Here, a quick recap of an earlier post - the collapse of the monoline insurance market meant it was no longer possible to do £100m plus PFIs as monoline wrapped bonds sold onto institutional investors. Big PFI projects instead went back to the banks who, due to liquidity constraints, were (and are) only willing (and able) to handle (a) smaller tranches of individual loans (b) for shorter terms e.g. 7 rather than 25 years (c) and even then only at significantly higher margins.
This left PFIs struggling to raise money on anything even approaching acceptable terms from what had suddenly become an enlarged and much more expensive herd of cats (that being the technical term for a syndicate of banks). The end result was that getting senior debt became the exception rather than the rule and more and more projects couldn’t get signed off.
So the PFI model of mixing government finance, private equity stakes and private debt effectively broke down last year. This was a shame because bringing forward PFI projects was touted by government as a counter-cyclical response to the credit crunch and subsequent recession i.e. a fundamental part of current economic policy. For instance, a January 2009 Department of Transport document on road capital projects emphasised its counter-cyclical benefits e.g. in government right now every policy needs to tick the counter-cyclical spending box cos we’ve all rediscovered Keynes.
To sort this out government finally bit the bullet on March 3rd when the Chief Secretary to the Treasury announced the setting up of a dedicated team, department unit or whatever that will lend to pretty much every current and new PFI project either in isolation or in conjunction with commercial lenders and the European Investment Bank. In other words if a PFI can’t borrow from a bank it can borrow from the Treasury.
Hang on a mo you’re thinking doesn’t the “P” in PFI stand for private not public? Ahh, the Chief Secretary to the Treasury over-emphasised, there’s still the private equity interest in each PFI so it still is “P” for private (give or take the fact that’s only ever been a wee tottie bit of the cash involved). Besides, the loans will be on what’s explicitly referred to as a “commercial” basis, the risk involved will still be transferred to the private sector, via the private equity stake, and what’s currently envisaged is that when things return to normal the loans will be sold on to private investors and the team, unit, department or whatever it is will shut up shop.
So that’s alright then isn’t it? Ish, I mean the stuff will still get built, but this new approach still leaves a coupla wee things to ponder. One is that the Treasury needs to intervene at all because doing so makes clear right now a wholly private sector funded PFI would fail the value for money test that needs to be passed to justify using private rather than public finance. Then there’s the Treasury’s reference to the loans being made on a “commercial” basis. A polite person might describe that as a rhetorical flourish, an honest person would describe it as mince. By definition, the loans can’t be on commercial terms because the Treasury is only intervening due to the fact the commercial terms currently available are unacceptable.
Instead, “commercial” here simply means interest will be charged on debt lent via contractually specific loans. Arranging things this way will make it easier to eventually sell on the debt while neatly confirming the government’s continued commitment to PFI.
Lets try and be understanding for a minute, this approach could arguably be justified on the grounds that we are currently living in exceptional times. Except it effectively assumes private finance will pass the value for money test in due course i.e. in a future nobody can predict give or take the fact we know the cheap private credit PFI depended on is less likely to be available due to the current regulatory response to bank liquidity and balance sheets that will permanently constrain their ability to throw cheap debt at things.
But, hang on a mo, isn’t the government doing this as a counter-cyclical response to the recession? Yup. But, won’t charging interest reduce the total amount being spent on new construction because interest will have to be (re)paid as well as the capital? Err, possibly. So that means the taxpayer will get less bang for their counter-cyclical buck? I’m sorry I don’t quite understand. Well won’t fewer new schools and hospitals get built? Perhaps. So less people will be employed building things and more kids will have to be taught in poor quality buildings for longer essentially because of an ideological commitment to PFI? I really think you need to look at the bigger picture here, after all PFI is a key means of transferring risk from the public to the private sector.
Transferring what risk? Well take the Scottish Parliament for example - generalist civil servants managed a wholly government funded project requiring specific skills and repeatedly caved into incessant political tinkering that led to costs reaching astronomical levels, I mean how good an argument in favour of PFI do you need? Ahh, so a PFI establishes a discipline whereby the sponsor agrees a detailed set of specs they are more likely to stick to while whoever won the construction contract has to work within the costs they originally estimated in their tender regardless of whether it turns out the land has all sorts of unexpectedly expensive problems to deal with? Pretty much, I mean look at the example of the PFI contract to build a National Physical Laboratory where, after getting their costs wrong, the private sector ended up losing an estimated £100m on facilities that eventually cost government £140m. Now that’s risk transfer or to be precise that’s the transfer of “construction” risk because the time things are most likely to go wrong is when stuff is getting built. Aye fair enough, but isn’t it much better just to moan about how much PFI costs? Well it certainly makes for better headlines.
Except, wouldn’t establishing an arms length government construction agency or an independently chaired quango to agree final specs with say an executive appointed on 5 year terms, thus at a remove from political tinkering, have much the same effect? Perhaps. And see this risk transfer thing? Uh huh? Well has the credit crunch no suddenly made clear that relying on PFI to finance the construction of infrastructure actually builds a new and unanticipated risk into the provision of basic services and infrastructure i.e. we’ve now learned the reality is that rather than transferring risk, PFI simply swaps one risk (construction) for another? (bank liquidity). Err, yes, but these are exceptional times, so shut it.
And see this funding of this new PFI arrangement? Aye, what? This emphasis on clawing back departmental underspends to create a pot to finance the loans, does that no mean that rather than any additional spending its simply generating different spending with the total unchanged? Mebbe. So it’ll have a limited net effect or even less of an effect given interest will be charged? Well that’s certainly something to consider, however, the announcement also made clear there is now additional scope for government to undertake additional borrowing to fund the loans, so we could well see some real net gains, plus there is the “multiplier effect” due to the types of activity likely to be financed. What’s a “multiplier”? Well buying bricks to build a hospital means brick makers have more money to go out and buy things and so on. So will this multiplier effect outweigh the consequences of charging interest? Err, I don’t know.
And see with the financing being funded via a clawback from existing departmental budgets AND additional government borrowing, does that mean government can borrow for capex cheaper than the private sector? Don’t know. Are you getting huffy? No am no. Aye you are, its no my fault PFI has suddenly become a wholly redundant exercise what with the debt required currently unavailable and the fact that when any Treasury loans are eventually sold down the risk transfer will be completely negligible given it’ll be wholly post construction. Well no one knows the future, so I couldn’t possibly comment.
