Wednesday, 8 July 2009

Fun In The Sunglasses

The website, run by some good friends, is "Fun In The Sunglasses" and it has returned to the world wide web after some tecchnical difficulties.

So, if you want to get a good deal on some new sunglasses, from names including Porsche and Wimbledon, then the address is

Good news, in all.

Monday, 6 July 2009

Economics cycles

A wonderful graphic from the New York Times can be used to show what happens to growth in two dimensions:

x-axis: growth over the past 6 months (extremes show sharp swings in output, or sudden drops).
y-axis: annual growth - long term trend (actual rate of decline in the economy).

Looking at that version of things, everything will be fine.

However, and this point was missed by the Economist's Free Exchange, this graphic suffers the same flaw as did the option-pricing model of Long Term Capital Management. That flaw, is that it only takes into account recent recessions, and so is unable to correctly predict the current, more serious one.

In other news, the markets have lost their shine (perhaps I'll post again on them, but not today).

Thursday, 18 June 2009

Krugman's recent lectures

Paul Krugman made a tour of Europe recently, and gave the "Robbins" lectures at the London School of Economics.

His first lecture is available here (audio and slides).
His second lecuture is here (audio and slides).
His third and final lecture is here (audio and slides).

All links taken from his blog, but oddly, not from the same posts. As an indication, the first lecture is 76 minutes long.

Sunday, 7 June 2009

Market moves 1-5 June 2009

The pound reached 7 month highs against the dollar and the Euro, before falling away towards the end of the week (the BBC suspected it was the political instability here, I'm not convinced).

Anyway, the bare facts are below:

FTSE: 4438.56 (up 20.62 or 0.47% in 1 week, 25.71% in 13 weeks)
DOW: 8763.13 (up 262.80 or 3.09% in 1 week, 32.23% in 13)
£/$: 1.5982 (down 2.06¢ or 1.27% in 1 week, up 13.43% in 13)
£/€: 1.1440 (up 0.04¢ or 0.03% in 1 week, 2.71% in 13)

Oil in $: 68.37 (up $2.63 or 4.00% in 1 week, 56.35% in 13)
Oil in £: 42.78 (up £2.17 or 5.34% in 1 week, 37.84% in 13)
Oil in €: 48.94 (up €2.50 or 5.38% in 1 week, 41.57% in 13)

Gold in $: 962 (down $13 or 1.38% in 1 week, up 2.78% in 13)
Gold in £: 601.93 (down 68p or 0.11% in 1 week, 9.39% in 13)
Gold in €: 688.60 (down 54¢ or 0.08% in 1 week, 6.93% in 13)

All the usual good news signals, except that the pound fell against the dollar (or rather, the dollar rose against the Euro and pound, perhaps indicating a shift in perceptions as to the consequences of recovery on the value of the dollar in the longer term).

It is notable that the oil price and stock markets have shifted far more than gold and the currencies have. That gold hasn't fallen proves that many aren't convinced that "everything is going to be okay" but demand for oil is recovering, which means that the restrictions put into place by OPEC (to limit the oil price collapse) will start to bite.

World Cup Qualifying

Today, England beat Kazakhstan by 4 goals to nil in central Asia, in an attempt to qualify for next summer's world cup in South Africa. On Wednesday they will beat Andorra by a similar margin, unless a flying pig stops the match, or something similarly implausible happens.

Why do I mention this, here on an Economics-based blog? Basically it is because I think the excercise was a waste of money. UEFA (the European football association) has been allocated 13 places, which are awarded to the winners of 9 groups, plus the 4 winners of playoffs between the runners up.

Given that there are 53 clubs in "Europe" (including Kazakhstan, Turkey and Israel, who choose Europe over Asia as their tournament of choice), it seems obvious to me that there should be some 2-stage process to whittle down the candidates and reduce the required number of games.

If the 24 weakest sides (decided by the UEFA coefficient, which is based on performances over the past few years) were to play a tournament during the same summer as the main European Championships and World Cups (that is, every even numbered summer) then the 18 weakest sides could be eliminated, reducing the field to 35 sides.

These could then be allocated into 6 groups of 6 each playing 2 matches, with the top 2 going through, reducing the chance of the "big money" teams failing to qualify (not that it saved England, who finished 3rd behind Croatia and Russia in 2007-8 qualifying for the European Championships of 2008).

The advantages:
  1. Fewer matches like England-Andorra or Germany-San Marino, resulting in fewer confidence sapping trouncings for the "minnows".
  2. More chances for the minnows to beat each other, allowing them victories in competitive matches, which will teach them much about how to beat the better sides (or at least, the in between teams).
  3. A competition that teams don't want to enter, but do want to win. If the prize of getting one of the 6 "bonus" places involves home- and away matches against 2 of Europe's 12 best sides (given UEFA seedings, one of the top 6 and another ranked 7-12 would appear in each group).
  4. Fewer journeys to more dangerous places for many of Europe's spoiled élites. Many of the less politically stable members, would be the same teams who struggle to get through this tournament, earning a double bonus.
  5. Fewer international matches, reducing the pressure on TV companies to find time in their schedules for ever more football. Already many complain of over-exposure, yet some competitive England matches are only shown on Setanta. This sort of procedure would cut 1-3 matches per year from the schedule, depending on the procedure chosen.

The downsides, as I see them:

  1. Fewer matches of the style Andorra-England. The value of this fixture is much greater to the Andorran federation than it is to England, but I still feel that they should have to earn this bonus.
  2. A tournament hardly anyone will watch. According to Wikipedia, the 6 teams who would be seeded to survive the tournament would be Latvia, Hungary, Lithuania, Slovenia, Wales and Northern Ireland. Of the other teams, I can only remember Macedonia giving a major country a hard time.

All told, I believe the benefits outweigh the costs, and have the added bonus of reducing the number of meaningless fixtures in far-flung places that fans would be mad to bother with.

To be sure, the number of European sides who qualify for tournaments does vary, and so does the qualifying method. Here is my simple guide to the more recent numbers:

12: 6 groups of 6, 2 from each qualifying. Teams come from 6 pots, with pot 1 being teams 1-6 by ranking, pot 5 being teams 25-30 and pot 6 the 6 "winners" of the minnows tournament.

13: as above, but with the 3rd placed teams competing for the final position (perhaps the 2 or 4 teams that come closest should playoff for the place)

14: 7 groups of 5 teams, 2 from each qualifying. Teams come from 5 pots, the first holding teams 1-7 by ranking, the 4th teams 22-28 and the final point consisting of 7 teams that survive a minnows tournament of all teams ranked below 29.

15 (European championships, minus host): as 12, except that the 6 3rd placed teams should playoff for the spare places.

22 (newly expanded Euro 2016 of 24, minus host and holder or 2 hosts): 11 groups of 5, with 2 qualifying from each. This would not require a preliminary minnows tournament, unless the number of UEFA countries expanded beyond 57 (and even then, perhaps only the very weakest would need to compete).

23 (24 team Euro 2016 minus host): 10 groups of 5, with 2 qualifying from each. 10 clubs to earn appearance in qualifying from all countries ranked outside top 40. Remaining 3 qualification spaces to be determined by best 3rd place sides, perhaps with playoffs to distinguish between them. It should be noted that the holder of the European Championship has never previously been granted automatic qualification, so this is the most likely number of qualifications spaces that will be up for grabs in 3 tournaments time.

Saturday, 6 June 2009

Understanding progress

Brad DeLong shares, via his blog, this exposition of economic history. The approach is to investigate average earnings per head across the past 800 or so years, and to find tipping points, where a genuine shift in the pre-existing correlation exists.

In a so-called Malthusian economy, named after Thomas Robert Malthus, the income of most individuals is determined by the land at their disposal, so any technology that enables land to be more productive, leads to more people being supported, and thus lower per capita income.

Page 10 of the pdf shows the historic relationship between population and income (working class real wages) and the break that occured in the mid-17th century. Curiously, the same figure doesn't appear on the graph on the next page, which shows income against time. This latter graph shows a peak during the wars of the roses and Henry VII's reign, which wasn't matched again until the age of Karl Marx, 100 years after the Declaration of US Independence or the publication of the Wealth of Nations.

The other key tale told is about the value of these 'real' numbers on income. Page 24 shows a table, demonstrating the number of man-hours (or more precisely, the multiple of an average earner's wage) required to purchase a variety of items. A single-speed bicycle, for instance, costs under 3% of what it did in 1895, by that metric. A silver spoon, however, costs more.

There then follows a vital desciption of the importance of substitute goods. The cost of live music in a middle class household has fallen from 2400 hours for the piano, plus however long is required to train, to a couple of hours, to buy an iPod with speakers. The key paragraph (in my view) is this one (with emphasis added by me):

Thus perhaps the most important component of the past century’s economic growth is the new commodity component—the goods and services of which people alive in the 1890s could dream but not purchase. Whenever we hear a sentence like “average GDP per worker in 1890 was equal to some $15,000 at 2008 prices,” we cannot help but think that the material standard of living then was about what we could obtain now if we had $15,000 to spend. But it was not. The simple valuing of the past’s production at the present's prices leaves out a very important part of the picture: the material standard of living then was about what we could obtain now if we had $15,000 to spend, but were required to spend it all on commodities that have been around for more than a century: no modern entertainment or communications or transportation technologies; no modern appliances; buildings, roads, bridges, and other infrastructure built using century-old technologies. And an income of $15,000 that must be spent exclusively on late nineteenth-century commodities is, for most of us, worth a lot less than $15,000.

Sunday, 31 May 2009

Markets 25-29 May 2009

A less dramatic version of last week's news, with small increases in everything (except oil, which continued its rise). Here are the figures, comparing Friday's close with the close a week earlier. I also include the last weekend when each indicator was last higher (this will differ from the data quoted on news channels, as they will use minute-by-minute data for comparison, not weekly).

