Category Archives: Bank

States of the economies.

The next economic and banking collapse is going to make the 2008 crash look like a slight adjustment.

Once-powerful Western economies are booking  quarterly GDP growths of 1% or less. For the non-mathematicians, that is within a rounding error of ZERO growth. So when you hear a Chancellor deriving solace from an economy achieving  a growth of say 1.5% which was “better than the expected” 1.3%, we know that they and we are in trouble.

Politicians and central bankers have exhausted their entire repertoire on a THREE YEAR attempt to put their economies in order whilst at the same time propping-up a broken banking system. None of it has worked!

They all know that the tsunami is coming but there is no high ground to run to.

European politicians are rushing about, turning inaction into an art-form whilst economies and banks  are merely standing on the trapdoor and holding hands hoping that somehow all this will go away and the entire system will somehow self-right. Their impotent prevarication can (and will) only result in two things – collapse and bankcrptcy.

Bankruptcy of governments, business and of private individuals.

Last week we had the very first example of a banker who more-or-less threw-in his hand, admitting that there was little-else that money could do. The Federal Reserve’s Ben Bernanke had the choice of either printing more empty dollars or not. The so-called Quantitative Easing 3 would have increased US inflation and made Investment Bankers happy. It would have enabled the bankers to further plunder the markets and create more of those illusory profits. They’ve been operating on that basis for two years now and perhaps Bernanke decided that enough was enough.

Mainlining money is never the long-term solution – it’s too addictive!

However, No U.S  Quantitative Easing   has simply accelerated the collapse of the United States economy.

Yes! It’s as clear-cut as that.

In the end, Bernanke took a leaf from the politicians’ book and decided to do nothing but sit and wait. NO mention of QE3 and no steps to promote economic growth.

He has decided to kick the the whole thing forward yet another month in the vain hope that Congress can deliver the next promise. THAT’S what you call a long-shot!

For the moment both Europe and the USA appear to be quite content to pause and doze in the middle of their joint economic tightrope until someone else (as yet unknown, probably China) comes along to coax  them out of their torpor.

Unfortunately, America and Europe are entwined in such a way that if Europe falls, so will the USA.

We used to dismiss the  PIIGS nations as the ones heading for the econo-slaughter house — Portugal, Italy, Ireland, Greece and Spain.  Their problem is very simple – they have debts so huge that there is absolutely NO prospect of them ever being repaid.  Their politicians  are also waiting for something miraculous to happen sometime in the future.

The Euro saviour WAS supposed to have been the “strong man of Europe”, the one with the largest economy – Germany. Unfortunately,Germany has also hit the economic buffers. It’s growth in this year’s second quarter was  just 0.1 percent!

France, Europe’s second-largest Euro-economy, has also ground to a halt. President Sarkozy’s has followed the UK route with huge budgetary cuts. That certainly looks good on paper and may lower deficits  but will  produce an  impossible drag on an already-waning economy. THAT will inhibit growth and ultimately lower tax revenues – which will inevitably result in higher taxation.

The United Kingdom’s Chancellor can take the credit for showing everyone else the way to economic stagnation through the triple whammy of  Government budget cuts, rising inflation and plunging consumer confidence. EXACTLY the conditions to discourage anyone from risking any sort of entrepreneurial initiative or borrowing from the banks to fund commercial expansion. That is, if the banks weren’t continuing to sulk.

Europe is frantically cutting spending in a desperate attempt to postpone the inevitable debt meltdown. Meanwhile  Washington continues to rack-up up its national debt at the eye-watering rate of more than 10 percent per year.

All that America has achieved so far is to have its credit-rating slashed by Standard & Poor’s while its local governments, states and cities frantically try everything from releasing prisoners early to selling off the family silver.

The ENTIRE Western economy has ground to a shuddering halt with the weird unwanted bolt-ons of climbing inflation and consumer confidence at near an all-time low.

So what IS the solution?

The solution is comparatively simple and should be attempted in stages.

The first would be to reconcile ALL sovereign debt.

Secondly,  the markets and banks would collapse – but at a controlled rate.

Thirdly, it should be admitted that the Euro and the Eurozone were both very bad ideas which developed into a grotesque sacred cow.

Then we could ALL start again.

The alternatives are greater budget shortfalls, greater deficits, even faster growths in  government debt, followed by  catastrophic collapses and Depression.

The former all require  political decisions of such magnitude that even the politicians have come to realise  that we do not have anyone  with even remotely the courage to  raise his or head above the parapet to take control.

So for the moment, it seems as if we’re knowingly headed for an economic holocaust.

So, unless the politicians wake up soon, we need to create hell and not wait for it.

From “Brother, Can You Spare a Dime,” lyrics by Yip Harburg, music by Jay Gorney (1931)

They used to tell me I was building a dream, and so I followed the mob,
When there was earth to plow, or guns to bear, I was always there right on the job.
They used to tell me I was building a dream, with peace and glory ahead,
Why should I be standing in line, just waiting for bread?

Once I built a railroad, I made it run, made it race against time.
Once I built a railroad; now it’s done. Brother, can you spare a dime?
Once I built a tower, up to the sun, brick, and rivet, and lime;
Once I built a tower, now it’s done. Brother, can you spare a dime?


Morton’s Fork lives!

Libya

Post-Saddam-type chaos in Libya will NOT be avoided. That’s nigh-on impossible.

One of the overlooked plans of the Iraq campaign was the Exit Strategy. Well, bugger me, the West has done it again in Libya.

The next major initiative will be the customary “Humanitarian Assistance” which is as good an excuse as any to maintain a military presence to ensure that the fuzzy-wuzzies keep in line.

THAT is going to be the most impossible task. The average Libyan’s loyalties are like this: 1. Family 2. Tribe  3. State Flag…….. In that order.

NOTHING but a totalitarian state can keep tribal factions in line. Government by Brutality appears to be the only way to stop tribes from killing each other. Saddam demonstrated that in Iraq and every other  state in the Middle East continues to suppress its people – but for very valid reasons.

Democracy is an anathema to tribal people. It is an alien concept.

In Libya’s case, the theory is that a fiefdom which has controlled many tribes through the medium of suppression can be turned into a democracy. Politicians may not have yet noticed that such a thing has never been done. It’s been tried on many occasions but so far, without success.

The most likely outcome in Libya is either the emergence of another authoritarian leader or the breakup of a country which was a western construct in the first place. It is a politically barren place with no political parties or constitution.

Meanwhile, the rebels are heading for Gaddafi City – SIRTE. One hopes that they all remember that the Tahoura Research Centre near Tripoli houses (or housed) the remnants of Libya’s nuclear programme. There are stocks of nuclear material which could easily be turned into a “dirty” bomb.

There has already been a half-hearted attempt to launch a Scud missile so hopefully, the rebels do not, once again find themselves on the receiving end, should Gaddafi supporters decide to surprise them.

Luckily, the BBC’s John Simpson has finally arrived in Libya – so all should be well. We don’t yet know whether he travelled across the desert with the Tuaregs or whether he is wearing the customary tea-towel on his head but after hearing of his exploits in Afghanistan, it’s possible. He’ll know what to do.

Meanwhile the next battle that  into which new Libyan Prime Minister Mahmoud Jibril will have to lead his people will be the rather unedifying soon-to-be-fought campaign for Libyan reconstruction.

The cue for the Western  invasion is the phrase “Humanitarian Catastrophe”. Look out for that one.

p.s. The politicians appear to be surprised by the fact that, in spite of the announcement that the war in Libya  had been won, the fighting appears to be continuing. Just like Iraq.

Guru

There appear to be more and more self-appointed “GURUS”  on the Internet:  Finance Guru, Lifestyle Guru, Management Guru….the list is endless.

I used to be one of those but luckily managed to extract my head from my ass before it was too late.

Please don’t do it.

I now prefer the more modest “Messiah”.

BBC

Yesterday, I was listening to the BBC World Service when I was surprised to hear  a presenter use the word “Asyla” as a plural of Asylum. WTF? People who do that are nothing but pretentious scrota.

World Finance

Tomorrow, if Ben Bernanke announces that the Fed is going to print yet more “empty” dollars, he will be introducing yet more inflation into the US economy. Markets will recommence their downward slide and investors will all rush-off  in the direction of the  Bullion Markets.

If however,  there is no further printing of dollars and QE3 does not happen, the likelihood is that the American economy will collapse as investors all rush off in the direction of the Bullion Markets.

Either way, gold is the safest bet.

Meanwhile in Germany, Chancellor Angela Merkel is also between a rock and a hard place. If she agrees to fully support lame-duck Euro economies through the issue of the Euro Bond – so that countries such as Greece are able to enjoy unlimited credit at reasonable rates, she risks a rebellion back home from the Christian Democratic Party as well as from an electorate which does not wish to donate any more to broken Euro economies.

However, if there is no mechanism to support poorer Euro states, the Euro could collapse, together with the German economy.

By the way, it is time to start worrying about the world’s Stock Markets. Starting tomorrow.

Liberal Party

Today, Liberals are UP(!) 4% in the latest opinion poll. Does that mean that there may be a change of plan in Nick Clegg being handed a sexy European Parliament  job as a consolation prize after the 2015 General Election?

In response to emails concerning my dog…

I am sick and tired of receiving questions about my dog who mauled an illegal immigrant, two rappers, a hoodie-looter with hanging-past-the-crack tracksuit bottoms , three Sub-continent customer service clerks speaking broken English, one Member of Parliament, two policemen, three flag burners and a  taxi driver.

FOR THE LAST TIME…THE DOG IS NOT FOR SALE !

Those Swiss!

Press release from HM Treasury: http://bit.ly/oIgJbo

GCSE Results

Record results! Congratulations kids – another record year. You must have worked SOOO hard.

Here’s something for the cleverer ones to colour-in:

Jittery Markets make small gains.

European markets have made nervous gains despite lingering fears that the world economy is heading back towards recession.

The FTSE 100 Index in London gained 1.5% as traders decided that shares represented good value after the index fell 5% last week. The CAC 40 in France and the DAX in Germany also pushed higher.

However, markets remain jittery after last week’s poor economic data from the US and eurozone created fresh panic about the prospect of a global recession.

The glut of bad news caused London’s blue chip index to suffer its biggest daily loss in nearly three years on Thursday, wiping £62.3 billion from the value of the UK’s 100 biggest companies.

In another session of volatile trading on Monday, London’s leading shares index slid nearly 1% at the start of the session – taking it below the 5000 mark – but it bounced back shortly afterwards.

Gold continued to hit new record highs, rising to 1,895 US dollars (£1,151) per ounce, because it is seen as a safe haven amid the market turmoil.

Oil prices fell more than 2%, on speculation that Colonel Muammar Gaddafi’s 40-year rule in Libya is on the edge of collapse, which traders think could reopen supplies from the war-torn country.

The gain for European markets was despite the Dow Jones Industrial Average in the US falling more than 1.5% on Friday.

Markets have swung wildly in recent weeks as figures revealed the pace of economic growth in countries such as the US and Germany has slowed, leading to fears that the global recovery is running out of steam.

Fears about the strength of the world’s biggest economy were heightened by a rise in the number of jobless claimants and weak manufacturing and home sales figures. There are also unresolved worries about the eurozone debt crisis after French president Nicolas Sarkozy and German chancellor Angela Merkel failed to back eurozone bonds to fix the current problems at an emergency meeting.

Gideon Floundering?

The MOST wretched Cabinet job is that of Chancellor of the Exchequer. I  spent years criticising the “Iron Chancellor”,  Gordon Brown. During his posturing days when he was surfing the economic wave created by his predecessor Ken Clarke and even when Tony Blair had declared him the “best Chancellor we’ve ever had”. I saw that he was overspending and that if he’d carried on, the solids would have hit the air conditioning even earlier than they did .

He was given the credit for keeping us out of the Euro but I suspect that the only thing that stopped him was his innate inability to make a decision. He was constantly hounded by self-doubt – and quite rightly so.

It took others several years to realise that the Iron Chancellor was more Irn Bru than of  the metallic variety and in retrospect, perhaps  didn’t quite deserve the consolation prize of the keys to No.10.

I had a sneaky admiration for Alistair Darling because he and I once shared a platform in the early 90s when he was in charge of Pensions. He came across as  a Minister who had taken the trouble to familiarise himself with his subject and anyone who can do that with Pensions earns my undying respect. Plus, when the bankers crapped their own nest, he was the one who managed to wipe their noses and bottoms, give then some pocket money and send them back to their offices without alarming the rest of us.

His contribution has never been fully recognised because his then boss was arguably the worst manager and motivator I was lucky never to come across.

Nowadays we are in the hands of Gideon “George” Osborne. His public manner and voice belie that fact that he is a shrewd operator and very bright. The only problem that he has is one of communication. He is too defensive.

The Labour Government left him NOTHING. In effect, he was (and still is) is in a start-up situation. He has to create the conditions which give the rest of us a reasonable chance to create an economy which, had it been a horse, would have been shot by now.

For several years I have been saying that Economic Theory needs a healthy dose of Chaos Theory appended to it. Consequently, what has become increasingly obvious t0 some of us in the last few years is that economic forecasting has become a mug’s game. Both economic forecasters and politicians ought, by now to have learned that any projections have an inbuilt error of up to 100%. So, if growth is forecast at 5%, it is just as likely to be either 10% or Zero. This is exactly what we are finding today with inflation predictions. The Governor of England may as well hire Russell Grant or Mystic Meg to hand him the numbers.

Hence the overuse of the phrases “Higher than expected” and “Lower than expected”. In spite of the unpredictable variables – from the Japanese Tsunami to the Middle East Riots, politicians still persist in their own special brand of blind optimism. The nearest that they come to admitting that they are no longer in control of events is the occasional “Because of global economic conditions…”

Unfortunately, blaming the Global Economy now looks like an excuse, on a par with “the wrong kind of weather”. The “Global” excuse is only pulled out of the hat when things appear to be going wrong.

The fact is that  a loosely integrated global economy  contains an infinite number of variables, so Finance Ministers ought to relax and freely admit that currently, they are OBSERVERS rather than SHAPERS of economic events.

We have just seen a “surprise” increase in the United Kingdom’s unemployment figures. The figure is 2.49 million – which in reality means that there are probably over 3 million people out of work.

The Chancellor says that in spite of the “disappointing” figures, his policies “are creating jobs” – and do you know – HE IS RIGHT!

He has already cited “world markets” as an explanation – and once again, he is absolutely right! Unfortunately, after a year of unnecessary excuses, that in itself looks like yet another routine excuse.

The number of unemployed women has risen by 38,000. That is the sharpest increase in 2 years and the highest number of unemployed women for 23 years. Why is that? The truth is that no-one really knows. Unfortunately, politicians and “experts” cannot find it in their hearts to admit that they do not know. So we will have yet more pointless explanations.

The Chancellor of the Exchequer is NOT responsible for the current moribund state of our economy. That was caused by a mixture of Gordon Brown’s ineptitude, crooked Bankers and the resulting recession.

George Osborne may have the communication skills and manner of a 30s lounge lizard but, technically, he is without doubt the best we’ve got.

He deserves our support so that he no longer feels the need to sell us  what is undoubtedly the most  foul-tasting economic medicine that has EVER been dished out by a peace-time government.

Be nice to your Chancellor. The alternative sits on the bench opposite –  a Brownite about to explode out of his grey suit and it ain’t a pretty sight!

Hug a Hooray.

Politicians? Self-interest? Surely not!

The world’s economic problems will not be solved by politicians. Firstly because they do NOT have the skills to deal with a multi-causal, muti-faceted  and highly technical international phenomenon. Secondly, their decision-making is always impaired and affected by the very ugly spectre of self-interest and their primary preoccupation: re-election.

If you look at the very front-end loaded “austerity programme” here in the United Kingdom, it is no coincidence that so much has been concentrated into the beginning of the government’s  new term in office. The hope is that if all the bad stuff is dealt with at the beginning, then the year or eighteen months leading up to the 2015 election can be a time of faux-plenty with give-aways and maybe some unravelling of the incredibly draconian measures which have been thrust upon us in this last year.

The government could have “phased” the introduction of its programme of economic destruction but its other agenda was to please the euro bankers and money lenders – certainly NOT the electorate. The bankers (as usual) demanded immediate gratification.

There is a good argument for only ever allowing a government a single-term. Unfortunately , after 4 or 5 years, many leaders demand squatters rights over their job with some having extended their tenure for decades.

It would be MOST refreshing for a political leader to say ” We are in deep trouble and at the moment we do not have all the answers, so we are going to try a few random things in the hope that some of them work”. THAT is the truth because  THAT is what is happening.

The politicians REALLY have NO idea what to do next. They have joined us peasants in the gallery as mere observers while the Global Economic Tornado gathers strength and velocity.

The first thing that should be done is for that most sacred of sacred cows, the world’s banking system to be reappraised. Once again, self-interest and re-election prevent the politicians from doing anything but complain  and maybe introduce small doses of irrelevant pseudo anti-bank legislation. More window dressing.

Banks should be a service industry which supplies and redistributes money and not the Black Hole which it has become.  The billions  that banks generate in profits is NOT money which has been generated by production or even work – it is “profit” which takes money and value OUT of the economy. Bank profits are profits which commerce would have generated if banks did the job that they were supposed to do.

So that’s Number One on the agenda.

Now who has the guts to take that first step?

What did the Greeks ever do for us?

The politicians are very happy to accept credit for taming the debt dragon which, in fact, they themselves created by allowing the banks a free rein for far too long.

The Bank of England’s solution of Quantitative Easing, that is to say handing more and more cash to the banks has done little else apart from allow institutional investors and  the investment banks to maintain Stock prices at  falsely high levels and to push Commodity prices to new stratospheric levels.

These days, the name of the game is to hunt around for any excuse to push the markets higher and higher – not by buying stock and holding it but by keeping it on the move, i.e.   “working those shares”, thus making a dying market look as if it is in rude health.

Last week’s announcement about a possible Greek bailout moved prices up as did the Greek government’s announcement that their austerity measures had been voted through. Good news is all that investors want to hear.

They are all in La-la land!

Scratch the surface and what do you see?  How do all the investors really feel about the possibility of a Greek default? In short, they KNOW that it is going to happen.

That is clearly demonstrated by how much they are willing to pay in premiums for the insurance  contracts which are designed to protect them from future losses in case of default.

The equation is simple, the more the likelihood of a default, the bigger the premium.

The billions in bailouts have made no difference to the perceived likelihood of Greece defaulting and in fact, the likelihood of a total collapse and default is increasing daily.

Today, the cost of insurance against a Greek default is FOUR times greater than it was when their Euro partners announced the very first bailout package.

On May 12, 2010  the European Union (EU) and International Monetary Fund (IMF) announced a €110 billion  bailout for Greece. At that time, the cost of insuring $10 million in bonds against a Greek default was close to $540,000. Last week, it was $2.3 million –  FOUR  times more!

As a comparison, when Lehman Brothers failed and even when the likelihood of a global collapse was at an all-time peak, the absolute maximum that investors were willing to pay for $10 millions-worth  in Greek debt-default insurance was only $52,000.

So, the premium for the cover has increased from $50,000 to over $2 million for the same amount!!  THAT’S FORTY TIMES MORE!!!

To put it simply, investors believe that the likelihood of a Greek default is over 40 times greater today than it was at the height of the 2008 financial crisis.

Meanwhile the politicians are celebrating. Do they really believe that as far as the Greek economy is concerned it’s “job done”? Of course not. Not really!

It’s all window dressing, prevarication, obliquity and procrastination, designed to protect the Sacred Cow of the Euro for the time being, in the vain hope that by some miracle, under-investment and austerity will reboot the Greek economy.

The austerity measures which have been agreed for Greece – massive tax increases and suffocating spending cuts will make it impossible for Greece to pay both its bills AND its debts.

In the United Kingdom we are following the same path to decreasing government revenues by killing entrepreneurial confidence and creating the ideal conditions for another recession – or worse.

Like any business, making staff redundant and selling assets is not the way to generate higher net revenue because in the background, debts are constantly increasing. Both Sovereign States and Commercial enterprises have been forced into this totally nonsensical process.

Without new revenue streams and by “over-slashing” costs there is only one possible end-game. All that we are all achieving is putting-off the evil day whilst at the same time hoping for the lottery win which never comes.

The lotterry win which our own Chancellor is hoping for, is a sudden Phoenix-like rising of  non-existent entrepreneurs who do not have the non-existent backing of the banks. These entrepreneurs’ job (theoretically) is to create new businesses or grow existing ones in order to create employment and produce goods which we can exchange for foreign currency.

Greece is hoping for a similar Miracle on Skid Row but in reality, it will survive through the summer and then the begging bowl will reappear. This time, however, it will remain empty.

So, who do we believe? The politicians who have achieved very little except boot the can along a narrowing cul-de-sac OR the investors who are willing to pay incredible insurance premiums to protect the money that they have lent? The Dreamers or the Pragmatists?

In spite of very generous Euro handouts, Greece is already twitching and Rigor Mortis will have well and truly set-in by the final quarter of 2011.

The answer of who to believe is telegraphed to us daily by people who know – the global investors. Nowadays “buy and hold”  investment seems almost anachronistic.  If you look at Stock prices every day,you will see that they move up and then down , then up again….etc……What is known as a volatile market.

So what WILL the end game be?  What will the Greeks do for us?

Firstly, both European and American banks will collapse (again). European Banks have loaned money to Greece but it is the American Banks who are holding a lot of European bank debt. If European bank shares plunge to ridiculously low levels, financial markets could freeze whilst at the same time, investors will want to withdraw their non-existent money.

Incidentally, money is already being withdrawn and in the last 10 days, over $50 millions has gone from primary money market funds.

Secondly, the market for short-term debts — especially corporate IOUs (commercial paper) may freeze up. (That’s what happened in 2008 as a result of the Lehman Brothers collapse). The difference is that for instance in the United States, the Federal Reserve will not step-in with guarantees or cash – they have said so. Safety net gone.

No doubt other Central Banks will come running-in with the sticking plaster and splints but hopefully, by then, we will have learned to recognise more futile attempts at a temporary fix.

Thirdly, Greece has more cash tied up in debts than their economy produces in a year (debt/Gross Domestic Produce ration of over 100%).  Greece is not alone. Their protests and riots may be just a foretaste of what most Western economies will experience in the not-too-distant future. America is just one example of an economy which has passed the danger threshold and is currently playing a waiting game.

It is not just the well-publicised countries such as Spain, Portugal, Ireland and Italy which are on the brink. The United Kingdom is not far behind.

So what do we do? Do we dance to the politician’s drum-beat?

To a certain extent we have to. Even a wounded tiger is dangerous, so we are forced to ride it along with our governments.

However, we should follow the facts and not believe government “spin”. Do not forget that a skilled tailor can make a hunchback look straight – and our governments have been sewing like crazy for nearly three years!

We (as individuals) should ensure that whichever institution (bank or insurance company) is holding our money, has the ability, will and wherewithal to fulfil its obligations. Not all of them do. Some will have to rely on more government handouts and guarantees.  When you want your money, you want it in full and NOW.

Finally, we should all be very very vigilant.

Remember the 2008 crisis?  The banks did see it coming but to all outward appearances, it all seemed sunny and “business as usual”. Profits….. bonuses……..obsequious governments prostrating themselves before the Gods of Banking…..

Once bitten……….

Nearly forgot: Happy July 4th

Spygun Snippets from an Island

Civil Servants will be striking on June 30th. Glad that they publicised the date, otherwise some of us may not have noticed the difference.

Good to hear that because Libya is a member of the International Olympic Committee, it has been allocated tickets to the London 2012 Games. However, there is now a bit of a panic  but we have had confirmation that Gaddafi will definitely NOT be attending. But it all depends on whether or not his status changes from Leader to Collateral Damage or, as we say in the trade – dead.

Rumours over here that  Alex McLeish has resigned as manager of Birmingham and will soon be taking over at Tripoli Nomads.

Kudos to the British Coalition government. May 2011 unemployment has fallen by 88,000. In Spain, which has a similar economy but with added Sangria, Siestas and Sun, the May unemployment fell by 80,000. Coincidence?

The “streaming ” debate has started. Clever children are clever and thick children are thick. If you think back to your own schooldays, you will recall that the thick child which you met at the age of five or six, continued to be relatively thick, despite a dozen years of education, targets and assessments.  The most reliable prediction of OUTPUT is input. Relative abilities of children do NOT change. Remember that bright kid who was good at everything? Do you think that he or she deserved to be taught alongside the droolers. Mind you, nowadays, the morons have as much chance of going to university as those who deserve further education. Sorry, but it’s true. Educational equality is a myth. The educational system has learned that the only thing which “false distribution” achieved was a general dumbing-down and an increasing university drop-out rate.(Which incidentally, is one of those stats which is rarely spoken of). Lack of intellectual ability should not be treated as a disease, because very often it correlates to practical or entrepreneurial ability. Not going to university should NOT be considered as some sort of failure. Look at Alan Sugar and Richard Branson. Then look at all those Oxbridge graduates doing either stand-up or unemployment.

If the Chancellor uses macho management words such as “ringfencing”, the banks have (quite rightly) won the argument. The solution to the Banking Conundrum lies in legislation which prevents banks from making unacceptably risky investment decisions. However, if a bank should choose to continue excessive speculation and throws our money into say, debt-based Derivatives, the government should withdraw all or some of its financial support an/or guarantees. Plus, banks should be given a minimum target for investment in safe Fixed Interest Securities (Gilts). Ringfencing is  no more than a crude accounting exercise which will involve system changes which will cost MILLIONS. Bank customers will have to pick up THAT tab as well. The banks continue to run rings round a naive government. The ONLY way to prevent banks from going bust is to LEGISLATE and not through rearranging the furniture………and if another idiot says “FIREWALL” I shall scream.  However, leave banking reorganisation to the bankers. Meanwhile let’s enjoy the Chancellor’s Mansion House posturing. <Moves Radio Dial from HILVERSUM to WORLD SERVICE>

Twitter: Am NOT being rude – I cannot see you.

Lagarde, IMF and Adidas.

The selection process for the next International Monetary Fund (IMF) Managing Director kicked-off yesterday and will finish on June 10th.

Coincidentally, that is exactly the same date on which  the front-runner for the post, France’s Christine Lagarde will learn whether she is to be investigated for “abuse of power”. Currently, Lagarde has not yet confirmed whether she intends to compete for the job but she is already the favourite to replace Dominique Strauss-Kahn.

She has gained a reputation as a “doer” and her decision in 2007 to put a stop to a protracted legal battle could result in her being prosecuted for “abuse of power”.

The former head of Adidas, Bernard Tapie had been waging a court battle for nearly 20 years. He had accused French bank Credit Lyonnais of mishandling the 1993 sale of his company and cheating him. Christine Lagarde stepped-in and ordered that a panel of judges should investigate the case.

A year later, the judges decided in Tapie’s favour and ruled that he should receive £248 in damages.

Credit Lyonnais had gone to the wall and was being administered by a state-operated consortium. That meant that in effect, Tapie’s payout was made from public funds.

Left wing politicians and French Green MEPs have wasted no time in claiming that Lagarde behaved improperly and had exceeded her authority.  They have questioned the legality of her actions  and there has been suggestion that she may have been acting on orders from ther Elysee Palace. The beneficiary of the judges’ ruling, Bernard Tapie was a well-known  Sarkozy supporter. It is that which lends credence to the accusation of Sarkozy having influenced Lagarde’s decision.

Christine Lagarde ought to be lauded for using common sense in ending a legal case which was not showing any sign of being concluded. As usual, it was only the lawyers who were benefiting.

Hopefully, when she is Managing Director of the IMF, she continues to demonstrate the pragmatism and common-sense of a leader and not the stuporous thinking of the average bureaucrat or the  furtive back-room well-nigh masonic style of the senior banker.

What?! Mandelson for the IMF?

(Yes, yes! We ALL thought that it was a nose-bleed)

The Chinese have asked if Prince of Darkness, Peter Mandelson would be interested in THE  job at the International Monetary Fund!

Does a Pope crap in the woods?  Is the bear a Catholic?

It is difficult to understand the qualities that the Chinese admire in Western politicians. If you recall, they were great fans of President Richard Nixon, even after the Watergate bust. They’re obviously seeing something that is invisible to the Westerner.

As well as having been EU Trade Commissioner, Mandelson is our former Business Secretary and he is known as an excellent manager, administrator and shrewd political operator. So he does have (with apologies to Dominique Strauss-Kahn) previous form.

If the oleaginous Mandelson were to be handed the job ahead of sexy Christine Lagarde or bumbling  Gordon Brown, many, including our own Prime Minister would be reasonably happy – after all, Mandelson, in spite of his many foibles is a very smooth international wheeler-dealer.

Mind you, ‘ la cerise sur le gâteau’ would be that not-only the French but more importantly, Gordon Brown would throw all of their toys out of the pram.

French President Sarkozy is still developing his neo-Napoleonic image by having elbowed his way to the front of the NATO queue in order to enhance his recently acquired ‘decisive international statesman’ image by bombing Gaddafi. For balance, he and his wife are expecting a child. He has literally worked his nuts off in order to create a new shiny voter-friendly image for the forthcoming 2012 French presidential election. Make no mistake, the alleged DSK-rape affair is a massive bonus to his campaign.

Now he has the opportunity to install his “protégé” Christine Lagarde at the IMF. That will be yet another feather in his ‘chapeau’ plus Christine will be out of the way, charming bankers and politicians, thus removing herself from the local (French) political scene. Currently, Christine Lagarde is so popular in France  that if she decided to run for the French presidency, she would doubtless win.

Gordon Brown needs a job and when interviewed, he didn’t rule himself out – after all it’s £320,000 tax-free – he just tried to sound serious and statesmanlike. He’s definitely making a low-key play for the job. For instance, he had wasted no time in flying out to  South Africa, where he was launching a new High Level Panel on Education. Today’s interview had a backdrop of a classroom full of nicely polished black kids. That always goes down well with the media.

When asked about his candidature for the IMF job, he replied in his usual sparkly way “Any candidate to head the IMF needs to be appointed on merit”. When he said that, he probably didn’t realise that in that single sentence, he’d ruled himself out.

David Cameron would probably settle for anyone, as long as it wasn’t Gordon Brown – and for valid reasons. There is little doubt that Brown the Bully would try and ‘lord it’ over our  Coalition Government. After all, it is barely a year since he suffered his very public humiliation. Plus he does not possess the urbanity or chic of any of the other candidates. Management by Shouting does not go down well in the IMF environment and Brown has proved more than once that he is a natural backroom boy and not a figurehead.

Nowadays, the Chinese tend to get what they want. After all, even the mighty United States is in hock to them.

Right now, the Chinese want Mandy.

This is going to be a very interesting summer.

(While we’re waiting, Greece will just have to sign a few more IOUs.)


Christine Lagarde or Gordon Brown?

“Hands out of your pockets, Dominique.”

The bookies’ favourite for the suddenly vacant IMF Managing Director’s job is the very bright, willowy 55 year-old  Christine Lagarde. The only obstacle in her way is the fact that she’s currently  French Finance Minister. President Sarkozy needs her.

By training, Christine Lagarde is a lawyer with a Masters in Politics. She has spent time working in America, speaks perfect English and has been voted the best Finance Minster in a G8 country ( Financial Times).

If given the IMF job, she will bring some much-needed glamour and grit to what is arguably the world’s top banking job. She is more of an economist- politician than banker but but has the sort of no-nonsense rod of steel running through her which will doubtless help a worried world through the current economic upheavals.

She is well-liked by the international political and banking communities and has the credibility to talk to them as an equal.

Gordon Brown is an academic, an analytical  and a history graduate. During his short tenure as unelected British Prime Minister he demonstrated a total lack of management and organisational finesse. He continues to delude himself that the ‘led the world’ out of the economic wilderness. Here in the United Kingdom, he left a trail of economic destruction which continues to look like the inspiration for the recent Japanese Tsunami – but with a longer recovery time. Brown’s legacy of incompetence and intransigence will continue to reverberate for at least another two generations.

His popularity within his own country plummeted and remains somewhere below the baseline. At the age of 60, he continues (wisely) to exist below the public’s radar. Unlike the roguish but still likeable Tony Blair, Gordon Brown’s name is never mentioned. He has morphed into the Voldemort of British politics.

In his favour though, he is very unlikely to attack a woman in a hotel room – because he comes across as someone who is frightened of women  and was extremely lucky to have been chatted up by the sainted Sarah, otherwise, he’d still be ironing his own shirts.

The International Monetary Fund  gig requires what one can  describe an Economic Showman – a Personality – a  ‘Sophisticat’  – a ‘Name’.  An economist with a personality. (Sorry, Gordon).

Former Turkish Finance Minister Kermal Dervis, South African Trevor Manuel (we cannot possibly have someone named “Trevor” running the IMF! It’s alomost as bad as “Mervyn”!) and even Singaporean Tharman Shanmugaratnam are in the frame.

Off-stage, the Chinese, Brazilians and Turks are making anti-european noises . (Turkey has competed in the Eurovision Song Contest since 1975 but failed to qualify for this year’s competition)

Meanwhile, German Chancellor Angela Merkel  is pushing for former Bundesbank head  Axel Weber.

Christine Lagarde is odds-on!!


Goldman Sachs strikes again!!

It was GS who helped Greece to cook their books before Greece’s bid to enter the Euro. They were paid a very large fee  for their economic culinary skills. We can all see the fallout of the GS ‘advice’ as Greece is exposed as a Third World economy which is only surviving because of IMF handouts.

Goldman Sachs wields an unfeasible amount of power in the United States Economy:   CLICK HERE

Dr Ben Broadbent has just been confirmed as an external member of the Bank of England’s Monetary Policy Committee. His employer? He is senior European economist at Goldman Sachs.

Does the Goldman Sachs strategy include world domination?

That would be surprising, considering the mess that they managed to get themselves into in 2008.

Euphoria on Planet Bank!

Yesterday, the Governor of the Bank of England suggested  that the banks have slowly returned to their bad habits – but why should that have happened?

Just over two years ago, senior bankers were standing around in draughty Treasury corridors willing to sacrifice anything for Government help in order to avoid  the prospect of a banking meltdown.

Yet now, all seems well on Planet Bank.

J K Galbraith said  “the financial memory is brief”. The fact that even now, those living in broken economies are piling into the stock markets and making speculative investments reinforces  his view.

Investors fall into only two groups. Firstly, we have those who believe that markets will rise for ever – at least for as long as they are investing. Secondly, we have the more experienced group which thinks that it can ride the “ups” and climb out just before prices begin to dip. What they don’t seem to realise is that they are all  as vulnerable as each other.

By rights, stock markets should have crashed by now. All that has held them at reasonably healthy levels is the abstract money that has been generated by central banks. No doubt the central banks imagine that they are doing their governments a favour but once again, they appear to have forgotten one immutable fact: investment euphoria (which on this occasion, they have helped to create) is always followed by a crash.

The trials and tribulations of 2008 have largely been long- forgotten. Speculators, traders and fund managers are riding the tiger once again with no obvious plan to dismount. They have returned to that state of  false-euphoria which may well be generating “winnings” today  but tomorrow will inevitably herald the collapse.

Those who really do manage to avoid the fall will do so more by luck than by judgement.

Regrettably, those who are making money and experiencing all that goes with it believe that they deserve their new-found riches. Their bosses tell them that they deserve their rewards – as if  it is they who are creating the wealth. That belief spawns another very dangerous banker “syndrome”:

It is a super-assurance which carries an ominous presumption of invincibility. (Other sufferers are some hospial consultants and many politicians)

It is that belief – that blinkered uber-vanity which grips them  in an ever-faster spinning vortex of blind euphoria.

When economist Roger Babson forecast the Crash of 1929, he was vilified because he was encroaching on the speculative madness which had gripped a nation.  He had said that there would be a 60 to 80 point drop in the Dow and that many would lose their jobs and money and that there would be a depression. At the time, everyone was investing. The majority borrowed the money to invest because they believed that they could not lose.