Aye fair do Nostradamus, its no as if it isn’t feckin obvious, but howabout this risk transfer thing one last time? What about it? Well, is that why post-construction PFI projects typically go back to their lenders and refinance i.e. renegotiate cheaper credit? Yup. So this post-construction refinancing was that why whoever provided the equity in the first PFIs made huge gains simply because the Treasury hadn’t taken it into account? I think that’s a very, very simplistic account of a complex situation. Aye, anyway, what about now? Well, for a few years now any refinancing gains have had to be shared with the Treasury i.e. the taxpayer. Really? That sounds pretty reasonable then. Yup, but again it doesn’t make for good headlines.
So can I ask another question? Sure. Why are you doing this analysis as a fake conversation kinda Q&A session? No idea I should probably stop, there again it is a useful device for pointing out PFI’s practical limitations.
But, isn’t having a go at PFI right now like shooting fish in a barrel? Sort of, except there’s a political consensus in favour of it – the Tories like it as do the leaders of the Labour party, who cares about the LibDems while the SNP’s Scottish Futures Trust alternative looks more and more like a joke every day.
Why does that matter? Well it means any criticisms of PFI tend for the most part to be couched in ideological terms rather than practicalities and as such can be easily rebutted. You know the kind of thing “PFI is the creeping privatisation of the NHS”. To which anyone can say whoop-de-feckin do, isn’t the point of the NHS to provide universal access to the best medical treatment available rather than debate who the providers are (for those interested in this kind of stuff the relevant thing would be the debate over clause 4 of the Labour party constitution and its subsequent rewriting)?
So are there any other practical criticisms of PFI? Yup. Such as? Well, a good one is the fact that by locking local authorities, NHS trusts etc. into 25 year contracts, the client can’t change how they deliver services or at least not without incurring mucho penalty costs. So say in 10 years time it turns out transferring more medical services to GPs would save more lives, there could be an off-puttingly large penalty cost due to it taking business away from PFI hospitals.
Fair do’s, so setting aside the “oohhh, we’re all indebted cos of PFI” and “oooohhhh its privatising the delivery of public services” mince, all this means PFI –
1) No longer passes the value for money test i.e. government borrowing would be cheaper. Moreover, the cost of borrowing from banks is unlikely to fall back to the kind of low levels seen before the credit crunch, ever!
2) It turns out the risk transfer argument is actually about swapping risks and if it involves selling on debt in however many year’s time will simply see government reducing its indebtedness i.e. PFI is simply about playing with balance sheets
3) Government charging interest could well raise the cost of capital spending beyond what it might otherwise have been, reducing the amount of work that gets done as a result
4) The notion of this being counter-cyclical is consequently open to serious scrutiny as a result of these interest costs and the clawback from existing budgets.
5) The market discipline PFI imposes could potentially be permanently achieved by other means that avoid the additional cost of borrowing from the private sector.
“Again I think you’re taking a much too simplistic approach here”, said the Treasury civil servant with responsibility for PFI policy.
P.S. Steve, I hope this makes sense
Wednesday 25 March 2009
Sunday 22 March 2009
The bankers strike back
Best to ignore fro the time-being the ineffectual, British huffing and puffing over the Sir Fred Goodwin pension for the cack-handed, disgusting little sideshow it is. By contrast the US House of Representatives has approved a bill to impose 90 per cent tax on bonuses to employees whose gross income exceeded $250,000 at bailed-out firms. Now that’s action!
In response the FT states “Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions” (20/3/09). Struck back? Really? How exactly?
By saying things of course. Fer instance, one banker was quoted saying “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” Wooooh, scary. Sticks and stones and all that give or take the assumption its somehow wrong to take away the bonuses of people who directly contributed to a financial disaster now costing millions of people their livelihoods.
But, said one investment banker, these taxes could “send [the US] back to the stone age”. Crikey, crivens and help ma’boab! So taxing a few hundred or mebbe a few thousand people will do that to the world’s biggest economy? If it’s that fragile presumably its going to topple over anyway? And how exactly?
Thru staff retention of course judging by the comments of Vikram Pandit, Citigroup’s chief executive, in an internal memo; “The work we have all done to try to stabilise the financial system and to get this economy moving again would be significantly set back if we lose our talented people”. So that’s us over a barrel then if these people aren’t free to earn tons of cash.
Alternatively, I don’t think these people realise the wider implications of what they're saying. Fair enough its fun to have it made clear employees are motivated almost entirely by cash; we sell our labour in a labour market for a price after all. And sure thats the last however many years of HR dogma on employee engagement and motivation out the window to the extent I'm betting every training courses run by a bank HR department is being duly amended as I type this (or not). But, to be honest all I'm left thinking is the people making these statements sound increasingly like ignorant tosspots.
Desperately guddling about for actual evidence one noted “Commodity traders are already moving to companies like BP where they can make as much money as they used to”. So that’ll be a couple of dozen people at most have got jobs with a single company in an area that only really came to prominence because there was nothing left to speculate in towards the end of the bubble? Crikey!
Alternatively, the reality is most high finance labour markets will be notably cooler for the foreseeable future because they're oversupplied with high financiers that have recently been made redundant. I’d even expect commodity trader bonuses at energy companies to fall regardless of what governments do elsewhere because of this and the general state of commodity markets now that the change in status of the remaining investment banks has permanently clipped the wings of the hedge funds.
It’s this kinda rank stupidity and failure to see the bigger picture that makes me doubt if Vikram’s got it right. Are the same commodity traders who exacerbated oil price swings really helping to stabilise the financial system? My jacksie they are, its central bankers, treasury officials, finance officers and regulatory and risk experts thatare doing the ground work here.
Lets be honest, Vikram is most likely cacking it that when these other people (who earn significantly less than top traders) finally help achieve some sort of stability he won’t be able to pile back into high earning businesses because all the big bonus bods will have naffed off to err, I'm not sure exactly, its not as if most other countries aren't biting down hard on the bonus culture. And anyway this kidna piling into markets type thing is exactly the kind of herd mentality that helped create the credit crunch in the first place.
It all leaves me thinking these guys really, really don’t have a clue about how much attitudes have changed or much shame for that matter (even worse they were given the otherwise credible platform of an FT article from which to whine). Rather than striking back, right now it comes across as no more than huffing and puffing outside a big brick house, except this time its the piggies trying to blow it down. If I was them and was wanting to get my bonus back I’d treble my political lobbying budget to try and sway government behind the scenes, cos the arguments being made in public are selfish, half-arsed, incoherent mince for the most part.
