Friday, October 30, 2009

Carlisle preview

You have to admire the hardiness of the 527 Charlton fans making the 660 mile round trip to Carlisle.

For fans aged below thirty, this fixture is yet another otherwise meaningless Northern away day. However for their more experienced brethren, it has all the romance of a candlelit dinner for two.

In both 1981 and 1986, promotion was sealed for the Addicks at Brunton Park. In the case of the latter, it sealed a remarkable season in which Lennie Lawrence’s new-look side somehow managed to maintain momentum despite the destabilizing impact of leaving The Valley.

The special togetherness and bond between fans and players which still exists today, owes much to that season and the refusal of either to lose hope that a better future would lay ahead.

For a town hovering on the edge of some of England’s most beautiful countryside, Carlisle is a surprisingly rough place, with football fans to match.

Poor Nicky Bailey is likely to fill the ‘brunt’ (no pun intended) of their wrath on Saturday thanks to an incident whilst playing for Southend, during a vital late-season fixture in 2007/8.

Carlisle joined the Football League in 1929, and did not achieve their first promotion until 1964. A heady decade followed and culminated in a single appearance in Division One in 1974/75, finishing bottom.

Their experience since then has been bleak, particularly a dire spell from 1998-2004 in which they finished 23rd, 23rd, 23rd, 22nd, 17th, 22nd and 23rd respectively during seven consecutive Division Three campaigns.

Although goalkeeper Jimmy Glass’ heroics saved them once, they were finally and deservedly relegated to the Conference in 2004, before bouncing back with two straight promotions to the level they now find themselves in.

Play-off semi-final defeat to Leeds in 2008 marked the peak of their fortunes, and they narrowly avoided relegation last season finishing 21st, just one point above relegated Northampton thanks to a last-day home victory over Millwall.

Averaging just a point per game so far this season, there is little to suggest that 2009/10 will be anything other than another relegation dogfight. Brentford, Exeter, Brighton and Norwich have all left Brunton Park with the points this season, suggesting that travel fatigue cannot be used as an excuse by Phil Parkinson’s men.

Having been gifted the lead at Priestfield on Saturday, it was disappointing to lose defensive concentration just minutes later and give up two much-needed points. Phil Parkinson used the adjective ‘pleased’ to describe the point gained, a word he seems to be overusing given our rather dodgy recent form.

The draw did extend our unbeaten run to four games, but there is no denying that the momentum garnered by those extraordinary first six games, was firmly lost with the visit of Alan Pardew’s Southampton side on 12th September.

The subsequent accumulation of just 11 points from the 8 games since has been something of a ‘reality check’, and now injuries are beginning to take their toll.

The injury to Rob Elliot is highly unfortunate given he has proven himself to be a most able shot-stopper, even if he needs to improve his goalmouth presence.

With Darren Randolph largely unproven, it would be no surprise to see on-loan Carl Ikeme make his debut. This will no doubt please the Carlisle fans who witnessed the Nigerian concede six on his last visit to Brunton Park, whilst on-loan at Stockport.

At right-back there is another mini-crisis with continued doubts over Fraser Richardson (although he always seems to pull through), and an injury to understudy Chris Solly. If Richardson is not passed fit, Kelly Youga will presumably move to right-back with Grant Basey filling the gap on the left.

Jonjo Shelvey was again left on the bench on Saturday, a decision likely to be reversed in my view as Izale McLeod reverts back to the bench in favour of a 4-5-1.

Thus I think Parkinson will line them up as follows: Ikeme, Youga, Basey, Sodje, Dailly, Bailey, Shelvey, Semedo, Sam, Racon, Burton. Subs: Randolph, Llera, Spring, McLeod, Mooney, Wagstaff, Tuna.

NY Addick predicts: Carlisle 1 (Dobie), Charlton 2 (Burton, Shelvey). Att: 6,891.

Thursday, October 22, 2009

Gillingham preview

Reading through all of the lovely comments after my last post was a humbling experience.

I'm not sure if and how I want this blog to continue, but for the timebeing I will plough on.

I wasn't intending to call it a day until we returned home on a permanent basis anyhow, so I feel a little like someone who wakes up in the middle of their own funeral as the tributes are being read out.

Ironically as I'm now back in the UK without the family, I suddenly have a bit of spare evening time to write a preview.

Unfortunately I won't be at the Priestfield Stadium. I would have struggled to get a ticket in the Charlton end, and whilst I am not particularly averse to watching matches from the opposition stands, it looks as though even they will be sold out.

Anyhow for perhaps the first time in my life where a decision involving possible attendance at a Charlton match is concerned, I've shown admirable maturity and will instead be viewing some potential rental properties.

Indeed if a spell abroad has taught me anything about my love for the club, it's the realisation that missing games really isn't the end of the world.

Whether or not I will feel the same way when home games are only an hour's drive away again remains to be seen, but I suspect many regular match goers might surprise themselves when they realise how little they would actually miss it.

