A camel, says an old Middle East joke, is a horse designed by a committee.

The European Union is in danger of getting camels for its two new leadership positions -- president of the European Council and foreign policy High Representative -- because of the dysfunctional appointment process created by the Lisbon Treaty.

The secretive horse (or camel)-trading by which EU governments choose the 27-nation bloc's top office-holders seems designed to deter strong candidates and produce lowest-common-denominator outcomes. Some of the most able potential contenders would rather stay at home than take the key jobs to Brussels.

The treaty does not provide for a democratic election because the EU is not a state, and national governments don't want a European president with his own legitimacy. However, the rules also seem to set aside the basic principles and procedures that any private sector company or public authority would use to select the best CEO or manager.

In a normal selection process, the jobs would go to the best qualified candidates with a clear vision, relevant experience and a track record of achievement, normally after a series of rigorous interviews. But the treaty suggests that the need to share the spoils among large and small states, and countries from the north, south, east and west of Europe is more important than criteria such as ability, charisma or experience.

In choosing the persons called upon to hold the offices of President of the European Council, President of the Commission and High Representative of the Union for Foreign Affairs and Security Policy, due account is to be taken of the need to respect the geographical and demographic diversity of the Union and its Member States.

Add to this the need to divvy up the top jobs among Europe's main political families (conservatives, socialists and liberals), and a growing demand for gender balance, and you have a selection process in which identifying the strongest talent is not necessarily the top priority.

Aggravating the problem is the increasingly clear message that politicians in the EU's biggest member states regard holding national office as far more attractive and important that serving the European Union. Both former German Foreign Minister Frank-Walter Steinmeier and current British Foreign Secretary David Miliband have signalled they wish to stay in national politics, even if that means a long spell in opposition, rather than take the EU foreign policy job.  All three major European powers have nominated second-ranking politicians for the European Commission.

Furthermore, many national leaders do not want a strong personality in the EU presidency who might overshadow them, and European Commission President Jose Manuel Barroso is said to be not keen to have a political star as foreign policy chief (and vice-president of the Commission) for similar reasons.

After Tony Blair's high-profile bid fell flat due to criticism of his Iraq war record and of his failure to bring Britain into the euro single currency and the Schengen zone of passport-free travel, the front-runner for European Council president is now Belgian Prime Minister Herman von Rompuy. A genial centre-right Christian Democrat with a knack for finding compromises in his linguistically divided home country and a self-deprecating sense of humour, he is little known outside Belgium and has attended only two European summits. 

Due to the imperative of political balance, Van Rompuy can only get the job if a socialist is appointed foreign policy chief. There is a dearth of socialist candidates from countries that fit the geographical matrix. Former Italian Prime Minister Massimo D'Alema is one possibility, but he is a former communist, which could raise hackles among the EU's 10 new central and east European member states, and supporters of Israel regard him as too pro-Palestinian. There are even whispers of giving the job to Britain's EU Trade Commissioner Catherine Ashton -- not because she knows much about foreign policy or has run a foreign ministry, but because she is socialist, female, already in Brussels and available.

France has three potential socialist contenders -- current Foreign Minister Bernard Kouchner, former Foreign Minister Hubert Vedrine and former European Affairs Minister Elisabeth Guigou. But President Nicolas Sarkozy has already said publicly his nominee for the European Commission is conservative former foreign minister Michel Barnier, and he has enough trouble with digruntlement in his centre-right UMP party without giving another plum job to a socialist.

For all these reasons, the outcome when EU leaders meet to make the choice on November 19 is still wide open. But there is a growing risk that Europe will be led by camels rather than thoroughbred race-horses. Was this really what the authors of the Lisbon treaty intended?

Who will be the first president of the European Council of EU leaders? Anyone but Tony Blair. That is the only clear message to emerge from a European Union summit, where the appointments of the EU's two new senior office-holders is not on the agenda but is on everyone's mind.