In response the FT states “Bankers on Wall Street and in Europe have struck back against moves by US lawmakers to slap punitive taxes on bonuses paid to high earners at bailed-out institutions” (20/3/09). Struck back? Really? How exactly?
By saying things of course. Fer instance, one banker was quoted saying “It’s like a McCarthy witch-hunt...This is the most profoundly anti- American thing I’ve ever seen.” Wooooh, scary. Sticks and stones and all that give or take the assumption its somehow wrong to take away the bonuses of people who directly contributed to a financial disaster now costing millions of people their livelihoods.
But, said one investment banker, these taxes could “send [the US] back to the stone age”. Crikey, crivens and help ma’boab! So taxing a few hundred or mebbe a few thousand people will do that to the world’s biggest economy? If it’s that fragile presumably its going to topple over anyway? And how exactly?
Thru staff retention of course judging by the comments of Vikram Pandit, Citigroup’s chief executive, in an internal memo; “The work we have all done to try to stabilise the financial system and to get this economy moving again would be significantly set back if we lose our talented people”. So that’s us over a barrel then if these people aren’t free to earn tons of cash.
Alternatively, I don’t think these people realise the wider implications of what they're saying. Fair enough its fun to have it made clear employees are motivated almost entirely by cash; we sell our labour in a labour market for a price after all. And sure thats the last however many years of HR dogma on employee engagement and motivation out the window to the extent I'm betting every training courses run by a bank HR department is being duly amended as I type this (or not). But, to be honest all I'm left thinking is the people making these statements sound increasingly like ignorant tosspots.
Desperately guddling about for actual evidence one noted “Commodity traders are already moving to companies like BP where they can make as much money as they used to”. So that’ll be a couple of dozen people at most have got jobs with a single company in an area that only really came to prominence because there was nothing left to speculate in towards the end of the bubble? Crikey!
Alternatively, the reality is most high finance labour markets will be notably cooler for the foreseeable future because they're oversupplied with high financiers that have recently been made redundant. I’d even expect commodity trader bonuses at energy companies to fall regardless of what governments do elsewhere because of this and the general state of commodity markets now that the change in status of the remaining investment banks has permanently clipped the wings of the hedge funds.
It’s this kinda rank stupidity and failure to see the bigger picture that makes me doubt if Vikram’s got it right. Are the same commodity traders who exacerbated oil price swings really helping to stabilise the financial system? My jacksie they are, its central bankers, treasury officials, finance officers and regulatory and risk experts thatare doing the ground work here.
Lets be honest, Vikram is most likely cacking it that when these other people (who earn significantly less than top traders) finally help achieve some sort of stability he won’t be able to pile back into high earning businesses because all the big bonus bods will have naffed off to err, I'm not sure exactly, its not as if most other countries aren't biting down hard on the bonus culture. And anyway this kidna piling into markets type thing is exactly the kind of herd mentality that helped create the credit crunch in the first place.
It all leaves me thinking these guys really, really don’t have a clue about how much attitudes have changed or much shame for that matter (even worse they were given the otherwise credible platform of an FT article from which to whine). Rather than striking back, right now it comes across as no more than huffing and puffing outside a big brick house, except this time its the piggies trying to blow it down. If I was them and was wanting to get my bonus back I’d treble my political lobbying budget to try and sway government behind the scenes, cos the arguments being made in public are selfish, half-arsed, incoherent mince for the most part.
Wednesday 18 March 2009
Sausage? Nah, just the sizzle
I blame Rudolf Hilferding myself. By 1910 the notion of an owner managed capitalism that underpinned classical Marxist theory was more than a bit iffy due to the emergence of big, private, bureaucratic organisations across a range of industries. To accommodate this Hilferding devised the notion of “Finance capital”, which for him only arose at a distinct stage of capitalism and constituted the coming together of finance capital - banks - and industrial capital - industry. The theory was very much a product of Germany at that time and the close links already formed there between big banks and big business. By contrast in Britain where banks remained wedded to the provision of working capital and senior debt as opposed to any equity, the relationship remained more arms length.
Regardless of its applicability elsewhere, Hilferding sought to establish a meaningful and relevant theory of capitalism as he saw it. For me that kind of intellectual endeavour (and effort) should at least be acknowledged. However, I still think the subsequent notion of “managerial capitalism” is the more relevant, especially as developed by Alfred Chandler Jr.
Chandler distinguishes managerial capitalism from Marx’s personal capitalism by detailing how decisions concerning the production and distribution of goods and services are made at a remove from the market by hierarchical teams of salaried managers with little or no equity ownership in the enterprises they manage. Ownership is instead at a remove, typically in the hands of institutional investors such as pension funds. Even better by describing this as the “visible hand” as opposed to Adam Smith’s “invisible hand” he introduced a wonderfully powerful metaphor that by itself made clear the fundamental change in how things were.
There was an attempt in the 70s to claim managerial capitalism was no more by I think it was Maurice Zeitlin, except his argument was pants. Essentially it was executives have been given so many shares and share options they count as owners i.e. lets all go back to classical Marxism to avoid the fact that when you have to distinguish between ownership and control in a capitalist enterprise, Max Weber’s class theory is more useful for analysing things than Marxist approaches.
And there you are then, a horrendously brief summary of some serious attempts by social theorists, business historians and sociologists to understand the location of ownership, control and authority within capitalist society, and the structuring of capitalist enterprises. By contrast what we now have are jizz slobbers fixated on generating a funky title first and only then some barely coherent assertions to substantiate it.
So now fer instance we have “casino capitalism”. Err right, but capitalism is predicated on risk taking, that being the reward for investors and entreprenuers so who gives a monkeys whether that's in a casino or not. Casino capitalism? And?
That kind of pants leaves you with the feeling that because managerial capitalism still largely rules the roost, these people are struggling here for something new to say to justify the advance given by their publisher. This is a shame because privatisation, fer instance, created a regulatory capitalism where strategic direction and capital allocation is set by private managers in relation to public sector fdetermined rameworks, objectives and representatives i.e. it constitutes a new form of locating, managing and structuring control and authority. Crikey, that might be a useful starting point for approaching the part-nationalisation of banking!
