are being blamed for Fannie/Freddie failing to do due diligence on what they were buying. Has anyone told the FHFA what Caveat Emptor means?

On $200bn of mortgages, it looks like they're seeking redress on ~20% of it - $40bn, which is a lot of money in anyone's book. Appreciating that you probably can't find this kind of money in the bank accounts of the Fannie/Freddie employees, it nevertheless seems somewhat iniquitous that the US government (for, let's face it, they're driving this) seeks to blame private industry for the failings of government employees and seeks to make a hefty chunk of cash in the process.

Perhaps the FHFA claims that the banks did better research on the mortgages than Fannie or Freddie, and should have passed on that research for free. Perhaps it claims that the banks didn't disclose what they where statutorily required to disclose, in which case the enforcer of the statutes (the FHFA, presumably) seems somewhat incompetent. Perhaps it argues that the banks should have disclosed more than what they were statutorily required to, in which case the statutes seem inadequate. Perhaps it argues that the mortgages should have been sold cheaper in hindsight, which is an interesting perspective on contract law.

Perhaps the FHFA has been a serious waste of Federal money over the past five years and is desperately seeking to camouflage this?

2011-08-25

Celebrating equality

I'm a little baffled why Jody McIntyre is complaining about being dragged from his wheelchair and hit with a baton by police at the student protests earlier this year. Surely, if you believe in equal rights for the disabled (and Hopper does) you should believe in their entitlement to receive the same amount of police beatings as the able-bodied?

This is of course the same Jody who decided to tweet during the riots this month:
Be inspired by the scenes in #tottenham, and rise up in your own neighbourhood. 100 people in every area = the way we can beat the feds.
I know the police are often accused of dragging their feet, but you can't fault them for that here - they got the punishment correct in advance.

[Really, Jody, "feds"? I mean, what generation do you think you are?]

2011-08-18

The A-level fiasco

And a fiasco it is. 8.2% get A*, 27% get at least an A making it clear that the current generation is the brightest ever. As a member of a previous generation I'd just like to say bollocks.

For non-Brits, "A-level" is short for the GCE Advanced Level exam, a course that normally requires 2 years of study by 16-18 year olds after they complete GCSE exams at age 16. Typically a student would take 3 (occasionally 4) A-levels, each in a distinct subject e.g Maths, English Literature, German, Biology, Economics. It used to be assessed on a small number of exams taken right at the end of 2-year study, but over the past 20 years more coursework has counted towards the final grade. Grades used to be A (best) through E (poor), with U (unclassified) as an option if you were completely asleep throughout all exams.

I've read the paper Changes in standards at GCSE and A-Level:
 Evidence from ALIS and YELLIS by Robert Coe of Durham University, for the Office of National Statistics in 2007. Maths grades over 20 years have risen 2 full grades from 1988 to 2006 - a C student in Chemistry in 1988 would have got an A in 2006. And for maths it's over 3 full grades, so a D student would have an A. WTF?

Is this a problem? As someone heavily involved in recruiting, I assure you it is. The minor annoyance is that it is tricky to compare candidates' grades across multi-year gaps: AAB in 2005 may not indicate a student who is any brighter than one with BBB in 1998, say. But that's not too common a situation. A major annoyance is that you lose the ability to spot distinctive candidates; a 3-A candidate was the exception back in the early 90's, and so if you spotted one you'd move heaven and earth to get them in for interview. But now everyone and his dog has 3 A's.

But the greatest problem, one that seems seldom discussed, is ego. Ten years ago, if you worked hard and gained A-levels at ABB in Maths, English and Physics then you could rightly feel that you were approaching a mastery of the first subject but realise that you had some way to go to get a proper grip on Physics and English. Nowadays, you'd have A grades across the board and you'd feel invincible, despite your Physics knowledge having significant gaps and being unable to write grammatical English. If someone tries to correct you, you'll have none of it: "Oh, I have top grades in those subjects, I know what I'm talking about".

My solution? Grade on a curve. Fixed percentages of A, B, C, D, E; at least in the major subjects which don't have significant skew in the ability of those studying them (Latin and Greek are tricker to grade fairly for this reason). Better yet, give the student their percentile position directly in bands of 5% or so. I'd also like to see at least one impossible question in each subject's exams, just to keep student egos in check. Those who think they know it all really annoy those of us who do. (Ahem)

2011-08-14

Can someone explain this to me...