I've only made one trip to Gillingham (for a preseason friendly in the 1990s if my memory serves me right). It was certainly an eye-opener to learn that not all of the county of Kent looks like Royal Tunbridge Wells or Sandwich.

The Gills have never been a true local rival in my eyes, but a useful repository for former Charlton players no longer good enough or young enough for the mighty Addicks.

Even a number of their former managers have Charlton connections, including Keith Peacock and Mike Flanagan. Those with longer memories meanwhile will recall that Andy Nelson was Gillingham manager before joining Charlton in May 1974.

A swift look at their squad list hammers home the point....Simon Royce, Barry Fuller, Mark McCammon, and Rashid Yussuff all failed to make the grade at The Valley, although Royce served as a useful understudy during two spells.

Infact, I'm probably doing him a disservice. During the relegation season of 1998/1999, during which Sasa Ilic dominated the keeper's jersey until the turn of the year, Royce played eight matches and kept four clean sheets.

The talented but erratic Andy Petterson saw out the final few games of the season, before Curbs swiftly and sensibly signed Dean Kiely. The rest as they say, is history although for Petterson it was a complicated one.

Unless my data sources are playing a cruel trick on me, he was on the books of fully fifteen more clubs after leaving Charlton, making first team appearances for ten of them. Is this some sort of record?

Until the current decade, Gillingham's entire league history had been played in the bottom two divisions, and they even suffered the ignominy of spells in non-League.

Their most famous fixture was surely the astonishing Wembley play-off defeat to Manchester City in 1999, which for some clubs might have been impossible to recover from.

They conceded two goals in the final minute, having gone 2-0 up in the 81st and 86th minutes respectively, going on to lose on penalties.

In light of the riches that City now enjoy, one wonders how different they may have looked today, without Paul Dickov's late equaliser back then.

Nonetheless the Gills bounced straight back the following season under Peter Taylor, beating Wigan in the same fixture and thus winning promotion to the League's second tier for the very first time.

They managed respectable finishes of 13th, 12th and 11th under player-manager Andy Hessenthaler (Taylor having left for a disastrous spell at Leicester), before a 21st place finish was the precursor to relegation in 2004/5.

As seems to be a common occurrence (now afflicting Charlton), it required a further relegation in their case back to League Two, to permit a degree of stabilisation.

Current boss Mark Stimson joined in November 2007 after considerable non-League success with Grays and Stevenage Borough, and eventually turned their momentum back round.

He was not able to avoid relegation during his first season (despite some help from Chris Dickson), but they bounced straight back via the play-offs helped naturally by an ex-Charlton connection, this time Josh Wright.

Wright incidentally is now enjoying regular first-team football with mid-table Championship side Scunthorpe, victors over Newcastle in midweek. The decision to let him go was understandable perhaps given his rumoured fallout and midfield competition, but letting him go for nothing remains somewhat bizarre.

Gillingham's League One form this season is all over the place, with just one point gained away (at Walsall), but ominously only four dropped at home.

Wins over Swindon, Exeter, Millwall and Wycombe have helped push them to a respectable 16th position, suggesting that Stimson acknowledges that their home form alone may be enough to keep them up this season.

Pint-sized striker Simeon Jackson continues to win the plaudits, and in common with the above theme, all of his seven goals this season have come at home.

It is not clear whether Phil Parkinson's interest in the striker was real, or a cheeky riposte to the Gills' renewed interest in Dickson. Nonetheless let's hope he tries 'too hard' to make a point, rather than let his obvious natural finishing ability do the talking.

The 2-1 Valley win over Huddersfield was extremely timely, briefly catapulting the Addicks back to the summit of League One despite just two wins in seven.

As I suggested in my preview to that game, Jonjo Shelvey was sacrificed to allow a 4-4-2 offering Izale McLeod a first start which he grabbed with both hands (or one head in this case).

The second half return of Jose Semedo was the biggest boost however, the Portuguese is arguably the team's most important player.

If he is 100% match fit and with Gillingham's home form in mind, I would expect us to revert to 4-5-1. I'm not sure the formation was the problem in recent matches, but his absence from it.

Thus I expect us to line up as follows: Elliot, Richardson, Youga, Sodje, Dailly, Semedo, Bailey, Racon, Shelvey, Sam, Burton. Subs: Randolph, Llera, Basey, Wagstaff, Spring, McLeod, Mooney.

NY Addick predicts: Gillingham 1 (Jackson), Charlton 2 (Burton, McLeod). Att: 8,498.

Tuesday, October 20, 2009

Homeward Bound

"Maybe tomorrow, I'll want to settle down. Until tomorrow, I'll just keep moving on." (The Littlest Hobo, 1979)

I fly back to London later today for a business trip, a precursor to a permanent move back home in six weeks' time. Our time in New York is rapidly coming to an end.

Upon the fifth anniversary of our move to the Big Apple, I wrote a piece from the heart about the experience we had enjoyed here.

I am relatively sanguine about the prospect of leaving. I've increasingly become conscious that Manhattan is a place for the young, single (or at least childless) and the rich, or preferably all three at once.

