Zippity doo-dah,Zippity Yayy - Friday's looking like a very good day ...

The Wall Street Journal today reports that " citing unnamed people familiar with the matter", Freddie Mac is "considering" selling up to US $10 billion in new shares to investors. One of their potential new investors over at Market Watch makes the wonderful pithy point , which raises the level of internet drollery to a new and higher level of informed financial comment.

CEsqy ..
"The invisible hand of the market slowly put its greedy fingers into the short stubby appendages of the latex glove and whispered to the Fed Chairman, "Its your turn today Ben."

The Market Watch library of his shots reveals (186 and counting) yet more compressed wisdom and cheer.

"The stock market, like housing, always goes up, till it don't."

"Rate's are going up, no matter what convoluted form the GSE bailout takes. Foreigners who support our addiction to credit realize they have the opium we don't have....American dollars. "

"President Bush was looking for weapons of mass destruction in Iraq, but all he had to do was take a stroll down Wall Street and open his eyes to see the true Apocalypse. "

"WaMu and Wachovia are highly leveraged with toxic loans. Do your own diligence" ***

Have a good day, won't you all.

Chuck Saletta at Motley Fool has the best take on the Hank'n'Ben" End of the pier World Show. Graph (and much more here)

***Washington Mutual (WM) Wachovia (WB) curiously missing from SEC's list of firms stopped from shorting. Thrown to the Dogs asks Mish ?

For good measure "When will people learn that you can’t legislate (for) honesty?"asks Roger Schlesinger at the TownHall ,"Stop Me If You've Heard This One Before "

St. Petersburg - Energetic discussions by the movers and shakers

Roman Abramovich bought the yacht Pelorus (10th largest in world) from Sheikh Modhassan of Saudi Arabia (bro to Saudi Arabia’s King Fahd) for US$129 million, and merely servicing it costs him US$12 million annually. There are 22 cabins decorated in a vulgar "vintage style" with antique wooden floors, all the interior design was handed to Terence Disdale . A crew of 40, is fairly safe behind bulletproof glass, missile detection systems, and look after an indoor pool, a steam room, two helicopter pads, and a minisub, as well as special lights to ward off paparazzi.

Roman tells us he is a generous boss and In 2005 he lent Pelorus to Frank Lampard and John Terry for two weeks as a bonus for being the two best players at Chelsea F.C. After John Terry married his fiancee Toni Poole at Blenheim Palace on 15 June last year, they had a two week honeymoon on Pelorus in the Mediterranean. (after his performance in St Petersburg against MU (the best footie tem in the world) he will probably next see service on Pelorus as an anchor

It is not Roman's biggest yacht. He also owns Ecstasea (rumoured to be is crewed by a crack team of ex SAS servicemen ), and he also gave away Le Grand Bleu to his friend Eugene Shvidler. Eugene 42, is Russian but has he worked for Deloitte & Touche in New York and became a U.S. citizen. He later returned to Russia, where he teamed up with Roman Abramovich to start the oil trading outfit Runicom S.A. he is now chairman of Millhouse, LLC, the investment and asset management company he shares with Abramovich and their various partners.

An interesting lady who makes an intersting contribution to Millhouse is Ms. Olga Pokrovskaya who joined Millhouse LLC as head of corporate finance in July 2006. She previously held several key finance positions in Sibneft since 1997, including serving as head of corporate finance since 2004. From 1991 until 1997, she worked as a senior audit manager at (now defunct) accountancy Arthur Andersen. Moscow born Ms. Pokrovskaya is also on the board of Evraz alongside Mr Shvilder and some other interesting people. In January this year she joined the Highland Gold Board of Directors alongside Mr Shvilder, Millhouse have a 40% interest and their 2007 results are showing a welcome , if modest profit.

When she joined Sibneft , President Eugene Shvidler said, “Her track record in ensuring Sibneft’s high level of financial transparency will provide reassurance to banks and investors.”

Evraz Group’s principal assets include three of Russia’s leading steel plants, Nizhny Tagil (NTMK) in the Urals region and West Siberian (Zapsib) and Novokuznetsk (NKMK) in Siberia. The Company also owns Palini e Bertoli in Italy, Evraz Vitkovice Steel in the Czech Republic, and Evraz Oregon Steel Mills and Claymont Steel in the United States.

The Economic forum will have 1,200 participants and cover many topics.. one of especial interest was yesterday ..‘ENERGY - GLOBAL PLAYERS AND ARBITERS. (INTERDEPENDENCE, PARTNERSHIP, COMPETITION)' (Supported by OAO Gazprom) This was a discussion with this truly stunning list of participants...

