Tag Archives: Finance

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.

 

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)

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?

 

 

 

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)

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.

 

 

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.

Give us a clue

darlingbrown2.jpg 

1-across is SWAT TEAM”

“I’ve got ‘T’ as the first letter”

“That doesn’t surprise me.”

The latest desperate initiatives of an increasingly desperate Prime Minister and  a Chancellor who is already packing his parachute  have just traversed the laughable and blundered into the surreal.

The plot so far: The banks rip each other off by granting a mortgage  to anyone with a pulse – irrespective of whether or not they can repay the loan. The banks then tart-up these dodgy mortgages by packaging lots of them up them up into a fund (securitisation)  and then they flog shares in these funds to each other. 

The money rolls in and  is lent to more dodgy individuals until someone realises that selling shares in  “funds” that are not producing any income because no-one seems to be paying their mortgage is not a good thing.

(The American banks started it but we aped them and then blamed them.)

The banks then decide that there is a crisis and the only way to deal with it is to stop lending – to each other and to the public.

This strange new situation is given a name – Credit Crunch.

Then these privately-owned banks go cap in hand to the Bank of England which has been “advised” to bail them out. Others, such as the Northern Rock are given money directly by the Government.

That does not seem to do the trick because the banks decide to sit on their (our) money because they don’t want to take any more risks. Why not? Because these ersatz corporate entrepreneurs can only function when things are going well.

They have no real idea what to do next – except perhaps to rip off existing customers by increasing interest rates on anything that they can get away with.

When they did play at being entrepreneurial with these so-called “securitised ” mortgages, they messed up – big time. They should all be standing shoulder-to-shoulder in the dock.

However, the banks know that if they do nothing for a few months, the desperate government will be forced into action. They know that the New Labour government has only two ways of doing business:

1. No Crisis = No Action.  

2. Crisis = Panic = Action = Handouts = Big Bucks.

Today we have the announcement that the government will lend money to first-time buyers and there will also be a package for those who cannot repay their mortgage and for good measure, Stamp Duty for properties with a purchase price of £175000 or less will be suspended for a year.

So the government lends to the banks then it lends to the borrowers so that the banks can lend some more to the borrowers.

Why doesn’t the government cut out the middle-man and give the money to the builders to build houses which can then be rented out with a post-dated option to purchase.

When will we all wake up to the fact that the “owner-occupier” skirmish with hard capitalism has not worked  and that we have to be re-educated into thinking of a house as a home and not as a commodity.

This is what Gordon Brown had to say:

“No-one in this country who works hard and plays by the rules should be left alone to bear the impact of the current global economic downturn, and I am determined to see the government do everything we can to help British families weather these difficult times.

I understand what it means to see people struggling to get mortgages or homeowners who, through no fault of their own, suddenly find themselves unable to keep up with their repayments. And it’s not just families who are finding it tough but businesses as well, with house-builders now experiencing difficult conditions after years of extremely favourable circumstances.

So to address these issues, the government’s new £1 billion housing package will give first-time buyers a leg-up onto the housing ladder, help homeowners in difficulty and support the UK’s housebuilding industry.

First-time buyers are one of the groups hit hardest by the credit crunch and are crucial to driving the wider housing market. They would usually benefit from falling prices, but a combination of the higher cost of borrowing, bigger deposit requirements and weakening consumer confidence means this has not happened.

To do everything we can to support them, there will be a one-year stamp duty holiday for all properties sold for up to £175,000 – helping to restore market confidence and giving first-time buyers the extra help they need. And, alongside this, 10,000 more first-time buyers will benefit from a new £300 million shared equity scheme called “Homebuy Direct”.

The current housing market difficulties are also leading to increased repossessions, so we are introducing a new £200 million mortgage rescue scheme that will help thousands of vulnerable families to stay in their homes.

And to do more to encourage social rented housing, we are bringing forward £400 million of government spending to deliver up to 5500 new social rented homes over the next 18 months.

Taken together, I am confident these measures and the other new steps we have announced will help create the best possible environment for the housing market to come through these challenging times – and I invite you to read more about our proposals on the Number10 website. “

Darling – listen to what I mean, not what I say.

doomed3.jpg

We know what Alistair Darling said but do we really know what he meant? What was the subtext? Let’s try and sort out any misunderstandings and misinterpretations.

Last week, according to the Chancellor, the British economy was going down the toilet and the public was “pissed off” with the Government.