So rail fares are rising by 8-13% in the next year. I can understand the annoyance of passengers, especially assuming that the current service won't actually improve in quality. However, there is currently record overcrowding on the trains. Won't the fare rise alleviate the overcrowding? And what's the alternative strategy to reduce overcrowding that doesn't bring in extra revenue?

This is not to say that directors of Worst Great Western and a good number of people at Network Rail shouldn't be hung by their toes for egregious incompetence. But that's tangential to the economics of the situation.

2011-08-11

Word of the day - squoodle

squoodle: noun, the result of crossing a squirrel and a poodle. See for example, Hazel Blears' new hairstyle.

2011-08-10

24 hours in A+E - the mad-as-a-fish edition

Our last view (for a while, at least) into Kings A+E. "For God's sakes, get me something for the fucking pain!" some bloke was shouting as the programme opened. Either he had a gunshot wound to the stomach, was in the middle of childbirth, or he was being a wuss. You know what I'm betting on.

Clive woke up confused with a slurrying voice - everyone was thinking 'stroke'. He was conscious enough to compliment his consultant on her youthful looks though, good man. Discussing with his nurse people who go away before exam results come back, he commented that if anything was wrong with him he'd want to know. Six years of fighting off depression (subsequent to alcoholism, sounds like), more bad days than good days. I could see how that would screw up your vascular system. Turns out that the symptoms were due to an accidental overdose of his meds.

Here came Joseph, the pre-announced 16 year old with a query stroke. He was a bit confused about times and dates, apparently remembering yesterday's events as todays. Initially you'd think 'head trauma' but there was no obvious history indicating a mechanism for it. Some unilateral weakness in his leg. Handy for diagnostic purposes having his twin brother there, I'd think. Later confirmed that it was a stroke, fully recovered.

A suicidal person with 74 previous attempts went missing from the department. Jenny the psychiatric nurse was trying to find her. Statistically you'd think there wouldn't be too much risk that this would be the one time her attempts would succeed but I guess you can't stake your job on that. Kings sees more people with mental health needs than any other A+E department in the UK. Lots of schizophrenia, lots of bipolar. I'd hazard a guess there's a strong correlation with homelessness. A lot of them are regular visitors which brings its own set of challenges.

There were funny vignettes with the two girls trying to keep themselves entertained for hours and hours while waiting for treatment for fingers trapped in a collapsible stool. A+E needs more entertaining posters, perhaps 'Where's Wally?'.

We had 28 days of filming in which time 9500 patients came through and 6 died. It may sound a little heartless to say it, but that's not bad going.

2011-08-08

2011-08-03

24 hours in A+E - the end-of-the-road edition.

Now we have Saturday afternoon to Sunday morning. Should be a corker.

Props to the Filipino nurse looking after Ted and Irene - the man was very smooth. Ted was on his way out with a cancerous tumour in the bladder, knew it was there but was very stiff-upper-lip about the whole thing. Irene was apologising for calling the sister over - I don't know what the opposite of 'entitled' is, but Irene feels it in spades. Ted and Irene were stretching to try to see the bright side of life in very trying circumstances. As sister Maria said, you don't always get the privilege of spending time with people like that.

One young chap, Ian, was skateboarding while drunk and broke his ankle. Two components of the pisshead triad at minimum. The exact circs of the breakage may remain a mystery. Ian hated needles, but clearly not enough to offset his like of beer.

Emergency technician Amanda caused my teeth to grate somewhat. Does this make me a bad person? The ambulance crews call her "Peggy Mitchell" so it's not just me. She must have loved kicked-in-the-face patient Duncan as he could barely talk, so she got all the air time.

A patient came in with a heart attack - the team was administering CPR, which is already a pretty bad sign. Sure enough, the consultant called it a day. To be fair to Amanda she was up on the man's chest pumping away like a good'un.

"Every year 7 million people have accidents at work". I'd bet a considerable sum that there may be 7 million reported accidents at work, but there are a good number of those people who have multiple accidents. The example shown to us was a hedge trimmer vs finger; a Polish gardener shooting the breeze with Roman his German doctor. Roman has had to adapt the typical German direct approach to the British patient. "Will it hurt?" "Oh, yes!" gets the nurses telling him off. He sounded not a little irked with a British GP telling a patient with splinter-in-the-thumb from a month ago to come to A+E. I can see his point. God forbid that the GP should actually have to do anything tricky.