Discussion featuring: (comments up to 5 minutes):
1) Alexei Miller, Deputy Chairman of the Board of Directors, Chairman of Gazprom's Management Committee;
2) Tony Hayward, Group Chief Executive, BP (whose Russki pals are causing even more problems at TNK-BP whose capital is divided equally between British oil major BP and three Russian billionaires owning the Alfa-Access-Renova consortium -- Viktor Vekselberg, Mikhail Fridman and Len Blavatnik this gangster gang of 3 have demanded the removal of CEO brit Robert Dudley, claiming he is running the company exclusively in the interests of the British shareholders.)
3) Vagit Alekperov, President, LUKOIL (Just announced today the deal for West Qurna field with Iraq he has been chasing he tells us for 5 years)
4) Jeroen van der Veer, Chief Executive Royal Dutch Shell
5) Daniel Yergin, Chairman, Cambridge Energy Research Associates
6) Andrew Gould, Chairman and CEO, Sсhlumberger
7) Andrew N. Liveris, Chairman and CEO of The Dow Chemical Company (who have justy shoved all their prices up , many by a whopping 20%)
8) David O'Reilly, Сhairman and CEO, Chevron Corp.
9) Rex W. Tillerson, Chairman and CEO of Exxon Mobil Corporation
10) James J. Mulva, President and CEO of ConocoPhillips
11) Thierry Desmarest, Chairman Total

Jeroen van der Veer gave us a call and suggested we listen to his podcast which is of his talk at Princeton in March to the spooky Council on Foreign Relations (download here) on the subject "Energy Scenarios to 2050: Implications for U.S. Energy Security " (if problems on download go here to Princeton site with link.)

Northern Wreck to be nationalised - but B & B offers quick buck to be made

A Nationalisation bill for Northern Rock was agreed with the Conservative Party (NOT WITH VINCE CABLE IT SEEMS) Week Ending December 1st, to put Northern Wreck plc into public ownership - and to rush it through in one day before Christmas.

The Government wanted interested parties to submit final deals by the end of the week. Parliament went into recess on December 17 and returned on January 7.

The reason for this was 3 fold.

1. It gave the Gubment room for negotiations in dealings with Branson et al.
2. It put the bidders on notice that the Gubment meant bizniz
3. It pulled the rug out from under Vince Cable the only person to talk sense about Northern Wreck.

They now realise Vince's point that nationalisation is the "least worst solution" and have simply run out of road and with the budget looming on March 12th they want the whole thing buried before then.

Swift Bill rushed through - end of story. Draw a line, Move on... nothing to see here.... and all the gory details will be concealed from public gaze.

Hopwever here is something worth pondering

Bradford and Bingley share price has been sinking fast all year. 44% down over 6 months and a massive drop on last week of 27% to 176 p = Market Cap just over £1 Bn. Last weeks fall due to "Preliminary" results (i.e unaudited so beware) on Wednesday for Y/E 31st Dec.

Total dividend per share up 5% to 21.0p (2006: 20.0p)
Tier 1 capital ratio 8.6%, total capital ratio 15.1% (2006: 7.6%, 13.2%)
Residential lending balances up 27% to £39.4bn (2006: £31.1bn)
Savings balances up 7% to £21.0bn (2006: £19.7bn)
Group net interest margin 1.10% (2006: 1.19%)
Underlying cost:income ratio improved to 42.8% (2006: 44.2%)*
Underlying profit before tax up 5% to £351.6m (2006: £335.9m)*
Statutory profit before tax £126.0m (2006: £246.7m)*
Total customer deposits funded 60% of customer loans (2006: 61%)

Which is all very, very good news excpet the profit but then they have written off losses on sale of commercial and housing association portfolios of £58.0m, treasury asset "impairment" of £94.4m, hedge ineffectiveness of £23.5m and other fair value movements on treasury instruments of £49.7m.

Underlying costs increased by 3% to £280.2m (2006: £271.6m), improving the underlying cost:income ratio to 42.8% (2006: 44.2%) so no worries there of runaway costs.

The total number of cases three months or more in arrears and in possession has increased to 6,170 (2006: 4,337), equating to 1.63% (2006: 1.30%) of the total book. No real problems there although not ideal.

An improvement in loan-to-value across our whole residential lending portfolio adjusted for house price inflation is 55% (2006: 53%) providing a good level of equity.

Then the very good news ..

We grew the Group’s total assets by 15% to £52.0bn (2006: £45.4bn). This growth was due to a 27% increase in residential lending balances to £39.4bn (2006: £31.1bn) driven by record gross residential mortgage advances, up 36% at £14.0bn (2006: £10.3bn). Of this total, £9.7bn (2006: £7.7bn) was originated through intermediaries and direct channels, and £4.3bn (2006: £2.5bn) was purchased from GMAC-RFC and Kensington Mortgages. Our estimated share of net new lending in the UK mortgage market was 7.7%, more than double our share of outstanding balances of 3.3%.

Now remember the Market cap is £1 Bn. For this you get £50 odd Billion of assets and Total customer deposits £24 Billion which is funding 60% of customer loans.

