Babcock & Brown

[manshimajin]

That may be the back up plan. The IOM needs to secure its gas and electricity supply and that would seem an elegant solution to the problem. If B&B are in trouble maybe a reasonable bid for MG would make sense?

If B&B are not able to refinance their massive debt then presumably they will need to do 'fire-sale' disposals of assets. Sounds like Eircom is on the block now for that very reason. MG is too small in value terms to play any meaningful part in digging them out of the deep hole they appear to be in. However if their financial situation deteriorates even further presumably they would need to sell MG - in which case should or could the Government take any interest in the proceedings as it would be the sale of a utility 'monopoly'?

[Lee54]

Lets not forget that the ones that your giving off about making big profits are also the same ones hat can lose out big time.

If B&B are going tits up the IOM Government can step in and take over the utility without any problem. It could also be a good thing for the Island. The Government could put in place a situation that would put off any investment company or asset stripper off. The IOM can right its own rules if needed and fuck these buggars off

[P.K.]

Then I'd like someone to explain in simple terms to me (I'm a simple sort of a bloke) what value - if any - these people who trade in world markets, commodities, futures etc. actually add to the process of production for consumption. Because I can't get beyond seeing lots of gambling addicts playing with other people's money and other people's lives, for their own gain. They get paid, win or lose - but if they win they make obscene personal fortunes in bonuses. I talked to a pig farmer a while ago - feed has doubled because the grain they use has become the latest 'hot' commodity. So now Giles has got another Ferrari out of it, but the pig farmer can't afford to stay in the business he's built up and nurtured over the years unless his prices can go up commensurately. My expensive bacon bap is helping buy a Ferrari for someone in Gucci loafers in London, not reward anyone involved in the actual production of it.

Funny - in the 80's I was a Thatcherite. Nowadays my old Tory chums are all socialists and my formerly left-wing pals are all capitalists...

Admitting to being a Thatcherite, there's a man at peace with himself...

 

The unacceptable face of capitalism. Most people think low interest rates i.e. cheap money are good for business. If you have a wedge to invest low interest rates mean low returns. So you put it elsewhere. Commodities are good. Buy loads of wheat, don't sell it, demand then exceeds supply, price goes up, sell at obscene profit. Easy peasy.

 

A word of warning. The biggest dollar holder at the moment is China. They have invested in lots of countries, especially countries like Australia what with it being in the right hemisphere and so forth. It wouldn't surprise me in the slightest if B&B were investing lots on behalf of Chinese clients.

 

Paging Chinahand to thread - don't worry, despite being a MEA apologist (why? you sound almost sensible...) financial nous from the far east needed.

[oldmanxfella]

Admitting to being a Thatcherite, there's a man at peace with himself...

 

I see in the Sunday Papers that Thatcher now has senile dementia so sadly now its only us who can remember what she did to the UK.

[Chinahand]

Then I'd like someone to explain in simple terms to me (I'm a simple sort of a bloke) what value - if any - these people who trade in world markets, commodities, futures etc. actually add to the process of production for consumption. Because I can't get beyond seeing lots of gambling addicts playing with other people's money and other people's lives, for their own gain. They get paid, win or lose - but if they win they make obscene personal fortunes in bonuses. I talked to a pig farmer a while ago - feed has doubled because the grain they use has become the latest 'hot' commodity. So now Giles has got another Ferrari out of it, but the pig farmer can't afford to stay in the business he's built up and nurtured over the years unless his prices can go up commensurately. My expensive bacon bap is helping buy a Ferrari for someone in Gucci loafers in London, not reward anyone involved in the actual production of it.

Funny - in the 80's I was a Thatcherite. Nowadays my old Tory chums are all socialists and my formerly left-wing pals are all capitalists...

Admitting to being a Thatcherite, there's a man at peace with himself...

 

The unacceptable face of capitalism. Most people think low interest rates i.e. cheap money are good for business. If you have a wedge to invest low interest rates mean low returns. So you put it elsewhere. Commodities are good. Buy loads of wheat, don't sell it, demand then exceeds supply, price goes up, sell at obscene profit. Easy peasy.