Except, that would be a bore. Much better is Noreena Hertz’s “Gucci capitalism”. Now Noreena is a cutey. She also knows Bono (I mind she kept saying this when she gave a speech at some corporate shindig I was at). She is also wonderfully, wonderfully vacuous despite having an otherwise impressive CV. Good ankles too.
But, rather than digress any further, I'll quote - “We are witnessing the death of a paradigm”, “The public recognises it has the moral right and authority to condemn the ideology that resulted in this.” No not really, the public is more concerned with Jade Goody right now while paradigm and ideology imply a worked out set of principles rather than the vague and untested list of assumptions and prejudices that more accurately describes the thought of the great and the good who created the credit crunch.
Oops I'm digressing again. Back to Noreena - “The next phase of capitalism will combine policies of localisation with an understanding that there are problems we share - such as carbon-dioxide emissions - that cannot be tackled alone. And it will actively seek to redefine what is valuable, so children growing up today do not make the mistakes of this generation in confusing success with the ability to purchase another pair of Nikes or a Gucci bag.”
See that just betrays a complete failure to understand human nature that does.The only way the kids are going to stop fiending for Gucci and Nike is if something more fashionable coming along. Ahh, but that’s just a consequence of capitalist cultural hegemony said the social worker who’d done an Open University sociology module too many years ago. Aye well, feck off ya plumb. Here, have a real example – so there was me in Havana a coupla years back sipping an espresso with a mate who got out his mobile phone. Allova sudden a product of the socialist revolution came over and started trying to buy his phone off him cos you know how the Cuban chicks dig a man with a flashy mobile.
But anyway, Noreena and what not – so that’ll be localisation and globalisation all mixed together then? That’s just meaningless drivel that is. Besides compared to say Hilferding and Chandler, Noreena misses the point big time in a manner that sounds groovy, but is actually deeply, deeply conservative to an extent that explains (even more than her being easy on the eye) why banks are happy to have her as a guest speaker.
Noreena's Gucci capitalism signifies nothing more than an environmentally destructive, selfish fixation with brands and conspicuous consumption i.e. a specific set of assumptions completely at a remove from issues of ownership, control, authority and the allocation of resources. As such they could as easily occur in a capitalist society as in a socialist one. Besides, if you take Thorstein Veblen at his word much of this was kicking about 100 years ago anyway or even 250 years ago if your preference is for recent academic accounts of conspicuous consumption in eighteenth century England.
This lack of analytical purchase and depth leaves the issues Gucci capitalism highlights looking no more than the kind of things a more detailed Corporate Social Responsibility policy could address, give or take establishing an emissions trading market. In other words things are dandy just as they are so long as institutions co-operate more and get a bit more fluffy.
Personally, you can take that and shove it. If Gucci capitalism is about the self aggrandizing triumph of the superficial, then Noreena's attempts at theory are as emblematic of it as kids aspiring to own branded goods.
Back in the real world Her Majesty’s Treasury came out with its latest survey of economic forecasts today. The new, average, independent forecast made in March is that in 2009 the British economy will shrink by 3.1%. Given the February average was -2.7% it seems pretty reasonable to expect a further downgrade next montt. if so, FECK! -3.1% would already be the lowest rate of growth – give or take World War II – since the great depression.
So it seems when Dr Sentence PHD of the MPC and formerly of BA and the CBI went to the IEA and said things were only looking as bad as the 70s and 80s he really was talking pants and isn’t anywhere near as good a forecaster as he thinks. Given that and in the spirit of the lovely Noreena here’s my localised, globalised typology for the current stage of capitalism – fucked.
Regardless of its applicability elsewhere, Hilferding sought to establish a meaningful and relevant theory of capitalism as he saw it. For me that kind of intellectual endeavour (and effort) should at least be acknowledged. However, I still think the subsequent notion of “managerial capitalism” is the more relevant, especially as developed by Alfred Chandler Jr.
Chandler distinguishes managerial capitalism from Marx’s personal capitalism by detailing how decisions concerning the production and distribution of goods and services are made at a remove from the market by hierarchical teams of salaried managers with little or no equity ownership in the enterprises they manage. Ownership is instead at a remove, typically in the hands of institutional investors such as pension funds. Even better by describing this as the “visible hand” as opposed to Adam Smith’s “invisible hand” he introduced a wonderfully powerful metaphor that by itself made clear the fundamental change in how things were.
There was an attempt in the 70s to claim managerial capitalism was no more by I think it was Maurice Zeitlin, except his argument was pants. Essentially it was executives have been given so many shares and share options they count as owners i.e. lets all go back to classical Marxism to avoid the fact that when you have to distinguish between ownership and control in a capitalist enterprise, Max Weber’s class theory is more useful for analysing things than Marxist approaches.
And there you are then, a horrendously brief summary of some serious attempts by social theorists, business historians and sociologists to understand the location of ownership, control and authority within capitalist society, and the structuring of capitalist enterprises. By contrast what we now have are jizz slobbers fixated on generating a funky title first and only then some barely coherent assertions to substantiate it.
So now fer instance we have “casino capitalism”. Err right, but capitalism is predicated on risk taking, that being the reward for investors and entreprenuers so who gives a monkeys whether that's in a casino or not. Casino capitalism? And?
That kind of pants leaves you with the feeling that because managerial capitalism still largely rules the roost, these people are struggling here for something new to say to justify the advance given by their publisher. This is a shame because privatisation, fer instance, created a regulatory capitalism where strategic direction and capital allocation is set by private managers in relation to public sector fdetermined rameworks, objectives and representatives i.e. it constitutes a new form of locating, managing and structuring control and authority. Crikey, that might be a useful starting point for approaching the part-nationalisation of banking!
Except, that would be a bore. Much better is Noreena Hertz’s “Gucci capitalism”. Now Noreena is a cutey. She also knows Bono (I mind she kept saying this when she gave a speech at some corporate shindig I was at). She is also wonderfully, wonderfully vacuous despite having an otherwise impressive CV. Good ankles too.
But, rather than digress any further, I'll quote - “We are witnessing the death of a paradigm”, “The public recognises it has the moral right and authority to condemn the ideology that resulted in this.” No not really, the public is more concerned with Jade Goody right now while paradigm and ideology imply a worked out set of principles rather than the vague and untested list of assumptions and prejudices that more accurately describes the thought of the great and the good who created the credit crunch.