The real worry is the asset mix ;
Buy-to-Let 45% (down from 40% so moving in the right direction)

Self-certified mortgages 16 %

Other residential ( ie traditional owner ocupier) 15%

Commercial and housing association 2% (down from 11%)

Wholesale / Other 22%

That Buy to Let looks unhealthy and if the market turns down current wisdom is that this will be hit first. But. But with increasing immigration and changing lifestyles renting is growing and demand is rising, not slowing, so perhaps this is even a plus.

All in all the shares (yielding 11.9% PE 6.25 !) look a good buy first thing in the morning. ... and if Lord Patel is not the only one working this one out then they could jump over £2.00 early doors giving an instant 10-12 % capital gain.

And of course if the bidders for Northern Wreck ( or anyone else) , now thwarted, have been running their ruler over B & B (which they most certainly have) and decide to make a bid ....?

Mortgage fraud, "A Northern Wreck / Halifax mortgage your "Flexible" friend

The Financial Times headline today (9/2/08) spotlights mortgage fraud. Which may be related to what Lord Patel discovered in a conversation with a long standing Asian Financial Wizard and friend at the gym.

In Jan - June 2007, 60% of his business was arranging mortgages with (mainly) Asian self employed businesmen mortgaging property with Northern Rock.

It worked like this. Mr Q is a prosperous self employed businessman and seeks capital to expand. Northern Rock intoduced a new principal and wizard wheeze for their mortgages to help such cash strapped souls, build business and pay handy fees to sales staff and agents and fund the bonuses of main board Directors whose salary and bonus was based on sales growth.

It also explains why sales increased in the first 6 months of 2007 and profits only rose 1%. (That they could fund and pay a rise in the divvy of 33% is another story) Note that the first starred feature of their Interim results on July 26th said ...

Record H1 gross lending of £19.3 billion - an increase of 30.5%, with record H1 net lending of £10.7 billion - an increase of 47.3%

and somewhat lower down and hidden away..

Statutory profit attributable to equity shareholders of £188.2 million, up by 0.2%

Hmmmmm. ?????? net lending up 47% and only a 0.2% increase in profits how so ?????

Mr Q has a house let us say with a valuation £800,000. He takes out a mortgage of say 75% , say £600,000, ( loans were not really considered below the magic £1/2 Mn.) A loan was arranged for £600K, based on self declared earnings.

As soon as the mortgage is provided it is immediately paid back less £1. This leaves Mr. Q with a facility of £600K which he can call down and a mortgage with a balance of £1 to pay. Mr Q has £599,999 available in total or part at any time by making a phone call and receiving funds in 3 working days.

My friend gets 0.85% for arranging what he describes, is, for his extensive clientele a "no brainer". Luvvly jubbly, trebles all round.

Any such loans of course fly right under the radar when audited - loans which exceed asset backing, or payment arrears. (e.g Northern Wreck Interim results - Credit quality remains robust. 0.47% of mortgage accounts 3 months or more in arrears (31 December 2006 - 0.42%) - around half of industry average )

Of course the first tricky bit is how all this (and my friend was handling £1 -2 Mn mortgages / loans a week) you deal with this on the balance sheet at Northern Rock.

The second tricky bit is how you find the funds, when ,let us say, every mortgagee decides to take up his "loan". This is why Old Adam Applegarth went to see the Bank of England on August 7/8/9 th ( less than 3 weeks after the half year results and issueing a 33% increased divvy!) asking for £30 Bn. as Lord King explained in his BBC4 Radio interview. The queues formed in the street when the , what we bankers call an , "empty till situation" arose and the word spread very, very, very quickly in the Geordie homeland of NR.

The third tricky bit is when someone discovers that these properties might possibly be slightly overvalued (or might not even exist) and the self declared income is probably somewhat lower than the mortgagee had anticipated.

The fourth tricky bit is when Mr Q disappears - or quelle horreur, doesn't seem to exist.

All this might explain why Mr Curran at Northern Wreck had such a bad headache it kept him off work until he decided (with some encouragement) to leave the company. It might also explain why there is so little enthusiasm by major players in resurrecting NR and why Mr O and his plas have politely withdrawn there declarations of interest.

However the gravy train rolls on, not quite at the same speed, with the same intensity (NR was writing 20% of all UK mortgages in the first 6 months of 2007) at the Halifax Bank with their Flexible Mortgage tailored to meet your "special" needs. Halifax are part of HBOS whose year end results are awaited. Shareholders are advised to bail out without delay. NOW..Pronto

Incidentally NR produced accounts in 26 days at the Interims .. it's February 9th and no sign of them .. the wel established rule that it takes a very, very long time to produce bad, very bad results.

Perhaps there is a clue in that the National Statistical Office maintains that the whole NR debacle should appear as a £100Bn. (ouch!!!) item on the Current borrowing requirement... somehwat slightly in excess of all the other magical figures previously published.