YESTERDAY he said that the “fundamentals” of the economy remained strong.

So what were his motives? He must have known that he would come in for the mummy and daddy of all bastings by the media and his Cabinet chums. Dave Cameron and his hooray happy slapper mates think that Christmas has come early and if they’re thrown any more Labour screw-ups, they are in danger of sensory overload.

Not one commentator has spotted Mr Darling’s motives for his outburst to the Guardian.

Whether he’d had a glass too many of (courtesy of the Guardian) Glencrap, whether he was feeling naughty  or whether he thought that he would piss on Gordon Brown’s strawberries just for the hell of it – none of that matters.

We suspect that there may have been a touch of  “In Vino Veritas” but that does not matter either.

This former Edinburgh councillor and small-time Solicitor who for some miraculous reason is running our economy is (and looks) stressed beyond limits.

Another case of a politician being promoted above his level of incompetence?  Or one who has just looked up “fall guy” in his Thesaurus.

What he would like more than anything is for Gordon Brown to put him out of his misery and replace him with David Milliband.

Darling’s own personal “end of term” will come in mid-October when Brown yet again rearranges the deckchairs on the sinking SS New Labour. (You started it, Prescott).

Darling’s outburst to the Guardian is a transparently conscious provocation and New Labour should be prepared for more. To continue the nautical metaphor : in Brown’s eyes, Darling has now become the shit deserting the sinking rats.

Do you remember Geoffrey Howe’s devastating attack on Margaret Thatcher during his 1990 resignation speech. Darling obviously decided to dictate his suicide note to the Guardian rather than make a speech.

He and Howe are both examples of “Yes” man morphing into “Fuck you” man.

If Brown does not “redistribute” him in the next reshuffle, Darling will resign either for health reasons (good early-pension scam) or the more likely “I want to spend more time with my family”.

We have already had the “anti-gaffe” brigade attempting to water-down  and reinterpret Starling’s indiscretions but it’s too late.

Man the lifeboats!

And the Milliband played on.

Troubled over Bridgewater

dianaactaeon.jpgOverheard conversation between the 7th Duke of Sutherland and a peasant:

“So how did you come into the possession of this so-called Bridgewater Loan collection, m’Lud?”

” Well Brian,  that’s a funny story….. When the Froggies were trashing their aristocracy, a relative of Louis XVl flogged the paintings to one of my ancestors. He was called the Duke of Bridgewater – hence the name. Of course, they waited until the King had been beheaded. It was all quite kosher and above board  – no funny business. Got the receipt somewhere. So my family have owned the paintings for just over 200 years. We’re a bit strapped at the moment so I thought that I might tap up the National Galleries for a few quid. Of course, I didn’t say that I needed the cash. No, I said that we wanted to “diversify the family’s assets”. Looks like I’ve really put the cat among the pigeons this time! What a hoot!”

” So where did the Froggies get the Diana and Acteon painting from? That’s the painting that everyone says is the most famous. Never heard of it myself. Titian, the bloke who painted it was from Venice, as far as I know.”

” Yes, that’s right. Titian painted this painting for Phillip ll of Spain , along with six more. Sort of a set. They stayed in Spain until   Philip V gave the painting to the French Ambassador who passed it to Louis XVl. He of course kept it until he lost his head! That’s where my lot come in.”

” So it’s painted by an Italian for a Spanish King who gave it to the French?”

“Quite.”

” So why is everybody screaming that the painting has to stay in Scotland? It’s not part of either Scottish or even (if you don’t mind me saying so) British heritage – is it? Some art critic poofter is even saying that it’s the most beautiful painting ever painted.”

“Well I don’t know about that but it is worth a few quid. About £50 mill I should think. The Duke of Bridgewater bought the job lot for about £43K – so potentially, it’s quite a nice little  earner.”

” You seem quite sure that they’re going to raise the cash, aren’t you?”

” You bet! About five years ago, I played the same trick with another Titian. It was called Venus Anadyomene – anyway it was some fat bird standing in a puddle. Got £11 mill for that one. Nothing like having a captive audience, eh? And don’t forget that there’s also Diana and Callisto.”

” Well, I’ve heard of that  Callisto one. That was owned by another French bloke…..No…. don’t tell me…. Jacques Cousteau wasn’t it. He was always on about the Callisto.”

” Are you sure that you’re not Brian Sewell?”