Oops I'm digressing again. Back to Noreena - “The next phase of capitalism will combine policies of localisation with an understanding that there are problems we share - such as carbon-dioxide emissions - that cannot be tackled alone. And it will actively seek to redefine what is valuable, so children growing up today do not make the mistakes of this generation in confusing success with the ability to purchase another pair of Nikes or a Gucci bag.”
See that just betrays a complete failure to understand human nature that does.The only way the kids are going to stop fiending for Gucci and Nike is if something more fashionable coming along. Ahh, but that’s just a consequence of capitalist cultural hegemony said the social worker who’d done an Open University sociology module too many years ago. Aye well, feck off ya plumb. Here, have a real example – so there was me in Havana a coupla years back sipping an espresso with a mate who got out his mobile phone. Allova sudden a product of the socialist revolution came over and started trying to buy his phone off him cos you know how the Cuban chicks dig a man with a flashy mobile.
But anyway, Noreena and what not – so that’ll be localisation and globalisation all mixed together then? That’s just meaningless drivel that is. Besides compared to say Hilferding and Chandler, Noreena misses the point big time in a manner that sounds groovy, but is actually deeply, deeply conservative to an extent that explains (even more than her being easy on the eye) why banks are happy to have her as a guest speaker.
Noreena's Gucci capitalism signifies nothing more than an environmentally destructive, selfish fixation with brands and conspicuous consumption i.e. a specific set of assumptions completely at a remove from issues of ownership, control, authority and the allocation of resources. As such they could as easily occur in a capitalist society as in a socialist one. Besides, if you take Thorstein Veblen at his word much of this was kicking about 100 years ago anyway or even 250 years ago if your preference is for recent academic accounts of conspicuous consumption in eighteenth century England.
This lack of analytical purchase and depth leaves the issues Gucci capitalism highlights looking no more than the kind of things a more detailed Corporate Social Responsibility policy could address, give or take establishing an emissions trading market. In other words things are dandy just as they are so long as institutions co-operate more and get a bit more fluffy.
Personally, you can take that and shove it. If Gucci capitalism is about the self aggrandizing triumph of the superficial, then Noreena's attempts at theory are as emblematic of it as kids aspiring to own branded goods.
Back in the real world Her Majesty’s Treasury came out with its latest survey of economic forecasts today. The new, average, independent forecast made in March is that in 2009 the British economy will shrink by 3.1%. Given the February average was -2.7% it seems pretty reasonable to expect a further downgrade next montt. if so, FECK! -3.1% would already be the lowest rate of growth – give or take World War II – since the great depression.
So it seems when Dr Sentence PHD of the MPC and formerly of BA and the CBI went to the IEA and said things were only looking as bad as the 70s and 80s he really was talking pants and isn’t anywhere near as good a forecaster as he thinks. Given that and in the spirit of the lovely Noreena here’s my localised, globalised typology for the current stage of capitalism – fucked.
Wednesday 11 March 2009
Fund of funds? F@&k tae F@*k more like
One of the joys of the credit crunch has been the Bernie Madoff scam where one of the great and the good of Wall Street turned out to have been running a ponzi scheme. What makes it even better, besides the sound of rich people nashing their teeth on realising they’ve been scammed, is the list of institutions that fell for it as well. These include RBS, HSBC, Banco Santander and BNP Paribas (notice the lack of any Wall Street banks there? Makes you wonder what they thought of a US company that’d been the subject of a 17 page memo called “The World's Largest Hedge Fund is a Fraud” sent to the U.S. Securities and Exchange Commission in 2005).
Of the institutional investors that were taken in my personal favourite is Bramdean Asset Management, a closed-ended Guernsey-based investment fund of funds. Bramdean, judging by an interview in the Daily telegraph, is run by an absolutely ghastly person who after losing almost 10% of her fund’s assets to the Madoff scam was described as being “angry. Very angry”.
Aye right. Personally, I think its the people that lost money to Madoff via a fund of funds investing in his businesses on their behalf who are the only ones with the right to be angry. On the other hand the "experts" who handed their clients' cash over look like fools. I mean what exactly where they charging a turn for given Madoff’s investment vehicles were audited by a totty wee accountancy firm not registered with the Public Company Accounting Oversight Board created under the Sarbanes Oxley Act of 2002 to help detect fraud?
There again given how things were in the run up to the credit crunch you can kind of understand. You see people were so desperate to believe the various alternative investments that suddenly came to prominence, the hedge funds, infrastructure funds and private equity houses and what not, really had discovered a means of turning base metal into gold that they were queuing up to throw money at them.
Private equity funds for one had more money than they knew what to do with, so much so when they went to raise funds they were regularly oversubscribed to the point where the fund raisers increasingly found themselves debating whether to turn away some investors. Eventually they did, but not before cranking up what they were charging those lucky enough to be allowed to invest in them. At the same time they were getting cheaper and cheaper credit from lenders just as desperate to believe that the returns being generated were due to more than cheap credit and a rising market. So the people doing the actual transactions were getting the gravy at both ends (or 3 ways if you include their tax treatment in the UK).
In this kind of environment a fund of funds appears less like an intellectual powerhouse picking and chosing the best fund managers to invest in on your behalf and more like an organisation with the connections necessary to invest in funds you couldn't otherwise access. For me the most obvious comparison are those blokes who get in the queue to buy some super deluxe sports car before you and then sell you their place so you only have to wait 6 months rather than 3 years i.e. no expertise, no value add, just enough contacts to leech off everyone else.
Except calling them leeches is way to kind. A fund of funds provides an obvious means of spreading risk – rather than invest your savings in one fund, you invest it in a fund of funds that invests in lots of different ones. The reality, judging by the fact Bramdean invested 9% of its portfolio in just 2 Madoff funds, is that the risk might not get spread as widely as you originally thought.
The other thing is that at a system wide level fund of funds helped concentrate rather than spreading risk. Here’s how –
Private equity firm A wants to raise £20 for its “buying company B fund”.
It raises the £20, then goes to Bank C to get the £80 debt needed to buy company B for £100. Bank C says of course leaving it on the peg for £80 of a company purchased for £100.
Except Bank C is a bit racy and via a different department has also directly invested £5 in the private equity firm’s “buying company B fund”. So that’s £85.
Even better a different Bank C department has also invested £50 in a fund of funds that’s invested 10% of its assets in the same “buying company B fund”, which takes us to £90.