Curiously this note is added to their decision... just what does this mean ?

This decision also required ONS to examine the structures and arrangements used in Northern Rock plc’s borrowing programme, which involves securitisation of mortgage assets. The ONS judgement here is to also classify to the public sector the UK-resident special purpose vehicles used in the securitisation programme.

The ONS said its reclassification of Northern Rock was backdated to October 9 last year, when the Bank of England's support arrangements for the bank were amended to accept all of its assets as collaterol, including unsecured loans.

Mile End rail Crash - RAIB report published.

The Rail Accident Investigation Branch (RAIB) have published their Derailment of a London Underground Central Line train near Mile End station 5th July 2007

At 09:01 hrs on 5 July 2007 westbound Central Line train 117 struck a roll of fire resistant material lying on the track in the tunnel between Mile End and Bethnal Green tube stations nd Network. In consequence three bogies were derailed. Thetrain operator applied the emergency brake and the train stopped after approximately148 m (468 ft).

Twenty passengers received medical treatment one had a broken ankle. Five hundred and twenty people were evacuated along the running tunnels to Mile End station from the incident train.

The cause of the accident was the dislodging of a fire resistant blanket which had migrated by wind onto the track - 7 similiar incidents of stored materials had ocurred in the 2006/7 where stored materials hit trains....storage bins, bin lids, plastic bucket and water butt and plywood sheets apparently dislodged by wind movements. These had been the cause of criticim by Bob Crowe and the RMT before the Mile End crash when reservations had been expressed about trackside management.

Tests by Metronet show that a force of a force of approximately 64 kg could be generated by a wind speed of 60 mph (96 km/h).(Mile End Station, Cross Passage Air Velocity. Issued by 4-Rail Services LtdReport No: 4RS-AJB-070449-R174401)

Paradoxically the fire blanket had been used (quite needlessly and not very safely ) to cover paper sacks of Tecroc fast setting cement, because, post King's Cross paper was seen as a fire hazard. The RAIB says , "The underlying cause was the lack of a comprehensive risk analysis being performed to support the use of fire-resistant blankets. "

RMT general secretary Bob Crow said at the time, that it was the fourth incident in 18 months in the same area where private contractors were operating.He said, “This union has raised concerns over the bad storage of equipment by contractors in this area and wrote to London Underground back in April demanding an investigation, yet nothing has been done.

Since the accident, Metronet has gone into administration and everyone involved is sat round scratching their heads wondering how they move forward on the massive £13 Bn. regeneration of the Underground's infrastructure... much of it vital for pnning for the 2012 Olympics ...and who is going to pay for it.

Bob Crowe responded to the House of Commons' Transport Select Committee's report last week on the Metronet collapse..." "Metronet's shareholders have stuck two fingers up at the people of London, and it is time to return the compliment. If any of them stands in the way of transferring the Metronet contracts back to the public sector they should be told to get on their bikes."

Commons Metronet Fiasco report due as PFI funding is threatened as Monoline Insurers of PFI Bonds struggle for credibility and new credit lines

The House of Commons’ Transport Select Committee chaired by vinegar faced Gwyneth Dunwoody (see pic - details below) publishes their report into the London Underground and its Public-Private Partnership Agreements tommorow.

High powered, highly paid consultants at PricewaterhouseCoopers (PWC) (£21.4 Mn.as lead Financial advisors and with a large PFI practice of 132 projects across the UK, ) Ernst & Young (£1 Mn.) , and KPMG (£2.4 Mn. ) were paid over £25m for advising on this wonderful deal which has collapsed leaving the tax / London rate payer with an embarassingly large bill to pay to simply keep the Underground working.

That of course was only a small part of the total fees of £445 Mn in fees the The Public Accounts Committee found had been paid to put the 30 year project together : more than the equity put in by Metronet's shareholders -"world-class companies"; Thames Water, Balfour Beatty, French electricity supplier EDF (employees of Pm's bro.), Canadian train maker Bombardier and engineers WS Atkins.

Metronet had responsibility for renewing nine of the twelve lines on the entire London Underground network and were projected to spend £17 billion during its 30-year contract - of which £7 Bn. would be spenty in the first 7.5 years.

Ernst & Young got two bites at the cherry because they are now handling the administration which Alan Bloom of E&Y admitted to the Committee in November was costing £13m a day to run - not including work that Metronet is still contracted to carry out - meaning more costs for prospective new owners Transport for London - who had guaranteed 95% of the £2bn debt the five-member Metronet consortium took out which carry commercial interest rates and can be called in by the banks in 6 months. Loans from the European Investment Bank that are paying for infrastructure investment in the London Underground are insured with Monoline insurer Ambac (see below).