Given that I am none of the above, our time here has thus reached a 'natural' end. It is time for the next chapter in our lives.

Certainly when one finds that weekdays are more enjoyable than weekends, it's time to reevaluate one's life situation. Since our second son was born, I've coined the phrase "Monday morning is the new Friday night."

Admittedly he has been a very difficult baby, which has not helped matters. If I took him on a tour of the country's secondary schools, teenage pregnancy rates would plummet; this kid could do more for population control than the condom.

Fellow New Yorkers with young kids tend to make life more bearable, by finding a suitable weekend escape from the city whether to parents in the suburbs, or perhaps a second home (hence my comment above about the rich).

The obvious transitional step would be to move as a family to one of those suburbs, but we figured we'd feel isolated without fully buying into the whole American lifestyle.

Moreover if we considered it likely that we'd eventually move home anyhow, it's surely fairest to the kids to do it before they reach school age, than when they're settled into schools and amongst friends. They will however retain their (dual) citizenship which pleases me.

We'll thus avoid the horror of their American accents, as well as the ignominy of developing our own mid-Atlantic twang, the tell-tale sign of an expat who overstayed.

Living abroad brings a new and generally positive perspective to Blighty meanwhile, which for all its drawbacks still firmly remains 'home'.

I have missed the UK's humour and quirks, whilst life away makes you appreciate institutions like the BBC that are often taken for granted.

It is a hellishly expensive country to live in of course, but it lacks the rampant commercialism which pervades so much of life in the US. One can live with less 'fear' back home.

It saddens me however that there seems to be a pervasive thread of nastiness running through UK life these days, although I wonder how much of it is media-driven. There always seems to be the threat of violence lurking, imagined or otherwise.

Our well-developed tradition of self-deprecation and irony can easily be interpreted in a destructive way, when left to those too ignorant to appreciate it, especially teenagers it seems.

America has enough of its own problems of course, grinding inequallity being the worst (as best exemplified by its healthcare system) but it seems to have greater pride in its history and traditions. This may just be by virtue of its relative youth.

Philanthropy is an integral part of life here, not an occasional £20 donation to someone running a marathon.

We will leave behind good friends, but rejoin old ones as well as some we made in New York, who themselves since returned back to the UK.

After over five years of perhaps the purest urban experience in the Western world, we are keen for a quieter life as we seek to find somewhere new to live.

The mother-in-law has declared her nervousness about motorway driving, which led me to enquire about long-term stays at the Travelodge at Toddington Services (rooms very small unfortunately, and noisy too).

Realistically we intend to settle somewhere in The Chilterns, an area we researched thoroughly when we were back in August, and liked very much.

Indeed I recall there used to be an enthusiastic official Chiltern Addicks club, so perhaps this can be the catalyst for its reformation?

I'd be sadder about leaving New York, if I wasn't fairly certain that I'd be back on a regular basis, hopefully as often as several times per year.

My much-loved runs in Central Park will be something to look forward to and savour, rather than snatched inbetween nappy changes and bottle feeds.

Although I remain somewhat undecided, it also feels like the right moment to bring this blog to a close.

Writing it has felt like a chore in recent months, and frankly I no longer have the time. There are plenty of excellent newer ones, as well as sites like Charlton Life to fill any small gap that this blog might leave behind.

By way of example, it's taking me so long to write my piece about Richard Murray approaching the Dragon's Den for new investment, that they've already found another £7million. It's certainly taken the edge off some of Duncan Bannatyne's more biting observations.

Living abroad has also hopefully given a different and interesting perspective to Charlton matters, as well as other subjects that I occasionally turn my hand to.

Moreover for the blogging fraternity, the past few years will surely be looked back on as the halcyon days, for those keen to provide incisive and thought-provoking debate.

Two relegations and five managers have provided considerable fuel, occurring after fifteen years of near linear progress that must have been terribly dull to opine upon.

Equally it's no surprise that this season's table-topping exploits have been the least interesting to write about for me. Much easier to write about things going wrong.

The blog meanwhile has allowed me to meet dozens of interesting, friendly and equally passionate fellow supporters. Ironic that I had to move nearly 4,000 miles to achieve this.

Until moving to New York, supporting Charlton had been virtually a solitary pursuit. Hopefully these connections will become stronger as my attendance at matches increases.

Strangely enough, writing reports on the occasional matches I've actually seen live has been one of the least satisfying aspects of the blog.

I want to just go to enjoy them again, rather than cheekily taking notes on my Blackberry like a budding young reporter.

Perhaps the rumoured takeovers by David Sullivan or a consortium fronted by Dennis Wise will provide new excitement, but both leave me stone cold and even less interested.

Either way I'll probably keep the blog alive for the occasional brain dump because sometimes when the Guinness has kicked in, I just can't help myself. However let's be honest, Berkhamsted Addick doesn't quite have the same ring to it does it?

Friday, October 16, 2009

Huddersfield preview

The two most overused words in football are probably ‘important game’, but tomorrow’s fixture against Huddersfield is definitely an important game for the Addicks.