Fast-forward to 1986 ; the time of leveraged buy-outs, merger and acquisition mania and  Gekko-style corporate raids. Once again, euphoria came to rule the world. That year, J K Galbraith himself was asked by the New York Times to write a piece on this “new” phenomenon. He recognised the investment euphoria symptoms and predicted a stock market crash. The New York Times declined to publish but The Atlantic printed Galbraith’s article in early 1987.

Black Monday was on October 19th 1987.

Currently, we are in the midst of yet  another one of those speculative episodes but this time it is mired in the economic fallout created by bailed-out bank debt. Plus we have that added “Chaos Theory” element provided by disruptions in the Middle East, various sovereign debt crises, commodity inflation and propped-up currencies…and yet…The Investment Euphoria is alive, smiling and in extremely good health.

Some may say that the investment banking fraternity has lost touch with harsh economic reality. The economy is outside their bubble.

The world’s indices are highish but still don’t seem to be in quite the right place. Speculators appear to be making money as stock markets  rise and fall daily like a tart’s knickers.

There are some outsiders who have a sense of foreboding because bankers’ and politicians’ policies appear to be doing no more than postponing an inescapable economic destiny.

Investment bankers, fund managers and speculators count their profits and bonuses as  speculative euphoria grips them.  The downside is that whereas past amateur investors would pile into the equity markets out of greed, the modern version has taken to buying equities out of necessity.

The returns that private investors can obtain from the retail banks are so low that inflation is now eroding their money. One of the few places available to them nowadays which can produce a reasonable return is the Stock Exchange.

So how will the end-game pan-out?

That depends on the will of Central Banks such as the American Fed and the UK’s Bank of England. Their current status has deteriorated to that of the mildly interested but totally impotent but anxious observer. That suits the banks. They’re filling their pockets before the shutters come crashing down – and who can blame them?

Meanwhile, the central banks should prevent retail banks from investing OUR money in anything vaguely risky – i.e. allow only a very small percentage to be invested in equities.

If  legislation decreed that Retail Banks should invest say 90% of their (our) money in Fixed interest or Gilts and a maximum of 10% in Equities, we could breathe a collective sigh of relief.

So what if the banks are pulling-in returns of 10%+ on their investments? We don’t care – all that we need is a return that beats inflation. Currently, the banks cannot even manage that – inspite of the super-human skills that they claim of their investment experts. (You know, the experts who are SO good that they have to be bribed to remain in place though the medium of the 7-figure bonus but can only leave the bank saver with a net-return of less that 1% p.a. on their savings)

Banking itself  should be  a very simple process.

The Retail Bank is a box into which we put money and the bank pays us a small return for the privilege. If we need a loan, and the bank believes that we ‘ll be able to pay it back, it lends us the money and we pay the bank a small return for the privilege.

But it doesn’t quite happen like that.

Instead, we have a monster which pays us a negligible amount for the use of our money and should we need the bank’s help, we are ripped-off with eye-watering repayments and outrageous interest rates. Plus, the banking “industry” is the only commercial activity which can sell you something (a loan) and then at any time in the future, increase the price.

Can you imagine buying a bunch of bananas from a greengrocer who then contacts you to say ” Have you finished those bananas yet? No?  Well, the price has just gone up on the uneaten ones. In fact, we’re going to charge you more for the ones you’ve already eaten.”

The other self-pertetuated myth is that banks “create wealth”. They do not create wealth – they simply redistribute it.

However, the function of an Investment Bank – the one which does play with equities, is to help industry and commerce to create wealth. The Investment Bank is supposed to do that by raising money. Instead, it has evolved (some say “mutated”) into an organisation whose raison d’etre has become profit creation – for itself and its shareholders.

Bankers and politicians are confusing external wealth-creation (for others) with profit creation (for themselves).

Think about it. The banks don’t actually make anything -they merely redistribute it. Imagine an economy which consisted of nothing but banks  – it would not work because no-one would be producing anything.

Banks cannot function without a steady money supply which is generated outside the banking system.

Mervyn King is right – until there is a major re-think of the banking system and it returns to carrying out those simple functions which augment an economy rather than leech funds away from it – we’re heading for another major fall.

Forget all that dramatic nonsense about “breaking up” the banks – it’s a straightforward accounting exercise with a “firewall” between the Investment and the Retail Bank.

What the banks need is a fundamental rethink of their function as well as another major reminder of their own fallibility.

I have a feeling that the lesson will manifest itself sooner than many “experts” believe.

Featherbedding the Banks

What the bankers are holding

 

 

A report was published today by the New Economics Foundation about the “hidden subsidies” currently enjoyed by the British banking industry. It is evident that the language, techniques and accounting procedures used within the banking system are such that they obscure both the full extent of the support that banks are accepting from the taxpayer  and the comparatively small amount of “banking skill” that banks executives contribute to their own “profits”.

Since 2008,  known public support for the financial sector has been unprecedented in scale.

Since the Bank of England came to the rescue of Northern Rock in 2007, with a  £25 billion emergency borrowing facility, the sums have grown. Subsequent systemic bank failures meant that the public purse would have to support the whole financial sector, not just individual banks.

Many schemes of different types were introduced. They all  lacked transparency so that the amounts are still hard to summarise.  Together,the schemes  added up to £1.2 trillion of backing to the banking system, equivalent to about 85 per cent of the UK’s national 2009 income.

The UK  scale of intervention, in spite of the vast differences in GDP was comparable to that of the United States.

But is it possible that there is still more to the story?  Research from the Bank of England, the Office of Fair Trading, the Institutional Investors Council and Moneyfacts (which provides independent rate comparisons)  reveals a range of other hidden subsidies to the big banks.

Chancellor George Osborne’s recently announced bank levy is minuscule in comparison to all the bank subsidies which we do not know about. The Chancellor was pulling a very small rabbit from a very large hat. The Independent Commission on Banking has yet to publish a complete list of the de facto hidden subsidies currently being enjoyed by the banks. What we know so far amounts to no more than scratching the surface.

Increased scrutiny of the financial system in the wake of the banking crisis has shed light on a number of practices previously taken for granted, which now might be viewed in a different light. The sheer complexity of modern banking (itself one of the conditions that brought on the crisis) has worked to shield the sector from difficult questions. But with the dust of public interventions now settling, a number of anomalies are emerging.

The ‘Too Big to Fail’ subsidy. Having concluded that our major banks are “too big to fail”, the government now  provides a public guarantee. That effectively is insurance against a bank going bust. In business terms, this gives the banks a huge commercial advantage over other organisations. All commercial enterprises need to borrow money and the banks are no exception. However, they can borrow money much more cheaply than any other type of company because of the fact that the public is guaranteeing anything that they borrow.

Answers from leading auditors questioned by the Treasury Select Committee confirm this. The hidden subsidies save the banks a large amount of money – at least £30 billion annually– and thus helps them generate “unearned” profits. To put it simply, they save billions on the cost of their own borrowing and so make MUCH  MORE profit that they would have done without that taxpayers guarantee.

It also means that when the banks pay bonuses to senior staff for “performance”  as well as dividends to institutional investors, the rewards of  the public’s  “insurance”  are headed in the wrong direction. They should be coming back to the taxpayer.

 

The quantitative easing windfall subsidy.  When it was decided that the economy needed more liquidity (cash), the Bank of England pumped money in using the technique called “quantitative easing”. Many people refer to this as “printing money”. However, there is slightly more finesse within the system than a bit of  pressure applied to  a  printing press button .

Take Government Gilts, for instance.(Gilts are bonds issued by governments and they pay a fixed ate of interest twice a year. Governments use Gilts to raise money)

The Bank of England  is not permitted to buy UK  gilts directly from the Government as this is considered to be “monetising” government debt, or in other words directly funding government expenditure through “creating money” .

Instead the Debt Management Office first sells the gilts to banks and other investors and then the Bank of England buys them back from the banks at a higher price, with money that it has “created” . The bankers then reward themselves for completing these “deals.”

 That gives the banks “new” money plus a cut of every trade.

 

The ‘make the customer pay’ subsidy. Thanks to an apparent lack of forward planning (and understanding), the government has created a paradox which really has placed the banks “between a rock and a hard place”. They have been given two contradictory goals by the government. The first is to lend money (which is what caused the majority of their problems in the first place) and the second is to hold onto their money so that they can rebuild their capital.

The banks could manage this problem in any number of ways. However, they have taken the easy option which is to charge more when they lend and at the same time, pay less to their own savers and investors. The difference between what the banks charge their borrowers and pay their savers is known as the “interest rate spread” or margin.

So the government, by way of using the taxpayer to guarantee that banks cannot fail to repay their debts has meant that banks can now “buy-in” money cheaply and resell it at a vast profit. That also means that they don’t have to pay their private savers very much at all. Technically, they are punishing the very people who are subsidising them .

As a matter of interest, there was a time when banks and building societies had an operating margin  (Difference between what they charged  borrowers and what they paid investors) of 4%.That means that in today’s climate,  borrowers could be charged say 10% and savers could be paid 6%. That excludes mortgagors whose borrowings are secured – their rates could easily be of the order of 3% .

Although the banks have taken the “screw the client”option, they could  speed-up their recapitalisation through eliminating bonus payments and dividends. The banks’ hidden subsidy created through overcharging their customers is estimated at £2.5 billion per year.

 

The Fake Money Subsidy. The nature of money is such that when a bank grants  a loan, it does not have the money. It is allowed to create money to hand-over and makes a profit from the interest rate which it charges. That is another form of subsidy – as the government has  effectively given banks another  licence to print money. Money is “lent into existence”. The old days when banks only lent money left by savers have gone.

So if this is considered another subsidy, it is worth tens of billions per year.

The whole essence of the contemporary monetary system is the  creation of money out of nothing, through the medium of lending.

The government and the taxpayer are no longer dealing with individual banks. We are dealing with a very powerful cartel which not-only negotiates as a single organism but has left the very concept of “competition” far behind. Furthermore,  if you study the various interest rate charges and products, you may be forgiven for assuming  that price-fixing appears to be taking place.

The UK retail banking industry is unusually concentrated. Not only do the largest five mortgage lenders have a market share of 82%  but the range of providers was much diminished by the demutualisations of the late 1990s. This concentration of the market has all but killed competition.

 

Mortgages: Current mortgage interest rates, compared to the bank base rate and the rates at which banks “buy in” money suggest that the banks are profiting greatly from their mortgage clients.

Using figures from Moneyfacts on the average rates offered for the benchmark two year tracker mortgage since June 2007, we can see that rates have fallen from 6 per cent to 3.5 per cent.  But the Bank of England base rate has fallen by much more – from 5.5 per cent to 0.5 per cent. The mortgage interest rate spread has therefore increased from around 0.5 per cent to 3 per cent.

Some readjustment in mortgage pricing was necessary, but even taking a conservative view of long-term spreads as being around 2 per cent, the increase to 3 per cent since the crash represents additional interest revenue of around £1.6 billion per year from 2009 gross lending and a further £1.5 billion per year from 2010 gross lending.

Increasing the margin on new mortgages has certainly been a factor in bolstering bank profits since the crash. Furthermore, despite the reductions in base rates and wholesale funding costs, key lending rates have hardly moved since the crash.

It seems therefore that the burden of “rebuilding” bank balance sheets is being borne by bank customers and certainly NOT  by bank shareholders and their executives.

 

Sneaky Fees: It is not only in retail banking that the customer is getting a raw deal. A study by the Office of Fair Trading (OFT) into the equity underwriting market, published in January 2011, found that “the market lacks effective competition on price”. This  followed an earlier report by the Institutional Investor Council (IIC) which tracked how total fees for raising equity capital, using rights issues, had increased over the past decade.

It has risen from 2% per cent to as much as 4%. Within this, the amount kept by the organising investment banks in their roles as broker, underwriter and adviserhad risen threefold from 0.75 per cent to 2.25 per cent!   There appears to be little justification for bank fees trebling and would explain for instance why a bank such as  Barclays Capital (the investment arm of the bank is now generating more profit than its retail arm)

Investment banks have collected over £1billion in  “excess” fees and over 90% of that has been generated since the 2008 crash. 

Banking is the only business which, when in trouble increases its prices. It can do this because it has a captive audience.

 It therefore seems a nonsense for Government to state that it would be desirable for London to remain “competitive”  as a global financial centre.

There is nothing competitive about London except bank bonuses. Competition used to be viewed as being based on the cost to the customer and not the income of the company’s officers.

 

And so…….The really frightening statistic is that notes and coins represent only about 3% of the total money supply. The rest is created as new credit.

According to analysts. estimates, the largest four UK banks are set to report profits before tax for 2010 of around £22 billion between them. By 2012 this is expected to more than double to over £45 billion, as analysts predict a return to “business as usual” for Britain’s large banks.

The same banks had total staff costs for 2009 of around £37 billion, with over £7 billion being paid out in the form of bonuses that were concentrated amongst their elite.

The hidden subsidies to UK banks from taxpayers and bank customers are very similar in scale to current bank profits.

This indicates that far from being efficient, the UK banking sector is deficient and that overall levels of dividends and remuneration, including bonuses are far higher than is economically justified.

Banged-up Bankers

Norman Tebbit is right. It is about time that the banking industry told us who was responsible for the banking Chernobyl of 2008. So far, apart from one or two career casualties, no-one has been brought to book. There certainly have been no criminal prosecutions.

Politicians continue to be in awe of the bankers. This is in spite of the fact that many “spooked” governments had “no-strings” money extorted by the bankers. Governments had to go cap-in-hand in order to borrow and over-commit themselves whilst  bankers behaved merely as the wayward child who had slightly overspent a term’s university loan.

The biggest mistake that governments made was not to ask the banks to try and stay “within budget” in future and not (at least) appear to be over-indulging themselves quite as openly as they used to. As we now know, the banks did not listen , took the money in the sure knowledge that they could carry on exactly as before, because there would be no sanctions. On the contrary, the governments told them that if they were ever in trouble again, government would borrow even more on their behalf.

Some would argue that governments, in handing those vast quantities of cash over to the banks, overstepped the mandate that had been handed to them by the electorate. But the consequence is very straightforward: we are now locked-in. Governments will keep on coming back to the people who elected them and will keep asking them for more and more money.

I say “more and more” because one of the by-products of the recessions suffered by most countries is more and more unemployment. The unemployed , no matter which way you cut it , are a burden on the State – a burden which needs to be supported. Support to the unemployed costs the State which once again has to return to the working electorate for funds.

Our own government spends more than it earns. The shortfall is made-up by borrowing. The difference is called a “deficit”.

Chancellor Osborne thinks that within the life of this Parliament ( by 2015) we will be able to eradicate that deficit. This , from a Chancellor who said this in a lecture to the LSE  three years ago:

“Around the world, countries like Ireland and Australia shrewdly took advantage of these huge opportunities. They reformed their economies, made themselves more competitive, and strengthened their public finances. Both of these countries, for example, now have a “future fund” of assets built to provide security against future shocks and liabilities. Their public finances are well placed. Their competitiveness has risen. Their institutions are stronger.”

Whlie we’re at it, here’s another George Osborne quote:

“A Generation ago, the very idea that a British politician would go to Ireland to see how to run an economy would have been laughable. The Irish Republic was seen as Britain’s poor and troubled country cousin, a rural backwater on the edge of Europe. Today things are different. Ireland stands as a shining example of the art of the possible in long-term economic policymaking, and that is why I am in Dublin: to listen and to learn.”

Mr Osborne then went on to say that he would endeavour to create a British economy in the same mould as that of Ireland.

Some may say in that statement, we have at least one Tory electoral promise which will be achieved.

In retrospect, the above very sincerely-delivered quotations may be interpreted as the ramblings of a future Chancellor who had no idea of what he was taking on or what he was talking about – and THAT is the point.

The banks perpetrated their frauds so cleverly that not even the brightest economists or politicians saw it coming. One could even say that some bankers were SO cunning that even they had no idea of what was about to happen. Although, having said that, the accounting techniques which the banks used suggest that even when they were technically bust, they still managed to declare profits and pay bonuses. Those were the days when the phrase “off-balance sheet” came into common usage.

Whatever the excuse, we do need to see some justice.

Diamond is forever

” These stiffs earn £65K. Wooooo! I’m so scared!!”

Barclays boss, Bob Diamond,  was today “grilled” by the Treasury Select Committee  and once again showed that he is slicker than frozen catshit on wet ice.

He, of course was not the ideal banker to be interviewed on certain topics, especially as Barclays did not source any funds from the British government during the banking crisis. Instead, they borrowed cash primarily from the Qatar Investment Authority (QIA) which was an existing Barclays shareholder.  Barclays had also held talks with  the Libyan Investment Authority and Russia’s VTB and Sberbank banking groups.

At the inquiry Diamond said (quite rightly), “No bank should ever be a burden on the taxpayer.” As someone who had run  Barclays Capital for 14 years, prior to being given the reins to the Barclays Retail operation, he had known where to source money when times became tough for Barclays in 2008.  He’d done it without any UK-focused sentimentality, whereas the rest of the industry ran to the Treasury for handouts. His exact quote: “Banks should be allowed to fail…It’s not okay for taxpayers to have to bail out banks.”

He was quite right. If a bank failed, it would be bought by another bank. Hopefully one with a competent Board and management.

Inevitably, that old chestnut, the banker bonus  reared its ugly head during rather tense exchanges but realistically, Diamond knows that he can earn what he damn-well pleases. Perhaps he wasn’t the ideal banker to defend bonuses. He has foregone his bonus for the last two years but there is little doubt that he can easily afford to do so. In 2007, he earned £21 million.

Barclays is not a government charity basket-case,  unlike the Royal Bank of Scotland whose CEO, Stephen Hester is set for a £2.5 million bonus. (As the government owns 83% of RBS shares, that will, in effect make Hester the UK’s highest paid Civil Servant).

Diamond expressed his belief in the Retail-Investment banking model, saying that the arrangement provided stability and was a “great starting position”. Many MPs believe that banks should be broken up  so that a clear distinction can be drawn between Retail (personal banking) and Investment (so-called Casino banking). In reality, they have always been separate operations and really only come together for accounting purposes.

It has taken the government a long time to come to the conclusion that they are totally impotent as far as banker bonuses are concerned and that they have effectively been told by the banks to “butt-out“.  As a concession though, the banks are expected to say that they are committed to lend more to small businesses. It remains to be seen whether this happens.

The banking industry claims that it is lending, whereas the business sector says that banks are not lending enough and when they do lend, it is at exorbitant interest rates with  borrowers having to jump through a series of bank-designed fiery hoops before banks do deign to lend.

However, Diamond said that demand for commercial loans had subsided.

Once again, Diamond demonstrated that our MPs, who are a motley crew of ex-lawyers, academics, union men and local councillors are no match for the denizens which swim the murky waters of the world’s banking system

PREVIOUS BOB DIAMOND

CHANCELLOR GEORGE OSBORNE’S VIEW ON BONUSES? BUSINESS AS USUAL

Vince Cable

Have you noticed how quiet Vince Cable is these days? He used to be the most vocal politician on the subject of both “Casino Banking” and the banker bonus. It seems that after being told never again to crap in the Coalition’s cosy little nest, he has had his wrist slapped and been muzzled.

Currency Wars.

I have been predicting the collapse of the dollar followed by the collapse of the pound sterling for about 12 months. the phrase ‘double-dip recession’ has now gone into the language but again is one of those phrases which is quite meaningless because I do not believe that we ever came out of recession.

Economically speaking, we have all been whistling in the dark.

Today the US dollar plunged to its lowest level against the Japanese yen in 15 years and fell to its lowest level against the Swiss franc in 27 years.

The world currencies which are going to do well in the next 5 to 10 years of those which belong to countries who have something to sell, that is to say countries which have minerals and metals in the ground and/or any sort of manufacturing. Australia is such a country and today the American dollar fell against the Australian dollar to its lowest-ever level.

Again about 12 months ago I predicted that gold was headed for $2000 an ounce. Today it is already at $1360 an ounce. That’s what happens when the dollar plunges and  investors start to buy gold by the ton!

World governments are plugging the odd financial hole here and there but, in the grand scheme of things, they are impotent to stop the meltdown of the dollar.

Apart from accelerating the value of gold, what else is the demise of the mighty dollar achieving?

There are only THREE major asset classes. Gold, commodities and currencies. As investors dump the dollar and rush for the exits marked gold, commodities and other- currencies-as-long- as-it-isn’t- the- dollar, there are two certainties. The first is that very soon the US government will have no choice but to devalue the dollar. The second is that  the dollar’s plunge has put incredible pressure on the price of food as investors rush to invest in wheat, corn, soya etc.

By the end of this year, the United States and the United Kingdom will be leading the Western world in unemployment statistics as both economies  are losing jobs at a greatly accelerating rate. In 10 days time,  the British Chancellor will give the British unemployment statistics  even more momentum by declaring thousand more public sector job losses. In the past four weeks, the United States has declared another 95,000 job losses.

Both the Federal Reserve and the Bank of England are inking the printing presses – ready to print even more dollars and sterling.  That will inevitably lead to currency devaluation which in normal circumstances would inflate an economy . However, after the United States and United Kingdom, there is a long queue of countries also wanting to down-value their currencies. That way (if such a thing were possible), they could all default on each other’s debts. Never mind, perhaps the banks will bail them out.

As recently as two days ago, both the IMF and the G20 admitted that this is not the end of the world’s economic troubles but the beginning of something truly terrifying:

Currency Wars.

It is simply a question of who blinks first and which economy can print money the fastest.

So what of the investors? They will produce what is known as a self-amplifying problem. That faster governments print money, the faster the investors will dump any currency they hold and the faster they will invest in gold and commodities. That will inevitably give rise to chronic  inflation and a very unpleasant end-game.

Will all these shenanigans affect the pound or dollar in your pocket?

Before you ask that question, make sure that you still have pockets that haven’t been picked by your government.

(THIS is from just over a year ago)

Goldman Sachs on the run

“Hey wise guy! Wanna buy any synthetic collateralised debt obligations?”

Over the last few years, I have written a great deal about Goldman Sachs and  its Svengali-like hold over successive U.S Governments.  Some of what I’ve written remains on this site. Hopefully, President Obama’s current  initiative, in tandem with the SEC is the dawn of a new relationship between Government and the banking industry.

It seems that the “minders”  Goldman Sachs used to have at U.S. Government level have disappeared.  Obama has, quite rightly finally set his dogs on them.

A few days ago the company was accused of fraud. What at first appeared to be slight financial naughtiness turns out to have been very bad indeed. Goldman Sachs is accused of eliciting investments from clients into financial ” instruments”  which had been designed (by them) to fail. The very same  family of products which precipitated last year’s banking crisis.

Not only that but they knew that yet another client of theirs , a hedge fund manager was “betting” on those products to fail and thus make a profit. The hedge fund manager had even helped Goldman Sachs to design that particular product.

John Paulson (no relation to Henry Paulson, former Treasury Secretary Henry Paulson and former Goldman CEO) is the owner of Paulson & Co, the hedge fund which was betting on the American Housing market to collapse. “

During the American sub-prime lending orgy, “exotic” mortgage-backed products had been designed with only one purpose – to generate a profit not-only for hedge-funds such as Paulson & Co but also for investment houses like Goldman Sachs.

The so-called “exotic trades” were no more than pooled mortgages worth billions. These mortgages had been granted to the so-called American Ninjas (No Income, No Job or Assets).  It was generally accepted that because these people had absolutely no chance of keeping up with any mortgage repayments, any product based on their mortgages would “tank” – and so it proved.

These mortgages were then “securitised”, that is to say, they were lumped together into what can only be described as a quasi-fund. Then, both private and corporate investors were encouraged to invest.

For instance, imagine  1000 Ninjas with  1000 mortgages worth £100,000 each. Lump them all together and you have a fund totalling £100,000,000. This should produce an income (mortgage repayments ) totalling say £5,000,000 per annum (at 5%). On the face of it, that’s quite a good investment – but only if you omit to mention that within a few months none of the mortgagors will have made any payments.

So, whoever “securitised” these  useless mortgages was able to pull-in yet more money which, believe it or not was subsequently  lent to other “Ninjas” and the cycle repeated.

Many investors found these potentially worthless investments very attractive – especially our banks. The rest, as they say is history. The only mildly interesting thing is that the banks didn’t understand what they were investing in and neither did the Financial Services Authority here in the UK or the US  Securities and Exchange Commission.

The Golman Sachs employee (I hesitate to use the word “banker”) at the centre of this potential scandal is Fabrice Tourre. He boasted that he had created the products “without necessarily understanding all of the implications of those monstrosities.”

 He obviously did a good selling job because he managed to lose Goldman Sachs clients who invested in these mortgage-based products over £645 million.  At the time, Mr Tourre was himself earning £1.5 million per year.

He has been accused of lying to investors – among the most gullible being our own Royal Bank of Scotland.

Meanwhile, the hedge fund owner John Paulson,  with whom the investments were placed, made himself a cool £2 billion.

Not so long ago, someone said that  if you put lipstick on a pig, it is still a pig. Mr Tourre and Goldman Sachs put so much lipstick on this pig that it looked like a glamorous dead-cert.

Mr Tourre is no doubt hoping that the Icelandic volcano continues to spew toxic fumes for ever – the last thing that he wants is to fly back to the USA to face the music. The Securities and Exchange Commission is just about to make a formal request to the British Authorities for Tourre to return to the USA to help the authorities with their inquiries and possibly face charges in conjunction with his employers.

Goldman Sachs shares are currently taking a pounding – especially as the SEC has said that it is investigating other financial shenanigans both by Goldman Sachs and other “banks”.

Unsurprisingly, Goldman Sachs has denied all charges and has said that SEC’s charges are unfounded “in law and fact” and that it intends to contest them.

However, as Goldman Sachs knows  a great deal about the US Government’s past financial machinations, there will probably be a “deal” of some sort.  But, as the SEC is also looking to recoup money lost by investors, it is hoped that Obama is strong enough to resist any easy compromises.

If money is, in effect stolen, then the mere act of returning it to its rightful owners does not usually put things right, although it can be interpreted as an admission of guilt.

It all depends on whether Goldman Sachs want to fight the action and whether it has the appetite for a lengthy trial.

Currently, it seems that Goldman Sachs does not have a leg to stand on, especially as it was paid £10 million by John Paulson to put together the mortgage-related product which was bound to fail.

Paulson took money from investors but at the same time “hedged” his bets by laying-off the risk through taking out a form of “insurance” which paid him vast amounts of cash when the investments failed ( and which he knew would fail in the first place).

These “pooled” mortgages which Goldman’s were selling were given the very impressive name of “synthetic collateralised debt obligations” – which is no more than sales talk for  “a load of potentially bad mortgages which have been lumped together for the gullible and feeble-minded to invest in”. For example, the entire banking industry.

The pill was further sweetened by Goldman Sachs through their claim that an independent third party called ACA Management Ltd had selected the pools of sub-prime mortgages. In fact a lot of the input into these potentially bad investments came from  John Paulson himself.

 This is what SEC Enforcement Director Robert Khuzami said:  “Goldman wrongly permitted a client that was betting against the mortgage market to heavily influence which mortgage securities to include in an investment portfolio, while telling other investors that the securities were selected by an independent, objective third party”

Tourre cobbled together the alleged fraud in 2007, just when the U.S mortgage market was  beginning to unravel. As a reward, he was promoted to Executive Director of Goldman Sachs in London.

John Paulson is not being pursued by the SEC  because in spite of the fact that he may have been complicit in the alleged fraud , he did not make any representations to investing clients. That was done by Goldman’s. 

Goldman’s has been an advisor to investment banking clients for many years and is also well-known for filling  high-level U.S Government posts with its directors and senior executives. Those days appear to be at an end because , as Simon Johnson, professor at MIT recently said ” I don’t think that anybody really values being connected to Goldman at this point.”

Because the SEC has indicated that it is on a financial witch-hunt, financial shares have fallen heavily in the last few days with Goldman Sachs itself losing about £10 billion in market capitalisation.

It seems that the SEC is retuning to its original role; the one in which it has so manifestly failed and that is protection of the investor. Hopefully, other financial regulators such as the UK’s Financial Services Authority will also have the courage to bare their teeth and not continue to be bullied by the banking industry, its white-collar bandits and their excesses.

William Hague – a tribute

 

The article  below appeared in the Daily Mirror on 5th March 201o and is reproduced here with the full permission of the author Brian Reade.

When you have finished reading about William Hague, you may perceive that Brian Reade is probably not the Chairman of Hague Fan Club – and you would be right.

I have been Socialist-bashing ever since I could open a notepad but for the sake of balance I do believe that we should have an insight into the lives and more-importantly, the characters of all the main players in the  forthcoming General Election. In the last year we have all come to learn that what really appears to separate politicians (of any Party) is nothing more than  size of wallet plus position on the Odious Scale.  Idealism seems to have given way to the ugly spectre of self-interest. 

William Hague has had a long history within the Tory Party and as Brian describes below, he is the Conservatives’ Malvolio – having had greatness thrust “up him” rather than “upon him”. He is also one of the few Tories who has proved that there is life after death.

The Daily Mirror has several heavy-duty writers of conviction  but I’ve always considered Brian Reade  as the most perceptive and incisive .  Enjoy some of the most genially-executed knife-work you’ll ever see.

For three decades he was a political joke beyond parody.

William Jefferson Hague, the geeky nerd who spent his youthful nights studying Hansard and memorising Churchill’s speeches. Who at 16 wowed a Tory conference with that shrill, hectoring speech. The gormless leader who at 36 thought he was being passed the Thatcher ite Flame, only to find it a poisoned chalice handed to any chump foolish enough to take it.

The Original Tory Boy who tried to win the yoof vote by wearing a baseball cap to the Notting Hill Carnival and a theme park, only for Tory writer Simon Heffer to say he resembled “a child molester on day release”.

Unabashed, he told GQ magazine he spent his youth downing 14 pints a day. No-one swallowed it. Not least a local pub owner who called him a liar and labelled him Billy Fizz.

Eventually The Youngest Fogey in the West became Billy Bandwagon, leaping onto every passing rightwing cause to ingratiate himself with the party’s core vote.

He was The Fighting Foetus, The Dome-Headed Tyke, in thrall to his party’s Loony Right, and he fought the 2001 election on a puerile Save The Pound platform. The Tories gained just one seat. He was a political failure at 40, leaving them so battered turned to Iain Duncan Smith.

ANIMAL

But even critics admitted he was not just a caricature. His combative displays at Prime Minister’s Questions hinted at a cunning careerist behind the joke exterior.

The next decade showed the real Hague – an avaricious animal ready to oil his way into the good books of any individual or organisation that could line his pockets and keep him close to the Tory throne.

So successful was he that he earned more than any other sitting MP. David Cameron made him Shadow Foreign Secretary and called him “my deputy in all but name”.

It is Hague, not George Osborne, from whom Cameron takes most advice, which is why the Michael Ashcroft affair goes right to the top of the Tory chain of command.

Ashcroft is Hague’s man. Friends call the two “extraordinarily close”, with Ashcroft admitting a “mutual chemistry” the instant they met in 1997. So Ashcroft’s outing as a non-dom, who went back on a pledge to pay tax here to gain a peerage, casts a long shadow over Hague’s integrity.

It was Hague who persuaded him to bankroll the party in 1998. Hague who begged Tony Blair to make him a Lord.

Hague who refused to give a clear answer when asked nine times by Jeremy Paxman and four times by Andrew Marr if Ashcroft paid tax on his overseas earnings.

Maybe he didn’t know him that well. He had only been travelling on the billionaire’s jets and staying on his yacht for 11 years.

He only let Ashcroft accompany him to Cuba and the US last year and attend key meetings. They were so close that when Hague ennobled him, both gave a “clear and unequivocal… solemn and binding” JAshcrofts assurance he would become permanently resident in Britain. Only for the lord to spend a decade avoiding full UK taxes.

As former civil service chief Lord Turnbull said on Wednesday, it was Hague’s responsibilty as his “sponsor” to ensure he fulfilled that assurance. “We were taking Hague’s word that he had negotiated this deal and it turns out that he had negotiated a deal with a loophole,” said Lord Turnbull.

Hague claims he has only known of his chum’s tax status for a few months. The Times called him “evasive and weak.”

But his devotion to wealth is no surprise to friends. After quitting as Tory leader he was the first MP to earn £1million in a year, thanks to consultancies, newspaper columns and speeches. Commons documents last year showed £235,000 in “remunerated employment” including £50,000 as “parliamentary advisor to JCB” and £25,000 for a speech in Brussels.

There are directorships at AES Engineering and AMT-SYBEX Group, four trips overseas funded by private firms, a helicopter ride to Crewe and honorary membership of the Carlton club.

BANKERS

The expenses scandal also raised questions.

Despite his fortune he got the taxpayer to pay his mortgage interest and £4,000-a-year service charge on his £1million second home in London.

His claim of £61,995 between April 2004 and March 2007 was almost up to the maximum of £64,646. A senior Labour source added: “He’s been using taxpayers’ cash to help build a property empire.”

Then there are the freebies, such as £800 tickets for him and his wife to attend a Tory ball, paid for by a private finance firm.

The London Evening Standard asked why one of the wealthiest MPs chose to “accept the hospitality of others at this event?” Questions were also asked over a 2008 Barclays jolly to Italy’s Lake Como on the day global markets went into freefall. The Daily Mail wrote: “The VIP treatment… was at odds with the restraint and austerity David Cameron imposed on his party”.

Labour’s Richard Caborn blasted: “On the one hand Cameron is trying to distance himself from his chums in the City by slagging off bankers’ bonuses. On the other hand his right-hand man is jetting off to join a £500,000 bankers’ banquet in Italy.”

Cameron wants to show the Tories are the party of the ordinary guy. But thanks to the Ashcroft affair, it may be backfiring.

Behind the exaggerated Yorkshire twang, Hague is no Man of The People. His father owned a soft drinks company and Hague attended Oxford University. He now owns £1million homes in Yorkshire and London.

And he remains passionate about axeing inheritance tax for the super-rich and says: “I believe in it strongly. If we’re going to create a savings culture rather than a debt culture, we need to show we are serious.”

Hague believes the Tories will win by scaring the electorate. He is currently asking voters how they might feel waking up on the morning after polls close to find Gordon Brown still in government.

Maybe he should ask how they would feel if Billy Bandwagon finally made it there.

Octavius – over to you.

Badger Brown

There are people who will vote for a politician because he has a pretty face, looks honest or has a good voice. What fires an important section of the electorate is not logic but emotion. Perception, prejudice  and superficiality are the new Gods and it is only in recent years that politicians have become conscious of the fact that complicated economic  and social policies are not the primary route to votes from an increasingly apathetic and intellectually impenetrable electorate. They need to tap into the electorate’s emotions. They need to SELL.

There are only TEN recognised Emotional Buying Triggers ( EBTs): Ego, Status, Prestige, Greed, Fear of Loss, Pride of Ownership, Ambition, Health, Security and Sex.  All selling is based around combinations of these 10 EBTs. 

For instance, television car advertisements: Status, Pride of Ownership, Ego.  M&S food: Status, Ego, Health.  The most powerful EBT is SEX and that is why  many advertisements and promotions tap-into it so frequently. Exactly the same rules now apply to persuading the jaded but still-susceptible voter.

Emotionally, there are large blocks of voters to whom politicians cannot sell. These are the individuals who are tied to a particular party by blood and bigotry. ” My father was Labour, his father was Labour etc etc.”  If you canvas these people and start talking interest rates, percentages, policies, their eyes glaze over.

When politicians talk of GDP, Fiscal Stimuli, Quantitative Easing, they are not talking to  the man in the street, they are addressing Times, Guardian, Independent, Mirror or Telegraph analysts and journalists or they want to direct messages towards bankers, corporate investors or other politicians. The “man in the street” needs blander and more digestible messages – something that he has been conditioned for.