Bloom ( who guided Railtrack back into public hands) also refused to disclose information relating to the value that had been put on the ailing company by advisers Rothschild. 'It's very confidential, he said.


Train Naming ceremony: (From left) MD of London Underground Tim O'Toole, Managing Director of GB Railfreight, John Smith and Metronet Chief Executive Andrew Lezala with Gwyneth Dunwwody MP at the naming of Metronet's Class 66 engineering locomotives

Gwyneth Dunwoody, named by Gwyneth Dunwoody, Chair of the Parliamentary Transport Committee.
METRO-LAND, named by Tim O'Toole
Metronet Pathfinder, named by Sam Ellis, a 27-year-old project engineer who entered Metronet through its graduate scheme
Harry Beck, named by John Smith, MD of GB Railfreight honouring the designer of the modern tube map.
Sir Edward Watkin, chosen by David Jukes, winner of a competition run by RAIL magazine. Sir Edward was the pioneering chairman of the Metropolitan Railway

PS : Historically, funding for PFI came from bank debt, but bonds have proved an attractive form of long term financing. Bonds require an international rating. To secure a good rating and lower the cost of funding, companies buy insurance for their bond issues from Monolines. Monoline insurers in the UK are US owned AMBAC UK and MBIA - for example a £30m bond issue by the Royal Bank of Canada Financial Group, for the Greenwich University PFI in 2004 .

They were at it again jut before Christmas ... NEW YORK, December 20, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) announced today that Ambac Assurance UK Limited recently provided a triple-A credit enhancement for the financing (£146.4 million) of new and updated roads in Northern Ireland. This financing was completed as part of the Government's ongoing Private Finance Initiative (PFI) investment in the provision (of) transport services.

NEW YORK, December 6, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) said today that Ambac Assurance UK Limited recently provided a triple-A credit enhancement for a major U.K. hospital financing (£192.65 million ) completed as part of the British Government's ongoing Private Finance Initiative (PFI) investment in the provision of health care services. Mid Essex Hospital Services NHS Trust (“the Trust”) procured the scheme for a new 5-storey hospital and a multi-storey car park. The hospital is situated approximately 40 miles to the north east of London.

NEW YORK, November 26, 2007-- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) said today that Ambac Assurance UK Limited recently provided triple-A credit enhancement to two major U.K. hospital financings completed as part of the British government's ongoing Private Finance Initiative ("PFI") investment in the provision of health care services.

The two bond issues by Consort Healthcare in September 2007 were for GBP 122 million (Salford Hospital) and GBP 78m (Tameside Hospital).

"These monoline insurers, the biggest of which are MBIA and Ambac, are hanging on to their crucial triple-A credit ratings by a thread. " Financial Times today

"US insurance bonds meltdown bad news for UK" James Doran in New York, Evening Standard today.

"Massachussets Regulator Subpoenas Bond Insurers MBIA, Ambac" Reuters Today

Northern Rock Directors abuse Down's Syndrome children

Richard Murphy writes again about the abuse of North East Down's Syndrome children by the Directors of Northern Rock plc.

The charity’s trustees have issued a statement:

In connection with the current problems of Northern Rock, we would like to assure our members and supporters that Down’s Syndrome North East (DSNE) has not been knowingly involved in any misuse of money. We are investigating why our charity appears to have been named as a beneficiary of a Trust without our consent. We have definitely not received any money from Northern Rock or affiliated companies, except for a one-off donation from a staff collection in 2001. Currently we have not received notification that any funds are being raised or collected by Northern Rock or affiliated companies on our behalf.

Richard points out that this is a species of identity theft and that the construction of these Special Purpose Vehicles, whether on or off balance sheet (and he point out - every bank uses them) is a based on a fraudulent misrepresentation.

The Trust is said to represent a registered charity 1096003, in this case DSNE , who were blissfully unaware of this "Granite" arrangement, failure to advise them was considered, it was deliberate, and it was done in the name of the Directors of the company and without this deceit , fundamental to the whole whole scheme it would founder.

As he explains - The fraud is simple. It is claimed that an SPV is not owned by the company that creates it - due to the preposterious claim that this untrue - a fraud. "These entities are mechanisms for issuing debt of the creator company, and nothing else. That means that they are a legal fabrication of no real substance that depend upon the fiction of having charitable ownership and intent ..."

"The centre cannot hold, things fall apart " ... Bear Stearns before the New York Bankruptcy Court and Judge Lifland discovered that their 2 bankrupt Hedge Funds Bear Stearns High- Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd., 07-12384, and its sister Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., 07-12383 could not seek protection U.S. lawsuits because Judge Lifland said .."The only adhesive connection with the Cayman Islands that the funds have is the fact that they are registered there,'' ... "There are no employees or managers in the Cayman Islands, " he added in his written judgement," the investment manager for the funds is located in New York, the administrator that runs the back-office operations of the funds is in the United States along with the funds' books and records, and prior to the commencement of the foreign proceeding, all of the funds' liquid assets were located in the United States.''