Despite three games without a goal, and just one win in our last six, we will nonetheless go back to the top of League One with a victory over the 8th placed Terriers.

By way of a timely reminder that it’s vital to check the club website before writing a preview, the club has signed striker David Mooney from Reading on an ‘emergency loan’.

Somehow the term ‘emergency’ conjures images of the player arriving at the training ground in a police convoy with sirens blazing. It can’t do much for Izale McLeod’s fragile confidence either when the mere thought that he might start a League match is considered cause for an emergency.

Following an excellent start to the season which saw Lee Clark’s men firmly installed as an early candidate for a promotion push, Huddersfield have fallen away somewhat in recent weeks.

Four wins and a draw from their opening six games (including a 7-1 thumping of Brighton), have been followed by a lackluster spell similar to Charlton’s, also managing just one win in their most recent six.

Despite averaging just a goal a game during their most recent half-dozen matches, they remain second highest scorers in the division with 23 goals, five more than Leeds.

Somewhat surprisingly they are second highest-scorers behind Norwich City who lead the way thanks to 21 goals in just their last 9 games, and 24 overall.

Bookmakers have woken up to the form of the Canaries, installing them as clear fourth favourites to win promotion; I wonder how many punters backed them after their opening day 7-1 defeat?

Over a third of those Huddersfield’s goals this season have been scored by teenage starlet Jordan Rhodes. The powerful striker joined from Ipswich after a successful loan spell at Brentford, and his eight-minute hat-trick against Exeter last weekend (all headers) has doubtless already assured him cult status in Yorkshire.

Just like last weekend’s visitors Oldham, I have only made a single trip to Huddersfield and it also coincided with an unhappy opening day fixture, this time a 2-0 defeat in August 1996.

Keen historians will be aware of Huddersfield’s proud early history, winners of three consecutive League titles from 1924-26, initially under the stewardship of Herbert Chapman before he departed for Arsenal and led the Gunners to 1930s domestic football domination.

Five more top three finishes followed either side of the Second World War, but in a way not dissimilar to Charlton, they began to decline in the early 1950s and since relegation to Division Two in 1956, they have spent just two seasons back in the top flight (1970-72).

Three relegations in just four seasons immediately followed, and despite two subsequent spells back in the second-tier, they have spent the majority of the past four decades in the bottom two divisions.

Things began looking up in 1994 however when their fabulous new stadium opened, a oft-forgotten lesson therein for dozens of clubs who did not appreciate that new stadia can be both modern and interesting.

We will not visit again until late-March, but in the meantime Phil Parkinson must find a way to win matches again after a spectacular start.

Some unfortunate injuries notwithstanding, it was inevitable that teams would begin to formulate a game plan to neutralize the dynamic 4-4-1-1 formation which garnered those six early wins.

This is partly because for all but the most organized League One clubs, the scouting file labeled ‘Charlton Athletic’ will have been understandably empty during those early fixtures. We are less of a surprise package now.

Fans including me have spoken of the need for a ‘Plan B’. So far this season Parkinson has only opted for a 4-4-2 formation for example in the latter stages of matches.

The Oldham manager spoke of their deliberate attempt to mark Jonjo Shelvey out of the game, and indeed despite the youngster’s talent, I’ve long felt that he may need to be the player sacrificed in any such ‘Plan B’.

After all there’s no point having a player in a ‘free role’ if the opposition have him shackled. He does not yet appear to have the discipline to play a central midfield role in a traditional midfield quartet.

Losing the vital Jose Semedo has clearly unbalanced the side, both for his role in shielding the defence as well as his willingness to let the likes of Therry Racon, Nicky Bailey and Shelvey pull the creative midfield strings.

If the Portuguese remains absent, it may be preferable to move Bailey inside to firm things up in central midfield alongside Racon or Matt Spring, whilst using Grant Basey’s natural left foot and defensive discipline to provide width.

Perhaps using McLeod’s pace from the start alongside Deon Burton or the 6ft+ Mooney will force the Huddersfield defence onto the back foot, and provide gaps for the late arriving likes of Bailey and Racon to exploit.

In this way, rather than the introduction of McLeod from the bench being the preferred alternative attacking threat to tiring defensive legs, instead the unpredictability of Shelvey would offer a late-game option if required.

Having said all of that, I expect them to line up as follows: Elliot, Richardson, Youga, Llera, Dailly, Spring, Racon, Bailey, Sam, Shelvey, Burton. Subs: Randolph, Semedo, Solly, Basey, Tuna, Mooney, McLeod.

NY Addick predicts: Charlton 1 (Bailey), Huddersfield 1 (Rhodes). Att: 16,881.

Tuesday, October 13, 2009

Financial Meltdown, Part II

”I have enough money to last me the rest of my life, unless I buy something.” (Jackie Mason)

Having discussed the build up to the boom in Part I, Part II will focus on its bursting and the challenges it brings.

One of my favourite pithy ways to summarise the past few years, is to emphasise that if the good times never ended, then they’d just be called the times.

The key assumption that asset prices could only rise, was prevalent throughout the boom.