The appointment process is typical of the surreal way in which the 27-nation bloc does business. The job is poorly defined in the Lisbon treaty reforming the EU's institutions, which is expected to come into force in the next few weeks.  But it is clear that most leaders are looking for a consensus-building summit chairman rather than a high-profile president of Europe.

There are no officially declared candidates. But Blair has been the front-runner for months, with the public backing of French President Nicolas Sarkozy and of the British government. He was not in Brussels on Thursday, but his name was at the centre of debate in the summit corridors, with many people determined to kill his phantom candidacy off.

Before the summit began, his erstwhile European Socialist comrades agreed, according to Spanish Prime Minister Jose Luis Rodriguez Zapatero, that they would prefer the EU foreign policy chief job to go to a socialist. That effectively ruled out the presidency for Blair, since the Socialists have no chance of getting both jobs.

Veteran Luxembourg Prime Minister Jean-Claude Juncker meanwhile announced he is available for the top post even though he acknowledged he had little chance of getting it. Juncker's kamikaze candidacy looks like a suicide mission to blow Blair out of the race. The two have been engaged in a long personal vendetta fuelled by Blair's blocking of Belgian Prime Minister Guy Verhofstadt's bid for the European Commission presidency in 2004, and his veto of an EU budget deal brokered by Juncker in 2005.

In British eyes, Juncker personfies "old Europe" -- a federalist from a tiny country which prospers as a sort of giant safe-deposit box at the heart of a Franco-German Europe. For Juncker, Blair embodies London's arrogant detachment from the EU. Despite his pro-European rhetoric, the founder of New Labour never brought his country into the euro single currency or the Schengen zone of passport-free travel in 10 years in power. "This is not about personal glory or an extended ego trip," Juncker told the daily Luxembourg Wort in a clear swipe at Blair's undeclared bid.

The likelihood is that neither Blair nor Juncker will find broad enough support among EU leaders, effectively cancelling each other out. That will open the way for a more consensual, insipid figure without either Blair's globe-trotting stardom or Juncker's federalist outlook. Several such potential candidates were preeening themselves at the summit.

Dutch Prime Minister Jan-Peter Balkenende, a centre-right Harry Potter look-alike devoid of charisma, was doing his best to charm Sarkozy and Merkel during the public photo opportunities. French Prime Minister Francois Fillon, whose second-fiddle role to Sarkozy means he rarely attends EU summits, was seated beaming in the limelight at the summit table in place of the French foreign minister.

Away from the summit, former Finnish Prime Minister Paavo Lipponen published a timely article in the Financial Times saying the president's job should be about interrnal consensus-building rather than external representation (in other words -- "me, not Blair"). The Baltic prime ministers agreed to seeksupport for former Latvian President Vaira Vike-Freiberga as EU president.

In reality, the choice is likely to boil down to one of a handful of leaders sitting in the room. My money is on Balkenende as the grey man with the fewest sworn enemies. Under his premiership, the Netherlands has turned increasingly Eurosceptical and voted against ratifying the EU constitution in a referendum in 2005. But unlike Britain, it is a full member of all EU policies.

That may seem a pretty thin qualification to be the first president of the European Council,  but curiously, no one in Brussels seems to hold Dutch Euroscepticism against Balkenende the way they hold British Euroscepticism against Blair.

The Russian Interior Ministry is about to seek the arrest of William Browder, the chief executive of Hermitage Capital Management, for illegally evading taxes. That’s according to a front-page article in the Russian newspaper Kommersant, a leading political-economic daily.

Browder, a British and US citizen who resides in London, has been denied entry into Russia ever since 2005, when his visa was annulled for obscure reasons. His Hermitage Fund, managed by the British bank HSBC, was once the largest portfolio investor in Russia, but has more recently been embroiled in a series of interconnected scandals.

Today's newspaper article, based on anonymous sources within the Russian police, is evidently the latest shot in a long-running media war that has pitched Hermitage against elements of the Russian police. Over the last year and a half, the British investment fund has made a series of sensational allegations, claiming that senior Russian police officers were involved in a corruption scam designed to fleece the Russian budget of hundreds of millions of dollars.