Richard goes on to say that "the City is a persistent party to this deception". ..... hence the anxiety now as Northern Rock is falling apart.

The consequences of this gigantic fraud are too, too awesome to consider.

The Great Pensions swindle - How Actuaries calculated the loot - and Directors carried it off

Life insurance surfaced as a business at the end of the eighteenth century. It's popularity was based upon the then fashionable hobby of European Monarchs with declining fortunes and rapacious mistresses to promote Royal Lotteries. It was a business described by Ambrose Bierce in his Devil's Dictionary as

" An ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who runs the table"

That there was an equivalence in the public mind between Lotteris and Insurance was of the class of simple mathematical delusions such as the European Emissions Trading scheme and Carbon Credits.

Lotteries are based upon a fixed basis - the odds are transparent and calculable if miniscule. The first companies claimed that the forecasting of human longevity could be calculated on much the same principles.

A Unitarian MinisterThomas Bayes led a quiet but busy life attempting to follow the first attempts to determine a way of calculating probability and in a sense it's twin - randomness. Laplace had determined what he called inverse probability - from which Bayes developed a calculus that entitles the user to assign a defineable numerical value to the credibility of our judgements about antecedent eventson the basis of past (and present) observations.

His thoughts were posthumously published in a memoir to the Royal Society in 1763 taken from a scholium found amongst his papers.

This was communicated by another Unitarian Minister. Dr. Price. Dr. Pprice was the first actuary of the Equitable - whose blue blooded members made the most massive losses of any such funds in the last ten years.

It is said that actuaries are people who find acountancy too exciting. Their role and function is decribed by the American Society of Actuaries at their website

An actuary is a business professional who analyzes the financial consequences of risk. Actuaries use mathematics, statistics and financial theory to study uncertain future events, especially those of concern to insurance and pension programs. ......

Their work requires a combination of strong analytical skills, business knowledge and understanding of human behavior to design and manage programs that control risk.

This really is pious bollocks - their motto says more - and well may they trade mark it. Risk is opportunity.

Here is a true tale of a Pilgrim who struggled in the Slough of Actuaries in the City of London and discovered what a lying bunch of fucks they are.

A graduate of Oxford, a skilled, lauded mathematician was successful in obtaining a post- graduate position at one of the major and renowned City of London Actuaries whose name is known and revered and respected.

Companies who have pension schemes have to regularly demonstrate that the funds in the scheme cover the calculated and accruing liabilities of the members. The members will vary with new staff, new mensioners, deaths of pensioners etc., which with income in the period is a relatively simple task to perform, but laborious.

This - (I speak 13/14 years ago) did not benefit greatly from use of desk top PC's , spreadsheets and was undertaken in a mechanical fashion on paper as inherited from it's earliest exponents. The "Partners" really did not take to these new fangles computer thingy's.

The next stage was to calculate the liabilities on the fund, current members in benefit, members who would qualify before the next review etc., and further calculations over different time horizons.

To do this there are essentially 3 variables to determine

1) Members in benefit and their benefits
2) Forecasts of income required as members retired and drew benefit which involved determining length of life expectation - which relied heavily on the Bayesian assumptions - which were as good as the past (and present) observations.(Life tables)
3) Income from funds invested, which may be in a variety of froms, land, agricultural holdings, shares, bonds etc.,

As a back office toiler our eager entrant would prepare these calculations which were essentially simple and iterative and were a grade of high level clerking. The final result would a be a report to present to the Board of the company involved stating what funds were required to maintain it's liquidity.

This would be borne (at considerable cost the Board of the Company) to their Directors who would look at it and say -- "aaah £120 Mn, that seems rather a lot Jonathan (or Torquil, or Robin) the Board think it should be along the lines of ... what shall we say ... £50Mn .. we realise of course this will require extra work, and costs, but of course ... anyway perhaps you will be joining us at Ascot next week and will have it done by then."

Our tyro would then have to recast the figures , the liabilities were essentially (unless a mistake was made) were fixed, it depended upon the income... Perhaps if we look at the rise in the value of agricultural land - the return on equities .... the partner might suggest .... and tap a port red rich nose.

A report would be prepared and presented and passed.

Which allowed the company to declare profits boosted by the sums (sometimes it was zero)not paid into the pensions, the shares rose, the Directors share options would be happily timed(and coincidentally) to ride the crest of the wave ... until next year. On a constantly rising equities market everyone was happy.

Our toiling calculatrix got fed up and suggested that it would save him a great deal of time, energy and frustration if they just asked the board what they wanted to pay and prepare a report accordingly. How could they arrive at such fundamentally unsound and variable assumptions between clients all investing in the same market - he enquired. If Company X expected equities to return 6.2 % why did Company Y expect a 9% return ?