If this were indeed true (and not merely in ‘good times’), then the rational course of action was to maximise asset accumulation, and not concern oneself with the servicing of the debt thereon.

This mad rush to borrow to purchase assets was observable not only at the individual level (think of the ‘buy to let’ phenomenon), but also the corporate level (eg. Lehman Brothers) and even the level of an entire sovereign nation.

Consider the amazing case of Iceland for example. For decades it enjoyed a peaceful and prosperous existence, thanks to its abundant fishing industry, natural geothermal power and its vital Cold War military location halfway between the US and Russia.

So what on earth persuaded the Icelandic people that what the world really needed from them was their banking prowess?

Nonetheless during the course of just a decade, its three major banks (Kaupthing, Landsbanki and Glitnir) managed to build up an asset base equivalent to more than eight times the size of the entire Icelandic economy.

As the Icelanders and many others are now finding out, much of the apparent prosperity of the last decade has been a chimera created by borrowed money. Even those that were sensible with money benefited indirectly, from the spending of those that were not.

Credit served its short-term purpose, offering a glimpse of prosperity that hasn’t been earned yet. However given that debt is merely consumption brought forward, borrowers must now retrench and those bills now have to be paid.

The economy has thus plunged into recession and when it slowly emerges and returns to a degree of normalcy, it will be less dynamic than before (more about this in Part III).

We have only avoided a 1930s style outright depression through the partial replacement of lost consumption with government spending.

Via a globally-coordinated plan, much of the debt overhang in the private sector (especially at the banks) has been replaced by debt at the public level.

This has been both explicit via outright nationalisation, and implicit via a myriad of complex asset guarantee schemes (some of which may hopefully never actually be required).

In addition governments around the world have embarked on stimulus packages, in order to act as a source of new exogenous demand to fill the black hole left by lower consumption.

The policies enacted so far can probably be described as one of the finest ‘deferrals’ of major problems in modern times. After all this extra government spending must eventually be paid for by higher taxes, higher debt interest or some form of money debasement (inflation).

This fiscal spending boost is temporary, but if it were channelled more towards infrastructure projects or education, then there would at least have been some long-term benefits to the younger generations upon whom the bulk of the debt burden will now fall.

Instead the government has tended to prefer short-term measures like the car scrappage scheme, effectively a handout with no discernible long-term benefit.

Allowing the irresponsible to fail, or investing public money in long-term projects whose benefits may not be seen immediately, is politically unpalatable it seems.

Why was taxpayer money spent for example on repaying UK depositors in those Icelandic banks, despite the warning signs? Where instead is the refund on interest foregone for those savers who sensibly deposited money in more staid institutions? This is ‘moral hazard’ gone mad.

However for the timebeing the presence of an overbearing government in the economy, has been described as being akin to having a “..bear in a canoe..” You’d rather he wasn’t in there with you but if he jumps out now, the canoe will capsize.

Government debt in the UK is projected by the Treasury to peak at 80% of GDP. If the average interest rate on this debt is just 4%, merely servicing this debt will cost the government as much as the combined 2009 budget for education and defence alone.

In a recognition of tough times ahead, it is already clear that the forthcoming UK General Election will have austerity measures at the very heart of campaigns.

I will discuss the implications of the sudden increase in government indebtedness in Part III, but I find it somewhat comforting that this issue is already being debated so publicly.

At least whilst the politicians may be both greedy and stupid, it seems they are reassuringly not mad too, collectively recognising that we must take some considerable pain now to avoid even worse calamity later.

Structural long-term unemployment is likely to remain uncomfortably high though, with all of the social problems it brings.

Just as the benefits of the boom were not evenly distributed, neither will be the costs of its unravelling. The large (but so far irrelevant) boost in support for the BNP can be seen in this context.

For unemployment to fall materially, it requires real GDP growth to exceed the rate of productivity growth plus the rate of growth of the population available for work.

Yet it is now clear that much of the economic boom of the past decade (in which job creation was strong) was driven by a credit machine that is now broken.

It is thus difficult to see how unemployment can fall because rates of economic growth will not be high enough to let it happen.

The media meanwhile has clearly charged bankers with causing the meltdown, but this is at best simplistic, and at worst plain wrong.

If house prices are oddly the ultimate gauge of the public’s optimism, then few were complaining when the wild credit expansion of those very banks directly caused them to rise.

A cynic might argue therefore that it wasn’t what the banks were actually doing that was so upsetting to the public, but the fact that they eventually blew up (which isn’t quite the same thing).

As I discussed in Part I, bankers were merely acting rationally as regulators and politicians turned a blind eye, surfing on the wave of popularity that their fake boom was creating.

Indeed I’ve often thought that a benevolent dictatorship might be more suitable than a democracy for managing the greed and fear of an economic cycle, capable of making difficult decisions without fear of electoral consequences.

Shareholders were complicit too, many of them overseeing the pension funds of those very members of the general public now feeling so angry at the course of events.

The share prices of banks were awarded the type of valuation multiples typically reserved for true growth companies, yet surely in sum the banks can only grow at the same rate as the economies they service?