Following these claims, Russian authorities have been busy upping the pressure against the Fund. A lawyer working for Hermitage in Russia, Sergei Magnitsky, was arrested last November, and his trial in Moscow is due to begin shortly. Today's Kommersant article lays out the case that the police intend to bring against Magnitsky, which relates to alleged underpayment of taxes by two Hermitage subsidiaries several years ago.

According to the sources cited in the newspaper, Browder is also implicated, and investigators now intend to approach Interpol with a request to place him on the international wanted list. The paper quotes Hermitage's view that the case is fabricated "to discredit Hermitage Capital".

Given the circumstances, the latest allegations against Browder will command little credibility outside Russia. According to court documents recently submitted by Hermitage in the US, the criminal case against Magnitsky was initiated by the same police officers previously accused by Hermitage.

If Russia does request Browder’s arrest and extradition, legal authorities in Britain are also likely to consider the findings of a recent report into the case by the Parliamentary Assembly of the Council of Europe, which slams Russia’s criminal justice system. The report states that Hermitage was “the victim of the corruption and collusion of senior police officials and organised criminals.”

In any case, this isn’t the first time that anonymous police sources have made similar claims about Browder in Kommersant. In April last year, the newspaper ran an article that alleged that a Russian arrest warrant had already been issued for the British fund manager, and an international one would be requested shortly. However, a Moscow police spokeswoman subsequently denied that any such warrant had been issued, and nothing more was heard about it.

Let the second-guessing, the mock horror, the disbelief, the crowing begin.

Google CEO Eric Schmidt has acknowledged he realized upfront that he was overpaying to acquire YouTube, to the tune of $1 billion, judged by any conventional measures.

The many critics of Google's $1.65 billion deal to acquire the video-sharing site three years ago will claim this confirms everything they have always said about the deal. Not quite.

In fact, not really at all.

Schmidt came clean in a deposition by lawyers in the Viacom copyright lawsuit that there was very little revenue coming into YouTube to justify the price his company paid.

No surprises here. There were intangibles to consider:

1. YouTube's popularity was sky-rocketing, making it the runaway market leader among video-sharing sites.
2. It was crushing his company's own site, Google Video.
3. YouTube was up for auction and would be sold to a competitor unless Google jumped first.
4. Google overbid to ensure YouTube didn't fall into rival hands.

The Google CEO said he told his company's board of directors that the 18-month-old video-sharing site was worth $600 million to $700 million, according to CNet, which obtained a transcript of his testimony. Of course, he fails to mention the potential costs of copyright lawsuits that already loomed for YouTube.

"In the deal dynamics, the price, remember, is not set by my judgment or by financial model or discounted cash flow. It's set by what people are willing to pay," Schmidt says.

So the real justification for the 150 percent premium Google paid was in derailing, or at least delaying, the rise of a potential competitor. Of course, Google has faced a long struggle to find ways to make advertising work on the site in order to pay the costs of free video. Only last quarter could Google say YouTube would be profitable in the "not long, not-too-distant future."

Of course, all the fuss over YouTube's valuation is not really Google's problem. The real issue is the extrapolation of valuations of all the Web 2.0 companies since then which have used the YouTube price as the benchmark for all the other-worldly valuations of their unproven business models.

Here are the relevant excerpts from Schmidt's deposition by Viacom lawyers, via CNet:

Viacom attorney Stuart Jay Baskin: And what was management's valuation?

Eric Schmidt: Much lower than we paid for it.

Baskin: And how was that communicated to the board?

Schmidt: I told them.

Baskin: So why don't you tell us what you remember telling the board in connection with the valuation?

Schmidt: I believe YouTube was worth somewhere around $600 million to $700 million.

...
Baskin: What methodology did you use to come up with that number?

John P. Mancini, an attorney working for Google, objects.

Schmidt: My judgment.

Baskin: Was it based on cash flow analysis? Comparable companies? What were you using as the basis for your judgment?

Mancini objects.

Schmidt: It's just my judgment. I've been doing this a long time.