Torquil (or Robin or Jasper) called in our graduate and explained that really he didn't think he fitted in there, he didn't really seem to understand the service the company offered. He explained that he understoon only too well what the service was - spurious valuations of pension funds and their liabilities.

Torquil (or Robin or Jasper) suggested that the company could offer him 3 months salary if he would sign a non - disclosure agreement and leave instantly. He hung on for 6 months pay. Got it. .. and left. He now holds a global position with a US$54Mn pharmaceutical company.

Essentially in the early 90's two frauds were perpetrated by Actuaries - one they persisted in using out of date (and known to be out of date) life tables. It was claimed this was an aid to "consistency" - indeed it was .... consistently wrong. People were simply living healthier and longer so the demands on the funds had a more extensive life that they were calculating. This REDUCED the expected liabilities, now and over time.

To augment this basic fallacy the gradual growth in the numbers of women in senior positions which again distorted longevity assumptions.

Improvident and unproveable assumptions were made about returns on funds, which as the income was repeatedly cut, inadequate cover for incorrectly calculated labilities grew exponentially until the shortfalls in funding were exposed when reality kicked in and the dot.com bubble simultaneously popped.

New life tables were introduced and greater honesty was to be found, regulations was improved, irate, well fed educated judges , barristers ansd stocbrokers in Equitable exposed the huge under fundings , which "emerged" - - a grammatical inexactitude - they were always there, artfully concealed in the confidential Actuarial reports which were limited in circulation to the Trustees of the Fund (s) who would keep bumping into each other at Boodle's, Ascot, Wimbledon, the Masters' Gaudy Night at Christ Church kept the secrets well hidden in a jumble of figures and false assmptions.

So when the Chancellor made his raid on the pension funds in 1997 it was difficult to see or hear any cries from the leaders of the FTSE 100 companies (check) . They had been raiding them for long enough - there is after all, Honour among thieves.

The accumulated underfunding on pension funds was at one time calculated in the 10's of Billions 60/70/80/90 Billion, who knows ? Gordon's £4Mn a year by removing tax relief is hardly , as they say in the curious world of Accountancy practised in the City - Material.

(Un)Clean Development Mechanisms, Carbon Offsets,.. and the City money jugglers

Lord Patel remembers Ginny Buckley in the late 70's as an 8 year old gap-toothed chatterbox - transformed now into a slim svelte, 42 year old Mum who fronted an asinine quasi travel/Money /Green program on BBC2 Wednesday, 24 January 2007 at 21:00 GMT on BBC Two. - Should I Really Give Up Flying? about the current "debate" about the contribution of jetliners and their cargoes of thoughless and hedonistic holidaymakers.

This program consisted of vacuous stilted scripted conversation between the voluptuous Ginny in skin tight black jeans, revealing shirtwaister and some neat tricks with a scarf, moodily shot (Paris. Texas - asif ?) on some downtown rail tracks or in St Marks Square with the vapid Max Flint, who will soon take up shaving.

This programs was says the BBC ...

An examination of air tourism and its impact on the environment, to help viewers make up their minds about their own flying habits. Presenters Ginny Buckley and Max Flint reveal the effects of climate change on some of the world's favourite destinations and explore the impact that the explosion in budget airlines both in Europe and India could have on the environment. The programme also visits beneficiaries of offsetting from the Mersey Forest to the Masai Mara.

What we got was what could have been library shots of "Where I would like to go for my Holidays" with a totally uncritical , uninformed race through the benfits of tiny solar powered lights to an Indian village, a very sparky and savvy Kenyan teacher who had a mobile phone network re-charged by batteries, charged by hugely expensive solar power - which could easily have been done with readily and widely available hand cranked Taiwan made mobile phone charging devices.

It also included the absurd Brian Blessed saying how wonderful Doncaster (the epicentre of Labour Party Local Government corruption) airport was and the loothsome grinning pullover

Lord Virgin of Grope explaining how he was going to use biofuels to power his planes - which the excellent ex school colleague of Lord Patel, anti airport campaigner (he lives near Manchester
Airport) Geoff Gazzard , explained was nonsense as biofuels freeze at minus 3/4 degrees and even the bearded wonder's planes fly at temperatures of minus 40 degrees.

A supreme example of how inane, lightweight, visually unexciting and verbally apalling BBC TV programmes can be.

Now Channel 4 are at it this week (Wednesday 7th) with a really incisive incisive view about the corrupt, futile, Clean Development Mechanism (CDM), carbon offsets and the ETS. (also Part 2 scheduled for Thursday -today but it didn't)

The excellent Tom Clarke has foundand publishes the details of some CDM carbon trading
schemes rich countries pay into, may not be adding to global cuts in emissions and may in fact
may, in fact, be damaging the local environment. He has found that currently Indian CDM plans
approved and in the process of approval would amount to companies receiving £1 -2.5Mn across 290 known schemes.