FTSE: 4417.94 (up 42.65 or 1.21%) - was higher on 10/05/2009 (3 weeks)
DOW: 8500.33 (up 223.01 or 2.69%) - was higher on 10/05/2009 (3 weeks)

£: $1.6188 (up 2.68¢ or 1.68%) - was higher on 02/11/2008 (30 weeks)
£: €1.1436 (up 0.67¢ or 0.59%) - was higher on 08/02/2009 (16 weeks)

Oil: $65.74 (up $5.11 or 8.43%) - was higher on 02/11/2008 (30 weeks)
Oil: £40.61 (up £2.53 or 6.63%) - data not available before 7/12/2008 (25 weeks)
Oil: €46.44 (up €3.14 or 7.26%) - data not available before 7/12/2008 (25 weeks)

Gold: $975.5 (up $15.75 or 1.64%) - was higher on 22/02/2009 (14 weeks)
Gold: £602.61 (down 25p or 0.04%) - was higher last week, lower 3 weeks ago
Gold: €689.14 (up €3.75 or 0.55%) - was higher on 29/03/2009 (9 weeks)

That both the £/$ and Oil/$ exchange rates are at 30-week highs is no coincidence. Next week, I will compare prices with 13 weeks earlier, since that marks 3 months since the "rally" began in the markets.

Thursday, 28 May 2009

Monday, 25 May 2009

Markets: 18-22 May 2009

A delayed post, but this tracks movements between Friday close (15 May) and Friday close (22 May). Major movements were on currencies rather than stock markets.

FTSE: 4365.29 (up 17.18 pts, 0.40%)
DOW: 8277.32 (up 8.68 or 0.10%)
£: $1.592 (up 7.41¢ or 4.88%)
£: €1.1369 (up 1.28¢ or 1.14%)
Oil: $60.63 (up $4.56 or 8.13%)
Oil: £38.08 (up £1.14 or 3.10%)
Oil: €43.30 (up €1.77 or 4.27%)
Gold: $959.75 (up $30.25 or 3.25%)
Gold: £602.86 (down £9.50 or 1.55%)
Gold: €685.39 (down €2.96 or 0.43%)

Put simply, the dollar fell dramatically, but the stock markets were unfazed. Of course, in dollar terms, the FTSE rose over 5%, but since that isn't how it is measured, it doesn't get mentioned in the news (in £ terms, the DOW fell over 4.5%).

My point about oil price shifts being less dramatic when measured in pounds remains true.

Saturday, 16 May 2009

Markets 11-15 May 2009

Bad news this week, but not on the scale we became accustomed to over the winter. Below are listed the Friday closing levels of several markets, and a comparison with their levels one week earlier - designed to eliminate "noise" from daily data you might hear on the news).

FTSE: 4348.11 (down 113.98 pts or 2.55%)
DOW: 8268.64 (down 306.01 pts or 3.57%)

£: $1.5179 (down 0.51¢ or 0.33%)
£: €1.1241 (up 0.73¢ or 0.65%)

Oil: $56.07 (down $2.12 or 3.64%)
Oil: £36.94 (down £1.27 or 3.32%)
Oil: €41.52 (down €1.15 or 2.69%)

Gold: $929.50 (up $22.50 or 2.48%)
Gold: £612.36 (up £16.82 or 2.83%)
Gold: €688.35 (up €23.26 or 3.50%)

In italics is the only measure that doesn't match the glum mood. Stock markets rise with good news, as does the pound (perceived as more vulnerable to a struggling world economy) and so does oil (implied increased demand) whereas gold falls (implied decline in instability).

Below is a graph which I hope demonstrates the correlation between oil and the pound. See how, especially over the past two months, the oil price as measured in pounds is more stable than the others.

Nothing British

There's nothing British about the BNP. Their desire for a 99.9% white British society greatly conflicts with Britain's clearly observed love of Gurkhas and various other non-white groups (from footballers to singers to actors or even for Barack Obama).

Why is it that we find ourselves in a position where we expect some BNP leaders to enter the European Parliament?

Any region that elects a BNP MEP is a region I don't want to live in. Help me stay in the country (!) when you vote on June 4th.

Wednesday, 13 May 2009

A solution

El Pais has the solution:

"I'll count to three, and when you wake up, you won't remember anything that's happened, and you'll go back to buying houses and investing in the stock markets." (Own translation).

Saturday, 9 May 2009

Markets 4-8 May 2009

A good week on the markets as confidence begins to return.

FTSE: 4462.09 (up 218.87 or 5.2%)
DOW: 8574.65 (up 362.24 or 4.4%)
£: $1.5230 (up 3.19¢ or 2.1%)
£: €1.168 (down 0.71¢ or 0.6%)
Oil: $58.19 (up $5.77 or 11.0%)
Oil: £38.21 (up £3.05 or 8.7%)
Oil: €42.67 (up €3.16 or 8.0%)
Gold: $907 (up $22.5 or 2.5%)
Gold: £595.64 (up £2.35 or 0.4%)
Gold: €665.09 (down €1.59 or 0.2%)

Big increase in the price of oil (sign of confidence), in the UK stock market (given that, in dollar terms it went up almost 7.5%) and several other indicators of economic well-being.

Despite this, you cannot say the worst is over. A similar rally occured in 1931. Only time will tell when this is over, but last week was 4th in a row where the FTSE rose, and the 8th in 9. Fear is passing, perhaps giving the current market levels a better scale of realism, as the "panic" of February seems to pass. Of course, come June, we might find a different story.

Thursday, 7 May 2009

ECB still throwing stones

Imagine this crisis as a plane bombing the global village (which here is represented by an actual village). It approached the US first (I guess their house overlooks the town from the side from which the bomber approached, but that isn't important), and they threw everything they could at the situation, starting with dramatic cuts in interest rates (from 4.75% in September 2007 to 0-0.25% in December 2008, where it has remained ever since). It is not zero precisely due to technical difficulties with maintaining rates at that value (what they set is a target rate). They have since bailed out the banks (TARP, TALF and various other programs) culminating (or perhaps not) with the stress tests that most of the leading banks passed, according to reports today. They also had a massive stimulus bill in their budget, acting as a boost the economy. This, in my metaphor, amounts to firing every available anti-aircraft weaponry at the plane.

In Britain, we were slower to acknowledge the threat. In July 2007 rates were raised to 5.75% and only started dropping in December 2007, finally reaching 0.5% in March 2009. We lead the way on "saving the world........'s banks" and also had a "stimulative" budget, running a whopping 12% deficit for two years. This amounts to using all available anti-aircraft weaponry, except starting with lower stocks. Consider also that Gordon Brown did much of the shouting about the peril we were all in.

In Europe, they are still throwing stones. The ECB started cutting rates in October 2008 from 4.25% and are STILL cutting, and in a position to cut rates. Today they went from 1.25% to 1%. Given that European economies are suffering every bit as much as British and American ones, it beggars belief that the ECB hasn't done more, sooner. Euro-zone governments have been less forthcoming in their stimulus packages too, although in Ireland's case it is because potential lenders won't give them any money. They must be assuming that the Americans, Brits or possibly the Japanese, Chinese or others will shoot this plane down for them. Put simply, they aren't doing their bit to help defend us all from a decade of penury.

Tuesday, 5 May 2009

Cameron campaigns for BNP

Cameron urges 'vote for change'
"enough is enough"; tell Gordon Brown "what you think of him"; "letting our politics descend into a quagmire" and a few other incendiary quotes are listed in the BBC article.
Audio is available here

Monday, 4 May 2009

Why printing money doesn't necessarily cause inflation

Paul Krugman, most recent Nobel laureate for Economics, shows on his blog a lesson from Japan on how increasing the money supply, even by very large amounts WILL NOT CAUSE INFLATION IN A LIQUIDITY TRAP. The key graph I'll include below.

Whilst during a period of inflation, such a monetary expansion would have made things much worse, in a situation like Japan's since 1990, or the Western world's since last summer, it is all you can do to prevent massive, destructive deflation.

As ever, the Onion knows the way forward

Nation Ready To Be Lied To About Economy Again

Includes such gems as:
"[A]n overwhelming majority of citizens said they believe that, during these
extremely uncertain times, our leaders have a responsibility to come
sit the American people down, and lie through their teeth about
everything from
misappropriations of taxpayer dollars to the severity of the
credit crisis."

""Please, treat me like a child. Treat me like a five-year-old," Sacramento
resident David Cooke, 64, wrote in a letter to Congress."

This will almost certainly be quoted by other, more respected Economist bloggers. I'll edit this post to link to them, then.

Sunday, 3 May 2009

Toxic assets

Sorry, but it had to be done.

Saturday, 2 May 2009

News this week

Using various websites' "most popular" function, I'm looking for a good news and a bad news article from each site.

BBC World News:
Good: umm, "World moves to contain swine flu" has the most positive sounding headline of the "most viewed" over each of the past 5 days.
Bad: "Car attack on Dutch royal parade"

Guardian website most viewed:
Good: Revolutionary Espresso Book Machine launches in London
Bad: Southampton will fold in eight days without a buyer

NY Times most emailed:
Good: After 341 Years, British Poet Laureate Is a Woman
Bad: Personal Health: Paying a Price for Loving Red Meat

Economist Most Read:
Good: The American economy: Better than it looks?
Bad: Chrysler: End of the road

To be clear, these aren't all the "top" story on each list, but are chosen to represent as many different stories as is reasonable, using the top 5, top 10 or whatever the website offers. Swine flu dominates all of the lists, obviously.

Markets this week

Swine flu became a global obsession, it was announced that the US economy was still shrinking faster than 6% a year (meaning it is currently about 3.3% below its peak) and as ever there was much bad news all around.

None of it appears to have surprised the markets, however. Here's the current levels and their change on a week earlier.