Admittedly, there is a small percentage  of voters that  does analyse the economic slurry which is discharged by Whitehall and then reported, interpreted and mangled in a variety of ways by a deeply partisan press. Whether the journalist is Labour, Conservative or Liberal, his or her views are as strong as those of the voter who will vote for his Party but only because he has always voted for the Party. Voters read specific newspapers and follow specific journalists, not for reasons of debate but simply for the warm milky comfort of having their own views and opinions reinforced.

In an election, the target is not the die-hard voter – the one  who will vote for his party even if the candidate is  a cardboard cut-out. The target is the so-called “floating voter”. The sales pitch has to be  for him.

So, which buying triggers do the political parties usually attempt to tickle? Security, Fear of Loss, Ambition and Health have always been favourites. Greed is another quite powerful trigger. In the final analysis, our primary concern is not the economy but ourselves. “What’s in it for me?”  The BNP is an excellent example of a party which is constantly tapping into Fear of Loss (of our sovereignty and way of life)  and  Security (the implication that we may somehow be in economic and physical danger from immigrants).

The above buying triggers have been tapped-into for years  and  apply to all parties.  A new “edge” was needed and not surprisingly, it was the emotional buying trigger of SEX – totally overlooked by politicians for many years which suddenly became the prime catalyst.

Let’s face it, most politicians were (and still are) “spuds”. That is to say, ordinary men and women who were obviously chosen for their abilities and not for their looks. Nowadays, that is not enough – especially for the people at the top – the party leaders.

Here in the United Kingdom, Tony Blair was the first politician to present himself as “Political Totty”  and surrounded himself with even more totty. Remember Blair’s Babes? Blair had learned the Cult of Personality from Bill Clinton, who some think  may have “overworked”  the  “boyish good looks” angle. The result, as we all know, was public disgrace and a dry-cleaning bill.

Much of  Tony Blair’s appeal was superficial – the slim good looks, the ready smile, the Bambi eyes etc. You may have noticed that when he appeared before the Chilcot Committee a couple of weeks ago, the soft-blush bloom of youth had faded and much of his appeal had dissipated. Consequently (and possibly unfairly) we were pre-judging his words because there were  no buying triggers left for him to tap-into.

There is little doubt that Gordon Brown is also going to attempt to tap-into our most basic EBT. His appearance on the Piers Morgan programme was designed to let us see Brown as a “bit of a lad” who had finally settled down and in spite of the setbacks and personal tragedies, has immersed himself into a loving family relationship with a handsome woman who dotes on him. Hey, that’s sexy.

Setting aside Morgan’s “lêche-cul” style of interviewing, the editing, tempo and content produced a  superficial but morbidly interesting piece of television. The Ill-tempered, chaotic, gauche  Billy-no-mates was airbrushed before our very eyes into a deep, emotional, loving, modest man who will work for charity when he finally retires from politics. Celebrity Mr and Mrs cannot be too far away.

Rumour has it that the Leader of the Opposition, David Cameron is being advised by friend and confidant, Octavius Black who, in spite of  a moneyed background and public school education, is quite street-wise. That is good because in order to cement his voter-appeal, Cameron needs to lose the off-duty Barbour image and gently pull his wife more and more into the limelight. His media advisers are probably already talking to ITV and BBC with the usual demands for “balance” (equal air time).

The one-on-one interview must sound appealing to the Cameron camp but they should beware of comparisons with Brown and they certainly should not accede to any requests from Piers Morgan. Cameron must start by  tempering his behaviour at the Dispatch Box because the nation now sees Brown as a cuddly old Badger who is doing his very best and who, although occasionally tetchy, seems quite trustworthy and competent. The last thing that they want to witness is the unedifying spectacle of a Mr Toad tearing down the hill, making lots of noise and being an all-round pain-in-the-a**e.

Who said  “This is not about personalities.” ?

Oh yes it is. Octavius – it’s over to you.

Octavius’ trouble and strife.

You may be forgiven for thinking  that someone with a monicker like Octavius Black was a  either a mad musician chained to a Gothic cathedral pipe-organ, a Hogwarts  Master of the Dark Arts or maybe even a Transformer. He is none of those but he is quite a strong Centre of Influence within the Conservative Party.

Here are some clues: He is a multi-millionaire who lives in Notting Hill. He is an Old Etonian and for a long time has been a frequent dinner guest at the Camerons’. Oh yes, he is married to  Joanne Cash who is not-only a barrister but is the “Is she?Isn’t she?” prospective Conservative candidate for the Tory safe seat of Westminster North. She resigned and then she didn’t – all in the space of three days.

Octavius Black runs a company called The Mind Gym, which describes itself as “a place to discover how to use your mind more effectively”. He advises David Cameron on an “informal basis”. Octavius is a cross between a PR man, an image guru and a snake-oil salesman.

His relationship with Cameron has the worrying shades of Margaret Thatcher’s fascination with Rollo Clifford and the Pacific Institute. Most of these organisations are of the old-fashioned American “motivational”-type outfit and can  be most eloquently summed up by that most distinguished of all management gurus, Bob the Builder: “Can we fix it? Yes. We. Can!”   Bar-room psychology in a bespoke suit and large fee.

The main worry should be that just like her Thatcherness, Dave may end up playing without the full complement of marbles – but it’s early days yet.

So here we have Dave’s close chum who advises  Dave  and whose missus is  the in-out-in-out prospective Conservative candidate, or as a well-known commentator recently described her: “She is the Okey-Cokey candidate for Westminster North.”

Ms Cash is one of Dave’s Debs. Blair had his “Babes” – who were mostly 30-something semi-glam Westminster ballast with lipstick. All that they had to do was to sit, smile, keep their knees together and vote. Whereas Dave’s Debs tend to be posh tarts with degrees so, if elected, will not-only be decorative but useful.

It looks as if Cameron is hiring slightly more up-market Debs and quite right too. So what is the problem?

Ms Cash was “imposed” on the Westminster North constituency and the local Party machine has never been 100% behind her. This eventually resulted in an inevitable “spat” between the winsome Joanne Cash and the local party party chief , Amanda Sayers. So what was this “Storm in a C-cup”?

Earlier this week, Ms Sayers was going to be re-elected as constituency chairman. Joanne Cash attempted to “block” the re-election but is spite of that, Ms Sayers prevailed and was duly elected.

It seems that  Ms Cash then stamped her foot and had one of those  “It’s her or me” moments .

Ms Cash resigned as candidate, flounced out and Cameron was immediately  informed. He wasted no time in hitting  the phones to gather support for his stroppy protegé.

That resulted in Amanda Sayers  being dumped as local Conservative Party chairman. The local party agent, Jonathan Fraser-Howells then resigned in protest, among dark mutterings of the “lack of democracy” in Westminster North. It was over in a flash.

Joanne Cash is back in place as the Tory candidate and apparently is preening and gloating over the de-elected Amanda Sayers who is now probably somewhere in West London sticking pins into  and pulling the limbs off a Barbie doll in a blue dress.

David Cameron was right to want to support his friend but is he beginning to show leadership “blind-spots”? He appears to have dived into the affray with both boots instead of maybe distancing himself, taking some advice from Octavius and engineering some sort of “win-win” situation for both Joanne and Amanda.

A Conservative “cat-fight” is never pleasant but Amanda Sayers knew that she was taking on a close chum of the party leader and was therefore placing herself in an unnecessarily vulnerable and ultimately untenable position. She too is a barrister and would have been totally aware of not-only what she was doing but also the “end-play”.

Eventually, she may be given the consolation prize of a safe Tory seat to contest and could well end up sitting shoulder-to-shoulder with her rival on the back benches. We can’t wait!

Meanwhile, the prospective Conservative candidate for Westminster North is (once again) Joanne Cash. Watch this space.

Transparency?

 

There is every likelihood of yet another banking scandal and it seems that yet another piece of the banking jigsaw has fallen into place. This particular piece indicates that at least two banks were near-bankrupt at the end of 2008. Not just “in trouble” but BUST.

The Bank of England extended secret emergency financing to Royal Bank of Scotland and to  HBOS during the banking panic last September and October – without telling the taxpayer or shareholders. Lloyds shareholders were being asked to approve the takeover of HBOS. Yet they were not told about the multi-billion cash bailout of HBOS.

From the beginning of October 2008 when the Irish Government guaranteed the liabilities of all its banks, HBOS needed life support, with RBS also seeking emergency lending on 8 October. There was a certain amount of scoffing at the Irish when the secret handouts were being made by the Bank of England.

By mid-month, the emergency liquidity assistance for the two peaked at £61.6 billion , indicating that insolvency would have followed had the Bank of England  not acted. The two banks clearly could not meet their obligations.

“This was a dire emergency,” said Paul Tucker, deputy governor of the  Bank of England, giving evidence to the Treasury Select Committee.

These loans were in addition to the measures which provided liquidity to the entire banking sector, suggesting that even those measures were not enough to sustain either bank.

In addition, both banks had access to the Bank of England’s special liquidity scheme under which banks could swap  mortgage-backed securities for government gilts.

The obvious question to ask is how many more secret deals have been made between the Treasury, Bank of England and the banking industry.

You may recall that in 2007, the Bank of of England provided secret finance to Northern Rock.

So what has happened to transparency within the financial sector – or is it a case some being more transparent than others? 

Eliot’s Mess

Financial Services Authority

So the toothless old tiger that is the Financial Services Authority is going to be ripping up the contracts of those investment bankers who are taking unacceptable risks.

More empty gesture politics from Gordon Brown and his band of drowning funsters.

Not so many years ago, professional investors, fund managers, hedge funds and even those City screen monkeys who are now being targeted were investing in a series of investment “instruments” which “spread risk”. Imagine parcelling-up lots of mortgages thus creating a quasi-fund and selling shares in it. Mortgages produce a steady income for a bank or building society so it had to follow that if several individuals “owned” those mortgages, then any risk would be “spread”.

The point is that most investments are not a risk – except in retrospect.

Those investments derived from credit were good for a few years before they began to unravel – so there was plenty of time for the risks attached to those investments to be calculated. Some individuals did regard Credit Derivatives as unacceptably risky  but those individuals were either suppressed or their professional and/or personal reputations were destroyed.

Remember Eliot Spitzer? He used to be New York’s Attorney General and then Governor of New York.  When he was Attorney General, he  dedicated much of his effort into pursuing white collar crime and  had investigated many of the investment banks that were subsequently  the main players in the 2008 banking crisis. He was  elected Mayor of New York but subsequently disgraced when he was implicated in the “Client No. 9 scandal”.

So here was a very public figure who two years previously had stated that financial institutions were exaggerating their worth by falsely inflating the value of their assets. As far back as 2003, he was prosecuting companies for “predatory mortgage lending”.He foresaw the problems which would result from irresponsible mortgage lending. Generally accepted practices at the time involved  hidden charges, little regard to an individual’s ability to repay and a system floating on a morass of bribes and kickbacks. This was the time when the Bush administration had aligned itself  with the banking industry. Spitzer was chasing investment houses for inflating stock-values and he also pursued AIG for fraud. Then he sued Richard Grasso, a former Chairman of the New York Stock Exchange. That was for Russo’s non-disclosure of his deferred $140 million compensation package. He attacked all of the issues which floated to the top of the cesspit that was (and still is) the global banking scandal.

In February 2008, Spitzer published an article in the Washington Post in which he criticised the Bush Administration for inhibiting State legislatures from prosecuting predatory mortgage lenders. On March 17 2008, Spitzer resigned as Mayor as a result of the “Client No 9” prostitution scandal.

He had rattled the Establishment and the Establishment destroyed him. He had taken a massive professional risk and lost.

So what is acceptable risk? If I invest in British Airways – is that a risk? Is it acceptable or unacceptable? BA has major cash-flow issues, a staff crisis and it looks as if they might merge with Spanish Airline Iberia. Should I take a risk?

Not so long ago I invested in a small company whose shares began a vertical descent two days after I had acquired them. I telephoned the company’s CEO who told me that the company’s long-term prognosis was good so I took a risk and bought a load more shares. Three weeks later, the share-value soared to three time the price that I had paid – because the company had announced that it had secure additional finance. I got out immediately. Three more weeks later, the company’s share were suspended by the Stock Exchange and they went bust.

I had taken an unacceptable risk but had made a huge profit. Would the FSA pick that up and rip up my contract (if I had one)? Or does the Government REALLY mean that the FSA will be allowed to tear up a contract but only if the investment banker takes an unacceptable risk which subsequently loses money.

This latest announcement at least shows that the Government and its advisers DO have something in common with bank executives. They do not understand the nature of risk. They proved it during the “mortgage years of plenty” and they’re still proving it through their intransigence.

As far as “unacceptable” risk is concerned – unacceptable to whom? How did the FSA’s Chief Executive and ex-investment banker Hector Sants become a multi-millionaire during his stints at  UBS , Warburg Dillion Read, Donaldson, Lufkin & Jenrette and Credit Suisse First Boston?

The government says that is is encouraging business and entrepreneurship. Again, they do have that in common with the banks. A total lack of appreciation of what entrepreneurship is all about. Risk.

It is the entrepreneur who puts his house, factory, cash and family on the line. The indulgence in unacceptable risk is what an entrepreneur does for a living. The banks don’t understand and do not want to be bothered by the small-to-medium entrepreneur because business-risk does not have the gilt-edged backing of a dazed Treasury and a “still-in-shock” Bank of England.

The “feast or famine” life of the small entrepreneur is an anathema to those working within the  banking system because their own particular brand of feast or famine comes with salaries and bonuses. They have responsibility without accountability, whereas the entrepreneur has both and unfortunately, on many occasions, the accountability is to a bank.

There are those within government and the banking industry who do  know where the bodies are buried  and where the risks are –  but the Spitzer affair tells them that dissidence is not worth the risk.

It will be long and hard.

” We all lose interest after making a deposit and a withdrawal”

We are all looking forward to the banking industry’s return to communication through facts and figures. In the last year-or-so they have all shown an increased predilection for the medium of the euphemism, metaphor or cliché.

The RBS Chief Executive Stephen Hester is our favourite banking boss – a straight-down-the-line guy  with whom you can shake hands without  having to count your fingers or look for your watch. Nevertheless, he too has succumbed to the inanities of modern “bank-speak”.

Yesterday,  RBS announced 3rd quarter losses  of £2.2 billion.

Stephen: “Although conditions have improved over the last three months, they remain ‘fragile'” and “The RBS recovery will be a marathon , not a sprint.”

He added that as far as executive bonuses are concerned ” Everyone is treading a delicate tightrope.”  A tightrope only has two pertinent qualities: 1. It is a rope and 2. It is tight.

He could take a leaf out of Mervyn King’s lexicon of generalities; avoid figures of speech and avoid facts as well . This is from yesterday’s pronouncement on the economy: “Households have reduced their spending substantially and business investment has fallen especially sharply. A number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident.”  Mervyn has the right idea – there is absolutely no point in clouding issues with facts.

Spygun’s all-time favourite: ” We can hear a Niagara in the distance but have no way of knowing how soon we’ll  hit it.”  (That was about a sudden economic downturn).

Stephen should hire a new metaphor scribe because if this recession continues for too much longer all the good metaphors will have been used up.

 

Not a terrorist?

Major Nidal Malik Hassan opened fire at Fort Hood and shot dead 12 fellow- American soldiers and injured over 30 others. Is this another terrorist “sleeper”? Probably not.

Fort Hood is the world’s biggest Army base and is (of course) in Texas. The soldiers that Hassan shot were men who were undergoing last-minute medical checks, dental treatment etc before being deployed to Iraq and Afghanistan.

The shooter was himself shot but is not dead. He is a long-serving American serviceman, a trained psychiatrist and a devout Muslim. It is known that he was very unhappy about going to Iraq and Afghanistan.

Major Hassan had previously faced harassment over his Palestinian ethnicity, although he was born in Virginia. Recently, he had expressed a wish to leave the army.

A picture is emerging of a disgruntled loner who was increasingly at-odds with  colleagues as well as current American military strategy – especially the fighting in the Middle East and Afghanistan.

In spite of a slight outbreak of “insurgent hysteria” in the media, this look like no more than a sad and lonely man who had been taken way-past his personal breaking point.

Bummer

One of Westminster’s most popular and colourful MPs, Sir Nicholas Winterton has been accused of bottom-slapping a fellow MP. His accuser is Ms Natascha Engel MP, who said: “I can’t believe it, Sir Nicholas just slapped my bottom.”  The heinous offence took place in the Commons eatery and although Sir Nicholas recollects that soup which he ordered, he has no recollection of the assault. 

There is only one thing to say to the spectacle-wearing Sir Nicholas:See full size image

 

 

Sir Nicholas’  eyesight may have also been a contributory factor in his claiming (together with his wife and fellow MP, Ann), £165,000 expenses on a London property which they already owned.

Out of the Frying Pan

THE VERY UNDERSTATED GM HEAD OFFICE

The General Motors announcement that the deal to sell the company to Canadian spare parts manufacturer Magna went down very well with the unions yesterday morning. That is because Magna had previously announced that after the sale they would be cutting as many as 10,500. The unions’ and workers’ euphoria was very short-lived because GM has now announced that it will be cutting 10,000 jobs.

In addition, the German government is demanding from GM a repayment of a £1.3 billion bridging loan. The Germans had been happy with the proposed sale to Magna because there had been guarantees in place that none of the four German GM-owned Opel factories would be closed. Now it looks as if two of them will be shut down  and both the German unions as well as the workers and government are extremely unhappy with the new turn of events.

The German government knows that in order to preserve German jobs, it will have to hand over vast subsidies to GM. Opel employs 54,000 people in the European Union. 25,000 of them are in Germany. That could mean billions in subsidies being paid to GM not-only by the Germans but by five other European governments: Sweden, Russia, Poland, Belgium and Spain.

Inevitably, and in keeping with the current trend for government being involved in every aspect of commerce, Lord Mandelson is seeking an early meeting with GM in order to discuss the preservation of Vauxhall jobs here in the United Kingdom. The agreement with Magna had been to limit UK job losses to approximately 600. Most of these would be through natural wastage. The current Vauxhall workforce is 5500.

There are those who may be excused in thinking that this 11th hour decision by the GM board not to continue with the Magna deal was a surprise to everyone except the GM board. This could well have been a part of their strategy from Day 1. They now have five European governments in the palm of their hand because they know full well that any government’s primary concern these days will be to preserve jobs.  GM have not-only been handed a massive loan by the Germans but they subsequently saw the full extent of the help that would have been given to Magna when the purchase had been completed.

GM will  now be handed billions by out-manoeuvred governments. It all  looks like yet another example of the private sector out-guessing and out-thinking the politicians and a fine demonstration of the “too big to fail” principle.

 

Quantitative Easing

More money is to be injected into the banking system. £25 billion more  “quantitative easing” will be bunged into the banking system because apparently, the banking gods are not yet confident enough to lend money to commerce in any great quantity – except to large businesses.  In the previous three months, the Bank of England has spent £50 billion on QE and it will spend £25 billion over the next three months. This is being portrayed as some sort of success ” That rate at which we are pumping-in money has slowed”.

So far £200 billion has been “quantitatively eased” into the banks.

The total amount of QE which will be needed is a “guesstimate”. The Bank of England has never indicated when it will stop printing money which is surprising because banking has always been so exact in its computations. Nowadays, it is acting in order to “boost confidence” within the banking sector. Unfortunately, there is no measure for CONFIDENCE so they are most likely to  keep printing money  in the hope that at some indeterminate time in the future, the banking system will feel satiated enough to start doing its job.

Mervyn King is still talking in the sorts of generalities  which would put a Pier-end astrologer to shame. This is today’s attempt in Mr King’s letter to the Chancellor:

“Households have reduced their spending substantially and business investment has fallen especially sharply. A number of indicators of spending and confidence, however, suggest that a pickup in economic activity may soon be evident.”

The phrase “May soon be evident”  says it all. They don’t know.

QUANTITATIVE EASING: The Bank of England creates new money then it uses the new money  to buy bonds from banks and other companies (it GIVES them cash in exchange for IOUs).

Then the Bank of England hopes  (!) that the extra money will enter the economy via the banks in the shape of loans to both business and private consumers.  The lending to private individuals is to encourage them to spend and the lending to businesses is to encourage them to produce goods and services which the consumers will spend their money on.

Spending and NOT saving is what drives an economy . However, unless the confidence which the BoE is trying to instill in the banks is also felt by the spending public, NOTHING is going to happen and the stagnation will continue for the foreseeable future.

Currently, there is absolutely no evidence to show that Quantitative Easing is having any effect on the real economy. The nightmare scenario will be  an extremely healthy banking system but  a commercial and personal wasteland  in place of what used to be an economy.

Vauxhall-Opel Safe?

VAUXHALL – The future?

 

General Motors has announced that it has changed its mind and that the impending sale of Opel and Vauxhall to Canadian car parts firm Magna will not proceed. It seems that most people are very happy with the last-minute decision. Opel emplys 54,000 pople across Europe and Vauxhall employs 5,500 people in Luton and Ellesmere Port.

In spite of promised backing by the German and British governments, there would have been substantial job losses as a result of proposed restructuring by Magna. Europe’s unlikely benefactor is the US Government – it was  they who agreed to take a 60 per cent stake in General Motors as the car maker filed for Chapter 11 bankruptcy protection in June.

GM was about to make the world’s largest-ever bankruptcy filing  and the US Government intervention was designed to stop the company from being broken-up.  The United Auto Workers (UAW) union were to take 17.5%  in shares and the governments of Canada and Ontario would lend $9.5 billion (£5.9 billion) and receive 12% equity and $1.7 billion debt in return. The US Government were to provide an additional $30 billion in financing to get the company through bankruptcy. The decision to bail-out GM was not taken lightly but the US Government was still smarting from the September 2008 collapse of Lehman Brothers and certainly did not have the appetite for yet another record-breaking bankruptcy.

The current U-turn by the GM board is unlikely to go unchallenged here in Europe. The German Government may argue that the disposal of Opel should go ahead.

When GM went into administration, ownership of Opel and Vauxhall was transferred to a Trust, which consisted of two GM employees, two  German government  representatives and one independent member.  Technically, it may not be the GM board’s decision as to whether or not the sale of Opel and Vauxhall is stopped.

The GM board’s rationale is crystallised in their statement which says that they perceive  “an improving business environment for GM over the past few months”.  The fact is that without the heavy intervention of several governments and the U.S “Cash for Clunkers” scheme,  GM would now be languishing in the dustbin of history, next to Lehman’s, Bear Stearns and the rest.

One suspects that Opel and Vauxhall would be safer OUT of GM’s hands.

 

  • Let us hope that Sir Christopher Kelly’s report on MPs’ expenses is accepted as a fixed menu and not dealt-with “à la carte”. MPs should accept all of his recommendations and not pick and choose the ones which suit them.  The only issue within the report which should be voted-on is the one of expenses claimed by Northern Irish MPs who are elected but who do not take-up their seats. David Cameron called on Gordon Brown to join him in accepting the Kelly Report’s recommendations on expenses.  Brown said that the report will be “referred for implementation to an independent committee”. Presumably, followed by an inquiry and then a Royal Commission. The report will now be considered by the Parliamentary Standards Authority.  The Speaker announced that the Sir Ian Kennedy will be the first chair of the Independent Parliamentary Standards Authority. He will be paid a maximum of £100,000 a year. The latter announcement appeared to interest back-benchers who made quite a bit of noise – in fact, many of them appeared to be quite livid. Good.

 

  • Gordon Brown claimed during Prime MInister’s Questions that “the Afghans have moved from heroin production to wheat production.”  Yes – Class A Wheat. Note to Gordon: Get your MI6 chums to have another look at those satellite snaps. Remember they did make a mistake with those weapons of mass destruction – so you never know. Best to check but we reckon that they’re still growing smack poppies. NOT wheat.
  • The Speaker warned the PM about being party-political during PMQs. Why does he seem to finish every paragraph with the phrase “unlike the Party opposite”?

  • The Afghan policeman who murdered five of our soldiers was obviously a Taliban “sleeper” who was in the Afghan police for three years. (We have to assume from his conduct that he has now resigned).  Hopefully, the military authorities have already worked out that there can be any number of such police insurgents waiting for their chance. Today in Parliament, Gordon Brown read more empty words in tribute to the murdered five. He talked of their “professionalism”. What the HELL was he talking about? These were five young men who were not being “brave” or “heroic” and they were murdered. End of story. The best that our Prime minister could do was to praise their “professionalism”.  Please stop these empty political platitudes. They are becoming FAR too routine and over-diluted. All that we have to do is  withdraw our troops NOW. IRAN is neatly sandwiched between Iraq and Afghanistan so let’s also stop kidding ourselves as to the real reason for our boys being there. Let’s leave it all to the Americans.

German Tosser

A German truck driver in his 30s crashed his 18-wheeler near Boras, Sweden, in September, and though not seriously hurt, was pinned, immobile, in the wreckage. When rescuers and police first saw him, they noted that the trapped driver’s genitals were exposed and that his hand was clasped in his genital area. Apparently he had suffered  a momentary lapse in concentration – he didn’t know whether he was coming or going.

Froggie Logic

The mayor of the Paris suburb of Levallois-Perret, faced with an overcrowded highway D909 through town, “solved” the problem recently by making the street one-way, sending traffic speeding into the adjacent town of Clichy-la-Garenne. That city’s mayor (a political rival of the Levallois-Perret mayor) reacted by making his portion of D909 one-way back toward Levallois-Perret, creating a dilemma at the city limit. Other authorities are now working to resolve the impasse.

Ring of Fire

A suicide bomber approached Saudi Prince Mohammed bin Nayef, intending to kill them both using a new, mysterious device that an al-Qaeda video had earlier proclaimed would be impossible to detect. The terrorist blew up only himself.  Security investigators concluded that his “bomb” was a 3-inch-long explosive hidden in his rectum. 

The new Ponzi Scheme.

THE BRITISH ECONOMY

Twenty months ago, I was the only commentator (to my knowledge) to predict nationalisation of our banks. SEE HERE.

Here’s another prediction: The Ponzi scheme that is the global economy will soon come crashing down – and it will be quick. Governments everywhere – but especially in the United KIngdom and the United States are bankrupting themselves and destroying paper currency. The crash of the dollar is weeks away. In six years, the dollar is already down one-third against other world currencies. It is now heading for a precipitous crash and the pound sterling will not be far behind.

That will affect our spending power as never before and we will finally claim our rightful place as a Third World economy – in spite of the Bank of England continuing to print money. The printing  and borrowing by our governments have inflated the stock markets and the values of our banks. However, there is always a price to pay. The price on this occasion is government bankruptcy.

We know that the balance of economic power is slowly heading East. China has been quietly buying gold – at least it now has the tangible assets which we no longer possess here in the UK. You may recall that Gordon Brown disposed of the UK’s gold. The buyer? China.

So, if you are holding dollar-denominated assets or even dollars – you know what to do. But be careful, because when you head for the exit, you are very likely to be trampled-on by hedge-fund managers and everyone else heading for the door.

Handouts with Conditions

21st Century Banking

The British government said that following improved market conditions and extensive due diligence announced in February, Lloyds will no longer  participate in its Asset Protection Scheme and instead will raise additional private sector capital and pay a fee  of £2.5 billion to the taxpayer for the  protection provided to date. Lloyds has also announced plans to raise £21 billion through a combination of a £13.5 billion rights issue, and £7.5  by swapping existing debt for contingent capital. 

The Royal Bank of Scotland will continue to  participate in the APS under revised terms that improve incentives and deliver better risk-sharing with the private sector.  RBS will take a greater potential loss than first agreed on a portfolio of toxic assets -£60 billion instead of £42 billion. That will be on a smaller pool of protected assets, £285 billion instead of £325 billion . RBS also won’t give up tax losses valued at between £9 billion and £11 billion as first agreed.

In addition it has been announced that about 10% of the UK’s retail banks will be up for sale and there was a surprise announcement that no cash bonuses are to be paid  – except to branch staff.

Both Lloyds and RBS will set up new banks from existing branch networks and sell them within four years.

In another development, RBS has said it is to cut 3,700 jobs across its UK branches, adding  that it hoped to achieve most through voluntary redundancy.

The jobs are to go over the next two years.

The  announcements have been approved by the European Commission.  This is as a result of the Commission having ruled that government-supported banks should be scaled-down in order to comply with European competition rules.  That can only be achieved through disposals of branches and other assets. 

Just to put the scale of the RBS problem in to perspective – the RBS balance sheet was once roughly equivalent to that of the entire British economy.  Currently, part of the government’s strategy is to get rid of the “too big to fail” problem.  Banks will now be rationalised so in certain circumstances, they may be allowed to fail without the risk of wrecking the economy.

The government has always had a tough choice to make. If the government didn’t put money into the banking system, banks would have collapsed and torn-down the economy. However , they have injected cash into the banks. If there is another major economic downturn, there could still be trouble ahead for the banking industry. This government and all other governments are gambling on there NOT being another downturn in the short-to-medium term.

One interesting aspect of the reorganisation and downsizing is that in spite of the “we are united in our approach” noises made at G20 conferences, the United States is not, as yet downsizing or breaking-up its own banking system.

One small note of caution. The Icelandic economy failed because the country was being run like a hedge fund. The amount of risk that our own government has now built into our economy suggests that they are following the Icelandic model. One can understand diverse economies (ones with manufacturing, natural resources plus less reliance on the service and financial sectors) taking-on high-risk investments such as failing banks. Their risk is acceptable because of the make-up of their economy. Can the same be said about the UK economy?

 

  • Here’s another thought on the supposed “sanctity and purity” of scientific opinion. The cannabis-inspired debate between our Home Secretary and the scientists has amplified the divide between scientific thought and political expediency. In principle, one cannot help but agree with the scientists – but only on the assumption that what they say is Gospel. Today, research has been announced which suggests that scientific evidence about the  health benefits of taking an Aspirin daily in order to ward-off a heart-attack may not have been all that it was cracked-up to be. It now appears that the risks of a stomach bleed and other complications outweigh the heart-related benefits. New Scientific Opinion. Remember HRT? Once lauded as a risk-free treatment – it was then announced that HRT increased the risk of cancer. New Scientific Opinion. Scientists have been reworking their computer models and have today announced that their predictions of obesity in the United Kingdom had been wildly exaggerated. More New Scientific Opinion. It all goes to show that scientific opinion is not an exact science.

 

  • A quick note about bank “competition”. The Chancellor  has said that he wants to increase the number of banks operating within the United Kingdom economy. The theory is that banks, like greengrocers or electrical shops will start to undercut each other and so provide a better “deal” for the customer. That sounds very plausible until you remember that prior to the meltdown of the banking industry, the UK had more foreign banks competing for our business than any other economy. Those were the days of real competition. In the last 12 months, most of them have either gone bust or cleared off. Theoretically, competition works – except in banking. What the government should be thinking about is the eradication of the “faux” entrepreneurship which was such a major contributor to the failure of the banking industry. That is the one thing that bankers cannot do – they cannot “do” entrepreneurship. If they could, they wouldn’t be bankers. They tried it and they were found lacking.

Another handout

Darling’s unique approach to the banking industry.

 

Alistair Darling is going to announce that the government will spend £30 billion on “buying bank shares”. One presumes that it is now called “buying shares”  because the government does not want to keep using the word “handout”. (By the way, he is not using “our” money. This will be a combination of recently-produced or borrowed money). The government will thus be increasing its equity in the banks and so diluting the share value. The medium-to-long-term intention is to break-up the banks and have another fire sale. This time the beneficiaries will be companies such as Virgin and Tesco. Considering the way that the banks have behaved, surely Ladbrokes would be more appropriate. Dealers have once again begun “shorting” bank shares so there is a very real possibility of the government ending-up with a load of underpriced stock which they will have to hold-onto  until the City  screen-monkeys decide to play again. Continue reading Another handout

Back to the Future (again)

There is potentially great news in the banking sector- and about time.  The government is to create three new bank chains by selling-off divisions of RBS, Lloyds and Northern Rock. By 2015, our High Streets may once again see old and trusted brands such as the Trustee Savings Bank, Williams & Glyns and Cheltenham & Gloucester. Could this be the best thing that this government has done? It looks like it – but once again, the new policy looks contrary to what Gordon Brown was saying only last week when he commented on Mervyn King’s proposal to rationalise the banking industry. Continue reading Back to the Future (again)

Joint-up Government

Two executives at the Royal Bank of Scotland have been suspended after alleged corruption at its overseas mortgage operation.

The bankers were allegedly asking foreign estate agents for payments worth tens of thousands of pounds in return for referring customers. Many of the suspected practices have  taken place within the last 12 months and since the government bail-out.  Continue reading Joint-up Government

Naughty pirates

DANGER-POLITICIANS NEGOTIATING

Who said this?  “Piracy and the taking of hostages is unacceptable in any circumstances. We call on those people who have taken the British citizens hostage to release them as soon as possible. They should abide by international law.”

Those Somali pirates must be really crapping themselves now that Gordon Brown  has told them that they should “abide by international law”. Gordon, you muppet – these are pirates and  NOT abiding by the law is not-only implicit in their job title but also in their job description. Kidnapping people is their JOB. Continue reading Naughty pirates

Didn’t he do well?

” Oh F*** it!”

  • Quite a lot has already been written about the Nimrod crash which killed 14 crew. Charles Haddon-Cave QC  who led the enquiry said that the crash happened because because “defence chiefs put cost cuts before safety”.  He also referred to  “a systemic breach of Covenant brought about by significant failures on the part of all those involved.”  and  “a story of incompetence, complacency and cynicism” Mr Haddon-Cave’s comments will hopefully be recycled as fitting epitaphs for this Government. Continue reading Didn’t he do well?

Take any card

Credit card companies now appear to be competing not only with each other but with back-street money lenders. If you are in the habit of paying only the minimum monthly payment on your credit card, it could take you up to 50 years to repay the balance. However, the good news is that if you do only repay the minimum, the credit card company is very likely to increase your borrowing limit from time to time. However, if you are one of the naughty people who repays their balance every month, you are likely to have your borrowing limit reduced. Why? Because the less prudent borrowers are the most profitable to the credit card companies.  Continue reading Take any card

Postman Prat

  • Royal Mail is going to hire 30,000 workers to “help” during the impending strike. Usually the  Post Office hires only an additional 15,000 staff for the Christmas rush. Let us hope that this blatantly provocative gesture by the Royal Mail management does not backfire. Let us also hope that in their haste, they do not forget to run proper background checks on the people that they hire and so keep the number of thieves and terrorists to a minimum. Expensive temporary labour plus the millions in lost revenue, plus the damage to the business does not, on the face of it look like the ideal plan. Adam Crozier, Royal Mail’s boss has taken a leaf out of Rupert Murdoch’s lexicon of nastiness. Remember when there was that big falling out with the print unions? Murdoch had an alternative workforce “ready to go” when the unions objected to modernisation and job losses. Where is that all-powerful print union nowadays? Continue reading Postman Prat

Conservative Party Conference week.

  •  
    •  
      • Boris Johnson once again has showed his leadership credentials by being approachable, witty and engaging. He does make the rest of them look a little bit pedestrian. In spite of his shambolic image, you can sense a rod of steel running through both his speech and personality. One to watch for the future. Imagine   a TV debate between Boris and Gordon Brown. It will never happen – but what a prospect.

 

  • Boris Johnson and friend

 

  • George Osborne’s department lined up like a row of fairground ducks was quite diverting. George Osborne is gradually shaking-off his Tim Nice-but-Dim image.

 

  • It’s very brave of David Cameron to allow Ken Clarke a voice – bearing in mind his strong Euro-sceptic stance. The Conservative Euro-sceptics should not attempt to embarrass David Cameron at Conference. They all seem to think that the next election is already won.