But c’mon this is pre-credit crunch days and theres this cheeky wee investor who likes leverage so much he’s also borrowed from Bank C to help fund his investment in the “buying company B fund”, so lets call it another £5 or £95 in total.
Shame over the last 12 months the FTSE has fallen from over 6000 to under 4000 i.e. yer average big company has lost over a third of its value, which implies Bank C lent out and invested directly and indirectly £95 to buy a company now valued at £66. And this really is a shame because the payback to investors was based on selling company B for more than the £100 it originally cost. Oops!
As fer the long term future of fund of funds, well the risk management principle remains sound, but on the basis that the “alternative investments” being invested in were based on being able to access cheap credit at rates and levels we’re unlikely to see for years, they’re well stuffed for the time being give or take the vulture funds that are already being established.
Of the institutional investors that were taken in my personal favourite is Bramdean Asset Management, a closed-ended Guernsey-based investment fund of funds. Bramdean, judging by an interview in the Daily telegraph, is run by an absolutely ghastly person who after losing almost 10% of her fund’s assets to the Madoff scam was described as being “angry. Very angry”.
Aye right. Personally, I think its the people that lost money to Madoff via a fund of funds investing in his businesses on their behalf who are the only ones with the right to be angry. On the other hand the "experts" who handed their clients' cash over look like fools. I mean what exactly where they charging a turn for given Madoff’s investment vehicles were audited by a totty wee accountancy firm not registered with the Public Company Accounting Oversight Board created under the Sarbanes Oxley Act of 2002 to help detect fraud?
There again given how things were in the run up to the credit crunch you can kind of understand. You see people were so desperate to believe the various alternative investments that suddenly came to prominence, the hedge funds, infrastructure funds and private equity houses and what not, really had discovered a means of turning base metal into gold that they were queuing up to throw money at them.
Private equity funds for one had more money than they knew what to do with, so much so when they went to raise funds they were regularly oversubscribed to the point where the fund raisers increasingly found themselves debating whether to turn away some investors. Eventually they did, but not before cranking up what they were charging those lucky enough to be allowed to invest in them. At the same time they were getting cheaper and cheaper credit from lenders just as desperate to believe that the returns being generated were due to more than cheap credit and a rising market. So the people doing the actual transactions were getting the gravy at both ends (or 3 ways if you include their tax treatment in the UK).
In this kind of environment a fund of funds appears less like an intellectual powerhouse picking and chosing the best fund managers to invest in on your behalf and more like an organisation with the connections necessary to invest in funds you couldn't otherwise access. For me the most obvious comparison are those blokes who get in the queue to buy some super deluxe sports car before you and then sell you their place so you only have to wait 6 months rather than 3 years i.e. no expertise, no value add, just enough contacts to leech off everyone else.
Except calling them leeches is way to kind. A fund of funds provides an obvious means of spreading risk – rather than invest your savings in one fund, you invest it in a fund of funds that invests in lots of different ones. The reality, judging by the fact Bramdean invested 9% of its portfolio in just 2 Madoff funds, is that the risk might not get spread as widely as you originally thought.
The other thing is that at a system wide level fund of funds helped concentrate rather than spreading risk. Here’s how –
Private equity firm A wants to raise £20 for its “buying company B fund”.
It raises the £20, then goes to Bank C to get the £80 debt needed to buy company B for £100. Bank C says of course leaving it on the peg for £80 of a company purchased for £100.
Except Bank C is a bit racy and via a different department has also directly invested £5 in the private equity firm’s “buying company B fund”. So that’s £85.
Even better a different Bank C department has also invested £50 in a fund of funds that’s invested 10% of its assets in the same “buying company B fund”, which takes us to £90.
But c’mon this is pre-credit crunch days and theres this cheeky wee investor who likes leverage so much he’s also borrowed from Bank C to help fund his investment in the “buying company B fund”, so lets call it another £5 or £95 in total.
Shame over the last 12 months the FTSE has fallen from over 6000 to under 4000 i.e. yer average big company has lost over a third of its value, which implies Bank C lent out and invested directly and indirectly £95 to buy a company now valued at £66. And this really is a shame because the payback to investors was based on selling company B for more than the £100 it originally cost. Oops!
As fer the long term future of fund of funds, well the risk management principle remains sound, but on the basis that the “alternative investments” being invested in were based on being able to access cheap credit at rates and levels we’re unlikely to see for years, they’re well stuffed for the time being give or take the vulture funds that are already being established.
Wednesday 4 March 2009
Big stupid
I mind working alongside this economist who’d previously worked for the Bank of England and very smart they were too, except the one thing they would never, ever do was give a clear opinion about what they thought was likely to happen.
Now at the time I wasn’t that bothered, I mean go and talk to yer typical lawyer as a typical punter and all they’ll do is state what your options are rather than give meaningful advice as to which one it would be in your interests to choose and which ones to ignore. But, then I subsequently found myself working alongside lawyers paid a retainer by a big company and man did they come out with clear, straightforward guidance, advice and opinions. So in my experience when there’s a big, fat, regular fee involved professionals tend to pull the finger out, except for this economist person.
You could almost admire the degree to which they had made fence sitting an art, give or take the risk of skelfs. At least you could until they started playing the big, stupid concept game. This is something loads of economists have been playing for years and it’s a shame because it does nothing more than undermine their personal, professional credibility.
For that to happen you need to know some of the rules, so here they are.
Rule 1 – cut and paste the definition of something from Wikipedia or an economics text book. For some practical examples google recession and Wikipedia or stagflation and Wikipedia.
Rule 2 – fire in some quotes from some long dead economist, say Ricardo, Say or even better Adam Smith, so it reads all erudite like.
Rule 3 (i) – do some braindead commentary stating why its reasonable to be mindful of the circumstances set out in this concept, but that it may or may not actually apply to current circumstances (ideally because you defined it so tightly in your cut and paste from Wikipedia, but who cares either way because its mince after all).
Rule 3 (ii) - alternatively assume everyone knows what you're talking about and just batter on regardless about your concept having missed out rule 1.
Rule 4 - well that’s it really. You’ve produced an article or report that says hee haw about hee haw and avoids providing a view as to what might happen while looking productive enough to justify this month’s paycheck. The more accomplished might even end with a few rhetorical questions.