FTSE: 4243.22 (up 87.23, or 2.1%)
DOW: 8212.41 (up 136.12 or 1.7%)
£: $1.4911 (up 2.39¢ or 1.6%)
£: €1.1239 (up 1.56¢ or 1.4%)
Oil: $52.42 (up 76¢ or 1.5%)
Oil: £35.36 (down 6p or 0.2%)
Oil: €39.51 (up 49¢ or 1.3%)
Gold: $884.5 (down $23 or 2.5%)
Gold: £593.19 (down £25.34 or 4.1%)
Gold: €666.68 (down €18.83 or 2.7%)

Interestingly, the movement in the DOW and the £/$ exchange rate have been remarkably similar of late. If the DOW were measured in £ terms, it would lie 11.3% below it's 03/01/2009 peak, compared to 11.4% last week, 11.5% the week before and 11.2% three weeks ago. This is a highly unusual correlation, but implies that any optimism about the US economy either weakens the dollar or strengthens the pound. It also means that in any common currency, the FTSE has outperformed the DOW recently. Graph below, of both indices, quoted in £, rebased so that their recent peak is set at 100.

Wednesday, 29 April 2009

"The truth about the EU"

(Edit: Part 2 of my retort to my response to a flyer I received from UKIP, part 1 can be found below)...


The EU subsidises farmers,
but penalises them when they grow too much which
leads to higher food
prices. If we import cheaper non EU food, we have to pay
huge import duties
direct to Brussels. (eg 105% on meat, 88% on Bananas

Membership of the EU costs the average family an extra £30 per week in
ASDA charges 8p per 100g for bananas, and I've never seen cheaper bananas than that, even at a greengrocer. This works out as £800 per tonne. Import duties on bananas are €176 per tonne. Am I missing something here?
Assuming their other claims to be just as accurate, that saving will swiftly turn into £7/week savings. This is before they encourage ALDI and LIDL to leave (EU, aren't they?) reducing competition at the supermarket, probably costing families money.

Nonetheless, the CAP is stupid, and in great need of reform. It is merely not as stupid as they claim.

EU law allows foreign companies to buy our utility companies, who then
overcharge us. The EU's high renewable energy targets will cost British families
£750 a year in higher energy prices - on top of the increases we are already

Water bills are also rising by 20%, thanks to new EU regulations.

Several claims, there. Firstly, that foreign energy companies overcharge us. We are free to choose our energy suppliers, might I suggest googling a price comparison site? If these companies prosper here, it is because they UNDERCUT UK firms. They suggest limiting the ownership of companies, which would reduce competition, which would actually lead to an INCREASE in prices.
Secondly, the claim that EU renewable energy targets cost British families money. This is probably true, but is surely preferable to increasing our use of and reliance upon fossil fuels.
Thirdly the claim that we are already suffering increases: surely they haven't heard that bills are coming down this year (in resonse to the falling oil price, amongst other things). Unless they mean over the longer term, in which case they would SUPPORT green initiatives, which reduce the long term energy prices.
On water bills, I am ignorant both of the price rise (our bill was the same this year as last) and of the relevant regulation. That doesn't make their claim false, of course.

We have to comply with costly EU recycling rules, or Brussels imposes
finces on our local councils.

Have no doubt that the UK government would enforce those rules anyway.

  1. British jobs will be given to European workers because of EU laws.
  2. The EU will take control of our North Sea oil and gas fields.
  3. EU reception centres will be set up in African countries to process even
    more immigrants to Europe.
  4. Britain's amateur sea fishermen will have to fill in forms to register all
    catches, and may then be unable to take fish home.
  5. Our farmers will not be allowed to use certain pesticides, which will reduce
    yields and push food prices even higher.
  6. Car repair prices could double, because Brussels wants to phase out small
    garages - forcving us to go to main dealers.
  7. They intend to ban ordinary light bulbs and replace them with low energy
    ones which cost 5 times more, give poor light and can cause health

1.In the future? Also, EU jobs will be given to British workers because of EU laws. And in more provincial news, Scottish jobs were given to English workers under UK law (and vice versa) many many years ago.

2. From the Norweigans? I haven't heard this proposed, but it will soon matter little, since production has long past its peak there.

3. The reception centres would be to prevent immigration, which is perceived to be a greater problem in several EU countries than it is here. Or would you prefer more people to come on little dinghies and drown at sea.

4. Quite right too. These waters are heavily overfished and every effort should be made to prevent further destruction. Of course, throwing back dead fish won't help, but I doubt UKIP would prefer heavy fines for unlicensed fishing, regardless of catch.

5. Certain pesticides: unsafe ones, perhaps? Again, so much the better, congratulations EU.

6. Another policy I've not heard about, but I can't imagine they want to "phase out small garages". More likely, I expect they want to ensure providers of a crucial safety service are licensed in some way.

7. I spent less than £2 on the 5 low energy bulbs in my room. They provide an awful lot of light, and cost LESS, because they use less energy. Also, "in the future"? These plans are set, and no UK government would back out of them, EU or no EU.


80% of our laws are made in Brussels. We just do what we are told. UKIIP is
the only major political party committed to leaving the EU and making Britain
great again.

I had no idea that MEPs were so productive. They must be great value for money, if an entire continent can get 4 times as many laws for about twice the price the UK pays for its own. And UKIP is a major political party - why do none of the opinion polls list it in their weekly/monthly releases then? Making Britain great again - is this a promise of re-colonisation, empty rhetoric or a heartfelt desire to work hard and improve those things that bring this country down, in the esteem of others (teenage drinking/pregnancy, football hooliganism)? I hope it isn't the first.

A few of the benefits of staying in the EU

Through the post today, I received a leaflet from UKIP, which I actually read. I'm going to go through, point by point, why I disagree with what I disagree with.

  1. Spend the £30m a day that we pay the EU out of our taxes - on new hospitals
    and schools and higher pensions.
  2. Thousands of jobs would be regained when we regain our fishing waters, and
    fish would be cheaper.
  3. Remove the threat of the EU Lisbon Treaty and keep full control of our
    courts and our army.
  4. Without Brussels red tape, British business would boom and create more
  5. We could stop unlimited EU immigration and make it easier to deport

That was the front page. My response:

1. Open Europe, a Eurosceptic think tank estimates that over the period 2007-13, the UK will make a net contribution of €57bn. This amounts to €26m a day, or about £24m. Perhaps UKIP has some other data, but they don't cite it. I'm citing a Eurosceptic organistation that debunks a UKIP lie. That £24m a day is £8.6bn a year, which is not nothing, but amounts to less than 5% of our DEFICIT, let alone our budget. Small fry, in other words.

2. The EU's common fisheries policy has lead to OVERFISHING in all EU waters. Allowing the UK to set its own target will only reduce the surviving fish (tragedy of the commons) and the UK's fleet would also be excluded from EU waters. If we got cheaper fish, it would only be for 3-4 years before they started becoming scarce.

3. I don't perceive the Lisbon Treaty as a threat. The European Court of Human Rights is a superb institution, which we would have to be crazy to leave. The additional European courts complement, rather than supplant our own. Also, since the Falklands, when did Britain last enter war without allies, and why would we want to?

4. A more fashionable view is that too little regulation led us to where we find ourselves, namely in the midst of a massive recession. I wonder where they think the finance would come from, to fund this boom. China, perhaps?

5. True, but undesirable. The free movement of people is the EU's single greatest sucess, in my view (it is one of the things that makes war unthinkable).

Later pages will be analysed in future posts

**UPDATE (16/05/2009): In their Party Political Broadcast for the upcoming local elections, Nigel Farage (UKIP) claimed that the Eu is taking £40m per day from Britain. Obviously, being a Party Political Broadcast, there is no sourcing of this information, but it further extends the difference between truth and claim.**

Tuesday, 28 April 2009

Why banks might need further support

In 2006, and more so in 2007 (until "the bubble burst") houses were being bought and sold at unprecedented prices. Many other assets were similarly "overvalued", simultaneously. How is this possible?

Firstly, let's start with the money supply. It has formed a bit-part of political vocabulary since the days of Reagan and Thatcher, and in Economics a little longer. Many laymen would first think of the money supply as what exists in coins and notes.

In reality this amounts to a tiny proportion of total money. To this can be added all money that is instantly accesible, in the form of current account deposits, and overdraft allowances (you have this money, since you can spend it instantly at no great cost to yourself). A precise definition of what should and shouldn't be counted as money isn't available, instead we have several measures, which reflect things you can trade with differing degrees of ease.

Ultimately, lots of money can be created through leveraging. A bank receives a £10000 deposit, and is permitted by law to lend £9000 out. This £9000 is spent, and the recipients then deposit it. £8100 of this £9000 is lent out in the same manner as the £9000 originally. This process repeats until £100k has been deposited. This is how much can be created with leverage ratios of 10%.

In a boom, it is essential for banks (from a competitive sense) to lend as much as possible, and so they extend their leverage, keeping, say 5% in house, so that £10k can become £200k instead of £100k. As leverage increases, so does the money supply.

A similar procedure occurs with houses. Where a minimum deposit of 20% prevails, prices are low, because fewer people can afford the house, reducing demand. When this requirement is reduced to 5%, people with only a quarter of the means can suddenly afford the house. This naturally increases the price, and so encourages banks to reduce their requirements (if prices are rising, defaults are rare, so deposits are less necessary).

However, when "the bubble bursts" or faith is lost, the required deposit surges cutting the number of people who can afford a house, and therefore house's value. Now the owner can't sell, even if they wanted to, simply because the leverage requirement/limit changed.

As banks deleverage, it is important to increase their "capital base" artificially, since moving from 5-20% whilst maintaining the same money supply (important to keep the economy going) requires a QUADRUPLING of the banks stocks. And a 20% holding is required in crisis periods, because people are more likely than usual to withdraw their money at short notice.