Bonuses are seemingly abhorrent to the public, but it is the way they were paid rather than their very existence which represented the true menace, despite the headline-grabbing rhetoric. This issue is now being addressed by the Labour government, just a few years too late.

Just like other highly-paid industries like football, the banking industry is blessed with massive ‘economies of scale’.

Wayne Rooney does not need to try any harder whether Manchester United’s game is being beamed to 50 million people, or to 500 million people, but the rewards to his club (and indirectly to him) are considerably higher.

The revenues and costs of banks also do not move in a linear fashion. The diligence required to syndicate a £500million loan for example is not ten times the work required for a £50million loan, but the fees earned will be commensurately greater.

These scale effects as well as the ongoing trend towards globalisation, ensure barriers to entry in banking are large and thus the industry is dominated by just a dozen or so behemoths, each hugely profitable and with the ability to pay handsome bonuses.

The fact that likewise both domestic and European football is dominated by a similarly small number of clubs is not coincidental in my view.

However large football clubs can project forward and estimate their revenues within a far narrower realistic range than banks can.

Season ticket sales are paid in advance, whilst full stadia at top clubs are largely a given. Some key commercial deals like shirt sponsorship are often fixed for years in advance.

Meanwhile unlike in banking, players are locked into contracts of varying length, so the ‘carrot’ of future bonuses is not required to encourage loyalty specifically.

Thus the pay of footballers is disproportionately received in the form of salary rather than bonuses (although these still play a role here too as a variable cost buffer).

The real problem came when many of these banks grew so large that they were considered ‘too big to fail’, and governments across the world were forced to step in to protect depositors and bondholders, and to restore trust.

They were not similarly disposed towards distraught fans of the likes of Leeds United or Fiorentina it should be noted, and this is where the analogy with football effectively breaks down.

By privatising reward but socialising risk in this way, governments effectively wrote the banks a free option to take outsized bets.

Once again, they acted rationally and took that free option, but not in a sinister way in my view. Every pound lent was a pound borrowed after all.

The horse has now bolted, but new regulations will ensure that a greater proportion of bonuses are deferred, and thus capable of being clawed back if unrealised profits turn back to loss.

Due to the above economies of scale however, the banking industry is inherently predisposed to create giant entities. Properly regulated like utilities, size should confer benefits upon clients and consumers, and not merely the bankers themselves.

If banks must by definition end up ‘big’, then we must also ensure they cannot ‘fail’, or at least be capable of dealing with failure without recourse to the taxpayer.

New regulations on capital requirements, liquidity and so-called ‘living wills’ seek to address this issue but regulators are like generals, always fighting the last war. The next crisis will doubtless look different.

In the meantime however, given that the taxpayer now owns large chunks of the banking system, it is important to encourage smart people to work there.

The systemic risk may have been neutralised, but the balance sheet of RBS alone remains larger than the entire UK economy. It can’t just be left to fester as its best people depart in droves, terrified of a populist backlash.

After all, the first wave of banking problems as discussed at length in Part I was the result of the boom in securitisation, and lending done ‘off balance sheet’.

The second wave that may engulf the system involves the precarious assets that sit ‘on balance sheet’, the traditional commercial and consumer loans upon which defaults will continue to rise as economic growth remains tepid. The banking crisis is not over and considerable new capital is still required.

Thus as unpalatable as it sounds, the solution to the ‘bonus problem’ may indeed be more bonuses if the banks are permitted to gradually earn their way back to health, and thus replenish their battered capital base.

The sooner they become profitable again, they sooner they can be returned to private hands and cease to be a further fiscal burden.

But now that the banks are safe from collapse at least for now, government and media demands that they increase lending are falling on understandable deaf ears.

This is not a traditional recession, namely one typically brought about by an increase in interest rates, in order to take the heat out of a booming economy. Instead this is a recession occurring with global interest rates already effectively at zero.

Rather than interest rates merely squeezing some life out of an overly expansionary (but otherwise healthy) economy, we are instead witnessing a classic debt-deflationary bust.

Defaults and subsequent losses (because debts could no longer be serviced), lead to forced asset sales and repossessions, leading to further defaults and losses.

Japan has been in a debt deflation cycle for two decades, which may strangely be viewed positively given that there has been no discernible fall in living standards there during the entire period. For several reasons however, it does not serve as a useful precedent.

Firstly it has always been a nation of savers, so its enormous government debt spending could easily be financed domestically, whilst for others those high savings acted as a fallback option to maintain spending.

Second, until recently of course, its deflation occurred concurrently with a boom in the rest of the world, providing huge demand for her famous exports, helping to boost growth.

Third its money printing was not inflationary because with its own interest rates near zero, yet with much higher rates available elsewhere, the printed Yen was generally sold in exchange for foreign assets. Today all major interest rates are effectively at zero.

Fourth, it may finally be reaching its denouement anyhow, as its demographic timebomb threatens to explode.