...
Baskin: I'm not very good at math, but I think that would be $1 billion or so more than you thought the company was, in fact, worth.

Mancini objects.

Schmidt: That is correct.

(Photo credit: Reuters/Jonathan Ernst)

That's the provocative question posed by Willem Buiter. His latest, characteristically lengthy, blog post tackles the regulatory vogue for forcing banks to hold much greater reserves of liquid assets - in practice, government bonds.

Buiter's missive follows new rules from Britain's Financial Services Authority, which will force banks to increase their reserves of government bonds by more than a third. The rules have been met with predictable bleating from the industry, which accuses the regulator of undermining Britain's competitiveness and promoting the fragmentation of the global financial system. Another concern is the FSA's handling of the transition.

Buiter's objections are more fundamental. He's not convinced banks should be preparing to deal with a seizure in the markets. That, he argues, is the job of central banks:

It may be possible for private banks to hold enough liquid assets (government debt, effectively) on their balance sheets to survive even a major liquidity crunch without recourse to the central bank.  But that would be socially inefficient.  Banks are meant to intermediate short liabilities into long-term assets, and frequently into long-term illiquid assets.  It’s what their raison d’être is.

By contrast, Buiter says: "Providing liquidity is what God made central banks for."

It's an argument which deserves to be explored further, though it does raise some practical concerns.

The first is whether central banks are able to prop up individual lenders without making matters worse. After all, the run on Northern Rock started after  the Bank of England announced it was providing support to the mortgage bank. The Bank of England has since installed a permanent discount window similar to the one used by the Federal Reserve. But it remains to be seen whether banks will dare use it once markets have returned to normal.

Then there is the question of collateral. The crisis has forced central banks to lend against a much wider range of assets than they previously accepted. Buiter appears to be suggesting that in future central banks should be willing to accept all kinds of illiquid assets, almost regardless of quality, as long as they apply an appropriate haircut.

Britain's embattled banks may welcome Buiter rallying to their cause. But they shouldn't get too carried away. The LSE professor prefaces his argument with a lengthy call for a global regime to shut down failing banks and seize their assets.

Only this, he claims, can "turn our financial sector back into something that belongs in and sustains a market economy instead of a form of communism for the rich and well-connected."

The End Is Nigh is always an arresting headline, the end which is nigh now is the Age of Oil, following the deep thoughts of the boffins at Deutsche Bank.

They are forecasting a "game change" as a result of - wait for it - the electric car. Their thoughts are "unburdened by the conflicting forecasting agendas of government agencies, oil companies or auto makers", so can roam the intellectual highways and byways.

They postulate a price spike to 175 dollars around 2016, followed by an "equilibrium" price around 100 dollars by 2030. The shock will be enough for the electric car to displace the conventional automobile, and OPEC will eventually be reduced to cutting prices to maintain its market share.

These projections are far enough into the future to ensure that nobody will remind Paul Sankey and his fellow authors of their words if they turn out to be hideously wrong.

Even at hundred-dollar oil, the electric car is a technological dead-end, and the battery is the roadblock. The technology is improving, but there is no sign of the "breakthrough" that might put energy storage capacity within an order of magnitude of the petrol tank. Nor is there a solution to the question of charging times - and the faster a battery is charged, the less efficient the process becomes.

The size of the problem can be simply illustrated: if a dozen cars are filling up simultaneously, the energy transfer (of fuel into the tanks) is equivalent to the output of a medium-sized power station.

Then there is the question of the cost of the exotic materials needed to squeeze more from batteries and electric motors. Rare earth elements, with unpronounceable names and mostly found in China, are crucial to modern technology, but electric and hybrid cars eat them wholesale.

 Rare earths will no more run out than will oil, but they may get much more expensive. That Toyota Prius sitting so smugly outside your house is full of them. It presents a tempting target for the same scrap metal merchants who helped themselves to manhole covers during last year's commodity boom.

Compared to the petrol, or better still, diesel engine, the electric car is a poor use of primary energy. Fuel must be burned to generate the power, which must then be transmitted and stored in the battery. Each process costs energy, and the total thermodynamic efficiency is less than that of internal combustion.