 

  • Custom dictates that when any Party is in the middle of its Conference, the other Parties keep quiet and do not make any pronouncements. So, Alistair Darling’s crudely populist announcement of cutting the incomes  of GPs and other high earners leaves us in no doubt that the Election campaign is now in full swing.

 

  • Retirement at 66? Purleeeze George – you can do better than that! Many will still retire at 65 and most of those who have not retired will be out of work – unless there is a local B&Q. The ACTUAL money saved will be negligible and it was hardly worth the leak.

 

  • It appears that as far as cutting Public Expenditure, the main Parties are now engaged in what can only be described as a peeing contest.

 

  • It was good to see that old duffer Kenneth Brown. So there is life after death!

 

  • The Editor of the Sun did not have to buy a single drink in the Conference bar last night. Hardly surprising but the Sun’s move to withdraw support from the Labour Party caused some disappointment among Conservatives. About as much disappointment as finding out that Gary Glitter can’t babysit tonight.

 

  • On a completely separate subject, the annual yakfest that is the 11th Pride of Britain Awards took place last night. One is never sure why only some kids with cancer attend the show, why only the kids whose parents managed to inform the media of how their brave 2year-old “dialled 999 whilst motherwas having a seizure in the bath” receive bravery awards and why Gordon Brown has to make a “surprise” appearance. We all like proper heroes but nowadays it seems that we have developed a real “need” to worship – as long as it involves lots of celebrities. If Michael Caine is made to feel any more ” ‘umble” I shall throw up. Having said all that, I’ve never managed to watch the show. This year there is a teacher whose Maths lessons contain RAP (one presumes that the “C” is silent). Then there’s the lady who stood between a small child and a Rottweiler. The best one is an ex-heroin addict with 176 convictions who now helps “young people to change their lives”.. As long as Simon Cowell, Tess Daly and Davina are there plus a room-full of tear-wracked luvvies we can rest assured that all’s well. Now where can I buy a Rottweiler? I’ve just noticed something and it is the final piece of jigsaw in a theory that I have been working on for some time. Here goes. I believe that Christopher Biggins is God. Why? because God is everywhere.

 

  • Safety campaigners are saying that if the Conservatives axe speed cameras, the accident-rate will increase. Here’s a compromise – and it will be comparatively cheap to implement. How about a sign that says “SPEED CAMERA IN 50 YARDS” on either side of every single speed camera in the country.  Not a good idea, I hear you say. Why not? Oh I see. What you really want is speeding motorists that produce a revenue and not necessarily slow motorists who do not.

 

  • Sir James Dyson managed to look like a prat when his autocue failed. A Dyson Vacuous.

 

  • Liked the announcement today that the Conservatives will begin a process of ridding us of Government forms and red tape. THAT’S the sort of thing we like to hear.

 

  • Conservatism SHOULD be the politics of giving everyone in Britain the ability, opportunity and tools to look after themselves and their families – without the smothering State intervention that is the hallmark of Socialism – even when it is wearing the thin veneer of New Labour. That should ALWAYS be, of course, coupled to the State taking care of its weakest citizens. Call it benevolent Conservatism if you like. Simple.  THAT is  the message that David Cameron and his rejuvenated Parliamentary Party should be promulgating. Needless posturing and name-calling should have no place in the modern Conservative political toolbox. David Cameron should look straight down a camera lens and explain what modern Conservatism is. Unsurprisingly, there are those who have never heard exactly what modern Conservatism represents because their views and opinions are still being distorted  and influenced by New Labour spin.

 

  • George Osborne is looking very promising.

 

  • So why DOES Jordan look as if she’s wearing a gumshield? Is in “hommage” to her cross-dressing new beau and professional thug Alex (Max – you’re running out of crap copy!) or has she been “done”. I think that we all know the answer to that one.

 

  • David Cameron has been photographed with a glass of champagne. Big deal! I shall simply repeat a previous report: The biggest consumption of champagne at  Conference time is by Labour. That was told to me by a former Chief Barman at the Grand Hotel in Brighton. Hypocrites.

 

  • Today, all the Socialist rags are laying-into  George Osborne who has introduced a bit of realism into our understanding of the economy. One suspects that once the Conservatives are in power and manage to have a good look at the books, they will see that things are far worse than has so far been admitted by ther present incumbents.

 

  • We are still living in cloud-cuckoo land as far as the economy is concerned. The FTSE is UP. House prices are UP, Gold is UP, Tesco shares are UP. In fact – everything is UP. Sounds great doesn’t it? So why aren’t we all feeling more positive. The fact is that the FTSE is up because  money is being invested on the Stock Exchange as a result of bank savings rates being so derisory plus, much of the money currently being invested is foreign so it could leave us at any time. The money that is being invested by British banks is not all real money. Some of it is the stuff that has been printed by the Bank of England and handed to the banking system. Mr Quantitative Easing strikes again. Gold has been creeping up for months. It is normally viewed as a “hedge” – somewhere to run when equities and commodities are down in price. That is not the case at present.  Something that has gradually been creeping into our collective peripheral vision is the slow-collapse of the dollar. There are strong rumours that very soon, oil will no longer be traded in dollars – there is foreign plotting afoot! Once the dollar really does go into freefall, share and commodity prices will tumble very quickly. The British economy has much to fear because the factors that it has traditionally relied-upon to buttress the economy have all but gone. The City of London USED to be the world’s financial centre. That is no longer the case. WE used to MAKE things and export them. Nowadays, that is down to about 17% of the country’s total economic output. Finally, the British economy and Governmemt are “over-borrowed” with little realistic prospect of repaying much of what was borrowed. If George Osborne had been in possession of ALL the facts, I don’t believe that he would have wished to even beigin his speech yesterday. He did very well and reminded us that we need to take a more collective and inclusive approach to heal the economy.

 

  • Yesterday I said that I would probably throw -up if Michael Caine was once-again “umbled” at the Pride of Britiain Awards. Apologies to Michael as it was Joanna Lumley’s turn to be “humbled and overcome”. Please make it stop.

 

  • So Boris and Dave are ex-Bullingdon boys and used to piss it up, throw bread rolls about, get toffed-up  and pose for silly photos. Go to any Comprehensive School on Prom Night (American import, I’m afraid) and watch scores of youngsters, toffed-up, arriving in ridiculous stretch limos and being encouraged to be extremely silly. So where’s the difference between our Grease wannabees and the Bullingdon Boys. Apparently, it’s only OK to dress like a posh prat and behave outrageously if you’re NOT a posh prat. It seems that those aspirational working classes are being herded by the Labour media back towards a concept which one hoped had been left behind – The Politics of Envy.

 

  • There was a great photograph of the Pride of Britain winners outside No 10 Downing Street. Sarah Brown looked very vivacious – so why did Gordon Brown look as if someone had inserted a six-inch ruler between his cheeks? Oh I see. Smile, eh? Wow.

 

  • Are we, as a nation, losing our sense of humour? We all remember Boris Johnson insulting Liverpool, Portsmouth and rather bizarrely – Papua New Guinea. He acknowledged all that in the introduction to his speech at Conference this week. Whatever you think of Boris, you have to admit that he carries a very mischievous sense of humour. That reminds me of a pilot who was censured by his bosses for the following Tannoy announcement: “Ladies and gentlemen, we are about to fly over Liverpool. Would you please ensure that you have placed your hands over your wallets.”

 

  • This woman’s husband, Andrew George was taken ill but has now been discharged and is being comforted by his family: 

  • She used to work at Little Ted’s Nursery and is a pervert. Although her husband does have our sympathy, one cannot help but think that at some stage during the marriage, he would have benefited from a visit to Specsavers.

 

  • The Conservatives have announced that they will deal with binge-drinking and teenage violence through the medium of taxation. Surprisingly, this is the first Conservative initiative that I disagree with. Remember that some drugs are far more expensive than alcohol, yet, money is still found for them. The alcohol genie is so far out of the bottle that there are no initiatives that will ever change the Brits’ uneasy relationship with alcohol. Social Engineering through taxation does not work. Let’s face it, Brits drink to get drunk – and then they drink some more. A few more pence on booze will make no difference whatsoever. Practical tip: The increased tax will be on cider and strong lager so do what kids do already, buy normal lager and tip cheap vodka into it. Now what?

 

  • Could it be true? Avram Grant is returning to Portsmouth as Director of Football? That should cheer the place up. Here is a photo of Avram practicing his Gordon Brown smile.

 

  • Sharon Shoesmith has  launched judicial review proceedings against Haringey Council, Ofsted and the Children’s Secretary Ed Balls. She was in charge of Haringey Social Services during the Baby P murder. One of the great British traditions is that if there is a screw-up on your watch then you fall on your sword. Ms SHOESMITH DID HERSELF NO FAVOURS during her few TV appearances when the Baby P affair was at its peak. She seemed aloof, smug, unrepentant and unapologetic. ” I was following orders” is the usual excuse. Hers was “We followed all procedures”. That neither exonerated her, nor did it go down well with the public.  Had she cried, begged forgiveness and made some sort of admission, the public would have been a little more sympathetic. As it was, Ed Balls did exactly the right thing in instructing Haringey to sack her without compensation.

 

  • Labour bleating noises have been heard again today. General Sir Francis Richard Dannatt, GCB, CBE, MC is our most distinguished soldier and tomorrow (Thursday) he will be officially announced as a Conservative Life Peer who will be advising the Conservatives on defence. General Dannatt was our highest-ranking  soldier and Chief of General Staff. He was going to be promoted to Chief of Defence Staff , which means that he would have become head of all of our armed forces – not just the Army. However, Gordon Brown personally blocked the promotion and General Dannatt was instead given the consolation prize of Constable of the Tower of London. Traditionally the Chief of Defence Staff is principal military adviser to the British Government. Gordon Brown was miffed because of General Dannatt’s “repeated calls for better pay and conditions for servicemen”. So General Dannatt’s sins? Speaking his mind, not being a Brown “yes man” and caring about his soldiers’ safety and welfare. Gordon Brown really has no idea whatsoever – probably because he was dealing with a proper  leader. It’s patently obvious that Brown does not recognise the species. He should learn that leadership is much more than Benito Mussolini-type posturing with overworked, overtired, adjective-free, moribund speeches.

 

  • Obama wins the Nobel Peace Prize. Quite right too. Climate, Democracy, Nuclear Disarmament – in fact, everything that he has touched so far. It looks as if Zimbabwe’s Morgan Chanderai was the runner-up. There is already talk  and discussion of whether Barack Obama deserves the Nobel Peace Prize with only nine months in office. The fact is that the Nobel committee can see that in spite of the fact that Obama’s actual achievements so far  are comparatively modest – he is by far the most influential individual on the planet as far as the short and medium term futures of the Earth are concerned. The progress that he has made in the last nine months is nothing short of remarkable.

 

  • It appears that today is probably the last posting day for Christmas. If you  want to send cards abroad, you’re too late. Christmas parcels should have been posted by March 31st. Why didn’t Crozier stick to football. This is yet another case of a Business Model triumphing over the Customer. Perhaps Royal Mail should be renamed Royal Lemming.

Friday October 2nd 2009

  • Ethiopia has suddenly become the focus for all anthropologists. An ancient  skeleton was found in 1992 and it has taken 17 years for the research team to rebuild it. Why all the excitement? The skeleton belongs to an in-between species of humanoid about 4.4 million years old. It has been designated Ardipithecus Ramidus. It is not “the missing link” but by extrapolation, it appears that it is probably about 9 million years since the division between apes and humans. So where was John Prescott this week?
  • The East of England Minister Barbara Follett is to stand-down from Parliament. She is (was) Minister for Culture, Creative Industries and Tourism. Her reasons for leaving? Yes, it’s the old chestnut: “For family reasons – to spend more time with my family”. Heard her name before? She’s the MP who claimed £500 to repair a Chinese rug ( don’t we all?) and she also claimed £25,000 “for security reasons”. She has since repaid all of the money. So how could she afford to sign such a large cheque? Her husband is millionaire pulp fiction writer, Ken Follett. Barbara and Ken epitomise the “champagne socialist” and are chums of Tony and Cherie Blair.
  • Jobs for the boys. Former Northern Rock boss, Adam Applegarth is now an advisor to Apollo Management. They are an American Equity firm. Adam is advising them on the purchase of bad loans, including parts of Northern Rock bank, the former Building Society he brought to its knees. Perhaps a touch ironic but perfectly legal. He will earn about 200,000 per year which is a lot more than the thousands of people who lost their jobs at Northern Rock. It’s all very worrying.
  • Today, Ireland will vote in favour of the Treaty of Lisbon. It’s their second attempt. The Irish economy is currently in such an appalling state that they appear to have little choice. However, if they do not support the Treaty, then it’s curtains for the Treaty.
  • The International Monetary Fund (IMF) is predicting that the British economy will grow by 0.9% next year. That’s about four times the current politicians’ prediction. House prices have returned to their pre-crunch 2008 levels, the FTSE 100 index is UP. As one of the few people who predicted nationalisation of the banks, I am still not sure whether to put the Bolly on ice just yet.
  • Vanessa George, Colin Blanchard and Angela Allen. They are the three baby-abusing perverts who are spread all over the newspapers today. Angela Allen is the one from Little Ted’s Day Nursery in Plymouth. She photographed herself sexually abusing babies as young as 12 months. Whichever prison they end up in, they are guaranteed some very close attention from other inmates. The burglars, drug dealers, fraudsters etc look almost honourable professionals next to these degenerates. I do hope that the other prisoners are not too gentle with them.

Thursday October 1st 2009

  • A survey has just been published of the world’s top  Broadband Countries – taking into account speed etc. The United Kingdom is languishing in 25th place. The top country? South Korea. Is this another indicator of the rise of the East and the slow eclipse of the West?. 

  • The Daily Mirror has adjusted its reportage of the Tories today – presumably in response to the Sun’s decision to back the Tories. It’s going to be a right mess leading up to the election. The gloves are off

  • BAE systems is about to be prosecuted for dishing out hundreds of millions in bribes. You may recall that when Tony Blair was in charge , there was a bit of a bribery scandal  involving Saudi Arabia, but as they say – all charges were dropped. There is one thing that both our Government and Judicial System would do well to remember and that is that greasing the cogs of commerce through the medium of bribery is normal in many countries – especially hot ones. Many years ago, I sold a yacht for a $1million to an Arab Prince and we shook hands on the deal and arranged to complete the paperwork the following day. That night , my phone rang. It was the Prince’s “Private secretary and advisor”. This is what he said: “Although the Prince is a very rich man, alas he is not a generous man. You will also understand that he always seeks my counsel and almost always heeds my advice. I have yet to advise him as to whether he should complete this purchase – but I am sure that we can come to some sort of arrangement.”  I was outraged! I told him that I did not make a practice of dishing out bribes and that I would report our conversation to the Prince. I never saw the Prince again. Some time later I realised that the Prince had probably been sitting next to his Secretary when he had made the call and it was probably his way of getting a few thousand off the price. I also recall another yacht-owning Middle Eastern client. Whenever we presented him with an invoice, I would ask the staff to make sure that it was itemised and added-up wrongly, but in his favour. Usually by either £50 or £100. Before handing over a wad of cash, he would add-up the bill himself, realise that it was incorrect , say ” Yes, that appears to be in order”  and pay. He was happy and I was happy but more importantly, honour had been satisfied, he had won a little victory and he always came back to us because he enjoyed our little game. We should NOT always be so po-faced about the way that other nationals  do business. It may not be pretty but it works.
  • Is it really the end of the Labour Party Conference? Thank You, God. Harriett Harman is not too chuffed about the Sun’s decision to support the Tories. She said: “Let’s face it, the nearest their political analysis gets to women’s rights is Page 3’s news in briefs.”  It’s only a matter of time before Harriet gets the call from Hugh Hefner.
  • At the Labour Conference yesterday, the jurassic Tony Woodley, leader of UNITE, was cheered when he tore up a copy of the Sun. One presumes that he had looked at the pictures first. He said: “I suggest the rest of the country should do exactly the same thing”. Labour should persuade more progressives such as Tony Woodley to give voice to their views – that way they’re absolutely GUARANTEED to lose not only the next election but several after that. During Tony Blair’s tenure these Brylcreemed 50s throwbacks used to be kept in a darkened room or padded box until after Conference. A dignified silence without even a platform-mention of the Sun would have been far more powerful.

  • Financial Analysts seem to be confusing the state of the FTSE 100 with the British Economy. The fact is that many of the billions invested in the Stock Exchange consists of foreign money. That’s where many of the profits are going – abroad. Instead of flying to Monaco to play the tables at the Casino, many foreigner “investors” are winning lots in the Casino that is the London Stock Exchange.

  • The FTSE 100 has experienced its biggest quarterly rise in 25 years. Once again, this  is being hailed as some sort of success. It simply means that lots of bets have been placed. The punters will be taking their profits soon. Then the Government can once again blame the bankers. Let’s hope that they don’t break the bank again.

  • Politicians are always saying that it is the Pension Funds and Insurance Companies  own most of the assets traded on the Stock Exchange. In fact, between them, they only own about 25%

  • Today the national minimum wage rises by 7p an hour to £5.80 and for 18 to 21-year-olds, the minimum wage increases by 6p to £4.83 per hour. This is also the day when the government legislation on “tips” has changed. From today it illegal for bars, restaurants and hotels to use tips or service charges to make up a minimum salary. That is all very well but in the grand scheme of things, it is a comparatively trivial matter and possibly not a terribly cost-efficient move by the Government. Especially as the Government has already conceded that the changes governing tips will lead to an estimated £60m in extra costs to ensure the legislation is implemented properly. The new code will also lead to higher National Insurance payments. This is an inflationarymove because bars , restaurants etc will simply “up” their prices to maintain their margins. The British Hospitality Association (BHA) estimates the new rules could lead to an additional £130m in costs and up to  5,000 job losses. There are those of course who feel that a tip should be a customer’s expression of appreciation for good service and should not be used by an employer to bring wages up to the minimum. Mind you, both the Federation of Small Businesses and UNITE are both in favour of the changes. The only people who will be really affected are the tippers and the tipees. The customer tippers will experience increased prices and the waiter tippees may suffer up to an estimated 5000 job losses. There is a saying: ” If it ain’t broken – don’t fix it.” Needless to say, one of the few groups who will not be affected is Politicians. You may have heard that when they eat out or stay in hotels – it tends to be on expenses. 

  •  

Wednesday September 30th 2009

  • So the Sun will not be supporting the Labour Party. No real problems there, except the usual one. Why should an Australian like Rupert Murdoch have any say in which newspaper supports which Party. The Sun is read largely by the drooling classes who are very susceptible but regrettably, there is very little that can be done. The Sun’s sister paper , the News of the World, no doubt is poised with some salacious Labour politician scandal ready-to-go.

 

  • The Sun will not just be pro-Cameron  – it will be strongly anti-Gordon Brown. The Sun will do the same assassination job on Brown as it did on Neil Kinnock . The Sun has a circulation of 3 million which means a readership of about 9 million – so  when the Labour Party says – ” it’s people who decide elections”  – they are not really being naïve because they know deep-down that seven months of relentless mickey-taking of Gordon Brown by the Sun will have a profound effect on working class views. Remember that this is the paper that helped Margaret Thatcher to power – they’re THAT good – and relentless. Incidentally, did you know that one James Murdoch is a pal of David Cameron? Coincidence? Er…No.

  • Today’s Conference speeches by Ed Balls and Andy Burnham are very likely to be delivered to a near-empty Brighton Centre. Quite right too.

  • One hesitates to dispense advice to Labour MPs but those who are screwing either their secretaries or researchers should beware  – at least until the First Thursday in May 2010. Whatever you’re doing that is naughty, illegal or vaguely interesting – stop doing it immediately. The News of the World will be releasing the hounds at any minute. For all you know, they already have their snouts in your dustbin.

  • Why was Gordon Brown banging-on about “change”? They’ve had 12 years. It’s a bit late with only a few months to go.

  • Gordon Brown has announced a referendum on how we vote in future – a subject always popular with minority parties. Which counting system will the referendum use? First Past the Post, the Single Transferable Vote or the Alternative Vote method? I think that Gordon looks like a Schulze Method man.

  • Good to see Martin McGuiness attending a Party at the Grand Hotel. Wouldn’t it have been ironic if someone had blown up the hotel – just like his IRA did in 1984?

  • 350,000 old people are to receive free home help. The only good thing about that is the fact that the £400 milllion cost is being made available by cutting some “bolt-on” NHS departments such as Marketing(!) and Communications. Get rid of them anyway.

  • Nero’s revolving dining room has been discovered in Rome. I’ve been in lots of rotating dining rooms in my time  – funnily enough, they usually begin rotating at about 11.00 p.m on a Saturday evening. We call it the “whirling pits”.

  • Tuesday September 29th 2009

    • Interesting statistic which doesn’t appear to be receiving the publicity that it deserves: In the United States, a house is foreclosed or repossessed every 7.5 seconds. As usual, the politicians are taking care of business at the macro-level, while the grass-roots are burning.

    • It is an excellent idea for Gordon Brown to take-on the other two Party leaders in televised debates. Any future Conservative or Liberal vote should be a “pro” Conservative or Liberal vote and not an anti-Labour vote. The Labour backroom boys, led by Darth Mandelson are obviously running a campaign centred-around the comparative inexperience and youth of the other two leaders. That’s fair, because that’s exactly what the Tories did  to Tony Blair in 1997. Admittedly, David Cameron and the Liberal David Whassisname look fresh and youthful compared to Brown – who currently looks as if he has been cage-fighting with his hands in his pockets but in spite of his comparative lack of political fitness, he is not to be underestimated. He will be boring but he will come out fighting. There will be blood. We’ll know by late next week whether David Cameron and George Osborne have steel and substance. Constant criticism and sniping at the Government by the Opposition is quite entertaining but when it comes to a General Election, we will need to witness views and hear policies. Having said all that, remember that PERCEPTION is king and if in spite of brand-new shiny policies from the Tories, the Labour spin machine manages to make David Cameron look like a shallow “oik” then the forthcoming election will be much closer that we currently perceive.

    • One of the ideas being kicked about at the moment is the saving of millions of Education pounds by  cutting teaching assistant jobs in schools. In the UK there are 40,000 teaching assistants – they’re the ones who sit in the classroom with “challenged” children or take them on zoo trips. They are all very nice people, I’m sure –  but a waste of money. Many of the children don’t need a glorified baby-sitter – they need specialist teaching. While we’re on the subject of cuts , I would take an immediate horizontal slice through the current Education Department bureaucracy and take-out all those school advisers – the ones in the designer suits with Series 3 BMWs. They are a waste of time but unfortunately , many are ex-teachers. 

    • Conference time is the time when politicians churn out populist crap in order to grab newspaper headlines and cheap applause. Gordon Brown now says that he will turn 11,500 Post Offices into the “Peoples Bank”. That’s what Building Societies used to be. There was one other bank which used to be popular with the “people”. Now what was that called?…… Oh yes, it was called the Trustee Savings Bank. Whatever happened to that? Here’s a quote from Gordon: “I want the Post Office to step in to help hardworking families to save and access their money easily with banking for the people in our neighbourhoods”. If Brown thinks that he is going to create a new banking system in under eight months, then perhaps Andrew Marr was right about the happy pills. Brown is obviously playing without the full complement of marbles. Oh yes – one final thing. “Hardworking” working class families need JOBS. They rarely save their Giro cheques.

    • Today’s the day that Gordon Brown will either  read the best speech of his life or stumble his way through the world’s most-boring and longest-ever suicide note. Whichever way it swings – there will be lots of applause, back-slapping and standing-up.

    • If you keep putting rats in a cage and keep adding rats, there comes a time when they start eating each other. The human equivalent is the run-down council estate. Weak rats are prey to the bigger and stronger rats. That is exactly the phenomenon which killed Fiona Pilkington and her disabled daughter Francecca. Mrs Pilkington was driven to such desperation through being goaded and verbally abused by a gang of young pikeys that she set-fire to herself and her daughter. Not the best way to die. Needless to say there will be enquiries, lessons will be learned, the Social Services will be exonerated, the Police will make excuses, the local Council will hold a press conference and make a statement. By now, the whole process is probably in an Operations Manual somewhere.

    • Jack Straw is surprisingly eloquent today. The trouble is that The Brighton Centre seems half-empty or as the Tories might say “half-full” or as the Liberals would say “too big”. Let’s hope it fills up when the leader performs. The Labour Party is going to play dirty this time. Straw mentioned Section 28 of the 1988 Local Government Act. This was repealed by Labour in 2000 and was the section of the 1988 Act which stated that a Local Authority “shall not intentionally promote homosexuality or publish material with the intention of promoting homosexuality”. They should stop dragging up 20-year old legislation (under which there wasn’t a single prosecution). Homosexuality is not an issue in 2009 and “New” Labour is clearly demonstrating what little legislative success it has had in the last 12 years. Occasionally they still bang-on about 13 years of Tory Rule!!! Labour should fight on current policies. By the way, when Jack sat down, the reception was at best muted, at worst underwhelming. As the spin doctors might say: He received a seated ovation.

    • Fiona Phillips off the telly is speaking but she is having difficulty speaking because she appears to have  her tongue well-stuck up Alan Johnson’s well-groomed backside. She is acting, flicking her hair and simpering like a love-struck typist who’s just shagged the boss. At least Johnson, who looks (and sounds) more Bookie’s runner than Statesman has the good grace to look embarrassed. What the f*** was all that about? “Airhead introduces Postman Pat”? 

    • There is one session that we presenters and speakers like to avoid – if given the choice. It is the session immediately after lunch when your audience arrives full of food and drink and whose brains are temporarily in semi-shutdown as their stomachs begin the digestion process. We call it the Graveyard Session. Wonder who’s speaking this afternoon? Oh yes! Him! Perhaps the audience needs to be semi-comatose. If it isn’t, it soon will be.

    • I’ve just been watching a recording of John Denham speaking at the Labour Conference. Is it me, but doesn’t he look like a Conference League Football Referee? He’s another one who disapproves of David Cameron’s “Notting Hill” Policies. All Labour speakers are talking-up the social gap between the poor and the Conservative Party. A dangerous and desperate strategy. Only Mandelson has verbally placed the Labour Party firmly in the middle of the political spectrum but he also took the opportunity to accuse the Tories of lurching to the right as soon as they are elected. The Socialists are going to defend  that middle ground to the death. That is where the election will be fought. The Labour strategy appears to be to make the electorate perceive the Tories as a gang of inexperienced extreme right-wing Notting Hill hoorays.

    • Have you noticed how the Party that’s behind in the polls always accuses the BBC of “bias”. Today we have anti-Government bias – in the old days, under Her Thatcherness and John Major, we had BBC left-wing bias. Apparently the BBC is capable of bias in all sorts of delicious flavours and colours.

    • Gordon Brown has started his speech with a list of Labour achievements. That’s the first five minutes gone. He has obviously structured his speech very simply. The next list is one of his cabinet and their achievements. That will probably be another ten minutes. Luckily I have a hairdressers appointment at 3 o’clock. He’s just mentioned Northern Rock. Talking off-script? He started with a smile but has now forgotten it and his expression has returned to looking as if he’s defusing a Taliban bomb. I notice that his <pauses for applause> seem to be immediately after he has mentioned a large number of some sort and his intonation changes as if he’s saying “Crackerjack pencil! “He’s mentioned Harriet and Alistair but has now stopped naming Cabinet members. My current thought is that his speechwriters should be ritually disemboweled and fed to Darth Mandelson. His speech has now become the usual drone. As he is slagging-off the bankers, I fear that it is time to go. If you listen to his speeches, you will notice that he seldom uses adjectives or adverbs. I just killed a fly and wonder whether I should turn the Aga back on today, in  spite of the sunny weather. Our field was cut a couple of days ago but I just cannot summon the energy to cut the lawn. It takes two hours. Gordon Brown is still talking. He doesn’t like banks, does he? Surprising therefore that he’s invested so much of our money in them. I’ll record it and come back later after a couple of Bushmills. He’s just used the most exciting phrase of the whole speech – Economic Model. Enough. He’s off on his pre-leaked Post Office bollocks.  Low carbon Zones? He knows how to give his audience a good time.

    • What’s all this about “Middle England”?  Why don’t they just say Northamptonshire? Or do they mean Middle Earth?

    • In the USA, the Federal Housing Association has a leverage ratio ( What it owes compared to what it owns) of 50-1. Interestingly, that’s just about the same as Bear Stearns had on the eve of its collapse. The FHA insures about $750 billion in mortgage debt. In the UK, “leverage” is known as “gearing”. They are both euphemisms for debt.

    • Have you noticed that the £-Sterling is just about to achieve parity with the Euro?

    • An ASBO is an Anti-Social Behaviour Order and it is usually given out to pikeys and their parents. The trouble is that most of them are so thick that they probably think that an ASBO is a qualification which will be worth a few points on their UCAS form when they go to University to study demolition or vehicle hotwiring. I’ve just seen some ASBO-pikeys being interviewed and it seems that the sub-species favours a single earring and a tattooed neck (men) and the women have to be very fat with bleached hair. Their natural habitat is either a bus shelter or a stained sofa which faces a television. They only eat orange-coloured food – as long as it doesn’t contain fruit or vegetables.

    • Just saw a re-run of Sarah Brown introducing Gordon. She was good. She will be a major Labour weapon in the forthcoming General Election. I wonder if David Cameron’s wife Samantha is taking Powerpoint and sincero-talk lessons?

    Monday September 28th 2009

    • Excellent headline grabbing by that jug-eared gargoyle Andrew Marr. He is without doubt a supreme journalist but his questioning of Gordon Brown yesterday was inexcusable. Suggesting that Brown needs prescription drugs to get through the day, followed by Brown’s admission that he has trouble with his eyesight was a direction that no journalist should steer. There is a real danger that if the Tory Press goes down the  ” Brown’s a sick man and therefore unfit for office” route, there will be a swell of pro-Brown sympathy. Then, if the Socialists succeed in portraying the Tory Shadow Cabinet as a bunch of hoorays lounging about in the senior common room with David Cameron as a self-serving Head Boy, there is a very real possibility that Labour will retain office. Undecided voters are driven by PERCEPTION and not by policies  or past performance. Remember John Major’s victory in 1992? He was behind in the polls, yet in that year claimed the most votes in British electoral history. Leading up to the 1992 election, Labour had been ahead in the polls since 1989 plus the economy had entered a recession under the Tories. Yet Major won and remained in power until 1997.  He won because the electorate liked him and thought that Neil Kinnockwasaprat. Nothing to do with policies.

    • Alistair Darling is going to deliver his usual speech on bank bonuses. “Clawback”, “Unacceptable” “Deferred” etc.will all  make their appearances – as they have done for many months. Alistair Darling will “pledge” to clean-up the banking industry. The proposed Fiscal Responsibility Act sounds like another focus group creation and no doubt, there will be another Financial Services Act close on its heels. He is obviously working on the principle of “If you can’t win the argument – legislate”. It’s all a monumental waste of time but look on the bright side – we will be living in a society where the highest earners are footballers and pop singers. Something which our children can really aspire-to.

    • Gordon Brown says that he won’t  ”roll over”. I do wish that his speechwriters would give him words that he is comfortable with. What’s next? “I ain’t goin’ to be no Tory dude’s bitch. Shabba”?

    • Roman Polanski arrested on a 31-year-old warrant. Apparently in 1978 there was a plea-bargain andhewasto receive a nominal sentence if he pleaded “guilty”. The judge then reneged on the deal so Polanski absconded. Originally, Polanski has been charged with rape by use of drugs, perversion, sodomy, lewd and lascivious act upon a child under 14 but the plea-bargain reduced the charges to  a single charge ofunlawful sex with a minor. Polanski was six years old when WW2 broke out and like many Polish children who grew-up during the war, he was damaged. Add to this the horrors of the Manson murders and the killing of his pregnant wife, Sharon Tate, it is doubtful whether Polanski has ever been in what we might call a normal psychological state. However, the fact remains that he did horrible things to a 13 year-old girl and is a convicted criminal who probably still poses a danger. There is no Statute of Limitations for this type of crime but as his victim has forgiven him and so much time has passed, one hopes that the high-level diplomatic activity currently taking place will result in some sort of amnesty. There should be a White House statement soon.

    • The next Labour Prime Minister is the new the darling of Conference. Yes, Peter Mandelson earned a standing ovation and became the Labour Party joker today after delivering an appalling speech. He stumbled over the funny lines, his timing was out and his voice was its usual oleaginous drawl. However, the Conference highlight up to that point had been Alistair Darling and had it not been for Mandelson, they audience would have been engaging in synchronised self-harming. That’s how dire it had been. He is going to extend the scrappage scheme <applause>. Sadly, he appeared to be talking about motor cars and not the Cabinet. The scrappage scheme will keep the Japanese, German and Korean car industries going for a couple more months so let’s hope that their own governments can take over soon after that. 

    • Tomorrow Gordon Brown is widely expected to give “the speech of his life”.  That good eh? He’s probably in his hotel room practicing by reading the instructions on his Corby trouser press – that’s just about the level of excitement that he’ll generate tomorrow. But the Labouristas will clap and there will be a standing ovation. Is it true that the conference-hall doors lock from the outside?

    • Alistair Darling’s speech also had all the excitement of a talk on basket-weaving at the local WI . He obviously had gaps in his script indicating <pause for audience reaction>. Unfortunately, the pauses were more exciting and informative than the text. As expected he did some pointless macho posturing on the subject of bank bonuses  – in the certain knowledge that the whole thing will be picked up by “Boy” George Osborne and lost in the mountain of unfinished business that Labour will leave behind in the May 2010 rush to clear their desks.

    • The British Frigate IRON DUKE scored a decent stash of Colombian Marching Powder, weighing 5.5 tons with a street value of £250,000,000. Apparently , the fishing boat containing the stuff was sailing erratically and suspiciously. That’s Coke for you! The only worry is that instead of sinking the boat WITH the cargo, the frigate is now taking the cargo to New York. Let’s hope that H.M.S Iron Duke doesn’t sail up 34th Street all shiny-eyed and twitchy to tie-up outside Macy’s. 

    Sunday September 27th 2009

    • Just down the road in Brighton THEY are arriving for the Labour Party Conference – or should that be the New Labour Party Conference. Did we elect Labour or NEW LABOUR? Anyway, that’s  now just a technicality or a long-forgotten dream of how things could or might have been. Here’s a Labour FACT, given to me by a friend who used to be Chief Barman at the Grand Hotel. More Champagne is consumed at the Labour Party Conference than at all other conferences and he told me stories of vintage Champers being quaffed  – not from a young lady’s glass slipper but from PINT jugs. If I recall correctly, that particular incident involved a gang (?) of Trade Unionists. Now THAT’S Socialism.

    • You know things are bad within the Labour Party when John Prescott begins to look like a Statesman (comparatively speaking). When Johno was Deputy Prime Minister, he used to deliver those grammar-free rabble-rousing “calls to arms” which could have been such fun if we’d understood what he was talking about. This year it’s Harriet’s turn and it won’t be the same. It will be the difference between a drug-crazed, alcohol-fuelled multi-position shagfest anddoingitquietly, Missionary-style with the lights out.

    • Gordon Brown is to introduce a law which is currentl;y being referred-to as the Fiscal Responsibility Act (FSA) (running out of ideas,perhaps?).The Act will oblige all future Governments to reduce the country’s borrowing by a set minimum amount. Needless to say, the amount and timescale are yet to be decided – probably a commission or enquiry… So what will happen if a Government fails to repay the minimum amount in a given year? A fine? Arrests? I suggest firing squads.

    • The Labour spin doctors have decided that David Cameron will be portrayed as a shallow toff – a script and autocue-reading “hooray”. Normally, that would upset the Tories but then they remembered the alternative.

    • Quote from Gordon Brown: “By 2015 we want our country to be fairer, greener, more prosperous and democratic.”  Seems to me that we have several Labour admissions in that sentence.

    • Lord “Darth” Mandelson has referred to David Cameron as “hugely arrogant”. Not really much more to say on that one.