The country already has more citizens outside the workforce than in it, and given its famously low immigration rate, its debt issuance may finally be reaching a ‘tipping point’ where it can no longer be funded without a sharp rise in interest rates and a currency collapse.

Back in the West, since credit should sensibly be extended following an assessment of net worth (wealth) and incomes/cashflows, then since both have fallen then inevitably credit creation is greatly constrained.

The key to a new healthy credit system (in which both borrowers and lenders enter into transactions freely and without interference), rests upon the concept of viability.

The system will be viable again when providers of credit are willing to lend it, in exchange for believable claims that it will be returned with interest. The banks insistence for example upon 40% deposits for home purchases should be seen in this context.

The current government programs do not address this viability problem, focusing instead on restructuring and guaranteeing legacy loans that should never have been created, and will never be viable.

Eventually the government’s own borrowing will need to pass the ‘viability’ test in the eyes of foreign lenders too, but that’s an issue for Part III.

Meanwhile on the demand side for credit, the cohort of borrowers willing and able to enter a viable new loan at this stage of the cycle, is greatly diminished.

Indebted companies and consumers are instead furiously seeking to deleverage, whilst the cash-rich generally consider it too early to lever up again.

Thus in the absence of enough attractive viable risky loans to extend, banks are again acting rationally.

They are choosing to rebuild their depleted capital bases and using their near-zero cost of capital (think of deposit rates), to lend only to the safest borrowers including the government itself. As mentioned above, there’s certainly no shortage of issuance.

I will dwell more upon this understandable absence of speculative ‘animal spirits’ in Part III, particularly with regard to the inevitable inflationary consequences for when it returns.

Throughout history, all episodes of money-printing lead to a short-term ‘feel good’ factor. After all inflation is tomorrow’s story, as those aforementioned deflationary forces of rising unemployment and debt payback greatly overwhelm it for now.

The ‘feel good’ factor derives from the public’s focus on the extra money in their pocket, not on its rapidly falling purchasing power.

But in a so-called ‘fiat money’ system where money is no longer backed by gold, a currency only has a relative value in terms of goods and services it can be exchanged for. It has no intrinsic value, and is thus capable of manipulation.

As a result, whilst for example a dollar bill states ’In God We Trust’, it seems many investors prefer to believe that ’In Gold We Trust’, pushing the price of the yellow metal to new highs.

By way of an interesting anecdote, if gold is indeed the only true ‘store of value’ then consider this for example. During the ten years ended September 2009, the average UK house price (according to Nationwide) rose 121%.

However ten years ago that average house would have cost you 419 ounces of gold, and right now it would only cost you 257 ounces of gold, implying a 39% drop!

No wonder UK politicians on all sides are so enthused by this neat trick, and indeed the flexibility of the pound has provided a temporary boost, but what is the end game for this game of currency debasement?

After all by definition all countries cannot depreciate their currencies at the same time, yet virtually all would like to.

The answer lies surely in a belated rebalancing of the world economy, towards greater consumption in the traditional saver nations (eg. China), and greater saving in the traditional consumption nations (eg. US, UK).

Standards of living in the former would rise at the expense of the latter, but permit the gradual debt restructuring required, eventually boosting domestic jobs through the effect of the weaker currency.

It sounds neat but the political and social ramifications are large, with China particularly reluctant to disturb the country’s swift urbanisation on the back of cheap exports.

Cooperation and mutual understanding is key, not least because the surplus countries hold so much of their enormous reserves in the currencies of debtor nations. They are understandably reluctant to cut off their nose to spite their face.

In the words of the G20 last month in Pittsburgh: ”We will need to work together as we manage the transition to a more balanced pattern of global growth.” In Part III, I’ll discuss how successful they’re likely to be, and the risks therein.

Friday, October 09, 2009

Oldham preview

A short preview only of the Oldham game, as it’s my 36th birthday today and I’ve a busy celebratory schedule ahead.

It’s reassuring to have reached the age where I can now legally marry a woman half my age in every European country, and every US state except Nebraska. So far the offers are not exactly flooding in.

Games against Oldham always resonate with me. I believe my first ever game may well have been a home game with the Latics in May 1977, and indeed for almost the entire period from 1977-1986 (my formative and impressionable football supporting years) we competed head-to-head in the old Second Division.

There can be few teams whose recent history is best described in terms of a single goal, in this case a stunning Mark Hughes volley that denied them an FA Cup Final berth in 1994.

Their deflation was compounded by relegation from the Premier League that very season, and just a few weeks later they hosted Charlton on the opening day of 1994/95, beating a poor Addicks side 5-2 in a game I made the mistake of driving to watch.

However the achievements of Joe Royle from 1982-1994 were exceptional, enabling a small club in the shadow of the Manchester heavyweights to firmly punch above their weight.

As is often the case (Charlton being another notable example), soon after the longstanding manager who had become synonymous with the club departed, it hastened a steady decline from which they have shown few signs of recovering. They even experimented with Iain Dowie as manager too.

Relegation to the third tier occurred as soon as 1996/97, a division they have remained in ever since achieving midtable finishes of unerring consistency, punctuated only by play-off defeats in 2002/3 and 2006/7.