The air quality in cities may be marginally better, but improved exhaust controls will do that far more cheaply. So here's my prediction for 2030: the electric car will turn out to be a vast, and unnecessary diversion of technological effort.

The EU show is back on the road. Sixteen months after Irish voters brought the European Union's tortured process of institutional reform to a juddering halt by voting "No" to the Lisbon treaty, the same electorate has turned out in larger numbers to say "Yes" by a two-thirds majority.

This is an immense relief for the EU's leadership. After three lost referendums in France, the Netherlands and Ireland, and a record low turnout in this year's European Parliament elections, the democratic legitimacy of the European integration process was increasingly open to question. The Irish vote will not completely silence those doubts. Opponents are already accusing the EU of have bullied the Irish into voting again on the same text, and of blackmailing them with economic disaster if they did not vote the right way this time.

Try this for size from a British Euro-sceptic, Lorraine Mullally of the Open Europe think-tank:

This is a sad day for democracy in Europe.  The Lisbon Treaty transfers huge new powers to the EU and away from ordinary people and national parliaments.  EU elites will be popping the champagne and slapping each other on the back for managing to bully Ireland in to reversing its first verdict on this undemocratic Treaty. But most ordinary people around Europe will not welcome this news, as they were never given a chance to have their say on the Treaty.  We should all be deeply worried about the way in which EU leaders have gone about forcing this Treaty on us.  Polls show that the majority of people across Europe want to be consulted on major transfers of power such as this - but politicians in Brussels aren't interested in what the people want.

The fact that the turnout in Ireland was higher, and the majority larger than in the first referendum may blunt such arguments. But EU leaders will clearly learn one key lesson from the Irish precedent: the days of grand treaties on ever closer European union are over. With unanimous ratification by 27 member states required, the probability of at least one country rejecting change is just too high.

For better or worse, the Lisbon treaty will be Europe's rulebook for a generation. I reckon there won't be another major overhaul of EU institutions for 20 years. Any further integration will take the form either of closer cooperation among groups of like-minded countries on issues such as defence, justice or taxation, or perhaps of limited, specialised treaties on policy areas such as energy and climate change.

The Lisbon treaty, and its predecessor, the defunct EU constitution, were never the federalist blueprints that their opponents claimed. But Lisbon does offer he prospect of somewhat more efficient leadership and decision-making in an enlarged Union. More decisions will be taken by majority vote instead of unanimity, notably on justice and home affairs. The directly elected European Parliament will have power over more legislation. And national parliaments will have a better chance to scrutinise, and send back, EU legislation.

A new long-term president of the European Council of EU leaders and a foreign policy chief at the head of a 5,000-strong diplomatic service and an 8-billion-euro budget will give Europe a higher profile on the international stage. But whether the Europeans become bigger global players hinges largely on their political will to think and act strategically, and to risk involvement in trouble spots and crises. To judge from their disjointed efforts in Afghanistan, that is still a tall order.

Europe's effectiveness will also depend on the personalities chosen to fill the big jobs. These appointments are traditionally stitched up in backroom deals between EU leaders in compromises between large and small states, northern and southern (and now also eastern) Europe, and between left and right. Of course Europe needs political balance. But it also needs strong, inspiring leadership.

If the first president of the European Council is a figure of international stature, with charisma and a successful track record in government, he or she will give the EU a bigger place in the emerging new world order. Ditto for the foreign policy chief. It is depressing to hear some officials say their prime ministers want weak personalities who won't overshadow them.

The next few weeks until the EU's October 29-30 summit will be dominated by speculation about who will get which job. When you hear the names of Tony Blair, Jan-Peter Balkenende, Paavo Lipponen, Bernard Kouchner, Carl Bildt, Olli Rehn, Michel Barnier or Hubert Vedrine, ask yourself one question: who will do the best job for Europe, giving the EU the most credible profile around the world and with its own citizens.