Mervyn’s Tea Party

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Monetary Policy Committee

David Blanchflower sits on the pointless Bank of England Monetary Policy Committee.

The MPC is supposed to be acting and thinking  independently but it always seems that whatever they say has been sanitised so as not to upset the neighbours.

David Blanchflower says that in his opinion,  two million people will be out of work by the end of the year.

That’s more like it! We need some realism. We need truth and not the platitudinous crap that  Merv and his chums keep dishing out.

Blanchflower goes on to say that the MPC seems misguided in sitting there and worrying about inflation when the whole economy is in imminent danger of collapse.

He also says, quite rightly that the BoE’s forecast of “broadly flat” economic growth has a great deal of wishful thinking attached to it.

He also thinks that there will be a fall in property prices in excess of 30%. Bravo! Tell it how it is and how it is going to be!

The very worst that could happen at the next MPC meeting is that Mervyn might splash soup on his silk tie but otherwise, whatever they decide will be irrelevant.

As we have said many times before, they should be making things happen but sadly it looks as if the are simply wondering what happened.

See what Spygun wrote on 15th May 2008 

A Wamk in the Park.

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This is from our occasional series on Magagement Bullshit.

There are occasions when the message that you have received is obviously wrong but you are not sure quite what the sender meant.

For instance, the five-word title to this article  is a texting-error about a walk in the park.

The full message was: “Thought a lot about you last night and then had a long wamk in the park.”

Below is a list of the 20 most common corporate lies but as the message is not always clear, translations are provided.

1. We have an entrepreneurial spirit.

“We don’t know what the f*** we’re doing.”

2. I like a man who speaks his mind.

“No-one likes a man who speaks his mind. You are an opiniated big-mouth.”

3. People are our greatest resource.

“We treat people like shit.”

4. The Boss is one of us.

“No he is not. If he was, he would be working for you.”

5. Staying small was a conscious decision.

“Our Standard and Poors  and Equifax ratings went down the toilet.”

6. Let’s keep this “off the record”.

There is no such thing as “off the record”.

7. Immediate delivery? No problem.

“Once we’ve got your money, you can whistle.”

8. W’ere going to lunch to talk business.

“Let’s get really pissed.”

9. Money? It’s just a score card.

“I earn more than you, you prat.”

10.You have to twist my arm to go on a business trip.

“It’s so nice to get away from the wife and screaming kid(s).”

11. We don’t tolerate failure.

“We do.”

12. In my day, we made six sales a day.

“I screwed up as a salesman and went into management. Now I’m screwing up management.”

13. I drive a BMW but I’d be just as happy with a Fiat 500.

“Yeah….right!!!”

14. I’m not doing this because you’e my boss.

“I’m a slapper.”

15. We treat every customer as if they were our only customer.

“We treat all of our customers like jerks.”

16. I’ll tell you when I’m coming.

“Hee hee!  Oops…. too late! Sorry!”

17. I’m doing this for the company.

” I’m doing this only  for myself.”  “Moi.”

18. I’ve heard good things about you.

” Who are you?”

19. I’ve recommended you for a pay-rise.

” I have not recommended you for anything – except an exit interview”

20. I’ve never felt like this about anyone.

( Since last week).

Titanic on the move again

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” Fucked it up again.”

 

Prescott has been bludgeoning the  old Titanic metaphor but because his paragraph construction has the direction   and smoothness of a blind man attempting to slalom on broken glass, he has managed to hit the headlines again.

 

Gordon Brown’s  “changes” will not be  like rearranging the deckchairs on the Titanic because he has no idea where the deckchairs are. Some might say that he wouldn’t recognise a deckchair if he saw one. Eh , Vince?

 

 

 

BROWN’S CABINET MEETINGS ALL OVER THE PLACE

latsupper21.jpg” Is Judas still at the off-licence?”

 

 

Good idea to keep on the move, Gordon.

Lower “Swap Rates”

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“Don’t Panic!”

“Moneyfacts.co.uk is claiming there is a “faint glimmer of hope” that the fixed rate mortgage market is returning to some sort of normality.

It says that new mortgage borrowers are now finally benefiting, as lenders pass on a string of welcome interest rate cuts on their popular fixed rate deals.