That is why the banks needed the support they've had so far, and will possibly continue needing more. I don't have their balance sheets, and am uncertain as to how "de-levereaged" they want to become, so I can't be sure HOW MUCH money they'll need. It is also why we use the credit crunch term to describe the cause, rahter than just the nature, of the crisis.

Economics for beginners #1

Also available on Greg Mankiw's blog, which is appropriate, since it his his "10 principles of Economics" which are being translated into non-specialist-ese.

Swine response #3

"Mad cows, bird 'flu, swine flu... Wouldn't it be better if we all became vegetarians?

At work, we came up with a new conspiracy: it's the vegan mafia who set all this up.

Swine flu responses #2

Yesterday I posted some trivial responses to the epidemic in Mexico, that is worrying many.

Here's how some shares are doing this week:
Ryanair (Friday close 3.41, now 3.15) down 7.6%
Easyjet (was 335.25, now 298.25) down 11.0%
Delta Airlines (was 7.88, now 6.75) down 14.3%
British Airways (was 163.9, now 143.5) down 12.4%
TUI (was 271.75, now 247.75) down 8.8%
Thomas Cook (was 282.75, now 257.75) down 8.8%
Pfizer (13.17 becomes 13.49) up 2.4%
GlaxoSmithKline (was 1006 now 1080.5) up 7.4%
AstraZeneca (was 2394 now 2466) up 3.0%

So not everybody loses in a pandemic scare.

Monday, 27 April 2009

On the crisis

New design for Rejkavik toilets.
Steve Bell on, well figure it out for yourself.
Chris Riddell on the response to the budget.

On pigs

Cartoon in today's Guardian.
Krugman points out flaws in the Republican Party criticism of the stimulus bill

Google trends (tracks the frequency of particular search terms):
Gripe porcina, gripe, influenza, flu, swine. All show dramatic upticks over the past day or two. It is interesting to note that it is not as frequently searched as it was in the bird flu crisis, but is appearing in more news articles. The first two terms are the Spanish words for swine flu and flu and are listed because the crisis is originally Mexican.

Saturday, 25 April 2009

The markets this week

Despite what has been described as a historic budget, the markets were fairly unmoved this week. This tells you that they more-or-less predicted what happened, undermining Tory claims that this budget is despicable and will bring the end of the world (or words to that effect).

Below are the movements over the past week:
FTSE: 4155.99 (up 63.19 or 1.54%)
DOW: 8076.29 (down 55.04 or 0.68%)
£: $1.4672 (down 1.25¢ or 0.84%)
£: €1.1083 (down 2.62¢ or 2.31%)
Oil: $51.66 (down $1.64 or 3.1%)
Oil: £35.21* (down 81p or 2.25%)
Oil: €39.02* (down €1.84 or 4.51%)
Gold: $907.50 (up $37 or 4.25%)
Gold: £618.53 (up £30.24 or 5.14%)
Gold: €685.51 (up €18.09 or 2.71%)

Since budget week has brought out the doom-mongers, I'll just list the prices 13 weeks ago (3 months) and the % change since.
FTSE: 4052.47 (now 2.55% higher)
DOW: 8077.56 (now 0.02% lower)
£: $1.3806 (now 2.67% higher)
£: €1.0626 (now 4.30% higher - although that week was exceptional €1.11 and €1.13 were the figures for the week before and after)
Oil: $43.18 (up 19.6% in $, 12.6% in £ or 17.4% in €)
Gold: $875.75 (up 3.6% in $, down 2.5% in £, up 1.7% in €)

All of which goes to support the notion that you should ignore the daily shifts in valuation, unless you are a professional trader. If even weekly shifts are greater in degree than quarterly ones, then a longer view is surely better

Quick reminder: My Formula 1 blog is up and running, and will feature articles about the Bahrain GP this weekend. It can be found here

Wednesday, 22 April 2009

Why 50%?

New Labour specifically promised not to raise the top rate of income tax in this parliament. The November announcement (of a 45% rate on earners of more then £150k) circumvented this by kicking in only in 2011, which must be after a general election. Now, however they have both increased and brought forward this rate rise (to 50% from April 2010). Why?

Reasons in favour:
1. Revenue. Increasing tax raises revenue (ignoring largely discredited Laffer theories about discouraging or scaring away high earners). However, even the Treasury only expects this tax to raise £2.4bn (compare to the budget DEFICIT of £175bn this year and next).
2. Symbol. There is a widespread feeling that the rich caused this crisis, and that whilst they may have lost more financially (stocks, housing and offshore banking having collapsed), they aren't the ones living hand-to-mouth as a result, and so it is very satisfying for the public to see the rich stung (especially since the personal allowance and base rate have both been made more generous for most people over the past couple of years). See "poorly targeted" in reasons against.
3. Angry mob. Related to symbol, this is a very effective way of drawing a little ire out of people's belief that politicians are representing the rich, and that everything possible must be done to punish both groups for this crisis.
4. Diversion. The deficit numbers are spectacular and so something must be done to draw attention away from the £350bn net public borrowing over the next 24 months. The Tories, to their credit, although entirely self-interestedly are focusing more on the deficit. It is my view that an 8-12% deficit was necessary this year and next, although I also feel that it should quickly return to surplus.
5. Putting the Tories on the spot. Not now, that is, but when they take over. How easy will it be for a Labour Shadow Chancellor to exclaim and fulminate about the Tories helping the few, the élite, at the expense of the many, whenever the next Chancellor tries to remove this tax (and try they will).

Reasons against:
1. Symbol. To those of means, this is a sign that Britain intends to tax them heavily for the forseeable future. Whislt taxes are rising everywhere, they are not equal everywhere, and this will encourage some rich people to shop around for a better country in which to live. They might even be heartily welcomed by countries desperate for their money.
2. Poorly targeted. Most of those who caused this crisis are no longer earning as much as they used to. Those still earning £150k work in countless fields, most of which have little to do with banking and many of which will be the same industries helping Britain (or any other economy) out of the recession.
3. Broken promise. Whilst Labour have (to me) a perfect force majeur defense for this charge, the Tories will use it to declaim any Labour election pledge.
4. It was proposed by the Lib Dems ages ago. Surely someone has pointed this out, but the Lib Dems had this in their manifesto for 2005, so surely the government is only acknowledging the superiority of the 3rd party.

Having said all of that, it was STILL the right thing to do. The symbol of hitting the rich (whilst not hitting them 85-98% as in the 70s) will help the party a lot, especially since it affects so few people (how likely are YOU to be earning £150k in the next 3 years?)

Budget 2009

Budget day and there are some key headlines:

1. Top rate of income tax to be 50%
2. £2000 incentive to scrap 10 year old cars
3. Borrowing to hit £175bn
4. Return of the fuel escalator
5. Changes to ISAs and pensions
6. Lots of other changes

I'll address each in turn below:

50% income tax - In 1988, Nigel Lawson (now Lord Lawson) cut the top rate of income tax to 40%. New Labour have always mentioned in campaigns that they wouldn't increase the top rate of tax. Last November, however, Alistair Darling announced a new top rate of tax for people earning over £150k per annum. This was to be 45% and to take effect in April 2011. It is this tax that has risen, and been brought forward. Now it will be 50% from April 2010. Several other adjustments, to minimise deductions for high earners mean that anyone earning in 6 figures will lose (however this is not many people).

Scrapping incentive - This is not a £2000 subsidy, as implied. Nor should it be confused with the £5000 incentive to buy green cars from 2011, that was announced last week. The government will only put up £1000, with the rest coming from the automobile industry, and will only apply to new cars. So not as generous as it sounded.

Borrowing - The largest peacetime deficit ever, even as a percentage of GDP. In fact only the Second World War sent the budget deficit higher. What is more, 2010/11 will be almost as bad as 2009/10. Over the 5 years whose deficits were announced a whopping £703bn. Which is more than a few. Realistically, the interest on that debt (given yields of 4% over the long term) amounts to £28bn per year forever, unless of course surpluses are run for the forseeable future (recent events have shown that period to be nil, but I speak figuratively). I still think this is the right thing to do, although I'd plan for lesser deficits in 2012-15 than Darling does. Having said that, it won't realistically be Labour in charge by then, so it is someone else's decsion to make.

Fuel escalator - 2p per litre come September, then 1p per litre ABOVE INFLATION every April for the next 5 years, subject to "keeping an eye on fuel prices". Empty promise of green policy, in other words.

ISAs - currently the allowance is £7,200, of which only £3,600 can go into a cash ISA (cash ISAs are lower-risk and lower-reward, except when things go like they have recently). These limits will be increased to £10,200 and £5,100 from next year (unless you are aged over 50, in which case they increase come October - if you turn 50 this winter, your allowance increases on your birthday). This will encourage saving, at a time when people were increasing their savings anyway. At some point I may explain in detail my view on taxing savings interest, but in principle I oppose it, so welcome this increased allowance.

Pensions - For the so-called super-rich, pension credits have been cut. If you earn over £100k you will face a higher marginal tax rate, until your average pension credit drops to 20%, where it remains (rather than the 40% it used to be, and remains for incomes in the £40-100k range).

Other - ask the Beeb. It has a personal budget calculator. Apparently I'll be slightly better off, although that comes mostly from increases in the allowances in line with inflation.

Market response: FTSE up 1%, pound down 1.1% against the dollar and 1.7% against the Euro. That implies that "the markets" believe Darling is doing the right thing, but that those debts must be paid for somehow (hence the drop in the £s value). Most importantly those changes are no greater in scale than usual daily changes, so the Budget was in line with expectations.

Final note: This blog will now focus on Economics. All new F1 related posts can be found on my new blog, the power of 15000 horses.