Joe Royle even returned as manager for a brief period last season, but they may finally have found a suitable replacement after over a decade of mediocrity in the shape of Dave Penney, appointed in May.

Penney was instrumental in the amazing run through the divisions that Doncaster Rovers have enjoyed, guiding them from non-League football to League One, before handing over to Sean O’Driscoll who continued his good work.

They have begun the season promisingly albeit somewhat inconsistently (witness a 3-0 home defeat by struggling Hartlepool for example), but they arrive at The Valley with a four-match unbeaten run generating ten points. Despite being six positions below the Addicks in the table, they are firmly the form side of the two.

Their potential threat is enhanced by our own injury problems which continue to mount. As was inevitably the case, the consistency of the Phil Parkinson’s team selections would eventually become challenged.

Sensibly he used Tuesday night’s game of paintball to give some youngsters a run out, and both the experience and the result should hold them in good stead if required again tomorrow.

We are in the midst of one of those ‘half full/half empty’ scenarios, only one League win in five but still holding 2nd place, and hosting Oldham on the back of a fighting point at Elland Road (one that I managed to see thanks to the wonders of Internet streaming.

Reading between the lines, I expect us to line up as follows: Elliot, Solly, Youga, Dailly, Llera, Bailey, Racon, Shelvey, Spring, Wagstaff, Burton. Subs: Randolph, Basey, Semedo, McKenzie, McLeod, Tuna, Mambo.

NY Addick predicts: Charlton 2 (Burton, Wagstaff), Oldham 1 (Marrow). Att: 16,291.

Friday, October 02, 2009

Leeds preview

It is difficult to preview a fixture against Leeds, without reminiscing about the incredible week in May 1987 when the battling Addicks, somehow preserved First Division status.

It still sends a shiver down my spine when I visualise those two Peter Shirtliff goals, and John Helm's highlights commentary asking, "Is that the goal?" (that secures First Division football for Charlton).

There's also something about Paul Miller's celebration which brings back a fond memory. At the time, we were living a few hundred yards from him and shortly after the final whistle, I raced over there to deliver him a handwritten congratulatory note.

Looking back, it's easy to make the case that those three matches were the most important in our history.

Indeed that entire five-year period from 1985-1989 was instrumental; Lennie Lawrence not only maintained the promotion push, but kept us there for four seasons.

This ensured that whilst matters off the pitch were only developing slowly, at least there was some positive momentum on it to keep fans' belief alive.

When he returns with Bristol Rovers in a few weeks' time, hopefully fans will get a chance to show that 'if you know your history' (as the old song goes), then he'll get a standing ovation.

There was something special about the group of players he put together. Not much individual flair aside from Robert Lee, but they played for their lives. Hopefully his new book will offer some interesting insights.

The intimidatory atmosphere they had to put up with was incredible, not only at St Andrews, but also at Elland Road (where we clung on) and even at Selhurst Park, where at least half the crowd were supporting the away side. Nothing the players will face tomorrow in front of a likely bumper crowd will compare.

Any thoughts about a return to The Valley were merely a pipe dream back in 1987, and the future would have looked bleak back in the Second Division at Selhurst Park.

Attendances would likely have been dire; we'd surely have eventually gone the way of the other eventual tenants of Selhurst Park, who ironically won promotion with us to the First Division in 1986.

Speaking of promotion, our hopes for this season took a big knock on Tuesday night, the first League defeat for the Addicks since Derby away on 25th April, and only the 2nd in our last 18. As Phil Parkinson rightly said, this is no time to overreact.

However there had been some warning signs in previous weeks that a calamity might be on the cards, with the defence's lack of pace and Elliot's indecisiveness being obvious weak points for opposition sides to exploit.

Unfortunately Norwich's late equaliser at Carrow Road slowed down the strong momentum we'd built up all season (the draw with Southampton felt more like a point gained, rather than two lost). It's vital we begin to pick it up again - a two-goal win after all tomorrow would take us top again.

A defeat however would leave us with just 5 points from our last 5 games, a mini run of form which if allowed to continue would swiftly see us back in only a play-off spot.

This season in previous posts, I've asked the question, "What is the Plan B?" For the first eight games, the question was moot with Parkinson able to name an unchanged side that remained unbeaten.

However with the temporary loss of the vital Jose Semedo, and with that unbeaten run now over, do we have the tactical flexibility and depth of squad which may now be required?

A surprise home draw with Carlisle on Tuesday night nonetheless maintains Leeds' unbeaten start, and under the well-regarded leadership of Simon Grayson, one senses that the club's downward trend may have found a bottom.

The division's most potent striker, Jermaine Beckford continues to bang in the goals, reminding sceptics that occasionally real gems can be found hovering in non-League (in his case, the mighty Wealdstone). Unfortunately our own former non-League gem is oddly scoring goals for the team right behind us in 3rd place.

NY Addick predicts: Leeds 2 (Beckford, Snodgrass), Charlton 0. Att: 26,291.