Darren Cook from Moneyfacts.co.uk, said: “Moneyfacts.co.uk has used a key barometer of the average two-year fixed rate over the past few months to analyse the trends of the overall fixed rate deals against the volatility of the swap market, the borrowing fixed rates used between financial institutions. The average two year fixed rate peaked at 7.08% on 11 July ’08, its highest in over a decade after swap rates also peaked at 6.52% on 16 June ’08, reflecting the lag time for swap rates to reach the mortgage market is normally around two to three weeks.”

Cook notes that several lenders, such as Halifax, C&G, Nationwide BS and HSBC have trimmed their mortgage rates over the past two weeks, which has resulted in the average two year fixed rate dropping to the current 6.95%.

Halifax, C & G, Abbey, Nationwide and HSBC , which supply the majority of overall mortgage lending, have a collective average two year fixed rate currently at 6.76%.

He added: “It is encouraging that, at long last, lenders are responding to the easing in wholesale borrowing costs and passing a discount on to the consumer. There is a sense that competition is finally returning to the fixed rate mortgage market, which will benefit the borrower. “Two year swap rates are continuing to fall and yesterday’s closing price of 5.74% is the lowest since mid May of this year, when the overall average two year fixed rate was 6.63%. If these downward trends continue unabated, we will see further fixed rate cuts by our top high street lenders in weeks to come, which just might be that glimmer of hope that we are all endlessly seeking.”

Buy to Let Rents begin to stabilise

Buy-to-let yields remained stable at 6.4% for the second consecutive month in June, according to Paragon Mortgages’ latest Buy-to-Let Index.

Average UK rents, which had been rising rapidly, have stabilised just short of £1,000 a month, and remain 9.3% higher than a year ago.

Regions achieving the highest yields in June were Wales (7.6%), the North (7.4%) and the North West (7.3%).

Over the coming months, the buy-to-let market will be a vital source of stability in an uncertain housing market. Returns remain attractive and strong tenant demand encourages landlords to retain property, whilst also looking for opportunistic purchases. The average portfolio gearing is less than 40% – giving landlords plenty of room to free up equity for further investment. 

The  managing director of Paragon Mortgages, said:  ‘For the vast majority of landlords, a slow housing market is nothing new. They recognise the counter-cyclical nature of buy-to-let and many landlords have held property through previous housing cycles. Falling prices are spooking first-time buyers and they are delaying house purchase, with tenant demand at high levels as a result.”

He added:  “During the downturn of the early 1990s we witnessed mass possessions because there was little alternative to house purchase and young buyers had borrowed above their means. Today’s modern and vibrant private rented sector provides people with a viable alternative to owner occupation and buy-to-let provides housing for young people who would otherwise have little choice but  to buy and be financially stretched.”

You can’t beat a good bank.

Chris Blackmore, Business Editor of the London Evening Standard  is quite right in saying that there ought to be a few more bank executives either resigning or at least participating in an exit interview.

Sadly, even on the rare occasions  when they are shown the door and pushed, they are invariably given a very big parachute so they’re never in any great danger.

Spygun understands the industry and knows that there is an almost masonic bond which nurtures, develops and then protects individuals who would be eaten alive in the outside business world. It is no good expecting them “to do the right thing” because they have no concept of what that means. These men are “takers”.

When it suits them, they are the victims of “external economic forces over which we have no control”. Regrettably, they never seem to have any concept or inkling of these forces and consequently, when the solids hit the air-conditioning,  it is always a surprise.

They certainly did not see that mortgage securitisation was an accident waiting to happen. The reason why most did not see the danger is because many did not understand the nature of securitsed mortgages.

They are the “Untouchables”. These are the executives who  can lose millions and still stick £100k per annum into their pension fund.

What Chris  highlighted is their arrogance but it is not just arrogance that has brought them to this point.

In the eighties we had the Genesis of the “corporate entrepreneur”.  American banks were looking for  individuals who were by nature, entrepreneurs  but who would be willing to work within a large organisation, bend the rules where necessary and make big bucks for the business.

It did not matter if they made expensive mistakes, because they had the company’s assets to fall back on. They were encouraged to take risks, on the understanding that occasionally they would make losses..

The Americans were good at it and it is that mentality which bundled up dodgy mortgages and sold them on.

Here is the UK, we played at it, made the right noises and created what can only be described  as “ersatz” corporate entrepreneurs. We had the suit, the car, the management jive talk and sometimes even a dodgy MBA  but we were never the real thing.

The bad news is that here in the UK, the 80s corporate entrepreneurs are now in charge.

However, because they continue to lack the entrepreneurial flair of their American cousins, all that they can do is sit tight and fill their pockets until their personal final whistle sounds.