    • Mandelson has said that he believes that the forthcoming election is “up for grabs”. Yes it is – by the Tories.

    • Great interview in the Sunday Mirror today. Vincent Ross interviews Mandelson and re-defines the phrase “butt-kisser”. Perhaps a spin-job awaits at No.10?

    • Iran is launching missiles today. So, they have missiles and they’re developing the capacity to stick nuclear warheads at the missiles’ sharp-end. I am now off to have another “No shit, Sherlock” moment. I shall report when I’ve worked it all out.

    • Why are the authorities making such heavy-weather of Baroness Scotland and “CLEANERGATE”. If they announced an amnesty for all illegals, they would have to hire at least one Wembley Stadium to fit them all into. Leave the Baroness and her cleaner alone. Is it because she’s clever, female, attractive and black? Mind you, she is Labour. See what you mean.

    • Ken Livingston has just married. At London Zoo. There are some things which are way, way beyond parody.

    • “I want this so badly” “It’s been a great journey for me” “Singing is my life” ” I’m doing this for my (sob) brother/mother/ sister etc”  and ” I’m sure he’s looking down on me” The last one is about Simon Cowell. He’s not dead – just incredibly condescending.

    • Great quote from Strictly Come Dancing’s Brendan “Shagger” Cole on Jo Wood. ” One of Jo’s big strengths is that she’s alive.”Considering how long she lived with Ronnie Wood- it has to be worth a mention and maybe a box of chocolates. We all hope that Ronnie Wood is reunited with Jo as soon as possible-he is currently risking his life. Some of those Russian girls will do anything for a bowl of Borsch and clean sheets. Anything.

    • In 2008, the NHS collected £112 million in parking charges. With such figures, perhaps the NHS should concentrate on parking and stop the healing and surgery  activities which probably distract them from where the REAL profits are. Perhaps a joint-venture with NCP beckons? Worryingly, £28 million was collected from its own staff. It’s a great wheeze. Tax the sick, tax their families and tax those who look after them. Who helped with the Business Model? Gordon Brown?

    Saturday September 26th 2009

    • The  American Fed has issued the following statement:   To provide support to mortgage lending and housing markets, and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt.”  Now we can watch the demise of the once-mighty American Dollar. Fund Managers and Investors will now start dumping dollars like confetti. A TRILLION is a million millions and in this case, it represents more Quantitative Easing or to be strictly accurate, the purchase of toxic assets with “printed”  i.e non-existent money. The sort that caused the global banking meltdown. This is a case of throwing bad money after bad.

    • President Obama has announced tough new capital requirements for banks as well as more stringent rules on bank borrowings. If you were to ask what these rules are likely to be or when they are to be implemented, the answer would probably be “We haven’t really decided but it will definitely happen later.”  They are saying that  the rules will be phased-in once financial conditions improve and recovery is “assured”. Leaders have been discussing a cap on bank bonuses for a while  but they still haven’t agreed any numbers or timescale. The only thing that they have agreed is that bonus payments should not be guaranteed for many years, should be deferred in part and should not exceed a percentage of the bank’s revenue. That is how vague it is at the moment. When the global economy has healed itself and both governments and banks return to generating profits, most of this will be forgotten because by then, the balance of power will, once again have shifted back towards the banks and the next boom-bust cycle will begin.

    • The least entrepreneurial profession of all is banking. There is a vastly different mental attitude between say, an entrepreneur such as Richard Branson and say, MervynKing, the Governor of the Bank of England. That rule works all the way down the line until we have the small local businessman and the small-town banker. Chalk and Cheeze. Incidentally, when I say “entrepreneurial” – I am referring to people who take risks with their own assets.  Just to reinforce the cultural difference – bankers will gladly take risks with other people’s money – especially in very large amounts – as evidenced by the cause of the current Global Banking crisis. However, when a local business goes to its local bank in order to borrow say £20,000 to purchase a machine, lots of fiery hoops are assembled for the business to jump through, fees are charged, personal guarantees are demanded, forms need to be filled out, cash flows and business plans are sought . So when a  small businessman goes to his bank – the MOST likely answer (especially nowadays) in “NO”.  Perhaps unknowingly, the banking profession is not-only killing itself but it is also slow-strangling the business community. The banker chose to work in a bank because he didn’t want the worry of not having a pay cheque at the end of the month, he did not want to work a 16-hour day and he didn’t want to cold-call  people in order to drive his business forward. What he needed from his life was predictability, order, neatness and a company pension. This is the paradox: The banking profession has managed to evolve itself into something which it was not designed to be and  it has managed to do it by what is known as the “Halo Effect”. There is a saying “Get them by the balls and their hearts and minds are bound to follow.”  Banks now have “business advisers”  ; mostly young people with degrees who cannot possibly have ever tasted the fears of an entrepreneurial businessman.  Bank management has developed a culture of self-importance and inaccessibility.  Remember the time when a bank manager tried to impress you in order to win your business? Now , you have to ask him to welcome you to his club so that he can look after your money. He is now doing YOU a favour – unless it’s ” I’d love to help you but the System  ( or those upstairs) say “NO”. The banking tentacles have moved further into he business community. Local Enterprise Organisations and  Business Clubs are now both Governed and heavily populated by more bankers. Entrepreneurial andmanagementadviceisbeingdispensed by a profession with little or no practical or first-hnd business experience or knowledge. That is the Halo Effect. Put simply, because the banker knows about money and has you by the balls, you assume automatically that he is able to dispense Tax Advice, Marketing Advice, Sales Advice, Organisational Advice, Training Advice, Recruitment Advice, Purchasing  Advice and any other Advice that you need.  The total power of the banking community is evidenced by the fact that Chancellors, Prime Ministers and even  Presidents are having to say “Please do something about your bonuses Mister Banker.”  Banking has developed into a multi-headed all-powerful Frankenstein. It is not a simple case of imposing a few rules. What is really needed is a massive cultural change within the banking industry and a massive perceptual change from both private and business clients. If you’re a businessman or work for yourself in any way, ask yourself – ” Am I comfortable with taking business or financial advice  and all the other captive-audience advice that they like to dish-out, from an organisation populated by people who obviously did not heed their own advice and lost billions but have no idea what really happened?”  WATCH THIS SPACE.

    •  I received a letter from a Member of Parliament today. He addressed me by my Christian Name. What’s going on? Paranoid? Moi?

    • The airlines appear to be learning from the banks. British Airways will be charging us again AFTER they have our business. We book a flight and then pay an additional fee  to get a seat. Genius! Can you bring your own seat and pay corkage?

    • There’s only one thing wrong with an Indian Summer. The Global Warming Mullahs will wake from their torpor and deliver the usual speech about our emissions. I think that 4X4 vehicles should be compulsory. Have to go now and have my dolphin steaks and light the coal fire.

    • In the last two years, 150 teachers have been sacked for sexual misconduct. A loss to the teaching profession but what a bonus for the Vatican’s recruitment team!

    • Gordon Brown has been voted World Statesman of the Year – mostly for giving away any leftover taxpayers’ money that Mervyn King has not given to the banks. Brown has been generous to Africa and quite right too. In addition, he has enjoyed many politicians’ or Pope’s ultimate wet-dream. An embrace from Bonio who , apart from being big in the dog-biscuit trade, is (apparently) some sort of Irish pop singer. He plays in a popular beat combo named after some American spy-plane. U2, I think. Crucial.

    • Remember Gordon Brown selling off the UK’s gold to China a few years ago? Who better to value, melt-down anddoitallover again with that pile of  gold Anglo-Saxon tat recently dug up in Staffordshire – wherever that is. Middle Earth?

    • There’s a very exclusive TV Club – the old dears who used to read the news and appeared on the Christmas Morecambe and Wise show in the 50s and who did high kicks andeithermarriedapolicemanorshagged Jon Snow or went to live on a farm in Scotland. Pretty soon, the pre-teens running the BBC andthecommercialchannel will be  playground-bullied into re-hiring these venerable oldsters.  Prepare for News at Ten to look like a re-run of Macbeth, Act 1 Scene 1.

    • In 1959, Typhoon Vera struck Nagoya in Japan. There was a 20 ft tsunami, 150 mph winds and 5000 people died. Did you know that they managed ALL that without Global Warming! They could do stuff like that in the 50s. We have a lot to learn.

    • TV’sDoctorGorgeousappearedtohaveeverything – but he was struck by the one affliction that even he could not cure. He lost the ability to keep it in his trousers. Marriage, Mistress, Divorce, Mistress, two-timed Mistress, Girlfriend.  Best of luck mate. The definitive case of “Surgeon heal Thyself”.

    • In an average week, I speak to 5 or 6 Chief Executives – guys I’ve either trained, coached or who I know personally. This week I had the most weird experience with a company CEO and company owner. He fancies himself as a “leader” but  is just realising that he has recently reached the upper limits of his incompetence. The stress-levels are phenomenal and I shall devote a whole article to him next week. Look out for it – it WILL be libellous!

    • Fantastic evening for crumblies. ITV is celebrating 250 years of Cliff Richard. He hasn’t changed one bit – apart from wearing Frankie Howard’s old rug. Well, it’s either that or a  very quiet ginger cat.

    Friday September 25th 2009

    Friday September 25th 2009

    • The mole who leaked the MPs’ expenses information to the Daily Telegraph has revealed what motivated him to do so – apart that is, from the £110,000 fee that he was paid. It now appears that his primary motivation was not money but the fact that serving soldiers were “moonlighting” at the House of Commons. They were working in the Security department and protecting the Civil Servants who were dealing with confidential matters – one of which was Members’ expenses. Apparently, it wasn’t long before the soldiers realised the extent and extravagance of MPs’ expenses and so glimpsed the comparative opulence and excesses of the politicians’ lifestyles.  The very people who represented them and who had sent them abroad to be shot at. The sums of money involved in the claims that they either saw or were told about were further amplified by the fact that the soldiers were doing this extra work in order to buy decent boots and body protectors and other items which would make their soldiering duties easier and safer. It is currently very easy for us to feel very emotional  when they hear stories such as this – but we should proceed with extreme caution because it now seems that the mole is trying to justify his actions in leaking the information. He appears to be telling us that he now feels vindicated because of the “poor” soldiers and because MPs have to-date returned over £500,000 in mis-claimed expenses. Planes bearing dead blown-to-bits soldiers, processions through Wootton Bassett and full-page photographs of a recently mutilated soldier paying his last respects to his blown-up dead buddy certainly do tug at the heart-strings. Great propaganda andimmaculatetimingbyourmole. Now the facts: The mole received £110,000 pounds from a right-wing paper. Currently each soldier receives Osprey lightweight body armour and£3500 – worth of state-of-the-art equipment – including boots and shoes. The mole’s motives for leaking the information would not be in question had he not accepted such a large amount of money – which one presumes has been donated to the Army Benevolent Fund. I am not a great supporter either of this Government or of the pointless shenanigans in Afghanistan but sometimes there are over-sugared pills which are just too difficult to swallow.

    • One question remains: Why were security men  -serving soldiers or not- allowed to either view or be given  confidential information.

    • China , India and Brazil are to play a more prominent part in G20 and will also have more IMF votes. Currently, China wields 3.7% of IMF votes compared with France’s 4.9%, although the Chinese economy is now 50% larger than that of France and  in spite of the fact that China has over 20 Provinces which each has a population greater than that of France. This looks very much like the dawn of the Eastern or New economies and the inevitable sunset for the once all-powerful West. Regrettably, not only is it a question of size and manufacturing power but the West is currently “in hock” to China. Chinese and Indian savers enabled all of us to be borrowers. Now economists are saying that the East has to create the same free-spending and borrowing consumer society that we have enjoyed for so many years: just look where WE are now! Are we really so well-placed as to be dispensing economic advice?

    • Another New Labour piece of legislation which has been languishing in the long grass for a while is the changing or possibly the removal of the Statutory Retirement Age. It is a shame that there are ex-teachers, ex-managers, ex-engineers who happen to be over 65 and who are now either shelf-stacking, working at B&Q or watching Countdown. What a waste. The Government says that the matter will be dealt-with in 2010, in other words, by the Tories. Meanwhile, at least 300 over 65s are taking ex-employers to Tribunals and yet again, lawyers have become involved. That is New Labour’s one big success – through their intransigence and incompetence, they have produced the best-ever Lawyer Job-Creation Scheme. The Brits have always been obsessed with 65 being their time to stop work, relax, take long holidays etc. Unfortunately in many cases it’s retire, sit around for a bit, die.  We are changing as a nation and it is not purely because of the recession or plundered company pension schemes that people wish to carry-on working. Our “retirement mentality” has gradually been disappearing and people genuinely WANT to work for as long as they can. OK, there are very physical jobs where at age 65, you’re clapped-out. For instance, building, mining or farming. You can punish your body to such an extent that by the time you are 50, you start looking forward to the day when you can stop. However, nowadays many of us are engaged in non-physical work which means that we SHOULD be as fit at 65 as we were at 45. Policies should not be driven by a Government with one eye on unemployment statistics because as usual, public opinion is against them. It’s now time for the Statutory Retirement Age to be abolished.

    • Iran is the world’s fourth-biggest oil producer. No wonder they need to make such a vast investment in nuclear energy. You never know! Or, could it be that the Mullahs want to produce nuclear warheads in order obliterate Israel and/or the USA. That’s not possible because the Koran says that Muslims want us all to be their chums. Here are three quotes directly from the Koran (or Quran if you know your Peking from your Beijing). Here goes: “O you who believe! do not take the Jews and the Christians for friends; they are friends of each other; and whoever amongst you takes them for a friend, then surely he is one of them; surely Allah does not guide the unjust people.” (5.51)  or :“So when you meet in battle those who disbelieve, then smite the necks until when you have overcome them, then make (them) prisoners, and afterwards either set them free as a favor or let them ransom (themselves) until the war terminates.” (47.4)  or “The punishment of those who wage war against Allah and His apostle and strive to make mischief in the land is only this, that they should be murdered or crucified or their hands and their feet should be cut off on opposite sides or they should be imprisoned; this shall be as a disgrace for them in this world, and in the hereafter they shall have a grievous chastisement” (5.33) As I said – nothing to worry about. They’re just misunderstood. Talk of fundametalist Muslims being a bunch of fanatical murdering misogynist psychos is very naughty. They want to love us – as we love them. It says so in the Quran. Let them build their nuclear power stations bombs. It’s for our own good. Just think about all that cheap electricity.

    Nearly forgot: “O Prophet! urge the believers to war; if there are twenty patient ones of you they shall overcome two hundred, and if there are a hundred of you they shall overcome a thousand of those who disbelieve, because they are a people who do not understand.” (8.65)

    • The often misunderstood and misinterpreted thing which suggests that when a  Muslim blows himself up for the cause , he will be rewarded in Paradise with 40 virgins to shag (presumably) -is wrong. Martyrs in Islam are classified as people who die for their religion whereas people who blow themselves up for women are dying for their own lusts. It’s Hell for them. Presumably you need to die with a hard-on. Not impossible – many men do, apparently.

    These are Iran’s main Nuclear sites:

    Thursday September 24th 2009

    • The Government has criticised the Football Association for not reforming itself. It has also asked the F.A to spend more time and resources on ethnics and women as well as telling them that they should provide better leadership. Perhaps when the F.A has completed its restructuring it can then give H.M Government a few tips. Talk about Pot-Kettle.

    • A recent U.S survey shows that many Americans think that Tony Blair is the British Prime Minister. Someone ought to tell them who the real UK Prime Minister is. Darth Mandelson.

    • Mandelson has been quoted as saying that Gordon Brown ought to “lighten up”  a bit. Not THAT smile again PLEASE!!!!  NOOOO!!!

    • What is it about meetings beginning with a “G”? Why is our expectation level do low? Is it because we know that the post-meeting statement has already been written? Is it because all previous meetings were such a monumental waste a waste of resources, time and money? Anyway – who DOES write that n-page statement which announces the next meeting in 6 months? Gordon Brown’s LAST such meeting.

    • Is it true that Obama snubbed Gordon Brown? Obama has had one-on-one meetings withotherleaders. Why not with our own Prime Minister? Is it because of the Megrahi affair or could it be because of the increasingly prominent sell-by date on Gordon Brown’s forehead?

    • Banks are currently reducing their assets and hoarding cash because of liquidity requirements. Put in simple terms, that means that the magic conjured-up money – the so-called Quantitative Easing is making it in through the banks’ back doors but the front doors remain only slightly ajar. READ REST OF ARTICLE

    • In 1998, the Saville Inquiry began its investigations into the shooting of 29 Civil Rights protesters by soldiers of the 1st Battalion of the British  Parachute Regiment. Five protesters were shot in the back and two injured protesters were run down by Army vehicles. Fourteen people died. This was the Bloody Sunday Massacre which took place on 30th January 1972 in Derry. The original Widgery Tribunal concluded that the  soldiers actions could be best described as “bordering on the reckless” . Unsurprisingly, the Widgery report was widely regarded as a whitewash. Hence the Saville Inquiry. Now we hear that the Saville Inquiry will report in March 2010!!! Apparently, there’s a printing issue that needs to be resolved. Once again , this 11-year inquiry brings into focus two great British institutions – queueing and inquiries. Not to mention a steady income for a whole “shark” of lawyers.

    • The anniversary of Lehman Brothers going down the toilet has passed anditisnowayearsincethesolidsreallyhitthe air-conditioning big time. For those who do not really understand finance – and who really does these days, here’s the deal. Politicians and bankers knew for at leat 18 months before the collapse that there was not enough cash in the system andthatmost, if not ALL banks were now standing on foundations of sand. It was only when Lehman had to admit that there was no real money – only paper ” instruments” which could be worth cash , that it was realised that the real currency that the banks had been  dealing-in was bullshit and promises. Politicians are now beginning to strike heroic poses as they tell us how they saved the banking system and that they only-just managed to avert a financial Armageddon. The real fact is that they knew what was happening all along and lived in the HOPE that somehow (they did not know how), the financial system would self-adjust or self-regulate itself back to stability . It didn’t and the solution that is being applied today is exactly the same as that which caused the collapse. Imaginary money. Eighteen months ago, bankers and politicians were HOPING that the system would sort itself out and that is EXACTLY what they are hoping for today. What is really needed is a total restructuring of the banking system but there isn’t the global political will to make that first all-important move.

    • There’s a (denied) rumour that Gordon Brown is going blind. Obviously we all hope that he is not. In spite of the fact that he has all the leadership qualities of damp Kleenex, he is a decent man. The rumour that he is blind has obviously been started by someone who is confusing his eyesight with his policies and management style.

    You calling me a banker?

    “Move over, Darling. Please!”

    Banks are currently reducing their assets and hoarding cash because of liquidity requirements. Put in simple terms, that means that the magic conjured-up money – the so-called Quantitative Easing is making it in through the banks’ back doors but the front doors remain only slightly ajar.

    No amount of media-blackmail or Government arm-twisting is going to persuade the banks to start lending to commerce or to the private sector  in reasonable volumes or at reasonable rates. The banks are lending but at nowhere near the volumes needed by the economy. When they do lend, they apply wall-to-wall fees and a starting interest rate of the order of 6% over Base Rate. So, if you factor-in their fees, the actual percentage rate is ridiculously high compared to what little the BANKS are paying for the money and compared to the average company’s profit margin.

    Very often finance is over-complicated. For instance, if you are a manufacturer and you have a bank overdraft on which you are paying 10% per year, you need a pretty hefty profit margin in order to make any profit after you have paid your bank charges. Simple.

    Currently, margins are so tight that the banks may as well be in a different economy and on another planet because the sums just do not add up. The banks are doing their own thing, apparently with absolutely no reference to what is happening in commerce – especially where interest rates and current commercial margins are concerned.

    There are those who seem to think that the current Bank of England Money Sale (Quantitative Easing) is not working. “We can’t tell yet” is a current often-recited bankers’ Mantra. The double uncertainties of whether QE is working and more importantly, whether  the UK will ever be able to repay its currently vast borrowings without further damaging the economy has caused the pound sterling to fall in value. It has begun its short journey South and will be closely followed by the dollar.

    Mervyn King, the Governor of the Bank of England wants to add another £25 billion to the Quantitative Easing pot. He is currently in a minority of ONE. The dissent reminds us once again that Economics is largely a matter of opinion, guesswork and misjudgement.

    The Chancellor, Alistair Darling still has an occasional bleat about bankers’ bonuses. That is all purely cosmetic. Bankers’ bonuses are trivial in comparison to the current needs of manufacturing and commerce.  In fact, the whole subject of bankers’ bonuses is taking-up a very disproportionate  amount of not-only our media space but also of the Chancellor’s and the Prime Minister’s collective energies. It is a red-herring. This morning, Alistair Darling has again been banging-on about “clawback” and banks holding onto bonuses for three years. It’s all ill-conceived rubbish.

    The fact is that the Government has absolutely NO RIGHT to tell any privately-owned company what it should be paying any of its employees. That is up to the owners of the company – the shareholders. However, where the Government is a major shareholder in a company, e.g. RBS, only then is it at liberty to impose its views.

    The banking issues will not be solved until there is a dislocation between High Street Banking and Investment Banking.

    This morning’s hare-brained scheme was to ask companies  to declare their TOP 20 earners’ incomes. That should work-well for many Hedge Funds! Some only  have 5-10 employees. We’ll know what their secretaries and cleaners are earning which should be useful!!

    The Banker Bonus issue is a red herring which the Treasury is using more and more to distract us from the fact that they  not-only made a mess of managing the economy prior to September 2008 but  it now looks increasingly likely that the “cure” that has been applied through the medium of Quantitative Easing only has a 50-50 chance of working.

    The real worry, however is that Quantitative Easing was the last throw of the dice – and don’t be fooled by the near-miraculous “recovery” of the Stock Markets. Those Investment Bankers are now gambling with pretend QE money. The end-game will be fascinating.

    Wednesday September 23rd 2009

    • Apparently, there is a small but statistically significant rise in patient deaths when junior doctors start work in August. Perhaps the same survey should be done with slightly different parameters: Before pubs open and after closing time.

    • A friend sent me a cartoon yesterday which, for the first time, explained the constant Midde East conflict . Jewish man  looking up at the sky saying, “Now, let me get this straight God. The Arabs get the oil and you want us to cut the end off our what….?” 

    • This snippet explains better than anything the anonymous nature of the Liberals’ leader. Nick Clegg will be delivering the Leader’s rabble-rousing Conference for the THIRD time!! He will attempt to come cross as a TOUGH leader. Doesn’t compute, does it? He always looks as if he’s just taken a “NICE” pill.

    • Justin-lee Collins has said what many are thinking: Bruce Forsyth should have stopped TV presenting three or four years ago. There’s a touch of the Emperor’s New Clothes about the whole thing. So much so that no-one appears willing to say ” Brucie, you are now coming across as an old twat. Piss off”. Instead the poor old bugger is being patronised, allowed to be unfunny (obviously from the tumbleweed school of humour) and worst of all, he’s being referred-to as “sprightly”.An adjective every man dreads because it is THE word which signifies the beginning of the end. It is NOT a compliment. It means that you are past-it and when you attempt to tap dance avec embarrassing Sammy Davis Jr-esque gurning, you look like a swinging cadaver with a ferret up a wet trouser leg.

    • I have just discovered that Chas & Dave have split up.     p.s. I am writing this on Beachy Head.

    • Kristna Rihanoff whose Strictly Come Dancing partner is Joe Calzaghe celebrated her birthday yesterday. Rumour has it that Joe and Kristina have grown very close. I  wonder whether he had any difficuty in wrapping her present?

    • More meaningless military “sincero-talk”today. Acting Sergeant Michael Lockett was blown up by a roadside bomb in Helmand Province.  “There’s now a gap in our ranks that will be so very difficult to fill”  and  “Sgt Lockett’s raw bravery and seflessness cost hm his life but undoubtedly saved that of one of his soldiers.”  are just two more examples from the Army Book of Fine Words. Meaningless twaddle. Sgt Locketthas left behindastrickengirlfriend and three children aged eight, seven and five. “We take solace in the fact that he died doing a job he was born to do” was more puke-inducing bollocks – this time from his father.  Stop this pseudo-heroic crap and bring ALL of our young soldiers back here to the United Kingdom, where they belong. The Taliban certainly do not see these young soldiers as heroes  –  more like fairground ducks.

    • When will the Vatican be called to account over the tens of thousands of children that have been abused by pervert priests? The Catholic Church has been accused at the United Nations Human Rights Council of a systematic and long-standing cover-up. The Vatican is in breach of its obligations under the United Nations Convention on the Rights of the Child. Handing out MILLIONS in compensation is really not the way forward. It’s customary to pay for sex up-front , not ten, twenty or thirty years after the event. Let us hope that one day there will be a time when the Vatican can close its child-abuse fund and get on with the business of religion.

    • Nothing about Gordon Brown today because he hasn’t said anything new or original. Situation normal. 

    Tuesday September 22nd 2009

    • Did you see Darth Mandelson being questioned on the subject of bankers’ bonuses last night? As Business Secretary, he has the power to stop the bankers in their tracks. But he cannot and he would not answer any bonus-related questions.

    • General Stanley McChrystal, the top US commander in Afghanistan has warned that the war there could be lost unless there is an increase in troops within a year. He is asking for an additional 30,000 troops.  This is truly developing into another Vietnam. Currently, there are 100,000 troops in Afghanistan, 62,000 of whom are American. Time to talk.

    • The United Kingdom is needlessly wasting resources by sending too many average and some downright thick students to University. In fact, there are too many Universities. Hence the current funding crisis. The solution is so simple that even an Education Minister ought to be able to work it out.

    • The worldwide recession and the resulting drop in consumer demand has had a profound effect on industrial production. That has had an unexpectedly welcome effect on greenhouse gas emission – it has fallen by over 40%. Perhaps the Global Warming Mullahs will take this opportunity to shut up.

    • Anish Kapoor, the 1991 Turner Prize winner has a solo exhibtion the Royal Academy. This event is unusual because Anish lacks the traditional qualification for such a exhibition. He isn’t dead. If you enjoy abstract sculpture and/or you like spouting pretentious arty bollocks, then this exhibition is for you. Here’s a nosegay from Anish himself: “That sense of the poem being put together as word objects relates to sculpture in a very fundamental way. Sculpture also has this ability to be what it isn’t. It’s kind of about the illusory and the real.”Quite.  Anish is very keen on vaginas so do look out for the odd wobbly red letterbox shape.

    • The media seem surprised that construction companies and builders have been ripping-off Local Authorities and other organisations which are spending other peoples’ money. It’s been going on for years. This is from April 2008 – CLICK HERE– and it includes a scene from the Coconut Club, which you will be hearing more and more about over the next few weeks.

    • This week is Climate Week – a crucial  week in the quest for a global climate deal. World leaders are meeting at the UN in New York and a G20 summit in Pittsburgh. Meetings such as this have been going on for a few years now so let us hope that the current series of meetings produces something that has been sadly missing from previous encounters. Action. In December the Copenhagen environmental conference will hopefully be the real turning point and turn meetings into agreements into action.

    • Global Warming: Predictions are made using computer models and although the general consensus is that Global Warming is occurring, there are scientists (the so-called “deniers”) who have alternative models which suggest that the Earth will cool before its becomes hotter. Regrettably, the religious-like aspects of Global Warming, treat scientists who deny Global Warming as heretics who are often lampooned andmarginalisedby both the scientific and political communities.  The latest of these is a   Professor Mojib Latif, from the Leibniz Institute of Marine Sciences at Kiel,  who has suggested that the long-term warming trend could be masked – perhaps for as long as 10 or 20 years – by a temporary cooling caused by natural fluctuations in currents and temperatures called the NorthAtlanticOscillation. It all seems to depend on which set of data is plugged into which computer model.  However, it is the politicians who are the true believers who only appear to read data which supports their dogma.

    • Helen Goddard , music teacher has been jailed for 15-months as the result of a lesbian affair with a 15-year-old pupil. How modern. Not nice – but definitely “of the age”.

    • Rumour has it that Louis Walsh, the Irish spud  and pop manager from the X-factor is going under the knife in order to improve his looks. There must be a long queue of knife-sharpening volunteers. Surprising that he hasn’t yet benefited from sitting so close to that pair of  BotoxedBookends – Simon Cowell and Danni Minogue – by osmosis.

    • Sir Bobby Robson’s Memorial service must have been an ordeal for Paul Gascoigne. There was only one photo of Gazza that the snappers wanted – and they got it.

    • This is the sort of medical research that we like:  If you have alcohol in your bloodstream, you are far less likely to die from a head injury, says Dr Ali Salim from Los Angeles. The findings are based on a 5-year study of 38,000 people. You can’t be too careful. Cheers.

    • Nothing in the Press about Jordan today. Max Clifford must be on a long weekend break.

    • Attorney-General Baroness Scotland is still facing an uncertain future. Gordon Brown, her boss is being his usual decisive self. This is what he said this morning: “We will have to find out what has actually happened and I will have to wait for that report this morning and she will want to answer the questions that are put to her. We will have to make decisions.”  Brown obviously has not been watching the news or reading his Daily Worker. The fact is that Baroness Scotland employed someone who did not have authorisation to work in the United Kingdom. In fact, her papers expired five years ago. As usual, the long grass is quivering in anticipation.

    Monday September 21st 2009

    • It now appears that Womens World  800m champion Caster Semenya was tested ages ago and there has been concern over her sex for months. The issue did not suddenly materialise at the last Word Championships. The whole thing has been handed so badly that there is every likelihood of IAAF resignations.

    • Baroness Scotland will probably resign this week. If every politician who made a mistake resigned, Westminster would be empty by now.

    • It looks as if Megrahi is going to be the first criminal to be retried on the Internet. We’re still awating an intervention from God and the miracle recovery. There has been one previous miraculous recovery by a convicted criminal. Ernest Saunders (1980s Guinness Scandal) was freed by a judge because he was suffering from Alzheimer’s. So far, Ernest Saunders in the first  and only recorded case of a total recovery from Alzheimer’s. The recovery took place soon after he was released from jail. Speaking of miraculous recoveries – Ronnie “released on compassionate grounds” Biggs has been seen out and about on his mobility scooter. Megrahi or Biggs? I’m off to Ladbrokes to make a small investment.

    • The Liberals are having their occasional rush of blood and putting themselves forward as a party of government. Remember David Steel in 1981? “Go back to your constituencies and prepare for government.”  Forget it boys and girls. There’s Vince Cable and Norman Baker and after that it all becomes a bit anonymous. Nick who?

    • The Liberals want to tax home owners whose properyis worth in excess of a million. They will be the only Party whose policies will be derailed by a property crash andonthatbasisalone, this policy has the depth and solidity of  a closing-time back-of-a-beermat “I really lovvve you”  concept. They’re not sponsored by the Royal Institution of Chartered Surveyors, are they? This new policy is the Liberals’ biggest-ever lurch to the left. The sort of thing that New Labour would have done when they were Proper Labour.

    • The elephant in the room – the one that no-one is talking about is still there. I am of course referring to the economy.

    • Several big companies, including a couple of large builders as well as the Royal Bank of Scotland will be coming to market very soon to raise many billions. Watch those share prices.  Here we go again.

    • Have you noticed how Kerry Katona’s nose is looking more and more like Danniella Westbrook’s last nose-but-one?

    • The Education bods are gettinng a bit twitchy at Ed Balls’ suggestions of swingeing cuts in Education. It is the designer-suited BMW-driving “advisers” at County Hall who should think twice before renewing their gym membership or booking that holiday in Tuscany. CLICK HERE

    • I did not see Alesha Dixon’s debut on Strictly Whatsit but it sounds as if she had a list of pre-prepared crap written down, dispensed it quite randomly and personalised it by adding bad grammar.

    • Rules are being published this week which will exempt family and friends from being prosecuted after assisting in a suicide.  It is purely coincidental that these rules are being rushed through just before Gordon Brown’s conference speech.

    • Manchester City manger Mark Hughes is complaining that too much time was added on at the endofyesterday’sderbygame with Mancheser United.  Michael Owen scored Man Utd’s winning goal in he 97th minute. Hughes forgets that his team had the identical extra time in which to score.

    Monday September 7th 2009-Friday September 18th 2009

    Friday September 18th 2009 

    • There has been some concern that Romell Broom may have suffered mental anguish when two Ohio State officials failed to find a vein in order to deliver a fatal injection. According to Broom’s lawyer, Broom had suffered both “mental and physical injuries” and apparently became distressed and appeared to cry. Broom was convicted of raping and then killing a 14 year-old girl.
    • We’re too fat, we drink too much alcohol, we’re unfit, we ingest female hormones in our meat  and weedkillers from our vegetables and we’re too stressed. Paradoxically, our life expectancy is increasing.
    • Alistair Darling is engaged in a series of meetings in order to decide where spending cuts can be made. If you’re expecting decisions within the next few months – stop being so silly. Although professional pundits do now have the opportunity to make pointless predictions.

    • Andy Burnham is suggesting yet more NHS changes. The God of Change strikes again! This month’s idea is that we will all be able to choose our GP. I would like one that’s qualified, understands human anatomy and is sober.

    • Baroness Scotland should know that in a Court of Law, ignorance is no defence. Mind you, the Baroness is the Attorney General. Hopefully, hiring someone called Loloahi Tapui(clue!) with out-of-date papers was just an oversight and as such, does not generate a witch-hunt. Oh yes – there’s an enquiry. There’s always a feckin’ enquiry.

    • Suddenly, Jordan doesn’t want to talk about “the rape”. It seems that her PR people are running out of interesting stories. The only remaining possbilities are either  ” I was abused as a child” or “I was abducted by aliens”.

    • Bit of a “to-do” about  unofficial sperm donors. Apparently, ladies can contact a sperm donor  on-line, arrange a meeting and either be handed a container-full of the stuff or on occasion have it delivered direct through the medium of sex. Hence the phrase : “”Bottled or draught?”  Sounds like an excellent service as well as an interesting career move, although it could mess-up the old CV, especially if the CV is printed on a sheet of Kleenex. Just realised that if this type of work is a career, the phrase “hand job” begins to make sense.

    • How would the management at Student Loans UK feel if they were told that because of administrative incompetence, their September salaries will be paid at the end of October. They would probably be quite upset. Next question: How do young kids with the incredible stress associated with leaving home feel-when they’re told by Student Loans UK that their University grants will be paid “about” four weeks late? Why is the beginning of the academic year ALWAYS a surprise? For the record and to help Student Loans UK: The next academic year will be starting in October 2010. Hopefully, that’s enough notice.

    • Scientists at Newcastle University have produced human sperm in the laboratory. Didn’t know that there was a shortage. Just take a chipping hammer to any Confessional carpet.

    • Gordon Brown said today “Cooperation between nations at the G20 summit will be crucial to ensure global economic recovery”  That is probably the twentieth version of the same sentence . It is a truism and it’s boring. Here’s another sentence which I hope Gordon finds as interesting as his own deep thoughts: ” The sun is in the sky”

    • Here is a quote from this evening’s No 10 bulletin: “The Prime Minister is launching a brand new podcast series this week talking directly to you about the big issues of the day. The podcasts, which will be available on our iTunes channel andonYouTube, will be recorded at Downing Street or around the world when the Prime Minister is travelling.”  Wow! That Gordon Brown is so “street”  -using that Interwebthingytoconnectwith the YouTube dudes. Way to go, MC Gordo! Soon,  he’ll be buying a pair of those really cool Levi Strauss blue denim casual trousers with the turn-ups, copper rivets and the little red label. Sound! Should go well with the black brogues.

    • Remember what I told you about the American dollar going into freefall. Soon. Continue reading Monday September 7th 2009-Friday September 18th 2009

    The Phony Economy

    The approximate position of the British Economy

     

    One of the great questions of our age is “Have the billions handed over to the banks had any affect on the economy?”