 

A word of warning. The biggest dollar holder at the moment is China. They have invested in lots of countries, especially countries like Australia what with it being in the right hemisphere and so forth. It wouldn't surprise me in the slightest if B&B were investing lots on behalf of Chinese clients.

 

Paging Chinahand to thread - don't worry, despite being a MEA apologist (why? you sound almost sensible...) financial nous from the far east needed.

Oh heck lets take the bait.

 

I don't think I can really say very much about the current financial markets. The one thing I will say is that the issues are orders of magnitude more complex than speculators reaping profits from the exploited.

 

Churchill's comment that democracy is the worst possible political system apart from all the rest can in my mind be equally applied to capitalism.

 

My answer to Stu's question about traders and speculators is that they are the froth on the surface of a huge sea of enterprise. They can be vital, firstly in supplying liquidity which allows people who would previously be unable to access the market to follow on their coat tails and secondly through providing innovations. An example: weather futures - these markets are highly speculative, but they can be easily modelled so hedge funds etc invest in them, but also farmers, ice cream manufacturers, clothing designers etc can also enter the market to hedge their risks and get a more stable income.

 

Nearly all financial assets can be used both to hedge (reduce risks) and to speculate (increase opportunities - which is the flip side of risk!). The speculators get the headlines, but these are often only a tiny fraction of the users of these assets, their main use is commerce. The image given is of monopoly speculators, holding markets to ransom, that is highly highly unlikely as speculators usually only make up a small percentage of the market.

 

Food, oil, credit markets are all in a huge state of flux as China and India create the biggest economic adjustment the modern economic world has seen: of course all and sundry are trying to cash in on this, but the trade volumes are simply huge. I am highly sceptical that speculators are more than one of many many factors in what is currently happening in the world economy.

 

China is a huge holder of US currency, but they are mainly holding them in low yielding bonds and the simple fact is the Chinese are probably damaging their own economy by doing this. Taiwan was in a similar position a generation ago - as was Japan even earlier - they developed their export economies over their domestic consumption and investment. By holding their currencies down artificially they have to purchase USD to balance their current and capital accounts - this money could be better used to invest in their own economies - its ironic that the Chinese government is investing in the US and not its own economy - given their relative growth rates does anyone really think this is a good investment!

 

China is diversifying its foreign exchange reserves - soverign wealth funds are one of the big financial stories of the moment. But again these have to be put in context - the big Pension and insurance schemes AXA, Norwich Union are of comparable size to China's wealth fund. It makes great headlines about the Chinese taking over the world and investing in all these industries, but they are a passive investor, with stakes of the order of 5%.

 

China couldn't sell its US assets simply without destroying its own economy - that is the bigest advantage for the world, China IS a part of the global system and has a vested interest in maintaining stability.

 

Nuf said, bottom line its complex.

[Stu Peters]

Thanks Chinahand - but my head hurts now from re-reading it so many times to get a grasp on what you're saying.

 

PK - yes, I'm pretty much at peace with my past. Thing is, I've never had much real interest in party politics, and during the Thatcher years I ran my own business, so she was the obvious choice as all sorts of tax breaks and regional development funds were set up which benefited me and helped me grow the company.

 

And at a basic 'beauty contest' level, it was a no-brainer to go with the respectable establishment over the rabid unions and Greenham Common tree huggers. I remember working through three day weeks and power cuts (my office was on the 7th floor - so 1973 was the only year I was anything NEAR fit), bins overflowing in the streets and the real threat of complete anarchy following Callaghan's Labour Government. Even in 1979 it was a brave man who admitted to being a Tory, which I always thought strange as she'd been elected by a clear majority of the population. But labels have never meant much to me - so during the Miner's Strike I did the sound for a band that was doing gigs to feed the poorest families, and never saw a dichotomy in that.

 

Of course, had The Final Cut been released a few years earlier, I might have been better informed. Roger Waters may be a champagne socialist, but he makes a good point about international diplomacy and domestic affairs...

[spermann]

if the share price has dropped so much why doesn't the government buy in and split off Manx Gas and nationalise it to get it out of the grip of the profit-takers ?

