Saturday, June 19, 2010

The Classless Society

Labour MP, and former minister, Tom Watson has been talking out of his arse as seems to be the fashion amongst his comrades. Apparently the government has a million-pound wine cellar for official functions, which he seems to think can be replaced with £10 boxes from Asda. Because nothing says "classy" dinner to foreign dignitaries than a splitting hangover the next morning.

The scale of the wine cellar is actually rather reasonable. In 2009, the famous Parisian restaurant La Tour d'Argent (try the Pressed Duck) auctioned off 18,000 bottles in the hopes of raising $1m. Its collection at the time was 450,000 bottles - compared to a mere 39,500 with a value of £864k for the UK government. Note that that's about £20/bottle on average - not cheap but hardly excessive, since you'll pay that in most pubs (and even more if you buy it by the glass). The article notes that Government Hospitality, under the FCO buys vintage wine (and port and spirits) relatively cheaply by the case and lays them down to mature. I've no doubt that some of the Premier Cru Clarets bought cheaply last year will be truly amazing in 10-20 years - perhaps when Labour are back in power - and will do the job nicely. The job, of course, is buttering up the French (and anyone else who knows fine wine) at summits. It's hard to put a price on that, but it's a damn sight more than the cost of maintaining the cellar or however much might be raised by selling off the contents.

This is, of course, token politics at its worst. Labour have increased the national debt by close to a trillion pounds and are coming up with toy policies like this which would 'save', at best, one millionth of the debt they incurred. It's appalling. It's the economics of the crack-whore: sell anything and everything to get the next fix of state spending.

It's particularly insulting in that it's a pseudo-populist line - "ordinary people drink Asda wine, therefore it's good enough for the Prime Minister to give to other world leaders" - as if ordinary people, whatever those might be, think that all wine is the same. The working classes don't tend to drink wine, except maybe a bottle of Liebfraumilch with the turkey at Christmas, but that doesn't mean they don't understand that there are differences in quality. Everyone knows that there are cheap wines which will strip the limescale off your sink, and there are really good expensive wines that rich people drink, and there are some in between (but it's a bit fuzzy which is which). My hopelessly untrained palate can easily tell the difference between a bad Merlot, a good Claret, and a 1971 Lafite-Rothschild. I certainly can't afford to drink the latter, but even from the tiniest sip it's clearly superior. Either Tom Watson can't tell the difference, which I doubt unless he smokes a couple of packs a day, or he feels that - while he is cultured - the little people won't understand and therefore the government can be berated for 'lavish' spending. Patronising.

So, just remember, folks: if Tom Watson ever invites you to dinner, either the wine will be poor, or he's a hypocrite.

- KoW

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Wednesday, June 09, 2010

Motor Racing News

Drayson at Le Mans

Lord Drayson and the Drayson Racing team are, once again, preparing to race in 24 Hours of Le Mans, the classic endurance race which everyone else builds their calendar around. It starts at 2pm UK time (3pm local) on Saturday and, well, the clue's in the name for how long the race is! Qualifying is three two-hour sessions: tonight (9pm-11pm), and tomorrow (6pm-8pm, 9pm-11pm), so we'll see how those go. Best wishes to Lord Drayson, Jonny Cocker, Emanuele Pirro and all the rest of the team!

Canadian Grand Prix

Also this weekend, there's the XLVII Grand Prix du Canada, from the Circuit Gilles Villeneuve in Montréal. That starts at 5pm UK time on Sunday, so just a short break after Le Mans for us petrolheads! Canada is a relatively unusual circuit these days, with high walls around the edge of the track instead of wide run-off areas - like Monaco, one mistake and it's Game Over. It's been a couple of years since the last F1 race there, when the track cracked and fell apart, but Robert Kubica made a very good showing in his BMW resulting in his only win of the 2008 season.

Massa Staying at Ferrari

Another piece of good news is that Felipe Massa has signed a two year extension to his contract, and so will remain with the Scuderia until 2012 at the earliest. With his injury last year and a tepid start to the 2010 season, it's about time things started going his way - good performances in the last couple of races put him 4-3 up on team-mate Alonso, now a contract extension means he can concentrate on driving rather than negotiations. "Felipe Baby" is one of the most popular and likeable drivers in F1, and an all-round good guy, so congratulations to him and I wish him all the best for another good couple of years.