    Some say “YES”, some say “NO” and others say ” IT’S TOO EARLY TO TELL”

    Currently , we appear to be living through what can only be described as a Phony Economy.  The Footsie looks much healthier and there is  sort of “whistle in the dark” pretend-confidence in the markets. Pundits are talking-up the markets, politicians are beginning to make soothing noises some are even daring to think about non-economics-related topics. It’s all very disconcerting. Continue reading The Phony Economy

    What Recovery?

     

    TOOLS OF THE TRADE: INVESTMENT BANKING

     

     

    Since 2007, there have been at least three announcements  which declared an end to the economic crisis. Today, we have the latest pronouncement of a slight ”recovery” and the fact that a survey shows “increased confidence” from consumers. All a bit nebulous but nevertheless welcome.

     

    The FTSE 100 is trying to muster the courage to break through the 5000-barrier and there are predictions that it will be well over 5000 by year-end.

     

    Pundits are once again queuing up to make predictions. It’s a pity that they weren’t around this time last year to predict the 2008  banking meltdown.

     

    Whenever the Government intervenes with yet another injection of cash or dose of “quantitative easing”, investors rush back to the risks and the markets rally sharply.

     

    We seem to have gone from a boom-bust cycle to a much shorter “cash handout-gamble” cycle. Continue reading What Recovery?

    Antonio Polverino scores again!

    There are two types of organisation that have made such huge financial rods for their backs that it looks as if they are beyond help.

     

    At first, it appears that they have little in common but if you look closely, you will see that they do share two very basic elements. The first is a weak and often unskilled boardroom and the other is direct access to the public’s money. Another interesting similarity is that their personal incomes bear little relation to how they perform long-term. That has resulted in near bankruptcies within both types of organisation with the genuinely solvent ones being very much in the minority. Continue reading Antonio Polverino scores again!

    Goldman Sachs – Fiscal Frankenstein.

    It was a few months ago that I realised the size of the divide between us ordinary Earthlings and the government-venerated banking royalty had gone past the tipping point and that we were now separate species. Survival of the fittest?  Darwin was right. We are the peasants with pitchforks gathered below Frankenstein’s castle where mysterious new things are happening. Continue reading Goldman Sachs – Fiscal Frankenstein.

    Where’s the New World Order?

    A twisted  fusion of capitalism and socialism is being forged in the white-hot heat of political panic.

     

    No-one should  complain because we  are all being forced to run  blindfold towards  a world where profits are privatised and losses are nationalised. We cannot lose.

     

    Competition within financial services will be a quaint throwback to the last century because both the US and UK governments have now demonstrated that if a company is big enough, it will have Federal and Treasury support. It is the smaller companies who will be allowed to go to the wall because it is only then that they can become financial fodder for their fat hungry cousins.

     

    The new financial conglomerates now know that they cannot fail because the State will bail them out.

     

    The lesson that has not been learned  is that the sheer size of companies is what  makes them difficult to govern. The only way to manage these fiscal behemoths is to impose rules that are so draconian that eventually, the spirit of capitalism will be totally expunged. The State will be calling all the shots.

     

    There has been debate as to who is to blame for the current chaos. The bankers know very well what has happened but  they mutter vague generalisations, citing worthless  sub-prime bonds and a general lack of confidence.

     

    There is no way that sub-prime (the greatest euphemism ever?) lending is to blame for the entire financial house of cards tumbling down. The real issue is that  the banks DID NOT HAVE THE MONEY that they were lending. They have behaved like a banana republic which prints more money in order to pull itself out of  the financial quicksand.

     

    Yes, they have been using “pretend” money. Mugabe is doing it now, the Wiemar republic did it  70 years ago and  the entire banking system is still doing it.

     

    The banking system has relied on “electronic money” for years. It was not real money and they have probably known for years that they were sprinting towards meltdown. George Soros knew.

     

    The regulators are not to blame because 90% of their efforts are designed to control the “little man”.  The big picture eludes them . Last September, the FSA was still issuing statements as to the solidity of HBOS – that’s in spite of the “investigation” that it carried our six months previously on the possible manipulation of HBOS shares.

     

    Now that the financial chaos has moved  from “boil” to “simmer”, the Government must take the opportunity not only to take a close look at the regulatory regime but also think about a complete restructure of the financial services industry.

     

    The FSA grew out of a need to control mis-selling in the Pensions and Life Assurance industry. That is still its main thrust.

     

    In spite of the increasingly bureaucratic Pensions and Life industry, the bandits are still out there and always one step ahead – they can never be eradicated.

     

    One hates to agree with Sarkozy but a new global authority must be formed that specifically carries out high-level audits and ensures the implementation of  proper business controls within the banking sector.

     

    However, we do have to accept that the ratcatcher can never catch all the rats.

    Darling has the solution in his hands.

    If you have read a good balance of the reporting and commentary on yesterday’s budget, you will have realised by now that this was a political budget. The Chancellor and his puppet-master know that their stewardship of the economy has a maximum of 12 months to run and then , as is the fashion nowadays, the lecture and non-exec circuits beckon. There is light at the end of the tunnel for some but unfortunately, not for all.

    There is no point in raking through the coals of yesterday’s return to Old Labour and the 21st Century embrace of the Politics of Envy.

    “Let’s do the rich!”and the great unwashed and the slack-jawed champagne Socialists will most likely follow. Trouble is that the great unwashed is fast becoming the great unemployed and Tony Blair’s Champagne Socialists (teachers, media people etc.) are now more Cava Sippers than being able to afford the real thing. Some have even moved to pink Zinfandel!

    The Budget was delivered with all the panache and conviction of a  tortoise that knew that it would never catch the Conservative hare. And did you see the Hammer-horror grin that Brown’s face morphed into when Darling sat back down into the wet patch.

    Cigarettes – √. Booze – √. – Petrol – √.

    Let’s make it look as if we are going to upset the rich – “It’s always good to piss on their strawberries”. -√.

    Oh yes – Pensioners  – √.

    Did you notice that the Chancellor looked a bit uncomfortable talking in mere pounds and pence. After all, he is used to lots of noughts now. When the scale of Government’s borrowing was announced there was a definite shift in the Earth’s orbit as economists’ scrotums shrunk to a tenth of their size – at the speed of light. Some may remain dysfunctional for years to come. Like the banks.

    This was a Budget by Numbers when what was needed was a masterpiece. The trouble is that before this Government is run out of town,  Chancellor  Darling will touch up an already impossibly bad economic picture with another Budget. What was that Chris Rea song? Oh yes – The Road to Hell.

    You may be wondering why all seems to be well with the Banks  – they should have all completed rehab by now and should be ready to score us some readies. Their Social Worker – otherwise known as the Treasury is telling us that they still need a bit of time to regain confidence. That is why they are currently being fed a “money substitute” through the medium of quantitative easing.

    How is it that a few of the big banks have declared such surreally fat profits? Have you never wondered why or how they seem to have been rehabilitated so quickly? They are still cooking the books, ignoring the fact that they are still insolvent. The difference is that now they are doing it with this and other Governments’ connivance. To put it simply – it is a world-wide con trick. There is naughtiness afoot.

    If we knew the real figures, we would panic. The fact is that for every pound or dollar that the Banks once had in their coffers, they lent or gave away at least 50. They tied the modern Gordian Knot not with rope but with worthless paper and they have fashioned what  appears to be the most complicated paper chain ever conceived. Currently they all owe each other billions because they screwed each over, many times over. The screwer was also the screwee and vice versa.

    This has been institutional fraud carried out by banks on other banks and  the only reason why they are not all standing in the dock is that there isn’t enough dock available.

    The other important factor is that instead of doing what Alexander the Great did and cutting through the knot, Governments still think that they can untie it . If they carry on their random attempts, it could take a generation.

    The banks have the Governments by the balls.

    That brings us neatly to a rather pathetic silver-haired Edinburgh Solicitor predicting that we are soon to experience a recovery with a growth rate of 3.5%. That statement really is not worth commenting upon because of the poor man’s past record – which is similar to Russell Grant’s. In fact…………………………..

    There are billions of pounds stashed away in funds, in banks and in insurance companies. That money belongs to us and many of us will have to wait years before we can get our hands on it.  I am referring, of course to Pensions. Personal pensions, group pensions, small company pensions… they come in a hundred delicious flavours.

    There was a time when someone leaving a company  – whether voluntarily or otherwise could take their accrued pension with them. Let us say that the Chancellor announced that for the next two years, anyone being made redundant or who wanted to stop working could have all of their accrued pension immediately. What effect would that have.

    Firstly, we would have “spenders” in the economy. who could provide a massive buying stimulus to all retailers. The Government would save on benefits because many of these individuals would suddenly have “savings”.

    Secondly the institutions holding the pensions would not have to be “persuaded” to part with the money because if they refused, they would be breaking the law. And if the didn’t have the money, then we would all know.

    Thirdly, employers would think twice before sacking anyone if they knew that they would not-only have to fund their redundancy pay but that they would also have to hand over accrued pension benefits.

    Too simple? The alternative is to keep feeding the banks with money that we do not have and that has a time limit which is not as far away as we seem to think.

     

     

    The Scam of the Millenium

    The Government has a vested interest in allowing us to assume that suddenly the comparatively modest bailouts and part-nationalisations of our banks have somehow solved our economic woes. They would have us believe  that we can now sit back and await the often-mentioned green shoots of economic recovery to somehow poke their way through the concrete of economic failure. We have even had “estimates” as to when the recovery will kick-in. Where were these soothsayers one year ago?

    I am using this blog to put on record – to predict, what will really happen.

    By Q4 of 2009, the FTSE 100 will be below 2500 and UK unemployment will be above 10% and there will be no proper recovery for at least three years.  Why so negative? Because we are being conned by the Unholy Trinity : government, economists and bankers. How are we being conned?

    During any economic turn-down there are comparatively short periods of “ersatz” recovery – the so-called bear-market rallies. Those nuisance false-dawns when astute traders can continue to make a few quid for themselves will act as an occasional shot in the arm which will make us all feel better when the real trend is DOWN.

    The banks will be allowed to inflate the book value of the so-called toxic assets and their profits will be further inflated by them “losing” most of their losses – if that makes sense – and this will all be done with the Government’s connivance.

    Politicians, regulators and economists are simultaneously scamming us and themselves not understanding what is going on because the amount of the so-called bank bailouts is a mere fraction of what is really needed.  If the banks had really been bailed out, we would by now be back to normal. Vague talk of “we are awaiting banks to regain their confidence” have been repeated so many times that we are beginning to believe without understanding. Exactly what the banks themselves were doing for ten years.

    The Budget will be no more than a little man, putting a little finger in a hole as big as a (rapidly depreciating) house.  The Chancellor is hawking snake-bite like an old-school medicine salesman  who is punting useless medicine which will do nothing to ease the pain to come.

    So What?

    As a businessman I have always been a great believer in applying the “So-what?” test to any management problems or initiatives – just to test any effect – positive or negative. The rule is simple – Write down the phrase or problem, then add “so what” and then attempt to answer the question.

    For instance, Kobe summit – so what? Global warming – so what? Tomorrow’s Budget – so what?

    There are many phrases that I have tested in this way – my most recent favourite being: G20 – so what? The answer is WINDOW-DRESSING. But the worrying thing is that the whole thing was based on the premise that you cannot overestimate the collective stupidity of people in large groups – that’s us.

    Susan Boyle?

    Over 100,000,000 hits on U-Tube. It’s those pesky Americans and their uber-sentimentality. Make the Yanks cry and the world is yours. Don’t forget, they know what they are talking about. They must do – they invented Country Music and Cabbage Patch Dolls. There’s your answer.

    Seriously, we all have to admit that Susan is not classically beautiful. What do you think the reaction would have been  if there had not been such a mismatch between looks and voice?

    She’s a lovely lady but the Americans love a freak show and that is what they will turn her into – and she does not deserve it.

     

    Socialist? Moi?

    The current Labour government is having a very tough time  and a very bad situation is made worse by what appears to be a lack of leadership and management skill. Gordon Brown seems to feel that you can manage by changing the rules or by organising enquiries. You can imagine Brown being informed that more and more people are on the breadline and solving the problem by having an enquiry whose purpose would be to confirm that the breadline is in the right place and if not, recommending where it should be placed.

    We are currently in a post-collectivist society which has lost several compasses, ranging from the moral and social to the economic and political, resulting in an upsurge in crime, family breakdown, violence, drug abuse and poverty.

    We are existingin a morally sterile, Left-wing, politically correct State and because we have forgotten how to self-manage, we will have more and more regulations imposed on us – otherwise, we are in very real danger of lapsing into anarchy. That is exactly what has happened in the Banking industry. It has taken a mere twenty years to move from what started as a self-regulating, rock solid service industry to arrive where we are today. An every-man-for-himself rip-off business which will now have such a raft of rules and regulations placed on it that it will suffocate. Collectivism has morphed into Neo-individualism which needs rules.

    The word “equality” used to be a concept – albeit a good one – definitely unnattainable but nevertheless, worth striving for.  “All men are created equal” and all that…..

    Nowadays, we all have to appear “equal”. Inequality has become an evil which has to be eradicated at all costs and it now stands in the dock, shoulder-to-shoulder with poverty and global warming as one of the Three Bogeymen which has to be killed-off through the medium of meetings, promises and large cut-and-paste documents.

    The sad fact is that we will always have both inequality and poverty. That is Society and Normal Distribution.

    But if we decide to subsidise the poor so that they are more equal to their rich cousins, then it is those rich cousins who have to generate more wealth in order to pay for those subsidies and thus we create a tranche of society which becomes totally dependent and more resentful because they not-only have poverty but also, courtesy the media, a direct window on the lives of their better-off cousins. Africa is a good example. We are in very real danger of creating a wholly-dependent continent which is simultaneously grateful and resentful.

    Elsewhere, the Equality Mullahs have substituted “qualifications” for education resulting in an insipid education system where excellence has become the property not of the FEW, as it used to be. It is now in the hands of the VERY FEW. That is what happens in any system where there is an attempt at “forced distribution” – whether it is A-level grades or income.

    All systems, whether political, physical or economic are self-adjusting with what appears to be a strong unwritten self-preservation programme buried in them – especially if there has been an attempt at “forced distribution”.

    Even the banking system has self-adjusted recently.

    We are now moving into the third generation of people who know nothing but emotional and physical squalor, who cannot communicate, eat properly, relate to “the others” and who will automatically resort to aggression when thwarted in any way.

    We appear to be at the stage when we need Victorian-type social reformers and not mediocre political management whose tools of the trade are slogans, meetings and enquiries.

    We are very good at uttering the slogans of equality but the sad fact is that over the last few years, the poor have been getting poorer, the thick have been getting thicker and the violent have been joining the police.

    There has been a build-up of social pressure which is in real danger of manifesting itself as social unrest – the sort that will have  to be dealt-with by means of state violence by uniformed men carrying sticks and Perspex shields.

    Tinkering ( VAT, green cars etc) is not the answer. The ONLY solution lies in massive CHANGE – and if that change comes late, the entire system will crash before it has to be rebooted..

    The Brown Delusion

    “Now down again. Slowly.”

    The G20 conference was the most orchestrated, pre-determined piece of theatre that we have had the privilege of seeing since the 1968 Morecambe and Wise Christmas Show. The primary motivators were to somehow please the banks, instill confidence in both the markets and the voting public and lift Gordon Brown’s approval rating.

    The three main devices  used were the over-wide smile , the already well-tried method of “let’s throw more money at it” and a long document.

    Make no mistake – this amazing show of unity was for the voters back home. Gordon Brown was being so transparently Party Political that the G20 conference should have been funded by the Labour Party. He no doubt he sees himself as some sort of latter-day King Canute in an M&S suit but he does not wear it well – the image or the suit.

    Barack Obama and his wife were the undoubted stars of the show – not because they are still new and shiny and unsullied by any of the recent banking shenanigans but because they are stars. Obama’s demeanour throughout was that of a modest thinking man who did not feel the need to stand either in the middle of the picture or at the front. Likewise, Michelle Obama did not put a foot wrong – although there was a moment when the Queen should have sent a flunkey to fetch a stool for her to stand on – such was the height mismatch between her and Michelle.

    The communique produced after the meeting is vague in the extreme but there are a few quite interesting items. The first is a sop to the Franco-German alliance – or as I prefer to think of it – Vichy 2. A Financial Stability Board will be established. One presumes that this will develop into the Global Financial Services Gestapo so that if there is any financial naughtiness or even naughtiness-with-intent – “there vill be reprisals!!”. One serious point that has constantly been ignored is the fact that the banking issues are more to do with financial bandits completely confusing incompetent bankers. Any Financial Services Authority will train its beady eye on the incompetent bankers. The bandits will continue to operate but with even more stealth and guile.

    The Head of the International Monetary Fund (currently Dominique Strauss-Kahn) will now be elected through “an open, transparent and merit-based selection process”. That simply means that any future encumbents can be  non-Europeans of any colour. Progress indeed. Likewise, the President of the World Bank (currently Robert Zoellick) can be non-American! Presumably, however, both will still be required to  attend the Bilderberg conference.

    Those are just a couple of minor concessions. The rest of the document reads as if it had been written a while back. It is full of non time-stamped “cut and paste” rhetoric, e.g.

    ” We have today therefore pledged to do whatever is necessary.” 

    ” We believe that the only sure foundation for sustainable globalisation and rising prosperity for all is an open world economy based on market principles.”

     “We are determined not-only to restore growth but to lay the foundation for a fair and sustainable world economy” 

    There is much more of this sort of turgid nonsense and padding which looks as if it was drafted by a Civil Servant from the Ministry of the Bleedin’ Obvious.

    The main single item from the whole circus was the agreement to recapitalise the IMF to the tune of $1.1trillion. One could argue that in these times of recession (and extreme poverty), all this could have been achieved through the usual channels without all the showbiz.

    Meanwhile, somewhere in the depths of a thousand bank strongrooms, there are “papers” which represent billions of dollars-worth of damaged assets. The surviving hedge fund managers  are ready for the new game. Incompetent bankers are still in place. Retailers are being strangled by a lack of credit. Manufacturers are shedding millions of jobs. Governments are printing money that they don’t have and the City screen monkeys are still confused.

    And yet today we feel optimistic. All because of several days of fine words and political sleight-of-hand.

     

    Dunplaying

    “Ooh look – something has bounced off the fan and it appears to be coming my way!!”

    The Dunfermline Building Sociey had the temerity to go cap-in-hand to the Government. The Chairman Jim Faulds was rude about the Chancellor and accused him of making the wrong decision, based on erroneous information. Bad move. The truth is that the Financial Services Authority has been hawking the Dunfermline around the indutry for a few weeks  – without too many takers. Jim Faulds’ outburst was nothing more than an 11th-hour face-saving attempt. It was not the Chancellor’s fault that the Dunfermline Buiulding Society has managed to build a terminally toxic commercial mortgage book.

    The Society has always managed to produce a modest surplus and it is quite amazing that the Board (in common with many other Financial Services Boards) has acted as if it did not see any of this coming. The solids hit the air-conditioning many months ago and have been flying in their direction ever since.

    The Dunfermline B.S was Mutual Society. That means that it was owned by its members and therefore had no pressure as far as profit or shareholder dividends were concerned. All that a Mutual needs is a small operating surplus.

    Therefore it takes a special kind of incompetence to run up such huge losses   and then to expect an automatic Government bailout. However, it would again seem like a case of provincial directors mixing it with professional investment sharks and the commercial world. Vanity over pragmatism.

    The DBS appointed a new Chief Executive in December 2008. His name is Jim Willens and until last year, he was on the Board of Nationwide. Coincidentally, it is the Nationwide which has now bought the DBS branches, investments and good loans. Jim Willens has been fighting a losing battle for several months – ever since Deloitte’s, the Society’s auditors refused to sign-off the accounts because the Society was insolvent.

    Graeme Dalziel was the previous Chief Executive and the spotlight will soon be trained on him. Regrettably, he is in the frame for the failure of DBS. He is a former Finance Director and in common with another CEO of a failed north-of-the-border financial institution – he is an Accountant.

    So what is it about Scottish Accountants who have power thrust upon them? Mind you, the British economy is currently being run by a Scottish History Graduate and a Scottish Solicitor – so we should be all right.

    Oink!

    The perfect line of curly tails has temporarily stopped flicking with pleasure because it seems that the trough of plenty is about to be removed. The squealing and slurping has stopped because the Mama Pig that is the taxpayer needs some respite. There is a real danger of drought – and it is not the drought predicted by the Global Warming Mullahs – it if the financial drought caused by the double-whammy of “on the take” bankers and their avaricious politician chums.

    The Home Secretary, Jacqui “Within the rules” Smith,  argues that she has done nothing wrong and she is right. What about hanging? That  also used to be within the rules – did that make it right?  Within living memory there were those who were “following orders”. Were they right?

    The debate is one of morality and not political chauvinism. If you are caught with both hands in the cookie jar – don’t blame the jar.

    There have been many debates as to the merits of electing politicians who are financially “independent” – those who do not see politics as a “nice little earner”.  Many are “at it” in the Commons and no doubt some are at it in the House of Lords.  Why are they at it? They are at it because many of them are about to enter the last 12 months of comparative plenty. Nests need to be feathered before the arrival of their personal political winter. For many, this is the most that they will ever earn.

    It is interesting to note that of the top 20 MPs  claiming for second homes (The Independent yesterday), 14 are Labour. All are from outer-London and the surrounding area because they are allowed to claim Additional Costs Allowance. The ACA is discretionary – it is not compulsory.

    Needless to say, there has been yet more fancy footwork from Gordon Brown, followed by  yet another disturbance in the long grass as Sir Christopher Kelly  and the Committee on Standards in Public Life are mobilised.

    By the time that they complete their ruminations, it may well have been cheaper to leave well alone.

    Bear necessity.

     

     

    We have entered a long-term bear market and equity prices are heading towards Ground Zero. All that Governments have managed to achieve so far, is to delay the decline.

    The currently established pattern is very simple – investors wait and see what the government is going to do. Then there’s a short Stock Market rally.  That is usually followed by another business admitting losses, bad debts or a cash shortage and shares move down again. Then the cycle is repeated.

    The whole thing is being dealt-with “piece-meal” because decisions are being made “on the hoof”  by politicians who always have one eye on opinion polls. The current economic woes are not a function of votes and governments should have taken a deep breath , sat back for two or three months and waited.

    That comparatively short wait would have resulted in the bankers emerging with their hands up and coming clean. Plus  there would have been time to properly audit the investment and commercial banks (that is where most of the so-called”toxic” debts reside).

    Instead, Governments and Treasuries all over the world allowed themselves to be spooked not for good business reasons but for political reasons. This over-protracted game of “pin the tail on the donkey” now looks as if it will never end.

    The initial funds that were gifted (yes!) to the banks represented a knee-jerk reaction by amateurs such as Gordon Brown and Alistair Darling. Their panic-fuelled decision had absolutely no basis in good business practice. The term “due diligence” did not come into general use until after five months of chaos. Due diligence was not practiced by the banks when they were lending or acquiring bad investments. That tradition was propagated by  this and other governments who handed cash to the banks as irresponsibly as the banks had handed money to the NINJAS (No Income, No Job or Assets) and dodgy businessmen.

    The amounts handed to the banks were based on a formula created in conjunction with the Financial Services Authority (FSA) – an organisation which itself is taking over £300 million out of the industry so that it can make sure that small-time brokers are completing their clients’ forms correctly, whilst at the other end of ther financial food chain, the big boys are still happily stripping money from investors and borrowers.

    The amount of money handed to the banks was calculated as follows: The FSA established what a bank’s safe capital level should have been, in excess of the Basel Accord ( a formula based on assets, capital and risk which establishes a capital asset ratio).  That was the simple subtraction that was carried out : the difference  between the Basel Accord calculation and what the FSA  had established as the safe capital level.  Due diligence which really means “Let’s have a proper look at your books”   was nowhere to be seen or experienced. Why? Because the FSA does not have the in-house experience to carry out a full bank audit.

    Good management practice should mean “no surprises”. The Government is being surprised at least once a week. It wouldn’t be so bad if it wasn’t costing us billions.

    A very dangerous precedent.

    “Sit on this and swivel , you bastards”

     

    Let’s get one thing straight – when an Executive  is hired by a Board, a contract is signed. That contract will contain information about remuneration, bonuses, pension contributions and a hundred other things that cannot be settled by a handshake.

    Sir Fred Goodwin will have agreed such  a contract with the Board of the Royal Bank of Scotland. Furthermore, the shareholders will have ratified all pensions contributions for his benefit and that money will have been invested on his behalf.

    The fact that his Pension “pot” now stands at somewhere near £16 million and that his annual pension is over £600,000 is not his fault.

    There has been too much emotional tosh talked over the last few days. Subtleties are added to the reporting such as : He will receive this sum “for life”. Of course it’s “for life”. That is what a pension is – it pays an annuity until death which admittedly does tend to be “for life”. Junior RBS staff have been interviewed and asked how they feel about a Chief Executive with such a large pension…etc ….etc”. Not surprisingly, many are upset!
     
    I am not a fan of Sir Fred Goodwin an according to a couple of acquaintances of mine who have worked for him, he does not have the benefit of an oversubscribed fan club. He is one of the new breed of “fair weather” Chief Executives and Chairmen who looked good during the times when the Global Economy was not mentioned. The times of plenty.

    We are also just beginning to realise that we used to have  a fair-weather Chancellor   and now that the economy has rounded the U-bend – do we withdraw his pension rights as well?

    Where does it stop? If we track back, we could probably lay the blame at Margaret Thatcher’s door and deregulation. Should we stop her pension? Fraudsters keep their pensions, criminals keep their pensions so why target an individual who simply made a mistake?

    Andy Hornby earns over £700,000 per year as a “consultant”. Where’s that money coming from? Would it have been different if he’d been old enough to take his pension? Would ignorant scribes be baying for his blood as well?

    There is a myriad of examples of those who have failed and gone on to collect substantial pensions – from policemen to politicians.

    We are caught up in a financial maelstrom and the suggestion that Sir Fred is being paid with “taxpayers’ money” is not  fact. He is being paid from an accumulated pension fund which belongs to him.

    All that one can say to sanctimonious politicians is “Welcome to Capitalism” but never forget that we live in a democracy and we are currently looking down both barrels of a very dangerous precedent.

    Revenue and Misappropriation

    What the Banks really mean

    It is about time that the taxpayer was told exactly.what the banks have done with the money that they have been handed by the Government.
     
    Vague statements such as “plugging holes in the balance sheet” mean nothing to most people (including politicians). “Restoring confidence” in inter-bank lending is also a meaningless phrase as is “toxic assets”.
     
    Alistair Darling has just asked the banks to “tidy up” their Balance Sheets. Does that mean that the banks were handed taxpayers money without having tidied up? A company’s accounts consist of two sets of figures: The Balance Sheet – what they own and what they owe. The other bit is the Revenue and Appropriation Account. Maybe its time to re-label it to the Revenue and Mis-appropriation Account because it would seem that is where the trouble lies.
     
    Where’s the money? Have they got it yet?
     
    When banks do deign to lend, the terms make it nigh-on impossible for the average borrower to take advantage of their generosity. Politicans continue to throw everything that they can at the bankers, yet the bankers are sitting back, calculating how to circumnavigate their sudden bonus loss and scratching round for the next non-exec directorship. Many know that they may still be pushed out of the airplane with only a small parachute.
     
    Most pundits are secretly thinking that we will end up with a fully nationalised banking system and are merely observing a game of “Who will blink first” between the Government and the banks.
     
    Here in the UK, Gordon Brown is beginning to sound monotonous (!)  and yesterday, even Barack Obama’s “cut-and -paste” rhetoric was sounding jaded.
     
    This terrible state of affairs has had a profound effect on the political and economic pundits.  “Punditis” is rife.
     
    Financial experts are running out of metaphors and their predictions show all the conviction (and accuracy) of a pier-end astrologer. Other experts are delving deeper and deeper into a morass of incomprehensible technical detail which may be interesting to other financial anoraks but is adding nothing to the debate.
     
    There was a time when Television and Radio reported the opinions of politicians and financial experts. Now, they report the opinions of Robert Peston.
     
    Time to take a deep breath folks.

    I’m a real FRIC.

     A Valuer FRICS

    Gordon Brown continues to speak with the conviction of a condemned man reading from a hurriedly-conceived briefing paper  This time it is mortgages (again).

    No more 100% mortgages? I think that it is about time that the Prime Minister carried out a simple calculation as follows:  Suppose that the Government (sorry, Northern Rock) lends 80% on a £100,000 property – that is an £80,000 mortgage. Then let’s suppose that the property falls in value by 20%. That means that there is an £80,000 mortgage on an £80,000 property. That is what they call a 100% mortgage. When a householder has  no equity in his property – that is also a 100% mortgage. Negative equity just means that the mortgage is over 100%.
     
    That brings one rather neatly to one organisation which has kept its head down throughout the whole sorry mortgage  mess. The Royal Institution of Chartered Surveyors. They should have come out with their hands up many months ago. Why? Because their members have been the ones who have been valuing properties. The most deflationary thing that the Government can do as far as property prices are concerned is to ignore the sulking banks for a while and have a serious chat with the RICS.
     
    There was a time when the RICS was a leader – an organisation whose valuations were sacrosanct. The RICS has now become a follower which does exactly what the banking industry tells it and has contributed more than any other organisation to the ridiculous house price rises of the last 10 years. But wait – their blind slavishness to the banks is far worse than merely following orders.
     
    Imagine that you are a Bank and you want to lend and you also want to make sure that the properties that you lend on have the benefit of  a high-enough valuation. How do ensure that there will be no problems with house valuations? How do you make 100% sure that  the valuation will be exactly the one that you need?

     Simple – YOU BUY YOUR OWN VALUER!
     
    For example, Halifax  valuations are carried out by Colleys. Who owns Colleys? The Halifax. One is not suggesting naughtiness but when valuation fees are a function of the valuation and the value of  properties in-mortgage represents a lender’s assets, the temptations do not have to be spelled out.
     
    The RICS should assert itself – otherwise there is a real danger of the property inflationary spiral replicating itself in a few years time. Independent property valuations and a return to more objective valuations will have an immediate impact. Currently, there is far too much reliance on the “supply and demand” argument and incidentally, the “drive-by” valuation – but that’s another story.
     
    In the last few years, the pressure on valuers has been to “value up”. The valuers value up and then the accountants come along later and value down. Not an ideal system.
     
    Time for the RICS to make a stand – if that’s all right with the banks.

    Sorry?……..Er….Yes, all right then.

    I would have asked only the one question:
     
    Sir Tom and Lord Stevenson……..”I sincerely and unreservedly apologise for this question but can you please describe the differences between a Credit Default Swap, a Total Return Swap and a Credit Listed Note?”
     
    “Phone a friend?……….Oops, sorry, I forgot!! You don’t have any.”
     
    Thankfully, this morning’s Treasury Select Committee Cringefest is over and there have been apologies. They were on a par-with and as pointless-as the Australian Government apologising to the aboriginals about nicking their land, the US Government’s apology to Native Americans about killing their buffalo or perhaps the Germans apologising for the Holocaust. ” Sorry about that”.
     
    Go to any good PR man and he will show you the anatomy of a good apology. This what it should contain:
     
    1. A detailed account of  what happened
    2. Acknowledgement of the damage done
    3. Accepting responsibility
    4. A statement of regret
    5. Asking for forgiveness
    6. A promise that it will not happen again
    7. Some offer of restitution
     
    Some of the elements were missing but there is never any harm in a bit of well-placed management sincero-talk.
     
    When the s*** hits the fan, don’t bother pretending to eat it because it is your audience that experiences the bad taste.

    City Slickers

     

    The primary reason for the outrageously high payments to the designer-labelled barrow-boy City slickers is the over-simple reward system. The City rewards the “ups” but does not penalise the “downs”. That encourages risk-taking. A trader can make a large bonus from the profit on a deal but when that deal or the share price falls, there are no sanctions.

    In the good old days when life was simple, every day was sunny and back doors were left unlocked, a life-assurance salesman would be paid what was known as “indemnity commission” on any contracts that he sold. If the salesman sold a £100-per-month policy to a client , he earned say £1,000 in up-front commission. Over the next twelve months, the client paid his £100 per month and at the end of the year, the salesman’s commission had been paid for. However, if the policy lapsed in the meantime, the commission was “clawed back” pro rata. That discouraged selling policies to high-risk clients.

    With systems that all financial services companies operate, it would be simple to create a payment system which took into account the often negative consequences of trading. Bonuses could be paid but with a “claw-back” period . That would have the added effect of stabilising share prices because it would not be to anyone’s advantage to, say, dump shares in order to depress a price. Such actions would affect bonuses.

    It is now time for those nice people at the Financial Services Authority to bare their teeth and take control.

    The argument of having to pay obscene bonuses in order to hire “the best” has been used before. “The best” used to mean the most aggressive and most ambitious and the most likely to take shortcuts. We now have the opportunity to enter an era where “the best” means the best-qualified, the most knowledgeable and the most professional.

    Where’s that paddle?

     

    No Government  can ever act on the basis of certainty. It is  always forced to act on the basis of probability. In other words, there is no REAL idea as to when the current financial mess will end so decisions and actions are based on a “best-guess” basis.

    Stock market prices lie in expectations for the future. It is a constant battle between optimism and pessimism. When there is optimism one expects:

    1. Confidence in the Banks and the Marketplace
    2. Consumers confident enough  to engage in long-lasting spending sprees
    3. Rising prices

     During a period of pessimism, the converse is  true.

    Depending on whether you are an optimist or pessimist, you will be anticipating one of the following (most probable) outcomes:

    • Uncontrollable money-printing and excess spending on bailouts and stimulus , producing a new, super-inflationary environment with a falling Pound and rapidly accelerating  unemployment. (Option A)
    • A major change in capital flow  evidenced by shifting consumer and bank attitudes, thereby generating a period of deleveraging and deflation that will eventually produce a economic rebalance and a strengthening Pound. (Option B)

    Needless to say, the Government is hoping for Option B but at the same time it is running up its (our) budget deficit to historic levels and will soon be printing money like confetti.

    The fact that  unemployment is heading for a new record and consumers are spending far less means that the Government has painted itself into a corner and can only lead the country to Option A.

    Our collective wealth in stocks and housing has been destroyed and  Sterling is at a 23-year low against the Dollar which, post-Obama, will gain strength, thus further eroding the Pound.

    Yes, we are up dirty creek without a paddle.

    Notwithstanding the odd Minister-induced  “virtual” green shoot and platitudinous attempts by government to tell us that  “We’ll get through this”, the current perception both within the banking system and the real world is  one of overwhelming pessimism.

    The  low Bank Base Rate and lack of consumer confidence in (what are  still laughingly referred-to as)  “lending institutions”  will result in  more and more money being kept under the mattress. The banks are doing it so why shouldn’t we?

    The government should set sail for Option B (above). Unfortunately, it appears that no-one has any idea of where to start and the rudder appears to be broken.

    Undue Diligence.

    “Toxic debt” has become a phrase which somehow appears to absolve the banks from having made very bad investment decisions.  Another phrase (which was used for the first time in pre-war America) is the concept of “Due Diligence”. It was used again with a passion in reference to the Bank of America not having taken a good look at Merrill Lynch’s accounts before it bought it .

     

    Gordon Brown said a couple of days ago that “the banks must come clean”. Does that mean that the government has been gifting  taxpayers’ money to the banks without having audited their books? If that is the case then , to say the least – it is poor and irresponsible business practice.

     

    There has also been talk of “ring-fencing” the toxic debts on the balance sheet. That simply means that purely for cosmetic and bottom-line  purposes, the debts should be ignored.

     

    These bad investments have been made by the banks over a number of years and many have been hidden (placed off-balance sheet) purely in order to turn actual losses into fictitious profits. That means, in simple terms that senior bankers have been paying themselves bonuses based on made-up figures. Figures which did not truly acknowledge the fact that very bad strategic investment decisions had been made.