70p for a Bounty in the vending machine? Talk about captive audience pricing.

When the resus sister Sharon is saying "Oh my God, this is ridiculous" as the phone rings again, you know it's a good night. From one point of view. "So Stuart, what were you doing up the tree?" He doesn't remember. Alcohol, stupidity, gravity, kerching. Stuart likes to live life on the edge, but is afraid of his mother finding out. You couldn't make it up. "You're silly and you do stupid things" as his girlfriend observed, cutting to the heart of the issue.

A week later, Ted passed on. Stuart and Ian are, unfortunately, fine.

Next week: a 16 year old with query stroke. WTF? A different patient has a history of 74 previous suicide attempts. Let's be honest, she's not really trying.

So about those SocGen numbers...

SocGen are taking substantial write downs on their Greek sovereign debt holdings in Q2; a little under 20% on 2.6bn euro of holdings, taking out 30%+ of their net profits for the quarter.

I would just like to say I told you so and I wonder what other non-marked-to-market skeletons linger in the SocGen closet. This isn't investment advice, but I wouldn't touch SocGen with a faeces-stained stick. Thank goodness that Berlusconi is making a reassuring statement on the Italian banks, I don't know what we'd do without him.

We now return you to your scheduled programming (specifically, 24 Hours in A+E).

2011-07-27

24 hours in A+E: the Garfield edition

"I hate Mondays" says Garfield. He has no idea...

Ooh, Channel 4 is warning us of "strong language and graphic scenes of stab wounds". That's what we're looking for. What does a non-graphic scene of a stab wound look like? A picture of a set of kitchen knives with a banana skin on the floor?

It strikes me that you can see the initial scenes of the hospital corridors containing patients slumped in wheelchairs and random cardboard boxes stashed around, and be left in no doubt that you're looking at a UK hospital.

I can't think of many worse things than being chocked and blocked on a spinal board in A+E and hearing screams, yells and gurgles either side of you but being completely unable to see what's going on.

For all those mathmos tackling NP-hard problems, you should have a look at Jen's bed allocation juggling. If anyone's going to crack SAT in polynomial time, my money's on her.

Why is Monday the busiest day of the week? That seems counter-intuitive to me. Apparently it's because GPs are closed over the weekend so no-one can go to them, so they wait for things to get bad and then go to A+E. Go figure. "Bit chaotic in here, not your average Monday, is it?" asks one punter. Jen grins and corrects him: "Yeah."

Ah, here comes the first stabbing. Attacked outside a local shop, life-threatening haemorrhage. Curled up on his side, BP 66/29, that doesn't look good to me. Lucky he was stabbed in the backside, unlucky there were a couple in the chest as well. I was impressed the guy wasn't screaming in pain as the medics stuck their fingers into the wounds.

I had to love Jen's impression of an AAA bursting: "plop!" Omar, who owned the AAA in question, was faced with an operation to fix it (50% mortality at his age) or leaving it and hoping for the best. His son had to sign the consent forms saying he understood that the operation was risky -- but without it, mortality was 100%. Talk about Hobson's choice. "Are you happy for us to go ahead?" Well crap, he's not going to be happy about it is he? Like Jen says, it's probably worse for the relatives in that situation because at least the patient is loaded up with opiates - the relatives have no such cushion. I was glad for Omar's son's sake that Omar beat the odds.

As Jen reeled off the list of drugs that suicidal Hany had taken (I lost count around number six and didn't recognise half of them) one was left with the strong impression that this was an actual attempt, not the typical cry for help. He'd taken them from his mother, and I'm somewhat surprised she's still alive if she takes all of those in one day. Six years of heroin and crack seemed to have screwed him up impressively, though I suspect gave his system the ability to survive the cocktail he took where a cleaner-living man would have pushed up the daisies.

Sounds like the urology registrar Jacqui is getting fed up of people trying to call her. Perhaps they are taking the piss (badoom tish).

On the Greek bailout

So Sarkozy and Merkel have reached into the magical top hat and produced a bailout deal for Greece that involves haircuts of no more than 20% for bondholders. No need for further spending cuts for Greece beyond what's been agreed, everything's rosy. Yes, Greece will technically default but there won't be much significant chance in the credit ratings anyway. So everyone's more or less happy, Greece won't drop out of the Euro and no banks will take dangerous hits on their capital. Sorted!