So time for some recent examples of big stupid concepts -
Stagflation: Ooooh this is a biggy, the 70s revisited and all that and something that was being commented upon a year ago as a real possibility. Quick definition – usually you get economic growth and inflation. Stagflation sees weak or negative economic growth and inflation which kinda screws monetary policy cos raising interest rates to cut inflation would exacerbate the weak/negative economic growth.
So yeah due to galloping oil price rises this emerged as a genuine fear. Problem was when it had happened in the past supply side shocks had caused the oil price hikes, whereas this time round it was simply demand running ahead of supply (plus a cheeky speculative froth). So by definition stagflation was never really going to become an option because weaker economic growth would have seen oil prices fall back (as they subsequently have done).
Decoupling: this is a seriously high profile bollocks concept predicated on the notion that domestic demand in the BRIC economies (BRIC? Brazil, Russia, India and China) would be sufficient to counterbalance the expected decline in demand from the key Western economies, particularly the US e.g. the US is stuffed? Who cares cos China is selling shit to Indian and Chinese consumers. And if decoupling was true then stagflation was a possibility.
The glaringly obvious problem though is that rapid growth in the BRIC countries was based on exporting to the US and EU. Intra-Asian trade did grow, but the stats were exaggerated big time by international supply chains that in reality meant rather than China selling finished goods to say Korea, much of what was actually going on was that semi-finished goods were being shipped elsewhere to be finished for eventual sale into the US (financed by the Chinese purchase of US financial assets). As for Brazil and Russia, I mean c’mon – basic commodities being exported to enable the production of goods exported to well the US and the EU essentially. So now that the US and the EU are stuffed of course everyone else!
Recoupling: This gets the award for cheekiest bollocks. When decoupling looked an increasingly daft notion due to all the stats emerging, people started saying ahh, now we're recoupling. Except, thats pants. We weren't recoupling because we'd never decoupled in the first place.
Reindustrialization: this is the dumbest notion going at the mo, no really, its King Dumb, Captain Ignorant, Baron Thicko and Colonel Shitferbrains all rolled into one. First off despite being used in a British context, that the word tends to have a “Z” in it should make anyone suspicious, except you’re put off guard by the rather tender thinking involved which goes as follows – finance and business services (FBS) have driven UK economic growth for years and created all the new jobs, except anyone with half a brain knows FBS is stuffed for at least the next few years. This realisation prompts a look elsewhere for positive signs and I know here’s one - the downturn in the exchange rate is an opportunity for exporters, in fact if only Britain could reindustrialise and take advantage of this great opportunity by making things again to sell to Johnny Foreigner! Even better we could even see the economy rebalancing away from financial services!
Right, let’s bring reality into play right fecking now. Regional policy in Britain was invented in the 1920s and 30s to help ease and ideally reverse the decline in heavy industry by encouraging the creation of new, light manufacturing jobs. See the key date there is the 19-fecking-30s i.e. some plums appear stupid enough to think 1 or 2 years worth of competitive exchange rate is going to have more effect than 80 years of active intervention in a wide variety of forms. Mebbe it will, but you and I know it won't and anyone stupid enough to buy into the notion that at best medium term market signals are potent enough to engender structural, economic change should be asked to piss off sharpish or my name isn’t Ravenscraig Linwood Silicon Glen the III!(1)
So there you are then, there are loads of actively rank concepts kicking about that have no solid intellectual foundations in the current environment because they aren’t even remotely plausible. Personally, if I was to read anyone taking any of this kind of mince seriously, then I’d click delete and avoid them on the grounds that either (a) they don’t actually know any better or else (b) they do know better, but have nothing more interesting to say about current events. Waste of space either way if you ask me.
And no I'm not making any of this up. For some practical examples see –
Stagflation - http://www.guardian.co.uk/commentisfree/2008/jan/02/stagflationcometh
Decoupling –
http://www.economist.com/finance/displaystory.cfm?story_id=10809267
Recoupling
http://economictimes.indiatimes.com/Global_markets_dump_decoupling_for_recoupling/rssarticleshow/2753766.cms
Reindustrialisation -
http://www.ft.com/cms/s/0/e6528e46-f603-11dd-a9ed 0000779fd2ac.html?nclick_check=1
(1)well no its not, but those are some major, major examples of sustained attempts by government at engendering reindustrialisation in Scotland.
Now at the time I wasn’t that bothered, I mean go and talk to yer typical lawyer as a typical punter and all they’ll do is state what your options are rather than give meaningful advice as to which one it would be in your interests to choose and which ones to ignore. But, then I subsequently found myself working alongside lawyers paid a retainer by a big company and man did they come out with clear, straightforward guidance, advice and opinions. So in my experience when there’s a big, fat, regular fee involved professionals tend to pull the finger out, except for this economist person.
You could almost admire the degree to which they had made fence sitting an art, give or take the risk of skelfs. At least you could until they started playing the big, stupid concept game. This is something loads of economists have been playing for years and it’s a shame because it does nothing more than undermine their personal, professional credibility.
For that to happen you need to know some of the rules, so here they are.
Rule 1 – cut and paste the definition of something from Wikipedia or an economics text book. For some practical examples google recession and Wikipedia or stagflation and Wikipedia.
Rule 2 – fire in some quotes from some long dead economist, say Ricardo, Say or even better Adam Smith, so it reads all erudite like.
Rule 3 (i) – do some braindead commentary stating why its reasonable to be mindful of the circumstances set out in this concept, but that it may or may not actually apply to current circumstances (ideally because you defined it so tightly in your cut and paste from Wikipedia, but who cares either way because its mince after all).
Rule 3 (ii) - alternatively assume everyone knows what you're talking about and just batter on regardless about your concept having missed out rule 1.
Rule 4 - well that’s it really. You’ve produced an article or report that says hee haw about hee haw and avoids providing a view as to what might happen while looking productive enough to justify this month’s paycheck. The more accomplished might even end with a few rhetorical questions.
So time for some recent examples of big stupid concepts -
Stagflation: Ooooh this is a biggy, the 70s revisited and all that and something that was being commented upon a year ago as a real possibility. Quick definition – usually you get economic growth and inflation. Stagflation sees weak or negative economic growth and inflation which kinda screws monetary policy cos raising interest rates to cut inflation would exacerbate the weak/negative economic growth.
So yeah due to galloping oil price rises this emerged as a genuine fear. Problem was when it had happened in the past supply side shocks had caused the oil price hikes, whereas this time round it was simply demand running ahead of supply (plus a cheeky speculative froth). So by definition stagflation was never really going to become an option because weaker economic growth would have seen oil prices fall back (as they subsequently have done).