Sunday, 19 April 2009

Team assesments

Brawn (1st: 36 points): Outdone today, but this was largely due to a key characteristic of their car. It is very gentle with tyres, which means that in the wet, it struggles to keep them warm enough. This will provide them with an advantage in changeable conditions (such as a track drying out) and when it is very hot (or more generally, when the super-soft is in use). They still look good for the title, probably both titles. Prediction: CHAMPIONS
Red Bull (2nd: 19.5): Clearly the best car to have in the wet. When conditions were at or near their worst, the Red Bull was 2s per lap faster than anyone else (even Webber, whose visibility wasn't great behind his teammate). Also quick in the dry, which is usually more important for championships, but not as quick as Brawn. I'm unconvinced that they'll make the same progress as others with the rear diffuser, due to their exisiting system not being as suited to its introduction. Prediction: 2nd
Toyota (3rd: 18.5): A poor weekend for them, but Glock showed his strength in the wet, fighting throuhg to 7th. Will certainly win at some point this year, but may get overtaken by the more traditionally leading teams, later in the season. Prediction: 5th
McLaren (4th: 8): Crisis? What crisis? Today's performance will ease the pressure on the team, ahead of their FIA summons next week. Unless the FIA throw the book at them (which would be ridiculous, but not out of character) they are well placed to improve further. Strong development team can probably get them fighting for wins in the second half of the season. Prediction: 3rd
BMW (5th: 4): Should have had a podium in Melbourne, had a podium in Sepang and yet they were nowhere to be seen here in China. Heidfeld's strategy probably didn't help him out - his wet tyres were thoroughly worn out by the end of the race, having gone on during the safety car period at 1/3 distance. Will need to improve, and aren't due to release their new diffuser for a while, yet. Prediction: 6th
Renault (6th: 4): Alonso looked good this weekend, but Piquet was a disaster waiting to happen in the race. Admittedly he didn't have the upgrades that were on Fernando's car, but he must improve, a lot, quickly to keep his seat for the remainder of the season. The team have upgrades coming over the next few races, which should bring them into the fight for podiums. Prediction: 4th
Toro Rosso (7th: 4): Buemi keeps picking up points through great Sunday performances. However, as the other teams improve, that will become harder and harder. Buemi might manage 10 points this season, but Bourdais won't. Prediction: 9th
Williams (8th: 3.5): Having the second or third fastest car at the opening rounds and scoring only 3.5 points shows that it is what you achieve on the day that counts. Now that their rivals will be catching them up, they will struggle to improve on 8th in the table. Nakajima (like Piquet and the Force Indias) has yet to reach the top 8 in any qualifying session (Q1, Q2 or Q3) or the fastest lap rankings, or score a point in a race. His job will come under pressure mid-season, if that doesn't change. Prediction: 8th
Force India (9th: 0): A great shame for Sutil, that he couldn't bring home that 6th place. He'll have other chances, but not many. Unless of course, their Bahrain upgrade is as good as hoped. The team WILL score points this year, but not many and not enough to come 9th. Prediction: 10th
Ferrari (10th: 0): Another weekend and yet again they leave empty hooved. Massa's pace was strong, but reliability is clearly a problem, even without KERS. Raikkonen was fairly anonymous, after his second stop, ending the race 10th. They will come good eventually, but it will amount to damage limitation for the season. Their 2010 cars will carry numbers in double figures. Prediction: 7th

Prediction assesment

Well the BBC made the best weather prediction. I hadn't believed the rain forecast (assuming it to be an outside chance). The Red Bull is the best car in the wet, that much was clear in Malaysia. The rain, starting under the safety car and the re-emergence of the same on lap 18 scuppered all predictions. It meant that James Allen's predictions were closer to the mark (all about 1-2 laps later than mine) and the BBC's further away (about 2 laps earlier). Perhaps in Bahrain we can get an idea whose methodolgy works best.

My prediction results (same rules as always, 1pt if named driver finishes in top 8, extra point if it is in position predicted):
Thursday: 6/16 (5 drivers, Jenson correctly placed 3rd)
Friday: 6/16 (6 drivers, none in the right place)
Saturday: 8/16 (5 drivers, Webber, Button and Hamilton all correctly placed).
In total I listed 13 different drivers, 6 of whom scored points and 3 in the positions I gave. Shows how predictable this sport is, I suppose. Yesterday's prediction was the best I've managed all year.

Driver reports

How did everyone's race go?
The field started behind a safety car, due to treacherous conditions at the start. The safety car came in after 8 laps, ruining some strategies. The track never dried out, although time did drop from 1min 59s to 1min53s at one point. Congratulations to the 16 drivers who finished, judging by the amount of spins, aquaplaning was a major problem. Any one of them could have been taken out entirely, throuhg no fault of their own, at more or less any point.

Here are my reports, in race finish order:
Vettel - Faultless performance. Helped by good visibility, more or less throughout. Also had the best car in the conditions (this was also apparent in Malaysia where they could almost match Glock on the wrong tyres). Congratulations, thoroughly deserved.
Webber - No hard luck story, merely the second best driver/car on the day. Good fight with Jenson in the middle of the race.
Button - Disadvantaged by the safety car, coming out a few laps before he would have stopped anyway. Outpaced his teammate for 3 periods - overtaking him early on, when Rubens was stuck in traffic and at the end when on newer tyres.
Barrichello - Shouldn't have let Button slip past him. Was hugely disadvantaged by safety car, as he slipped behind Raikkonen, Hamilton and a couple of others - the poor visibility and traffic cost him 2secs a lap. Unlucky that conditions deteriorated after he'd kept his existing wet tyres on (had conditions continued improving he'd have been on Jenson's tail, not having the McLarens on his).
Kovaleinen - Finished a lap, finished a race, beat his world champion teammate. A fairly anonymous race, without errors. Strategy worked well for him, staying out very long and 1 stopping.
Hamilton - Overtook many, many cars, but fell off the road far too often. Still, realisitically he wasn't going to get a much better result.
Glock - Started from pit-lane, enabling him to change strategy. Took his only pit stop after damaging his front wing, but had the pace to fight through to 7th. Well done.
Buemi - It seems that Toro Rosso have got another star-in-the-making. Was running in the top 4 at times, due to strategy. Only mistake came where he didn't see Vettel slowing down as the SC came out. A mistake similar to that made by Vettel in Fuji '07.
Alonso - Made a mistake stopping early under the safety car. He probably had enoguh fuel for 3 racing laps. Went from last and 20s behind Vettel to last and 37s behind within 3 laps of restart - had he waited, he oculd have emerged from the pits mid-pack, and might well have scored points.
Raikkonen - Another race without points for Ferrari. What's worse is that he just wasn't quick enough in the conditions (much like Melbourne in the dry).
Bourdais - Overshadowed by his teammate, but racy at times. I wasn't paying him much attention, but I think he got a little unlucky on strategy calls, but only really deserved 11th.
Heidfeld - One stopped, but too early. His car was fuelled as long as Hamilton, and had he followed McLaren's strategy he wouldn't have faded from 9th to 12th (despite Sutil dropping out) at the end on worn out wet tyres.
Kubica - Anonymous except for the moment where he climbed over the back of a slow moving Trulli. This brought out the safety car, minimising his losses. Car not quick enough, in short.
Fisichella - Overshadowed by his much younger teammate. An anonymous race at the back of the pack - perhaps his car wasn't well balanced on fuel/wet tyres.
Rosberg - Disappointing. Made the same mistake as Alonso, without having the excuse of being as short-fuelled. Never got far through the traffic before risking intermediates as conditions reached their best with 16 laps to go. Rain returned which forced him to change back 8 laps later.
Piquet - Not as fast as his team-mate, but he didn't have the upgrades to the car. Must do better soon, though.
Sutil - Great race, until his car escaped him near the end. 6th place would have been a great reward for his strong wet-weather performances over the past 2 years. He'll mange it next time.
Nakajima - Terrible. Eventually retired towards the end after leaving the track several times, and getting overtaken by his teammate.
Massa - Was on the pace with the McLaren until his car gave up the ghost under the safety car. Shame for Ferrari, as they might have got some points.
Trulli - Worst driver of the day. He had already been overtaken by his teammate (who started from the pits, whilst Trulli started 6th) before Kubica mounted the back of his car. Nothing he could do, thereafter.

Saturday, 18 April 2009

Predictions for the race

Unaccountably, I omitted my post-qualifying predictions from the previous post.

Here goes:

Win: Rubens (outqualified Jenson with more fuel, started better in Malaysia)
2nd: Webber (that Red Bull is quick, even if, fuel adjusted the Brawns were faster in Q3)
3rd: Button (May struggle in the early laps, unless he gets a good start)
4th: Trulli (Mustn't forget those Toyotas, they've been quick in every race)
5th: Alonso (His short 1st stint might help him to a top 5 finish)
6th: Hamilton (Has gained places at every race so far, and more than most/KERS will help)
7th: Heidfeld (Heavily fuelled, may benefit from rain, or else short soft-tyre stint/KERS will help)
8th: Glock (Might just fight his way through the field, as he did in Melbourne)

Hon mensh: Vettel (limited running imply reliability issues), Rosberg (anonymous in qualy, but still has a quick car), Kovaleinen (KERS will help, might last longer than a lap).

China GP grid and post-qualy views

The grid listed below includes the estimated laps worth of fuel, with which the cars will start. Williams estimate consumption of 2.55kg/5km, which is the equivalent of 2.78kg/lap. Naturally, some excess weight is left in (drivers lose eight during a race, cars need fuel to get to grid and do formation lap). For this reason the numbers aren't a simple "car weight-minimum allowable/fuel consumption" function. I'll assess my accuracy against the BBC and James Allen after the race tomorrow.

The grid:
Front row: Vettel (11-12) Alonso (9)
2nd row: Webber (12-13) Barrichello (17-18)
3rd row: Button (17) Trulli (19)
4th row: Rosberg (14) Raikkonen (22)
5th row: Hamilton (24) Buemi (22)
6th row: Heidfeld (24) Kovaleinen (30-31)
7th row: Massa (28) Nakajima (25-26)
8th row: Bourdais (28) Piquet (31)
9th row: Kubica (17) Sutil (13)
10th row: Glock (14) Fisichella (24)

KERS cars in bold, Glock penalised 5 places for gearbox change.
Also note that Piquet does not have the same car upgrades as Alonso, and that Alonso's front row spot is entirely due to having the lightest fuel load.