Germans have voted for change. A centre-right government with a clear parliamentary majority will replace the ungainly grand coalition of conservatives and Social Democrats that ran Europe's biggest economy for the last four years.

This should mean an end to "steady as she goes" lowest common denominator policies, and at least some reform of the country's tax and welfare system. The liberal Free Democrats, who recorded their best ever result with around 14.7 percent, will try to pull the new government towards tax cuts, health care reform, a reduction in welfare spending and a loosening of job protection in small business.

Conservative Chancellor Angela Merkel, a cautious centrist, made clear in her first post-election comments that she she would not allow a radical lurch to the right. She promised to be the "chancellor of all Germans" -- old and young, entrepreneurs and workers -- and said the conseravtives would be sufficiently dominant in the new coalition to prevail "in questions that affect social balance".

The new government faces tough economic challenges in what is bound to be a more polarised political atmosphere, with the Social Democrats in opposition. The economy is expected to contract by at least 5 percent this year, and export-led growth is likely to return only slowly. Unemployment is set to explode in the coming months as short-time work schemes run out. The budget deficit is set to top 6 percent of gross domestic product next year, more than twice the EU limit. So 2010 will be an extremely difficult year. But there are some problems that are even more urgent.

The first big choice involves Germany's ailing banks. Outgoing Finance Minister Peer Steinbrueck admitted last week that the public-owned regional Landesbanks "continue to pose an enormous systemic risk to our market". The outgoing parliament passed a virtually useless "bad bank" law meant to encourage stricken financial institutions to put their toxic assets into state-guaranteed special purpose vehicles. The banks have so far spurned the system because it leaves the risk of losses with them rather than with the taxpayer.

Merkel and her new partners need to amend the law so that the state takes more of the risk, otherwise Germany faces a future of "zombie" banks that are too burdened with liabilities to lend to the real economy. That won't be popular, with the left bound to claim that taxpayers are being forced to bail out wealthy bankers.

Fixing the banks is more urgent than cutting taxes or curbing public spending to revive the economy. That also means merging the Landesbanks, shrinking their activities and privatising as much as possible. The Germans must also be ready to allow healthy foreign banks to buy up sickly German ones. That is the logic of the European single market, to which a centre-right government is likely to be more committed.

That brings us to the next urgent priority. The new Berlin government should reconsider the dodgy deal it clinched on the eve of the election to rescue the ailing Opel auto manufacturer. Germany promised billions of euros in state aid for a consortium of car parts maker Magna and Russia's Sberbank to take over General Motors' European arm in order to preserve four production sites and as many jobs as possible in Germany.

The European Commission has made clear that "bribing" companies to skew restructuring plans according to national interests breaches EU rules. Merkel should seize the opportunity to seek a deal with other countries with Opel and Vauxhall production sites to co-fund a restructing plan along strictly commercial lines. In the longer term, Opel will need a bigger industrial partner to achieve critical mass in the inevitable consolidation of European auto sector.

Fixing the banks and Opel will be the first two tests of whether Germany gets the change it needs. Tax cuts and welfare reform will take longer and be trickier, especially given the burgeoning budget deficit and debt mountain.

As your friendly neighbourhood investment bank rarely tells you, something like 80 percent of deals don't pay off. So why do one if you don't have to?

That is the question facing the mighty City of London firm of Cazenove. Five years after Caz poured its investment banking business into a joint venture with the U.S. bank, JP Morgan <JPM.N>, it has to decide whether to go the whole hog and sell the remainder -- or to hang on.

Technically the shares are the subject of a put and call arrangement -- JP Morgan can force Caz's investors to sell and vice versa. But it is hard to imagine the Americans obliging the shareholders to sell if they clearly don't want to.

Which raises the question: why would they want to?

A deal has certain attractions for JP Morgan. The bank's UK business would be simpler if it owned 100 percent of its UK investment banking operations. The current set-up is quite advantageous for Caz. Not least it gives it access to JP Morgan's deep pockets and client list.