 

what makes you think that the Government can buy into a company? Manx Gas should not be embarrised to make a profit, which is probably why they have let the OFT see their books.

 

the Government needs to look at helping those on low incomes who cannot afford the current energy prices (gas, coal, oil and electricity), rather than spending further tax payers money on another OFT report only to find... surprise surprise Manx Gas have made a profit - which their directors are legally obliged to do!

[oldmanxfella]

soverign wealth funds are one of the big financial stories of the moment. But again these have to be put in context - the big Pension and insurance schemes AXA, Norwich Union are of comparable size to China's wealth fund.

 

The Economist confirms that China's Investment Corporation was set up in 2007 with $200bn (£100bn) of cede capital paid out of China's foreign currency reserves of US$1.53 trillion (the biggest reserves in the world). That money is totally surplus funds built up by the Chinese Government and they are not used for any other purpose other than creating long term growth that will be fed back into the Chinese economy decades from now. Its free money that can be invested in any way they want.

 

In contrast Norwich Union (well Aviva) did have assets under management of £367bn last year but most of these assets are owned by its insurance busines, private investors or pension fund trustees - its not surplus money that can be used to achieve strategic goals as its not strictly Aviva's money because they will have all sorts of liabilities and promises to investors backed by the assets it holds. CIC is accountable only to China’s State Council so their market influence is that much greater than Aviva's because they do not have to manage the money to back liabilities they have, or in line with manadates handed to them by their investers (Avivas UK growth fund can of course only invest into UK equities, its US fund only into US equities etc). So you are talking about two completely different things.

[P.K.]

The Economist confirms that China's Investment Corporation was set up in 2007 with $200bn (£100bn) of cede capital paid out of China's foreign currency reserves of US$1.53 trillion (the biggest reserves in the world). That money is totally surplus funds built up by the Chinese Government and they are not used for any other purpose other than creating long term growth that will be fed back into the Chinese economy decades from now. Its free money that can be invested in any way they want.

Those are sort-of the numbers I understood as well. Interestingly this makes the Chinese keen to support the US economy. The thing I don't like though is China's up and coming superpower status. Currently the world's largest navy is Chinese - now why would that be?

 

Mr Stu - there is no doubt that the miners brought down Ted Heath so something had to be done. Thatcher causes the Falklands War and then revels in the victory - so don't anyone EVER accuse Labour again of spin as Thatcher built her political life on the unneccesary loss of life in the South Atlantic. She was also the first British Prime Minister to hold on to power purely for the sake of it so those who didn't vote for her could go hang. So she had no qualms whatsoever about destroying the mining industry (that brought down her predecessor) out of sheer spite. The social cost was huge - but she just didn't give a toss about that. They were never going to vote for her so fuck'em was the philosophy.

 

Something had to be done, no question, but what she did was disgraceful. Bitch.

[Frances]

Currently the world's largest navy is Chinese - now why would that be?

same reason as the Brits created theirs - they are dependent on foriegn imported raw material

 

Agree with your comments re Thatcher - you can see the type she spawned in her son Mark

[manshimajin]

Thatcher causes the Falklands War and then revels in the victory - so don't anyone EVER accuse Labour again of spin as Thatcher built her political life on the unneccesary loss of life in the South Atlantic.

 

Something had to be done, no question, but what she did was disgraceful. Bitch.

 

Spot on PK. If she hadn't been so hell bent on cutting Defence spending and withdrawing the Royal Navy from the Falklands Galtieri and his junta mob would never have invaded. So many young lives both British and Argentinian lost on a futile adventure.

 

And after the war what did she do? emasculate the RN further....

 

"Rejoice..."

 

PS: I am not sure what this has to do with Babcock and Brown being up shit creek but the Forum is wonderful in its ability to deviate from the topic.

[Gladys]

The Thatcher years were unbelievably 'let them eat cake' with the main result of condemning communities, whether in the geographic or industry sector sense, to a slow and painful demise, very many of which are only now finding their feet again. But, her most invidious legacy was to legitimise and praise greed without social responsibility.

 

Even in the Victorian industrial era there were many industrialists who took a responsible, even paternalistic, attitude towards the means with which they generated their wealth. May not be truly altruistic and may even be considered non-pc, but the net effect was that with Maggie there was no such responsiblity; in fact, it was consciously rejected.