     

    For instance Deutche Bank has suddenly surprised everyone by declaring a £6.3 Billion loss for the last quarter of 2008. A loss of that magnitude cannot be pulled like a rabbit out of a hat and it certainly cannot be blamed on the current downward adjustment in the equity market.

     

    Here in the UK a very well-known bank decided that it would not opt for a government handout but instead try and raise capital in the Middle East. At the time , some thought that this looked like nothing more than  banking machismo but there is now a suspicion that this particular bank maybe did not want Treasury accountants inspecting its books too closely. Easy on the due diligence!

     

    There are times when we do not learn the lessons of history. In 1933, the concept of due diligence was introduced in the USA  as a result of the Securities Act of that year. Do you know what the act was all about?  It was designed to protect investors from  investment brokers who may not have investigated an organisation or investment fully before buying shares in that company on behalf of the investors.

     

    Nowadays, Due Diligence  means investigating a company as thoroughly as possible before investing any money in it.  For instance – a government handing money to a bank.

     

    That way, surprises such as having to write-off a £2.5billion Royal Bank of Scotland loan would not happen and the British Government would not appear to be using the same Due Diligence standards as the banks.

    KFC is not a Knighthood, Gordon!

     

    As a management trainer I thought that I would give Gordon Brown and his motley band of funsters a basic (and free) lesson in management – purely to help then to concentrate their minds.  During this week’s PMQs, David Cameron referred to the “headless chicken”. His brutally eloquent summing up of the Brown style , although unoriginal is perfectly accurate.
     
    There are only a few types of generally accepted styles of management. So which one is the Labour Party using?:
     
    1. Management by Objectives. This is the best-known and easiest to understand  and all other styles of management have this style at their core. You set specific measurable objectives which are agreed and timebased and then you monitor progress. For instance: The banks will have lent £10 billion to businesses by 15th February. Currently, the government’s version is that the banks will lend when they have “regained confidence”.  Perhaps Gordon Brown ought to assign a social worker and a counsellor to each bank to help with their affirmation exercises.
     
    2. Management by Exception. Let the system continue and only intervene when pre-defined objectives are not being met. Do not attempt to manage every single micro process such as fiddling with the VAT at a time when retailers are discounting by 50 or 60 %.
     
    3. Management by Process. Define critical Macro and Micro processes, assign ownership of these processes and monitor and measure performance and progress against pre-determined objectives.
     
    4. Management by Projects. Plan the entire process that you need to complete your goals and set interim goals. Intervene when it looks as if a goal is in danger of failing to be achieved.
     
    Currently it appears that the government has no plan, no time-based objectives and appears to be  creating so many disparate goals that the country is in real danger of losing total confidence.
     
    The government appears to be an observer rather than a shaper of events. The current style of management also has a name and is called:
     
    5. Management by Pissing in the Dark. You attack as many parameters as you can in the hope that something positive happens. Unfortunately you need to hit them in the right order which is unlikely especially if  a. You don’t really understand the root cause of the problem and b. Your head is being eyed up by the man from KFC.

    The name’s Bond – Bernie Bond.

    Gordon Brown has invoked the British wartime spirit to cope with the current economic downturn.
     
    He probably thinks that that we are all quite looking forward to shivering in our Andersen shelter as we pump the old Primus stove and await our turn with the teabag. Is that what he means? Or are we being gently steered towards seeing him as the new Churchill?
     
    “We must not just plan for tomorrow. Our task over the next twelve months is to build tomorrow today”. Is that what he was thinking  seven years ago when he sold-off our gold reserves?

    Between 1999 and 2001 the gold price stood at a 20-year low.  Rumour has it that the Bank of England counselled Brown, the then Chancellor of the Exchequer not to go ahead with his proposal to flog-off 415 tonnes of our gold. He ignored their advice and like the corporate entrepreneur that he undoubtedly is (!) , he announced his intentions. The price of gold then fell even further.

    The word on the streets was that he was going to spend a large proportion of the gain on Euros. That made most banking “experts” (yes, it was them!) think that he was preparing us for  an entry into the single European currency. The European Central Bank’s announcement that countries wishing to join the euro would have to sell off their gold reserves reinforced that view. In retrospect, that may not have been a bad idea.

    At the time gold represented about 17%of the country’s total reserves. The gold disposal reduced that by 10% and left us with the lowest bullion holdings of any major country. This was our first step towards third-world economics and 2009 will usher the final step.

    So far, the actions of that Chancellor have cost the taxpayer at least £4billion and in the future, the loss is set to rise.

    Who benefited from the Delboy-type deal? China. They bought most of it.

    Currently, bankers are slithering out from behind the sofa and “predicting” (on average) that the downturn will last another 18 months and that everything will then be OK. Will it?

    Having worked in the financial services industry for over 30 years, my only suggestion would be that if you need any “no questions asked” money, register yourseld as a bank. The Government will then provide you with shedloads of cash. The good bit is that they won’t ask you what you need the money for  and they won’t even inspect your accounts.

    If you don’t want to own a bank, change your name to Bernie or Bernard and start a fund (role models and heroes: Bernie Cornfeld and Bernard Madoff) . All the experts who are currently making positively sunny economic predictions will probably invest in your fund. That should keep you going for a few years by which time, the world economy should have sorted itself out.

    If it seems too good to be true……………………….

    A Hedge Fund Manager

    The current banking chaos has been caused by nothing less than institutional fraud on a world-wide basis. The banks have defrauded each other and their clients. The alleged Bernard Madoff affair is only the latest but certainly not the last financial “naughtiness with intent” scam to be discovered.
     
    The so-called Ponzi scheme is being referred-to as a pyramid selling scheme. It is not pyramid selling – it is simply a scheme whereby old investors are paid with incoming new  funds and the whole thing keeps rolling along for as long as there is a money-supply. 
     
    Most governments are realising that there needs to be much tighter control on unusual investment vehicles. There is a far simpler answer – ban all of these investments. The Americans will no doubt accuse everybody else of an attack on capitalism. It is not an attack on capitalism  it is an attack on gangsterism.
     
    Remember that the United States is the country which gave us Capone, Luciano, Bonano, Gambino, Lucchese, Colombo and of course, Ponzi himself. In those days, at least the authorities knew who the enemy was.
     
    Nowadays, it is much more difficult because modern-day bandits are part of the establishment and their fame and power are the deterrents to proper investigation and control.  It is not the gun but financial and political “clout” that is their weapon of choice.
     
    The United States would do well to exercise more control of its financial institutions, otherwise the world might notice that it was Uncle Sam who gave us not-only the original gangsters but also securitised mortgages and the Ponzi scam.
     
    We have already heard spluttering British ministers talking about “an enquiry” and pledges to “investigate”. There is really nothing to investigate – for two reasons. The first is that they don’t know what they’re looking for and secondly, they certainly don’t know where to look.

    VAT are you saying?

    Alistair the house elf

    This Government and the banks have a lot in common. They have both enjoyed many years of negligible economic turbulence and  zero competition.

    The good times may have continued if either had noticed that Wall Street had invented the real weapons of mass destruction – the financial ones. The banks had sliced, chopped, diced and mixed bad mortgages and fashioned them into contaminative instruments of death with a built-in time fuse.

    The bankers’ handiwork has created a vast financial Black Hole which has already consumed many financial institutions and is beginning to consume whole economies. So  what to do? It’s obvious – decrease VAT by 2.5%.

    Decrease VAT? The Government has shown once again that it is a bit short on creative ideas. It often uses short-term tactics to deal with strategic matters. On this occasion, it is in the vain hope that when the global economy returns to sunshine and wealth , the Government  will will be able to claim that it  had controlled events. Gordon “Canute” Brown and his house elf  Darling will have done it!

    (In reality it will have simply been a readjustment in the new global Stability-Chaos-Stability cycle). 

    But think about this: The global economic crisis is happening because of “external forces which are out of our control”. If that is the case and we truly have no control over super-macroeconomic events, gestures such as VAT-tweaks will have negligible impact. Even Mervyn King appears to be distancing himself from this initiative.

    Gordon Brown is indeed a one-trick pony who believes that the only way forward is to persuade the consumer to consume. However, he will not pull the economy out of the quicksand by persuading us to buy 42″ television sets and new cars. When the going gets tough, the tough buy food and clothing.

    By pulling the white rabbit of higher taxation out of the Budget hat for those earning more than £100K, he has appealed to the “not-so-rich” (are we allowed to say “poor”) with a touch of the old “Politics of Envy”.  We can almost hear Denis Healey  “squeezing the rich until the pips squeak” .  Let’s call it Gordon’s “hommage” to Old Labour.

    In the next few years, the pips will squeak but the fact that there will be a saving of £12.50 on a £500 TV set will not dampen the squeaks.

    Soundbite Brown

    “Osborne? Io sono huomo di cortelle e si tu no mascolta io te do na cortelatta.”

    George Osborne has said Mr Brown’s attempts to secure a global agreement for a fiscal stimulus package have failed. It pains me to agree with the Shadow Chancellor but he is right.

    Many (about 3500) fine words have emerged from last weekend’s G20 meeting. But what has really been achieved except perhaps an agreement to have another meeting in 2009?  Oh yes, there was a  statement that the G20 are going to “harness tax cuts to stimulate the global economy”.  

    As Manuel might have said: “Que??”

    The good intentions of the G20 will not prevent events such as a fire-sale of stocks by Hedge Fund managers or the accelerating erosion in the value of sterling. The sheer speed of developments within the global economy may create the real danger of politicians’ status  being demoted to that of observers rather than shapers of events because the provisional time for the follow-up G20 meeting is not until April 2009. 

    In five months’ time the global economy will be in a VERY different place but meanwhile, the flow of politicians’ platitudes will continue as more financial placebos are dished out.

    Brown has always indicated a dislike of political  “sound bites”  but in spite of that, his speechwriters have created some gems. Like an ageing football pundit, Brown has has increasingly relied on tired and crass political soundbites and clichés.

    Brown now has a “route map” and that’s about it. “Road map” would have been a better phrase but that one has been taken. “Money map”, “Fiscal map”, “Green map”, “Mouse map”, “Door map” and even “Brown map” are all still available.

    “Brown paper” is also an excellent one which has not yet been spotted by Brown’s wordsmiths.

    It is a shame that these phrases cannot be registered like websites. Someone could make a fortune.

    There have been many fine words but they do not seem to make much sense.

    “These are extraordinary times and they require extraordinary measures”. Yep – can’t disagree with that one.  A  fine example of both a cliché and a truism  but Brown might as well have said “We are in deep  s*** and we really should think about getting out of it.”

    G20 made a commitment to “boost growth and reform financial markets” is not a world-shattering assertion. Mind-numbing perhaps but definitely NOT world-shattering.

    “The G20 are going to strive to draw up a timetable for a new world trade deal”  sounds like a fine statement but  would have sounded better if he’d left out the “strive to” phrase. Is Brown’s route map time-based or not?

    Gordon Brown’s pseudo-Churchillian posturing and new world-leader status is looking increasingly silly and maybe a little delusional,  especially if you know that 45% of the world’s financial reserves are in the hands of the BRIC economies = Brazil, Russia, India and China. Currently they appear to be deferring to the USA, United Kingdom, Germany, France, Canada, Italy and France who collectively control less than 5% of the the world’s financial reserves.

    Brown feels the hand of history on this shoulder (sorry!) and doubtless his writers are polishing a fine new set of clichés.

    “Eloquent silence”  would be my favourite.

     

     

    The New Financial Order

     

    The shock treatment applied to the world’s economies was no more than a fiscal version of “Pin the tail on the Donkey”. It is a failed experiment and politicians are now doing the only thing that they really understand. They are having a meeting.

    The heads of the world’s 20 most prosperous (!) economies are meeting in the USA this weekend for what is probably the first of many such meetings, the ultimate purpose of which is unclear  – both to us and to the politicians.

    Meanwhile, about 6500 Hedge Funds are about to collapse worldwide – billions of shares that are about to be dumped.  That will no doubt put the world’s stock-markets exactly where they really belong – on the floor.

    They will all flat-line.  Only then will we see the promised recovery.

    The facts that are being fed to a curious public have all been through government sanitising machines before they are  thrown to the media who then give us their version of the  ”facts”. Unfortunately the truth is never absolute because the financial institutions (who, in many cases are still looking for cover) cannot afford to face the truth. They have spent far too long creating increasingly complex and incomprehensible financial instruments which not-only confused investors but ultimately confused them.

    The epicentre of the global financial crisis remains in the USA and having learned that the very public approach to bank collapses was counter-productive, deals are now being done behind closed doors. American Express, for instance, has very recently become a bank holding-company. Why? Because they have to secure their place at the financial trough because they need a bailout of about $3.5 billion.

    In the States GM is blaming a downturn in the automobile market for its sudden change in fortunes. The fact is that their financial division, GMAC which used to provide auto finance took an ill-advised  journey into the sub-prime mortgage  market. GM now needs a $25 billion bailout.

    In the USA, Treasury Secretary Paulson worked very hard to arrive at a sum of $700 billion -remember the trials and tribulations and the voting?. That was not an arbitary figure but it was the amount required to purchase bad debts from US financial institutions. 

    Paulson has now changed his mind and has announced that the cash will be better spent in buying company shares rather than buying-up bad assets. There has been barely a whisper after that bombshell.

    The phrase “negative equity” is very popular at the moment. It simply means that there are millions of individuals who owe tens of thousands  more  on their mortgages than their houses are  worth. That means that ultimately, many will simply abandon their houses and move-on to rent. Makes sense.

    Unfortunately, many of these mortgages have been repackaged and sold-on. They have been bought by banks, hedge funds and other institutional investors.

    The original lenders are devising schemes that either allow mortgagors (borrowers) to have payment holidays or reduced payments. They want to keep people in their houses -primarily as a result of political pressure.

    Those sorts of moves may appease the politicians but will not be popular with the institutions who have bought the mortgages. That could mean litigation. Imagine yourself investing in something and then being told that the terms were about to change. What would you do? You would sue.

    The entire banking industry has painted itself into a very dark corner and if they were frank, they would concede that there is no way out.

    Therefore when they have money thrown at them by frightened governments, you cannot blame them for not wishing to spend that money. They will squirrel it away  and resist all moves designed to make them spend it.

    Bankers know that their jobs are on the line, the economy is in recession so consequently whatever they decide to do has an unacceptable amount of risk attached to it.  Not spending the money is the logical (and correct) option.

    Bankers (in spite of what they claim) are not really entrepreneurial so they will not take undue risks. The correct thing  to do is  is to rebuild their capital bases and  tidy-up their balance sheets. When those two initiatives have been stabilised, only then they may think about lending.

    What banks and fund managers have been guilty of over the last ten years is asset inflation  but those inflated assets have now deflated at the speed of a machine-gunned balloon. So the answer to ” What should we do now?” can be approached in one of two ways:

    The first is the (already attempted) blunt politician’s  instrument of throwing money at the banks and fiddling with taxation and other “gifts” in a bid to stimulate spending.  Bush even tried sending people money. Half spent it and the other half saved it . Net effect? Zero.

    The other method is to reflate those assets.

    It can be done by way of an economic and monetary “con trick”.

    The first stage will be to simultaneously DEVALUE ALL of the world’s currencies while at the same time suspending all GOLD trading.

    The official gold price should then be raised enough to offset all global debts and thus reflate the value of all those toxic assets.

    Finally, there is little sense in allowing speculators to fiddle with the value of the various world currencies.

    The most logical step is to create a world currency.

    There have been previous financial crises. This one will need revolutionary thinking.

    Instead of thinking  “out of the box”, most politicians – notably our own Prime Minister – are merely standing on it.

     

    Em I Rate?

    ” A large erection in Dubai – the Burj Dubai”

    Dubai, in common with all other Middle Eastern States is not immune to the global financial crisis.

    A few weeks ago the UAE Central Bank injected nearly $15 billion into the economy in order to maintain liquidity. It did so without the accompanying noise and self-justification that Western governments go about their business.

    Dubai has had local issues which have complicated its exposure to the credit crunch – namely allegations of corruption among its banking and real estate executives. There has been naughtiness.

    In recent years, during the rapidly inflating property market, “flipping” became a bit of a national sport. (“Flipping” is the practice of buying a property and then selling it almost immediately for a profit). If you have the right executives in place, flipping can be an almost instant method of acquiring a great deal of capital – sometimes with no initial outlay. It is the opposite of “shorting” shares and can only take place in a rapidly rising property market.

    Dubai property prices have risen by 80% in the last 18 months but currently, in spite of Government support, they are experiencing a downturn.

    Dubai’s fixation on leading-edge architecture and artificial islands, coupled with its testosterone-fuelled march towards the architectural “biggest and best” seems to be generating the vigour which is currently sustaining its PR machine – but what happens when the building stops?

    This is an economy which (unusually) appears to be driven by a constant striving for a continually amplifying “WOW” factor. If we didn’t know better, we may be forgiven for thinking that the Dubai economy is controlled by a Public Relations company!!! But there is a serious undercurrent.

    The glitzy celebrity-fired parties and openings are the superficial face of Dubai. This Emirate is also a uniquely-placed business hub which attracts international investment like a designer magnet.Why? Because the UAE are not “overborrowed” but have massive reserves.

    Sheikh Mohammed Bin Rashid AI Maktoum has very recently stated that the federal government will ensure that no UAE national bank will be exposed to credit risks, guarantee deposits and savings, guarantee all inter-bank lending operations between banks operating in the UAE and inject sufficient liquidity in the financial system if and when necessary.

    That seems pretty comprehensive.

    In addition, Energy Minister Mohammed bin Dhaen Al Hamili has announced that the UAE has decided to reduce its November production ceiling of crude oil in accordance with the most recent OPEC agreement.

    Those are definitely the kind of problems that most economies would give their right arm for.

    More by accident than by design, Dubai has crafted a haven for big-hitting investors to shelter whilst the global financial hurricane blows itself out.

    I suspect that the long-term prognosis is good – better than for instance, the USA and Western Europe.

    Arrival of the “Suits”

    Some commentators are saying that  here in the United Kingdom, Margaret Thatcher’s policies and the 20 year-old deregulation of the markets have finally unravelled. It is not policies or rules that cause catastrophes – it is people. In this case it is the ineptitude of those running the banks and building societies.

    Guess what? Apart from the four sacrificial lambs that were offered up a couple of weeks ago, the same senior executives are still running the banks – or should I say should be running the banks.That is, if they weren’t hiding behind the sofa with their hands over their ears.

    Here’s a good Mastermind question: Who was the last bank CEO or Chairman to give a TV interview?

    We have been regaled by the rather fatuous argument that the executives who are still in place are the ones who understand how the business works and if we trashed them then we would be in even more trouble.

    That is nonsense.

    I have worked for a Building Society, several large insurance companies and a large (the largest) American bank. The root cause of what has been happening in the last year-or-two is the total lack of senior technical and managerial talent within the industry. It is not a new phenomenon.

    In the good old days, the lending of money  to an individual was never  a profession – it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation – usually through a combination of hard graft and company loyalty.

    The directors would make sure that they kept the bank or building society well within the liquidity rules, they would vary interest rates when instructed  to do so by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. I recall just one occasion many years ago when the Chelsea Building Society was forced to revalue its assets but otherwise – no problems.

    There were no executive bonuses because the word “profit” was not in their dictionary – but they would strive to make a small surplus. Likewise, there were no golf days, coventions or any other executive freebies.

    Then laws were changed and the “suits” came.

    Directors of lending institutions used to be a crustily venerable lot of old duffers who tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in accountancy companies, estate agencies or solicitors. They were men in their 50s and 60s who were REAL businessmen and who had created their own wealth.

    That is where the seeds of destruction were planted – in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree and Insead.

    The rheumy-eyed, pipe-smoking unqualified old directors were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!

    It was in 80s  USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.

    The phrase CORPORATE ENTREPRENEUR is like “Police Intelligence”, ” Microsoft Works” and “Friendly Fire”. It is an Oxymoron.

    A corporate entrepreneur is a man who has a salary, takes risks with other peoples’ money and is rewarded for his “bravery” through the medium of the exec-bonus.

    A proper entrepreneur takes risks with his own hard-earned cash whereas the boys who run our banks are just overpaid bluffers with a shelf life and a permanent hard-on.

    As a result of their corporate games, our Government is now forced  to take a shortcut which is the reciprocal of what  happened in China and the old USSR.

    The Russians and Chinese flipped from state control to capitalism but we appear to be heading  in the opposite direction. If the government takes on any more banks, it ought to  be reported to the Competition Commission!

    For the time being, the markets will bounce along, floating on occasional short-term  waves of faux-euphoria.

    We are whistling in the dark.

    Soon we will all wake up and realise that if we are really seeking a new banking direction – it is the drivers and not the cars that have to be changed. The government is the short-term relief driver but new drivers need to be found from within the banking industry.

    There are scores of very talented senior  “solid citizen”  gems within banking who are dependable and honest but who do not have the need  to constantly spray testosterone and arrive in helicopters. We need service-driven bank managers and directors and not self-serving ego-driven scalp-hunting prima donnas with over-funded pensions.

    These corporate hidden gems have all the knowledge and experience needed to reawaken the banking system from its torpor.

    They are also the ones who know where some of the bodies are buried.

    Methinks that it may be  time to line up the current bank executives and perhaps introduce them to the concept of the exit interview.

    (If you are not familiar with the phrase CORPORATE ENTREPRENEUR, please enter the phrase in Google, see the various Management Models, the smug mugshots………………and weep)

    LIBORATION!

    Under Mervyn King, the Bank of England has become an irrelevance.

    There is no longer any correlation between Base Rate and what happens to real borrowing rates. The banks are out of control and more-or-less doing what they damn-well please – in spite of taxpayers’ handouts.
     ” Come and get it.”

    Today, Mervyn King and his band of funsters at the Bank of England are attending  their irrelevant monthly monetary policy committee. Why “irrelevant”? Because it is the British Bankers Association (known collectively as “the Wunch”) that decides consumer interest rates.

    Any change in the Bank Base Rate is irrelevant  because it is the LIBOR and not the Bank Base Rate which affects the consumer.

    LIBOR is the London Inter Bank Offered rate and is the rate at which the Banks lend money to each other. The rate is set by the British Bankers Association. It is a rate which is controlled by the banks and can be changed at any time. Once again, they are stitching-up the Chancellor, the Government and us.

    The current 3-month $ LIBOR rate is below 3% and the Bank Base Rate is 3% and soon to fall again. Why are many mortgages still at over 7%? What difference will these official rates make to  the Credit Card holders who are being charged over 20% per annum?

    Not so long ago, Alistair Darling said he hoped that moneylenders (the banks) would ‘continue to take their responsibilities towards customers seriously’.

    While Alistair is “hoping”, the  fat-cat banker is lighting up another Monte Cristo as the houseboy counts the bonus. The banker is not thinking how he can help Mr “In the Poo” Borrower or Mr “Is that the Samaritans?” Small Businessman. He has far more important things on his mind.

    Those share options are not looking as attractive as they did a few months ago. Perhaps he should wait before cashing them. After all , once the government has sorted-out the mess, the share price should rise quite nicely……….

    Real or False Dawn?

     

     

    There is little doubt that we are currently in a bear market but this week, the markets  have been affected by the optimism sweeping the world as a result of the anticipated and now-confirmed  new White House administration.

     

    Shares are rallying and the markets appear to be rising. Do not be fooled – this is just a temporary “blip” – a bear market rally.

     

    The causes of the rally are artificial, psychological and temporary – borne out of hope more than fact. These rallies are not real – companies have not suddenly started to declare unusual profits, the so-called toxic investments are still there and the banks are still sulking and not lending. 

     

    Investors are caught up in the moment and  imagine that Government  efforts to ease credit conditions  allied to the electoral success and electric rhetoric  of America’s new president-elect, Barack Obama can somehow avert  or divert a deep global recession.

     

    Regrettably, the damage has been done. There will be no Lazarus-like recovery of the global economy.

     

    The debt-collapse is only at its initial stage – the real New Dawn.  National economies have become well and truly unglued and all governments are acquiring record deficits.

     

    All major governments have embarked on record borrowing binges – even the US Treasury is going to borrow ( an additional) $550 billion during  the  final quarter of 2008.

     

    Mr Obama can do nothing to change that or to somehow halt the downward progression because it has now gained its own momentum and like a forest fire, it needs to be given time to burn itself out.

     

    Governments are having to borrow in order to finance their deficits and to purchase bad assets from the banking industry. Unfortunately, they also have the routine problems of financing their  day-to-day administrative expenses as well as any maturing securities which they have issued in the past.

     

    Governments generate income through the medium of taxation and in a faltering economy, production decreases and unemployment rises. That creates  not-only additional government expense (e.g. benefits payments to the unemployed) but those unemployed are no-longer paying taxes to finance the government.

     

    The solution    yet more Government borrowing.

     

    In a couple of days – the Obama-inspired stock market rally will be viewed as a selling opportunity because the fact remains that the world’s massive speculative bubbles have burst — in commercial and private property, stock markets, commodities  and above all, debts.

     

    Even as the government sweeps piles of bad debts under the carpet, mountains of new debts will go bad — a new flood of mortgages that can’t be paid, a new raft of credit cards defaulting, an avalanche of companies going bankrupt.

     

    Governments will  bail out  a select group of large companies but  countless small and medium-sized companies will drown.

     

    Governments  will focus on companies which deal in money – they will inject more money into bankrupt banks, money brokerages, struggling insurers and any company that is  deemed essential to the economy.

     

    They will pump resources into credit markets and stock markets and by doing so they will create the occasional stock market rally.

     

    In reality though, they are treading water and buying time.

     

    Unfortunately, time has run out and this is one fire that even a real Messiah would be hard-pushed to extinguish.

    Did you call me a Banker?

     

    Over the last week-or-so, there has been a slight upswing in the markets as investors  focus on economies rather than on the global banking crisis. 

    The sad fact however is that the banking sector is still having a vastly negative effect on the economy:

    1. The banks are not lending.

    2. They are “upping” interest rates to businesses as well as personal borrowers – in spite of prevailing downward pressures on rates.

    One could argue that banks have behaved fraudulently over the last few years. The mere act of keeping dodgy investments “off balance sheet” (hidden) means that these loss-making institutions have been declaring fictitious profits which have enabled them to pay executive bonuses.

    Barclays has gone to the Middle East for a cash injection. Why? Would their books not stand up to detailed government scrutiny and would government money have strings attached? Such as parachute-free executive resignations?

    Barclays was already after a £5 billion cash injection in May 2008 and now  appears to have secured £6.5 billion jointly from the Quatar and Libyan Investment Authorities. It’ll cost them and let’s hope that when the time comes, they are able to repay the loans to their new masters.

    Barclays is currently behaving like a teacher’s pet and will be the first bank to participate in the European Investment Bank’s £4billion scheme to provide cheap loans for small businesses.

    In the States, the screens were placed round Goldman Sachs with almost indecent haste. Why? Did they have an unacceptable exposure to SIVs and SIV-lites? We’ll never know – unless of course the new Washington administration is in a surgical mood and decides to take a scalpel to its own banking system.

    Sadly, the banks seem managerially-unequipped to deal with the current business chaos and if they need “cash in” , they simply jack-up rates and withdraw credit in the vain hope of temporarily tarting up their balance sheets, prior to the inevitable write-offs 12 months later. 

    They should take their own business advice and nurture the businesses who will provide them with future cash-flow. One of the great banking paradoxes is that when a client is in trouble, the bank’s tendency is to increase his loan-and-overdraft rates. That’s banking logic – if someone cannot afford £1000 per month, increase it to £1100, sit back and watch them choke but give them lots of advice.

    The other paradox is that of bankers providing “business advice”. The individuals who need  banking as a career are diametrically opposed to their clients who have chosen the risky route of creating wealth through entrepreneurship. 

    Yet, it is the entrepreneurs who have to sit and nod as their bank’s “business advisor” or “consultant” tells them how to run a business. Bankrupt banks providing advice through the medium of bankrupt ideas and penniless platitudes – priceless!

    One more thought: did the government complete a detailed audit of the banks prior to agreeing to support them with taxpayers’ funds? Or did they accept their word as gentlemen?

    Adair the God.

    “Listen Big G – there can’t be two of us.”

    Lord Turner of Ecchinswell is in an expansionist frame of mind. The FSA will expand with even more highly-paid Civil Servants being hired for a proper Blitzkreig through the financial services industry.

    The FSA was originally designed to protect the “little people” It has now grown into a monster  which munches its way through a mind-numbing £300 million per year – and it wants more! Incidentally, the £300 million is raised from the financial services industry by way of fees and fines and most of it is spent on salaries of the 4000 or-so FSA employees.  

    They  are the traffic wardens of the FS industry and they rule by fear.

    They have made the industry far more bureaucratic, they are responsible for more paper production than the Indian Civil Service and after their recent performance,  they probably cost more to run than they save the consumer.

    In the last two months, there have been mutterings about the inflated salaries of banking Chief Executives. The FSAs Chief Executive is Hector Sants and if you inspect their 2007/08 accounts, you will see that his basic salary is £417,179 with bonuses of £114,000 and “emoluments and benefits” of another £130,769. That amounts to a total of  nearly £662,000! You can inspect the figures HERE .

    Lord Turner added “We will pay more than necessary to attract the best people”. They will not attract the best people because the  last thing that the “best” want  or need is to become Civil Servants. The FSA managed to get Hector Sants because he had more-or-less retired after having made his fortune in exactly the same way as those strangely mute bank CEOs who have managed the economy into its present state.

    What the FSA should do is to identify the really serious risks and make compliance managers within businesses directly and legally responsible to the FSA. Manage the big risks and do not waste your time chasing provincial brokers who, for instance,  have entered the incorrect date on their KIF or missed a date-of-birth from their Fact FInd. The process is called “Management by Exception” and I commend it to the self-styled “Adair” Turner.

    The FSA should also make bank directors and CEOs criminally responsible for the sort of gross negligence that has passed for management in recent years. That may concentrate executives’ minds and encourage them to install proper internal controls and earn their money.

    There is no point in having a financial police force if there are no decent laws and controls. The job of the FSA is NOT to provide management and control for the financial services industry – although that DOES appear to be Lord Turner’s ambition. The FSA’s job is to ensure that proper management and appropriate controls are in place.

    The FSA needs to spend a lot more of its time chasing the senior boys -although they appear to be more geared up to correct the juniors’ work. The people that they really need to recruit are more experienced individuals with a bit of boardroom credibility – not necessarily expensive ex-stockbrokers.

    Lord Turner should not imagine that throwing money at this type of problem will ever be cost-efficient and he should not engage in transparently opportunistic empire-building. The baking-in of unnecessary additional expenses into the current financial system is not the way forward because “guess-who” will once again have to pick up the tab.

    In the last 15 years, the FSA has all but wiped-out the large life assurance direct sales forces – because direct distribution of financial services products became non-viable as a result  of the huge additional FSA-induced fees and  management costs. Thes sales forces primarily distributed pensions and life assurance products to Socio-economic groups C2-down. The A-B-C1 groups already belonged to the broker or intermediary market. (You never hear a council house tenant say ” I’ll talk to my broker about it.”)

    As a result of the additional FSA-induced expenses, there are hundreds of thousands of under-insured and under-pensioned people in the United Kingdom.

    Never mind – “guess who” will pick up that tab as well.

    The argument is that many policies were mis-sold. Yes they were but primarily because of bad company policies, low quality senior management and corporate greed. That is exactly what has been allowed to happen within the banking sector.

    It happened to the Life Assurance Industry and now it is happening to the rest of the industry – and the FSA  is rubbing its fleshy hands  as it drools over the prospect of MORE.

    A regulatory body can never eradicate all crooks and all errors. That is because it can only work with historical data, i.e. by the time that it finds out that there has been wrongdoing, it is too late.

    The FSA did not spot any of the issues which culminated in the nationilisations of Northern Rock, Bradford and Bingley et al.  It was not because they were looking in the wrong places – it is because they did not know where to look and consequently, did not look at all.

    Recently,  Hector Sants tightenened his FSA “cilice” another notch as he practiced his own personal brand of self-mortification by admitting that they had screwed-up. Yes they had screwed-up and Mr Sants had no choice but to own up because it was so  blindingly obvious that the gross incompetence of the bank boardrooms had been compounded by the headless-chicken negligence of the FSA.

    This is from the FSA website: “One of our main aims is to protect customers of financial services – such as you.”

    The FSA is very good at fining small Brokers when bad advice is given or when there has been negligence or incompetence.

    So who fines the FSA?

     

     

     

    Is there “naughtiness with intent”?

    ” Mr Banker, would you please move your head just a little bit to the side. It appears to be blocking your backside.”

    One of the conditions of the Government’s bailout of the banks was that no dividends were to be paid until any loans (the debts to the taxpayer) had been repaid.

    It was that condition which caused the participating banks’ shares to be dumped this week. That caused quite striking drops in share prices. In fact, they all nose-dived.

    HBOS shares fell so much that it is pretty definite that Lloyds-TSB will want to renegotiate the terms of their proposed takeover. At those prices – so would you! It also begs the question – does HBOS need to be taken over. I know that it’s a small price to pay to wipe the smile off Alex Salmond’s face  but as long as Gordon Brown is in the mood to over-mortgage the country (the United Kingdom – not the Caledonian “republic”), perhaps HBOS is best left alone. Otherwise  Scottish bank notes may have Eric Daniels’ mugshot on the front.  Eeek!!

    Currently, the majority of bank shares are being sold by petulant institutional investors in  the full knowledge  that their actions will cause  prices to drop – and it looks like a coordinated effort which is designed to persuade the government to cave-in and agree to some sort of dividend payment.

    Once the government has clarified what it intends to do and (inevitably) agrees to postpone the taxpayers “charge” over dividends – watch bank prices increase as institutional buyers pile back into the market.

    Financial institutions know that the government’s biggest fear is what is currently shaping up to happen on the stock markets  and that is the inevitable mega-fall. Financial institutions  are not-only still manipulating the market but treating the Treasury and the Bank of England like idiots.

    Incidentally,  has the Treasury or the BoE carried out detailed audits of the banks? Do they know the exact extent of their “losses”?

    There is still a total lack of numbers – probably because no-one has asked for them.

    Black Friday tomorrow?  I’m only asking because it’s about time we had the romance of something black. Unfortunately, the markets are so volatile that closing prices nowadays are a matter of timing and a reflection of current confusion. For instance, yesterdays Dow was rattling up and down at such a rate that the closing-bell value could have ended anywhere between 3800 and 4050, It just happened to end on a high. Of course the high finish will influence the Asian markets which will show the inevitable initial gains – and so it will go on.

    Whatever happens, it will be interesting to watch shares belonging to the “silent” banking institutions (those which been keeping a low profile over the last month).

    And prepare for an assault on insurance companies.

    Even Mr Peston might mess himself.

    The bank that likes to say “Help!!”

    There is euphoria, Gordon Brown is the saviour of the Western economy, there have been a couple of “dead cat bounces” and all decent metaphors have been used up. Life is great! Happy sunny days!

    But in reality….. it is still raining.

    The FTSE 100 index is limping soggily either side of 4500 . Last week’s red screens seem to have been forgotten – as has the fact that twelve months ago, the FTSE 100 was standing at a healthy 6500. Today, the Dow rallied and finished at about 9300. Economists are smiling. One year ago it was at 14000.

    The banking diversions and shenanigans of the last two weeks will slowly be giving way to harsh economic reality as final quarter company profits loom, with the sobering prologue of unemployment and inflation figures.

    Some commentators are saying that  here in the United Kingdom, Margaret Thatcher’s policies and the 20 year-old deregulation of the markets have finally unravelled. It is not policies or rules that cause catastrophes – it is people. In this case it is the ineptitude of those running the banks and building societies.