Tyre choice: In qualifying many drivers were getting a better second lap time than first out of the super-soft tyres, so they shouldn't be as bad as they were in Melbourne. However, a 40%-40%-20% two-stop strategy may still prove popular. That would leave 22-24 lap stints on medium tyres and 10-12 laps on super softs. By this reckoning Vettel, Alonso, Webber, Rosberg, Sutil and Glock are all likely to start on softs.
Barrichello, Button, Trulli and Kubica are on neither here-nor-there tyre strategies, in that their fuel loads should take them to about 1/3 distance, which isn't an obvious level for either tyre. Of course, rain may interfere.

Of the 5 forecasts I viewed (the first five from google) all show a fair chance of rain (though probabilities, where offered, vary from 30% to 90%, though these don't specifically relate to the race period. The BBC predicts heavy rain, but doesn't offer hourly forecasts for non-UK cities.

If it rains mid race, advantage to those about to stop anyway, and to those who have yet to use the softer tyres (as they would no longer have to). If the race starts wet, then advanatage to those who cope best with a drying track (if it dries at all) through timing of stops and car balance. Fuel consumption is slightly less in the wet, so that may affect stop times (as would any early safety car).

Markets this week 14-17 April

Another short week, in that Easter Monday reduced the available time for trading on either side of the Atlantic. No major changes in any of the measures I follow, details below:
FTSE: 4092.8 (up 109.09 or 2.74%)
DOW: 8131.33 (up 47.95 or 0.59%)
£: $1.4797 (up 1.36¢ or 0.93%)
£: €1.1345 (up 2.17¢ or 1.95%)
Oil: $53.3 (down 76¢), £36.02 (down 85p) or €40.87 (down 16¢) per barrel of Brent Crude
Gold: $870.5 (down $9.50), £588.29 (down £11.94) or €667.42 (down 54¢) per Troy oz.

Below is a graph showing trends in the value of oil and gold. The methodology for my indexing is as follows:
(1) The weekend price of each commodity is calculated in each currency by dividing the dollar price by the appropriate exchange rate.
(2) These commodity prices are then indexed, such that the mean value over the recorded period is 100.
(3) The weekly value for each commodity is calculated by a simple average of the three index values for that week (the value for $, £ and €).

Two main points to note:
1) From December through to February, the gold price was consistently rising, whilst the oil price was much more volatile, with a slight upward trend interrupted by big falls. This reflected a general lack of confidence in the world economy, and in the currencies, too.
2) The highest value gold achieved was in the same week as a trough for oil. This correlation is more than mere coincidence. The timing doesn't coincide with any *particular* announcement (it happened before the G20 summit, for instance) but Obama's mortgage bailout plan was annouced the following week, and one of the UK's bank support schemes was also announced around that time. Neither seems to have "turning point" power to it, so perhaps I'm forgetting something. Nonetheless, ever since, oil has been rising and gold falling - both sure signs of confidence increasing.
Thoughts on the week: no news is good news.
Google hits count: "because of the credit crunch" scores 237,000 whilst "despite the credit crunch" manages 305,000. Take that, pessimism.

Friday, 17 April 2009

Obama and the Nuremberg defense

Obama has released memos detailing the interrogation techniques allowed to the CIA under the Bush administration.

Those agents who tortured suspects without exceeding the limits of the guidelines, will not be prosecuted. To me, this is the thoroughly demolished Nuremberg defense.

How is this acceptable to anybody? This "the past is over and can now be forgotten" attitude fundamentally undermines justice, since it brings the expectation that any incoming President would pardon anyone who acted "within the guidelines" in place at the time. Whatever those guidelines happened to be.

China - Friday preview

Friday practise comes and goes, and things appear a little clearer. Of course, Friday times are usually misleading, so caveat lector. Team-by-team updates below:

Brawn: (First session (FP1): P2&P3, Second session (FP2): P1&3) Unusually strong Friday performance from the team. This was put down (partly) to the fact that their car looks after the super-soft tyre best (Jenson put in the fastest times in the final sector). Look exceedingly strong for this weekend.

Toyota: (FP1: 6&8, FP2: 6&8): There or thereabouts. Should maintain their strong early season form. If anything happens to the Brawns, Toyota would be the team to beat.

BMW: (FP1: 16&18, FP2: 17&18) Always slow on Fridays (probably due to different testing schedule. However, this performance is terrible, even by their standards. Will need chaos to score points.

Renault: (FP1: 9&20, FP2: 16&19) Alonso was not running KERS, but did have a new diffusor. That left him 9th and 19th in the two sessions (was the 9th place a so-called glory lap?) Not looking great for the team, but perhaps they are sandbagging. We'll know tomorrow, but I suspect they are in trouble. Nul points, I predict.

Williams: (FP1: 7&19 FP2: 2&7) Rosberg finished just 0.025s away from Button's time, but Williams usually run away with the Friday sessions, so unless they are running more fuel than usual, they've dropped back a little.

Toro Rosso: (FP1: 10&13, FP2: 10&15) Mid table, they did run an adjustable front wing, something Red Bull haven't done, but don't expect them to race with it (5 live's commentary team understood it to be a test run for the senior squad). A race like the 2 most recent might lead to points, a normal one wouldn't.

Red Bull: (FP1: 5&12, FP2: 4&5) Vettel had some problems in the second session, but they don't appear to be too major. Should maintain their place in the top 4, probably as the 3rd fastest car. Racecraft and strategy (and coping with super-softs) will determine whether they end up with podiums, points or nothing.

McLaren: (FP1: 1&4, FP2: 9&13) Aero upgrades appeared to be working in the first session, but if form from the second session (usually better representative of Qualifying form) is repeated, they'll struggle to get into Q3. Better than I expected.

Force India: (FP1: 14&17, FP2: 11&20) A better than usual showing from the team, but this probably reflects the problems of others, more than any improvement by them. Another team who might benefit from chaos.

Ferrari: (FP1: 11&15, FP2: 12&14) Running without KERS (for "reliability" reasons) they are no better, in fact worse than they have been so far. Nul points, most likely.

Updated predictions:
Win: Button (seems to be quicker than Rubens this weekend)
2nd: Barrichello
3rd: Glock
4th: Vettel
5th: Trulli
6th: Rosberg
7th: Hamiton
8th: Webber

That is, I've moved Jenson up, replaced Alonso and Kimi (cars too slow) with Trulli and Webber (not dropping them for "bad luck" any more).

Further updates tomorrow.

Thursday, 16 April 2009

China preview

Another Thursday, another set of predictions.

Team-by-team (now in championship order, rather than my view of their performance):
Brawn-Mercedes: Jenson won both of the opening races, Rubens suffered much mishap on his way to 2nd in the championship and the approval at the Appeals Court of their diffuser. All told, Brawn are in good shape for this weekend. The question remains "have the opposition managed to catch up?"
Toyota: Finished 3rd and 4th in Australia, after starting from the pits (and after Lewis' disqualification). Were in good shape before the rain (Trulli) and during the rain (Glock) in Malaysia. I'm sure that they will manage at least a podium, and will probably lead the race on Sunday. Brawn, in my view, are only just ahead of them.
BMW Sauber: Heidfeld used good tactics, more than good speed, to get his eighth second place finish. However, Kubica is now being given a try at KERS, which implies that the team have found a way to lighten the car. This will only help (because they wouldn't use it if they didn't feel it was worthwhile). Rumour has it that their new diffuser will be ready for Spain. In the meantime they should be scrapping for points, if current reliability trends continue, otherwise 10-14th.
Renault: Along with McLaren, they have a new diffuser for this weekend. This should help them make the leap to the front running pack (joining Red Bull and Williams slightly behind Toyota and Brawn). Alonso to be in a podium place at some stage, finish about 5th. Piquet to finish a race without crashing (well, maybe).
Williams-Toyota: Will push as hard as they possibly can this weekend, as they will find their advantage slowly slipping away. Having said that, I feel they would be contending for the win, were it not for the fact that their car took VERY unkindly to the super softs at Melbourne. I doubt they've fixed that, so that they only suffer as much as everyone else. We'll see. Predicition: points if they finish.
Toro Rosso-Ferrari: Umm. Got lucky for their points. Don't have KERS or a new diffuser. Will struggle. 9th out of 10, in my view. At least one, probably both drivers will drop out in Q1.
Red Bull-Renault: Vettel to secure shock pole position. More realistically, they'll both be in the top 4 rows, with one interrupting the Brawn/Toyota hegemony at the top of the grid.
McLaren-Mercedes: New diffuser (see Renault). One of the best drivers (see his performance in a bad car at Melbourne). I'd say, barring disqualification, that the McLaren will drop out in Q2, and will somehow score good points. Credit KERS (I think it is a slight disadvantage in qualifying, big advantage in the race).
Force India-Mercedes: Rumour has it they are further advanced than Ferrari in their diffuser design, but since they haven't got it yet, expect nothing from them this weekend. Only chaos exceeding what we've seen so far this season will help them get any points.
Ferrari: Last in the standings. Major managerial reorganisation. Surely things won't get worse? They've dropped KERS until Spain (due to reliability issues, apparently). Expect Q3, but few, if any points.