- KoW

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"British Petroleum"

The political fallout from the BP spill continues, with President Obama continuing to make shamefully populist attacks repeatedly using an archaic name for the American Oil Company (Amoco merged with BP in 1998, the resulting multinational is no more "British" than it is "American") to stir up international discord. The fact that the operators of the drilling rig, Halliburton and Transocean, are both US companies is getting lost behind the attacks on the "foreign" owner - which employs twice as many people in the US as in the UK.

The latest version is that Tony Hayward, Chief Executive of BP, "wouldn't be working for [Obama] after any of those statements". Because political interference in private companies is a sign, nay a hallmark, of free and capitalist societies. Obama has tried to tell the company what it can do with the money it's earned, and paid taxes on, and now he's trying to tell it who it can and cannot employ. In between golf games.

Yes, it's understandable that the POTUS is angry. This is a disaster. A dozen people died in the Deepwater Horizon explosion and many citizens on the Gulf Coast are being harmed by the leaking well. It's also understandable why he's lashing out: he can do nothing about this and feels impotent - there is literally nothing that the US government can do about this leak. Understandable doesn't make it acceptable, however, and this sort of divisive rhetoric is ugly.

One one side, we have the world's foremost experts in undersea drilling and oil leak capping, who have been working night and day to fix an unprecedented problem. Over a month ago, they had crews working around the clock to weld together a funnel to catch the oil. Trouble is, it started "icing up" with hydrate crystals. Then came the "top hat". Then a "top kill" attempt failed. Finally, the latest cap has had some success, learning from the previous difficulties (e.g. using methanol to prevent hydrate build-up). It's not over yet, but it's clear that these people have been working hard and when Plan A failed, they tried Plan B, and so on until something finally gets results.

On the other side, we have politicians threatening to "push BP aside" because they've been missing "deadline after deadline". Doesn't that sound like the most incompetent manager you've ever worked for? Pulling dates out of his arse and demanding that everything is fixed by then, then shouting and screaming when reality fails to comply. Just who would they be replaced with? A large committee who will order the oil to stop flowing by fiat? These political lightweights have been implying corruption and attacking the finances of a company which has volunteered to pay (so far) 20x the statutory maximum liability - what bastards they must be! Now someone who's visited the area three times is trying to sack someone who a) doesn't work for him and b) has been dealing with this 24/7 for a month and a half, on the grounds that he was looking forward to the problem being solved, instead of looking back for someone to blame.

I'm disappointed, though sadly not surprised, that Obama is still relying on hollow soundbites and words instead of actions. That political points-scoring works well as a candidate, but not as President. "Yes we can"? No, it's clear you can't. A leader would have immediately and unconditionally offered whatever support could be useful and saved any recriminations for later. The priority isn't making BP look bad, or making yourself look good, it's stopping the oil leak.

If you're not part of that solution, you're part of the problem.

- KoW

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Saturday, June 05, 2010

Insurance Arbitrage

The BBC has a story about parents 'breaking the law' over insurance for their children because they don't believe a 400% risk premium is appropriate and proportional. The tone - and uncritical reporting - in the article seem to suggest that the BBC supports the insurers' position and that we'll hear more of this as they bitch and whine about how they can't screw more money out of the vast majority of the population.

The facts are that half of the population (41% admit to it, 61% would do so) are 'fronting' insurance because the punitive rates charged for an under-25 main driver are so completely ridiculous... and to preserve that cartel, the insurers are now resorting to the law. The law isn't there to protect your profits. If you construct a market with such piss-poor dynamics as to allow people to save 75%+ by a trivial arbitrage strategy, people are going to do that. And when it's half of the population, they are right and you are wrong. We call it democracy.

Some industry mouthpiece is quoted as saying:
"Yes, £4,000 is an awful lot of money but it accurately reflects the risk posed by young drivers"
which is utter bullshit. You do not have "accurate" risk statistics because at least half of your customers have been forced to lie to you because of your retarded pricing scheme.

You will note that insurers are still making a profit from car insurance, therefore the prices they are charging are sufficient to offset the risk and the costs of young drivers. Despite the fraud. Since half will admit to fronting, we can probably knock at least £2k off that price for the actual average risk premium received (and sufficient to be profitable). And, hey, doing that might just encourage people to do things by the book...

If not, then there's a good case for a state minimum insurance to guarantee access to the roads. This is the case in much of the US - e.g. the State of California will provide insurance to meet the minimum statutory requirements, since (like here) it's a legal requirement to have proof of insurance to be allowed on the roads. The current situation, which allows insurers to price young people off the roads and encourages fraud and driving without insurance, is ridiculous and needs to change.

If you can't make sensible profits from your oligopoly, then you shan't be allowed to have one.

- KoW

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