He raises first the case of Sri Bajrang & ISPAT in the Chantisgar state who have been served
notice by the State regulator - which they deby that they are not judged to be sustainable.

Further south in Karnataka he looks at the OP Jindal Group who have benefited by Euros 20 Mn. and whom Sunita Narain of the Centre for Economic Development claims that the rk undertaken was necessary and provides little environmental benefit for the local economy and area - again stoutly rejected by the company.

All the time these payments from the prosperous North are referred to as Investments. They are nothing of the kind, they are merely ;

1. A license to continue pollution
2. They are effectively a modern version of the mediaeval sale of indulgences, where a priest would undertake prayers (at a cost) to allow the sinner to continue their wayward life. January 27, 1343, that Pope Clement VI issued a bull, Unigenitus, officially reaffirming that the Catholic Church can grant remission of sin through indulgences.
3. They allow the erection of the market to trade in these "carbon credits" which become pari passu with the ETS units under the EU cap scheme with all it's derivatives and sparkly financial mumbo jumbo of commodities markets.
4. Ultimately these rigged markets allow the leaching (leeching) of pension funds either directly
or via "Hedge funds" and similiar corporate (and barely legal) quasi stick up gangsters.

One thing the CDM scheme and carbon credits do not do, is reduce the production of CO2, and other myriad attendant pollutants - PCB's , Dioxins, sulphur, toxic heavy metals and especially fine particulates.

The whole CDM circus also deflects critical attention on the production and pollution in the developed world and the respiratory epidemics, skin ailments, actions of oestrogen mimetics and many, as yet unknown consequences that follow unbridled pollution - whilst at the same time allowing the polluters to claim how hard they are working at providing a sustainable world ...simultaneously helping the 3rd world.

Wonderful how things haunt you .. poor old Larry Summers Ex World Bank, Ex Dean of Harvard famously endorsed a memo in 1991 from Lant Pritchett which was alleged to be "ironic". It advanced an economic argument for the dumping of pollution from First World countries in the territory of 3rd World countries.

Just between you and me, shouldn't the World Bank be encouraging MORE migration of the dirty industries to the LDCs [Least Developed Countries]? I can think of three reasons:

Read the rest here ....

Tommorrows reading will be from "Carbon Trading" .. a critical conversation on climate change ..Dag Hammarskold Centre. Sept. 2006 . Chapter 4 Page 219 et seq. Offsets - The fossil economy's new arena of conflict.

In which it is shown how projects designed to "compensate" for continued fossil fuel use are helping dispossess ordinary people of their land, water, air - and future.

BBC Five Live did a program (40 mins) by Matthew Chapman (Sunday 29 October at 1100 GMT ) which you can hear by clicking the link.... learn what happens when you "carbon offset" your air travel.

A report about the program is available at BBC Online .

Learn how

Money pledged by the UK to make up for the pollution caused by the world leaders flying to last years G8 summit in Gleneagles hosted by Tony Blair to help a Cape Town township cut energy costs by installing low energy light bulbs, is paying for bureaucrats and accountants, BBC's Five Live Report has found out. (This was, bragged TB a G8 "Carbon neutral" summit)

An independent body, South South North, involved in the project, calculated it would raise £37,000 from the sale of carbon rights for re-investment in the poverty stricken township.

Result ? Hiring auditors to meet needs of the CDM mechanism (KPMG) in the way demanded by CDM, cost £54,000, leaving Cape Town council in debt to the tune of £17,000.

Learn how ;

The Carbon Neutral Company Ltd., (originally known as re-Leaf Britain Limited 1995 , Forests for the Future Ltd 1996 and Future Forests Ltd 2005, ) one of 2 favoured by the Gubment (the other is Climate Care Ltd of Oxford , previously Co2 Management Ltd., 2003, CST Management Ltd., 2000- they are now a subsidiary of Co2.org - Climate Care is the trading name of Climate Care Trust Limited. who confusingly pays a fixed royalty of 10% of annual turnover to Climate Care Ltd) hasn't produced any accounts beyond June 2005, (i.e accounts are due) and will sell you a right to carbon which will squester in trees that were planted before they got involved and whose lifetime will be determined by the owners - who might be The Government Agency the Highlands and Islands Enterprise Council.

The Carbon Neutral Company Ltd., principal shareholders their website reports, are , Zouk Ventures (whose website deescribes them as a a London-based venture capital firm) who manage $100 million in two technology funds and owns investments in Finland, Germany, Ireland and the United Kingdom.

Triodos Bank is an independent bank investing in enterprises creating social, environmental or cultural added value - for example they sponsored the Soil Association Annual Conference January 2007 - ‘One Planet Agriculture’ at the Cardiff International Area.

Confused ? You will be. In the fantasy world of CDM and Carbon offsets.