My arse.

So Greek bondholders get rolled over to 15 or 30 year terms. That means that for the next 15 years the amount of debt that Greece holds (and pays coupons on) will not drop at all even if they don't issue a Euro more of debt. Will Greece spend no more than it receives for the next 15 years? I think not. They're going to run into the same brick wall of spending-vs-unaffordable-debt. I give it two years at the outside. What do they do then, roll over terms to 50 years? Who the hell are they kidding?

Incidentally, it'll be interesting to see if any French or German banks take significant write-downs as a result of the haircuts. If so, they were marking their Greek debt at over 80% of nominal value, and you can bet your bottom dollar that a lot of other things on their balance sheets are similarly 'optimistically' marked.

It'll be interesting to see how Angela sells this to her fellow Germans.

2011-07-25

Journalists on research: we've heard of it

Grauniad journalist writing on the injury of Afghan children by a British Apache:
Five Afghan children have been injured, some seriously, by cannon fire from a British Apache helicopter, according to UK defence officials.

It is believed they were hit by stray bullets during an intended attack on an insurgent as they worked in a field in the Nahr-e-Saraj district of Helmand province, on Saturday.
I can assure Mr. Norton-Taylor (the author of the piece) that, had any of the children been hit by a stray 30mm high-explosive cannon shell (aka 'bullet') from the Apache's cannon, they'd have been a good few steps beyond "seriously injured".

I realise that 'accuracy' comes a distant 10th to 'sensation' in a journalist's priorities, but is there any chance they could get a grasp of the relevant facts? Being hit by shrapnel from the cannon shell splash isn't a fun day out, and one can only hope that the children recover and their families are compensated, but it would be nice for a British newspaper not to give the impression that British Apache gunners go around spraying fire at random passers-by.

2011-07-20

24 Hours in A+E: the blunt truth edition

This should be interesting - a Wednesday, 10am start. As close to a "normal" week day as you can get. What trade comes through Kings outside the weekend stab/alcohol window?

Firas wanted to be a doctor ever since he had his tonsils out at age 5. Perhaps he wanted to get his own back. Now he's a consultant in A+E, so he's probably paid his dues. His first patient was a 59 year old male, overweight, flushed face and chest with chest pain and a history of heart problems. Bingo, likely heart attack in progress (notable that the ambulance crew brought him in along with a couple of feet of ECG trace so they were thinking the same thing). He's clearly not a believer in sugar-coating things, rather preferring to tell you exactly how bad it's going to be (and daring you to run away). But refreshing that he was open to admitting to Reg, his second patient, that he'd promised to make him better, hadn't yet, but would bust a gut to make it happen. Sounds like his father was ballsy - getting Firas and his brother evacuated from Kuwait in 1990, when he couldn't be evacuated himself, and telling them "chin up and cheer up" as they boarded the coach to leave. If I was in a bad state in A+E, I'd be pretty happy with Firas as my consultant. For the rest of the hospital, hmmm... they seemed to take a lot of chasing by Firas ("I'm going to be blunt, if this man does not get exploratory surgery, he's going to die") before they moved into action. Reg wasn't just knocking on Death's door, he was ringing the bell and chucking gravel up at the window. But he was a pretty ballsy guy too, making a Bogart joke with consultant Andre as he OK'd the life-or-death operation. But they didn't find anything wrong when they opened him up, so what was wrong? Best guess was insulin overdose, but you can never be sure.

Richard had twisted his knee moonwalking (showing off, reading between the lines). Pity his poor younger brother Jake who got to look after him. He was bragging about dating a Kings gynaecologist, which I can only imagine resulted from an overenthusiastic affirmative action policy hiring doctors who are clinically blind -- and deaf. He's pursuing Cheryl Cole, and I leave all the obvious rejoinders to the audience. The triage nurse had his number, telling Jake to do the opposite of everything his brother told him.

Junior doctor Dom looked about 16. Crap, I'm getting old.

Towards the closing of the episode was another stab wound - fit young man, on hi-flo O2, leaving a small spot of blood on the trolley sheet where his left lung would have been; police officer hovering nearby. FFS.