This is Chris Blackmore’s excellent article which appeared in the Evening Standard on 28th July 2008. It is reproduced here with his kind permission.

Thank God for Mark Burgess, head of equities at Legal & General. At last, an institutional investor has had the guts to say in public what many of them have been muttering in private these past few months – that not enough senior executives at Britain’s banks have quit in the subprime debacle.

Only one has gone – Bradford & Bingley’s Steve Crawshaw, and that was for angina – whereas in America and elsewhere, the sight of highly paid bankers eating humble pie has been a regular occurrence. Look at Royal Bank of Scotland. Its shares have plunged twothirds in the past year, partly because the bank followed its rivals and thought it could make millions from trading in fancy financial instruments built around dodgy borrowers in the US ( precisely the sort of people RBS would not ever lend to normally) and also because it ignored the warning signs and paid a fortune for ABN Amro.

Imagine if a business in any other sector had seen its value plummet so much. Do you think its bosses would still be in situ? Do you suppose RBS analysts would hold back from demanding management changes? Yet RBS chairman Sir Tom McKillop and chief executive Sir Fred Goodwin carry on regardless.

They’re not alone. At HBOS, Lord Stevenson, the chairman, and Andy Hornby, the chief executive, have presided over a share-price collapse of 75%. You have to wonder what sort of cloistered world they inhabit. Surrounded by fawning colleagues, lost in their own vanity, they are shielded from the uncomfortable truth. No surprise then, that Edinburgh is referred to as “Fredinburgh” in tribute to Goodwin’s hold over the home of the Scottish banking establishment.

It’s the sense of complacency I find so breathtaking. Somehow, Goodwin and McKillop, plus their compatriots at other British banks, are saying: “We’re different. Yes, we know others have gone, in New York, Paris, Zurich and Frankfurt, but we’re not like them.” This is arrant nonsense – arrogance that isn’t lost on foreigners when they look at how we conduct ourselves in this country.

Frankly, it’s the sort of old boy matiness that was supposed to have been banished from the City but is clearly as entrenched as it ever was.

It rears its head in other ways, too. One of my bugbears has always been the rank failure of our authorities to prosecute for fraud and other instances of white-collar crime. In the US, managers are frequently led away in chains – but not here. In the UK, apparently, our bosses are clean – they wouldn’t dirty their hands with a bit of crookery.

What rubbish. Jessica de Grazia, the former US prosecutor, has just compiled a report into the Serious Fraud Office. What did she find? Only that the organisation had “pass-the-buck, risk-averse culture, lack of focus and skills”.

Oh, and get this. De Grazia said the SFO had charged seven defendants in five years, against 50 in the same period by the US Attorney’s Office for the Southern District of New York. Seven in five years!

Even when we do pursue cases, we do not get them right. The SFO’s conviction rate for 2003-7 was 61%, compared with 92% in New York.

Concluded De Grazia: “A criminal justice system that produces this little cannot be said to be effective in deterring, detecting or punishing criminals who commit serious white-collar crime.”

But it’s the silence that is so damning. Where are the calls for change? Why isn’t the City jumping up and down, saying enough is enough? How can we honestly lay claim to be the world’s leading financial centre when we behave in such a lackadaisical fashion?

What is required is more like Burgess, a fund manager who is not comfortable sitting on his hands, to break their silence. Legal & General holds 5% of RBS. For the sake of the City’s reputation, the other 95% need to stand up and be counted.

The rats were digging – now they’re leaving.

karadzic.jpg Alistair Darling

We have devoted quite a bit of time and space to Mervyn King, his band of funsters and their effectiveness in doing anything at all to the economy. Currently, they are totally boxed in. 

They cannot attempt to stimulate the economy by dropping rates because inflation is running away –  it is out of control and as usual, the BoE is just an expensively suited observer.

There is as saying:


1. There are those who make things happen.
2. There are those who watch things happen.
3.There are those who wonder what happened

The BoE has just slipped from Two to Three. They never made it to One.

The USA has responded aggressively because after three years and a gradually collapsing housing market they had to stop it.

Here in the United Kingdom, interest rates will not be seriously played with until 2009.

That will not help our collapsing property market and unlike the States, we are still in the early stages of the collapse-the USA are about two to three years ahead of us.

The main growth driver of the UK economy is the financial services sector.  That sector is running for cover and because the economy is manufacturing-light, we are in deep trouble.