Thursday predictions:
Win: Barrichello (his turn to avoid bad luck, methinks)
2nd: Glock (that Toyota is good)
3rd: Button (some misfortune will strike)
4th: Vettel (something to go wrong for Trulli)
5th: Alonso (that new diffuser will help, along with KERS)
6th: Rosberg (all that effort, and still Williams won't win)
7th: Hamilton (fighting through from 14th on the grid)
8th: Raikkonen (benefitting from others' misfortune)

Wednesday, 15 April 2009

China highlights 2004-8

The BBC provide highlights of their 5 favourite examples of each Grand Prix, in the week preceding the event. This week, due to the 5 year history of the Chinese Grand Prix, that means that they are offering highlights of every F1 race ever held in China.

For 2004 (Barrichello's last win): click here (and what price a repeat podium of Barrichello, Button, Raikkonen- ok, the Ferrari has no chance).
For 2005, 2006, 2007 and 2008 click the links as appropriate. 2007 won their "vote for your favourite" competition, featuring, as it did, the classic image of Hamilton losing control of a 30mph McLaren on tyres that were beyond completely shot.

My pick? 2004, but only because Rubens won. They were all fairly good, but none were superb. Let's see what the weekend brings.


I know I usually claim that daily movements are misleading and that a weekly view is a better way of viewing markets. However, thresholds are thresholds, and I'm glad to see that the pound has surpassed $1.50 in trading today. In fact, the pound has risen today against EVERY currency that the BBC tracks. So bully to us.

To be clear, this won't help the British economy much. The weak currency was helping quite a lot. However, it is a strong signal that the markets generally have a lot of faith in the world economy (and by proxy the British one). This is the good news I'm celebrating.

The pound has been consistently rising in value against the Euro, too, which is a good sign (for me as a potential tourist, if nothing else). Currently it is approx €1.13 to the pound.

Difffusers legal

Phew. The FIA have confirmed that the Brawn, Totota and Williams diffusers are legal. This isn't a surprise, but many fans were nervous. After all, the decision making process has never been predictable. They promise more details later. The most convincing argument of the hearings was provided my Renault, who claimed that the FIA had banned them from using something similar - I assume theirs was illegal on some other grounds.

The race is now on to get double diffusers onto the other 7 teams' cars. Rumour has it that BMW and Force India are best placed. That would be fun, and might put BMW in race winning contention, with FI entering the points (and certainly Q2).

Weather update:
Most sources (MSN search) show clouds and around 22C (or slightly below). However, the BBC differs - it predicts heavy rain. Can't we get something in between?

Tyres: The softer options have been chosen for China, as in Melbourne, unlike Malaysia. Bridgestone are confident that the teams now understand the tyres better so we won't see a repeat of the Melbourne chaos. Predict a couple of Q3 competitors going v. light.

Saturday, 11 April 2009

Markets this week

A much quieter week, without a G20 summit or anything else to create havoc.

No major bank collapsed or anything, it is almost as if everything has calmed down.

Anyway, here's the week-on-week changes:

FTSE: down 45.96 (1.14%)

DOW: up 65.79 (0.82%)

£: down $0.0181 (1.22%)

£: up €0.0126 (1.15%)

Oil: up $0.59, £0.85 or €1.40 (let this highlight the difference between commodity and currency fluctuation).

Gold: down $25, £9.52, €2.92 (so the dollar moved dramatically as measured in gold or €, whilst the €price hardly changed.

A final thought - there is a good reason why news reports mention the percentage rise, as well as the points rise of financial markets. Here is a display of the FTSE and the DOW (revalued into a common currency, in this case £ sterling). It shows their performace since the beginning of December 2008, re-indexed so that their recent peaks at the beginning of the year appear as 100. Again, as always on this blog, data is recorded weekly, not minutely or daily.

I feel that this shows how similar the performance of the two markets have been, in performance, when measured in a common currency. Since early March, both have recovered most of the losses experienced in February.

Thursday, 9 April 2009

Irish cancel Christmas

The Irish budget was annoucned yesterday, and as usual for Irish budgets, it got little coverage in the British news. Compared, say, to a UK budget. This is entirely reasonable.

It is generally very contractionary, which makes sense only if Ireland believes itself to be near bankruptcy. One feature I found less than friendly was in the social welfare expenditure section. A €171m saving is being made by:
Removal of provision for a Christmas bonus payment in 2009.

Which, to me, amounts to cancelling Christmas.

Wednesday, 8 April 2009

Circuit guide/bad joke

ITV-F1 have a video guide to the Shanghai circuit (shaped like a Shang character in the Chinese alphabet, apparently). It involves a blindfolded Nico Rosberg decribing it, whilst tracing (or attempting to trace) the circuit. All well and good but not very interesting. The only reason I mention it is, in case of Nico off-roading, I want to pre-empt anyone making the joke: you're meant to follow the actual track, not the one you drew blindfolded.

Tuesday, 7 April 2009

Half a US Great Depression, every bit a world one

The first half of the title comes from Paul Krugman, in his comparison of this recession against the Great Depression, finding it half as bad (how big does something have to be to acquire capital letters?). It should be noted that the peak date presaged a long slow decline, which is important for comparing the implications with those below).

The second half of the title comes from this report, hat tip to the Economist's Free Exchange blog.
In summary, for the world as a whole, industrial output is falling in just the same way that it did in 1929-30, the stockmarkets are falling FASTER as is the volume of world trade (albeit from a higher base, but without the help of protectionism). They also assess the policy responses of leading economies and find that central banks were equally slow (6 months after peak industrial production) to cut rates, but that they have cut them further, despite starting from a lower base (this uses the Fed, Bank of England, ECB and the central banks of Japan, Sweden and Poland, and although it doesn't explicitly say it, I must assume Germany and France for the earlier response details - it says 7 countries). It predicts that policymakers won't repeat the 1931-2 error of hiking rates to maintain gold parity (or these days, dollar parity). It shows also that the money supply (this time across 19 countries, I assume this disparity is due to data availability) had risen far faster over the period 2004-08 than in 1925-1929. They believe that the money supply has continued to rise (despite quantitative easing, this is not automatic, since most money is created through lending, not printing) which it didn't in 1929 (before catastrophically collapsing in 1931). Finally, they show that fiscal stimuli offered by governments have been much greater than they were.

Basically, they summarise that the situation is FAR worse than 1929-31, but that our collective response has been much better, so things might end up worse, or not quite as bad as the 1930s.

My view: we're doomed (but then I'm not very good at prediction).

Updated baseline scenario

Tired of partial explanations of what's gone wrong and what is being done to fix it?

Baseline Scenario have updated their description of the "baseline scenario" that forms the basis of their analysis of what is occuring.

Key points: Situation a little worse than they suspected it to be last time, Obama policies well-meaning, internally consistent but misguided, and that the US situation is more significant than any other.

This would be perfect, to me, except for the last point (see next post).

Monday, 6 April 2009

Rubens complains about tyres

Auto Motor und Sport quotes Rubens as saying that he asked for the intermediate tyres when the rain came down, but was given wets, and that a couple of laps later he was again refused, on the grounds that "it was about to rain heavily". Another couple of laps later, of course, it did start tipping it down, but had his original suggestion been followed (like Timo Glock) he would probably, nay almost certainly, have been in a position to win the race.


Also, if you remember the Ferrari press spokesman claiming that Kimi was ready to head back out if the race restarted, whilst Kimi was busy eating ice cream, dressed in shorts...

(Found on a forum, yes, I sometimes read forums - only when bored at work, of course).

Sunday, 5 April 2009

A few other points

My pre-race predictions of fuel stops:

Firstly, I can't be judged on those who brought their stops forward for wet tyres, but for the other drivers, I was closer with my guesses than either James Allen or the BBC pre-race show.

Vettel stopped L13 (2 later than Allen and the BBC predictions, 1 earlier than mine).
Rosberg Glock and Sutil stopped on L15 (as Allen predicted, 3 later than BBC, 2 earlier than mine).
Webber stopped L16 (1 later than Allen said, 4 later than the BBC, 1 earlier than my prediction).
Trulli stopped on L17 exactly as I predicted, and he weighed the same as Rosberg, Glock and Webber, so my assesment is reasonable (Glock surely pitted early to prevent both Toyotas stopping on the same lap).
Raikkonen stopped earlier than I imagined, and put on wets, on a dry track. Apparently Ferrari thought the downpour was starting on lap 18.
Button stopped exactly as I predicted, on lap 19, 3 laps later than James Allen's prediction and 4! laps later than the Beeb expected.
Barrichello stopped the following lap, one earlier than I imagined.

Basically, even with the fuel loads published, any guesses about fuel seem subject to a "give or take a couple of laps" degree of inaccuracy.

Last year's leading drivers [2008 points](2009 points so far):
1. Hamilton [98](1)
2. Massa [97](0)
3. Raikkonen [75](0)
4. Kubica [75](0)
5. Alonso [61](4)
6. Heidfeld [60](4)
7. Kovaleinen [53](0)
8. Vettel [35](0)

This only goes to show how different this year's pecking order is. We should allow for the fact that Vettel and Kubica came close to big scores in Melbourne, and that Malaysia was no normal race, but still Brawn have already exceeded their 2008 total (they managed that after one race!)

Immediate response

Well, track action finished an hour ago, and the race was "ended" half an hour ago, but still, this is my version of an immediate response.

1. Congratulations Timo Glock. He judged his tyre choices perfectly, managing to put on inters, when nobody else did, on a track that clearly (he was quicker by 8-12 seconds than other drivers) suited them. When they wore out (he'd been pushing to take further advantage) all the other drivers had given up on their full wets, and so he switched to full wets (on an increasingly sodden track) just as everyone switched to inters. He therefore saved himself from stopping AGAIN for wets.

2. My prediction for dry then wet more or less came true. Whoever had fuelled for slightly longer than it remained dry benefitted. As it turned out, Heidfeld took best advantage, finishing 2nd.