    Guess what? Apart from the four sacrificial lambs that have been offered up today, the same senior executives are still running the banks. We have been regaled by the rather fatuous argument that the executives who are still in place are the ones who understand how the business works and if we trashed them then we would be in even more trouble. That is nonsense.

    Spygun has worked for a Building society, several large insurance companies and a large (the largest) American bank. The root cause of what has been happening in the last year-or-two is the total lack of technical and managerial talent within the industry.

    In the good old days, the lending of money  to an individual had never been a profession – it was more of a “trade” because it was simple. Consequently, the money-lending business (nowadays it is called “banking”) was run by ordinary honest folk who could gradually work their way to the top of their organisation.

    The directors would make sure that they kept the bank or building society well within the liquidity rules, they would vary interest rates when instructed  to do so by the Bank of England and they NEVER went bust because it was nigh on impossible to go bust. I recall just one occasion many years ago when the Chelsea Building Society was forced to revalue its assets but otherwise – no problems.

    There were no executive bonuses because the word “profit” was not in their dictionary – but they would strive to make a small surplus. Likewise, there were no golf days, coventions or any other executive freebies.

    Then laws were changed and the “suits” came.

    Directors of lending institutions used to be a crustily venerable lot and  tended to be unqualified businessmen who strangely enough, were more entrepreneurial than the MBAs that are running the show these days. Typically, they were senior partners in accountancy companies, estate agencies or solicitors. They were men in their 50s and 60s who were REAL businessmen and who had created their own wealth.

    That is where the seeds of destruction were planted – in the panelled boardrooms of provincial England. The Old met the New and were dazzled by the following: (perm any two from six) MBA, Oxford, Cambridge, Harvard, Degree and Insead.

    The flatulently pipe-smoking unqualified old duffers were dazzled and seduced by the shiny new boys with MBAs and incomprehensible management jive talk. They all wanted one!

    It was in 80s  USA that the cult of the “corporate entrepreneur” had been born and transplanted rather uncomfortably into the gut of the UK’s financial industry.

    The phrase CORPORATE ENTREPRENEUR is like “Police Intelligence”, ” Microsoft Works” and “Friendly Fire”. It is an Oxymoron.

    A corporate entrepreneur is a man who takes risks with other peoples’ money and is rewarded for his “bravery”. (Incidentally, one is not being sexist when referring to entrepreneurs as “him”. There  are few REAL female entrepreneurs because most girlie entrepreneurs had a flying start with either inherited or gifted money.)

    Plus, one of the vital ingredients of REAL entrepreneurship is testosterone. Most women don’t have it – although there are a few who act as if they have. We digress.

    A proper entrepreneur takes risks with his own hard-earned cash whereas the boys who run our banks are just overpaid bluffers with a shelf life and a permanent hard-on.

    As a result of their corporate games, our Government is now forced  to take a shortcut which is the reciprocal of what  happened in China and the old USSR.

    The Russians and Chinese have flipped from state control to capitalism but we appear to be heading  in the opposite direction. If the government takes on any more banks, they will  be reported to the Competition Commission.

    For the time being, the markets will bounce along, floating on the short-term  wave of faux-euphoria. We are all whistling in the dark.

    Soon we will all wake up and realise that if we are really seeking a new banking direction – it is the drivers and not the cars that have to be changed. The government is the short-term relief driver but new drivers need to be found from within the banking industry.

    There are scores of very talented “solid citizen”  gems within banking who are dependable and honest but who do not have the need  to constantly spray testosterone. We need service-driven bank managers and directors and not self-serving ego-driven scalp-hunting prima donnas with over-funded pensions.

    These corporate hidden gems have all the knowledge and experience needed to reawaken the banking system from its torpor.

    They are also the ones who know where some of the bodies are buried.

    (If you are not familiar with the phrase CORPORATE ENTREPRENEUR, please enter the phrase in Google, see the various Management Models, the smug mugshots………………and weep)

    I blame Bjork.

    Chancellor: ” I suppose that it’s going to be a bit of a lottery as to who manages to get their money out of Iceland.”

    Landsbanki banker: ” Yes. But you have to be Inuit to win it. That’s an Icelandish yoke, you know.”

    Chancellor: ” Very funny. I’m off to do some more air miles.”

    Landsbanki banker: “The Prime Minister of Iceland would like to see you before you go.”

    Chancellor:” I’m fed up with giving Kerry Katona free publicity.”

    Landsbanki banker: ” It’s Geir Haarde.”

    Chancellor:”It’ll be really f*****g Haarde if we don’t get our dosh back! You have been confusing running a country with running a hedge fund, you tw*ts!”

    Landsbanki banker: ” We have help coming from a “friend”. I cannot tell you who it is. Let’s just say that we’re going to be “Putin on the style.”

    Chancellor: ” No wonder that Bjork is as mad as a box of frogs. Goodbye.”

    Landsbanki banker: ” I am not a terrorist.”

    Chancellor: ” I really do have to go. Does G7 mean anything to you?”

    Landsbanki banker: ” I’ve got a C5.”

    Chancellor: ” Magnus must be spinning in his grave and how the f**k did Lief Erikson find his way out of the harbour?”

    From a Jack to a King.

     

    The government’s  rescue package has been met with a tsunami of indifference, as has the Bank of England’s announcement that the base rate has been lowered to 4.5%.

    There is still a fear that there are other financial services outfits who are yet to declare that they are not viable – notably insurance companies and judging by the FTSE 100 index (which today is happily bouncing between 4400 and 4500), traders are unimpressed. How many more SIVs and SIV-lites are sitting and festering in off-balance-sheet suspense accounts?

    The FTSE 100, the Dow Jones and all the other indices will continue to oscillate up and down like a bride’s nightie until we are all allowed a good look under the voluminous skirts of the entire financial services system. The money’s on the table – now let’s see what you’ve got. We already know it’s not balls.

    The same people who are responsible for the catastrophe are still in charge and advising Gordon Brown, George Bush et al. There is already talk of not butchering bank executive remuneration because this “talent” will simply up sticks and go to ply its trade elsewhere. Good.

    There is no explanation as to why this all happened and why nothing positive  is going to happen for a very long time. The other mantra “The Banks won’t lend to each other” is being intoned on a daily basis without real explanation. “Toxic Debt” is still toxic as far as we can tell and the fatcat bankers are still plundering executive expenses.

    There was a time in the early 80s when the banks decided for the first time that they would have  a go at the mortgage market – prior to that it had been a simple affair which had been run without mishap  for many years by degree-free and MBA-less Building Societies.

    On that occasion in the 80s, the banks screwed it up (Yvette Cooper’s words, not mine) for the first time and then climbed out of the market. They should have stuck to what they knew.

    Lending money to people so that they can buy a house was not rocket science – until bankers and securitisers become involved. Then it goes way beyond rocket science because the banking alchemists believe that they can produce cash out of debt ad infinitum.

    A few days ago , the spectacle of an angst and bile-ridden Dick Fuld answering “Janet and John” Congressional questions with all the grace of a Dodge-ball full-back with a club was sickening. He had no intention of sharing what he knew with questioners who were obviously way out of their depth. “You are confusing liquidity and collateral” really meant “You seem confused – let me confuse you some more”.

    Here’s some more for you, Dick. You are confusing profit with earnings. You are confusing electronic promises with cash. You are confusing all of us because you don’t know what the hell happened either.

    For years, you were holding a pair of Jacks but you  tried to make us think that you had a royal running flush.

    Let me explain. The “lending” that goes on between banks is not the lending of hard cash. What they are lending to each other is a series of promises of cash at some time in the future. Our politicians who still do not appear to understand the process are about to inject cash into the system and there is nothing to show that the banking fraternity will know what to do with it.

    Banks have been inflating their profits for years by concealing their debts – or as they like to put it: keeping their debts “off balance sheet”.

    They have been playing Texas Hold-’em with worthless chips – and I would still like to know why a Federal screen was placed around Goldman Sachs with such indecent haste. Insider knowledge?

    Scurrilous? You bet.

     

     

    No, No, No!

    Yvette “tell it how it is” Cooper.

    21st Century heroine.

    The Treasury statement on financial support for our banking system has been made! Perhaps this hails the beginning of a new era when the Chancellor can stop flip-flopping from meeting to meeting and knocking-up air miles.

    By now he should  have collected enough points to buy a couple of banks.

    The Treasury statement  (all 899 words of it) is very light on numbers and has no mention of any changes in governance of any of the banks (and building society) involved.

    These are the lending institutions which “have confirmed their participation in a Government-supported recapitalisation scheme.”

    Abbey , Barclays,  HBOS,  HSBC Bank plc,  Lloyds TSB,  Nationwide Building Society,  Royal Bank of Scotland, Standard Chartered

    Another quote from the statement: 

    “In reaching agreement on capital investment the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers.”

    It appears that the taxpayer is paying the banks to lend. To the taxpayer.

    A Socialist is an individual who has nothing and wants to share it with everyone.”

    Perhaps that should be the new definition of a banker. 

    Last year, the banks declared (mostly illusory) combined profits of nearly £40 billion. There were self-congratulory  dinners, awards, chairmen were frolicking round TV studios and radio stations, chief executives were granting interviews to the media and there was lots of corporate merriment. Sunny days.

    These are the same people who, during the last few months have avoided the dark clouds of banking meltdown  by  remaining  hidden in their gold-plated bunkers. They have kept their well-coiffed heads down and  allowed their poorer politician cousins to take-on the stock market bullies.

    How many reassuring statements have we heard from CEOs and Chairmen – apart from the very few self-pitying statements after a takeover  or nationalisation? Where have all the numbers gone?

    It would be very interesting to see some numbers.

    What is the “debt” of each of the above institutions and what does it consist of?

    It should no longer be acceptable to keep blaming the American sub-prime market, because the global figures that are currently being bandied about are well-in-excess of the $1.2 trillion apparently written in sub-prime mortgages.

    These mortgages are now being discussed as if they are worthless. They are not worthless because at the end of the line, there is a property which has a value. We should see a calculation whereby each bank displays two numbers:

    1. How much it spent on bad investments?

    2. What is the current estimated value of those investments?

    We could also ask why it is that banks stop talking in numbers when they make a loss  and of course, it goes without saying that the govenment will be carrying out a full audit of the banks – or are we still taking their word as gentlemen?

    And what is the smug bloke from Lloyds TSB doing on the list? Eric Daniels is his name, he is their Chief Executive  and the claim was that his bank was OK because of their ultra-conservative investment policy. More hot air? CLICK HERE.

    Finally, this is a  time when we do need words – not from the bankers but from the politicians. Warm inspirational words, sentences dripping  hope – a  sunny painting of the world in twelve months time , lots of “doing” words and 100% honesty.

    Yvette Copper has provided the most memorably honest quote: ” The bankers screwed -up”.

    An understatement, but nevertheles memorable.

    p.s. Why are we including the Santander Group and the Hong Kong and Shanghai Banking Corporation in this scheme?

     

    This is the Treasury statement in full:

    After consultation with the Bank of England and the Financial Services Authority, the Government announces that it is bringing forward specific and comprehensive measures to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers.

    In summary the proposals announced today are intended to:

    Provide sufficient liquidity in the short term;

    Make available new capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy; and

    Ensure that the banking system has the funds necessary to maintain lending in the medium term.

    In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity. In its provision of short term liquidity the Bank will extend and widen its facilities in whatever way is necessary to ensure the stability of the system. At least £200bn will be made available to banks under the Special Liquidity Scheme. Until markets stabilise, the Bank will continue to conduct auctions to lend sterling for three months, and also US dollars for one week, against extended collateral. It will review the size and frequency of those operations as necessary. Bank debt that is guaranteed under the Government’s guarantee scheme will be eligible in all of the Bank’s extended-collateral operations. The Bank next week will bring forward its plans for a permanent regime underpinning banking system liquidity, including a Discount Window facility.

    In addition the Government is establishing a facility, which will make available Tier 1 capital in appropriate form (expected to be preference shares or PIBS) to ‘eligible institutions’. Eligible institutions are UK incorporated banks (including UK subsidiaries of foreign institutions) which have a substantial business in the UK and building societies. However applications are invited for inclusion as an eligible institution from any other UK incorporated bank (including UK subsidiaries of foreign institutions). In reviewing these applications the Government will give due regard to an institution’s role in the UK banking system and the overall economy.

    Following discussions convened by HM Treasury, the following major UK banks and the largest building society have confirmed their participation in a Government-supported recapitalisation scheme. These institutions comprise:

    Abbey

    Barclays

    HBOS

    HSBC Bank plc

    Lloyds TSB

    Nationwide Building Society

    Royal Bank of Scotland

    Standard Chartered

    These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn. This is an aggregate increase and individual increases will vary from institution to institution. In order to facilitate this process the Government is making available £25bn to be drawn on by these institutions if desired to assist in this process as preference share capital or PIBS and is also willing to assist in the raising of ordinary equity if requested to do so. The above institutions have committed to the Government that this will be concluded by the end of the year.

    In addition to this, the Government stands ready to provide an incremental minimum of £25bn of further support for all eligible institutions, in the form of preference shares, PIBS or, at the request of an eligible institution, as assistance to an ordinary equity fund-raising.

    The amount to be issued per institution will be finalised following detailed discussions. If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer. In reaching agreement on capital investment the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers.

    The Government will take decisive action to reopen the market for medium term funding for eligible institutions that raise appropriate amounts of Tier 1 capital.

    Specifically the Government will make available to eligible institutions for an interim period as agreed and on appropriate commercial terms, a Government guarantee of new short and medium term debt issuance to assist in refinancing maturing, wholesale funding obligations as they fall due. Subject to further discussion with eligible institutions, the proposal envisages the issue of senior unsecured debt instruments of varying terms of up to 36 months, in any of sterling, US dollars or Euros. The current expectation is that the guarantee would be issued out of a specifically designated Government-backed English incorporated company. The Government expects the take-up of the guarantee to be of the order of £250bn, and will keep this under review alongside ongoing monitoring of capital positions and lending volumes.

    To qualify for this support the relevant institution must raise Tier 1 capital by the amount and in the form the Government considers appropriate whether by Government subscription or from other sources. It is being made available immediately to the eight institutions named above in recognition of their commitment to strengthen their aggregate capital position.

    The Government has informed the European Commission of these proposals and is actively talking to other countries about extending these proposals and has committed to work together with them to strengthen the international system.

    The Government is moving ahead immediately with the internationally agreed proposal for colleges of supervision and other measures to improve supervision of the system. After discussions with the major economies at the G7 meeting on Friday, the Government and other countries agreed on the need for a meeting at heads of Government level.

    Who’s kidding who?

    Always look on the bright side

    In the USA,  the Federal Deposit Insurance Corporation (FDIC) which currently guarantees U.S.A deposits up to $250,000  has a list of problem banks. The list  includes  117 U.S. institutions with assets of $78 billion. But the list has a fatal deficiency:

    It does not include any of the large banks that have failed or been forced to merge this year.

    There are 1,479 U.S. banks and 258 thrifts at risk of failure with total assets of $3.2 trillion  –  41 times more than estimated by the FDIC. This number alone illustrates the shock  ahead for anyone expecting the current bailout law to bring about a real recovery.

    The U.S government seems to assume that their  debt problems can be resolved by focusing on banks with bad financial assets. But the reality is that bad debts are everywhere:

    At Fannie Mae, Freddie Mac, Ginnie Mae and other government agencies, $5.4 trillion in residential mortgages continue to depreciate.

    As well as the publicised residential mortgages, there is an additional $2.6 trillion in commercial mortgages.

    Plus,  there is another $20.4 trillion in consumer and corporate debts – all subject to the same kind of accelerating attrition rates that are evident in the sub-prime residential mortgage market.

    The $700 billion Paulson plan is designed to help clean up debts that have gone bad so far. But what about future debts ? The economic decline is very unlikely to suddenly stop – in fact, judging by today’s stock falls, the decline is gaining momentum.

    The rescue plan does nothing to address the $182 trillion maze of derivative bets . Furthermore, the plan does not take into consideration the fact that the U.S.A’s three largest banks – Citibank, JPMorgan Chase and Bank of America – are exposed to far more credit risk on their derivatives than they have in capital.

    The story so far:  $200 billion has been committed to Fannie-Freddie, $85 billion for AIG, $25 billion for the auto industry and  $700 billion for the Wall Street bailout.

    Prior to these  bailouts, the Office of Management and Budget (OMB) projected the 2009 federal deficit would rise to $482 billion.

    Now, in just three weeks, the government has effectively chartered a course to triple that deficit.

    In practice, the only way the government can try to raise that much money is by borrowing  and  the only possible outcome is huge upward pressure on interest rates.  

    That can’t make the debt crisis go away. It can only make it many times worse. All that  politicians can do is to keep papering over the cracks.

    Today, October 6th2008, the first full day’s trading on the New York Stock Exchange after the Paulson plan signing-off. They hoped that it was going to be the end of the beginning of the global financial crisis.

    By the end of the day, we will know whether or not it is the end of the beginning  or possibly …………..well…. you can fill out the rest.

    (Alistair Darling is making a statement in a few minutes and rather ironically, it’s DEAL OR NO DEAL on the other channel. NO CONTEST.)

    Summary of Alistair Darling’s statement: Two more meetings scheduled, more money in the pot and the FSA to get a bigger stick. The statement was read out with all the conviction of a Prozac-fuelled Richard Dawkins fan reciting the Lord’s Prayer.

    “Tomorrow morning it’s dead-cat-bounce and then, down-the-toilet !!! Yipeee!!!”

    Nightmare on Wall Street

    The Nightmare on Wall Street has now spilled over to the  British High Street and the FTSE 100 index is twitching and flatlining  at about 4700.

     

    Some thought that signing-off the $700 billion “rescue package” would have an immediate positive impact on stock markets.

     

    It is apparent that the machinations and horse-trading which eventually produced the rescue package were just a distraction  and now that the Paulson plan has been approved, traders are once again  focusing on the economy. So what do they see?

    In America, over five million mortgagors are either in serious arrears or in foreclosure.

    That will produce a very significant and continuing  “drag” on spending. That in turn, will affect share prices as  result of the inevitable downturn in corporate profits because the economy relies on people spending money.

    The U.S Government does not have the $700 billion that it has promised. It has to raise the money on the international money markets by issuing Bonds which (hopefully) will be bought by investors.

    So existing bank debts will be shored-up by Government debt and IOUs.

    There is a real danger that Uncle Sam will be asked to pay  higher-than-normal yields on these bonds.

    If the Government is unwilling to promise reasonable yields, there may be a shortfall and the entire $700 billion will not be raised. What then?

    The most likely outcome is that the Federal Reserve will print more money which could ultimately result in a devaluation of the dollar. If that does happen , the American tax payers’ purchasing power will be further decimated and the economy will be drawn into an ever-accelerating maelstrom.

    Do I hear you saying “Weimar Republic”?

    The Wall Street Crash of 1929 severely affected many economies, notably the German Weimar Republic. Because of its own economic issues, the United States demanded that Germany repaid debts owing to it.

    Those demands pushed the German economy further into depression and the resulting economic catastrophe led to the rise of the Nationalsozialistische Deutsche Arbeiterpartie. The Party’s leader was Adolf Hitler.  The Butterfly Effect – but on a huge scale.

    The current economic goings-on have a worryingly familiar ring to them.

    Finally, why is it that the $700 billion is only going to be distributed within the U.S economy?

    Banks worldwide  invested in the U.S.  mortgage market through the purchase of those near-fraudulent securitised mortgages.

    Surely if the Americans accept responsibility for those investments, they should be bailing everyone out.

    The Thunderer squeaks.

     

    Even after months of credit crunch and  weeks of banking meltdown, there are still those who do not understand the scale of the current global financial crisis.

    This is the first sentence from today’s Times leader: ” The banking crisis began with a few mortgages irresponsibly mis-sold to borrowers in the United States who could not afford the repayments.”

    The article has all the in-depth research of something hastily scribbled on the back of a Carlton or Reform Club menu just before deadline and just after a large snifter of Remy.

    Let’s spell it out. The “few” mortgages referred-to amount to $1.2 trillion or to make it easy for our uninformed Times chum, $1,200,000,000,000. Or to make it even easier for him – a lot.  

    It is  hoped that the American $700,000,000,000 bailout figure is now in some sort of context.

    Secondly, it is not the fact that ” a few mortgages were irresponsibly mis-sold” that has led to the current crisis. A few mortgages have always been irresponsibly mis-sold.

    The crisis has been caused by those potentially dodgy mortgages being sold and then  bundled up into something resembling funds and then shares in those funds being sold to investors, some of whom were banks and insurance companies. The banks then borrowed more money, using their purchases as collateral by referring to them as “assets”. Those assets are now liabilities.

    The other misconception is how the Paulson plan is perceived in the United States. It is  a plan which was conjured-up and true to form, mis-sold to the American electorate by a Secretary to the Treasury who barely 18 months ago was Chief Executive of Goldman Sachs. He earned nearly $40 million in his final year at GS and his estimated worth is of the order of $1 billion.

    The same article refers to the Irish Governments decision to provide a 100% guarantee to bank customers. It is referred to as a “bold move”. It is not a bold move – it is foolhardiness spawned by desperation. Why? Because the Irish guarantee is well in excess of all the money in the rapidly-shrinking Irish economy.

    The Irish Government has taken the sort of stupid risk that has pushed the banking community into its current chaos. 

    A little knowledge is truly a dangerous thing.

    Capitalism Jim – but not as we know it.

     

     

     

     

     

    Liquidity – the City way

     

     

     

     

     

     

     

    Gearing – the City way

     

     

    The flush-cheeked silk-suits who used to talk loudly in London bars are quiet today.

    They are awaiting the result of the Congress vote which may ratify the  U.S. $700 billion rescue package.

    When (and if) the package is agreed, the politicians should take an immediate step back and the US Treasury Secretary, Henry Paulson should announce the hire of a money-man to administer the funds. He should find someone without any  vested interests or someone who cannot be accused of profiting from the distribution of the rescue package. That will not be as simple as it sounds.

    Many (if not most) of the big-hitters in finance own share portfolios, so finding a financial Elliot Ness who knows what he’s doing may be difficult.

    The reason that the politicians should distance themselves from the scheme is because it is very likely that the markets will not reawaken if the dealers feel that they have a politician’s boot looming over them.

    Politicians have a tendency to meddle and over-analyse so there may be a danger of every single transaction being scrutinised and further costs being “baked” into the system as a result of another tier of beaurocrats being introduced.

    It’ll be “Capitalism Jim – but not as we know it.”

    It is generally accepted that the financial system will now be experiencing a bit of a quantum leap but unless the leap is a positive one, the markets may be stifled by administrators and legislation.

    The current mess does not stem from day-to-day procedures but from year-to-year policies and lack of active supervision.

    This is definitely an occasion when the monkey should be left alone. It is  the organ grinder who should have the benefit of a severe talking-to (and maybe reminders on gearing and liquidity ratios).

    B&B – In Memoriam

     

    The Bradford & Bingley Bank has been nationalised.

    B&B’s £41 billion loan book is now on  the public balance sheet and the government has guaranteed around £9 billion in other commitments related to the bank. 

    Spanish bank Santander has bought the bank’s branches and savings business for £612 million. That’s about 2.7 million customers and approximately £20 billion in deposits.

    Santander already owns Abbey and recently agreed to buy Alliance & Leicester – so the B&B deal will give it 1,286 branches and a 10% share of the UK retail savings market.

    The Financial Services Authority (FSA) decided on Saturday morning that B&B was not strong enough to continue as a deposit-taking bank after the recent financial turmoil undermined confidence in the company. It is thought that B&B’s decision to purchase the GMAC mortgage book contributed to its demise.

    B&B’s has been a feature of the British financial landscape for about 150 years and many will view this dramatic collapse with great sadness. Prior to its demutualisation, the Bradford and Bingley Building Society was regarded as one of the most prudent and conservative financial services organisations in the UK.

    It will be greatly missed, both on the high street and in our collective psyche. It was the last of the great Building Societies, and in spite of becoming a bank in 2000, it retained its “solid no-nonsense” image all the way to the end.

    This morning, Alistair Darling told GMTV: “My priority was to protect savers and depositors but also to ensure we got a good deal for the taxpayer. We had to stabilise the situation in order to protect the banking system as a whole, just as we have done on previous occasions.”

    The Treasury said it would be “business as usual” for the firm’s savers and borrowers although for the moment, quite understandably, all lending has been suspended until further notice.

    B&B has around 3,000 staff and 197 branches.

    Today, the shares of RBS, HSBC, Barclays and LLoyds-TSB  are all taking a bit of a bashing . That’s because of  their anticipated contributions to the Financial Services Compensation Scheme following the B&B collapse.

    The Ringmaster

    Henry Paulson

     

    When the $700 million Wall Street rescue package is unveiled, remember the saying:   A camel is a horse designed by a committee.

    The last few days have shown how unpopular the US $700 million rescue package is among the American electorate.

    Both the Republicans and the Democrats are very mindful of the fact that a Presidential election is looming, so the fact that Joe Average is having to bail-out the Wall Street fatcats is a potential vote loser.

    Neither Party wants to be seen as the one which pushed the deal through Congress – just in case. The package is currently being window-dressed  so that it will look as if it was agreed and objected-to in equal measure by both parties.

    Self-preservation and vote acquisition have triumphed.

    The system is supposed to have seized up because (new mantra)“the banks have lost confidence and therefore will not lend to each other.”  So why don’t they do what we used to do in the old days and use their own money?

    The reason is simple – they do not have any money. Most of the mortgage cheques that lending institutions sent  out in the last few years should have bounced.

    Banks are distributors of money – no more and no less. They do not MAKE anything.

    They cannot conjure-up new money because all that they can do is MOVE money from a. to b.

    They do not CREATE new money. They do however, create wealth for themselves.

    The U.S. ringmaster, Henry Paulson who is currently United States Secretary of the Treasury has a net worth in excess of $700 million and his income in his last full year as CEO of Goldman Sachs (2005) was nearly $40 million. No-one would ever suggest any impropriety but is an executive  who spent nearly 32 years at Goldman Sachs the best man to be proposing a rescue package?

    There is now talk of curbing the excesses of the Wall Street fatcats through legislation and the whole process is being overseen by a former uber-fatcat.

    There are several important questions: Has Henry Paulson retained any shares in Goldman Sachs and could we please have  sight of Mr Paulson’s investment portfolio? How much is he currently worth and how much (if anything)  does he stand to gain?

    The new Oktoberfest?

    The financial establishment was driving an express train  to hell but now it wants to hand the steering  to the government  –  any government –  and it wants to do it as soon as possible.

    We are the prisoner- passengers and there is no possibility  of getting off the train. We’re trapped.

    The Crash of 1929 and  the Crash of 1987 both have something in common. They took place in October.

    October 2008 starts next Wednesday and it looks as if  our train is about to hit the painful buffers of another Black October. Inevitably there will be what is euphemistically called a single-day  “DOWNWARD ADJUSTMENT”.

    Look out for a Black Monday, Tuesday, Wednesday……………….you choose.

    By now, George W. Bush and his crew are realising  that a mere  $700 billion will not be enough to save the fantasy world created by the global financial system.  But they need to appear to be doing something.

    What is being done to slow mortgage defaults? What will be done to encourage the banks to lend money to each other and to consumers?  How will the housing market stabilise?

    It is also painfully evident that the banking establishment has no idea of  how to attack the current problem so the “professionals” are handing the problem over to a collection of elected amateurs led by Goldman and Sachs’ ex-CEO. Priceless.

    The credit contagion will soon hit every company that distributes its products on credit. Will the government(s) bail them out as well?

    The sad fact is that we cannot provide a solution to a problem that no-one understands . The inaction of our bank chairmen and boards suggests that they are   paralysed by a combination  of fear and what appears to be institutional intransigence.  

    There is nothing easier to manage or direct than an organisation which is  in “steady state”.  It is when a company destabilises that senior managers , directors and administrators  should be earning their money.

    Instead, there will be retirements, sackings, redundancies and court cases.

    After  the blood-letting, there will be a shiny new train that we can all climb aboard. 

    Does anyone remember the good old financial steam-trains of thirty years ago?

    Building Societies took in savings and deposits and paid a small interest rate. They would then lend that money  to mortgagors at about 4% more than they were paying  their investors. That gave them their operating margin  plus a small surplus.

    Then the banks, insurance companies and stockbrokers waded into the mortgage market and made the whole system super-technical and totally unintelligible. The legislators then gave the whole industry a good stir and  the rest,  as they say, is Geography.

    Perhaps it had all been too simple.

    The only surprise is that it took so long to unravel.

    Bradford and Bungley?

    Bradford and Bingley’s shares are continuing to travel in the wrong direction and we are still not hearing any positive noises from the board.

    They have an excellent management team, they are product innovators, they are responsible lenders  and the only major mistake that they have made is the purchase of the GMAC mortgage book. They signed up to purchase £12 billions-worth of mortgages. The purchase  looks increasingly like the sort of idea that materialises in the pub just before closing time.

    They were to buy the GMAC mortgages in quarterly tranches but are renegotiating the deal because the GMAC mortgages are in arrears by a factor of nearly 5, compared to Bradford and Bingley’s self-sourced mortgages.

    Two further factors are making things difficult. The first is the fact that they have a higher-than-average number of buy-to-let and self-certified mortgages. These mortgages are known to have a higher attrition rate but that is already reflected in the share price.

    Moody’s have downgraded the BBG within the last week and that together with excessive media attention is putting additional pressure on the share price.

    Nowadays, credit rating agencies such as Moody’s and Standard & Poors are  downgrading companies with almost indecent haste. They have become part of the problem and not of the solution.

    The proposed redundancies at the BBG have not been announced or reported carefully enough. The initial impression given by the media is that they are to lose nearly 400 people immediately. That is not the case. There will not be a Lehman-type scenario.

    We will not be seeing tearful box-clutching junior staff being interviewed on the 6 o’clock news.

    The announcement that the sacking of 370 staff will produce a per-annuum saving of £15 million suggests high wages, so all-in-all, BBG is continuing to handle the whole thing very badly.

    They seem to forget that much of what is happening is about PERCEPTION. 

    The BBG board is probably now thinking that demutualisation was possibly not all that it was cracked up to be. Ask the shareholders.

    However, the Chairman Rod Kent and Chief Executive Rod Pym need to get their fingers out of their backsides and come out fighting. They should not leave it to the FSA to flip-flop from company to company hoping for a sale. 

    Has the board lapsed into “analysis paralysis”?

    “B&B was an old Building society and therefore is not organised for the speed and change in the mortgage market,” is a two-month-old quote from Rod Kent.

    That may be true but is not the sort of sentiment that the market enjoys – and in this business they do not forget and they do shoot the messenger.

    *******************************

    STOP PRESS:
    Bradford & Bingley (the Company) and GMAC-RFC confirm today that they have successfully renegotiated the terms of their mortgage forward sale agreement.
    Under the original terms of the agreement, signed in December 2006, the Company agreed to purchase a minimum of £350m of UK mortgage assets per quarter, with £1.75bn remaining to be purchased before the end of 2009.
    Both businesses have agreed to revise the terms of this agreement to their mutual benefit whereby £500m of loans will be acquired in Q4 2008 and between £225m and £250m in Q1 2009 after which the agreement will cease. GMAC-RFC will receive in lieu, the equivalent of the premium that would have been paid should the agreement have run the full term.
    MORE:
    Bradford & Bingley plc are pleased to announce that Barclays Bank PLC have
    agreed to act as interest rate swap provider in their Covered Bond programme. 
    Bradford & Bingley previously acted in this capacity. This change is effective
    as of 22 September 2008. 

    The Speech 2008

    Gordon preparing for his speech.

    A lot of amateur analysis will clog tomorrow’s newspapers, so I’ll keep it short.

    Gordon Brown’s 2008 conference speech was not good.  It did have the effect of a temporary reprieve but Brown is still hoping that someone will manage to get at the jury before they deliver their final verdict. The decision will arrive sometime after the next by-election. That’s about one month away.

    David Miliband looked far too smug, Starling smiled and what the hell was simpering Fiona off the telly doing there? Baroness Phillips of GMTV? John Prescott and Harriet Harman  both swayed as if they had enjoyed lunch. Harriet resembled a deputy head girl after one-too-many Crofts. Ed Miliband had obviously agreed to drive and Kinnock  had morphed into his Spitting Image puppet. Ed Balls stood as if he (or something) was about to explode and Yvette was  a pixie-puppet with one broken string.

    It certainly looked as if the Pomerol ’76 and the ’96 Bolly had received some attention.

    Some commentators have said that Brown did not say much about the economy. That was the best decision that he made. Currently, the markets are so sensitive that a wrong word or nuance could have sent the FTSE 100 due south. Congratulations to him for being prudent. (!)

    So here goes:

    DELIVERY 4/10. The voice is  good  and with a bit of work, he could learn proper modulation. He is a shy boy who is afraid of overdoing the metaphors, consequently he does not use them. Occasionally he sounded as if he was reading a Saga advert.

    CONTENT 5/10. Mostly recycled stuff. Mentioned the eye and admit it – you were waiting for the school motto. Thankfully, he left it out. It was a Budget speech which had been topped and tailed by the stitching-in of some NHS and anti-Tory stuff.

    VISION 3/10. No great leader actually uses the “V”-word. This was a senior manager’s and not a leader’s speech.

    BODY LANGUAGE 2/10.He only appeared to move his head between the two stereo autocues.

    FACE 3/10. He is naturally expressionless and did not let us down . There were about four examples of the  “Jack the Ripper” smile.

    HUMOUR 1/10. Not a natural comedian.

    Let’s end on a high note:

    He is as good as Iain Duncan-Smith.

    We need a GFSA

    ” Yo political dudes. We need $700 billion dolleros for the money dudes. $1000 dollar bills? Can you do Wallmart vouchers or  Euros?”

    We are chewing into last week’s shares rally and the FTSE 100 is heading down to 5000 again. That always happens when there is a knee-jerk government announcement. The initial upswing caused by happy noises is then followed by a couple of days of reflection and analysis.

    When the US government announced its $700 billion rescue package, the markets relaxed and rallied. Over the following weekend, everyone took time to think.

    Then it was realised that the rescue package was far from a signed deal.

    For instance, the U.S. Democrats want the government to take a stake in the companies that it helps.

    Their proposal is that companies who effectively sell assets to Uncle Sam should give the government shares in their company.

    The Democrats also require the government to come up with “a systematic approach for preventing foreclosures and ensuring long-term, sustainable home ownership…..”

    That makes sense because the government is being asked to purchase sub-prime mortgages.

    They are also looking for curbs on executive compensation as well as an ability for judges to modify a bankruptcy petition where a primary residence is included.

    In addition, financial institutions are now coming out of shock and are confident enough to specify what they want in the new bill.

    So, the current situation is that there are too many parties with vested interests for the bill to be agreed quickly. Unfortunately it will probably take some time for all the horse-trading to be concluded and if there is one thing that the stock market dislikes is uncertainty. The market likes good news and can certainly deal with bad news. No-news means some jittery trading for the next few days.  The FTSE  100 is very likely to be bouncing off the 5000 line for a few days but for as long as there is hope, it will not make that drop below 5000. If at some stage it does go below 5000 then would ther last person to leave please switch off the lights.

    If the politicians cannot agree or if the market does not reacquire confidence, the drop will be so fast that we will all feel the  G-forces.

    Needless to say, the U.S government wants and needs a “clean bill” to be passed quickly so that the rescue package can be put into place. Any undue delay will affect stock prices all over the world and slight “wobbles” are already taking place.

    Meanwhile, there are banks and other FS companies which are holding their collective breath in the vain hope that they can keep quiet and just sneak under the wire when “the announcement” comes but there are those who cannot keep it up for too much longer.

    I think that the above reinforces an immediate need for a Global Financial Services Authority so that all other economies are not “pointing” at the USA

     

    Note to Hector:  Why don’t you ban “shorting” oil stock?