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Thursday, 8 June 2017

Quality of Information

There is a buzz around the London Stock Exchange, stimulated by informed rumours that the government of Saudi Arabia is likely to launch the state oil company - Saudi Aramco - onto the exchange. The normal rules of the London Exchange require at least 25% of the equity in a company to be made available for purchase, for the listing to conform to the basic requirement that a price per share that is struck in the market is a reasonable reflection of informed stock-pickers' valuation of the shares. It is rumoured that the Saudis want to put as little as 5% of the stock on the market in the first tranche; and that there is some discussion going on as to where agreement might be reached as between a 5% and a 25% float. Any solution of this issue would have to be allowed by the Financial Reporting Council, and other regulators, if a London launch is to be effective.

Saudi Aramco is generally agreed to be the biggest firm in the world, larger than the star-studded 'technology' giants [Google, Apple etc] and producing about twice as much oil per day as Exxon, which was for a while the world's biggest company whose shares were traded. Verifying the data issued by a company of such magnitude, so closely associated with the ruling family of a secretive, absolutist state, raises it own problems. Are hidden discounts and premiums arranged in some of its sales, on political grounds? What settlement methods are used to ensure that revenue figures are even approximately reflected in transactions? And, what oil reserves does the company control?  By a remarkable coincidence, the company's books indicate year after year that almost exactly as many barrels of reserves are discovered as the barrels of oil that are sold in that year. It could be that much greater reserves have been discovered than have been disclosed, and that disclosures of genuine reserves balance sales every year: but it does cast doubt on the whole scenario. Thus, if a stock-market launch is achieved, the old rule of "Buyer take care!" - in Latin, caveat emptor! - will apply.

British voters, entering the polling booths today, are in a sense 'buyers'. The parties have made their sales pitches, and the time for thinking is over. Commentators in the media and in the pubs and bus queues around the country have said that it is a most unusual election.

Mrs May called the election 'unnecessarily', under the impression that she would stroll on to a big majority in the Commons just by declaring herself to be "strong and secure"; and although she repeated that phrase many times yesterday [almost as if it were an incantation in some primitive religion], virtually nobody who heard it believed it. She has shown herself to be weak, both intellectually and in the ability to judge the reaction that the electorate will display to the ideas pushed out by her politically-inexperienced kitchen cabinet. She has been outrageously tight-lipped on what she expects to achieve in the crucial Brexit negotiations, showing no empathy with the 48% of voters who favoured Remain or with the probably-thirty-per-cent who are passionately pro-EU. She has shown no wish, or capability, to reconcile the nation. She has told us nothing on which we could base a rational decision in her favour.

The Labour 'Gang of Three' are suddenly reduced to a duumvirate  by the removal from the front line of the huge embarrassment of Diane Abbot; too late for an abiding impression of her inadequacy to fade from voters' minds. The Labour party has a huge problem with the electorate today: they have hit upon policies that seem to many people to be a marvelous antidote to the idiocy and cruelty of Cameron-Osborne austerity: they are risky, but no less than the risks the Tories would take with the cohesion of the nation if they continue with Osbornism [as they threaten to do]. The huge burden that all the Labour parliamentary candidates carry is the long record of anti-patriotic utterances by Corbyn, McDonnell and Abbot; which show appalling misjudgment about the evils of terrorism. Such statements are inexcusable. It looks as if Labour will be sufficiently handicapped by this legacy that they will fail to be the biggest party in the Commons; and the party will then fall prey to internal disputation. If Corbyn refuses to resign [permanently] as leader, the moderate majority of Labour and Co-operative MPs will have to 'consider their position'; which means that the launch of a second May government would be met by no effective opposition.

Paradoxically, Labour has given the electorate enough information to inspire people with their policies, while the press has gleefully supplied enough of the downside to alienate the electorate from Labour's leaders. The Tories have told the voters nothing of what they deserve to have been told: yet it looks like a small majority of the nation will vote for the party which has insulted us with obfuscation.

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