3. My finishing predictions were better this weekend than last, at first glance. Here's my points score:
Thursday: 6/16 (5 drivers in top 8, Jenson correctly placed)
Friday: 6/16 (5 drivers in top 8, Jenson correctly placed)
Saturday: 7/16 (5 drivers in top 8, Jenson and Jarno correctly placed)

Only Heidfeld, of the top 8, did I not predict at all, whilst I "only" chose 4 drivers who didn't score. Compare this to Trulli and Bourdais surprising me in Melbourne, with 8 drivers chosen who didn't feature. Let's see how those figures improve (or don't) over the rest of the year.

For the record, the result and the championship positions:

Win: Jenson Button
2nd: Nick Heidfeld
3rd: Timo Glock
4th: Jarno Trulli
5th: Rubens Barrichello
6th: Mark Webber
7th: Lewis Hamilton
8th: Nico Rosberg

Drivers' Championship:
1. Button 15 points
2. Barrichello 10
3. Trulli 8.5
4. Glock 8
5. Heidfeld 4
6. Alonso 4
7. Rosberg 3.5
8. Buemi 2
9. Webber 1.5
10. Hamilton 1
11. Bourdais 1
12. Everyone else 0

Constructors' Chamionship:
1. Brawn 25
2. Toyota 16.5 (despite both starting from the pits in Australia)
3. BMW 4
4. Renault 4
5. Williams 3.5
6. Toro Rosso 3
7. Red Bull 1.5
8. McLaren 1
9/10. Ferrari and Force India 0.

Yes, that's right, only Ferrari and Force India are yet to score (last season's best and worst team, excluding Super Aguri).

Early days still, but as it stands, Trulli and Jenson could be the title fight. Interestingly, with Trulli's half point, this season could be even closer than the last two seasons....

Saturday, 4 April 2009

Grid and Saturday Prediction

Qualifying was uninterrupted by weather, and featured a notable mistake by Ferrari - they assumed that there were at least 5 cars who wouldn't beat Massa's time, and in fact it was only 4. So Massa will start 16th. Penalties for Barrichello and Vettel also affect the grid, which I inlcude below with predicted first stop laps:

Front row: Jenson Button (19) Jarno Trulli (17-18)
2nd row: Timo Glock (17-18) Nico Rosberg (17)
3rd row Mark Webber (17) Robert Kubica (20)
4th row: Kimi Raikkonen (20) Rubens Barrichello (21)
5th row: Fernando Alonso (26-27) Nick Heidfeld (31)
6th row: Kazuki Nakajima (28) Lewis Hamilton (22)
7th row: Sebastian Vettel (14) Heikki Kovalainen (29-30)
8th row: Sebastien Bourdais (23) Felipe Massa (30)
9th row: Nelson Piquet Jnr (27) Giancarlo Fisichella (27)
Back row: Adrian Sutil (17) Sebastien Buemi (29)

KERS cars in bold, penalised drivers in italics.

Scenario 1: Dry, no forecast rain. Vettel, Sutil, one Toyota and possibly Rosberg or Webber start on softs. Rubens drops further places off the start, to 3 men on 2 following rows with KERS. Heidfeld, Kovaleinen, Massa try one-stopping (start on hard, judge softs based on Vettel, etc and then either 1- or 2-stop). Button favourite, but we'll find out on the day.

Scenario 2: Starts dry, rain forecast: Most teams start on hards, Vettel on softs. Someone will "luck in" on the timing of the rain. Note: if it rains, the drivers are no longer required to run both dry compounds (for obvious reasons). Favourite: still Button, but Vettel, Kimi and Rubens all stand a good chance, if the rain falls conveniently for them.

Scenario 3: Starts wet, but drying. Whoever has the lightest car that will go until the track suits dry tyres will be in the box seat. Ferrari would therefore be well placed.

Scenario 4: Wet, not drying. Whoever copes best, wins. Favourites: Button, Glock, Raikkonen, Barrichello, Vettel, Heidfeld, Hamilton.

I think scenarios 1 and 2 are most likely and therefore predict the following top 8:

Win Jenson Button
2nd Timo Glock
3rd Rubens Barrichello
4th Jarno Trulli
5th Fernando Alonso
6th Nico Rosberg
7th Sebastian Vettel
8th Kimi Raikkonen

We'll find out tomorrow how good these predictions were.

The markets this week

G20 summit and the usual turbulence left most markets significantly higher. Here's my weekly update on the performance (reminder: this is to better follow trends, rahter than get swamped by one day's news).

FTSE: up 130.82 points or 3.36%

DOW: up 241.41 points or 3.10%

£: up 5.22 US cents or 3.65%

£: up 2.35 Euro cents or 2.16%

Oil: up $1.87, down £0.01, up €0.83

Gold: down $21, down £35.49, down €24.02

Below I'll include a graph of the value of oil and gold in £ over the past 4 months (18 weekends worth of data) with the gold price divided by 20, so both can be displayed on the same graph.

These lines are a little different from those for the dollar (which are widely published so won't be repeated here). The oil price has been fairly flat in the past fortnight, since movements in its dollar price have matched those in the $/£ exchange rate. The value for gold is, in fact, more volatile in £ than in $, probably because confidence in the world economy causes the gold price to rise, and the value of sterling to fall, emphasising shifts in the £ price of gold. In the past fortnight the price has tumbled, far faster than it appears to have in dollar terms.

Friday, 3 April 2009

Malaysian Predictions - Friday

Friday practise (in hot, dry conditions, rather than the warm, wet ones expected for Sunday) showed a similar picture to Melbourne.
Purely judged on times, you'd guess it was a Williams/Ferrari race with Red Bull and Brawn just behind. BMW would be fighting to avoid last place (but then BMW are ALWAYS slow on Fridays).
Realistically, I'm only going to adjust my predictions slightly: Rubens got a 5 spot grid penalty, so he'll have a harder job on Sunday.

Win - Jenson Button
2nd - Kimi Raikkonen
3rd - Rubens Barrichello
4th - Nico Rosberg
5th - Mark Webber
6th - Sebastian Vettel
7th - Robert Kubica
8th - Timo Glock

I'm still expecting rain, so will put my mistakes down to incorrectly judging who'll slide off (Trulli, Massa and Nakajima, for instance).
Guess 3 to come after qualifying.

Thursday, 2 April 2009

Malaysia - or Melbourne revisited

So the paddock and press arrive in Sepang, and start talking about the race ahead. Well, almost. As per Formula 1 ritual, they in fact are discussing stewarding decisions from the previous race (both Vettel's grid penalty, and the overturning of Trulli's penalty, without appeal and the disqualification of Hamilton, fo rmisleading the stewards).

Firstly, I'll re-reasses my predictions from the last race. By the previous scoring method (one point for each named driver appearing in top 8, 2 points for any correctly placed) I now score:
Thursday: 5/16 (4 drivers, Alonso correctly placed)
Friday: 6/16 (5 drivers, Alonso correctly placed)
Saturday: 3/16 (3 drivers, none correctly placed).

Now, how about some views on this weekend?

Firstly, the weather. Storms and heavy rain are predicted, and some are anticipating a premature red flag, due to poor visibility (either through the rain, or the darkness after rain delays proceedings). This favours weaker teams, as it reduces the significance of their lesser cars. It also favoured experienced drivers (or those who specialise in the wet, I'll name Button, Barrichello, Vettel, Sutil, Heidfeld and Webber as drivers who have taken advantage of poor conditions before). It should also favour those teams who have experience driving this year's car in the rain (all bar Toro Rosso, Force India and crucially Brawn).

Good wet-weather drivers, great tactician (Ross) but no wet weather practise. Hopefully, they'll be able to take advantage of Friday practise to get accustomed to the handling of their car in wet conditions. If it is dry, then the race is theirs. If it is wet, it will probably be theirs anyway.

Now second in the championship thanks to their "3rd and 4th" finish in Melbourne. They have some experience of their car in the wet, and Glock did well in such situations in testing. Should be well placed, and might well match their Melbourne form, barring accident or further penalties.

Thrid in championship thanks to Fernando. Will suffer greatly here, but storms may provide Fernando with the chance to put in a virtuoso performance. Nothing else will save them from a zero-point weekend.

Showed good pace last weekend, and may be able to take better advantage of it, now that they have put a race weekend behind them. Should score points, assuming they finish, and will almost certainly be in the front 3 rows on the grid.

Toro Rosso:
Joint fourth (technically fifth) in the table after their fortunate double-points finish of last weekend, they will be hoping for an equally chaotic race to further their chances of scoring points. I still feel the team is favourite for 9th place in this year's standings.

Last year they were atrocious in the wet, but Kimi has performed well before. They will have a very tough weekend ahead of them if they want to score more than a few points. Any less, and there will be outrage in the Italian press.

It will be interesting to see whether Heidfeld uses KERS again this weekend. It wasn't all that useful for him last weekend, but might prove crucial in chaotic wet situations. Should put one car in the top 6, and probably both in the top 10 in qualifying. They will also expect points for both cars, supposing again that they finish.

Many eyes will be on them as controversy yet again flies around Lewis and the team. They know that this will be a tough weekend on the track, and today's news won't help them to focus.
However, on a wet track, Lewis can amaze crowds, and stands a good chance of ending on the podium or in the wall. If it is dry, neither car will score.

Red Bull:
Very fast last weekend, I expect one of the cars to be light-fuelled to try and start from the front row (on softs if there is no rain). Both drivers are good in the wet, especially Vettel, so this could be their weekend (a win even, if anything happens to Brawn).

Force India:
With the greatest will in the world, rain, chaos and dodgy stewarding decisions are the only chance Force India have of featuring this weekend.

So, now for my Thursday predictions:

Win - Jenson Button
2nd - Rubens Barrichello
3rd - Sebastian Vettel
4th - Robert Kubica
5th - Lewis Hamiton
6th - Timo Glock
7th - Kimi Raikkonen
8th - Mark Webber

This supposes rain, and accidents wiping out some of: Heidfeld, Massa, Trulli and the Williams cars. Let's see if Friday practise will change my views - I'll let you know tomorrow.