But these are also good reasons for Caz shareholders to hang on. Most commentators have focused on the cultural reasons for leaving the joint venture intact and these are indeed potent. But there are also good financial reasons to leave things where they are. Take the fact that the joint venture perches on JP Morgan's mega balance sheet. This gives it the best of both worlds. It can use the U.S. bank's financial heft to haul in equity capital markets business but it doesn't carry the risk. Any duff underwritings land on JP Morgan's plate.

This means the JV hardly needs any capital. Caz itself is a shell these days -- its only asset is its near 50 percent stake in the joint venture. That in turn means almost all its profits are flushed through as dividends. Caz's share of the joint venture's after-tax profit last year was 46 million pounds, all of which was paid to its own shareholders (plus a further 3 million generated by Caz itself).

Caz's shares trade intermittently on an internal market. The last traded price was 240 pence per share. On the basis of last year's dividend of 26 pence a share, the stock yields about 11 percent.

This year the joint venture will probably do even better, given the general hunger for equity rather than debt (which is Caz's stock in trade) and reduced competition in the investment banking business. But that is not the whole point. Essentially, Caz is a sort of money machine geared to the performance of markets and appetite for the sort of investment banking services it provides. Not only is it highly profitable when things are going well, but most of that profit is distributed to shareholders. That is quite an attractive asset.
 
The question ultimately is what sort of exit yield might tempt Caz's owners -- half of whom are former partners who no longer work at the firm -- to cash in their stock and invest elsewhere. Assume the dividend rises 30 percent this year and investors sought an exit yield equivalent to the yield on the FTSE100, currently 3.45 percent. That would equate to a price of about 900 pence per Caz share or a valuation of 1.7 billion pounds -- implying a total value for the joint venture of 3.4 billion pounds.
 
That might look like a wildly overblown number. After all the entire joint venture was only valued at about 700 million pounds when Caz sold half its business to JP Morgan in 2004. It would also be extremely hard for JP Morgan to justify paying a price earnings multiple of over 25 for the business. After all, Goldman Sachs trades on just 11 times.

Of course, some of Caz's owners might accept a lower price: after all, a JP Morgan takeover is the only way to exit what is otherwise a highly illiquid investment. If there's a deal to be done, the answer is probably somewhere between the two extremes of the very low internal market price and the very high price justified by Caz's dividend stream. That wide gap also explains why agreement may be harder to find than it first appears.

It's hard enough to persuade your bank manager to agree new terms for your overdraft, but when there are 300 lenders who are owed nearly 4 billion pounds between them, it's perhaps no wonder that Yell's refinancing seems to be taking forever. 

In June the Yellow Pages publisher signalled that the process was underway. On Wednesday it revealed agreement with its lead banks and a headline figure of 500 million pounds for its rights issue, roughly its market capitalisation after the recent run-up in the shares. The issue itself is unlikely before November, as Yell still needs time to corral its myriad lenders to agree to restructure its debt.

Now it has struck a deal with 40 per cent of the lenders, Yell can at least confirm the size of the bill for shareholders, while also warning that they will need to find a further 300 million pounds if no alternative can be invented. At least, before the rights issue door finally slams shut, the company has got its foot in it.

There are no nasty surprises on trading for this year, but things remain grim and Citigroup and Cazenove were quick to cut their forecasts for next year.  The migration from yellow paper to the web is slow and uncertain, but a successful refinancing would prevent a fire sale of the Spanish and US businesses, keep the well-regarded John Condron in charge and prevent the banks from grabbing the company.

It's expensive, of course. The 300 banks who fought to get aboard the financing of the Spanish acquisition in 2006 will be invited to approve a rise in their margin over LIBOR from 3 percent to between 3.5 and 4 percent. These days that counts as cheap money for an industrial borrower.

The banks will also gouge 50 million pounds in a "consent fee". The consent is needed before Yell can improve the banks' security through the rights issue, redeem some debt now, and pay more interest on what's left. Somehow, it seems a much easier way to make money than, say, flogging round millions of small businesses trying to persuade them to take advertising in your doorstopper book.

Neil Collins is a shareholder in Yell