Past Chancellors have made a great deal of the fact that we are the world’s commercial centre and that London is that the epicentre of world trade.  That is all very well  when the world’s economies are booming but leaves us very vulnerable when they are not.

Unlike the States-all that we can do is sit and wait.

Rats deserting the sinking ship.

We thought that things were bad when Eastern Europeans started heading back home. The real reason that they are disappearing is that our own (domestic) unemployment rate is gathering pace which means fewer jobs for foreigners.

Looking at the G8 group , the best-off at the moment are the “resource economies” such as Russia and Canada. They have something to sell.Our problem is that we have nothing to sell – we are as service-based economy.

What Gordon Brown should do is to take back control of interest rates but not give them to Alistair Darling.  Alistair  can go away, grow his hair and beard, put on a large pair of  glasses and work as a new-age therapist.  No-one will recognise him.

Finally, the Securitisation of mortgages should be outlawed. It is far too easy for bad lenders to hide bad lending by bundling mortgages up and flogging them off on the open market. It is like buying a box of bric-a-brac at an auction and when you get home , discovering that you have bought a load of crap.

Lenders should take responsibility for their own lending -like they used to.

By the way…. Northern Rock….Covered Bond issue?  One thing to say. No.

Glasgow by-election

curran2.jpg 

“Bollocks.”

Margaret Curran was beaten by 365 votes.  Coincidence?  Yes, I think it was.

Here are the full results:

John Mason(SNP): 11,277 votes (43%) Majority: 365

Margaret Curran(Labour): 10,912 (41.6%)

Davena Rankin (Conservative): 1,639 (6.3%)

Ian Robertson(Liberal Democrat): 915 (3.5%)

Others: 876 (3.3%)

The turnout was a respectable 42.25% .

One gets the feeling that the electorate was trying to make a point.

Davena Rankin, the Conservative candidate harvested over 1500 votes. That result is not to be underestimated because let’s face it – most Glaswegians would rather vote for a deep-fried dog’s testicle than elect a  Conservative.

There are several downsides to this result.

The obvious one is that Ms Curran is a victim of the current Labour Government’s dithering and incompetent “oke coke” style of government. She campaigned well and during her campaign was relying on local initiatives and policies.

This result has yet again proved that politicians’ promises, policies and crystal ball gazing are no longer of any interest to the electorate. The “swing” voters rely on their perception of the Government and its leader.

We have already had the obligatory statement from David Cairns, the Scottish Office minister who said: “The Prime Minister’s fate does not hang on any one by-election… I think Gordon Brown will continue to be leader of the Labour Party and will lead us into the next election.”  Cairns made that statement just BEFORE the result was announced.

Perhaps Cairns knows something that we do not. For instance, has Gordon Brown has had the locks changed at No 10 ? 

The other downside to this result is that Alex (McGargoyle) Salmond’s smug grin will remain in place for the foreseeable future.

At least the Labour Party is consistent in its by-now regular achievement of double-figure swings against them. This one was a 24%-er in a rabidly Labour area. Nice one. Edward Timpson only managed a 17.6% swing to the Conservatives in Crewe and Nantwich.

Is that what Transport House  calls “progress” these days?

Spygun wishes Gordon Brown and his family a pleasant holiday and suggests that Gordon takes his Latin Reader to the beach so that he can practice phrases such as ” Et tu, Jack?”

2008 BUDGET (Move over Darling)

The leader of the Liberals – you know, the Cameron clone – had it spot-on yesterday. You could not see Prime Minister’s lips move as the Chancellor delivered his Budget speech. Or could you?

The Chancellor managed to achieve just the right tone of moribund apathy that you would expect from a dead man standing. Meanwhile, Gordon Brown sat there with his Archie Andrews rictus-like grin and nodded. Many years ago, I shared a platform with Alistair Darling. I faced the audience straight after his riveting talk on Pensions. I could not go wrong! With Mr Darling as my warm-up man, I could have been a Jehovah’s witness with a speech impediment and I would have gone down a storm.

You know the way that a nervous mother mouths her child’s every word at the school Nativity play? It’s not surprising because she has spent days and weeks helping her sprog to learn lines and knows them off by heart. Yesterday, Brown was that mother!

Would little Alistair screw up his lines? Was his tie straight? Did he remember to comb his hair? Did he sound as if he was reading his mum’s shopping list?

Yes.