 

She sowed the seeds for the current economic climate; she privatised all the utilities, how sensible was it to give up to private hands, often on the other side of the globe, your country's means of powering itself? The credo was that government shouldn't be doing what should more effectively be done by the private sector. No, government should ensure that it controls the means for the nation to power itself, should ensure that only one imperative controls energy and that is the wealth and well-being of itself and should also ensure that it maintains its nation's bargaining position in the global market. Now, we see the reverberations.

 

Sure, very many people made a killing in privatisations, (quite alot of 'Grannies' took their couple of hundred, even thousand, quid and thought they had hit the jackpot, but are now paying the price) but, in the long term, it would have been so much better if these industries had been kept in public ownership; rationalised and made more efficient, definitely, but still they are 'lifeblood' supplies which should neve have fallen into private ownership.

 

So many people were saying it at the time, but only now you can really understand why.

[triskelion]

"Rationalised and made more efficient?" By who? Labour promised in their 1945 election manifesto that they would do that, indeed they believed the state could improve everything that way, yet forty years later the problems remain. Indeed, during the 3 day week days in the 1970s, British productivity barely dropped, which goes to show how poorly it was doing by that stage.

 

Unfortunately, your assertions that Thatcher should have maintained mining communities AND improved British power generation are largely incompatible. The small and often uneconomic pits over which there was been so much controversy represented a failing industry. Thatcher would have had to provide public subsidy AND pay more for the coal than she would if she imported it from South Africa. Lots of industries have failed over the years (shipping, ship building, weaving etc etc etc) but you can't just keep throwing money at them. Communities have to adapt.

 

Also, you claim that modern industrialists have no concern for the well-being of their workers or the people of their localities, but these days companies are owned by proxy (ie shareholders) rather than local boys-come-good, so where is that local connection? Companies could start doing this now probably, but then margins would suffer so prices would go up, perhaps reversing somewhat any social benefits. Since there is 'no longer' this altruistic sentiment, why does it matter who owns Britain's energy generation capacity? They can't exactly pack up their power stations and leave. And why would they? Britain is an excellent market and one of the World's top economies.

[Chinahand]

soverign wealth funds are one of the big financial stories of the moment. But again these have to be put in context - the big Pension and insurance schemes AXA, Norwich Union are of comparable size to China's wealth fund.

 

The Economist confirms that China's Investment Corporation was set up in 2007 with $200bn (£100bn) of cede capital paid out of China's foreign currency reserves of US$1.53 trillion (the biggest reserves in the world). That money is totally surplus funds built up by the Chinese Government and they are not used for any other purpose other than creating long term growth that will be fed back into the Chinese economy decades from now. Its free money that can be invested in any way they want.

 

 

I think you've got to be careful saying that China can do what it wants with its FX reserves - and I would really be very very careful in saying these are an example of Chinese power - quite the opposite; they have been forced to build up FX reserves due to their exchange rate policy which damages their internal economy while helping exporters.

 

Rather than having money to invest internally they are forced to hold huge FX reserves mainly in very low yielding financial assets. Assets which they can't sell off in mass without destroying the very thing they are trying to maintain - a low valued currency.

 

It most definitely is NOT free money and cannot be invested any way they want - selling these assets will effect China's exchange rate - something China is very louth to do.

[P.K.]

"Rationalised and made more efficient?" By who?

Well, I have worked in both the public and private sector. I can assure you that one of the enormous failings of the public sector is the way it never rewards effort. So basically it's not worth busting your balls because you will meet resistance all the way. So the mindset is just to jog along in complete security until retirement. Why else do you think government IT projects are always a shambles? Change has to come from within but I don't see it happening somehow.

 

However as concerns the miners don't forget that a great deal of North Sea oil revenues were squandered on social security payments to the unemployed. But the fact remains that Thatcher destroyed the mining industry for reasons other than economic ones. DID EVERYONE GET THAT? She also made a virtue out of greed. And sucking up to murderous dictator Pinochet said it all really. I hope she rots in hell.