Decoupling: this is a seriously high profile bollocks concept predicated on the notion that domestic demand in the BRIC economies (BRIC? Brazil, Russia, India and China) would be sufficient to counterbalance the expected decline in demand from the key Western economies, particularly the US e.g. the US is stuffed? Who cares cos China is selling shit to Indian and Chinese consumers. And if decoupling was true then stagflation was a possibility.
The glaringly obvious problem though is that rapid growth in the BRIC countries was based on exporting to the US and EU. Intra-Asian trade did grow, but the stats were exaggerated big time by international supply chains that in reality meant rather than China selling finished goods to say Korea, much of what was actually going on was that semi-finished goods were being shipped elsewhere to be finished for eventual sale into the US (financed by the Chinese purchase of US financial assets). As for Brazil and Russia, I mean c’mon – basic commodities being exported to enable the production of goods exported to well the US and the EU essentially. So now that the US and the EU are stuffed of course everyone else!
Recoupling: This gets the award for cheekiest bollocks. When decoupling looked an increasingly daft notion due to all the stats emerging, people started saying ahh, now we're recoupling. Except, thats pants. We weren't recoupling because we'd never decoupled in the first place.
Reindustrialization: this is the dumbest notion going at the mo, no really, its King Dumb, Captain Ignorant, Baron Thicko and Colonel Shitferbrains all rolled into one. First off despite being used in a British context, that the word tends to have a “Z” in it should make anyone suspicious, except you’re put off guard by the rather tender thinking involved which goes as follows – finance and business services (FBS) have driven UK economic growth for years and created all the new jobs, except anyone with half a brain knows FBS is stuffed for at least the next few years. This realisation prompts a look elsewhere for positive signs and I know here’s one - the downturn in the exchange rate is an opportunity for exporters, in fact if only Britain could reindustrialise and take advantage of this great opportunity by making things again to sell to Johnny Foreigner! Even better we could even see the economy rebalancing away from financial services!
Right, let’s bring reality into play right fecking now. Regional policy in Britain was invented in the 1920s and 30s to help ease and ideally reverse the decline in heavy industry by encouraging the creation of new, light manufacturing jobs. See the key date there is the 19-fecking-30s i.e. some plums appear stupid enough to think 1 or 2 years worth of competitive exchange rate is going to have more effect than 80 years of active intervention in a wide variety of forms. Mebbe it will, but you and I know it won't and anyone stupid enough to buy into the notion that at best medium term market signals are potent enough to engender structural, economic change should be asked to piss off sharpish or my name isn’t Ravenscraig Linwood Silicon Glen the III!(1)
So there you are then, there are loads of actively rank concepts kicking about that have no solid intellectual foundations in the current environment because they aren’t even remotely plausible. Personally, if I was to read anyone taking any of this kind of mince seriously, then I’d click delete and avoid them on the grounds that either (a) they don’t actually know any better or else (b) they do know better, but have nothing more interesting to say about current events. Waste of space either way if you ask me.
And no I'm not making any of this up. For some practical examples see –
Stagflation - http://www.guardian.co.uk/commentisfree/2008/jan/02/stagflationcometh
Decoupling –
http://www.economist.com/finance/displaystory.cfm?story_id=10809267
Recoupling
http://economictimes.indiatimes.com/Global_markets_dump_decoupling_for_recoupling/rssarticleshow/2753766.cms
Reindustrialisation -
http://www.ft.com/cms/s/0/e6528e46-f603-11dd-a9ed 0000779fd2ac.html?nclick_check=1
(1)well no its not, but those are some major, major examples of sustained attempts by government at engendering reindustrialisation in Scotland.
Tuesday 3 March 2009
Wet liberal capitalists
CEOs and social workers all think the same if you ask me. Take some random ned called Wee Tommy up for the umpteenth time for joyriding or what have you. Anyway, you know some social worker will trot out the usual wet liberal line about how this individual’s behaviour was the product of a given set of socio-economic conditions.
Now take Sir Fred Goodwin in front of the Treasury Select Committee on the issue of personal responsibility; “it is just too simple if you want to blame it all on me. If you want to blame it all on me and close the book, that will get the job done very quickly, but it does not go anywhere close to the cause of all of this."
Well I guess there is one difference between Wee Tommy and Sir Fred, Sir Fred is perfectly capable of saying it wisnae me it was the socio-economic environment all by himself.
Except, how plausible is that? For one thing thats determinism that is which is morally suss because it denies individuals free will. For another, it’s theoretically naïve because if conditions determined every outcome then everything subject to those conditions would turn out the same, but as we know full well not every ned is up on charges and not every bank is getting bailed out by government.
So individual decisions clearly matter. Besides, if a CEO’s deliberate actions aren’t a key determinant of corporate performance, good and bad, then why exactly do they get paid shed loads of cash? Either Sir Fred was being too modest or alternatively, had been taking all that cash for providing “game-changing leadership” on false grounds.
As for Wee Tommy, my view of determinism is that we all make our own decisions, just in circumstances not of our choosing, a formula that allows me to say he’s simply a bad wee bastard. Or am I still talking about Sir Fred?
Now take Sir Fred Goodwin in front of the Treasury Select Committee on the issue of personal responsibility; “it is just too simple if you want to blame it all on me. If you want to blame it all on me and close the book, that will get the job done very quickly, but it does not go anywhere close to the cause of all of this."
Well I guess there is one difference between Wee Tommy and Sir Fred, Sir Fred is perfectly capable of saying it wisnae me it was the socio-economic environment all by himself.
Except, how plausible is that? For one thing thats determinism that is which is morally suss because it denies individuals free will. For another, it’s theoretically naïve because if conditions determined every outcome then everything subject to those conditions would turn out the same, but as we know full well not every ned is up on charges and not every bank is getting bailed out by government.
So individual decisions clearly matter. Besides, if a CEO’s deliberate actions aren’t a key determinant of corporate performance, good and bad, then why exactly do they get paid shed loads of cash? Either Sir Fred was being too modest or alternatively, had been taking all that cash for providing “game-changing leadership” on false grounds.
As for Wee Tommy, my view of determinism is that we all make our own decisions, just in circumstances not of our choosing, a formula that allows me to say he’s simply a bad wee bastard. Or am I still talking about Sir Fred?
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